To boost export growth and help the economy rebound from the COVID 19 pandemic impacts, improving the manufacturing sector’s productivity will be crucial for Bangladesh, says a new World Bank report.
The report, ‘Gearing up for the Future of Manufacturing in Bangladesh’ released on Thursday, suggests that by strengthening innovation and technology adoption in firms, the manufacturing sector can improve productivity.
For this, the report identified three pillars: capabilities of managers and workers, connectivity to international markets, and complementary markets and institutions.
Adopting new technologies and business practices will also help firms recover faster from the COVID-19 crisis, said a World Bank press release.
“Bangladesh’s success in readymade garments (RMG) export has created about four million jobs and driven economic growth. But, in recent years, job creation in the RMG sector slowed due to automation and the trend will likely accelerate in the post pandemic world,” said Mercy Tembon, World Bank Country Director for Bangladesh and Bhutan.
“This creates urgent need for Bangladeshi manufacturers to shift gears from competing on low labour-intensive productivity to competing on higher productivity. For this to happen, firms will need to adopt better technologies across business functions and production processes. “she added.
The report finds that in Bangladesh, most firms still use basic or near-basic technologies. For example, more than 40 percent of firms still use handwritten documents for business administration, while three-fourth of them practice manual quality inspections.
Managerial and technical capabilities are crucial for a turnaround. About half of the manufacturing firms are run by people without college degrees.
Compared to these firms, those with college-educated managers have a 10 percent higher level of technology. Hence, building human capital remains an important agenda, as well as enabling firms to access advisory services in cost-effective ways.
The release said International connectivity also contributes to the spread of technology. Firms doing business with multinational companies use more advanced technology than those working only in the local market. Export diversification beyond the readymade garments (RMG) sector will be crucial.
Reducing restrictions on international trade and Foreign Direct Investment, making the duty-free import of raw materials more accessible to firms outside the RMG sector and modernizing special economic zones will help diversify export-led growth