Improving the manufacturing sector’s productivity and technology adaptation will be crucial for Bangladesh to boost export growth and help the economy rebound from the impacts of Covid-19, says a World Bank report.
Strengthening innovation and technology adoption in firms and the manufacturing sector can improve productivity, adds the report launched on Thursday.
For this, the report identifies 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, the report further reads.
Mercy Tembon, World Bank Country Director for Bangladesh and Bhutan, said that Bangladesh’s success in readymade garments (RMG) export has created about 4 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,” she added.
She also said that this creates the urgent need for Bangladeshi manufacturers to shift gears from competing on low labor-intensive productivity to competing on higher productivity.
“For this to happen, firms will need to adopt better technologies across business functions and production processes,” Tembon added.
The report finds that in Bangladesh, most firms still use basic or near-basic technologies. For example, more than 40% 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, finds the report.
According to the report, firms with college-educated managers have a 10% 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.
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, the report further says.
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.
Strong financial institutions and regulatory frameworks underpin the importance of complementary markets for technology adoption.
About half of the surveyed small and medium enterprises (SMEs) identified a lack of financing as the main barrier to adopting technology. To help firms to borrow for their technology needs easily, a stronger financial sector will be needed, the report adds.
Siddharth Sharma, World Bank Senior Economist and a co-author of the report, said that creating more and better jobs is a development priority for Bangladesh.
An export-led manufacturing sector can create sustainable and better-paying jobs by adopting better technologies.
“As Bangladesh seeks to diversify its export base, move up the value chain, and create better-paying jobs, improving the productivity of firms remains central to preparing for the future of manufacturing,” Sharma added.
Faruque Hassan, president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) said that apart from the change brought by Covid-19, there are few more changes like LDC graduation and its impact on market access, trade competitiveness and export.
“Fourth industrial revolution [4IR] will be the paradox of jobs, competitiveness and opportunity. Global competition and sourcing are changing due to 4IR as buyers focus more on automation. The report highlights the importance of technological adoption both in industrial and managerial techniques,” he added.
But there is a problem with knowledge sharing platforms and new technology is costly and there are difficulties in access. The BGMEA is working on innovation, establishing new technology, he added.
Prof Mustafizur Rahman, distinguished fellow of the Centre for Policy Dialogue (CPD) said that market access has given us competitiveness and: “we have to move onwards”.
70% of Bangladesh’s exports enjoy duty-free or quota-free access in the global market.
“LDC graduation will be a game changer. So, we have to focus on productivity, technology adoption. The message from this report is important, as we have 5 more years to graduate, we have to focus on bilateral agreement and focus on proper technology,” he also said.
Commerce Minister Tipu Munshi launched the report as chief guest where Prof Mushfiq Mobarak of Yale University; Dr Nazneen Ahmed, senior research fellow of BIDS, also spoke.
Zoubida Kherous Allaoua, a director of World Bank Group, moderated the program.
