Bangladesh must address a number of challenges if it is to maintain recent strong growth in garment exports, according to a new report from The World Bank.

Shortcomings in trade logistics, skill shortages and the need to comply with government labour standards could all hinder future growth in garment exports from the Asian country, says the report, 'Consolidating and Accelerating Exports in Bangladesh.'

It suggests that greater export diversification beyond clothing is needed – garments account for more than 75% of Bangladesh’s exports – but adds that, even in the garment industry, export growth is not to be taken for granted.

Bangladesh is heavily reliant on exports to drive dynamism in the manufacturing sector, to provide high productivity and high-income jobs – all envisioned in the country’s Sixth Five-Year Plan.

“While China’s wage growth presents major opportunities for countries with less expensive labour, Bangladesh will need to overcome significant bottlenecks to ensure that its exports continue to grow at the pace seen over FY05-10, when dollar exports nearly doubled,” said Sanjay Kathuria, lead country economist at The World Bank.

The World Bank said faster export growth would be “critical” to Bangladesh achieving the level of growth required to reach its ambitious goal of becoming a middle-income country by 2021.

“The garments sector of Bangladesh has grown impressively and captured an increasing share of the world market,” The World Bank said.

“But growth in exports cannot be taken for granted. Second only to China, Bangladesh’s garment exporting sector will need to compete with the impact of an already large base and significant market share in key markets.”

Exports can grow faster, the report suggests, but only if “critical bottlenecks” are addressed – the first of which is the provision of effective trade logistics.

Improvements in this area would give the country a “competitive edge”, ensuring that exports and imported input goods are shipped on time, cost-effectively and reliably.

Better connections, improved customs procedures, better air shipment capacity and better rail services could reduce lead times for order fulfilment by up to 21 days, the report estimates, even if raw materials are sourced from abroad.

Meanwhile, it warns that Bangladesh’s skills gap is “increasingly visible in all manufacturing sectors, and perhaps more so in the garment sector”, where it reports a high rejection rate for final products.

Noting the strong presence of skilled foreign workers, the report calls on Bangladesh’s publicly funded Technical and Vocational Education and Training programme to make itself more relevant to the needs of the garment sector and come up with more innovative ways to improve skills.

Finally, the report highlights the importance of industry complying with the Bangladeshi government’s labour and building standards – an ever more important issue as the country attempts to move into higher-value garment exports.

Pinpointing the need for the government to work closely with industry to make sure standards are properly implemented, The World Bank said firms might also need support to relocate factories out of residential areas and into purpose-built facilities with safer working conditions.