Bangladesh's government has approved a draft labour law that will allow workers in export processing zones (EPZs) to form unions - a week after both the EU and US criticised the country's progress on improving worker rights.

However, the proposed Bangladesh EPZ Labour Act 2014 explicitly avoids the term 'trade union', with the groups instead being referred to as 'workers' welfare associations'.

The draft law is consistent with the Bangladesh Labour Act 2013, and upholds all existing facilities for workers employed in the EPZs, M Musharraf Hossain Bhuiyan, cabinet secretary of Bangladesh, told reporters after the meeting.

"The proposed law has been prepared in consultation with all stakeholders, including the owners of the industries located at the EPZs," the cabinet secretary noted.

Until now, there have been gaps between national law and international standards in EPZs, with their separate status as cause for concern, especially the fact that unions are barred.

Factories in these zones have been outside the reach of labour and safety inspectors covering the rest of the country, with the EPZ governing authority retaining "nearly complete discretion" on labour-management relations.

Issues including recruitment, working conditions, maternity facilities, the workplace environment, working hours, wages, and the formation of labour courts have been incorporated in the new draft.

The government's latest move comes after the US last week said Bangladesh must do more to address the worker rights and safety concerns that led to the suspension of its Generalized System of Preferences (GSP) trade benefits last year.

In particular, the Action Plan given to Bangladesh by the US when GSP benefits were suspended in June last year calls for the rights of workers in EPZs to be brought in line with the rest of the country.

Likewise, the European Commissioner for Trade, Karel de Gucht, told a recent meeting of the Organisation for Economic Co-operation and Development (OECD) that improvements in labour rights must be extended to the EPZs.

"Bangladesh's labour law still needs to address restrictions on trade union formation and membership," he added.

There are eight EPZs in Bangladesh in Chittagong, Dhaka, Mongla, Ishwardi, Comilla, Uttara, Adamjee, and Karnaphuli, employing around 388,000 workers - of whom 250,000 work in the ready-made garment sector.