UK-based retail giant Tesco is taking steps to boost productivity in the Bangladesh apparel industry by investing in a new training centre to teach leadership skills and production techniques to garment workers.

The Apparel Skills Foundation being set up in the Bangladesh capital of Dhaka is jointly funded by the UK government's Department for International Development (DFID) - and Tesco says it will contribute to the country's long-term competitiveness.

The facility will be open to all garment producers in Bangladesh, whether or not they supply Tesco, and is expected to train mid to lower level managers from over 100 factories by the end of 2015.

The knock-on benefit will be "to improve the lives of up to 250,000 garment workers in Bangladesh," Tesco says, by improving conditions, pay and opportunities.

Factories making use of the Skills Foundation will be required to share cost savings with the workforce in the form of reduced overtime and increased basic wages.

The classroom-based course will show managers how to improve productivity and working conditions, while factory owners will also be educated on better worker management, ethical leadership and new production techniques.

Initiatives include giving workers productivity bonuses and implementing mentoring and buddy systems for new workers.

The pilot programme for the Skills Foundation launched with three factories in May 2012 and the results so far have been "very promising," Tesco says.

In the past five months, workers in the pilot have seen their pay go up by 19% per hour, monthly working hours are down 16%, labour turnover is down 45%, absenteeism is down 25% and efficiency is up 20% on the pilot line.

"Increasing efficiency and productivity will improve the lives, pay and conditions of garment factory workers while enabling us to deliver high quality clothing to our customers at affordable prices without comprising on ethics," said Dame Lucy Neville-Rolfe, Tesco's executive director for corporate and legal affairs.

"This is the right thing to do and a win-win for Tesco, our suppliers and their workers, and our customers."

Bangladesh is the world's largest clothing manufacturer after China, with more than 3.5m people - 85% of whom are women - employed by the sector. The garment industry is the country's largest foreign currency earner, contributing nearly 80% of all export earnings at around $19bn last year. 

As well as Tesco, Bangladesh's low labour costs have helped it secure business from international apparel brands and retailers like Gap, JCPenney, Wal-Mart, H&M, Kohl's and Marks & Spencer.

But it has also been beset by protests and violence by Bangladeshi garment workers demanding higher wages.

While most other Asian garment-making countries have hiked their minimum wages over the past year, workers in Bangladesh last saw their pay increase in 2010, when the monthly minimum pay was raised to BDT3,000 (US$36).

Workers are currently calling for at least a 30% pay hike saying their wages have not kept pace with rising inflation. And in September Swedish fashion giant H&M called on the Bangladesh government to raise minimum wages at the country's garment factories and to carry out annual wage reviews.

But industry experts also agree that if Bangladesh wants to stop Western clothing brands and retailers from shifting their sourcing elsewhere, factory owners must improve productivity so they can afford higher wages and bring an end to recurrent labour unrest.

Research from consultancy firm McKinsey & Company earlier this year said it expects labour costs to steadily increase as buyers require more fashionable and sophisticated products like outerwear, tailored products, ladies' intimates, and functional clothing - which will put pressure on the supply of suitably-skilled workers.

Consequently, productivity levels will need to improve - not only to mitigate rising wages, but also to close the existing productivity gap with other supplier countries. At present there are just 50 to 100 local garment manufacturers able to produce more advanced product categories, productivity, services, and compliance, the consultants estimate.

Tesco opened its sourcing office in Dhaka, Bangladesh in 2002 - one of eight that it has across the globe - and last year exported GBP310m worth of products from Bangladesh.