Bangladesh needs to move beyond garments and invest instead in high-value added, technology-intensive sectors like engineering and electronics to lift the country out of poverty, a new policy report suggests.

Not only would these sectors bring in more money for the country, suggests labour rights group ActionAid in a new report, but they can also generate higher profits for factory owners – which have the potential to generate high wages and profits, and would yield higher tax revenues for the state to reinvest in social and economic development.

The current strategy for development has focused on job creation through the garment sector, but this "may have reached its limit," ActionAid says in its new report 'Diversify and Conquer'.

"Now, Bangladesh needs a new and innovative National Development Strategy, to diversify its economy into sectors which add more value, creating more wealth for the country and jobs for the Bangladeshi people," it says.

The researchers argue that by focusing almost exclusively on the garment sector, which now accounts for more than US$24bn in exports, or 84% of the country's export earnings, and employs 4m workers, Bangladesh has neglected investment in emerging industries.

And by relying on its plentiful supply of cheap labour, Bangladesh is stuck in a low value-added segment of the global value chain characterised by low profits and even lower wages, they say.

While the clothing industry creates jobs for women, they are poorly paid and badly treated, the report claims. And it says that while 200,000 formal jobs have been created per year in the past decade, this "barely addresses unemployment in Bangladesh," where the population is growing at a rate of more than 2m per year.

"To lift the country out of poverty, the government will need to do a lot more to support economic transformation, learning from the successful industrialisation of countries like South Korea and Taiwan," ActionAid says.