55 percent Bangladeshi industries are managed by people without a college degree, says a World Bank study, stressing on firms’ capabilities and technology upgradation to create more sustainable jobs in manufacturing sector.
The findings were revealed in a report titled: ‘Gearing up for the Future of Manufacturing in Bangladesh’ published recently.For achieving its long-term development goals, improving manufacturing sector’s productivity will be critical for Bangladesh to boost export growth and help Covid-19 economic recovery, according to the lender.
More than 75 percent ﬁrm workers lack a college degree in engineering or applied science. The mean percentage of the workforce with an MBA or master’s level degree is only 2.4 percent, the report also finds.
“Labor-intensive, export-oriented manufacturing driven by RMG industry has propelled Bangladesh’s recent economic transformation, but this growth engine will face many challenges in the near future,” the WB warned in its report.
The export-led manufacturing growth model will remain central to Bangladesh’s sustained growth and job creation, but continued reliance on low labor costs to maintain the competitive edge is increasingly untenable as the country consolidates its middle-income status and its wage costs rise.
Simultaneously, major global trends—the growing use of labor-saving technologies, shifting trade patterns, and the increasing use of services inputs in production—are reducing the importance of wage costs in determining international competitiveness.
“In this changing manufacturing landscape, Bangladesh risks becoming uncompetitive on both the wage and non-wage dimensions of productivity as it seeks to diversify its export basket and move up the value chain,” the lender also warned.Most Bangladeshi ﬁrms still use basic or near-basic technologies although some advanced technologies are already in use among selected ﬁrms, suggests Bangladesh Firm-level Adoption of Technology (FAT) Survey of WB.
47 percent of ﬁrms still use handwritten processes for business management and 72 percent of them practice manual quality inspections.
While ﬁrms have started using digital technologies for sales and payments, the use of cash and traditional sales methods are still predominant.
80 percent of RMG ﬁrms use semi-automated technology in the sewing stage, and another 9 percent use automated sewing methods, the WB says.
32 percent of ﬁrms do not monitor any key performance indicators (KPIs). Almost no ﬁrms use industrial management techniques.
Diﬃculty in access to ﬁnance, especially among small and medium enterprises, is a major constraint for technology adoption in Bangladesh.
Around 35 percent of ﬁrms and 50 percent of small and medium enterprises (SMEs) report diﬃculties in access to ﬁnance as the top obstacle to adopting new equipment, machinery, software or processes, according to the report.
Comparable survey data show that ﬁrms in Bangladesh are lagging behind those in Vietnam in many general-purpose technologies, but can narrow this gap substantially through incremental improvements.
A 25 percent increase in the overall technology level is associated with a statistically signiﬁcant 3 percent increase in proﬁts per worker, the report said. Strengthening ﬁrms’ capabilities for innovation and technology adoption will be increasingly critical to productivity growth, WB said, adding that improving ﬁrm-level technology will be an integral element of the strategy to create good jobs in a sustained manner.
The main technology challenge facing Bangladesh’s manufacturing sector is not that advanced technologies have not arrived in the country, but that even incrementally better technologies need to be diﬀused much more widely, WB suggests.
“There is no alternative to adopting new industrial technologies as Bangladesh is going to face LDC graduation challenges apart from that of Covid-19,” Bangladesh Garment Manufacturers and Exporters Association (BGMEA) president Faruque Hassan.
However, he put emphasis on striking a balance between technology and workers in labour-intensive RMG sector, otherwise a large section of people can lose their jobs.
Local apparel makers have to focus more on non-cotton garments instead of cotton for more competitiveness, Faruque Hassan suggested saying that still 75 percent of locally produced garment are made of cotton.