Germany has recommended Bangladesh undergo a structural transformation to avoid the so-called middle-income trap – where the industrial sector loses its competitive edge in exporting manufactured goods due to improved compliance and increased wages.
The structural transformation should promote sustained economic growth through enhanced productivity – better meeting buyers' changing demands.
Bangladesh must also firmly uphold international labour rights and conventions – plus resolve related issues – to meet even the strictest compliance demands of the European Union's Generalised Scheme of Preferences (GSP) Plus facilities, after graduating from being a Least Developed Country (LDC) in 2024.
In addition, the country's readymade garment (RMG) production should be aimed more at maintaining the healthy functioning of the ecosystem and the global climate – considering the challenges regarding CO2 emissions and waste.
A recent policy paper by the German government said that although the "grow fast, clean-up later" approach to development has contributed to Bangladesh's economic growth, sustaining a growth trajectory will require a paradigm shift in the industrial sector.
Competing on price – rather than moving up the value chain and producing higher-value-added and sustainable products under the "grow fast approach" – poses a significant threat to Bangladesh's economy.
The report stated that although Bangladesh has improved regarding working conditions and respect for labour rights, there are still issues that require attention.
The German government had sent the "Promotion of Social and Environmental Standards in the Textile Sector, Bangladesh" policy paper to the Economic Relations Division (ERD) under the Ministry of Finance, for a programme scheduled on Monday.
The bilateral event, called "Bangladesh-German Consultations 2020," will be held at the ERD Conference Hall in Dhaka.
Rana Plaza collapse aftermath
Bangladesh has been aiming at enhancing social and environmental conditions, thereby increasing the sustainability of textile production. Recently, a number of steps have been taken in that direction.
The garment sector has become one of the safest, globally, after the Rana Plaza incident; through recommendations of the Accord and Alliance.
The minimum wage has increased. While a lot still has to be done to further improve the sector, the government – as well as the private sector – is increasingly responding to the need for better working conditions and fair wages, which respect fundamental workers' rights.
At the same time, global export markets for textiles and garments are becoming increasingly competitive, posing a considerable challenge to Bangladeshi suppliers to invest broadly in sustainability.
Less sustainability, however, is no longer a solution as this issue is becoming an increasing element of competitiveness.
Meanwhile, on the demand side, consumers on the European market are increasingly considering sustainability concerns in their purchase decisions, according to the German policy paper.
Skill development of mid-level managers – especially in Bangladesh's small and medium-sized factories – is vital to depart from the "grow fast, clean-up later" model of development and shift towards a development path based on the principals of the green economy, Germany recommends.
The country also recommended supporting the industry to implement innovative solutions regarding the management of waste, wastewater and exhaust gas to significantly minimize environmental pollution and health risks.
Moreover, these moves contribute in departing from a linear model of production towards the principals of a circular economy, where products, components and material are reused, repaired and remanufactured or recycled.
Germany further said that although Bangladesh committed in 2016 to establishing a full Employment Injury Insurance for the RMG sector, the government never took concrete steps regarding the matter.
A catastrophe similar to Rana Plaza would leave the workers without an appropriate compensation mechanism and would risk all achievements in terms of sustainability and compliance.
Donations from the welfare funds also do not offer full and sufficient claim rights.
Germany urged Bangladesh's government to continue its efforts in establishing statutory injury insurance for RMG workers in order to ensure that employees are properly protected from the consequences of work-related accidents and illness.
Bangladesh is the largest beneficiary of the current trade facilities – duty and quota free – on the EU market, which has been a key factor for the success of the country's RMG sector.
Germany has pledged to help Bangladesh's government's institutional capacity to improve the regulatory framework regarding labour, social and environmental standards as well as their enforcement, said the policy paper.
The German side also intends to involve retailers and consumers through relevant mechanisms, which has been welcomed by Bangladesh Garment Manufacturers and Exporters Association and other industry leaders.
In order to achieve the status of a Middle Income Country by the nation's 50th anniversary in 2021, Bangladesh's government is pursuing an export-oriented growth strategy.
The seventh five-year plan, as well as the Sustainable Development Goals financing strategy, both stress structural transformation and sustainable industrialization as priorities to achieve this goal.
Commenting on the policy paper, Federation of Bangladesh Chambers of Commerce & Industries' Vice-President Siddiqur Rahman said, "Bangladesh is far ahead of a lot of countries in terms of labour rights and factory compliance.
"The sectors where Bangladesh is lagging behind will not be difficult to improve upon. We still have another seven to eight years to resolve such issues. We will have no problem qualifying for the GSP Plus facilities."
At the discussion programme scheduled for Monday, Fatima Yasmin, ERD secretary and Dr Ute Heinbuch, head of the South Asia Division of the German Federal Ministry for Economic Cooperation will represent Bangladesh and Germany, respectively.
At the meeting, Bangladesh and Germany will discuss the following policy papers: "Renewable Energy and Energy Efficiency," "Justice Reform and Human Rights," "Adaptation to Climate Change in Urban Areas," "Biodiversity," "Social and Environmental Standard in the Textile Sector," and "The Rohingya Crisis in Cox's Bazar."