Bangladesh's readymade garment (RMG) sector could be on the cusp of a transformative leap, with the potential to earn up to US$94 billion in annual export earnings by 2029, if the country expands into non-traditional markets and embraces manmade fibre (MMF) production.

This ambitious amount is expected to be achieved at an average annual growth rate of 15 per cent, which would require coordinated reforms across trade, industry, and finance, according to a new diagnostic report jointly released by the World Bank, IFC, and MIGA.

Beyond export earnings, the report outlines how strategic reforms and sectoral investments could create over 664,000 new formal jobs in the domestic paint and textile dye industry, and formalise hundreds of thousands more through the digitalisation of financial services.

Additionally, unlocking housing sector potential could draw US$2.0 billion in private investment into construction and allied industries, providing another major boost to employment and economic resilience, according to findings presented at a high-profile event on Tuesday.

The adoption of reforms in digital financial services (DFS) could create up to 460,000 new jobs, including the formalisation of around 360,000 informal positions, the report said.

The analysis was shared at a dissemination event for the 'Country Private Sector Diagnostic (CPSD) for Bangladesh' report, jointly conducted by the World Bank, the International Finance Corporation (IFC), and the Multilateral Investment Guarantee Agency (MIGA).

The event was held at a hotel in Dhaka, with stakeholders from the government and private sector in attendance.

Suhail Kassim, Senior Operations Officer at the World Bank, delivered the sectoral insights virtually.

IFC Country Manager Martin Holtmann, World Bank's new Country Director for Bangladesh and Bhutan Jean Pesme, senior private sector specialist Hosna Ferdous Sumi, and IFC operations officer Miah Rahmat Ali and operations analyst Noor Ahmed Naveed, among others, spoke at the event.

The CPSD identified four key sectors with high growth potential where targeted private investment could stimulate significant economic development are greening the RMG sector, housing for middle-income groups, domestic production of paint and textile dyes, and expansion of digital financial services (DFS).

The report also included an overview of the country's business climate, foreign direct investment (FDI) trends, cross-cutting challenges, and institutional bottlenecks that continue to hinder private sector development.

Electricity shortages topped the list of business obstacles, followed by limited access to finance, corruption, informality, and high tax rates.

Syed Nasim Manzur, President of the Leathergoods and Footwear Manufacturers and Exporters Association of Bangladesh (LFMEAB), said the most pressing concerns for investors today are policy inconsistency, regulatory overreach, and systemic corruption.

Speaking on the challenges facing the RMG sector, Mr Kassim noted high import duties on non-cotton raw materials such as MMF, a lack of regulation on fabric waste and groundwater use, and low levels of investment in modern technologies.

These, he said, are key constraints to achieving greener and more sustainable production.

He also stressed the need for labour law reforms to ensure continued access to the EU market following Bangladesh's graduation from Least Developed Country (LDC) status, in line with upcoming European green product standards such as the Ecodesign for Sustainable Products Regulation.

To remove market distortions, the report recommended ending the cash incentives for exports of PET (polyethylene terephthalate) bottles and flakes, aligning duties on solar inverters and panels to create a level playing field, and introducing water efficiency certification for RMG firms.

In the paint and dye sector, the CPSD highlighted inconsistent customs classifications on imported inputs and the high cost of inventory holding as major barriers to domestic production.

It recommended digitising customs procedures, revising bonded warehouse policies to permit third-party operations, and improving logistics to reduce trade costs.

For the housing sector, high urban development costs and cumbersome land registration and clearance processes were seen as key hurdles.

The report called for improving access to municipal services, digitalising land records, and expanding access to housing finance to attract long-term investment in affordable housing for the middle class.

In digital financial services, the CPSD suggested policy actions to promote wholesale transactions via mobile financial services and encourage the use of structured finance by removing taxes on assets moved between originators and financing vehicles.

These steps could deepen financial inclusion and make DFS a stronger engine for job creation. The report, while optimistic about Bangladesh's growth potential, underscores the need for regulatory clarity, digital transformation, and an inclusive investment climate to fully unlock the capacity of the private sector.