The report cites evidence that heroin consignments destined for Europe are increasingly passing through Bangladesh.
The topography of Bangladesh, particularly its long borders with India and Burma, make it conducive to heroin trafficking, said the report.
Bangladesh police are quoted in the report as saying that the Chittagong seaport is the "main exit point for drugs leaving the country," while the rest is smuggled out through Sylhet and Chittagong airports.
The report also cites press reports of couriers trying to smuggle heroin to Europe on their way from Pakistan through the Zia international airport in Dhaka.
The report observed that the use of Bangladeshi courier services for drug trafficking is on the rise, with drugs shipped primarily to Canada and South Africa, citing the seizure of 550 kilograms of ephedrine in February 2007.
The Vienna-based body also reported there has been an increase in the availability of Indian heroin in Bangladesh, along with Indian codeine-based cough syrup that is sold locally as Phensidyl.
The board also called on the Bangladesh government to attach high priority to drug control issues and to ensure that all partners involved in the implementation of the national drug control strategy have the support and resources necessary to enable them to carry out their activities.
Drug abuse is also reported to have spread to rural areas, with heroin, Phensidyl, and cannabis being the most frequently abused drugs.
The board also noted that increased drug trafficking in Bangladesh could further worsen the spread of HIV/AIDS within the country.