Bangladesh is an agricultural country with full of natural resources. The country became independent in the year 1971.It has been almost forty years that we got independence but still the economy of the country did not click enough. In spite of having small area, it is one of the most densely populated countries of the world. Therefore it has a large consumer market. But due to the lack of strategic management country has been suffering to develop an improved business environment. Business environment of Bangladesh will be much better than it is right now if some major issues can be added or removed. It is true that efforts have always been taken to achieve a developed business environment in Bangladesh but not been properly implemented yet. Domestic savings in Bangladesh has remained at around 20% of total GDP in the past few years. Role of domestic savings & investment in Bangladesh
Economic growth of Bangladesh is highly dependent on the basis of domestic savings and investment from both public and private sectors.
The process of economic growth of a country depends on the ability of firms to expand their productive capacity through domestic savings and investment. Proper relationship between saving and investment in the macro economy helps to attain desirable business environment. The term domestic saving is highly related to domestic investment. By not spending all of income in buying consumer goods and services, it is possible for resources to be converted as fixed capital such as factories and machinery. Saving can therefore be vital to increase the amount of fixed capital available, which will contribute to increase economic growth. However, increased domestic saving does not always match to increased investment. This means that domestic saving may increase without increasing investment when there is a short-fall of demand (for reduction of production, employment, and income therefore recession) rather than to economic growth. For short-term, we can say that if saving lags behind investment, it can turn to a growth of aggregate demand and there must be an economic boom. For long-term, when domestic saving goes down than investment, it eventually reduces investment and detracts from future growth of a country’s economy. Domestic savings in Bangladesh has remained at around 20% of total GDP in the past few years. Measures to boost up domestic saving and investment
Fulfill Saving-investment gap – government should pay particular attention to the relationship between domestic savings and total investments in the economy. High Saving-investment gap may signify the impending problem in the balance of payment account.
Consumption behavior – After the 2000, Bangladesh has had a major shift in consumption pattern. The major contributing factors to over consumption are luxury imports and tourist expenditures. Adequate control on consumer credits should be set up pro-active campaign for saving culture should be implemented.
Incentives for savings – in many emerging economies, commercial banks often play central role in which domestic savings are channeled. Increase in variety of saving products would increase the level of investment.
Increase tax structure that based on consumption rather than income would also promote domestic savings and investment.
Focusing on SME-Government has to come forward to spread SME all over the country. Rather than forming a industry it will be better to finance SME. Financing the SME’s will increase domestic savings and investment locally. Risk management policy must be introduced. This will encourage the small investors to contribute in domestic investment. Foreign direct investment (FDI)
The issue of Foreign Direct Investment (FDI) has been receiving phenomenal attention from many governments. Bangladesh is not lagging behind from it. Economic development for the developing countries like Bangladesh is largely dependent on FDI.