Saving and Investment in Bangladesh

Chapter Name

Saving and Investment in Bangladesh

QUESTION - Definition of Saving and Investment.

Savings means setting aside money on a regular basis, preferably from every
paycheck. But to save one must spend less than he can earn. The portion of
disposable income not spent on consumption of consumer goods but accumulated
or invested directly in capital equipment or in paying off a home mortgage, or
indirectly through purchase of securities.

Investment consists of putting savings in various areas such as fixed deposit,

mutual funds, gold, etc. which generates a rate of interest return on your invested
money. The challenge in investing is proper financial planning to get maximum
profit.

Investment means spending your savings to earn profit.

QUESTION- Key differences between Savings and Investment.

Topics Savings Investment

Meaning Savings means to set aside a part of Investment is defined as the act of putting
your income for future use. funds into productive uses.

Purpose People save money, to fulfill their Investments are made to generate returns over
unexpected expenses or urgent money the period that can help in capital formation.
requirements.

Risk No or comparatively fewer chances of With an investment, there is always a risk of

losing the hard-earned money. losing money.

Return Savings provides comparatively less Investment provides higher returns than
returns than investment savings, as there is a nominal rate of interest
on savings. However, the investments can
earn money more than the invested amount, if
invested wisely.

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Access You can have access to your savings, In the case of investment you cannot have
anytime because they are highly easy access because the process of selling the
liquid. investments takes some time.

QUESTION- Guidelines for Investment.

Buy low and sell high

Selling an investment for more than you paid is how you make a profit. The idea is simple, but
it’s a challenge to do it consistently. The historical trend of a stock’s price may help indicate
what might happen in the future, but there are no guarantees. When you research possible
investments, many advisors recommend that you focus on the investment’s objective (in other
words, whether the goal is to give investors income, growth, safety, or some combination of the
three), risk profile, and how well it fits into your overall portfolio. Try to avoid buying a stock at
its high point. Look for opportunities to buy stocks with good potential at low prices after a
major market downturn.

As an alternative, some investors use a strategy called dollar cost averaging, investing equal
amounts of money on a regular basis. They purchase more shares when prices are low, fewer
when prices are high, with the goal of reducing the average cost per share over time.

Diversify

Divide your money among different types of investments to reduce your risk. Have a balance of
different types of investments in a variety of companies and industries.

Buy and hold

Some investors overreact to news items they read or “hot stock tips.” They start trading all the
time, buying and selling investments very quickly in an attempt to make quick gains. These
strategies rarely work and can put you in serious danger of losing your money. Stay objective
and focus on the long term. Be an investor, not a gambler. Avoid the impulse to react to sudden
changes in the market or to buy the latest hot stock.

Decide when to sell

One of the keys to successful investing is deciding when to sell investments that are doing poorly
as well as those that have increased in value. Most professional investors set strict guidelines for

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themselves regarding the specific price, either high or low, at which they will sell. To cut your
potential losses and maximize your gains, consider adopting the same approach. Review your
portfolio on a regular basis to see which investments have significantly increased in value, which
have dropped, and whether the time to sell is now.

Pay attention to costs

Taxes, fees, inflation, and other costs can all affect your return on an investment. It’s wise to
consult with an investment professional and your tax adviser regarding the best way to minimize
these costs.

Keep track

Whether you invest online or through a professional, it’s important to keep track of your
investments. A fast and convenient way is through online account access offered by many
investment brokerage companies. This service allows you to view balance and transaction
information, transfer money, contact customer service, and more. It’s usually provided for free.

Finally, stick with your plan

Periodically review your investing plan so that you don’t lose sight of your goals. Adjust your
portfolio as needed to maintain the mix of investments you want at your target level of risk.

Take tax consequences into account when you buy or sell investments. Read more in the
article Minimize investment taxes.

Question - Bangladesh’s Initiatives to Attract FDI

Bangladesh undertakes a series of initiatives to attract FDI. These are as follows:

Reforms and liberalizations

I. Open Market: Bangladesh opened up its market for foreign investment up to 100% foreign
ownership without few reserved sectors like production of arms and ammunition and other
defense equipment, and machinery, forest plantation and mechanized extraction within the
bounds of reserved forests, production of nuclear energy and security printing (currency notes)
and minting.

ii. Private Sector’s Ownership: Government has enacted a law in the parliament enabling the
private investors to set up private Export Processing Zones (EPZ). The units in private EPZ will
enjoy facilities similar to those in government EPZs. The Private Power Generation Policy has
been formulated paving the way for private investment in power generation for which a new

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Electricity Act and a regulatory commission is on their way. Private investments have already
been allowed in gas exploration, gas development, power generation and other mining and
exploration activities.

iii. Legal security for investment: Foreign Private Investment (Promotion and Protection) Act,
1980 ensures legal protection to foreign investment. Bangladesh is a member of Multi-Lateral
Investment Guarantee Agency (MIGA), Overseas Private Investment Corporation (OPIC) of
USA and International Centre for Settlement of Industrial Disputes (ICSID), World Intellectual
Property Organization (WIPO) and World Association of Investment Promotion Agencies.

International road shows and entrepreneurs meet

Bangladesh Board of Investment (BoI) organized a number of international Road Shows and
entrepreneur’s meets in Hong Kong, Germany, India, and London, Japan regularly from 2009. In
2015 Road Shows were organized at England, Netherlands, France and Japan.

QUESTION- Why Bangladesh is considered now a new hotspot for investment?

Investments have seen a sharp rise due the government’s higher spending on infrastructure
and the power and energy sector

Government initiatives such as establishing Special Economic Zones (SEZs), mega

projects, and regulatory reforms to promote business have turned Bangladesh into a
hotspot for investors from home and abroad. In recent months, Bangladesh has witnessed a
sharp rise in Foreign Direct Investment (FDI) and even recorded the largest ever foreign
investment. Investments have seen a sharp rise due the government’s higher spending on
infrastructure and the power and energy sector.

Special Economic Zones lure foreign investment

Investment is the topmost priority of our government. As a pro-business government,

Prime Minister Sheikh Hasina has taken bold and timely steps such as establishing SEZs,
power plants, the construction of the Padma Bridge, and the Dhaka -Chittagong four-lane
highway. “On the other hand, it is offering incentives to export-oriented businesses as
well. As a result, considering business prospects and profitability, investors from home
and abroad choose Bangladesh as the destination for investments”. In the years to come,
Bangladesh will lead the Asian countries as a receiver of FDI, he added.

Everyone appreciate the government initiative to establish SEZs as it is very difficult for
a businessman to purchase or find the space for setting up factories. Investors will enjoy

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a lot of advantages making investments in SEZs. We have seen lots of development in the
power sector, which increased the power generation capacity. The government has to go
for reforms so that we can reduce cost of, and improve ease of doing business.

Policy reforms boost investor confidence

In a bid to encourage private sector investors from home and abroad, the government went
for massive reforms in rules and regulations. As part of its reforms, the government has
enacted the One-Stop Service Act 2017 to provide services under a common roof within a
shorter span of time. It has brought changes in the investment environment encouraging
investment. The One-Stop Service is a fully automated online platform where one can be
registered sitting at home from any part of the world. One-Stop Service is a good initiative
taken by the government. If it is smoothly run, it will bring significant changes in the
investment climate of Bangladesh.

Proper implementation and continuation of steps for sustainability

The country’s private investment has started to increase. The previously stagnant situ ation
was caused by inadequate infrastructural development and shortcomings in the power and
energy sector. Now that these are on track, what is required is the continuation of the
initiatives, along with proper implementation and development.

Growth of public investment is very much higher than private sector investment. It means
the country cannot reap the benefits of public investment. This is because of lack of
effective implementation of projects. In reaping the maximum benefit of public
investment, timely implementation of projects to ensure the required infrastructure is a
must.

As an essential element of business, electricity generation has given an extra mileage to

boost private sector investment. The government should continue to invest on
infrastructure as a rise in public expenditure will attract private investment. In making
development sustainable, Bangladesh has to increase port capacity and think about
building a deep sea-port as trade volume would jump sharply due to investment.

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Questions - Recommendations to Improve Investment Climate in BD

1. Decreasing number of permissions/registrations/licenses with a predetermined time frame/one

stop investment requirement services.

2. Ensuring hassle free and in time delivery of industrial utilities like Electricity, Gas and water
etc.

3. Restructuring investment promotion organization i.e. the Board of Investment with new
management.

4. Special investment attraction drive with specific project proposals to attract local and foreign
investment.

5. Activating entrepreneurship promoters like better business forum or regulatory reform

commission.

6. Developing infrastructure as per requirement of tomorrow’s business.

7. Developing sector specific demand driven skilled manpower with specific technical
knowledge.

8. Establishing investment promotion agency.

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