Changing the investment multiplier for remittance dollar
What do you top policy-makers say?
Every dollar that non-residents send to Bangladesh has a multiplier effect of 3.3 on overall economy in GNP terms.
In lay-man's term, if some worker sends 1 dollar to Bangladesh, it does not increase the GNP by 1 dollar, rather it increases the national GNP by 3.3 dollar. Its a very promising statistics, isn't it?
Don't be too ecstatic. Take a second look.
Where does that that 3.3 dollars of additional GNP comes from? 2.8 dollars from consumption and 0.5 dollars from investment.
Now if 2.8 dollars is spent on consumption - its a good sign too. The market size growth rate is healthy.
However, if all of those consumption is fulfilled by imported goods, it wouldn't be a good news. So, to be on the safe side, the ratio of imports in local consumption has to go down that would help us to prevent those 2.8 dollars to take an U-turn and go out of the country again.
How do you do that? Not easy task, but to achieve that two pronged strategy is needed.
Increase the overall investment multiplier of the economy.
Increase the share of the dollar amount that goes into investment when a remitter send 1 dollar of their hard-earned money; i.e. push that 0.5 dollars to something higher.
How do you do that?
If we start talking about that in detail, it would need another afternoon. So, we leave that to the experts. Or search the scholar.google.com
But here is a clue - change the incentive structure to the businessman. Do not give cash incentive directly on export dollars. Businessman will export as long as they can sell it. What they do not find attractive is - specifically the lazy ones who are after quick money - they do not re-invest their export-earned dollars. Give incentive to investment - through the use of tax filing system. In other words, do not give cash. Give double tax breaks on investment dollars. Give tax break in R&D dollars. Give tax break in donations to educational institutions.
Its very unfortunate that govt gives tax break if someone gives handout to the poor (through donating to the central relief fund), but govt do not give tax break if someone gives poor students money to study, or make an investment in an educational institution.
Hopefully the Chief Adviser, Finance Adviser and NBR Chief will look into these issues - for the next budget (short term). We also expect you to start a national dialogue to devise a strategy about how to increase the nations "investment multiplier" so that multinational companies do not come here only to sell their products, but also choose Bangladesh as their investment destination.
If you thought some of the ideas are worth of your reading time, please forward it to others. If you have an ear to the columinsts in regular traditional media, please forward it to them. If you have an ear to the journalists and news editors of the electronic media, discuss it with them. Hope they would look at the suggestions and give due diligence.
Tags: Bangladesh , Economy , Business , Investment , Remittance , Dollar
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