Budget in the Context of Facilitating Investment in Bangladesh

Introduction:

Growth and development in Bangladesh is constrained by poor quality of infrastructure. Public Investment will continue to play a critical role in overcoming this infrastructure deficit. Yet, the Annual Development Program (ADP) continues to be underutilized every year, and projects have large time and cost over-runs. Recent reviews indicate weaknesses in the systems and procedures surrounding public investments and suggest that a strengthening of the capacity to manage public investments may have a significant positive impact on development outcomes.

Bangladesh Investment Related to Budget:

Investment properly depends on budget because big budget increasing investment and low budget decreasing investment. Big budget (2013-2014) means that it is developed by surrounding of the country. So investors inspired to invest of the country that develop communication, employment increases, industrialization, Infrastructure, Repatriation, budget deficit, Subsidy, inflation decreases, economic growth (GDP), increasing gross investment and Foreign Direct Investment (FDI). Low budget is opposition to big budget.

Bangladesh Investment Issues and Impact in Budget:

•    i.    Budget Deficit: To achieve sustainable economic growth of a country balanced budget is not only important but necessary. This research aims at investigating the true impact of the budget deficit on the economic growth of the country. Regression analysis is conducted to ascertain the impact of budget deficit on the GDP, and explored a negative impact of budget deficit on the economic growth.

•       ii.  Government Export Subsidy: Goods and services produced domestically but sold in other countries without tax. That is to way, local investment increases and domestically production also increases.

•     iii.    Foreign Direct Investment (FDI): FDI generally has a positive impact on economic growth in developing countries. The investment plans in Bangladesh do not have appropriate mechanisms for the progressive development of foreign investment. In the absence of a long-term industrial development strategy, the reforms initiatives have had negligible success to create conditions favorable to promote foreign direct investment.

•     iv.    Inflation Rate: If inflation rate decreases, investors will influence to invest increases for the country.

•       v.     Return on Investment (ROI): "Return on Invested Capital, a measure of company performance. The company’s total capital is divided into the company’s income (before interest, taxes, or dividends are subtracted). How both the "return" and the "investment" are derived and what time period is covered. Three ways to maximize ROI. Minimize costs, maximize returns, and accelerate the returns.

    vi.            Cash Inflow: Cash inflow means that more increase of currency or money. Such as, remittance, FDI etc.

•   vii.    Cash Outflow: It means that export of the money and import of the production. Government reduces tax, investors influence invests of their money in import of the production.

• viii.    Political Stability: Political instability of a host country changes the rules of the game under which businesses operate that has an impact on profit and future FDI inflows.

•     ix.    Gross Domestic Product (GDP) Rate: If in this year investment increases on industrialization and farms that is to say total market value of all goods and services of Bangladesh increases a period of time, the next year GDP rate will increases.

•       x.    International Integration: International integration is another determinant associated with investment. Countries that aggressively pursued integration with the global economy the low level of FDI incoming in Bangladesh indicate poor integration with the global economy. Other evidence of poor integration with the global economy is the low level of FDI inflows and per capita remittance receipts.

•     xi.     Investing in Capital Markets: Social investors use several strategies to maximize financial return and attempt to maximize social good. These strategies may satisfy the ethical principal of non-harming but with the exception of shareholder engagement, they do not necessarily create positive social impact.

 Impacts for International Investors:

•         i.       Sovereign Debt: Budget deficits can lead to lower sovereign debt ratings, if structural balances remain in negative territory for too long, while budget surpluses can lead to lower interest rates on sovereign debt due to an improved credit rating.

•       ii.      Tax Code Change: Structural deficits necessitate changes to either revenues or spending, with the former being the easiest to implement. Tax increases aimed at improving these deficits can negatively impact corporations or equities.

3. Currency Valuation: Financial markets can quickly lose faith in countries unable to resolve structural deficits, resulting in potential currency devaluations, while increased confidence in a country can lead to higher currency valuations.