It can be incentivize investment and savings by changing relative cost of either action, in an economy. Both savings and investments have a positive correlation and impact to over all economy of the nation. For example if the economy is in expansionary phase with a rapid growth, the government might disincentivize the investment or consumption/expenditure would then be interested to increase nation’s savings, in the other hand if the state of economy is in recession, the savers will be encouraged to spending or investing to jump-start the economy.
There are several ways government can encourage investment and savings adjusting the costs of savings and investing, but will discuss the two major ways to affect both investment and savings.
MONETARY POLICY
Since our economy does not accommodate interest rate, we need our central bank to develop an alternative instrument to encourage investors to involve economic activities. One such a instrument can be an interest free loan for small business to finance cyclical business downturn, to cover their working capital shortages during economic recession, and collect back during economic heatup to slow inflation., and monetary expansion. Other financial instruments can be tailor made for specific industries.
TAXES
The other major instrument that government can use to evourage invedtment and savings is tax reduction, for instance the government provides tax breaks to targeted industries such as medicinem agriculture, infrastructure or those with a cross–cutting affects to multiple sectors.
EDUCATION AND HEALTHCARE
Governments can encourage investments through developing the nation’s human capital. If the country setup a policies that have a positive affect to the human capital such affects are quality educationation and healthcare system that can habe a long-term economic growth. Therefore, human capital devolopment is an other form to encourage investment and savinof the economy in the in the long-run.
PROTECT RIGHTS
Property rights is the theoretical framework that determines how the resources are used by both the government and individuals and there are four broad components such an res
1, Right to use the property
2. Right to earn income from the property
3.The right to transfer the property others and
4.The right to enforce property rights through te legal system.
INFRASTRUCTURE
Infrastructure is technically defined as those roads, electricity, telecommunication, water sanitation and, sewage system, however, the data availability of this sectors is somewhat cumbersome, therefore; researchersrely on data from public capital which is much easier to identify in developing countries, but public capital has a broader sense that is quiet unclear for its purposes to the extent of it’s relevance to assess infrastructure role of growth. The
public can iclude fire and police stations, all buildings, schools, hospitals, government offices housing, which makes unclear for evaluation purposes and infact it is decreasing since shraub pointed (2011), and the importance of private sector has gained importance in infrastructure. Then public capital has a positive affect to the economic growth but underestimates the affects of infrastructure.
Somaliland can allocate around 25% of the GDP to develop infrastructure and targeted infastructure subsector s such as energy, agricultural development, and roads.Investing infrastructure will be a key intervention for creating new jobs to jump start the economy, mainly to farming community and urban centers, I will be arguing that the government of Somaliland to utilize national service program as a pilot project for infrastructure development in the rural area and the development farming community while encouraging private sector to take the lead of developing new source of
energy.
CONCLUSIONS
The government can enourage investments and savings of the economy for several ways such as monetary policy in both expansionary and recessionary period of the economy. Government can also use human capital development to install policies for economy to encourage investment and savings growth. Free trade can be an other investment instrument which government can use to economy to encourage courage investments and savings.Tax savings for the development of renewable energy will boost private sector development of infrastructure and helping innovations and preparing the nation to compete global knowl edge based economy.
