'Corporate profit needs to be invested in industries'

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FE Report
It is less likely that investment in government savings certificates would shift to enterprises or share market only if the rates are reduced, economic adviser to the prime minister Dr Mashiur Rahman told the FE.
"No survey based data is available who invested in the certificates but my occasional visits to national savings offices show that those who come to these offices are elderly women, many of them widows, and occasionally I meet retired officials older than I am," he said.
Dr Mashiur said the household savings alone cannot provide adequate resources for entrepreneurial investment.
"Unless corporate profit is invested, paucity of investment in industry will not be solved," he said adding, "there is little information about the use of corporate income and profit."
Debt financing has created a lot of problems including bad debt, bad investment and excess capacity, Dr Mashiur said.
"We continue to think of debt financing of investment but the focus should be also on equity market," he said.
High interest rate encourages adverse selection and may lead to moral hazard, he opined
"Some people may borrow to invest in ambitious projects without considering their viability and if they fail, much of the risk is shifted on to the credit institutions," he explained.
If such investment is made, the next step is to seek interest rate waiver, rescheduling, subsidy, protection etc, he added.
The adviser said low interest, on the other hand, may not be adequately remunerative to the savers, especially the small household savers, and may have an adverse impact on savings and intermediation.