Haider Al Lawati - haiderdawood@hotmail.com - The importance of savings in any country lies in the fact that there can be no investment without savings. Saving is, therefore, an investment function. In terms of a country’s tendency to save, its ability is measured by the extent to which new investments are injected into its economy. Small investors are more important than pension funds and institutional investors in many countries.
Hence, commercial banks in any country are interested in this segment, known as “key customers”. They do not own long-term deposits, but small savings, which means saving at an early age, is crucial.
At the GCC level, there is consensus that with opportunities having been made available to youth over the past years, they should have directed a part of their money to monthly savings accounts even with very small amounts of $100 or $200.
It does not matter how small an amount is, but instilling the concept of savings and making it a habit with young people and children is important.
Some countries make their citizens save by offering them incentives. Singapore is a case in point. Its compulsory saving programme is a good example. It mandates each citizen to save up to 20 per cent of their net income for several years.
In return, the government gives them incentives. For example, the value of real estate in Singapore is very high, so the government provides property to citizens in exchange for saving at a compulsory rate, otherwise the citizen will lose such privileges granted by the government. Today, a Singaporean’s share of the annual GDP is around $62.400, ranking seventh worldwide, ahead of all major industrialised nations. Singapore has been enjoying impressive economic indicators since the beginning of its renaissance and launch of projects over 50 years ago.
One such project was the Central Provident Fund (CPF), a compulsory savings scheme launched in 1955, to assist workers in directing a percentage of their monthly salaries to a future savings account. Thanks to the scheme, nearly 85 per cent of Singaporeans were able to afford their own houses.
Some experts believe anti-saving factors in many cases include lack of standardised funds for savings and different rules that govern these funds from one place to another and from one sector to another.
Systems must be unified to make these funds richer than governments from the accumulated savings to the extent that they can lend to, and sometimes finance, governments, and spend more investments on different economic sectors.
Hence, social security or retirement funds in the Sultanate must make real investments to provide comfortable savings for citizens whilst benefiting the national economy.
Generally speaking, if citizens’ savings were to be converted into short to long term, they can be invested to provide sufficient capital for small and medium enterprises in the country.
As for countries’ savings, these can be used to maintain inflation rates and exchange rate of the national currency. It can be said low savings rate in any country may prompt them to borrow from foreign countries, putting them at the mercy of other governments or foreign investments, especially during financial and economic crises.
If any lesson has to be learned from the 2008 global economic crisis, it would be that it has affected flow of foreign investments to various countries worldwide, including the Sultanate and its neighbouring countries, prompting some kind of reservation towards funding investment in the region.
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