Economic downturn Should the govt help businesses?
Dear Mr Tan, 

I’ve read that some SME bosses are asking the government to do more. I’ve also read some people object to this request, saying that in good times when the company makes money, the bosses enjoy,  but when problems come they ask the government. So the government should not help.

Hold that thought for a moment. Suppose a individual is retrenched...does the same argument apply? In good times when they have a job and get bonus and increment, the person enjoys...:and when they get retrenched and don’t have enough, should they be held on the same argument?

Some may say as an individual they may not be making a lot in the first place, but then not all businesses are laughing all the way to the bank either ...

Tan Kin Lian reply

During normal times, businesses make profit and pay tax to the government. Individuals earn a good income and pay tax to the government.

During an economic downturn, it is justified for the government to help businesses and individuals. 

I suggest that the financial assistance should be in the shape of a soft loan to the business and individuals. The loan will carry a low rate of interest (e.g. pegged to the rate of inflation) and has to be repaid in the future. 

The amount of the loan for a business can be based on the rental expense and wage bill. For an individual, it can be based on the loss of income, e.g. if they are retrenched or put on partial no-pay leave. The soft loan should be made available for the duration of the downturn.

Some of the soft loan to business and individual will not be repaid, e.g. due to bankruptcy. The loan can be written off. I expect that the proportion to be written off should be around 20% (this is just my guess).

I prefer a soft loan, which has to be repaid, rather than an outright grant. I believe that the loan will help the business or individual, but will not lead to moral hazard or the entitlement mentality.

Tan Kin Lian

Vote - do you agree with my suggestion?

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