Welfare wrongly distributed!

Quote:

SINGAPORE: From next month, the government will enhance its business financing schemes to support an additional S$2.3 billion in loans to help local firms gain access to credit in the current economic slowdown.

The measures will take effect 1st December 2008, and will be valid for one year at which point the enhancements will be reviewed for further extension.

The Ministry of Trade and Industry says the enhancements to its business financing schemes include increasing loan quantums and raising of government risk sharing of loan defaults.

Up to 124,000 local companies will be able to benefit from the schemes.

The enhancements are part of the government’s efforts to act early and ensure local enterprises have sufficient resources to operate.

Under the enhancements, the government also announced a new loan scheme for working capital.

The Bridging Loan Programme allows all local enterprises with more than 10 employees to access credit of up to S$500,000. The default risk is shared equally by the government and the financial institutions.

Small businesses with no more than 10 employees will have access to SPRING’s Micro Loan Programme.

The limit of this loan has been doubled to S$100,000, and the government will increase its portion of risk to 80 per cent to encourage lending to the businesses.

To encourage start—ups, the government will be raising investment capital from S$300,000 to S$1 million under the SPRING’s Start—up Enterprise Development Scheme.

Its Business Angel Scheme will also be raised to S$1.5 million as a permanent feature.

The government will also temporarily increase its co—match ratio, which means that start—ups will receive S$2 from the government for every dollar an investor puts into the firm.

Firms will also gain support in branching overseas.

To help the firms spread their wings, eligibility criteria under the existing Internationalisation Financing Scheme (IFS) will be widened.

The caps will be raised to S$300 million for non—trading companies, private non—trading companies and listed trading companies.

This will help to increase the number of companies that qualify for IFS benefits.

Commenting on the move to enhance financing schemes, Senior Minister for State and Trade S Iswaran said if the take up rate exceeds expectations, more help could be available to
businesses.

“This should have a positive effect on flow of funds — it is backed up by a loan line of S$3.9 billion available for enterprises to tap on. And if the take up rate exceeds expectation, we will make available more resources with the support of the Ministry of Finance."
— CNA/sf/yt

:End Quote

I still don't get it! And I'll bet Nobel Laureate Paul Krugman is shaking his shaggy head as well somewhere in Boston!

THE current economic model is one based on consumption. The current crisis is one based on a tightening of credit & dampened consumer sentiment due to shocks coming out of the financial sector. This is a natural correction stemming from over consumption. Simply worsened by deliberately creative 'derivatives.' As I've argued before in Uni and I'll argue again now - one cannot indefinitely create wealth based on nothing.

Any throwing of money should be at the consumers who will thus shore up demand for consumables with a net trickle down effect for the entire local economy. Jobs will be created since demand is on the 'up' due to consumer spending - provided they have money in their collective hands.

Yet money is being pumped into the supply side of this economic equation when it is the demand side that needs help? Business, just like investors, take risks. And taxpayers are asked to bear this risk in a downturn? What returns do taxpayers then get in an upturn? Tax more on businesses? FAT HOPE! Businesses have a much healthier chance of survival if consumers spend. The recovery is steadier and deeper. Simply opening up credit lines worsens the existing situation by allowing companies with poor working capital management and lousy customers (in terms of payments) to exist yet another day to wreak havoc somewhere in the future.

The short term credit and cash flow crunch once again belies the fact that it may be that the biggest single buyer of services and goods, i.e. the government, may have reverted back to its nasty habits of delaying payments for a zillion and one reasons. A loosening of payment from that quarter, contractual obligations met of course, should ease some of the M1 issues currently being faced. Perhaps even impacting some M2.

IFS schemes? To take the money out of Singapore and throw it in China? How then do we re-instate the level of demand that can prop up the local economy?

$2.3 billion in loans? $3.9 billion available to tap on? THAT is a grand total of some $6.2 billion. Not yet counting all the other schemes for re-training and re-employment efforts.

At last count Singapore was some 4 million citizens and PRs. THAT is going to work out to greater then $1,500 for each man, woman and child. Less the destitute and the low income salaried workers .... who knows how long more we'll be paying for this financiall folly - with no direct gain except the 'promise' of jobs being kept. And we all know how very likely that will be!

So, we are not a welfare state for citizens. It seems that we are a welfare state for coporate citizens. What price will Singaporeans pay?

What price will be exacted in 2010/11? Probably none. Just keep paying!

THIS is a golden opportunity for governments of the world to re-write the rules of commerce and credit so that such a meltdown does not ever occur again.

Hard work has its staunch and lasting dues.

Vote wisely if you get the chance. The next whammy that comes after another 50 years of complacency may just wipe this tiny red dot out no matter how bleeding squeaky clean the incumbents are.