Despite our sound macroeconomic foundation, Singapore's highly open economy is acutely vulnerable to contagion effects of global and regional economic crises.
Ever since Independence, businesses in Singapore have relied on government fiscal policy interventions to tide them over when crises hit. The more serious the crisis - the more generous the Government.
Over time, businesses have become accustomed to the State's willingness to take effective and timely policy measures to manage the adverse effects.
In order to stimulate and sustain progressive growth, the Government's interventionist approach during a crisis is to manage short-term problems to attain longer-term objectives.
By virtue of Singapore's vulnerability to crises, the Government should explore more effective, equitable and sustainable solutions to help businesses.
One way is to introduce a mandatory contingency provision fund, requiring businesses to save a small token percentage of their net income, progressively.
Using net income to fund savings, will not burden business cost.
These savings, cared for by the state, similar to the Central Provident Fund (CPF) Board, would be used in times of crisis.
While it is hard to predict crisis frequency, savings accumulated over time would be significant.
During crises, while waiting for government help to kick in, cash flow remains the main concern for small and medium-sized enterprises. Instant cash becomes a life-saver in dire situations.
When businesses are seen helping themselves, it serves to allay underlying unhappiness of implicit subsidy using taxpayers' money to support commercial enterprises.
By cost sharing, businesses are freeing funds needed by the State to deal with protracted exigencies.
As the world's economies are getting more intertwined and connected, future global and regional economic crises will intensify. For a small city-state lacking in natural resources, it's incumbent on Singapore to look beyond budget surpluses and reserves to fight a perpetual war.
Chow Kok Fai
