Govt should not bail failing companies out

Investors who purchased Hyflux bonds knew they were not rated but were attracted by the high interest rate, says the writer.
Investors who purchased Hyflux bonds knew they were not rated but were attracted by the high interest rate, says the writer.PHOTO: ST FILE

Why should taxpayers' money be used to bail a failing company out just because investors have lost money on Hyflux bonds (Clash over $2.7b of debt at Hyflux heats up, Feb 27)?

Investors who purchased the bonds knew they were not rated but were attracted by the high interest rate.

However, high interest rates also come with high risk.

In order to protect the economy, it is important that the Government intervenes through regulation.

But protecting corporations just because they are large or important undermines democracy.

Bailouts impede necessary structural change in the economy, and corporations should be allowed to fail.

Capitalism is an economic system that is supposed to reward merit.

Singapore is a capitalist country and needs to let businesses do their thing.

Also, if the Government bails this company out, then why shouldn't it bail another out?

Keeping companies on life support holds back healthier firms and harms the economy overall.

While some risk is good, having bailouts as a safety net encourages recklessness and excessive risk-taking in the quest for profit.

Cheng Choon Fei

A version of this article appeared in the print edition of The Straits Times on March 06, 2019, with the headline 'Govt should not bail failing companies out'. Print Edition | Subscribe