Commentary: Government assistance to businesses – is less, in fact, more?

SINGAPORE: When a prominent Singaporean businessman told me that he thought the Government should limit financial assistance to businesses because it was crippling the spirit of entrepreneurship by creating a dependency mindset, it surprised me.

That the Government should help those in need, those who can’t help themselves, is never in dispute. Social spending has been increasing over the years and rightfully so, say many. Taxpayers’ money is also often used to empower people to help themselves. In the realm of work, the SkillsFuture initiative comes to mind.

So why withhold assistance to businesses?

Up till then, most businesspeople I had spoken to had said the Government was not doing enough to help businesses in spite of a plethora of initiatives and grant schemes having been implemented. Some had issues with the conditions attached to the schemes. Others took issue with the way they were devised. Many of their concerns seemed valid.

But co-founder and chairman of Goodrich Global, Chan Chong Beng, pointed out to me in an “On the Record” interview that if businesses counted on themselves and merely saw government schemes as a bonus, none of these issues would be problematic.

Chan, who started off as a small-time wallpaper retailer in the early 80s, took his company global with no government assistance in the early days.

THE ENTITLEMENT MENTALITY

He said definitively that the Government was spoiling entrepreneurs. “Think about it. If I have rich parents, I probably will not go through the same journey because if I need money, I’ll go back to them and get it. The Government is like the rich parent. I’m glad that I came to the business without money. And because I did not have money, I was able to really learn the hard and cruel part of life. You must go through that for you to really understand the hard reality of business.”

Even when I pointed out to him that government assistance comes with conditions, he insisted that many businesspeople he knew felt they were entitled to it and often expressed anger when they didn’t qualify for certain schemes or if their businesses failed in spite of government help. 

Many netizens had criticised him for making such statements.

Some said that he probably only succeeded without assistance because he had started his business in less challenging times, when competition wasn’t as fierce as it is today. That might be a valid point until you consider that his company has weathered several storms and continues to evolve and grow even today.

While government assistance in the form of grants and internationalisation efforts have also been available to him, the mindset with which he approaches such initiatives is the key.

The Government’s job is to provide the infrastructure but it is not the Government’s job to guarantee the success of the business. The businessmen will still have to work themselves, find ways, and of course, if you think very clearly, there will be a way.

When I pointed out that many feel tough economic times, the Government’s restrictions on foreign manpower, and economic restructuring makes government help necessary, he said, “Helping them in developing capabilities is good. But at the same time, you have also to nurture them to have the culture of entrepreneurship. They have to be enterprising, they have to be hungry, because if they are not hungry, no amount of government help is going to help them.”

Chan took issue with initiatives such as the SME Working Capital Loan scheme. 

“The Government will co-guarantee the loans, but then if the SMEs are all being assessed in accordance to the bank’s requirements objectively, they probably won’t get the loan. So, back again to this guarantee, if they give the money too easily, then it will not be valued so preciously.”

“Businesses need to realise the grant that they get is actually from tax-payers. So by having this money, they are also depriving other people of it.”

IT’S IN THE GOVT’S INTEREST TO HELP

However, one could argue that such assistance doesn’t just help individual businesses. It helps workers stay employed and the economy as a whole, so why shouldn’t taxpayers’ money be used for such initiatives? Besides, SMEs will still have to present a compelling business plan in order for the government to co-guarantee the loan so why shouldn’t they get some help along the way?

He saw it quite differently.

“If they really have a good plan, I believe that they will be able to get the loan anyway, with or without government backing. When you go to the bank, you also have to show the bank your sincerity, your plan, and the bank will assess you on your future ability.”

So has government assistance in fact kept some companies artificially afloat for a period of time before they eventually succumb to economic headwinds anyway due to flawed fundamentals?

What is the Government’s role then?

Former Member of Parliament, Inderjit Singh has spoken up several times about Singapore’s business environment being more favourable to MNCs than SMEs.

Among the areas he feels the government could address better is high business costs which include commercial rents.

But my conversation with Lim Soon Hock, Founder and Managing Director of PLAN-B ICAG Pte Ltd, a boutique corporate advisory firm, revealed a different side of the argument.

“The issue of high business costs in Singapore has been around for many years now. Companies should have taken steps early to manage and overcome this. For example, if I have one dollar left, where should I deploy it to generate more than one dollar of revenue. In other words, companies should not continue to do more of the same, as the outcome would be predictable,” he said.

THE ENTREPRENEUR’S MINDSET

According to Lim, the issue is not about the amount of government assistance on offer, it’s about the entrepreneur’s mindset.

“While help is welcomed and you might take advantage of grants, you’ve got to work on the basis that you get zero grants. It compels you to rethink how you would want to manage, develop and grow your business. You need to find your own sources of funding.”

In many ways, Singaporeans resent government interference, but when it comes to government assistance in general, many seem to think more is better.

However, these businessmen clearly think “less is more”.

Chan’s argument that part of entrepreneurship is to develop character and be able to withstand hard times under your own steam is a good one, but it doesn’t really make sense to purposely withhold support in order to build character and resilience.

Just two weeks ago, in an “On the Record” interview, Rosemary Tan, CEO of homegrown biotech firm, Veredus Laboratories said that even though she started with no government help, she is of the mindset that “if you can help them, why not?”

When I asked if too much help could make businesses too dependent, she replied:

I can tell you that whether or not you give him money, he will succeed anyway if he has the right business model. If he doesn’t have that, all the money you throw at him won’t help.

“Out of 10 companies, maybe only one or two will succeed. But if you don’t support at all, these companies wouldn’t have started up and we wouldn’t have an ecosystem. So are we going to give up those two companies just because we didn’t want to fund the other eight, or we don’t want to make them too dependent?”

So what is the balance?

IS LESS, MORE?

Some economists argue that if no assistance is provided, people will be less likely to take risks and this could, in fact, be detrimental to entrepreneurship.

But if too much help is provided, it could create a culture of dependence, even entitlement and this could stymie entrepreneurship too.

CEO of CrimsonLogic, Saw Ken Wye said in a recent interview that a dependence on the Government has even led to businesspeople relying on the Government to endorse their business ideas before they make a move.

“We are in a position where the tendency is to ask: ‘What does the government think?’ People like to do something which will be endorsed and are looking for the correct answer. I think part of innovation is that you don’t know what the correct answer is, and you need to push the boundaries if you truly want to be a Smart Nation and come up with your own solutions.”

Could this be why we haven’t seen many world-class enterprises emerge from Singapore?

But is providing less or no assistance really the answer?

Perhaps it is more a question of the type of assistance provided. So far, many of the schemes are geared towards empowering companies to become independently successful at some point, but companies with a crutch mentality may not benefit in the long-run.  

The Government has a duty to create a conducive economic environment and opportunities for businesses and individuals.

However, the businessmen who caution against too much assistance have a point in that such help shouldn’t be treated as an entitlement.

Less could indeed be more if the only objective is develop grit, resilience and innovation – qualities every entrepreneur should strive to have. The lessons we can learn from a crisis can, no doubt, be immensely beneficial.

But instead of calling for the Government to reduce aid, it would make more sense to see the numerous government schemes as icing on the cake that could enable us to reach even greater heights, not as aid that we can’t survive without.

This applies to all forms of government assistance, not just assistance to businesses.

If for whatever reason, help ceases to be available, what should follow is the ability to be resilient and rise above. We can’t control policy but we certainly can control our mindsets and actions.

Bharati Jagdish is presenter and senior producer for Digital News at Channel NewsAsia.