Hot spots: Singapore.(managing credit in financial meltdown)

As the world financial crisis spreads and countries around the globe see their economies weaken and slide into recessions, most governments seek to overcome tight credit and worsening business conditions by pumping up their own spending and trying to persuade consumers--with tax incentives, cash bonuses and other inducements--that they, too, loosen their purse strings, in the hope that increased domestic demand can and will make up for flagging exports. In Singapore, though, private consumption accounts for less than 40% of GDP and the population of 4.5 million is not nearly large enough to be able to provide a home market capable of compensating for falling sales of goods and services overseas.

So, the government does what it has always done in the face of adverse economic developments: admonish the population in speeches, pamphlets and advertisements into adjusting to the risks of rising unemployment and shrinking incomes by spending less, saving more and avoiding "over-consumption." The authorities last year unveiled a program worth 5.4 billion Singapore dollars providing for cash payouts, utility rebates and special assistance to the tune of SGD 1,700 per citizen to help the poor cope with rising food and energy prices, but they are not planning any Keynesian stimulus packages, arguing that if people do not help themselves during a crisis, if they come to depend on the government, "we'll cultivate a sense of reliance" and "weaken ourselves as a society" to use the words of Prime Minister Lee Hsien Loong.

So, the government is telling people to set the thermostats on air conditioners higher, to use less water (for instance by taking shorter showers), to substitute expensive fresh meat with a cheaper frozen variety, or better yet, with "healthier" vegetables, and to skip purchases of the latest high-tech gadgets such as top-of-the-line mobile telephones. In an effort to help, the administration plans to compel companies to re-employ staff when they reach the official retirement age at 62, and parliament has passed a bill that will allow people with debt of as much as SGD 100,000 (roughly USD 66,600) to work out repayment plans with creditors without having to have themselves declared bankrupt and having to accept the "attendant disabilities and social stigma."

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In Singapore, people who have declared personal bankruptcy are not allowed to obtain credit exceeding SGD 500 without disclosing their insolvency. They cannot travel or play any part in managing a company without permission from the court or the official assignee. Under the amended laws, distressed debtors will be able to keep their jobs and apportion part of their monthly incomes to the repayment of creditors. They also can sell assets for the same purpose. In other words, there is now something akin to a "Chapter 11" for individuals in the City State, which will help avoid unnecessary hardship cases and should benefit the creditors in the process.

This is not to say that the government is totally averse to deficit spending to breathe a little more life into the economy and help companies in ...