Bailing out industry

April 03, 2020

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QUITE rapidly, pressure is mounting on the government to do more for trade and industry through the lockdowns since the losses are mounting with each passing day. Some of those who have to run their payrolls for the month of March are not sure if they will be able to do the same for the month of April. So if the lockdowns continue, the ranks of those in severe hardship will only increase. With this in mind, as well as other concerns such as export orders that are ready or nearly ready for shipment but cannot move to the port due to the lockdown, the industrial leaders of this country gathered together and met the finance team on Wednesday. The traders are separately announcing their own gatherings to mount pressure for a relaxation on the lockdowns. This pressure will increase rapidly from here on for the government to either announce a relief package for trade and industry or ease the lockdowns as each day brings more losses.

The problem for the government is that lockdowns cannot be eased while the rate of the Covid-19 infection is still rising. Doing so would be catastrophic since the infection would return with a vengeance, forcing even more stringent lockdowns in the immediate aftermath. The best way forward would be to build a mechanism that allows government assistance to flow directly to the workers of the enterprises, thus relieving the traders and owners from the burden of payroll expenses. This way the government could partner with business to help develop a database of beneficiaries for the targeted assistance they are preparing to release. Building this mechanism has its own set of challenges, but the government should not put public resources at the disposal of trade and industry owners in the name of helping the workers. Keeping the payrolls running through the lockdowns is the collective responsibility of the government and private sector, and they can partner with each other in the effort. But government funds must not be used to bail out private capital, at least not at this stage. The priority must remain targeted assistance for the poor and unemployed, and building the database as well as the mechanism with which to target the assistance directly to them. The time has come for business leaders to realise that the more data they can share with the government about their payrolls, the greater the support they become eligible for.

Published in Dawn, April 3rd, 2020