Ethos Issue 6, Jul 2009
Extraordinary Times,
Fundamental Principles:
The 2009 Budget and the Ministry of Finance’s
Approach to Countercyclical Economic Strategy
Jonathan Pflug
Landmark measures such
as the Jobs Credit scheme and
the SRI must balance short-term
needs and long-term goals. On
the one hand, the Government needs
to help companies find breathing space
to ride out temporary dislocations in
demand. At the same time, businesses
must still have incentive to restructure
and adapt to changing circumstances.
In order to achieve this subtle
balance, it is vital for programmes of
such generous scale to be temporary.
Hence, the Jobs Credit scheme and the
SRI have definite end dates articulated
upfront, although there is a possibility
of limited extensions. The Jobs Credit
scheme has four payments over the
course of one year. Loans can be issued
under the SRI schemes within one year,
while a four-year cap on the loans’
tenure makes the initiative essentially
self-terminating after five years.
Companies have shared anecdotes on
how the Jobs Credit scheme has positively
shaped their employment strategies for
the downturn.7 Some companies who
have been less affected by the downturn
are even using the injection of funds to
reinvest in future growth8 —for instance,
by hiring more staff, or investing in
training and new equipment.
The time-limited nature of the
SRI schemes may also have prompted
participating banks to respond positively.
In the first month since the SRI and
other enhancements to Government
credit schemes was launched, SPRING
Singapore, our enterprise development
agency, reported a record of 729 loan
approvals under Government schemes,
up from 411 in January and almost
three times the monthly average in the
previous year.
ACT WITH EFFICIENCY: BUILD ON ESTABLISHED INFRASTRUCTURE FOR TIMELY INTERVENTION, WITH MINIMAL ADMINISTRATIVE BURDEN TO PARTICIPANTS
Given the suddenness of the downturn,
the disruption to Singapore’s economy
would have been worse had the
Government not acted decisively. Even
prior to Budget 2009, the Government
had launched major initiatives as
early as November 2008 in response to
acute and rapidly developing shocks to
the economy.
The speedy implementation of the
Jobs Credit and SRI schemes was made
possible only by building on established
processes and mechanisms, such as
the CPF system, to minimise working
lag time.
Given its goal of saving jobs by
easing cash-flow constraints posed by
the downturn, the Jobs Credit scheme
had to be implemented in a manner that
posed minimal administrative burden
to recipients. MOF, in close collaboration
with the Central Provident Fund
Board (CPFB) and the Inland Revenue
Authority of Singapore (IRAS), used
existing administrative data from CPF
contribution and tax filings to compute
and distribute Jobs Credit payouts.
This avoided the need for burdensome
declarations from companies.
We also had to sacrifice
comprehensiveness for efficiency in some
instances. For example, MOF decided
not to use rental costs (in addition to
wages) to calculate payment quantum to
businesses, as we would then have to ask
businesses to submit rental information.
Similarly, the SRI schemes had
to be put in place quickly due to the
prospect of an acute arrest in credit
flow. MOF and the Ministry of Trade &
Industry (MTI) harnessed the network of
financial institutions and the existing
government framework of smaller-scale
credit schemes, allowing government
agencies to launch the new credit
programmes as early as six working
days after the Budget speech.
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