EXTRAORDINARY times call for extraordinary responses. Faced with the worst recession in Singapore's history, Finance Minister Tharman Shanmugaratnam had to think out of the box and pull out all the stops. This is what he has done in the Budget for FY '09. The record $20.5 billion 'resilience package' that he unveiled yesterday will require presidential assent to be delivered in full.

It will lead to red ink in the budgetary accounts that Singapore has rarely, if ever, seen. But it will go a long way to preserve every job that can be preserved (plus create a few thousand more), to save every company that can be saved and to help people, especially the most vulnerable, tide over what what threatens to be the most wrenching recession in memory. And this might not be all. Mr Tharman said that the government is ready to do more, if needed.

Perhaps the most eye-popping, even audacious, measure in the Budget is the jobs credit (equivalent to 12 per cent of the first $2,500 of wages of each employee), which is being extended to all companies in Singapore. This is a clever variation of the 'job creation tax credit' offered by many states in the US, which provide tax credits to companies that create new jobs - say, $1,000 per job created - but typically subject to a minimum number of jobs created.

Mr Tharman has made the scheme far more generous, and foolproof. Companies don't have to create new jobs to get the credit. They get it just by maintaining workers on their payroll; in other words, they are incentivised to keep their workers employed. Note, though, that they also have an incentive to expand employment; the more workers that it has on its rolls, the greater the job credits a company will get.

One possible criticism of the scheme is that it is indiscriminate: rather than concentrating financial assistance on companies that are the weakest and most likely to lay off workers, the jobs credit doles out largesse to all companies, including those that are profitable and had no layoff plans and which thus stand to collect a windfall. To that extent, it could be suggested that the scheme involves some waste. But as against this, it's worth noting, first, that it is hard to target companies. In the current economic environment, there is no way for the government (or anyone) to ascertain just how badly which companies are hurting, or which will remain profitable and for how long.

Good to include profitable firms

Moreover, profitable companies have also engaged in layoffs - DBS Bank being one of the earliest cases. A jobs credit would discourage them from doing this. In addition, profitable companies are better placed to expand hiring, which, as noted, is also rewarded under the programme. So even if there is some waste, there is a good case to include the profitable as well, rather than trying to discriminate between companies.

But, more important than job credits in keeping companies afloat, is ensuring that they have continued access to funding. Here, the government has expanded its bridging loan programme offered through Spring Singapore to $5 million (from $500,000) and increased its share of the risk from 50 per cent to 80 per cent, which means that mid-sized companies too, can get more help to augment their working capital. The local enterprise financing scheme, too, has been extended to non-SMEs. And the government has extended its risk sharing to unsecured loans, including to larger corporate players. It will also take on the major part of the risk in trade financing.

These are all critically important measures on which the very survival of many companies will turn. Mr Tharman has placed a lot of faith in participating banks, which will be driving these schemes. Much will, however, depend on their willingness to take their residual share of risk. Early indications have not been encouraging, although it might be too early to judge, as the schemes have only been in place since November. But the behaviour of banks bears close watching. If their extreme risk aversion continues, the schemes will have to be revisited and more radical alternatives tried.

Besides these two major initiatives, corporate Singapore will cheer the cut in corporate taxes, and particularly, the enhancement to the loss carry-back regime, which will provide many companies with immediate cash flow relief. The measures to help families and individuals, including the doubling of the GST tax credits, the rebates on income and property taxes, and the enhanced assistance to the vulnerable are broad-based and inclusive - it is hard to find any group that will not gain at least something from Mr Tharman's Budget.

It is not a Budget that will revive economic growth or boost companies' top lines; for that, we have no choice but to wait out the global recession. But it is a Budget that will make the wait more bearable, keep corporate bottom lines in as good shape as they can be and so help position Singapore Inc to ride the eventual upturn when it comes.

This article was first published in The Business Times on January 23, 2009.