By Ignatius Low

SINGAPORE'S $20.5 billion Resilience Package has been well received by economic commentators and the business community alike - both locally and overseas. Still, a couple of issues may be worth airing in this week's Budget Debate.

The first is to explain why the Government decided it is better to subsidise employers' wage bills, using the new Jobs Credit Scheme, instead of relying on the past route of cutting employers' contribution to workers' CPF accounts. Both measures achieve the same objective - a much-needed reduction in the cost of doing business at a time when company revenues are slumping, with no immediate end in sight to the downturn.

The Jobs Credit Scheme, however, comes at a significant cost to the Government, and sets a precedent that the Government may not want to encourage for future crises. A CPF cut, on the other hand, would be borne by workers. With the current crisis clearly unprecedented in scope, workers all over the world are mentally prepared for cutbacks. Singapore workers would have agreed to at least share part of the burden of the subsidy to employers.

A second issue has to do with stimulating demand to boost the economy. The emphasis in the current package of help measures is largely on the supply side, with the key demand booster being from the Government - through the acceleration of public sector spending on infrastructure projects and increased hiring. Could more have been done to boost consumer demand?

Individual taxpayers received a 20 per cent income tax rebate, but it was capped at $2,000 (the same as last year). A higher tax rebate might have led to more spending in Singapore's shops and restaurants, with leakage from the system controlled by, for example, a simple voucher system that limits validity to Singapore-incorporated businesses. Yes, most of the goods sold here are imported, but a significant chunk of the spending would go into retail margins to keep businesses alive.

Could a case be made for helping them more directly?

This article was first published in The Straits Times on February 03, 2009.