Sunday, 09 Aug 2020 07:13 AM MYT
With several government support measures due to expire soon, Wong is bracing himself for more bleak times ahead. Although he has pivoted his company’s business model to focus on holding virtual events, he said that it is a gamble as the industry is still finding its footing in this “uncharted territory”.
His staff, Jasmin Chen, 26, is fully aware of the possibility that she may be out of a job in the next few months if the firm’s transition proves unsuccessful. Meanwhile, having to learn new skills such as digital marketing is also a challenge for her, she said. Keeping companies afloat through various support schemes has been the leitmotif of governments’ response to the coronavirus-induced economic distress globally, and Singapore is no exception.
“The focus is not to keep unviable companies alive. We don’t have a serious case of zombie companies. But of course this is a concern. It raises the concern of whether resources could be put to better use,” said Irvin Seah, senior economist at DBS Bank. Globally, experts have warned against the rise of “zombie companies,” which may reach unhealthy levels due to the large swathes of cash that governments have injected into their pandemic-stricken economies.
Contributing to their proliferation is the low interest rate environment globally, which was meant to stimulate the economy after the 2008/2009 financial crisis. Apart from wasting precious resources on them, zombie companies can also have a deleterious effect on a country’s economy. article, these companies can be a drag on productivity growth and hinder the reallocation of labour and skills to more productive parts of the economy.
“Even if you are a zombie, you can be a temporary zombie, you can be resurrected when the situation improves. You are a viable company, you are just hit temporarily by Covid-19. When some normalcy returns, you can come back to life in a viable form,” he said. Loh said government agencies are therefore in a moral bind, given that they are using public funds to prop up the ailing economy.
“They need to give help fast, so they cannot have too much administrative, bureaucratic submissions Otherwise, nobody will get help,” he added.In Singapore, experts said these factors help to prevent a proliferation of zombie companies:The government’s prudent nature when doling out financial assistanceLoh said that the structure of Singapore’s economy allows companies on the brink of collapse here to make an exit relatively quickly due to the absence of cumbersome obligations, unlike in Japan.
The temporary nature of the various support measures would also help prevent unviable companies from languishing in the twilight zone, she added. “Of course some companies stay alive because of the support. That’s an unintended outcome but I don’t think the number is very high,” he said. With most of the government support set to expire by the end of this year, experts said the number of business closures and retrenchment will continue to go up through the year and into 2021, though it will be spread out over a few months.spoke to are considering the very real possibility of closing shop at the end of this year if things do not look up.
He is now in the midst of negotiating with his landlord for rent to be tabulated based on a percentage of his monthly sales. If that is not successful, he might close by the end of this year. The owner of a fitness gym, who only wants to be known as Goh as he is in the midst of negotiating a new rental space for his business, has a longer runway as he has taken out a bank loan that will tide him through the end of the JSS and rental waivers.
“The economic situation beyond Covid-19 is highly uncertain, and it is too early to label affected companies as zombie companies. Our support measures are thus intended to preserve capabilities and give companies the best chance of emerging stronger during the eventual economic recovery,” said the spokesperson.
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