The Big Read: Kept afloat by government lifelines, will ‘zombie companies’ haunt Singapore?

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The Big Read: Kept afloat by Govt lifelines, will ‘zombie companies’ haunt Singapore?

The relative ease in setting up and shutting down businesses hereThe way the support measures have been designed

“Looking at the playbook of the Singapore Government, they have very few sacred cows that they ‘die die’ must protect,” she said. She cited the national carrier Singapore Airlines as possibly the rare exception.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.

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. “If there’s no more help, I’m not sure what’s going to happen to be honest … For us, we are holding out as long as possible. We are still optimistic that the Government will still probably help us,” he said.

“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.Besides help aimed at relieving manpower and rental costs, the Government has also calibrated its support to provide more help to harder-hit sectors, such as aviation and tourism.

“This will enable them to stay competitive and relevant, and be well-equipped to capitalise on the upswing when the global economy recovers,” the spokesperson added.Nevertheless, the Government cannot extend lifelines indefinitely, experts stressed. One way forward is to extend support measures in a more targeted manner, the experts said. This will also help ensure that the life support for companies is gradually turned off.

“Keeping some of these companies alive, especially the ones that are strategically important to the economy, will ensure that they can contribute to employment and productivity,” he said. “A blanket wage subsidy scheme will cover nearly two million workers, while an unemployment support scheme for retrenched workers will cover about 50,000 to 100,000 workers. This is less than 5 per cent of the number covered under a wage subsidy scheme and will be more effective and targeted,” he said.

“Training and upskilling remain critical for workers who are in these hard-hit industries, so that they can tap into new opportunities if need be,” said Mr Choo.

 

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