You are here
Signal goes out to struggling firms: Buck up - or be left behind
FOR struggling firms in Singapore, the writing is on the wall - or rather, in Budget 2017.
Finance Minister Heng Swee Keat on Monday promised short-term help to support companies hit by the cyclical downturn, but this help was limited to those in specific sectors.
For the rest which are trying to catch up with the economy's restructuring, he had this to say: "Firms in sectors that are facing structural shifts will need to dig deep to change their business models to stay viable."
In outlining a raft of near-term support measures in his Budget 2017 speech on Monday, he urged companies to buck up, or be left behind.
This proclamation was but the latest in a line of similar calls from the government.
Two weeks ago, the Committee on the Future Economy (CFE) wrote in its report: "While some enterprises will succeed, others that are slow to adapt will not, and we should accept this." Mr Heng is also co-chair of the CFE.
Last November, Deputy Prime Minister Tharman Shanmugaratnam said at an Association of Small and Medium Enterprises (ASME) event that it is inevitable that some firms will exit in every economic cycle.
Reactions from the business community to Mr Heng's Budget 2017 near-term proposals have come swiftly, and they point to firms feeling let down by the underwhelming amount of near-term support.
The Budget offers S$1.4 billion worth of immediate lifelines, but most take the form of extensions of existing broad-based measures.
The Singapore Business Federation (SBF) expressed disappointment on Monday night with the short-term measures, describing them as "inadequate" in lowering business and compliance costs.
ASME president Kurt Wee also told The Business Times on Monday: "The part we're really disappointed with is the fact that businesses have seen a big chunk of the demand disappear. It's not coming back, and there're no cost measures to help businesses with cost."
The perceived lack of short-term measures comes at a time when economic growth in 2016 was slow by historical standards, at 2 per cent.
Latest official figures pointed to a lack of demand and investments to keep businesses afloat; private consumption expenditure contracted 2.3 per cent on-year in Q4 last year, the first such contraction since the global financial crisis. Investment also contracted in three quarters last year.
Yet, economists are agreeing that there there is no pressing need for the government to help struggling companies, because growth has still outperformed expectations.
Standard Chartered economists wrote in a Monday note: "Conditions are not dire enough to trigger broad-based support."
The government will thus focus instead on medium-term goals to combat economic and global uncertainties with the fiscal resources at hand, economists have said.
This means that it has to be prudent in spending on restructuring; some S$2.4 billion has been committed to CFE goals, they noted.
CIMB economist Song Seng Wun said: "There isn't a significant stress in the economy like an acceleration of companies folding, so the government can take a longer view of things.
"With all the uncertainty going on around in the world, Singapore needs to be more cautious in its spending."
UOB economist Francis Tan said that although structural challenges may continue to weigh on certain sectors, there is a silver lining in these clouds - in the form of the Industry Transformation Maps (ITMs) for struggling companies.
The government has set aside S$4.5 billion to implement restructuring plans to bolster the prospects for 23 industry sectors. The plans for six sectors have been put into force; those for the remaining 17 sectors will be rolled out in FY2017.
Through the ITMs, companies, especially small ones, will get more targeted help, and a clearer picture of how they can survive and grow, said Mr Tan.
"We can't pick winners as a mature economy in a disruptive landscape anymore, so the ITMs will be crucial."
Even as details of Budget 2017 will only be debated in Parliament starting Feb 28, SBF chief executive officer Ho Meng Kit told BT on Tuesday that efforts should still be made by the government to soothe companies' concerns. "We cannot just ignore the short term; they are top and foremost concerns for firms.
"And coming from a very uncertain economic climate, just harping on long-term concerns comes across as being harsh and cold."
- For more Budget 2017 stories visit bt.sg/budget17