Allocation of COVID-19 Relief Assistance to "Zombie Companies"

Ms Foo Mee Har asked the Minister for Trade and Industry whether the Ministry is aware of the prevalence of "zombie companies" in Singapore and the risk that COVID-19 support schemes may be allocating precious resources to them, hindering the allocation of labour and skills to more productive parts of the economy.

The effects of the COVID-19 pandemic have devastated the global economy, and Singapore is no exception. MTI expects GDP growth this year to be between negative 7% and negative 5%. If this forecast is realised, the impact of COVID-19 will be worse than that of past crises, such as SARS and the Global Financial Crisis (or GFC). It will negate the gains that the Singapore economy had made in the last two to three years.

This extent of impact required the Government to act swiftly and decisively to provide temporary relief to businesses. We have introduced a variety of support measures to help companies with cashflow, costs, and credit. We have also introduced measures that were designed to help companies retain capabilities or build new ones in the face of a changed environment, including the enhanced Enterprise Development Grant, and Productivity Solutions Grant.

We recognise that some companies with unviable businesses might have been able to stay afloat in the near-term by benefiting from some of the support measures. However, the temporary nature of the broad-based support given means that any reprieve enjoyed by such companies would only have been for a short time. This is especially since we constantly review our measures to ensure that they are relevant for the situation.

In particular, over the past few months, it has become clear that the economic downturn will be prolonged. The economy emerging from the crisis will also look very different. Rather than sustaining businesses, we need to help them adapt to the new environment. There are broadly three types of companies.

The first type of companies still have the opportunity to grow. For these companies, we will look to spur them on to grow further, so that they will create more jobs and opportunities for Singaporeans as they flourish.

The second type of companies comprise those that have suffered a drop in demand, but will eventually recover. We will help them preserve their core capabilities as they tide through this difficult period, so that they will be well-positioned to emerge stronger once the economy recovers.

The third type of companies comprise those that have seen their business conditions changed permanently. We will provide support to them to pivot to new products and markets. At the same time, our SkillsFuture and Adapt and Grow initiatives will help the workers in such companies reskill and find jobs in new areas. Even with this support, some businesses will inevitably have to cease.

By taking this approach, we will be able to reallocate resources, labour, and skills to support those parts of the economy that are still growing, while preserving the core capabilities of our companies that are going through difficult times. This will give us the best chance to create the largest number of jobs for Singaporeans in a fiscally sustainable and efficient manner.