Major Singapore Companies That May Be Too Big To Fail

In situations where failure of a sector or business has a potential for a catastrophic impact on Singapore’s competitive or national security, the government might step in, said Deputy Prime Minister and Finance Minister Heng Swee Keat in Parliament in October.

“In such instances, we cannot preclude the possibility of government taking some action to ensure these strategic capabilities are preserved,” he said.

This was in reference to firms in sectors facing the biggest impact from the COVID crisis but will eventually recover. Sectors such as aviation, aerospace and tourism – dubbed tier 1 sectors – are among the hardest hit. These firms might have to receive additional support to weather the COVID-19 downturn in order to prevent permanent scarring on Singapore’s economy. 

Read also: October 2020 Ministerial Statement: 5 Government Scheme Updates That Businesses Should Know

There are existing support schemes for such sectors, such as the SingapoRediscovers Vouchers for tourism, the Enhanced Aviation Support Package, and resilience packages for arts and culture. In addition, the Jobs Support Scheme (JSS) for tier 1 companies was also extended at the 50% level from September 2020 to March 2021, while other sectors receive lower salary support levels. 

Other than these sectors, there may also be other sectors that will require support if necessary, especially if the COVID situation worsens or drags on. Such sectors will be integral to Singapore’s viability as a commercial hub and national security, and special care needs to be taken to ensure firms in these industries continue to operate in this uncertain business climate.

#1 Banking Sector

Arguably the most important sector in Singapore’s economy, not only because we are a trusted financial hub, but also because banking supports the rest of the economy in providing the infrastructure necessary to build (or rebuild) businesses. The three local banks – DBS, OCBC and UOB – are key drivers of the local financial landscape in terms of the total amount of assets owned and the amount of integration between the banks and the local economy. 

They have total assets of over $1 trillion (as at FY-2019), making them key stakeholders in the local economy. Given that so many people and businesses rely on them for day-to-day functions, they can be deemed as “too-big-to-fail”.

#2 Port, And Offshore And Marine

Historically, Singapore’s success was founded on its strategic location as a harbour and port. Today, Singapore’s international standing still hinges on our reputation as one of the busiest ports – PSA – as well as a global offshore and marine hub. 

Servicing worldwide demand for ship repair, shipbuilding, rig-building and offshore engineering, there is a need to ensure that we are still seen as an esteemed international trade partner and service provider in order to retain our competitiveness. As such, the big firms in this sector – Keppel and Sembcorp Marine – are a critical component of Singapore’s future economic viability.  

More so during this period of economic uncertainty when oil prices are volatile and demand for offshore and marine services have slowed, there might be additional support required in order to help these firms change with the times. 

#3 Telecommunications

It is no surprise that critical communications infrastructure needs to be on any “too-big-to-fail” list in Singapore. Everything in our economy depends on efficient and operational telecommunications infrastructure, from calls to Internet provision, and failure in this sector would have devastating consequences for the rest of the economy.

As the biggest telecom service provider in Singapore, Singtel is a significant stakeholder in the local economy and the fate of many a business will hinge on the infrastructure that has been laid out, not forgetting the future of communications in 5G Internet as well. Other local telcos such as StarHub and M1 may also be supported.

#4 Aerospace

As COVID-19 continues to ravage aerospace manufacturers, this high-value industry that employs more than 22,000 people, about which 80% are Singaporeans, is “under threat”, as explained by aviation analyst Shukor Yusof of Endau Analytics. There may be a need to support these firms – ST EngineeringSIA Engineeringand Singapore Aerospace Manufacturing – during this crisis as the aerospace ecosystem is “broken” and will require time to rebuild.

As this sector prepares itself for a post-COVID world, it will be several long months or more before Singapore can slowly re-establish itself as a regional hub. Before demand comes back on, however, firms in this sector will have to find a way to minimise cash burns and offload costly assets. This could mean major company restructuring in this space. 

#5 Aviation 

Overseas holiday trips that Singaporeans have been looking forward to are struggling to materialise. The aviation industry has not been dealt a good hand, especially with the lack of domestic air travel in Singapore. With travel bubbles slowly opening to places like Hong Kong, only time will tell whether the aviation industry can bounce back. 

Read Also: Fast Lane; Green; Air Travel Pass; Air Travel Bubble: What You Need To Know About Singapore’s Travel Arrangements

With more than 96% of its fleet grounded, large retrenchment exercises and deep pay cuts, it feels like SIA is bruised and battered. It is in this existential crisis where there will be a need for Singapore to support the national carrier, possibly beyond the $8.8 billion raised by a rights issue earlier in the year. 

As a national growth strategy, Singapore’s focus in developing the aviation and aerospace industries has paid off handsomely, and letting a company of such international repute like SIA go under will have severe consequences for the economy. It will be in Singapore’s interests to keep the aviation sector afloat until air travel can slowly return to normal. Much of the industry’s survival hinges on the next 6 to 12 months. 

Our airport – Changi Airport Group (CAG) – and supporting businesses are also a cornerstone of Singapore’s positioning as an international air travel hub.

#6 Tourism

Many other sectors depend on tourism to survive, such as hotels, F&B, retail and entertainment. With the lack of international tourists, there will be a need to boost domestic tourism in order to fill the demand gap. There are many tourism-based support measures across the 4 Budgets that were announced to help boost domestic tourism-related sectors. 

While $100 SingapoRediscovers vouchers will be given to every Singaporean, more may possibly be afforded to tourism destinations that put Singapore on the world map. Iconic hotels such as the Marina Bay Sands, Raffles Hotel, Resorts World Sentosa (RWS) may be bolstered, and may already be supported by putting up travellers on SHN notices. Attractions such as Universal Studios, Gardens by the Bay, the Zoo and many others also adds to Singapore’s vibrancy as a travel destination.

#7 Sovereign Wealth Funds (Asset Managers)

Singapore uses a few entities to manage its assets, including sovereign wealth funds  – GIC and Temasek. These entities provide the state with the ability to manage its assets well, including land, buildings, financial assets and other physical assets. Together, these wealth funds provide the state with much needed liquidity and potential upside for growth in yield and capital gain.

While a lot will surely be done to aid these two behemoths, it will be very worrying if it does come to it. GIC and Temasek are built to withstand these types of downturns and should be among the best placed companies to ride out the COVID-19 storm.

Recovery Awaits, With Bated Breath

Together, these sectors and companies form the bedrock of the Singaporean economy, buttressing national interests and helping us stay competitive as an international business hub.  However, as big as some of these companies are, how they handle this crisis will determine whether they come out unscathed or scarred permanently.

Need Financing Support During This Period?

From now till 31 March 2021, SMEs can enjoy extra financing support of up to $5 million through the Temporary Bridging Loan Programme.

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