Is Singapore Inc ready for a protracted recession?

For several months now, analysts and pundits have been debating the question of whether Singapore is headed for a recession.

The threat of a major recession looms as headwinds have gathered strength in recent months. They include the eight-year cycle that the United States economy seems to be caught in since 2000, with economic crashes coinciding with presidential elections and the handover to a new leader. When president Bill Clinton stepped down, the crash struck the US economy. In 2008, when president George W. Bush stepped down, the sub-prime mortgage crisis was unleashed. This year, with President Barack Obama bowing out, is another US crash on the horizon?

Meanwhile, the euro zone countries are grappling with immigration woes, while the repercussions of Brexit and the euro sovereign debt issues are still playing out.

In Asia, the economic outlook has been dimmed by the economic slowdown of China and Japan, traditionally the engines of growth for the region. Low oil prices, coupled with near-zero to negative interest rates and global economic sluggishness, will definitely be a drag on Singapore's growth prospects.

It appears that an economic tsunami is heading for our shores. Singapore has faced several economic crises in the past but they have been rather short-lived. Is the city state ready and equipped for a global or protracted recession if it arrives?

Should a major recession hit, many companies will be in distress and will need to decide if they should continue their business. If the answer is yes, they will next want to know where they can secure funding to help them stay afloat, and where they can engage the right talent to help them navigate through treacherous times.

There is no single magic bullet but local businesses would do well to make preparations in the following three areas to soften the likely adverse impact.

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The first key issue is that local small and medium-sized enterprises (SMEs) have been living on past successes and some are still content to play the role of middleman. Doing so has served Singapore very well but past success is no guarantee of future growth. With technological advances and disruptive innovations, middlemen are increasingly being marginalised as the Internet has levelled the playing field for direct transactions between buyers and sellers, thus allowing them to bypass middlemen. We are not suggesting that SMEs get out of the middleman role entirely and become the principal. But they may have to urgently transform their business model to remain relevant.

As it is, intense global competition has left many local SMEs struggling for survival. In a global recession, neither pump-priming nor off-Budget measures will be able to tackle the problem at its root. Such measures will be the equivalent of throwing good money after bad.

What SMEs need to do is to examine their business model and think through what they need to do to remain viable. They need to ask themselves if their current business model still works in the face of technological disruptors? They need to study ways to transform through business-model innovation so as to stay ahead of the competition.

TALENT The second issue has to do with the attitude and capabilities of business leaders and top management. During tough times, are these head honchos prepared to lead by example and tighten their belts by, for example, switching to budget airlines and hotels? Do they have the requisite skill sets to help their businesses navigate through these challenging times? The buck stops with them.

The other human resource issue relates to the availability of experts to help business leaders steer through particularly treacherous waters. In a major recession, distressed companies need the assistance of specialists.

The problem today is the dearth of experienced turnaround specialists who can plunge into rescue operations and help save ailing companies. Singapore needs more insolvency lawyers, forensic accountants and specialists in debt restructuring, among other such experts.


Today's fast-paced marketplace requires mutually beneficial partnerships to leverage creativity, experience and resources. Collaboration is no longer just a strategy - it is the key to long-term business success and competitiveness, as well as to developing the scale local SMEs need to internationalise.

Collaborative efforts, especially in technological innovations, are driving extraordinary improvements in overall business performance. The successes of Apple, Google and Alibaba are actually the result of numerous collaborations between these tech giants and their partners around the world.

During bad times, distressed companies have more reason to band together, merge and collaborate to share resources and tide over the difficult period. When times are bad, the banks are unwilling to lend and there will be a credit squeeze.

Cash-flow problems are likely to affect companies, including those which seek to continue their business. I think there is a strong case for Singapore to set up a national restructuring centre or a collaboration centre where such help can be rendered.

What firms face today is both the best of times and the worst of times. Not all is doom and gloom for in the midst of crisis, there emerge opportunities for new growth.

New players such as Uber and Airbnb have capitalised on innovative technology to disrupt settled ways of doing business in their sectors and to gain global dominance.

Thanks to globalisation and the Internet, there are many opportunities for companies but only those players with the mindset, courage and determination to embrace new business models and new ways of doing things will be able to ride this wave of change to achieve business success, in the midst of otherwise bleak market conditions.

• The writer is CEO of the Singapore Innovation & Productivity Institute, a subsidiary of the Singapore Manufacturing Federation.

This article was first published on September 21, 2016.
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