Govt unveils support measures for marine and offshore engineering firms

The Government will take on 70 per cent of the risk-share for both financing schemes
ANGELA TENG Today Online 25 Nov 16;

SINGAPORE – As the latest data showed output from the marine and offshore engineering industry almost halved last month, the Government on Friday (Nov 25) announced targeted measures to help companies in the sector which it said is going through a “unique and prolonged slowdown”.

Enhancements have been made to trade development agency International Enterprise (IE) Singapore’s Internationalisation Finance Scheme (IFS) while enterprise agency Spring Singapore’s bridging loan has been re-introduced for companies in the sector. The schemes aim to facilitate marine and offshore engineering companies’ access to working capital and other financing.

The bridging loan will help Singapore-based marine and offshore engineering companies finance their operations and bridge short-term cash flow gaps. Eligible companies will be able to borrow up to S$5 million each, with a loan tenure of up to six years. The maximum loan quantum for each borrower group is S$15 million.

Meanwhile, the maximum loan quantum under the IFS, which provides project and asset financing support for companies, will be raised to S$70 million per borrower group from the current S$30 million per borrower group for marine and offshore engineering companies.

“These measures will help to address the intensifying financing challenges faced by the marine and offshore engineering industry in recent months, as it experiences a unique and prolonged slowdown,” IE, Spring and the Ministry for Trade and Industry said in their joint statement.

The one-off measures are targeted at stabilising the marine and offshore engineering sector, as it copes with the prolonged weakness in oil and gas prices amid the slowdown and uncertainty in the global economic environment, according to the statement. The Government will take on 70 per cent of the risk-share for both the bridging loan and IFS.

At the Association of Small and Medium Enterprises’ 30th anniversary dinner on Friday, Deputy Prime Minister and Coordinating Minister for Economic and Social Policies Tharman Shanmugaratnam warned that the marine and offshore engineering sector is going through a deep and long downturn.

“It will have to restructure, and there will be inevitable downsizing. But this additional Government support is aimed at helping the many viable companies in the marine and offshore engineering industry with core capabilities that should be preserved for the long term,” he said.

Commenting on the support measures, Mr Ho Meng Kit, CEO of the Singapore Business Federation said: “It is uncommon for the Government to target financial support for a specific sector. That it is doing so now for the marine and offshore engineering sector reflects the gravity of the situation and the importance of this sector to Singapore.”

“The bridging loan scheme will help local companies in the sector deal with their immediate financing needs. Hopefully this additional facility will allow more companies, particularly the smaller ones, to meet their tight cash-flow needs in the short term.”

“The enhanced IFS signals Government support for the industry to pursue growth opportunities internationally.

“This is a needed development as our companies must look for growth in new markets and new sectors. The industry should view these latest Government measures as providing some welcome relief, but they are not the silver bullets that will solve the industry’s woes,” he added.

Plagued by the low oil price environment, which curtailed rig-building activities and demand for oilfield and gasfield equipment, the marine and offshore engineering sector suffered a 46.9 per cent slump in output in October from the same month a year earlier, data from the Economic Development Board (EDB) showed on Friday.

This was an acceleration of the 31.7 per cent and 29.5 per cent declines in September and August, respectively, bringing the cumulative performance for the first 10 months of this year to a 31.5 per cent contraction, the EDB data showed.

Despite the dismal performance of the marine and offshore engineering sector, Singapore’s overall industrial production rose 1.2 per cent last month from October a year earlier, although this was sharply lower than the revised 7.7 per cent expansion in the previous month.

The increase in output was driven mostly by the electronics and biomedical manufacturing clusters, which expanded by 24.6 per cent and 11.3 per cent, respectively.

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