Vastavam web: A big drag on Singapore’s growth in recent years, the embattled offshore and marine industry, has broken a three-year losing streak. Yet industry executives aren’t betting on a return to the glory days anytime soon. The industry, along with a top-class finance sector, has been a key pillar of Singapore’s economic transformation into a first world economy since independence from British colonial rule in 1965 and a source of national pride. But a 2014 collapse in oil prices has resulted in thousands jobs lost, several defaults and billions of dollars in debt restructurings.
However, Singapore’s battered companies are bracing for a long period of convalescence. The specialist divers and engineers servicing rigs in Southeast Asian waters have moved on and may be unwilling to return for lower wages. Bankers, having been bitten by the sector, are reluctant to lend. And oil prices have recovered almost too quickly for oil exploration and production clients to have the confidence to turn enquiries into actual orders. Take Kim Heng Offshore and Marine Holdings (KIMH.SI), a firm which provides rig services and owns shipyards. During the downturn, it slashed its workforce by a third, cut salaries by 10-20 percent, and sold around seven barges.
As oil prices recovered, it has gone into distressed sales and bought several vessels used for towing and anchoring rigs, for as little as $3.2 million apiece, about 10 percent of their usual price. It plans to own 15 of them, hoping for help from private equity investors. “Eventually the increase in oil prices will give (companies) enough money to reinvest in the future, which may happen probably next year,” he said. “They are slowly increasing their investment but not in a big way. Demand is still pretty slow.”
Growth in Singapore’s trade-reliant economy had slowed in the wake of the oil price crash. It has since recovered as output in sectors like electronics surged, though economists say the city-state faces growing headwinds from a bitter U.S.-China trade dispute.