Oral Answer by MND on number of firms in the BE sector that have ceased operations in 2021 due to insolvency and support measures to help construction firms cope with the cost pressures brought about by COVID-19

Feb 15, 2022

Mr Saktiandi Supaat: To ask the Minister for National Development (a) how many firms in the built environment sector have ceased operations in 2021 due to insolvency, as compared to 2018 to 2020; (b) given the intention for the extended relief periods under the COVID-19 (Temporary Measures) Act 2020 (COTMA) to expire in Q1 2022, whether the Government is considering any transitional measures to prevent firms from suffering a hard landing; and (c) what are the examples of “unforeseen circumstances” which would see a further extension of the relief period under COTMA.   

Answer:

Mr Speaker Sir, the Government has put in place a wide range of support measures to help construction firms cope with the cost pressures brought about by COVID-19. This includes the $1.36 billion Construction Support Package to help firms in the construction industry cope with the cost of implementing safe management measures at worksites, as well as to co-share prolongation costs for public sector projects. Firms have also received support for their manpower costs through the Jobs Support Scheme and Foreign Worker Levy waivers and rebates. The Government has also put in place unprecedented legislative measures through the COVID-19 (Temporary Measures) Act (COTMA) to provide relief for contractors, and to enable equitable cost sharing of increased costs by project parties due to the pandemic.

These measures have helped the construction industry tide through the COVID-19 pandemic. About 2,200 construction firms ceased operations in 2021, which is comparable to the average number of firms that wound up annually between 2018 and 2020. There were 2,187 firms that wound up in 2018, 2,347 firms that wound up in 2019, and 2,027 firms that wound up in 2020.  

We do not take decisions to intervene in private contracts lightly. The COTMA reliefs are meant to be temporary, and firms will need to partner each other for long-term sustainability and resilience. However, given the significant impact of COVID-19 on the Built Environment sector, we have extended the relevant COTMA reliefs several times. This has provided firms with additional time and support to negotiate amicable outcomes between the parties. 

And we have seen encouraging signs of the sector’s recovery. Based on project progress payments made at the industry level, the current level of construction output is close to pre-COVID levels. This indicates that construction works are progressing at a steady state. As such, barring any unforeseen circumstances such as a severe industry-wide disruption to construction works caused by COVID-19, the reliefs under COTMA Part 2 and Part 8B will end on 28 February 2022. We strongly encourage all contracting parties to agree on mutually beneficial arrangements to sustain their projects.

Part 10A of COTMA has been extended until 31 March 2022. This Part pertains to the co-sharing of cost increases attributed to foreign work permit holder salaries. While the foreign manpower inflow has been improving in recent months, we will continue to monitor the situation and review whether a further extension is needed.