UPS Asia Business Monitor Reveals Indian SMEs Most Optimistic for Economic Recovery in 2009
India, June 17, 2009 - UPS today announced the findings of its fifth annual Asia Business Monitor (UPS ABM 2009) survey, a study on the competitiveness of Asia's small-to-medium enterprises (SME). Despite the impact of the slowdown on their business, SMEs in India are most optimistic of economic recovery and growth this year amongst other countries in the region, according to the survey.
"It is encouraging to see SMEs, who are key contributors to the economy, optimistic even amidst this challenging business environment. Through the findings of the ABM, we hope to draw attention to the role of the government this year. Together with the business community, we can help ease the burden on SMEs by business solutions, while they prepare for the economy to rebound," said Pirojshaw Sarkari, Managing Director of UPS Jetair Express Pvt. Ltd.
"This year's UPS ABM survey reveals that SMEs in India have a more positive outlook towards their development and business prospects than their regional counterparts," said Derek Woodward, President, UPS Asia Pacific region. "While they have been affected by the financial meltdown and are facing a number of obstacles, they are confident of bouncing back."
"Within the region, SMEs have a tough road ahead. With SMEs making up 95 percent of all businesses in Asia Pacific, their desire to keep their workforce and at the same time, operate competitively is commendable. Their call for help should not go unheeded," added Woodward.
Optimism in the Midst of Challenges
While Indian SMEs are more optimistic about 2009 than the majority of their counterparts in the Asia Pacific, only 40 percent expect to see any economic growth for India. They are equally optimistic of their own business prospects with 42 percent expecting growth.
As a whole, the trade outlook of Indian SMEs has fallen significantly in tandem with other Asian markets in the survey. However, trade within the Asia Pacific remains the strongest at 48 percent compared with 69 percent last year.
"While external trade has fallen, India's domestic market continues to grow so the impact of the economy affects businesses differently, depending on where their key markets are," said Sarkari, "Indian businesses are known to be resilient and resourceful. We expect them to bounce back quickly when the economy recovers."
This is in line with the ABM 2009 findings that indicate Indian SMEs are expecting growth in 2009. Twenty-nine percent of SMEs expect to increase their work force, and a further 59 percent expect to maintain their workforce at current staffing levels.
Opportunities for Growth
In the survey, SMEs were asked to highlight key industries where growth is expected this year. Thirty-seven percent felt that IT will continue to lead in growth opportunities, followed by Building and Construction (29 percent), Healthcare and Pharmaceuticals (26 percent), Manufacturing (25 percent), and Automotive (22 percent).
In three-to-five years, SMEs expect IT (54 percent), Building and Construction (41 percent) and Manufacturing (28 percent) to be the key economic pillars for India.
Looking beyond the industries, 21 percent of Indian SMEs felt that in order to grow, they need to focus on producing higher value-added products and services (21 percent), exploring new markets (18 percent), optimizing their operations and production (17 percent), strengthening the workforce with good talent (15 percent) and forging new partnerships.
What About China?
The countries within Asia Pacific view China quite differently. While Singapore (75 percent), Australia (63 percent), Malaysia (54 percent) and Indonesia (50%) see China as a boost to their businesses, the rest of the countries have mixed sentiments about China. In India, 37 percent of the survey respondents see China as a boost and 28 percent as a threat. A further 24 percent are indifferent towards China.
"While both India and China are major outsourcing locations for the world, they are backed by their fast rising domestic markets, which are helping them to weather the impact of the economic crisis," said Sarkari.
UPS recognises the importance of these two markets and has invested heavily in them. In India, UPS recently signed a strategic agency agreement with AFL, one of the country's leading logistics and domestic transportation service providers, significantly expanding UPS's field stocking locations to more than 130 and boosting its post sales capabilities in India. Also, in November 2007, UPS announced its first strategic alliance with AFL for UPS's international express delivery service.
Economic recovery
Forty-five percent of Indian SMEs seconded the opinion of Asian SMEs that the government's regulations and policies would help the economy to recover. Thirty-four percent felt the performance of the economy would improve. In India, 83 percent of SMEs are tightening cash flow management via strict credit control and collection plans to sustain their business and counter the effects of a global economic recession. Seventy-six percent will reduce other costs such as rent and utilities, and 75 percent will diversify and/or explore new revenue streams to stay afloat amidst the challenging economy.
SME competitiveness
Forty percent of SMEs outside India rated Indian SMEs to be more competitive than them. While Indian SMEs are optimistic when it comes to their own business prospects, SMEs outside India have not given Indian SMEs a high rating. More than three-out-of-four Indian respondents feel SMEs in China are their biggest competitors.
Eighty percent of Indian SMEs felt that government support was lacking, which rose by nearly 10 percent from last year. Ninety-one percent of Indian SMEs rated access to overseas markets as the most important factor. Transportation infrastructure followed with a high 90 percent rating by SMEs as an important factor, similar to last year's findings. The economic slowdown was rated as the key business issue faced by Indian SMEs (61 percent), followed by corruption and crime (52 percent) and bureaucracy and regulations (49 percent).
Other highlights from Indian SMEs in the UPS ABM 2009 include:
Government Focus
A majority (90 percent) of Indian SMEs felt that the government should focus on transport infrastructure and better access to capital, financing and loans to help small businesses. Eighty-seven percent said that the government should focus on education and training, while 85 percent felt that they should look at R&D and bureaucracy respectively. They also felt the need for the government to make labour laws more flexible and provide more guidance and information.
Financing for SMEs
Sixty-three percent of SMEs in India stated the lack of institutions willing to lend to small businesses as a major obstacle in financing their businesses in 2009. Last year, only 30 percent of SMEs encountered the same problem.
Business Issues in India: Policy Initiatives
According to the survey, policy initiatives were a major business issue in India. Given the current economic situation, 40 percent of SMEs in India were of the opinion that subsidised finance for SMEs is important, and governments and international organisations should take up this policy initiative as a priority. Thirty-seven percent laid importance on the control of inflation while 30 percent felt the governments and international organisations should increase market liquidity.
Business Issues in India: Managing Financial Requirements
Eighty-seven percent of SMEs in India stated that they were funding themselves as a way of managing their financing requirements during the economic downturn. Forty-eight percent of Indian SMEs were working with reduced capacity, whereas 31 percent were dependant on third party collaterals such as industry associations. Twenty-one percent of SMEs stated that they were seeking help from local money lenders and selling part of their fixed assets for funding.
About UPS Asia Business Monitor
Since its launch in 2005, the UPS ABM has been conducted annually to deliver the latest insights on the changing business needs of SMEs, the largest business community in the region. As discussed at the 3rd APEC Business Advisory Council Meeting in August 2008, SMEs make up 95 percent of all businesses in the Asia Pacific region and employ 80% of the workforce. This year, the UPS ABM 2009 surveyed 1,200 company owners, proprietors, CEOs, Managing Directors and other top management across 12 markets.
About UPS
UPS (NYSE: UPS) is the world's largest package delivery company and a global leader in supply chain and freight services, offering an extensive range of options for synchronizing the movement of goods, information and funds. Headquartered in Atlanta, Georgia, USA, UPS serves more than 200 countries and territories worldwide. UPS's stock trades on the New York Stock Exchange (UPS) and the company can be found on the Web at www.UPS.com. To get UPS news direct, visit pressroom.ups.com/RSS.
Notes to Editors
- UPS Asia Business Monitor series provides the latest insights into the changing opinions, attitudes and habits of business leaders from the region's small and medium sized enterprises.
- UPS Asia Business Monitor 2009 surveyed 1,200 decision makers of SMEs between January 8, 2009 and February 27, 2009. Interviews were conducted by an independent research organization, TNS, using the respondents' native language. SMEs are defined as companies with fewer than 250 employees.
- Interviews were conducted in the following 12 markets: Australia (100 respondents), China (150), Hong Kong (100), India (100), Indonesia (50), Japan (100), Korea (100), Malaysia (100), the Philippines (100), Singapore (100), Taiwan (100) and Thailand (100).
- Respondents were from a range of industries: automotive, garments & textiles, healthcare & pharmaceuticals, toys & sporting goods, electronics & electricals, gifts & housewares, timepieces, jewellery & optical goods, and others.
- The average SME has been in business for nearly 22.6 years.
- The full ABM 2009 presentation deck is also available at www.ups.com/abm.
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