Singapore, May 27, 2008 - Singapore's small and medium enterprises (SMEs) are poised to meet business challenges head-on, according to the latest UPS Asia Business Monitor (ABM) 2008 findings.
This is the fourth year that UPS has conducted the survey which focuses on competitiveness and issues facing small and medium enterprises (SMEs) in Asia.
As with the previous three editions, the UPS ABM 2008 surveyed SME leaders across 12 markets on what keeps them awake at night. A total of 1,201 respondents were surveyed, out of which 100 were from Singapore.
Overall, SMEs in the region are less positive about economic growth in their own countries and in the region, compared to last year's figures. In 2007, 66 per cent of Singapore SMEs rated growth prospects for the region positively. This year, the figure has dipped to 62 per cent.
The figure has also fallen in terms of Singapore SMEs' views of business prospects for 2008. In 2007, 66 per cent of SMEs here were confident of their business prospects. This year, the figure has fallen to 59 per cent.
SMEs across 11 markets, save for India, have also indicated that they are less confident in their competitiveness this year. In Singapore, 56 per cent of SMEs were confident in this area last year, but this has seen a dip of 4 per cent this year.
Such findings are not surprising, given that Singapore's Ministry of Trade and Industry recently announced that Singapore's economy is expected to grow by 4 to 6 per cent in 2008, as consensus forecasts for the US, EU and Japan have come down.
What was heartening though was the fact that SMEs across the region, including Singapore SMEs - while cautious - are stepping up their game.
The UPS ABM has found that 71 per cent are keen to capitalise on intra-Asia trade growth, and have recognised the need to strengthen competitiveness by retaining a qualified workforce and embracing innovation as a competitiveness differentiator.
In Singapore, accessibility to overseas markets is cited as the most important contributing factor to SME competitiveness. Compare this to 2007, when this was only ranked seventh out of 14 factors.
In addition to access to overseas venture opportunities, training and development, as well as access to trade development funds, are viewed as vital resources for SMEs in Singapore.
"The global outlook in recent months has been highly challenging, with rising costs and inflation, to the looming US recession, as well as natural disasters in the region taking headlines. The ABM results showed that while Singapore SMEs are coping with these 'caution' factors, they have managed to look beyond the issues and explore ways to take their businesses through this period," said Mary Yeo, Managing Director of UPS Singapore.
"We had suggested at last year's ABM results announcement that SMEs in Singapore need to focus on growing their business, including venturing overseas. It is indeed heartening to know that issues highlighted in ABM are relevant and the information extracted is useful reference for SMEs," she added.
According to International Enterprise (IE) Singapore, the lead agency promoting overseas growth of Singapore-based enterprises and international trade, its services and funding have benefited 26,800 SMEs (or one in five local SMEs) in 2006 and 2007 through more than S$280 million in tax and financial grants to support their export and international expansion needs into over 90 overseas markets, which will generate over S$13 billion in projected overseas turnover when fully realised in the next 3-5 years.
The slew of schemes offered by the government in recent years is timely and a welcomed gesture by Singapore SMEs. While high labour cost is still seen as the major obstacle to SMEs, it has improved significantly from 2007, standing now at 54% compared to last year's 76%. The SME Rebate Scheme, which took effect on 1 July 2007 for two years, is one of the schemes which helps SMEs to mitigate the rising labour costs due to the increase in employer CPF contribution rate.
The ABM also showed how Singapore's SMEs value the same factors as important to SME competitiveness as their counterparts in the region, such as the availability of quality workforce, which ranked high across all markets surveyed.
Other Highlights on Singapore:
While SMEs in Singapore viewed availability of quality workforce as a highly important factor to competitiveness, 53% of the respondents also saw it as an obstacle, following closely behind labour cost
Similar to 2007, more than half the respondents are concerned about their financial performance in this global economy, followed by customer loyalty/retention and political and economic stability
63% of SME leaders in Singapore mainly see China's rise as a boost to their business
Singapore SMEs expect strong growth momentum in the building & construction, manufacturing and financial services sectors in 2008
Key findings in the UPS ABM 2008 include:
Skepticism on regional economic growth
Fewer SMEs are expecting economic growth compared to last year in 11 out of the 12 markets polled, indicating a dip in optimism across the board. Japanese SME leaders show the biggest lapse in confidence, with only 36 percent anticipating growth, followed by South Korea (57 percent) and Thailand (44 percent) respectively.
Hiring freeze or headcount reduction likely among Asian SMEs
The UPS ABM 2008 shows that SMEs are hesitant about their prospects for workforce growth. More than half of the SMEs polled do not plan to hire or are considering reducing their headcount. This indicates that the SME community may be bracing themselves for a tougher business environment.
Eroding business growth and competitiveness
SMEs in India, China, Taiwan, Singapore, Hong Kong and Japan feel their own companies will not perform as well as they did in 2007. Though there were pockets of optimism in other markets with regards to business growth, SMEs across all markets except India show declined confidence in their own competitiveness.
The workforce headache
Nearly all SMEs (90 percent) across the region recognize that having a qualified workforce enhances competitiveness. However, half say that retaining a qualified workforce is the most pressing business issue.
The China Paradox
While fewer SMEs regard China as a threat compared with 2007, the UPS ABM 2008 shows that mixed feelings still linger. Twenty one percent of SMEs still view China as a threat while 30 percent view is as both a threat and a boost to their business, indicating that Asian SMEs are still unsure about the impact of China's growth to their businesses.
Trade with North America expected to decrease significantly
In line with the current economic climate, only 39 percent of SMEs expect trade with the United States to grow, compared to 51 percent in 2007, while only 25 percent (versus 32 percent in 2007) expect the volume of trade with Canada to grow. Outlook on Intra-Asia trade is remains robust at 71 percent, while there is a slight improvement in the outlook for trade growth with the Middle East, Europe and Latin America.
U.S. economic woes creates uncertainty in the region
The possibility of economic downturn in the United States is creating anxiety among SMEs in the region. SMEs in Indonesia (63 percent), Hong Kong (57 percent), South Korea (54 percent) and Singapore (53 percent) are most concerned their businesses will be hampered in a U.S. economic downturn.
Urgent call for Government action in sustainability
An overwhelming 81 percent of SMEs polled feel that the government should take a more active role in sustainability, while another 51 percent of SMEs feel large corporations should take on more responsibility. SMEs cite cost (67 percent) and staff motivation (49 percent) as the two major challenges to their ability to champion sustainability practices.
The supply chain puzzle
Though 80 percent of SMEs across the region believe supply chain efficiency is important to their competitiveness, the majority are still unsure about how to achieve this. Nearly one third of SME respondents are still experimenting with ways to manage their supply chains more effectively, and over a quarter acknowledge they are under-utilizing the power or neglecting the management of their supply chains.
Getting through the business financing maze
More than half of the SMEs polled face difficulties related to business financing. Regionally, 38 percent find bureaucracy and red tape a hurdle in processing their applications for funding, while 29 percent respectively cite lack of institutions willing to lend to small business and insufficient collateral as issues.
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. According to Asia Pacific Economic Co-operation (APEC), SMEs make up about 99 percent of enterprises in the regional APEC economy, contributing between 30 and 60 percent of an economy's gross domestic product. This year, the UPS ABM 2008 surveyed 1,201 company owners, proprietors, CEOs, Managing Directors and other top management across 12 markets.
UPS (NYSE: UPS) is the world's largest package delivery company and a global leader in supply chain and freight services. With more than a century of experience in transportation and logistics, UPS is a leading global trade expert equipped with a broad portfolio of solutions. Headquartered in Atlanta, Ga., UPS serves more than 200 countries and territories worldwide. The company can be found on the Web at UPS.com. To get UPS news direct, visit pressroom.ups.com/RSS.
Notes to Editors
UPS ABM 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 ABM 2008 surveyed 1,201 decision-makers of SMEs between December 18, 2007 and January 24, 2008. Interviews were conducted by an independent research organization, TNS, in Hong Kong 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), China (150), Hong Kong (100), India (100), Indonesia (50), Japan (100), South Korea (100), Malaysia (100), Philippines (101), Singapore (100), Taiwan (100), Thailand (100).
Respondents were from a range of industries: automotive, electronics & electricals, garments & textiles, gifts & housewares, healthcare & pharmaceuticals, timepieces, jewellery & optical goods, toys & sporting goods, and others.
The UPS Asia Business Monitor is available for download at www.ups.com/abm.
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