Thursday 23 October 2014

More SMEs head abroad to grow their businesses

Fewer firms expanding here given cost and manpower issues: Survey
By Marissa Lee, The Straits Times, 22 Oct 2014

INCREASING numbers of small and medium-sized enterprises (SMEs) are trying to grow their businesses overseas while fewer are expanding their presence here, according to a survey released yesterday.

It found that 20 per cent of SMEs plan to try their hands on foreign shores, up from 14 per cent in the same poll last year.

The survey of 2,836 firms in seven sectors also noted that only 8 per cent are expanding their presence here, down from 17 per cent last year.

Meanwhile, 15 per cent of SMEs this year are loss-making, up from 13 per cent, according to the poll by DP Information Group.

"Prevalent domestic issues, such as rising business cost and manpower challenges, have eroded SMEs' confidence in the local market," said Mr Ho Meng Kit, chief executive of the Singapore Business Federation yesterday.

The survey also revealed that more SMEs are doing business overseas, but the proportion of revenue generated from these operations is falling.

The percentage of SMEs generating less than 30 per cent of their sales overseas rose to 53 per cent from 43 per cent last year.

But those earning more than 70 per cent of their revenue overseas fell to 21 per cent from 26 per cent.

Liquidity has also fallen with average cash reserves down 24 per cent between 2012 and 2013, continuing a three-year downtrend that leaves the 2013 figure of $718,310 at half of its level of $1.37 million in 2010.

"This may affect their ability to respond to emergency cash needs, to invest in the business, as well as their ability to secure new financing," warned Ms Leung Wai Ling, group director of capability and partnerships at Spring Singapore.

Changing market conditions have also polarised the credit-worthiness of SMEs, with 45 per cent receiving a high-risk credit rating while 23 per cent were classed as investment grade.

"This is the largest portion of SMEs in high risk seen over the past six years," said Ms Chen Yew Nah, managing director of DP Information Group.

"SMEs with weak credit ratings can have a domino effect on the entire business ecosystem when they fail to pay vendors on time," she added.

She proposed creating an official "mark of credibility" to help investors navigate the polarised landscape and differentiate the strong SMEs from the weak.

The survey also found that Myanmar was the top choice for overseas expansion, followed by Indonesia and Vietnam.

Malaysia, China and Indonesia are again the top three countries in which SMEs are engaged.

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