Thu, Aug 05, 2010 - Page 12 News List

SMEs wary of customer solvency, reliability: report

By Ted Yang  /  STAFF REPORTER

A majority of Taiwanese small and medium-sized enterprises (SME) regard solvency and reliability of their overseas customers as the biggest barrier to doing international businesses, a report by HSBC said yesterday.

The bank’s latest report on global SME’s confidence index, which polled 6,346 businesses in 20 markets from April to May, showed that 41 percent of respondents were concerned about these two risks.

“As a result, how to effectively shift risks and secure profits have become [SMEs’] first priority,” the report said, adding that complex local regulations and legal complications were considered the second-biggest obstacle (31 percent) followed by sovereign risk (29 percent).

Russell Liu (劉政瑩), a senior vice president and head of CMB Business Banking at HSBC, said that following the global financial crisis, Taiwanese SMEs’ risk awareness had increased substantially as many turned to unfamiliar yet profitable emerging markets to diversify shipment destinations.

“However, because these markets involve risks that are hard to predict and conditions that are relatively unfavorable to sellers, SMEs often face a dilemma on whether or not to take orders [from these markets],” Liu said.

Solvency and reliability were also the biggest barriers cited by SMEs operating in China and Hong Kong, with 40 percent pointing to risks presented by customers and 30 percent to risks from overseas suppliers, the report said.

Liu said that increasingly frequent trade activity among emerging markets would become a main driver of Taiwanese export growth, and encouraged SMEs to use services provided by international banks to aid their business.

Taiwan’s SMEs, more than half of which conduct international business, have shown signs of regaining business confidence, with more than 70 percent expecting the current pace of economic growth to remain stable in the next half year, the report said.

However, Taiwan still remained the least confident among Asian countries, with Vietnam being the most upbeat, followed by Singapore and China, the report said.

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