(5 December 2018 – Asia) Despite SMEs accounting for most of the businesses in APEC, dedicated training and support that prepares them for exporting success remains lacking according to the APEC Business Advisory Council (ABAC).
The council commissioned a research team from the University of Southern California’s Marshall School of Business to report how APEC could build SMEs untapped potential and address the barriers SMEs face in building their businesses internationally.
Their research, based on interviews with 600 companies across the region, also found a story of “frustration and continued disappointment” among SMEs. The data revealed that the digital revolution and the growth of multinationals’ global supply chains has brought radical new cross-border opportunities for SMEs. In particular services companies are positioned to benefit strongly given historically they had few chances to grow their business internationally. “Digital technology has reduced trade costs and expanded the reach of SMEs. It has increased the advantage of being small, specialised and being the best-of-breed. It has offered forward-thinking developing APEC economies ways to get out of the low-valued manufacturing sectors that they have traditionally been trapped in.”
Research by the University of Wellington in New Zealand has shown that over half of SMEs selling overseas do not have a formal contract, still less a dispute settlement clause to provide clarity in the event of a business dispute. Recent EU research confirmed there was 820 million worldwide business disputes in 2016 with each dispute taking up to 15 months to resolve and legal charges in multiple countries of at least US$1000 an hour – it is no surprise that over a third of SME disputes go unresolved at immeasurable cost to the companies concerned.
Much more needs to be invested in ensuring SMEs are “foreign market ready” before they venture overseas. SMEs find it “particularly problematic” to manage customs procedures, widely varied local licensing, regulatory requirements and other compliance costs. The Marshall School team conclude that they need “greater transparency, simplified, plain-language rules, timely customs clearance, and they need multilateral trade rules, not bilateral Free Trade Agreements (FTAs). “FTAs and RTAs (regional trade agreements) are negotiated from a large firm perspective, with little consideration for the positive or negative impacts on MSMEs,” the research team stated. Most ignore the FTAs, and just pay the tariffs. The Marshall School’s study places Hong Kong and Singapore out front in providing supportive environments to SMEs.