BUSINESS confidence among local small and medium enterprises has fallen sharply in the fourth quarter of 2008, according to a survey by research specialist Kadence Asia Pacific. In a study of 304 SMEs across six general categories of manufacturing, services, wholesale, retail, construction and other industries, 56 per cent of businesses expect worse prospects for the next 12 months, with only 13 per cent expecting better.
The overall Kadence Business Confidence Index - a weighted score derived from the spread of positive, negative and neutral outlook by respondents - also fell to just 35 in October, from 60 in April and 66 in January. There was no survey done in July because of a lack of sponsors.
Despite the drop in confidence, Singapore SMEs are still more optimistic than their counterparts in Hong Kong, where only 3 per cent of the 202 SMEs surveyed said they expect business prospects in the next 12 months to be better. In the same survey, 67 per cent of Hong Kong SMEs are expecting worse outlook.
'The global economic crisis is clearly hitting business confidence hard but the SME sector in Singapore is proving resilient and nimble,' said Kadence managing director Piers Lee.
'These firms are the very heart of the country's economy and the source of many new products and services which they are quick to take to market.'
About 46 per cent of the local SMEs said they might restructure their business. In terms of strategy, 75 per cent plan to review their product range and 73 per cent intend to implement new sales and marketing activities. About 31 per cent said they will undertake joint ventures and 14 per cent are going for mergers. Almost half, or 49 per cent, will be looking for new markets overseas. Of that, 5 per cent have never been in foreign markets.
'SMEs here are reacting very quickly to changing market conditions,' said Mr Lee. 'In Hong Kong, by comparison, only 40 per cent of businesses expect to launch new marketing and sales activity compared with 73 per cent in Singapore, and only 14 per cent are looking at joint ventures compared with 31 per cent in Singapore.
'Although the survey shows that SMEs in Hong Kong might have an advantage in terms of financial liquidity, human resources and more stable prices, it will be the ability of businesses to reinvent themselves that will make the difference. The increased sales and marketing activity planned by Singapore SMEs may well give them a competitive advantage when the recovery starts.'
About 37 per cent of the Singapore SMEs - mostly those in services or transportation sectors - do not expect to be affected too much by the recession, claiming that sales are still buoyant or that their markets and customers are simply not influenced by the downturn.
This article was first published in The Business Times on December 04, 2008.
