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SME positivity ranks second globally
Viet Nam's small business confidence index remains positive at 156, the second highest in the world, over the global average of 125, according to a bi-annual small business confidence monitor recently released by the Hong Kong and Shanghai Banking Corporation (HSBC).
Though there was a slight drop, this is in line with the economic outlook of all as SMEs in Viet Nam with 60 per cent believing that the economy will continue to grow in the next six months.
Over half of the surveyed enterprises in the country are involved in international business, much higher than the average global rate of 29 per cent.
Mainly, these enterprises are conducting import (71 per cent) and export services (34 per cent) as well as marketing products and services through international subsidiaries or offices (10 per cent). Off-shore services, including call centers and service centers accounted for 7 per cent.
Over half of the Viet Nam SMEs have plans to either expand (42 per cent) or continue their existing international activities (9 per cent) while 18 per cent have plans to go international while the rest of 31 per cent do not.
When asked about the intention to do business internationally in the next two years, 82 per cent of the international companies in Viet Nam believe they will expand their business, double the global figure. Thirty-seven per cent of domestic enterprises have plans to do business internationally.
Availability of financing (49 per cent) and concerns about dealing in foreign currencies (48 per cent) remain at the top of barriers for doing international business.
Aside from that, other concerns for these businesses include the complexity of certain international markets (Taxes, foreign currency controls), local regulations, legal complexities of contacts, and experience of overseas markets.
While considering the expansion of their business internationally, 48 per cent of the surveyed Viet Nam SMEs said that they needed information about foreign exchange risk and regulations, while another 46 per cent needed to know more about financial options that might be available.
They also consider tax implications and legal advice as vital to their business should they wish to expand globally.
Increasing their revenue is the top reason that drives businesses to trade beyond their national borders, with 95 per cent of Viet Nam SMEs agreeing on this. Forty-eight per cent wish to expand abroad to tap new customers.
The top three concerns for the next six months are inflation (62 per cent), economic conditions (52 per cent) and difficulties in accessing credit (48 per cent).
This is also in line with the latest result from the HSBC Emerging Market Index survey.
The survey results also highlight that government policy measures such as monetary policy and stimulus packages play a key role for local economic growth as 53 per cent of local SMEs believe that these help their businesses significantly.
Twenty-eight per cent of the enterprises say the increased demand from the domestic market will also boost economic growth.
Global scale
Globally, confidence in future business growth among small and medium enterprises (SMEs) within the developed markets has dropped, while the emerging markets continue to increase.
A quarter of SMEs in the developed markets expect the pace of growth within their local economy to slow down in the next six months, while 43 per cent in emerging markets forecast an increase.
Alan Keir, HSBC's Global Head of Commercial Banking, said: "Increased private consumption, global re-stocking and liquidity from the West have helped boost the emerging market economies. The emerging markets play a vital role in driving the global economy and SMEs in these markets are once again demonstrating their strength and positivity on the global stage."
The bi-annual HSBC Small Business Confidence Monitor gauges the six-month outlook of SMEs on local economic growth, capital investment plans and recruitment drives.
The results were used to calculate an index ranging from 0 to 200 where 200 represents the highest confidence level, 0 represents the lowest, and 100, neutral.
The latest wave is the largest international survey of its kind, covering more than 6,300 SMEs across 21 markets in Asia, Africa, Middle East, Europe, North America and Latin America.
The decline in confidence within the developed markets (DM) brought the overall global index down, while the emerging markets indicated sustained growth.
Emerging markets continued to hold a positive local economic outlook with almost half (43 per cent) forecasting an increase in the growth of their local economy over the next six months.
In the developed markets, only 12 percent predicted an increase in local economic growth over the next six months, while 26 per cent predicted a decrease.
Increases in recruitment and capital expenditure remain largely stable globally, with 33 per cent of emerging market SMEs planning to increase their staffing (Compared to 17 per cent in developed markets) and 48 per cent planning to inject more into investments over the next six months (Compared to 27 per cent).
Research findings show the number of SMEs across the globe conducting international business activities is expected to expand from 29 per cent to 40 per cent by 2013.
The increase is driven by domestic SMEs, 18 per cent of which plan to become international by 2013.
International SMEs are demonstrating aggressive cross-border expansion plans with almost half (48 per cent) intending to expand their international operations in the next two years to increase revenue.
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