New Trade Landscape Emerging for Asia’s SMEs

FedEx-Commissioned Research Reveals Trade Opportunities for Asia’s SMEs Increasingly Linked to Burgeoning Demand from China’s Domestic Market And to Unrealized Potential of FTAs


FedEx Express, a subsidiary of FedEx Corp. (NYSE: FDX) and the world's largest express transportation company, today released the findings of new research which reveals the challenges and opportunities for Asia’s Small and Medium Sized Enterprises (SMEs) emerging from the financial crisis towards economic recovery. The study shows that while cost controls remain crucial to survival, SME exporters may benefit from both new sources of consumer demand within Asia, and from the rising volume of trade within the region—especially if more advantage is taken of its many Free Trade Agreements (FTAs).

Entitled “Towards the Recovery: Challenges and Opportunities facing Asia’s SMEs,” FedEx Express commissioned the research from The Economist Intelligence Unit (EIU). The report is based on interviews with corporate officers at SMEs, regional experts and a review of recent studies published by leading authorities, including the Asian Development Bank and national governments in the region.

“Small and medium sized enterprises, which comprise 95% of businesses in the Asia Pacific region and employ nearly 80% of the workforce, play a critical role in the region’s economy and will be vital in its recovery and growth in 2010,” said David L. Cunningham Jr., president, Asia Pacific, FedEx Express.[1] “With demand in the West making a slower recovery than Asia’s rapidly improving economic outlook, this report provides SMEs in the region with an understanding of the new trade dynamics that are emerging here. As a facilitator of trade, we believe the report’s insights will help SMEs to evaluate these new opportunities and tap into the regional recovery underway in Asia.”

One of the report’s key findings examines how SMEs stand to benefit from two new interlocking dynamics within the economies of the Asia Pacific region. The first is a need to rebalance economies in the region to reduce their reliance on consumers in developed Western markets and turn their attention towards domestic demand.

The second is intra-regional trade, by which SMEs in smaller markets in Asia may take advantage of increasing consumer demand in the region’s developing giant economies, namely China.

Against a backdrop of slow economic recovery in the West, Asian SMEs would benefit from an emerging customer base within the region. There are signs that China may be able to provide this, as its middle class becomes wealthier and policy makers seek to rebalance its economy away from a reliance on exports and towards domestic demand.

In fact, in the first three quarters of 2009, China’s retail sales grew by 15.1% year-on-year, almost as fast as before the financial crisis. The buoyant Chinese economy has the potential to anchor a new region wide trade dynamic, with China not just an assembly point for exports to Western markets, but as a final destination for goods from other Asian countries.

“Throughout this decade we have witnessed the flow of goods into China as it has acted as the assembly line for the region, and then exports out of China to the West. This research shows that Asian consumerism is a force that will lead the region back to prosperity,” Mr. Cunningham said. “FedEx is committed to assisting SMEs seek out emerging trade opportunities within and across the Asia Pacific region through our intra-Asia network which connects 22 major cities. Coupled with our flexible services we can help position SMEs to be even more competitive in today’s rapidly changing business environment.”

Linked to this trend of increasing intra-regional trade is the proliferation of Free Trade Agreements (FTA) that have been signed over recent years in an effort by Asian economies to promote more trade with each other. As of mid-2009 these economies concluded 54 FTA’s among themselves and with countries outside the region. Most recently, an FTA between China and the Association of South-East Asian Nations (ASEAN) went into effect on January 1st, 2010. This will create a common market of some 1.7 billion people and under the agreement, 90% of goods traded between China and ASEAN’s six richest member states now enjoy zero tariffs.

The trade preferences offered by FTAs represent a major opportunity for SMEs in the region to grow their cross border business. However, the research points to the fact that many SMEs, with their limited resources to handle multiple tariff schedules and document requirements, do not yet know how to make use of FTA provisions. It is clear that better official guidance and information is necessary if SMEs are to take advantage of Asia’s evolving trade dynamics.

“FedEx is a supporter of any act or process that facilitates trade,” Cunningham said. “Confusing customs regulations, duties and taxes remain one of the biggest barriers for SMEs in accessing international markets, which is why FedEx offers dedicated software solutions that help small business expand their reach quickly and simply.”

One such example is FedEx Global Trade Manager, an online tool that simplifies international shipping by identifying the documents needed for shipping to more than 200 countries. The free, online resource even calculates various taxes and duties needed in the process.

“We commissioned this research recognizing the importance of SMEs to the region’s economy and also to the future development of the express market. Today’s international exporters are not major multinational companies, but small businesses,” Cunningham said. “FedEx helps small business owners go global from day one through greater access and its tailored portfolio designed to meet the unique needs of SMEs with personalized services, innovations, tools and discounts focused on value, reliability, reach and service. It is particularly satisfying to see these services as being increasingly relevant in Asia’s changing economies.”