Hong Kong SMEs Call for Further Innovation and Government Support

Hong Kong, August 19, 2010

UPS survey shows renewed confidence in the economy and new business opportunities for growth

While 36% of Hong Kong small and medium enterprises (SMEs) foresee business growth this year, UPS's Asia Business Monitor (ABM) 2010 survey reveals their appeals for further support. SMEs cite innovation (61 percent), government support (61 percent) and rising labor costs (55 percent) as the top obstacles to their competitiveness.

"Although business confidence has improved, SMEs, like the larger corporations, look ahead for opportunities and support to grow their businesses and become more competitive. Hong Kong has a small domestic market, so SMEs need to look overseas and identify markets where they can be highly competitive," said Mr. KK Leung, Managing Director of UPS Hong Kong and Macau.

"SMEs make up the majority of the business landscape in Hong Kong. With a greater focus on innovation and close management of labor costs, Hong Kong could become a regional hub for innovation and technology," Mr. Leung continued.

The UPS ABM 2010 is an annual survey that provides valuable insights into SMEs' competitiveness and current business issues, as well as growing opportunities that are perceived by SMEs in the region. In its sixth year, it covers 1,351 SMEs across 13 markets, including 100 Hong Kong SMEs.

Other UPS ABM 2010 highlights include the following:

Hong Kong SMEs sleep easier as financial concerns decline

Concerns related to financing are yesterday's problem. The cash situation has improved vastly in 2010, with the number of SMEs seeing no financial issues nearly doubling. More than 60 percent of Hong Kong SMEs report that they have no difficulties in financing their business, which is a significant improvement from the mere 33 percent who shared the same view last year.

Although fewer Hong Kong SMEs are concerned with financing this year, they are still calling for government aid. This year, 61 percent of Hong Kong respondents still feel the government is not doing enough to address their needs and believe further assistance should be provided on top of financing support in the forms of discounts or subsidization.

As financial fears begin to wane, SMEs refocus on growing their workforce. The number of respondents who plan to increase their workforce more than tripled, from a mere 6 percent in 2009 to 20 percent this year. Despite the rapid shift toward hiring mode, Hong Kong SMEs still rank among the lowest in the region when it comes to adding staff this year.

Middle East and Latin America are the next lands of opportunity

Even as business in Asia continues to flourish, SMEs are also looking to new regions for growth opportunities. Over the next three years, Hong Kong SMEs indicate they will look beyond the traditional markets such as the U.S. and Europe and explore new areas in the Middle East (19 percent) and Latin America (14 percent).

Location remains key advantage for Hong Kong SMEs to capitalize on

Hong Kong's convenient location by China and in the region places Hong Kong SMEs at a significant advantage. This year, 66 percent of Hong Kong SMEs' business is conducted within the Asia Pacific region, as opposed to Europe at 19 percent, North America at 11 percent and Latin America at 2 percent.

"In line with the rapid expansion of intra-Asia trade, UPS has relocated our Asia Pacific hub from Clark, Philippines, to Shenzhen, China, at Shenzhen Baoan International Airport," said Mr. Leung. "This strategic location of the US$180 million hub will enable shorter transit time between burgeoning Asian trade lanes, while offering a new level of service to the manufacturing region located just north of Shenzhen, where many Hong Kong SMEs are located."

Notes to Editors

• UPS Asia Business Monitor series provides the latest insights into the changing opinions, attitudes and habits of business leaders from the region’s small and medium sized enterprises.
• UPS Asia Business Monitor 2010 surveyed 1,351 decision makers of SMEs between March 11, 2010 and April 20, 2010.  Interviews were conducted by an independent research organization, TNS, using the respondents’ native language in Hong Kong. SMEs are defined as companies with fewer than 250 employees.
• Interviews were conducted in the following 13 markets: Australia (100 respondents), China (150), Hong Kong (100), India (101), Indonesia (100), Japan (100), Korea (100), Malaysia (100), the Philippines (100), Singapore (100), Taiwan (100), Thailand (100) and Vietnam (100). 
• Respondents were from a range of industries: automotive, garments & textiles, healthcare & pharmaceuticals, toys & sporting goods, electronics & electricals, gifts & housewares, timepieces, jewellery & optical goods, and others.
• The average SME has been in business for nearly 22.6 years.
• Graphs and charts from the UPS Asia Business Monitor 2010 are available by contacting Ms Ria Choi at UPS Hong Kong on +852 2738 5685 or cria@ups.com, or Angela Kor at Ogilvy Public Relations Worldwide on +852 2884 8552/  +852  6238 9030 or angela.kor@ogilvy.com.