UPS Asia biz monitor: Indian SMEs still bullish

Majority of Asian SME Leaders See Indias Rise as Beneficial

With India's growing importance in global trade and its businesses gaining a stronger foothold in the world economy, Indian Small- and Medium-sized Enterprises (SMEs) are bullish on the country's economic growth. Indian SME leaders have emerged as being most optimistic about their current business growth prospects as compared to other SME leaders in Asia Pacific, the UPS Asia Business Monitor (UPS ABM) 2007 reveals.

The UPS ABM 2007 is an annual survey designed to gauge the competitiveness of SMEs in Asia. The survey was conducted based on interviews with 1,200 business executives of SMEs across 12 markets in the Asia Pacific region.

The study found that 81% of Indian SMEs are optimistic about economic growth in India. This is a big jump compared to the 69% recorded in 2006. Eighty-nine percent of Indian SMEs are confident about their company's growth prospects, which is a consistent rise in growth expectations from 2006. This positive sentiment is reflected in Indian SMEs' expectation to increase or maintain their current workforce in 2007.

However, although the overall reading about India is ranked among the most optimistic in the region, there are roadblocks to competitiveness such as a lack of qualified workers, innovation, and government support. SME leaders in India cite a lack of supply chain efficiency and transportation infrastructure as the biggest obstacles to their competitiveness, factors considered both important and lacking. These obstacles need to be addressed to ensure their sustainable growth and competitive position in the global marketplace.

Across Asia, the top three business concerns that keep business leaders up at night include quality of their services (50%), customer loyalty (48%), and the retention of quality employees (47%). Indian SME leaders have echoed the same business concerns.

With regard to the problems encountered by Indian SMEs in financing their businesses, 57% state bureaucracy and red tape in processing applications, 40% state insufficient collaterals and 34% mention a lack of institutions willing to lend to small businesses.

Indian SMEs also highlight the problems faced in supply chain management. Fourty-two percent of SMEs in India express difficulty in forecasting demand which affects the efficiency of their supply chain. Of these, 33% state a lack of knowledge and expertise in supply chain management and that their supply chain was fragmented with too many parties involved.

With all eyes on India, this year's ABM study also posed a number of questions specifically on the country. India's business and legislative environment is viewed as positive and encouraging to foreign companies and multinationals (52%). Of these respondents, 13% feel that this is because of India's low production and labour costs; 12% believe that it is because India has a good business and investment climate; while 11% believe that India's government policies encourage foreign investment.

As China and India continue to emerge as two of the fastest growing economies in the world, SME leaders in Asia remain more skeptical about the growing dominance of China than India. While China is consistently rated by SME leaders with the greatest prospects for economic growth (92%) in 2007, across the region India's prospects are also viewed as very positive in the coming year (81%)

Commenting on the findings of UPS ABM 2007, Andy Connelly, Senior Vice President of South District, UPS Asia Pacific Region said, "We are witnessing a fundamental global economic shift, due to the rapid emergence of China and India as key players in relation to trade and economic growth. Through the ABM, UPS hopes to be the pulse of SMEs and help them explore factors that could enhance their competitiveness in the global marketplace."

The majority of Asia's SMEs are bullish on the region's economy, with 74% expecting to see growth in intra-Asia trade. Indian SMEs, however, have rated the U.S as the strongest prospect for growth in trade volume for the third consecutive year.

"According to this year's ABM findings, Asia's SMEs believe that India will be a future leader, and has already established itself as a leader in the IT sector. For UPS, these perceptions act as motivators to constantly enhance our service offerings and global network to cater to the needs of these economic drivers," said Pirojshaw Sarkari, Managing Director of UPS Jetair Express.

"The backbone of every economy on the globe is the SME Sector. The UPS ABM 2007 has brought out excellent insights on what SMEs perceive across the countries in terms of their competitiveness. For a country like India, where the 'speed to market' for SMEs is a perennial problem, this report highlights the need to bring efficiency along the value chain. Moreover such surveys also break the myth that the SMEs are not aware of the global changes and challenges," said Dr. K Rangarajan, Head, Centre for SME Studies, Indian Institute of Foreign Trade (IIFT).

SME leaders across Asia expressed a desire to capitalise on India's rapid growth by leveraging its continued rise as a manufacturing base (30%); and outsourcing to India (25%). In line with this growth, SME leaders in Asia also express a desire to become an outsourcing destination for India (20%), and exporter of raw materials to India for manufacturing (19%).

Other Key Highlights:

?JOB PROSPECTS IN ASIA BRIGHTEST IN YEARS

o The positive job outlook for 2007 bodes favourably for employees, with over 89% of respondents across all countries expecting to maintain or increase the size of their workforce. The greatest increase is expected in India (79%). Even in mature markets such as Hong Kong and Japan, 34% of respondents anticipate workforce growth.

?INDIAN SMES CONSIDER CHINA'S SMES MOST COMPETITIVE

o Indian SMEs once again rated China's SMEs as most competitive with 75% of the SMEs rating China as more competitive.

o On the other hand, Australian SMEs gave India the highest rating, with 57% of the respondents believing Indian SMEs are more competitive than their own followed by Malaysia.

? INDIA AS THE FUTURE LEADER

o The majority of SME leaders in the Asia Pacific region see India as a future leader. Thirty-one percent of respondents perceive India as a leader in the IT sector while 13% feel it is a leader in the textiles and apparel industry.

UPS, which celebrates its 100th anniversary in 2007, is the world's largest package delivery company and a global leader in supply chain services, offering an extensive range of options for synchronizing the movement of goods, information and funds. Headquartered in Atlanta, Ga., UPS serves more than 200 countries and territories worldwide. UPS's stock trades on the New York Stock Exchange (UPS) and the company can be found on the Web at UPS.com.