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Seoul, September 29, 2010
UPS ABM Survey Highlights Korean SMEs' Pessimism Toward Regional Economic Growth and Business Prospects
UPS (NYSE: UPS), the world's largest package delivery company and leader in supply chain services, today announced findings from the UPS Asia Business Monitor 2010 (UPS ABM 2010), a survey of 1,351 small-to-medium sized enterprises (SMEs) in 13 Asian countries, in which Korean SMEs improved on their regional competitiveness to share second place with Japan. Vaulting from last year's fifth place, and only behind first place China, Korean SMEs were seen to be more competitive than those from other Asian countries by 63 percent of respondents.
"The UPS Asia Business Monitor has served as a meaningful indicator of SMEs' overall business environment for many years. Through the survey, we can deduce that the economic recovery has not yet translated into improved business conditions for Korean SMEs who are still feeling the effects of the economic downturn," said Steven Chang, managing director of UPS Korea.
Korean SMEs perceived they are still in the tunnel
Even though most respondents perceived Korean SMEs as being very competitive, surprisingly only 33 percent of Korean SMEs feel positive about their company's own prospects. Korea is ranked the second lowest among 13 Asia Pacific countries, only beating out Japan in this category.
The somewhat pessimistic attitude also trickles down to their view of the economic growth for the region. Korean SME leaders have the most pessimistic view with only 23 percent projecting growth for the Asia Pacific economy over the next 12 months. This is in contrast to Japan SMEs (81 percent) who have the most optimistic view of regional prospects.
Korean SME leaders are also skeptical about the business opportunities available to them this year. Seven out of 10 believe they have fewer opportunities this year as compared to 2009.
The economic downturn still weighs heavily on Korean SME leaders, of whom 40 percent cited this as their most pressing concern in 2010. Although they feel that the overall economy is in recovery, they still harbor doubts that the recovery can be sustained, and perceive that business conditions are still unfavorable. They are also concerned over staff retention and remuneration (35 percent), costs (30 percent), and competition (29 percent).
The lands of opportunity will be Asia-Pacific and the Middle East
Korean SMEs are however, more optimistic about trading overseas. Sixty-one percent anticipate Korea's trade within the Asia Pacific region will grow this year, a result which will positively affect the fortunes of transportation and logistics companies. They also expect trade with the Middle East (50 percent), North America (34 percent) and Europe (33 percent) to grow.
Korea's image as an IT powerhouse reinforced
The IT industry (62 percent) continues to be the country's key growth industry in 2010 followed by automotive (29 percent) and manufacturing (23 percent). When asked which industries will be key economic pillars for Korea over the next three to five years, 71 percent of Korean SMEs indicated IT, followed by automotive (45 percent), renewable resources/renewable energy (21 percent), manufacturing (20 percent) and building & construction (20 percent) (Appendix 8). This confirms Korea as one of the powerhouses in the world's IT industry as a result of the Korean government's continuous investment in this sector. Korea has globally established IT companies in the areas of semiconductors, cell phones, and consumer electronics, namely Samsung Electronics and LG Electronics.
'Green' wind blowing in SMEs
As environmental commitments continue to increase in the country, 20 percent of Korean SME leaders say that they could "achieve long-term cost savings by investing in environmentally conscious mechanisms today," while 47 percent responded that "investing in environmentally conscious mechanisms has a place, but not in 2010," and 33 percent said that "investing in environmentally conscious mechanisms should be addressed by government and big businesses, not SMEs." This reflects a changing perception among many Korean SME leaders who once focused only on development and expansion. They are now realizing the importance of environmental initiatives, and are willing to make efforts towards environmental sustainability in their businesses.
SMEs facing high wall of banks with lack of collateral and complicated financing procedures
For Korean SMEs who have encountered financing problems, 36 percent pointed out lack of collateral, followed by financial institutions' reluctance to finance SMEs (24 percent) and complicated financing procedures (20 percent), implying that it is still difficult for SMEs to obtain suitable financing.
Reducing transportation cost in supply chain management critical
When asked about what changes are needed in supply chain practices to support future growth, 40 percent of Korean SMEs responded that they will just "focus simply on reducing transportation and distribution costs," while 22 percent said that there will be "no change in our supply chain practices." Regardless of the company's size, they are eager to minimize costs. Most understand that supply chain management is an important aspect in doing so and that working with a logistics partner capable of handling the most basic shipping to managing the most complex supply chains is an important consideration.
"The UPS ABM 2010 strongly suggests that reducing transportation costs in the supply chain and focusing more on intra-Asia trade and the Middle East market will be critical for Korean SMEs who perceived they are still in the tunnel," Chang said. "As the business partner of SMEs for their logistics and supply chain needs, UPS Korea will continue to enable global trade and support them through leading supply chain solutions and cutting-edge technology that will improve their competitiveness and allow them to succeed wherever they do business."
SMEs Question the Value of FTAs
While the government is pushing for more foreign trade agreements (FTAs) to be signed with countries around the world, Korean SMEs are unsure if these would help them. Although Korea currently has FTAs signed with the U.S., Chile, ASEAN and Europe, only 36 percent of SMEs believe that these agreements will benefit them. Another 33 percent say that FTAs only partially help create more opportunities for them. Fourteen percent said that the FTA signed with the U.S. did not have significant relevance with SMEs as they mainly trade with neighboring countries.
Notes to Editors
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