Singapore firms keen to expand international trade amid pessimistic outlook: survey

SINGAPORE firms are keen on expanding international trade compared to their global peers, despite having a more pessimistic outlook on business arising from the impact of Covid-19, according to HSBC's annual Navigator Survey.

Some 87 per cent of Singapore firms surveyed are planning to expand their international business over the next three to five years, compared to 76 per cent globally. Around 51 per cent are immediately investing in expansion overseas, compared to 44 per cent in the Asia-Pacific region.

"Despite the headwinds they face, Singapore businesses aim to expand international trade," the report noted. The survey on business sentiment sought the views of over 200 businesses in Singapore in September this year.

"Intra-regional trade dominates, with more than eight in 10 businesses trading within the Asia-Pacific," the report said. "Trade with leading partner mainland China has grown, as it has with Malaysia."

The main areas of attraction of new markets for Singapore firms are proven customer demand, access to new suppliers and partners, and building businesses ahead of competitors.

The look to international markets comes even as Singapore firms take on a more pessimistic outlook than global peers.

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"Singapore's open and trade-dependent economy means they are more pessimistic about 2021 than businesses globally," the report noted. The biggest concern for businesses is a resurgence of Covid-19, followed by a decrease in demand, and supply chain disruptions.

Business optimism has fallen to 19 per cent, from 27 per cent in 2019. Fewer businesses expect revenue growth next year, with around 42 per cent of Singapore businesses expecting their sales to shrink in 2021, higher than the 28 per cent of firms that feel the same in the region.

Companies in Singapore also expect a slower recovery than elsewhere, with around 27 per cent expecting it to take until 2025 for recovery, compared to 17 per cent in the Asia-Pacific and globally.

To aid recovery and overcome threats, Singapore companies plan to cut costs, expand into more markets and improve cashflow management, the report said.

"There's no doubt that Singapore's businesses have been hard-hit - it comes with the territory of being one of the world's most internationally connected trading hubs," said Iain Morrison, head of global trade and receivables finance, HSBC Singapore.

"Yet, it's encouraging to see that they are still investing for growth; digging deep to strengthen Asian trade links and seeking open, easier and safer trade."

He noted that the formation of the Regional Comprehensive Economic Partnership, signed after the survey was conducted, could not have come at a better time. Mr Morrison said it creates a more coherent trading zone that hands Singapore firms a step-up to greater market access.

As Singapore firms prioritise overseas growth, nearly all businesses surveyed in the Republic also expressed concerns about their supply chain, in relation to the time spent on management, instability and possible tariffs.

The report noted that the majority of businesses are intent on reshaping and not restricting their supply chains in 2021, with a focus on usage of digital or technology means, and selecting suppliers with operational resilience and ability to quickly deliver, who are also closer to customers.

"Firms are on the frontfoot in pursuing technologies to overcome the cracks exposed in global supply chains," Mr Morrison said. "They know that digital is the key to building resilience, now the challenge is in formulating an 'innovation elixir' - combining technologies to make meaningful changes across their businesses."

The HSBC Navigator survey was carried out in September and October this year, surveying 10,000 businesses across 39 countries, markets and territories.