Signed, sealed, FedEx delivered
The spotlight is on SMEs in the Asia Pacifific, as express delivery giant FedEx seeks to introduce to the region its unique brand of value addition. Emma Dai spoke with the regional president.
Eyeing growth in the Asia Pacific, the purple-tailed fleet of FedEx, the express transportation company, is taking off to help small and medium-sized enterprises (SMEs) in the region expand their business to the world.
“We are very interested in small and medium enterprises, because this is where FedEx can bring in particular value,” said Karen Reddington, president of FedEx Express Asia Pacific, who took over the helm a year ago.
Originally from the UK, Reddington began her career at FedEx in 1997 as an operations research advisor in Hong Kong, where the express company’s Asia Pacific headquarters has been located since 1984.
FedEx Express, a subsidiary of the New York-listed FedEx Corp, flies more than 400 times a week to more than 30 countries in Asia Pacific. The company employs nearly 18,000 workers in the region and more than 1,250 in Hong Kong, from where its flights reach out to more than 220 countries and territories worldwide.
“Lots of SMEs have great products and ideas. One thing they want to do is to bring it global. But they often need a trusted partner to help them manage cross-border commerce in terms of customs clearance and returns processing. We see ourselves playing a big role in helping SMEs get to overseas markets and grow,” Reddington told China Daily.
A survey conducted by FedEx found last November that SMEs are the driving force for economic growth in the Asia Pacific. These companies account for 98 percent of all business in the region, compared with 90 percent worldwide. Hong Kong, the Chinese mainland and Singapore are the top three active markets, with 50 percent, 35 percent and 41 percent SMEs involved in export business.
The survey also found that in six key markets in the region, 22 percent of exporting SMEs reported they were “growing rapidly”, compared to just 11 percent of domesticonly SMEs putting themselves in that category.
However, on average, only 36 percent of SMEs in the Asia Pacific trade with overseas markets, despite more than double that proportion, or 77 percent, recognizing that the opportunities are significant.
Reddington said many SMEs are hesitant because they are concerned about the various kinds of barriers to cross-border trading.
“Having assurance is very important. Your ability to deliver reliably to your consumer reflects your business,” Reddington said. “The one thing SMEs need, above all, is knowing that they can promise their customers ‘I’ll have that with you on Wednesday’, and their logistic partner can get their products there on time, in one piece.”
Another key thing to know, according to Reddington, is how to get through different regulatory requirements across markets.
“Cross-border commerce is very confusing and complicated. Every country has different regulations and customs regimes. Having a partner who could help you understand that is very important.”
Meanwhile, in the era of e-commerce, return processing, which could be complicated, is also becoming a crucial factor. “A lot of people will make their final decision on whether to buy on (the basis of ) whether they can easily return the shipment,” she pointed out.
Reddington said FedEx is responding to these concerns by providing value-added solutions to SMEs. It holds seminars with the Asian Development Bank to explain what they need to do to engage in cross-border trading. It offers a variety of choices in terms of delivery speed, from FedEx International First — the first thing in the morning — to FedEx International Economy, a bit trade off if you are not so much in a hurry.
It has also rolled out the Return Label, where parcels with such tags can be easily sent back by receivers. “It has been very well received,” Reddington noted.
Although the Asia Pacific has lately been facing a lot of market volatility and growth deceleration, Reddington said she is not unduly concerned and that she believes economic activities in the region are still vibrate and the development potential bright.
“Growth in China and other Asia Pacific emerging markets are still good, (rates) which many regions in the world would be happy with,” Reddington said.
“We are also seeing quite a nice pickup in the Asian tigers (such as Malaysia), and Vietnam as well. We are expecting growth for the Asia Pacific to stay between 5 and 6.5 percent from now to 2017. I’m very positive about the region. There are still good opportunities.”
And a major driver of future growth is believed to be e-commerce. According to New York-based research firm eMarketer, global online purchases by 2019 will reach $3.551 trillion, or 12.4 percent of total retail sales of an estimated $28.55 trillion.
That is more than double of the estimated online spending of $1.672 trillion by end of 2015. The Asia Pacific is expected to grow faster than any other region at an annual rate of 35.2 percent.
“As a provider of logistic services and connector of trade, to get that sort of growth, to take it from vision to reality, we are going to need strong infrastructure development, alongside with a regulatory environment that supports and encourages rapid economic growth,” Reddington said, adding that this would involve investments in large sorting facilities and connectivity to these facilities.
With regional air cargo hubs in Guangzhou, Osaka and Singapore, FedEx will be opening one more hub in Pudong, Shanghai, in early 2017. The new facility, built with an investment of $100 million, is expected to more than triple the company’s current capacity in Shanghai, allowing FedEx to process up to 36,000 parcels per hour.
“Apart from that, what you really need is regulations that smooth cross-border trade. A good sample is de minimis value,” Reddington said, referring to the maximum tariff free value allowed in crossborder trading.
She added that while Hong Kong is the free-trade hub for the region and Australia has an “extremely high” threshold of A$1,000 ($723), the rest of the region is not so trade-friendly. Exporters are often required to file hardcopy paperwork to customs and sometimes other agencies such as quarantine departments as well.
“For SMEs, that becomes administrative barriers and weighs on expense,” Reddington said.
“Somewhere like Singapore is very progressive in terms of allowing electronic filing. You just need to file once for submission to many different agencies. That’s the kind of long-term vision that a lot of players in the industry have.”
And multinational trade agreements are also expected to make cross-border shipping easier, no matter whether it is the Trans-Pacific Partnership, signed on Feb 4 by 12 countries accounting for 40 percent of the global economy, including the United States, Australia and Japan, or the proposed Regional Comprehensive Economic Partnership (RCEP), a free-trade agreement between 16 countries including China and 10 Association of Southeast Asian Nations (ASEAN) members.
Reddington expects these agreements to make cross-border trade flows faster, cheaper and life for SMEs easier, and added that FedEx acts like a spokesperson for SMEs during negotiations, in order to help policy makers understand challenges faced by the business community.
“We try to make sure countries make well-informed decisions about regulatory changes,” Reddington said.
“We bring all the facts to the table so people can see the bigger picture, that if you make trade easier, you can encourage growth, which will benefit all parties. So the pie becomes bigger and everybody gets a share.”
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