· Hong Kong and Singapore rank second and fifth respectively in most favorable business environment for SMEs across 13 evaluated economies
· Canada tops the list with the U.S. and the Netherlands round out the top five
· Top five economies share the common theme of flexible labor market, low level of red tape, favorable tax policies and sound financing conditions
Hong Kong, 18 November 2019 – Hong Kong finishes second only behind Canada in Euler Hermes’ proprietary SME Business Climate Index (SMEB), a study that measures business climate for small and medium-sized enterprises (SMEs) across 13 economies worldwide. Singapore comes in fifth to round out the top five that include the U.S. and the Netherlands.
Riding on the Global Business Monitor 2019 survey jointly issued with Bibby Financial Services last month, the SMEB aims to provide an overview of each of the 13 selected economies and evaluates which one is the most attractive for SMEs in 2019 based on six major criteria, namely red tape, tax policy, labor market flexibility, financing, export opportunities and competition. In a context of slowing global economic growth ahead, it also provides policymakers with a roadmap to improve the business climate for smaller companies.
Hong Kong flourishes in the ranking, finishing only behind Canada, largely due to its business environment characterized by low level of red tape, strong labor market flexibility and a relatively favorable tax policy. Among which, labor market flexibility tops all of the economies assessed. Moreover, favorable tax policy (8.25% for SMEs vs 16.5% for regular companies) has further incentivized SMEs to run businesses in Hong Kong.
On the negative side, the financing and competition components weigh on the business environment for SMEs in Hong Kong. Looking more closely at the financing component, Hong Kong ranks sixth worst in our sample. This is mainly due to a comparatively high lending rate for SMEs, despite both HSBC and Standard Chartered, two of the city’s major lenders, had cut their prime lending rates by 12.5bps to 5% and 5.25% respectively earlier this month in view of technical recession and ongoing social unrest.
Singapore is the other Asia Pacific economy assessed and ranks fifth in SMEB. With favorable performances in red tape and labor market flexibility, the former stands out the most and in fact leads all of the 13 economies. Despite lending rate is the highest in our sample, financial conditions of SMEs in Singapore are supported by decent credit scores and relatively low loan rejection rate.
As for European economies, SMEs in the U.K., Germany and France are experiencing a less favorable business climate. While tax policy is the main constraint for SMEs in the first two economies, lack of labor market flexibility and red tape are the main drags for those in France.
Full report can be downloaded here.