Today's Pick (04/12/12/211/906) Fung says governments must facilitate SMEs to be part of global trade

Fung says governments must facilitate SMEs to be part of global trade

KUALA LUMPUR: With global supply chains opening up, governments need to facilitate the participation of the small and medium enterprises (SMEs) so that the local economy can be part of the global trade.

In line with the revolution of technology and logistics, global supply chains no longer rely on singular companies or countries to complete products but various companies in various parts of the world participating in different segments of the manufacturing process.

“The atomisation of the manufacturing process has enabled SMEs participate at different parts of the supply chain by focusing on their niche and providing that expertise,” according to global trading, logistics, distribution and retailing giant Fung Group chairman Victor K. Fung.

For that to happen, Fung said that governments must ensure that the infrastructures especially for information technology and logistics be developed enough to allow SMEs to begin participating in the global supply chain.

“Unless the Government does that, there is no way for the SMEs to participate. And SMEs are the largest job creators anywhere in the world,” he said when presenting at the 10th Khazanah Global Lectures recently.

Just as private sector supply chains needed to be efficient, stable and sustainable, government services were also supply chains that needed to have those qualities at different levels to function in harmony.

“From the national perspective, economic policy today is really about plugging the domestic economy into the global trading system. SMEs need to be inserted into living, sustainable and profitable global supply chain,” he said, adding that Malaysia's national prosperity depended on that.

Hong Kong-based Fung said how the global supply chain was constructed advocated the trade, investment and jobs flows which countries needed to understand to work out a way to harmonise it with the local economy.

He elaborated that the global supply chain demanded far greater stability in regulatory principles and practice, and clear adherence to rules-based operations.

“Market and supply chains will move to those economies that demonstrate stability in rule of law and clear protection of property rights,” he said,

“The future lies in strengthening our labour force through good education, favourable tax and other incentives for the global supply chain and having government services that support and nurture our supply chains to compete globally.”

With the advent of globalisation and technological advancement, Fung said the next frontier for the global supply chain would likely be in service-intense economies.

Taking Hong Kong's economy as an example, Fung who is helming a 105-year-old family business, added that supply chains were moving from merely thinking about production to thinking about business-to-business services.

“When you start moving the labour-intensive parts of the manufacturing process out, that leaves you with the front-end and back-end services which over time will make your economy a service-intense one.

“That is the model of the future,” he said,

“The fragmentation of the services provided, I think, could be the next big wave.”

Fung added that most developing economies would have over 60% gross domestic product contribution from the services industry.

On China's economy, he said although there has been a slowdown in the last few months, the “long-term prognosis is 7.5% to 8% growth (while) I don't think a hard landing is in the cards for China”.

Fung also pointed out that China would change the global trade and supply chain trends as its economy continued to grow.

“China will be importing finished consumer products, which is a brand new trade stream for the world,” he said,

“China will increasingly want to invest overseas, diversifying away from the traditional treasuries and domestic investments.”

“I think a lot of that will come this way, to this region.”

Fung noted that China's outbound tourism would increase rapidly in the next few years. He was certain many would made their way to South-East Asia.

“From our experience in Hong Kong, they are the highest-spending tourists, not really on restaurants or hotels but merchandise,” Fung said

Source : The Star

Date : 3 December 2012

Today's Pick (04/12/12/211/906)