Hong Kong placed second while Singapore placed fifth in Euler Hermes’ SME Business Climate Index (SMEB), a study that measures business climate for small and medium-sized enterprises (SMEs) across 13 economies worldwide.
Canada took first place in the rankings, while the US and the Netherlands took third and fourth place, respectively.
The SMEB aims to provide an оvеrviеw оf еаch of the 13 selected economies аnd evaluates which оnе is thе mоst аttrаctivе fоr SMEs in 2019 based on six major critеriа, namely red tape, tax policy, labour market flexibility, financing, export opportunities, and competition, Euler Hermes said. In a context of slowing global economic growth ahead, it also provides policymakers with a roadmap to improve the business climate for smaller companies.
According to the global trade credit insurer, Hong Kong achieved the high rank due to its business environment’s low level of red tape, strong labour market flexibility and relatively favourable tax policy. Hong Kong’s labour market flexibility was the highest among the 13 economies studied. Furthermore, its favourable tax policy (8.25% for SMEs versus 16.5% for regular companies) has further incentivized SMEs to run businesses in Hong Kong, Euler Hermes said.
Meanwhile, financing and competition components are the downside for SMEs in Hong Kong. For the financing component, Hong Kong ranked sixth worst among the studied economies. According to Euler Hermes, this is mostly due to a comparatively high lending rate for SMEs, despite both HSBC and Standard Chartered, two of the city’s major lenders, recently cut their prime lending rates by 12.5bps to 5% and 5.25% respectively due to technical recession and ongoing social unrest.
The study found Singapore turning in favourable performances in red tape and labour market flexibility, with the former standing out and leading all of the 13 economies. Despite lending rate being the highest among the economies sampled, Euler Hermes said that financial conditions of SMEs in Singapore are supported by decent credit scores and relatively low loan rejection rate.
