Do you have clients with international trading partners?

Australian exporters are being urged to be mindful of risks when dealing with APAC countries according to a recent report.

The latest Atradius Country Report (January 2017) has revealed that Australian organisations looking to do business with international partners should be especially cautious due to less-favourable economic conditions for many of Australia’s trading partners.

Mark Hoppe, managing director ANZ, Atradius, said, “Atradius develops its country reports based on extensive research by experts around Asia Pacific. The report is designed to give Australian exporters insight into the risks and opportunities of doing business with various trading partners in the region. It’s crucial for local businesses to be aware of the potential pitfalls to ensure they make smarter decisions and take steps to protect themselves in the event a debtor doesn’t pay.”

The January 2017 report offers an in-depth analysis of 12 key countries in Asia Pacific, including: China; India; Indonesia; Japan; Malaysia; Philippines; Singapore; South Korea; Taiwan; Thailand and Vietnam.

The report revealed that India, Malaysia, Philippines and Vietnam pose the highest risks to Australian exporters, while Singapore poses a low risk and is relatively stable.

Additional key insights included the following:

Insolvencies continue to rise in China and businesses are struggling to pay. Key affected industries are construction, metals and steel, shipping, mining and paper. Australian companies should exercise caution when dealing with small and medium-sized private businesses. Furthermore, the credit risk situation is strong for agricultural and financial service industries.

India’s stable political climate, reform-oriented government and low oil prices are driving economic growth but the banking sector is weak, so Indian businesses are looking for finance from foreign banks, in foreign currencies. That hampers India’s long-term growth potential even as GDP is set to increase to around 7.5 per cent. The best outlook is in chemicals and pharmaceuticals, food, paper, and services industries, while the risk is high in construction and materials, including metals and steel.
Commodities account for more than 60 per cent of Indonesia’s exports, while the country depends on oil imports and a high stock of inward portfolio investment. Red tape, widespread corruption, a poor legal system, an inflexible labour market and poor infrastructure limit Indonesia’s growth rate and create risks for businesses. Food, and construction and materials are markets trending upwards, while Australian businesses should exercise caution with the automotive/transport, and metals and steel industries by making sure their business is proactively managing risk through strategies like trade credit insurance.

Japan’s growth remains lackluster but a forecasted strong US dollar in 2017 may increase Japanese exports and business sentiment. Extremely high public debt, a shrinking population and declining working age make it difficult for Japanese companies to grow. There is, however, a good performance forecast for the agriculture, electronics/ICT, financial services and food industries. The textiles industry is one for Australian businesses to be wary of, the risk is high with performance in this sector below long-term trend.

China’s struggling economy poses a risk to Malaysia and a corruption scandal surrounding Prime Minister Najib could affect business and consumer sentiment. However, the performance outlook is good for industries including agriculture, financial services, food and services. High-risk industries include construction, construction materials, paper, steel and textiles.

Mark Hoppe said, “While Asia Pacific remains a key market for Australia, it’s important to be aware of the political and economic vagaries of the countries organisations do business in and with. Australian businesses should protect themselves by thoroughly researching potential business deals and by taking out trade credit insurance, which can protect the organisation in the event of non-payment.”