- Export represents a real lever for growth for Belgian companies, which consist mainly of SMEs. According to a survey conducted by the credit insurer Credendo1, 3 in 4 Belgian CEOs are betting on an increase in their exports over the next three years.
- Although the majority of companies sell to the countries of the European Union, the emerging market economies offer significant prospects for growth.
- There are three principal barriers that explain why certain companies are reluctant to export: the production costs in Belgium (41%), the risks of non-payment (36%) and the associated formalities (customs, administration, certification, etc.) (34%).
- For the emerging and developing nations, the fall in the price of raw materials represents a real challenge.
- While 54% of companies have had to deal with non-payment, 23% of exporters do not have insurance to cover the associated risks.
Today, more than 350 CEOs and CFOs of exporting companies attended the 2016 Credendo Trade Forum entitled ‘The curse of raw materials’. This Forum, organised by Credendo Group, provides a review of the new trends in global trade, the geopolitical issues affecting international markets and their impact on companies, the changes in country risk around the world, and the challenges faced by Belgian companies in emerging markets.
Export: a lever for growth for SMEs
In an era of globalisation, winning export markets constitutes a lever for growth for many small and medium-sized enterprises. With exports representing more than 85% of gross domestic product (GDP), the Belgian economy is particularly outward-oriented. The majority of these companies sell in the neighbouring countries within the European Union (78%), but also in the other EU nations (42%) and in Asia (25%). The survey also revealed that the sectors with the greatest export potential are biotechnology (58%), pharmacy (51%), chemistry (48%), and construction and dredging (43%).
Optimistic prospects for the future
According to the survey, Belgian business leaders are rather optimistic about their companies’ export prospects, with 3 in 4 expecting an increase in volumes over the next three years. Furthermore, they believe that the greatest potential for development is in Asia, the United States, Canada, the Middle East and Africa. While EU nations are still the preferred markets, because of their proximity and regulatory conditions, the emerging market economies also offer significant prospects for growth.
Exporting, but not without risk…
Although an increasing number of companies are motivated to search for growth opportunities in the emerging nations, there are various barriers that explain why others are reluctant to do so. According to the companies surveyed, the production costs in Belgium (41%), the risks of non-payment (36%), and the associated formalities (customs, administration, certification, etc.) (34%) represent the principal barriers to developing their exports. ‘Belgian companies must be more cautious today when they export to emerging markets such as Russia or Brazil, because unpaid transactions and non-payment risks have increased. However, in the long term, the emerging nations have more growth potential.’ explains Nabil Jijakli, Group Deputy CEO at Credendo.
The drop in raw materials: a major problem for the emerging nations
For the emerging and developing nations, the fall in the price of raw materials represents a real challenge. Many of these countries will have to develop with lower prices for raw materials, substantially below the peak values achieved over recent years. In this context, since early 2016, Credendo has had to downgrade close to 24 country ratings while only upgrading 3. There are, however, certain emerging markets – such as India, Vietnam, Morocco and Côte d’Ivoire – that are performing well because they have more solid, more diversified economies or because they are importers of raw materials.
Various initiatives to support SMEs
The survey also revealed that 23% of exporters have no insurance against non-payment risk. ‘In Belgium, if a customer does not pay, there are legal instruments available for companies to assert their rights. But it is a different story for exports,’ explains Nabil Jijakli. Credendo has launched various initiatives over recent years to support the financing of Belgian export operations. ‘Forfaiting, for example, makes it possible for companies to finance their export contracts for limited amounts, ranging from several thousand to 5 million euros. We have also introduced an “SME Desk”. This is a strong signal for SMEs, intended to encourage them to seek out new export markets,’ adds Nabil Jijakli.
1 Survey conducted in September 2016 by Trends-Tendances on behalf of Credendo on a sample of 600 Belgian business leaders.