The whir of sewing machines slowly grinds to a halt, the buzz of electricity powering packed work floors gradually dies as small and medium companies shut shop – the financial crisis has hit home. Emerging Asian giants are being hit by the global downturn and now its only the financially fittest that will survive.
“SMEs have less access to capital, both debt and equity, and they don’t have large, untapped credit lines or the sizeable cash reserves that larger and more mature corporates have,” Scott Bennett, a Singapore-based fixed income fund manager for Aberdeen Asset Management told Reuters.
Small and medium companies across China, Vietnam and India have closed and laid off several thousands of workers. The China Daily quoted an industry expert as saying that as many as half of all toy manufacturers in the Pearl River Delta (southern China) could go out of business within the next two years. Soaring inflation, a drop of orders from the west, tightening purse strings and a depreciation of the dollar have left SME companies pessimistic about the road ahead. A total of 3,631 toy exporters, or 52.7 percent of the industry’s total, were closed in the first seven months, according to Customs.
Speaking in an interview with Guangzhou Daily, Wang Zhiguang, vice-chairman of the Dongguan Toy Industry Association, said: “Of the 3,800-odd toy firms in Dongguan, no more than 2,000 are likely to survive the next couple of years.”
However, its not only China that is being affected – Vietnam is feeling the pinch of the meltdown too. “We are worried,” deputy director Dinh Tuan Anh, admitted to the AFP. “The crisis has really affected our business plans.” Overseas orders to SME Vietnamese manufacturers began falling even before the crash on Wall Street.
“A US client used to place orders for up to 300,000 dong (US$18) per backpack. Now they want backpacks for 60,000 dong. They have told us to reduce the detailing on the products to make them cheaper,” he continued.
The story continues across the Himalaya’s as well. India’s soaring airlines industry has taken a big hit, forcing the countries two largest private airlines into an operational merger. Both Jet Airways and Kingfisher Airlines have laid off several hundreds of employees with a promise to trim high managerial salaries in a bid to cut costs.
India’s export driven glittering diamond industry is also being hit. “As the diamond industry’s export is dwindling, there is a decline in demand in the domestic market and even the gold prices have increased. Because of this global recession, the entire diamond industry is feeling the heat,” Praveen Nanavati a diamond trader in Surat, India’s largest diamond hub told Channel news Asia.
As Japan offers to help finance its banks and the IMF aids pakistan back on its feet, South Korea is also protecting its industries with a US$130billion rescue package, including US$4 billion to keep the construction sector from sinking.
“The overall situation is more serious than the 1997 crisis,” a South Korean presidential spokesman quoted president Lee Myung Bak as saying during a cabinet meeting. “Back then it was an Asian crisis but today the entire world economy is at risk,” the IHT reported.
