Jack Ma, the founder and Executive Chairman of Alibaba Group, spoke on Saturday at the B20 Summit about obstacles and solutions faced by small and medium enterprises (SMEs) engaging in cross-border trade. The B20 summit is the business-focused summit held alongside the G20.
“Big international companies have benefited from globalization during the past two to three decades. But SMEs, which account for 80% of the world’s enterprises, were left out,” said Ma.
The reason is that cross-border trade participants largely rely on intermediaries in every part of world trade, including procurement, distribution, and payment. The model works well with big corporates, but presents considerable costs to SMEs.
For a small enterprise whose annual income is below USD five million, the ratio of its logistics spending to income can be as high as 42%. That ratio is generally lower than 15% for companies whose annual income is above USD five million, according to the World SME Competitiveness Outlook 2015, a report by the International Trade Centre, an organization affiliated with the World Trade Organization and the UN.
The idea of an Electronic World Trade Platform (eWTP) , involving governments and companies, is designed to facilitate SMEs cross-border trade with favourable policies like taxation exemption, clearance within 24 hours, and logistics fast tracking.
The platform would also speed up payment, bringing companies sufficient cash flow and operation capital.
Creating an eWTP is easier said than done. Ma suggested that it is hard to make leaders from more than 100 countries get together and make rules. They would implement the eWTP in a bilateral way, making arrangements per pair of countries.
“If not me, then who? If not now, then when?” Ma shared what he said in Alibaba to urge all parities to “take actions now, to promote globalisation and free trade, and to change the rules and create jobs.” Because in Jack Ma’s words, “when trade stops, wars start”.
(Top photo from Baidu Images)