Asian companies are struggling to collect unpaid business invoices. This issue concerns both their domestic customers and customers from regional export markets. That is evident from Atradius' Payment Practices Barometer. Late or non-payments are adding increasing pressure to these companies' liquidity. The risk of non-payment is, thus, also rising for Dutch companies exporting to Asia.
For its annual Asia Payment Practices Barometer, Atradius surveyed businesses in seven Asian markets (China, Hongkong, India, Indonesia, Singapore, Taiwan, and Vietnam) and the United Arab Emirates. They are mainly concerned about the late payments they increasingly face. Economic conditions are extremely uncertain, so there are 60% more of these than in 2021.
"Asia is still an attractive market for Dutch exporters," says Rik Broekman, Head of Commercial at Atradius. "The region we looked at accounts for almost seven percent of Dutch goods exports. This year, growth in Asia is falling back to 4.5%, only to rise slightly to five percent in 2023. However, many companies in the region operate globally."
"They feel the disruptions in global trade disruptions caused by the pandemic and geopolitical tensions. Plus, the manufacturing economy is struggling with rising raw materials, transportation, and fuel costs. The increased defaults could suggest the business environment is under great pressure."
The problem is even more pronounced in long-term (90+ days) unpaid trade debt that must be written off as uncollectible. Taiwan is struggling the most with this. It has an eight percent write-off rate, almost triple that of last year. In Hong Kong and Singapore, companies' bad debts rose by an average of 50%.
In Indonesia, it is 40%. It was the first time Vietnam was included in Atradius' Payment Practices Barometer. There, businesses say their liquidity is increasingly under pressure due to both write-offs (six percent of the total value of business invoices) and unpaid trade debts. These represent about half of the value of business trade.
"The Asia Payment Practices Barometer's results are troubling. Given the continuing uncertainty in the market, we don't expect this bad debt trend to recover any time soon. Dutch exporters would therefore be well advised to make clear payment arrangements with their buyers in the Asia region," Broekman concludes.
You can download the Atradius 2022 Asia Payment Practices Barometer from www.atradius.nl ('Publicaties' section). The survey provides an in-depth analysis of how companies in key Asian markets are dealing with default risk in credit sales to business customers. It covers topics like payment terms, the time it takes to collect invoices, late payment management and its impact on businesses, and expected business trends.
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