25/06/2008 - 22:00

Exporters signal offshore shift

25/06/2008 - 22:00

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A quarter of Western Australian exporters intend to move at least part of their business offshore within the next five years, the latest DHL Export Barometer survey has found.

Making Moves: Patrick Davin says Vmoto\'s agreement to develop and supply 20,000 engines to a Vietnamese customer will generate about $6million in sales. Photo: Tim van Bronswijk.

A quarter of Western Australian exporters intend to move at least part of their business offshore within the next five years, the latest DHL Export Barometer survey has found.

The survey also found high confidence in the profit outlook across five major industries for the next 12 months.

The potential benefits of offshore relocation are, however, tempered by the accompanying high risks and uncertain costs.

The services and manufacturing industries remain the most likely to relocate, with 41 per cent and 32 per cent respectively planning to shift some of their operations.

WA businesses remain attracted by the lower production costs and available workforce in other countries, particularly China, as the production plant caravan marches east.

Perth-based companies to have established offshore manufacturing operations recently include scooter company Vmoto and bamboo flooring supplier Style.

Vmoto has a 67 per cent interest in an engine manufacturing business in Nanjing, China.

Last week it signed an agreement to develop and supply 30,000 engines to a Vietnamese customer, generating about $6.1 million in sales for Vmoto.

Managing director Patrick Davin said the Vietnamese agreement would be nearly double the total scooter unit output in Australia and practically underwrite the company's fledgling manufacturing facility.

Style has established a finishing factory at Anji, in China.

It has encountered a series of delays at the factory, which have led in part to major board and management changes at the company.

The DHL survey found that high set-up costs have been the factor most cited as a barrier for those relocating overseas for the first time, with 32 per cent of companies encountering financial difficulties when entering foreign markets.

Closely following are language and cultural implications, logistic and transport issues, and regulatory concerns.

First-time exporters face similar difficulties, with 30 per cent struggling with changing legal frameworks and working environments, and adapting to a more competitive environment.

Companies surveyed by DHL called for the Australian government to support their export plans.

The survey reports two thirds of exporters wanting marketing grants such as the Emerging Markets Development Grant to assist with their exporting activities.

Other types of assistance called for include market access, help with offshore regulations and business practices, free trade agreements, and help with finding distributors and partners.

DHL Oceania's strategy and research manager, Mark Foy, said companies operating offshore were keen to maintain their standards.

''Relocation does not mean sacrifice of standards, and manufacturers are determined that a relocation does not equal deteriorating quality of service,''he said.

''Geographically, most relocations are an extension of already established links with the host country.''

While there has been a big focus on China and India, Mr Foy said many exporters were still looking at the Asean countries, North America and Europe.

The DHL survey found that exporters are pursuing a variety of strategies to expand their global presence.

These include strategic alliances, joint ventures and outsourcing.

The need for these has been fuelled by the record high exchange rate, with 61 per cent of WA exporters reporting a negative impact from the strong Australian dollar.

Across Australia, other significant factors affecting export sales have been high oil/fuel prices, the cost of raw materials and the economic/political conditions abroad.

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