Sunday, May 17, 2009

SINGAPORE FIRMS TURN TO BARTERING

By Mariko Oi
Asia Business Report, BBC World, Singapore

Malvin Khoo at his factory
Mr Khoo says bartering helps cut costs.

In northern Singapore, among many residential flats, there stands a huge six-storey building called Northlink.

It houses more than 500 small to medium sized businesses, or SMEs.

They are the backbone of Singapore's economy, and yet they are the hardest hit by the current recession.

Since the global credit crunch spread to the city state, banks became nervous to lend - especially to SMEs.

Alarmed by the situation, the government has announced that it will spend almost $4bn (£2.6bn) to stimulate bank lending in the budget.

But Singapore is experiencing its worst downturn in its history, with the economy forecast to shrink by much as 10% this year. And the freeze in credit markets is not yet thawing.

So businesses are turning to alternative methods to pay their bills, a tactic once considered a last resort, namely the age old practice of barter trade.

On the top floor of Northlink building, manager Malvin Khoo is busy finalising deals with his clients. He owns a Singapore based printing and packaging firm that employs 15 people.

Malvin Khoo at Megumi Japanese restaurant
I structured to trade $20,000 worth of plates to restaurants
Malvin Khoo, printer

"The greatest thing about bartering is I could be ordering a jumbo jet, or a yacht tomorrow," he quips.

Obviously, that is "quite unlikely", he laughs, though he has managed to use a property in Malaysia to barter with.

"It is the cheapest way to expand my business."

Mr Khoo joined Barterxchange, a network of 600 businesses in Malaysia and Singapore, 18 months ago.

Instead of simplistic one-to-one direct exchange of goods and services, members go online.

Forget cash. They have their own universal currency.

Companies earn credits by offering their services and skills. They can then use them to get what they need from other members.

"I had some customers that I did packaging for, who had surplus plates," explains Mr Khoo. "So I structured to trade $20,000 worth of plates to restaurants. Some of them were just opening up so they needed new plates."

In return, Mr Khoo scored free meals at various restaurants.

One of them is Megumi Japanese restaurant, which has sold dining vouchers worth more than $10,000.

"Not only did we get free webpage design and printing services by bartering, we also got some tremendous exposure to the business community," says managing director Hazel Hok.

"We used to be a local neighbourhood restaurant, but we have seen a significant increase in corporate functions."

And there is no geographical boundary.

Asia's biggest barter trade site is connected to more than a dozen global websites, where half a million companies participate.

"We have even sent electronic goods to Nigeria," says Lee Oi Kum, executive chairman of Barterxchange.

The industry is now worth over $8bn annually, according to the International Reciprocal Trade Association.

And its popularity is rising.

Barterxchange has seen a 30% jump in its membership since 2007.

Companies cannot operate solely by bartering. But it definitely offers alternative methods to make things a little easier.

BBC NEWS REPORT.

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