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SMEs do not understand foreign direct investment

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A surprising amount of Australia’s small-medium enterprises (SMEs) lack a working knowledge of foreign direct investment (FDI) and how it relates to the economy and their business.

Findings released from Bentley’s The Voice of Australia Business Survey has revealed that 64 per cent of SMEs have ‘no idea’ how much FDI contributes to Australia’s Gross Domestic Product (GDP). While the remaining 36 per cent of SMEs took a stab at an estimate (36 per cent), they were nowhere near the real rate of 3.7 per cent.

“The lack of understanding of foreign investment highlights in our survey was surprising,” McLean Delmo Bentleys Director Alan Ling said.

“The research shows that SMEs are either not thinking about foreign investment at all, or believe the amount of foreign investment in Australia is much higher than the true figure. In fact, foreign investment is a very low proportion of our overall economy and is an untapped resource for Australian SMEs. Businesses are potentially missing out on both the cash injection and the access to new markets that foreign investors can provide.”

46 per cent of SMEs want to see more foreign investment in Australia, 37 per cent want to see less, and 15 per cent said they would be worried about the ways in which foreign investment could affect the control they have on their business.

Mr Ling said Australian SMEs can take products to new markets by partnering with foreign investors, thus moving past the “natural ceiling on organic business growth” Australia’s small population creates.

“International investors are looking to invest in Australian SMEs but the key to maximising these opportunities is in ‘business readiness.’ Foreign investors generally require audited accounts, an independent valuation of the business and a robust governance framework before they can enter into discussions, but most SMEs do not have these in place,” Mr Ling said.

Metro and small businesses were found to be the most open to an increase in foreign investment, with 67 per cent and 55 per cent respectively stating that there should be more.