The pace of growth in the global economy is now clearly segmented between the stagnant Western economies and Asia’s emerging markets. Even so, Thailand, more than other growing Asian markets, faces challenges ahead. The Thai Chamber of Commerce predicts, at most, five percent growth after this year’s devastating floods .
The recovery for Small and Medium Businesses (SMEs) will not be easy but it will occur gradually. SMEs are an integral component of Thailand’s economy and comprise 78 percent of employment, 43 percent of non-agriculture GDP, and 30 percent of exports. Preparing Thai executives for a new regional commercial environment by improving education and strengthening collaboration between policymakers, SMEs, and the regional organizations will make long-term growth and competitiveness much more likely.
The Association of Southeast Asian Nations (ASEAN) is enjoying impressive growth rates and is looking to the next phase of regional integration by 2015 under the ASEAN Economic Community (AEC) Blueprint. The AEC aims to create a single market and production base for ASEAN.
This includes the free flow of goods and services, capital, skilled-labor, and investments, thereby increasing competition in the region. It will build on the accomplishments of the ASEAN Free Trade Area by eliminating non-tariff barriers and forming an ASEAN Single Window.
The Single Window will harmonize rules of origin and standardize customs procedures. The expected result is lower transaction costs for businesses and increased economic dynamism in the region. These developments will make the ASEAN bloc more competitive in the global economy.
However, the AEC plan faces a critical issue—the lack of private sector involvement.
Particularly among SMEs in Thailand, company presence beyond national borders is largely absent. SMEs are either unaware or do not have the capacity to carry out hefty research projects to fully understand and take advantage of the AEC in their industries.
While studies have shown that calculated subsidies in research and development yield positive effects, the trifling amount of investment that goes into R&D, which is only 0.25 percent of GDP, prevents SMEs from innovating. High overhead costs, complicated rules of origin, and absence of ASEAN and trade specialists contribute to the overall malaise.
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