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Small and medium enterprises are making up 99.7% of Thai companies

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Small and medium enterprises are the beating heart of  Thai business, making up 99.7% of companies operating in the country. The semi-governmental agency that offers them support is known as OSMEP, or the Office of Small and Medium Sized Enterprises Promotion. It considers everything from small hotels that would do better by using computers for bookkeeping to grandmothers making handicrafts at home without any market savvy.

“Our vision is to be the central organization in formulating SME promotional policies and strategies,” said Dr. Yuthasak Supasorn, director general of OSMEP. “We coordinate governmental and private working systems toward achieving the frm and sustainable growth of SMEs.”

That is a big job. At present, there are 2.82 million SMEs registered with the Ministry of Commerce. When considering unregistered businesses, Thailand’s actual number of such companies is believed to be triple that. Planning, therefore, is essential to getting assistance to the smaller companies that are spread across the land. Having such an important mission, Bangkok-based OSMEP works from a fve-year Master Plan, with operational revisions each year to stay on course.

The goals for the current fiscal year include helping companies el iminate their weaknesses, expand on strengths, add value to their products, and gain global competitiveness.

“SMEs need to become more dynamic now because of the many free trade agreements,” said Vorapoj Prasanpanich, chief of the Promotional Policy and Strategic Division of OSMEP’s SMEs Macro Strategies Department. One of OSMEP’s tasks is to push small local companies in making their products more competitive against those from the outside. Measures include ways to enhance productivity, minimize costs, improve designs, and manage labor and overall operations better.

“We want to give them skills that make the product and sell the product,” said Dr. Apiradee Khaodhiar, deputy director of the International Cooperation and Policy Support Department at OSMEP.

The Village and the Home

Two particular projects that have OSMEP representatives talking are cal led “One Tumbon One Product” and “Homepreneur.” The former involves assisting tumbons or rural communities in commercializing and fnding markets for their unique products. Examples are ceramics from Lampang province and Thai silk from Konkaen province.

“You have to imagine rural grandmas and grandpas making something in the backyard. The goal is to help them upgrade from a very primitive operation. We want them to become more systematic and capable of meeting standards,”

Dr. Apiradee said.

“Potential buyers are interested in their products,” she added, “but when they come and want to buy 1,000 pieces the small makers cannot meet the orders.”

One technique that OSMEP is trying to teach small operators is to pool community resources for greater opportunity.

The agency is also encouraging new college graduates to become entrepreneurs at home. Internet communication networks have made it possible for business-minded individuals to develop home-based companies. Sectors with great potential for this include art graphics and digital content. Even though OSMEP is not providing money to SMEs, it is taking steps to improve what Dr. Yuthasak calls their “fnancial accessibility.” As part of this, the director general is encouraging commercial banks to provide non-collateral loans to smaller companies.

The current target industries are food and beverages, textiles, furniture and wooden products, chemicals, hotels and cultural tourism, and wholesale and retail business. These sectors account for more than 60% of the country’s GDP. Special emphasis is being placed on sectors with export potential, including handicrafts, jewelry, agricultural goods, and creative products.

The agency is also promoting a “Machine Fund” scheme under which SMEs that want to upgrade equipment could buy new machines with bank loans on which OSMEP would subsidize part of the interest.

“Everyone in Thailand is talking about SMEs right now, from the prime minister to many agencies,” Dr. Apiradee said. “After the economic crisis of the past couple of years, there is a lot of emphasis on the importance of promoting these companies. SMEs are the grassroots foundation of our economic development.”

The figures back her up. SMEs create jobs for more than 8.9 million people in Thailand, or 76% of the national workforce. They contribute about 37.8% of the GDP or 3.4 trillion baht. Such businesses also generate about 1.7 trillion baht in exports annually, according to OSMEP.

OSMEP serves as the country’s SME information and research center, cultivating networks to support the operation of such companies. This includes acting as a sort of early warning system when SMEs face diffculties. The agency is entitled by law to provide funding, but it mainly focuses on policy.

OSMEP wants to see SMEs stay on their feet and grow by improving their capability. Generally, though, small companies are weak in financials, technology, management skills, and market data as far as what customers really want. With the right support, Thailand’s SMEs offer a wealth of potential, forming a valuable part of the supply chain and the economic vibrancy of Thailand’s strong consumer and export market, and offering excellent potential for investment.

BOI: http://www.boi.go.th

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