Monday, November 20, 2006

Why Somchai can't export -- the real problem with SME competitiveness in Thailand

The Thai government routinely interferes on an almost Stalinistic level with the day-to-day operations of SMEs. How they propose to 'help' by adding additional regulatory burdens and restrictions on the supposedly free market is paternalistic and insane. Most investors have figured out that doing business in communist Vietnam is far easier.

And why does The Nation continually publish 'blame it on the foreigner' allegations by lazy and corrupt Thai government officials without explanation or analysis?

Thousands of SMEs predicted to go under

Published on Nov 20, 2006

Competition from abroad proves too intense: agency

Nearly 10,000 small and medium-sized enterprises will fold this year in the face of fierce competition from overseas.

These companies are neither capital-intensive enough to withstand cheap products from China and Vietnam, nor quality-oriented enough compete with high-end products from the United States and Europe.

According to Jhitraporn Techacharn, director-general of the Office of Small and Medium Enterprises Promotion, many SMEs in various industries will go under now free-trade agreements with countries like Australia, China and New Zealand are effective.

Meanwhile, SMEs face strong domestic competition from large foreign investors expanding in Thailand, especially in the retail sector. As a result, a number of SMEs have already closed. [ed. must be referring to Tesco and Big C. Erroneous, since it's been repeatedly proven that Thai owned 7-11 Thailand (CP Group) is the real competition faced by Thai mom and pop shops and the reason for their closure, not the huge box stores. Besides, if it benefits the average consumer, and employs plenty of Thais, which it does, then why is the Thai government interfering?]

"Some of Thailand's SMEs cannot adjust to meet the new business environment and as a result they have had to quit," Jhitraporn said on Friday. [ed. that's called free market economics, so take a macro view and stop fretting]

The value of SME business will comprise 4 per cent of gross domestic product this year, compared with 4.7 per cent last year. [ed. hardly a disaster]

Jhitraporn said SME business value had grown only slightly because of an increase in operating costs and a lack of competitiveness.

However, her office plans to help with product development and data to meet market demand. [ed. oh god!]

Though some SMEs are disappearing, others are emerging. So far this year 40,000 new SMEs have registered.

"SMEs have to develop niche products not cheaper products because they cannot compete with imports from China. But they have to develop trendy products or creative products that meet demand both domestically and internationally," she said. [ed. sweetie, let the free market figure out what's really needed]

The office will spend Bt700 million to help SMEs in the fiscal year ending next September. [ed. how many schools would that fund? total waste of taxpayer money]

That money will pay for new development centres. There are just six today but within the next 12 months their number will grow to 30. Centres provide suggestions for product development to meet customer demand both here and abroad. [ed. Thai government bureaucrats are going to give product development advice? Where do all these stupid ideas come from? I thought it was Thaksin, but he's gone now]

The office has another Bt500 million to spend expanding One Tambon One Product (OTOP) products. [ed. please de-list that line item from the central budget unless an equivalent return in tax revenue can be shown from last year's OTOP program]

Jhitraporn said makers of OTOP products had the potential to become SMEs if they received good advice and developed packaging and design. [ed. most OTOP products are a piece of shit that operate in a vacuum with no consumer demand. Demanding that SMEs spend more on packaging is not going to help.]

"Our target in the next year is not a high growth of SME numbers but to help existing operators produce high-quality products and strengthen businesses that will survive competition," she said.

Her office in conjunction with the Federation of Thai Industries has created six new projects to strengthen SMEs. It will spend Bt1.2 billion doing so.

These projects include promotion of industry standards, training, business matching between producers and buyers, logistics development, machinery renovation and industry development in provincial areas. All projects will last one year. [ed. what is needed is a fundamental overall of the Thai educational system, from the ground up. Nothing else will help]

Jhitraporn added it would soon work with other industry associations in similar joint ventures.

Today there are almost 2.25 million SMEs and 5,000 are active exporters.

Exporting SMEs recorded sales of Bt1.37 trillion in 2005 and that figure will be Bt1.54 trillion this year - a 12-per-cent increase.

Jhitraporn said if the target were met, SME export growth would average 11 per cent a year. [ed. so if we spend 1.2 billion baht and SME exports don't increase 11 percent by next year, can we shut this thing down?]

Chalida Ekvitthayavechnukul,

Somluck Srimalee

[ed. will you two newsies follow up this story in a year's time? Or even relate it to similarily idiotic stories from last year and the year before? No, of course not.]

The Nation

And now, a good summary of what really ails SMEs in Thailand:

Product development is not the main concern for SMEs

Re: "Thousands of SMEs predicted to go under", Business, November 20.

A government office giving suggestions about product development sounds like a bad idea. As the owner of a small SME (small and medium-sized enterprise) going for the high value-added, high-tech market, competing directly with European products, I think the biggest problems are:

1. Lack of skilled staff

2. Suppliers responding too slowly. In Singapore and China we receive quotations the same day. In Thailand it takes a week - but only after calling the supplier daily.

3. People not doing what they say they will do.

Please address these fundamental issues first, as they are the main reasons SMEs go under, not the products.