Thailands support of small business SMEs at the international level

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Thailands support of small business (SMEs) at
the international level 1st International Small
Business Festival Moscow, Russian
Federation December 13, 2007
by Dr. Wimonkan Kosumas Director Department of
International Cooperation and Policy Support
Office of Small and Medium Enterprises Promotion
(OSMEP), Thailand
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Table of Contents

• I. Background of the Office of SMEs Promotion
• II. Overview of Thailand-Russia economic relation
  and trading volume between the two countries
• III. Comparative definition of SMEs (based on
  number
• of employees) and profile of Thai SMEs
• IV. Challenges of SMEs moving into oversea
  markets
• V. Internationalization of Thai SMEs
• VI. Government SMEs Supporting Policy
• VII. OSMEPs support for SMEs Overseas Business
  
• Operation
• VIII. Services and facilities for foreign SMEs
• IX. Policy measures for upgrading competitiveness
  of Thai
• SMEs and SMEs target sector 2007-2008
• X. Implication on Business Potential
• XI. Proposed Framework of Thai-Russian SMEs
  Cooperation

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Background of the Office of SMEs Promotion

• established under the Small and Medium
  Enterprises Promotion Act 2000 (publicized in the
  Royal Gazette on Feb. 17, 2000) as a juristic
  entity and a government office, not an official
  agency or state enterprise.
• supervised by the Board of Small and Medium
  Enterprises Promotion chaired by the permanent
  secretary of industry.
• Acts as the countrys central organization in
  formulating SMEs promotional policies and
  strategies as well as coordinating governmental
  and private working systems in achieving strong
  and sustainable growth of SMEs as the main
  driving force of the countrys economy.
• In regard to translate the governments SMEs
  promotion policies and plans into concrete
  actions, the cabinet has approved on May 6, 2003
  the Master Plan of Thailands SMEs Promotion
  (2002-2006).
• Due to the expiration of the 1st Master Plan of
  SMEs Promotion (2002-2006), OSMEP together with
  related public and private agencies has formulate
  the 2nd Master Plan (2007-2011) which is still in
  due process for approval from the cabinet.

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Strategies of SMEs Promotion Plan 2 (2007-2011)
Vision SMEs to Grow with Sustainability,
Strength and Balance
Intellectual Infrastructure
Strategy 1 Create new entrepreneur and develop
the capability of existing entrepreneurs
Strategy 4 Promote the Capability on Value
Creation in Services Sector
Strategy 5 Promote SMEs in Regional and Local
Areas
Network Alliance
Strategy 2 Upgrade Manufacturing SMEs
Productivity
Strategy 3 Increase the efficiency and reduce
impediment in trading sectors
Strategy 6 Create business environment and
enabling factors
Competitiveness
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International Governmental Private Units

• Board of SMEs Promotion
• Executive Board of the Office of SMEs Promotion

Regional

Central
Governor
Ministry

• Sectoral
• Strategies

State Enterprise
Local Ministerial Office
Other Public Sector Agencies

• OSMEP
• Formulate Master Action Plan
• Create Mechanism in implementing
• Allocate Budget
• Monitor and Evaluate

Academics

• Policy / Action Plan

Public Org.
Local Admin. Agency
Academic/ Expertise Institution
Provincial Industrial Federation

• Projects under SMEs Promotion Action Plan

Chamber of Comm./Fed Of Thai Industries/ Bankers
Assoc.

• SMEs University

• Community/ Local Product

Provincial Chamber of Comm.
OSMEP Regional offices

• - Implement
• Report Operational Result
• Identify Problem/Demand

• - Implement
• Report Operational Result
• Identify Problem/Demand

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II. Overview of Thailand-Russia economic relation

• Russia and Thailand enjoy a history of more than
  50 years of trade and economic relations
• Thailand remains the largest trading partner of
  Russia in Southeast Asia
• First business contacts between Russian trade
  organizations and Thai companies date back to the
  end of 40s following the reinstallation of
  diplomatic relations between the two countries in
  1941
• In 2005, bilateral trade reached the volume of 2
  billion USD after significant slump in 1997 due
  to Asian financial crisis
• According to the Thai custom statistics, trade
  surplus remains on Russian side in 2006 with
  Russian export at 1.38 billion USD and Thai
  import at 0.42 billion USD

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Thai Exports to Russia
Thai Imports from Russia
Source CIS Balkan States Center, University of
Thai Chamber of Commerce ( period between
Jan.-Sept. 2007)
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III. Comparative Definition of SMEs
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Profile of Thai SMEs
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Number of SMEs, 2006

• Number of SMEs by Size, 2006
• 2,287,057 enterprises in total
• LEs 4,292
• MEs 9,791
• SEs 2,264,734
• Unidentified 8,240
• Total Number of SMEs
• 2,274,525 enterprises, 99.5

• Number of SMEs by Sector, 2006
• Most of SMEs are operating in Trade Repair
  Sector for 908,846 enterprises (40.0 of
  Total SMEs)
• Service Sector was the second largest group for
  675,622 (29.7)
• Production/Manufacturing Sector was the third
  for 672,351 (29.6)

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Employment in SMEs, 2006
SME Employment by Size, 2006 In 2006, all
enterprises in Thailand created 11,551,272 jobs
in total. - LEs accounted for 2,687,938 jobs -
MEs accounted for 1,338,398 jobs - SEs accounted
for 7,524,936 jobs - Totally, SMEs created
8,863,334 jobs or 76.7.
SME Employment by Sector, 2006 Between
2004-2006, employment in SMEs increased
continuingly, especially in Service Sector, which
the employment grew 10.8 in 2006.
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SMEs Economic Contribution

• In 2006, overall GDP accounted for 7.81 million
  baht of which 10.7 came from Agriculture Sector
  and 89.3 came from Non-agriculture Sector.
• SMEs GDP accounted for 3.04 million baht or
  38.9 of overall GDP
• Between 2003-2006, SMEs GDP share was in steady
  line (approx. 39.0 of national GDP), while SME
  GDP growth rated at a range of 4.1-4.8 (y-o-y)

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SMEs Economic Contribution (Contd)

• Structure of SME GDP in 2006
• Service Sector was the highest with 32.2 share
• Manufacturing Sector was the second highest
  with 30.3
• Trade and maintenance Sector was the third
  highest with 29.2
• Between 2002-2006
• SMEs in Service Sector had been regarded as most
  important economic engines in creating GDP with
  32.2-34.2 share, followed by SMEs in Trade and
  maintenance Sector with 29.2-31.2, and SMEs in
  Manufacturing Sector came third with 26.9-30.3
  share

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Role of SMEs in International Trade
In 2006, SME export accounted for 1.45 Mil.THB
or 29.1 of total export In 2006, SME import
accounted for 1.60 Mil.THB or 32.7 of total
import Thus, SME Trade Balance still deficit with
amount of 0.15 Mil.THB The ratio of SME Export to
SME GDP accounted for 47.3 indicated that SMEs
relied on domestic market rather than
international market
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Role of SMEs in International Trade (Contd)

• SME export classified by level of factor
  intensities shows that Primary products was the
  highest with 32.1 share, followed by Labour
  Intensive products came second with 19.2, Third
  and Fourth was High Skill and Medium Skill
  products with 12.0
• SME import classified by level of factor
  intensities shows that High Skill products was
  the highest, followed by Primary products

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SMEs Promotion Plan (Year 2007 2008)

• Goals
• To increase the contribution of SMEs to GDP to
  reach
• 5 of the national GDP per year.
• To increase the number of new entrepreneurs by
  50,000
• per year
• To increase SMEs Total Factor Productivity of 3
  per year
• To increase SMEs export value to no less than 6
  per annum
• To create product brand with a minimum of 100 per
  year
• 6. To commercialize SMEs innovation with a
  minimum of 100 per year

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IV. Challenges of SMEs moving into oversea markets
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WEAKNESSES
STRENGTHS

• High flexibility and adaptability
• High utilization of local/ domestic
  resourcesknowledge
• Well performed in skill-based sectors food
  fashion products tourism and related
  productsservices
• Easy business access and quick consumer approach
• Eligible in producing products which are various
  in design and quality

• Losing competitiveness in labor-intensive
  resource-based sector
• Weak production structure Poor management
  Incapable in marketing Lack of product
  development Employing low quality workforces
  Using out of date technology
• Limitation in applying good governance
  accounting system consumerenvironmental
  responsibility
• Limitation in access appropriate fund
• Lack of integrating and networking system

THREATS
OPPORTUNITIES

• Trends of new business approaches favor SMEs
• Easy for starting ups and allow workforce and new
  entrepreneurs to accumulate skills
• Allow for business alliance with LEs and MNCs
• Potential for the creation of new genre of
  entrepreneurs
• SMEs promotion is national agenda with high level
  of significant

• Pressure from Globalization
• - Economic integration between
  countries
• - FTA on Goods/Services/ Investment
• - New form of NTBs
• SMEs promotion system is still fragmented both in
  policy formulation and implementation
• High competition results in Nutcracker situation
• Obstacles from public administration

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V. Internationalization of Thai SMEs

• Problems
• Entrepreneurs fails to reap sufficient benefits
  from bilateral and multilateral trade agreement
  with other economies
• National income generation policy still focus
  only on increasing the number of exports and FDI
  inflows while neglecting the importance of FDI
  Outflow
• In 2007, Institute for Management Development
  (IMD) has ranked Thailands competitiveness at 33
  which fall from 29 in 2006 due to low FDI Outflow
• Business restructuring from a manufacturing base
  country to an investor country is necessary in
  order for Thailand to still maintain its
  comparative advantage in the global market

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• Internationalization Project

• initiated by Department of Export Promotion
• Objectives
• To encourage oversea business expansion as
  mechanism for value addition
• To meet the challenge of liberalization and the
  disintegration of preferential treatment such as
  quota and GSP (Generalized System of Preferences)
• To maintain comparative advantage by relocating
  to other countries which has lower cost of labor,
  technology, and raw material
• To increase the competitiveness of export in the
  long run

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• Internationalization Project (cont)

• Offers 2 types of oversea business supports which
  include
• A) Manufacturing dimension
• - sourcing
• - subcontracting
• - Green Field Investment
• B) Non-Manufacturing dimension
• - Sales Representatives
• - Franchising
• - Licensing

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VI. Government SMEs Supporting Policy
Government has proposed SMEs supporting policy to
the national legislative assembly on Nov. 3,
2006 as follows
Development of intellectual infrastructure for
SMEs
Collaboration between public and private sector
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Budget 800 million baht
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VII. OSMEPs Support for SMEs Overseas Business
Operation

• International SMEs cooperation
• Overseas Thai SMEs Agency cooperation
• Internationalization Program

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Samples of InternationalCooperation on SMEs
Promotion

• Thai Malaysia
• Thai France
• Thai Italy
• Thai Japan

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Framework of Thai-Malaysia Cooperation on SMEs
Promotion

• Information exchange of SMEs development policies
• Establishment of Malaysia-Thailand SME Business
  Portal
• Establishment of Joint investment and trade
  mission
• Establishment of training program for
  entrepreneurs in food processing and automotive
  sectors
• Organizing exhibition and business matching
  activities

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Framework of Thai-Italy Cooperation on SMEs
Promotion

• Establish SMEs help desk at OSMEP to assist
  Italian SMEs doing business in Thailand
• Information exchange of cluster development in
  Italy
• Promote the export of Thai organic products to
  Italy
• Collaborate on fashion design, jewelry
  (possibility of establishing co-brand), and
  export of furniture
• Organize workshop on alternative energy and
  environment protection
• Sponsorship from Fierra Milano for ISBC 2007

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Framework of Thai-France Cooperation on SMEs
Promotion

• Development of Joint Cluster
• Entrepreneurial registration
• Advisory Support for Design
• Advisory Support for Branding
• Experience sharing on Technical Institution for
  SMEs
• SME Networking
• SME Working Group Meeting (at least once a year)

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Framework of Thai-Japan Cooperation on SMEs
Promotion

• Knowledge and experience sharing on the
  establishment of SMEs University
• Collaboration on the establishment of Business
  Development Service Center
• Development of business diagnosis or Shindan
• Exchange of SMEs expertise
• Development of financial institutions risk
  evaluation of SMEs

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B) Overseas Thai agency SMEs cooperation

• Inform the National SMEs Promotional and
  Operational Plan to be as a guideline for
  allocate budgeting for SMEs promotion through
  strategic fund
• Exchange of Business Data Information Knowledge
  Know-how Linkage
• Provision of in-depth information of trading
  partners (economic, social and political) for
  facilitating the investment decision of Thai SMEs
  entrepreneur
• Coordination on MOU and Action Plan on SMEs
  Promotion
• Support both in-bound and out-bound SME
  promotional activities

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C) Internationalization Program

• subsidies to SMEs entrepreneurs (not exceeding
  50 of expense and the maximum amount not
  exceeding 7,000) for international
  expansion through international exhibition,
  business matching, market survey or other export
  promotion activities

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VIII. Services and facilities for foreign SMEs
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BUSINESS MATCHING
Increase trade opportunity, match worlds demand
with Thais supply
FTI members
Target market

• SMEs
• Product scope
• Community Products
• Quality Assuring
• By Q-mark

• Market Intelligence
• Demand
• Standard / Specification
• Taste
• Trade regulation
• Etc.

• Channel
• Matching Activities
• SMEs Shop Channel
• SMEs Trade Promotion
• Thai confectionary
• Business Trip
• Exhibition
• Product catalog
• E-commerce

Objectives
Sales Growth / Minimize Defects
Develop to be regular customers
Market Exploration
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Product Cluster in Thailand
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Venture Capital Fund (VCF)

• Provide equity financing to targeted SMEs
• In charge of shareholders
• Support for enhancing
• SMEs strengthen

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Venture Capital Fund in Thailand

• A) Venture Capital Fund for Enhancing
  Competitiveness of Thai Business
• B) SMEs Venture Capital Fund
• C) Innovation Development Venture Capital Fund

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Media to access recent SMEs movement

• SMEs Today magazine
• SMEs Shop Channel (UBC Channel)
• SMEs Chee Chong Rouy TV Program (Channel 11)

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IX. Policy measures for upgrading competitiveness
of Thai SMEs

• A) Promotion of SMEs network through the
  development of cluster
• B) Employment of standards (especially on
  agricultural
• products)
• C) Capacity building through training, mentoring,
  provision of consultancy service, e-projects and
  SME university
• D) Creation of business opportunity through
  domestic and international business matching
  activities

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SMEs Target Sector 2007-2008
1. Manufacturing
3. Service
2. Trading
2.1 Retail 2.2 Wholesale 2.3 Trading firm
1.1 Indigenous - Light industry textile,
Leather, gems/jewelry, Printing matter,
packaging - Engineering and electronics
metallurgy, machinery, mould, electrical
appliances, automotive parts - Natural
resources food, medicine, herbs, wooden
furniture, rubber products, ceramics, gifts,
souvenirs, household decoratives 1.2 New wave
- Animation, multimedia, computer
games - Alternative Energy and
energy saving
3.1 Tourism industry hotel, restaurant,
souvenir shop tourism, spa, conference holding
related-business (MICE) 3.2 Other services
information Technology, software (digital
content), business consulting, health and
beauty, construction design, logistics,
education, entertainment
4. Regional and local
4.1 Manufacturing, Trading and service 4.2
Community products
Link
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X. Implications on Business Potential

• Geographic complementarities
• - Russia as gateway to the Commonwealth
  Independent States
• -Thailand as a gateway to Southeast Asia and
  southern China
• Russias abundant source of raw material
• - Thailand can import from Russia or penetrate
  the Russian market by direct investment in Russia
  (in forestry, jewelry, furniture and paper
  industry) and export to third countries
• Rapid infrastructure development and expansion
  of service sector in Russia
• - vast potential for Thai business which
  include spa and beauty , interior design,
  restaurant, and hotel

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XI. Proposed Framework of Thai-Russian SMEs
Cooperation

• Expansion of business matching to increase joint
  investment
• Joint cooperation between private sectors,
  particularly chambers of commerce, in the
  following sectors
• ? energy sector
• ? metal industry
• ? natural rubber manufacture
• ? jewelry industry
• ? tourism
• Exchange of SMEs development policy through
  seminar/s conferences, study-visit, and training
• Establishment of Russian-Thai Business Council
  (under ongoing process)
• Establishment of SMEs exhibition or pavilion to
  expand business partnership

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THANK YOU FOR YOUR KIND ATTENTION SAWASDEE
KA! www.sme.go.th
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Appendices Other OSMEPs project for SMEs
development
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SMEs University

• SME University is consisting of
• E-SMEs University
• Practical Curriculums through the University and
  College in Thailand

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E-SMEs University
OSMEP
Assumption U.

• Various Subject- E SME University
• Entrepreneurships concept for strat-up SMEs
• Introduction for Marketing
• Introduction for SMEs Financial
• SMEs Management for sustainable
• Business Creativity Innovation for SMEs
• ICT E-commerce for SMEs
• Production Management Service Businesses for
  SMEs
• Business Strategy Trend / Opportunity for SMEs
• Advance Marketing for SMEs
• Accounting and Financial Management for SMEs
• Corporate Governance
• Business Plan

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SME UNIVERSITY
SMEs University Curriculum Model
Major 70 Practice 30
Financial Management
General Management
Sale Marketing Management
Practice Courses
Elective Course
Core Course
Manufacturing Management
Innovation Management
New Technology Venture
- According to local smart businesses -
Practical OJT
- Considering a start up company - Real case
study
- Time Situation - Law Regulation
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C) OSMEP E-Projects / SME_at_Click
Business Startup
Business Improvement
Business Expansion
Business Maturity
SME Portal (www.sme.go.th)
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OSMEP e-Projects / SME_at_Click
Digital University
SME_at_Click Main Page
Virtual Coach
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E BizNet
E InnoMarket
Virtual Coach
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Warning System for Investment and SMEs Corners

• Type of SMEs
• Characteristics of Sector
• Assets per Sector
• Liabilities per Sector
• Revenues per Sector
• Total Sales per Sector

• ROI per Sector
• Economic Value Added per Sector
• Financial Ratio per Sector
• Export and Import per Sector
• Employment Rates per Sector
• No. of SMEs per Sector

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Warning System for Investment and SMEs Corners
SMEs Supply and Value Chain
SMEs Export and Import Positioning
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SMEs Financial Situation Positioning
SMEs Financial Health Positioning
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Warning System for Investment and SMEs Corners
Payab University Siam University Rangsit
University Christian University and 4 more each
year
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SMEs Tool Kit
Business Manual for start-up SMEs Marketing/
Sales/ Accounting/ HR/ Production/ Services/ ICT/
Sufficiency Economy including Good
Governance Practical Guideline for SMEs and able
to apply for own business which makes SMEs
confident to run business. Interactive E-Book
Lesson Learn from selected SMEs entrepreneurs
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