SMEs drop in competitiveness
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Index slips in Q2 as markets slow down at home and abroad
Small and medium-sized enterprises are losing competitiveness because of the slowdown in both domestic and overseas markets, according to the University of the Thai Chamber of Commerce (UTCC).
“Thai SMEs are facing difficulty in competing. As economic growth has slowed, people have cut their spending,” Thanavath Phonvichai, director of the university’s Economic and Business Forecasting Centre, said yesterday.
SMEs are facing full stocks and limited capacity to keep up production. They say they have to unload inventory urgently to prevent damage and to reduce carrying costs.
The centre’s survey found that its SME competitiveness index slipped to 57.5 points in the second quarter of this year from 59.6 in the first quarter.
SMEs make up 90 per cent of all Thai companies and contribute about 40 per cent of gross domestic product. Because of lower sales, SMEs quickly face a liquidity squeeze and rarely start new investment projects or expand business.
The government should launch measures to help them pare down stocks and promote exports, he said. It should help them increase their liquidity and speed up its infrastructure-development projects, which would boost consumer confidence.
The centre predicts that the SME sector will expand by only 3.2-3.7 per cent this year, while the overall economy grows by 3.5-4 per cent.
UTCC president Saowanee Thairungroj said SMEs were finding it more difficult to compete as labour and raw-material costs were climbing while sales were stagnant.
“Thai SMEs are facing higher costs of operation, but cannot increase prices during the economic slowdown. SMEs’ competitiveness could continue to weaken in the third quarter as the cost of production is increasing, while the economy is slowing down,” she said.
SMEs have to deal with a wide spectrum of problems such as rising inventory and lower sales, higher cost of production, declining income, weak brand promotion, lack of skilled labour, poor standards of goods and limited marketing channels.
Worst-hit sectors
The businesses experiencing the most difficulty are garments and fashion, retail, and food and beverages. SMEs that lack experience or have been in business for less than 10 years are more prone to liquidity crunches or business failure.
The SME sustainability index fell from 57.7 points in the first quarter to 53.6 in the second quarter. It measures vision and strategy, risk management, human-resource development plans, investment on marketing, information technology and research and development, and corporate social responsibility programmes.
Meanwhile, Deputy Prime Minister Niwatthumrong Boonsongpaisan still insists that the Commerce Ministry’s export-growth target of 7-7.5 per cent is attainable.
The ministry will work closely with other agencies including the Industry Ministry, the Agriculture Ministry and the private sector. Thai trade representatives in 62 countries have been ordered to draw up urgent plans to promote exports in the rest of the year.
“Exports may not achieve the target of 7-per-cent expansion because of many negative factors, mainly the world’s economic slowdown, which results in lower demand for goods.
But responsible agencies will try to drive exports as much as possible,” he said.
The UTCC projects outbound shipments rising only 1-3 per cent this year.
