SMEs also feeling pinch

SMEs also feeling pinch.

Big companies aren't the only ones that are struggling in the current tension-filled times. Small businesses are also feeling the pinch.

In fact, the gross domestic product of the small and medium-sized enterprise sector is likely to contract in the current quarter, says Jhitraporn Techacharn, director-general of the Office of Small and Medium Enterprises Promotion (Osmep).

The Dec 31 bombings and their impact have been especially bad news for entrepreneurs in the tourism, wholesale and retail fields, she said. The blasts are likely to scare away foreign visitors and also dent local consumer confidence.

Even small businesses with good growth prospects could find the going tough. Borrowing will be tougher as banks will be especially cautious.

SMEs in export-focused areas such as auto parts, printing and pulp and paper should fare better. "The key reason is that the baht has weakened slightly," Ms Jhitraporn said, adding that the SME export sector should grow by 11%.

Last year, Osmep estimated the GDP growth of SMEs at 3.9% to 4.8%, benefiting from a second-half decline in oil prices and the fact that interest rates had stopped rising.

However, current negative sentiment, she believes, should have only a short-term impact since the country's economy and fundamentals are still sound. "The only thing is that the government needs to quickly solve the ongoing problems and regain confidence among investors as well as the public as a whole."

For SMEs, the keys to riding out the storm will be managing costs and concentrating on increasing profit-making ability and competency. "They need to focus on risk management, network expansion and transparency. Besides, they need to add more value to their products or services or create niches in the market," says Ms Jhitraporn.

This year, Osmep is launching six new projects to complement its existing incubation centres and electronic learning projects.

According to Osmep statistics, with the help of its 16 incubation centres _ 10 more will be added this year _ 75% of SMEs have been able to stay healthy. In general, the failure rate of SMEs is around 35%.

SMEs joining the incubation project are responsible for only 10% of the expenses incurred, while the centres absorb the rest.

For more online, see: http://cms.sme.go.th/cms/web/osmep

Your money
Bangkok Post
Monday January 15, 2007