Monday, March 26, 2007

Bangkok Post Article on SMEs


Bangkok Post


SMEs account for 99% of the nation's businesses and generate 75% of Thailand's national employment. The contribution by SMEs to the GDP and export totals last year were calculated to be as much as 38% and 31%, respectively.

Moreover, small business operations are a large part of the nation's tax base. Hence, the issue of strengthening SMEs is not taken lightly by the national administration, as sustainable SME growth is a necessary component of a healthy economy. This is, of course, true not only in Thailand but throughout the world.

So it is no surprise that international conferences like the Apec SMEMM are held to identify issues that policy makers need to address in order to promote SMEs. Yet, translating policy to effective strategies for removing the many obstacles confronted by smaller local businesses is no easy task.

A World Bank study of Apec member countries gave Thailand average marks for ease of starting a business, and rated it quite good for doing business. In the face of rapid globalisation, many Thai businesses are stuck with financial and marketing constraints, as well as limitations in technology and logistics. The result all too often is reduced quality and productivity.

Moreover, business environments are changing rapidly. Advancements in trade liberalisation and in information and communications technology (ICT) have tremendous implications for conducting business. Superimposed on all this is international competition.

The report cited in the first section of this article, which revealed that around 10,000 SMEs in Thailand folded in 2006, concluded that often Thai SMEs "are neither capital-intensive enough to withstand cheap products from China and Vietnam, nor quality-oriented enough to compete with high-end products from the US or Europe".

It is self-evident that Thai SMEs must make changes in order to be competitive, and some good broadly based solutions were put forth at this month's SMEMM. But filling in the necessary details and implementing them on either an individual or macro scale still looks to be some years away.

From the statistics, it looks like Thailand's SME sector is strong and resilient, because it caters to a domestic market. Yet, from my experience, most Thai SMEs care nothing about quality, cleanliness, their marketing materials and professional customer service. Globally, Thai SMEs will continue to be weak because of these things. If buyers want cheap, they go to China and Vietnam.

Thailand has lot of potential to develop its SME sector, but because of the Thai lax attitude towards doing business it will probably stagnate or won't beyond its niches in the domestic market.

I suggest my readers go to a trade show in Thailand and see what it is like to do business here, or go to Pratunam and ask around about exporting products.

Then, if you have an opportunity, go to a trade show in Malaysia, Singapore, Hong Kong or China.

At a Thai trade show, you will have many people at the vendors stalls looking dazed and confused, or they are eating, or they can't speak more than a sentence of English, or they have pretty girls shaking their asses and checking their makeup but know nothing of the products they are selling. When you ask for the sales manager, he or she is usually not there, then you are given crappy marketing materials that are laced with English errors. Not every stall is like this, but most of them are.

I went to a couple OTOP shows also. If people want to understand why the government shouldn't be in business, this is it.

There were a couple products that I was interested in exporting to the US. Potentially millions of dollars in business. Again, the sales girls didn't know what they were doing, except give a deer caught in a headlights look to every question I asked--even when the communication was in Thai. I looked at the marketing materials. The printing job was horrible. The English material had numerous errors. Thais just don't give a shit. Why even bother to make the effort at all?

Go to another country, however, and they are eager to do business. They make an effort to do business. Unfortunately, Thais are the polar opposite. But hey, it is their choice.

If some Thai SMEs got their shit together and stood out from their domestic competitors, they could make a lot of money.

But why improve and develop their brand when they can be committed to complacency and mediocrity. Then when things go wrong and their business folds, they can blame the evil foreigners for destroying their businesses.

I like this article, because it talks about the need to improve, but will any action come from it? Probably not.

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