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.

"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.

The value of SME business will comprise 4 per cent of gross domestic product this year, compared with 4.7 per cent last year.

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.

Though some SMEs are disappearing, others are emerging. So far this year 40,000 news 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.

The office will spend Bt700 million to help SMEs in the fiscal year ending next September.

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.

The office has another Bt500 million to spend expanding One Tambon One Product (OTOP) products.

Jhitraporn said makers of OTOP products had the potential to become SMEs if they received good advice and developed packaging and design.

"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.

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.

Chalida  Ekvitthayavechnukul,

Somluck Srimalee

The Nation