SME contribution to the Kingdom's GDP decreased from 42 per cent in 2001 to 38 per cent last year despite government efforts to promote SMEs in the international arena, said Aat Pisanwanich, director of the SME Study Centre at the University of the Thai Chamber of Commerce.

"The SME sector should contribute more than 50 per cent to the GDP, in order to ensure the country's sustainable economic growth. But the ratio has been declining," he said.

The study showed that the GDP of SMEs was projected to grow only 4.48 per cent to Bt1.44 billion this year, down from 4.74 per cent, or Bt1.38 billion, last year, based on an exchange rate of Bt36 to Bt36.50 to the US dollar. That growth has been severely affected by rising costs of raw materials, political uncertainty and the proposed amendments to the Foreign Business Act.

SME operators still lack manufacturing efficiencies and knowledge of business operations. Moreover, lack of both technological support and continued financial support has also slackened growth, said Aat.

He noted that government financial assistance to SMEs had been used incorrectly. The budget has been spent to promote key manufacturing sectors rather than services and wholesale and retail businesses. As a result, these sectors are losing competitiveness to foreign firms.

In the study's worst-case scenario, the GDP for SMEs is estimated to grow only 3.12 per cent, or Bt1.42 billion, based on a baht value of 35 to 35.5o to the dollar and assuming the mystery over the New Year's Eve Bangkok bombings was resolved within six months.

However, Aat is optimistic that the SMEs' GDP growth could reach more than 4.4 per cent if the government launches clearer policies to ease worries over bomb threats and if the baht appreciates only slightly this year.

To boost SME competitiveness and ensure a higher contribution to the Kingdom's GDP, he suggested the government quickly revise its SME promotion plans.

SMEs urgently want the government to help solve their problems, particularly deficiencies in research and development and technological and financial support by non-commercial banks.

Aat said the government must reconsider signing free-trade agreements with more competitive countries like Japan and the United States, because Thai SMEs had lower competitive efficiency compared with foreign enterprises.

In addition, he said although many projects were created to support SME growth, a plethora of regulations and conditions had obstructed their operation.

For instance, the Bangkok City of Fashion, Kitchen to the World and Detroit of Asia projects all focused on large enterprises rather than on SMEs.

Petchanet Pratruangkrai

The Nation