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Published on February 6, 2008

The Office for Small and Medium Enterprises Promotion (Osmep) has warned that six industries face tough conditions this year.

Cited as factors were the global economic slowdown, the US sub-prime mortgage crisis and spiralling oil prices.

The industries are furniture, textiles and garments, glass and ceramics, wood and wood products, leather and leather products and seafood. In all cases, their net profits last year were less than 3 per cent of revenue, with the exception of the seafood industry, which recorded a net loss equal to 0.97 per cent of revenue.

Most of them also face high competition in export markets, particularly from cheaper Chinese products, and most expect a drop in the value of their exports. This is particularly true of the furniture industry, Osmep said.

A survey of 300 small- and medium-sized enterprises (SMEs) by Osmep's SME-Sector Analysis and Early Warning Project office from last August to November found most were concerned the business environment would have a negative effect on their operations this year.

Factors causing most concern were rising oil prices, appreciation of the baht, consumer purchasing power, interest rates, high competition in the market, the country's political state after the election and the global economic slowdown.

The survey found SMEs' net profits averaged only 4.41 per cent of revenue, because they were unable to control their costs, particularly for transportation and management. SMEs' net profit as a percentage of revenue is expected to fall further this year, to an estimated 4.08 per cent.

Nuttapon Nimmanphatcharin, director of Osmep's SME-Sector Analysis and Early Warning Project office, said many SMEs faced business-management problems when confronted by a new market environment, particularly an environment changed by rising oil prices and high competition from cheap imports under free-trade agreements.

Following its research, Osmep believes SMEs must find ways to reduce their business costs and compete with cheap imported products, Nuttapon said. They also have to produce goods that are "different" and have value added.

As of the end of last year, Thailand had 2.3 million SMEs, representing 99 per cent of all registered companies and employing about 9 million people, or 76 per cent of Thailand's total workforce. They also generated combined revenue of Bt5.69 trillion, or 40 per cent of Thailand's gross domestic product. About Bt1.56 trillion of that revenue came from exports.

Despite his prediction of a hard time for many SMEs , Nuttapon said those able to develop their businesses to compete with others would succeed in expanding. Osmep expects SMEs' revenue to increase 3.72 per cent to Bt5.91 trillion. Of that, Bt1.69 trillion will come from exports, an increase of 8.12 per cent year on year.

Somluck Srimalee

The Nation