Wealth 'not finding its way down to SMEs'

Despite recent robust export growth, economists have warned that wealth has been distributed mainly to multinational companies, while small and medium-sized enterprises have been hit by inflation and low competitiveness.

They also warned that political tensions hammering domestic confidence will drag the economy down to growth of less than 6 per cent and that the country needs micro-management - including "targeted subsidies" - to help SMEs and the poor.

So far this year, exports have grown by more than 20 per cent, while growth in gross domestic product in the first quarter was as high as 6 per cent.

However, a closer look at the details reveals that exports have been mostly driven by the electronics and auto sectors. Many of the big gainers in these two sectors are owned by multinational firms. However, exports of SMEs have seen poorer growth, said Ekniti Nitithanprapas, a senior economist from the Finance Ministry's Fiscal Policy Office, at a roundtable seminar on Friday.

He added that consumption had also grown this year due to imports of luxury goods by the rich, while spending by the poor had been sluggish given the low sales growth of motorcycles. In addition, investment has been driven by large companies, including Japanese firms.

Ekniti said domestic economic momentum was subsiding, while the government has failed to manage domestic confidence.

Kobsak Pootrakool, executive director of the Stock Exchange of Thailand's SET Research Institute, said the government needed to restore confidence, otherwise the economy may not survive the global economic downturn. With good indicators in the first quarter, the economist warned that GDP growth had been an illusion due to inflation.

Veerathai Santiprabhob, executive vice president of Siam Commercial Bank, said fears of rising inflation made people buy durable goods more quickly than they need to, as they are concerned about prices rising in the future.

"It is the crisis of the supply side. So far, the government has implemented only demand-management policy. All state agencies have followed the quick-fix policy, including the suggestion to the Bank of Thailand to raise the policy rate," Veerathai said.

The economists agreed that the government, particularly the industry, commerce and agriculture ministries, needed to tackle the micro issues by offering targeted subsidies with a specific time frame rather than a general subsidy.

His comment was echoed by Songtum Pinto, division executive from the Bank of Thailand's Domestic Economic Department. "Macroeconomic issues still need to be solved, or you'll get a spiral of purchasing power falling, which will affect the poor. And investors will not be confident enough to invest. But how can we go through this transition period? We need to take care of the weak and there is a need for targeted subsidies," Songtum said.

Chatchai Boonyarat, vice chairman of the Thai Chamber of Commerce, believes that logistics development in the agricultural sector will help improve wealth distribution.