30% of SME exporters reel from political row

Economy January 29, 2014 00:00

By Petchanet Pratruangkrai
The N

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Most unprepared for AEC, study finds

The political unrest in the Kingdom has already affected 30 per cent of small and medium-sized enterprises in the export sector through loss of trading opportunities, and even more damage could be done if there is no early resolution, according to a study by the University of the Thai Chamber of Commerce.
The study by the UTCC’s Centre for International Trade Studies (CITS) found that 29.9 per cent of Thai SMEs had been affected by the political mess. Of these, 94.83 per cent said their customers had shifted their orders to other countries on worries over Thai export competency, and another 5.17 per cent said they had problems with export documents.
“A prolonged political conflict would continue to deteriorate Thai traders’competitiveness. The competitiveness of Thai SMEs is projected to drop from third place to fifth among Asean nations , after Singapore, Malaysia, Vietnam and Indonesia,” said CITS director Aat Pisanwanich.As a result of the export difficulties faced by SMEs, which account for 98 per cent of Thai enterprises, shipments this year could grow by less than the previously expected 3.8 per cent this year. Absent the political disruption, that growth rate could have been 5 per cent, he said. The SMEs that appear to have been hit hard are in the food and garment industries.
The CITS study also found that of the Kingdom’s 2.7 million SMEs, about 81.99 per cent or 1.38 million still lack a proper understanding of what is going to happen under the Asean Economic Community (AEC) by the end of next year, and are unprepared for market liberalisation.
Only 12.01 per cent of SMEs, or 303,145, have a good understanding of the AEC and have plans to benefit from this seamless market.
Aat said those SMEs with weak understanding of the AEC could be hit hard by the high level of competition from operators in other Asean member states. Many enterprises would lose market share, forcing them to close down or be taken over by foreign companies.
The study found that most SMEs lack knowledge about the AEC because of poor public relations and a lack of education on issues particularly affecting smaller firms. 
Aat said it was disappointing that although SMEs were gaining more understanding about the AEC, their knowledge was still too shallow to enable them to benefit under the regional integration.
Government agencies have educated enterprises in the traditional way, by organising seminars only in big cities and large provinces. But enterprises in small provinces and remote areas are not aware of the AEC’s implications as they lack the opportunity to access the needed information. The seminars have also been too broad-based and have not been set up for specific industry groups, Aat said.
Agricultural sector   
CITS figures show that SMEs in the agricultural sector have the least understanding about the AEC.
Additionally, the study found that after the AEC integration, exports by Thai SMEs were expected to rise by 10 per cent or Bt51 billion, from a total of about Bt500 billion last year. Meanwhile, exports by large enterprises are projected to increase by 16.24 per cent, or Bt203 billion, after the regional integration.  
After the AEC, almost 40 per cent of SMEs will be able to trade in Asean. Of these, most will trade with neighbouring countries, namely Myanmar, Laos, Malaysia and Vietnam.
Asked about their investment plans in Asean, the most popular destination for Thai SMEs is Myanmar, followed by Vietnam, Indonesia and Cambodia.