Thai SMES told to adjust amid slowdown in China

Corporate February 22, 2014 00:00

By Watchara Pussayanawin
The Nat

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Experts have urged small and medium-sized manufacturers to lower costs and improve production efficiency, given that one of the country's main markets - China - is facing an economic slowdown.

Kosit Panpiemras, chairman of the Thailand Development Research Institute, yesterday said China’s economy was on a downward path, with signs of a potential contraction including high short-term interest rates and declining investment expansion. 
   Small-and medium-sized enterprises (SMEs) could in these circumstances change tack, not expecting rises in export sales and using the opportunity to reduce production costs through logistics, labour skills and IT systems, improve product attractiveness and add more value to products, he said.
   “Improving these issues takes time and requires knowledge. They [SMEs] should, during low production-capacity utilisation, grasp the opportunity to enhance production capacity and the quality of labour to achieve higher competitiveness. It could be difficult for SMEs to run businesses without self-development,” he explained. 
   Kosit said SMEs could not at this time expect their performance to be maintained by purchase orders alone, given the unclear recovery in economic powerhouses like the United States, the European Union and Japan, and lower domestic purchasing power in light of Thailand’s political unrest. 
   Thailand has over time shifted its main export market from the US to China and Asean, he said, while not gaining much advantage over competitors during the baht’s recent depreciation, due to rival countries’ currencies also having weakened against the US dollar.
   Kosit expects Thai economic growth to come in at no more than 3 per cent this year.
   Vitoon Simachokdee, Industry Ministry permanent secretary, also encouraged SMEs to cope with future changes by prioritising cost reduction, including the choice of raw materials and logistics, for their business operations. 
   Improving product quality and services also leads to higher demand, and green factories should be adopted to preserve the environment, he added.
   Kosit said achieving SME improvement targets should involve business allies, including academics, so that they gain crucial knowledge to take their businesses forward. 
   He acknowledged, however, that there had been conflicts following earlier collaboration of this sort, given the differing views of businesses.
   “In developed countries, there exist deep linkages between operators and educational institutions. Every US university ties up with a manufacturing cluster for a new development direction. 
“Operators with know-how gain knowledge, and innovation results,” he said.
   Atchaka Sibunruang, director-general of the Industrial Promotion Department, said the upcoming Asean Economic Community would result in a larger regional market, increasing trade opportunities for each country and market opportunities for Thai operators. 
   The AEC, when the six non-Asean partners of China, Japan South Korea, India, Australia and New Zealand are taken into account for liberalised trade, will have a combined population of more than 3 billion, she said.
   She suggested that Thai operators, particularly SMEs, should cope with higher competition through production-efficiency improvement, cost advantages, and by studying Asean demand and the feasibility of relocating manufacturing bases to countries with cheaper raw materials and wages.