January 28, 2014 00:00 By Erich Parpart
The Federation of Thai Industries has proposed eight measures to the caretaker and the incoming governments in support of SMEs, especially in the tourism and retail industries, which are the hardest hit by the political crisis.
“If the situation is prolonged into the third and fourth quarters, there might be a chance of a contraction for SMEs this year,” Visit Limprana, vice chairman of the FTI, said yesterday.
According to the FTI, the export sector remains largely oblivious to the unrest.
The FTI predicts SME growth for this year at 3-4 per cent if the situation normalises by the first half. Besides the impact of the political turmoil, SMEs face other problems including lower competitiveness.
The first and foremost issue raised by the FTI is the need for the government to solve the political conflict as soon as possible, because if the situation is prolonged, the sector that will take the brunt of the damage is the SME sector.
Second, once the political problem is solved, the new government should help facilitate SMEs in terms of access to investment funds to help them expand their business. Third, the government should keep an eye on the exchange rate and try to keep currency fluctuation at a minimum.
Fourth, the government should support the development of SMEs by helping them raise the quality of their products and lower cost while maintaining the minimum wage at Bt300 per day. The FTI also urged political parties to exclude a hike in the minimum wage from their campaign platforms. They believe that the setting of minimum wages should be managed by the labour-relations commission, not the government.
Tax structure revision
Fifth, the new government should revise the tax structure in terms of the value added tax and personal income tax. The FTI believes the current structure allocates most of SMEs’ income to the government and hampers their ability to invest.
Sixth, the government should seriously tackle the problem of corruption.
Seventh, commercial and government banks should extend loans to SMEs that are the most affected by the political conflict, namely the tourism businesses near the protest sites.
Last, the government should make clear the rules and regulations for the migration of foreign labour in order to ease the shortage of workers for manufacturing.
The political effect on export-oriented companies remains minimal since their bases of production are outside Bangkok and in areas that are not affected by the state of emergency, especially the main port in Chon Buri’s Laem Chabang. The FTI forecasts exports to grow 5 per cent this year.
The biggest problem for SMEs, especially retailers, is lowered competitiveness in terms of product prices and lowered confidence in terms of revenue due to lower domestic consumption that was brought on by the political chaos in the past two months.
From the survey conducted by the FTI from January 17-22, 70 per cent of SMEs predict their operating results to be lower than last year.