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Thailands support of small business (SMEs) at the international level Thailands support of small business (SMEs) at the international level 1 st International.

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Presentation on theme: "Thailands support of small business (SMEs) at the international level Thailands support of small business (SMEs) at the international level 1 st International."— Presentation transcript:

1 Thailands support of small business (SMEs) at the international level Thailands support of small business (SMEs) at the international level 1 st International Small Business Festival Moscow, Russian Federation December 13, 2007 Office of Small and Medium Enterprises Promotion (OSMEP), Thailand by Dr. Wimonkan Kosumas Director Department of International Cooperation and Policy Support

2 Table of Contents I. Background of the Office of SMEs Promotion II. Overview of Thailand-Russia economic relation and trading volume between the two countries III. Comparative definition of SMEs (based on number of employees) and profile of Thai SMEs of employees) and profile of Thai SMEs IV. Challenges of SMEs moving into oversea markets V. Internationalization of Thai SMEs VI. Government SMEs Supporting Policy VII. OSMEPs support for SMEs Overseas Business Operation Operation VIII. Services and facilities for foreign SMEs IX. Policy measures for upgrading competitiveness of Thai SMEs and SMEs target sector SMEs and SMEs target sector X. Implication on Business Potential XI. Proposed Framework of Thai-Russian SMEs Cooperation

3 I.Background of the Office of SMEs Promotion established under the Small and Medium Enterprises Promotion Act 2000 (publicized in the Royal Gazette on Feb. 17, 2000) as a juristic entity and a government office, not an official agency or state enterprise. established under the Small and Medium Enterprises Promotion Act 2000 (publicized in the Royal Gazette on Feb. 17, 2000) as a juristic entity and a government office, not an official agency or state enterprise. supervised by the Board of Small and Medium Enterprises Promotion chaired by the permanent secretary of industry. supervised by the Board of Small and Medium Enterprises Promotion chaired by the permanent secretary of industry. Acts as the countrys central organization in formulating SMEs promotional policies and strategies as well as coordinating governmental and private working systems in achieving strong and sustainable growth of SMEs as the main driving force of the countrys economy. Acts as the countrys central organization in formulating SMEs promotional policies and strategies as well as coordinating governmental and private working systems in achieving strong and sustainable growth of SMEs as the main driving force of the countrys economy. In regard to translate the governments SMEs promotion policies and plans into concrete actions, the cabinet has approved on May 6, 2003 the Master Plan of Thailands SMEs Promotion ( ). In regard to translate the governments SMEs promotion policies and plans into concrete actions, the cabinet has approved on May 6, 2003 the Master Plan of Thailands SMEs Promotion ( ). Due to the expiration of the 1 st Master Plan of SMEs Promotion ( ), OSMEP together with related public and private agencies has formulate the 2 nd Master Plan ( ) which is still in due process for approval from the cabinet. Due to the expiration of the 1 st Master Plan of SMEs Promotion ( ), OSMEP together with related public and private agencies has formulate the 2 nd Master Plan ( ) which is still in due process for approval from the cabinet.

4 Strategies of SMEs Promotion Plan 2 ( ) Vision: SMEs to Grow with Sustainability, Strength and Balance Intellectual Infrastructure Network & Alliance Productivity Competitiveness Strategy 1: Create new entrepreneur and develop the capability of existing entrepreneurs Strategy 2: Upgrade Manufacturing SMEs Strategy 3: Increase the efficiency and reduce impediment in trading sectors Strategy 4: Promote the Capability on Value Creation in Services Sector Strategy 5: Promote SMEs in Regional and Local Areas Strategy 6 : Create business environment and enabling factors 14

5 OSMEP Formulate Master & Action Plan Create Mechanism in implementing Allocate Budget Monitor and Evaluate Central Sectoral Strategies Policy / Action Plan Projects under SMEs Promotion Action Plan Other Public Sector Agencies State Enterprise Public Org. Ministry Chamber of Comm./Fed Of Thai Industries/ Bankers Assoc. Network to Promote SMEs -Board of SMEs Promotion -Executive Board of the Office of SMEs Promotion International Governmental & Private Units MOU Action Plan Coordination Regional SMEs Data Action Plan RegistrationService Provision Service Provider Creation SMEs University Governor Provincial Chamber of Comm. Local Admin. Agency Local Ministerial Office Provincial Industrial Federation Academics Community/ Local Product - Implement Report Operational Result Identify Problem/Demand Academic/ Expertise Institution 22 - Implement Report Operational Result Identify Problem/Demand OSMEP Regional offices

6 II. Overview of Thailand-Russia economic relation Russia and Thailand enjoy a history of more than 50 years of trade and economic relations Russia and Thailand enjoy a history of more than 50 years of trade and economic relations Thailand remains the largest trading partner of Russia in Southeast Asia Thailand remains the largest trading partner of Russia in Southeast Asia First business contacts between Russian trade organizations and Thai companies date back to the end of 40s following the reinstallation of diplomatic relations between the two countries in 1941 First business contacts between Russian trade organizations and Thai companies date back to the end of 40s following the reinstallation of diplomatic relations between the two countries in 1941 In 2005, bilateral trade reached the volume of 2 billion USD after significant slump in 1997 due to Asian financial crisis In 2005, bilateral trade reached the volume of 2 billion USD after significant slump in 1997 due to Asian financial crisis According to the Thai custom statistics, trade surplus remains on Russian side in 2006 with Russian export at 1.38 billion USD and Thai import at 0.42 billion USD According to the Thai custom statistics, trade surplus remains on Russian side in 2006 with Russian export at 1.38 billion USD and Thai import at 0.42 billion USD

7 Thai Exports to Russia ProductValue (million USD) 1. Automobile and auto parts Canned and processed fruits Polymer Electric appliances Canned and processed seafood 24.0 Total value Thai Imports from Russia ProductValue (million USD) 1. Crude oil Rolled steel Scrap metal Fertilizers and pesticides Pulp and paper 12.4 Total value 1,195.4 Source: CIS & Balkan States Center, University of Thai Chamber of Commerce ( period between Jan.-Sept. 2007)

8 III. Comparative Definition of SMEs ThailandRussia Act for the Promotion of Small and Medium Enterprises B.E (2000) Federal Law on State Support of Small Entrepreneurship 1995 businesses has either asset of no more than 200 million baht or no more than 200 employees self-employed individuals or (ii) legal entities in which: auhorized capital of public sector bodies, charities or businesses have no more than a 25 per cent of their equity shares, where the average number of employees does not exceed the following limits according to main sector of activity: -100 in industry, construction and transport; - 60 in agriculture, science and research; - 50 wholesale trading; - 30 retail trade and domestic services; and - 50 in other sectors. Small Types of business Employment ProductionNot more than 50 ServiceNot more than 50 WholesaleNot more than 25 RetailNot more than 15 Medium Types of business Employmen t Production Service Wholesale26-50 Retail16-30

9 Profile of Thai SMEs

10 10 Number of SMEs, 2006 Number of SMEs by Size, ,287,057 enterprises in total LEs : 4,292 MEs : 9,791 SEs : 2,264,734 Unidentified : 8,240 Total Number of SMEs 2,274,525 enterprises, 99.5 % Number of SMEs by Sector, 2006 Most of SMEs are operating in Trade& Repair Sector for 908,846 enterprises (40.0 % of Total SMEs) Service Sector was the second largest group for 675,622 (29.7%) Production/Manufacturing Sector was the third for 672,351 (29.6%)

11 11 Employment in SMEs, 2006 SME Employment by Size, 2006 In 2006, all enterprises in Thailand created 11,551,272 jobs in total. - LEs accounted for 2,687,938 jobs - MEs accounted for 1,338,398 jobs - SEs accounted for 7,524,936 jobs - Totally, SMEs created 8,863,334 jobs or 76.7%. SME Employment by Sector, 2006 Between , employment in SMEs increased continuingly, especially in Service Sector, which the employment grew 10.8% in 2006.

12 12 SMEs Economic Contribution In 2006, overall GDP accounted for 7.81 million baht of which 10.7% came from Agriculture Sector and 89.3% came from Non-agriculture Sector. SMEs GDP accounted for 3.04 million baht or 38.9% of overall GDP Between , SMEs GDP share was in steady line (approx. 39.0% of national GDP), while SME GDP growth rated at a range of % (y-o-y)

13 Structure of SME GDP in 2006 Service Sector was the highest with 32.2% share Manufacturing Sector was the second highest with 30.3% Trade and maintenance Sector was the third highest with 29.2% Between SMEs in Service Sector had been regarded as most important economic engines in creating GDP with % share, followed by SMEs in Trade and maintenance Sector with %, and SMEs in Manufacturing Sector came third with % share SMEs Economic Contribution (Contd)

14 14 Role of SMEs in International Trade 2004 / / / 2549 SME EXPORT to TOTAL Export (% share) 30.2%29.7%29.1% SME IMPORT to TOTAL IMPORT (% share) 32.9%32.4%32.7% SME EXPORT to SME GDP (% share) 45.1%46.7%47.3% TOTAL EXPORT to TOTAL GDP (% share) 59.6%62.5%63.3% In 2006, SME export accounted for 1.45 Mil.THB or 29.1% of total export In 2006, SME import accounted for 1.60 Mil.THB or 32.7% of total import Thus, SME Trade Balance still deficit with amount of 0.15 Mil.THB The ratio of SME Export to SME GDP accounted for 47.3% indicated that SMEs relied on domestic market rather than international market

15 15 SME export classified by level of factor intensities shows that Primary products was the highest with 32.1% share, followed by Labour Intensive products came second with 19.2%, Third and Fourth was High Skill and Medium Skill products with 12.0% SME import classified by level of factor intensities shows that High Skill products was the highest, followed by Primary products Role of SMEs in International Trade (Contd)

16 SMEs Promotion Plan (Year 2007 – 2008) 16 Goals 1.To increase the contribution of SMEs to GDP to reach 5% of the national GDP per year. 2.To increase the number of new entrepreneurs by 50,000 per year 3.To increase SMEs Total Factor Productivity of 3% per year 4.To increase SMEs export value to no less than 6% per annum 5.To create product brand with a minimum of 100 per year 6.To commercialize SMEs innovation with a minimum of 100 per year

17 IV. Challenges of SMEs moving into oversea markets Human Resource Infrastructure and Business Environment Commercial and administrative practice Employing top quality managers & engineers Employing top quality managers & engineers Human resource management Human resource management High wages High wages Difficulty in procuring raw materials Difficulty in procuring raw materials Insufficient infrastructure Insufficient infrastructure Inefficient legal system Inefficient legal system Uncertainties surrounding regulation enforcement by local government Difficulty in payment collections Foreign exchange risk Draining technology/ know-how Violation of intellectual property rights

18 STRENGTHS High flexibility and adaptability High flexibility and adaptability High utilization of local/ domestic resources&knowledge High utilization of local/ domestic resources&knowledge Well performed in skill-based sectors: food; fashion products; tourism and related products&services Well performed in skill-based sectors: food; fashion products; tourism and related products&services Easy business access and quick consumer approach Easy business access and quick consumer approach Eligible in producing products which are various in design and quality Eligible in producing products which are various in design and quality THREATSOPPORTUNITIES Trends of new business approaches favor SMEs Trends of new business approaches favor SMEs Easy for starting ups and allow workforce and new entrepreneurs to accumulate skills Easy for starting ups and allow workforce and new entrepreneurs to accumulate skills Allow for business alliance with LEs and MNCs Allow for business alliance with LEs and MNCs Potential for the creation of new genre of entrepreneurs Potential for the creation of new genre of entrepreneurs SMEs promotion is national agenda with high level of significant SMEs promotion is national agenda with high level of significant WEAKNESSES Losing competitiveness in labor-intensive & resource-based sector Losing competitiveness in labor-intensive & resource-based sector Weak production structure; Poor management; Incapable in marketing; Lack of product development; Employing low quality workforces; Using out of date technology Weak production structure; Poor management; Incapable in marketing; Lack of product development; Employing low quality workforces; Using out of date technology Limitation in applying good governance: accounting system; consumer&environmental responsibility Limitation in applying good governance: accounting system; consumer&environmental responsibility Limitation in access appropriate fund Limitation in access appropriate fund Lack of integrating and networking system Lack of integrating and networking system Pressure from Globalization: Pressure from Globalization: - Economic integration between countries - Economic integration between countries - FTA on Goods/Services/ Investment - FTA on Goods/Services/ Investment - New form of NTBs - New form of NTBs SMEs promotion system is still fragmented both in policy formulation and implementation SMEs promotion system is still fragmented both in policy formulation and implementation High competition results in Nutcracker situation High competition results in Nutcracker situation Obstacles from public administration Obstacles from public administration

19 V. Internationalization of Thai SMEs Problems Entrepreneurs fails to reap sufficient benefits from bilateral and multilateral trade agreement with other economies National income generation policy still focus only on increasing the number of exports and FDI inflows while neglecting the importance of FDI Outflow In 2007, Institute for Management Development (IMD) has ranked Thailands competitiveness at 33 which fall from 29 in 2006 due to low FDI Outflow Business restructuring from a manufacturing base country to an investor country is necessary in order for Thailand to still maintain its comparative advantage in the global market

20 initiated by Department of Export Promotion initiated by Department of Export Promotion Objectives: Objectives: 1.To encourage oversea business expansion as mechanism for value addition 2.To meet the challenge of liberalization and the disintegration of preferential treatment such as quota and GSP (Generalized System of Preferences) 3.To maintain comparative advantage by relocating to other countries which has lower cost of labor, technology, and raw material 4.To increase the competitiveness of export in the long run Internationalization Project

21 Offers 2 types of oversea business supports which include: Offers 2 types of oversea business supports which include: A) Manufacturing dimension: A) Manufacturing dimension: - sourcing - sourcing - subcontracting - subcontracting - Green Field Investment - Green Field Investment B) Non-Manufacturing dimension B) Non-Manufacturing dimension - Sales Representatives - Sales Representatives - Franchising - Franchising - Licensing - Licensing Internationalization Project (cont)

22 VI. Government SMEs Supporting Policy Government has proposed SMEs supporting policy to the national legislative assembly on Nov. 3, 2006 as follows: Development of intellectual infrastructure for SMEs Collaboration between public and private sector

23 Development of Intellectual Infrastructure Collaboration between public and private sector Create linkages between academic institutions and industrial sectors Create linkages between academic institutions and industrial sectors Personnel development in science and technology Personnel development in science and technology Increase multi-level research supporting channels with emphasis on collaboration between users and researchers; motivate innovation development of the private sector Increase multi-level research supporting channels with emphasis on collaboration between users and researchers; motivate innovation development of the private sector Delegate the public sector as SMEs coordinating body in building economic infrastructure Delegate the public sector as SMEs coordinating body in building economic infrastructure Provide financial tools which support SMEs innovation creation Provide financial tools which support SMEs innovation creation Provide support for the commercialization of SMEs innovation Provide support for the commercialization of SMEs innovation i.e. FTI and OSMEP Skills Enhancing Industrial Standard Upgrading Industrial Standard Upgrading Establishment of SMEs Incubation Center Establishment of SMEs Incubation Center Competitiveness Improvement Business Matching Business Matching Machinery Fund Machinery Fund Logistics Networking Logistics Networking Development of Provincial and Regional Industry by sectors Development of Provincial and Regional Industry by sectors Administration Administration Budget: 800 million baht

24 VII. OSMEPs Support for SMEs Overseas Business Operation A) International SMEs cooperation B) Overseas Thai SMEs Agency cooperation C) Internationalization Program

25 Samples of International Cooperation on SMEs Promotion Thai – Malaysia Thai – Malaysia Thai – France Thai – France Thai – Italy Thai – Italy Thai – Japan Thai – Japan

26 I. Information exchange of SMEs development policies II. Establishment of Malaysia-Thailand SME Business Portal III. Establishment of Joint investment and trade mission IV. Establishment of training program for entrepreneurs in food processing and automotive sectors V. Organizing exhibition and business matching activities Framework of Thai-Malaysia Cooperation on SMEs Promotion

27 I. Establish SMEs help desk at OSMEP to assist Italian SMEs doing business in Thailand II. Information exchange of cluster development in Italy III. Promote the export of Thai organic products to Italy IV. Collaborate on fashion design, jewelry (possibility of establishing co-brand), and export of furniture V. Organize workshop on alternative energy and environment protection VI. Sponsorship from Fierra Milano for ISBC 2007 Framework of Thai-Italy Cooperation on SMEs Promotion

28 I. Development of Joint Cluster II. Entrepreneurial registration III. Advisory Support for Design IV. Advisory Support for Branding V. Experience sharing on Technical Institution for SMEs VI. SME Networking VII. SME Working Group Meeting (at least once a year) Framework of Thai-France Cooperation on SMEs Promotion

29 I. Knowledge and experience sharing on the establishment of SMEs University II. Collaboration on the establishment of Business Development Service Center III. Development of business diagnosis or Shindan IV. Exchange of SMEs expertise V. Development of financial institutions risk evaluation of SMEs Framework of Thai-Japan Cooperation on SMEs Promotion

30 B) Overseas Thai agency SMEs cooperation B) Overseas Thai agency SMEs cooperation Inform the National SMEs Promotional and Operational Plan to be as a guideline for allocate budgeting for SMEs promotion through strategic fund Exchange of Business Data & Information Knowledge & Know-how Linkage Provision of in-depth information of trading partners (economic, social and political) for facilitating the investment decision of Thai SMEs entrepreneur Coordination on MOU and Action Plan on SMEs Promotion Support both in-bound and out-bound SME promotional activities

31 C) Internationalization Program subsidies to SMEs entrepreneurs (not exceeding 50% of expense and the maximum amount not exceeding $7,000) for international expansion through international exhibition, business matching, market survey or other export promotion activities subsidies to SMEs entrepreneurs (not exceeding 50% of expense and the maximum amount not exceeding $7,000) for international expansion through international exhibition, business matching, market survey or other export promotion activities

32 Services and facilities for foreign SMEs VIII. Services and facilities for foreign SMEs

33 BUSINESS MATCHING BUSINESS MATCHING Increase trade opportunity, match world s demand with Thai s supply Market Intelligence Demand Standard / Specification Taste Trade regulation Etc. SMEs Product scope Community Products Quality Assuring By Q-mark FTI membersTarget market Channel Matching Activities SMEs Shop Channel SMEs Trade Promotion Thai confectionary Business Trip Exhibition Product catalog E-commerce Objectives Market Exploration % Sales Growth / Minimize Defects Develop to be regular customers 33

34 Product Cluster in Thailand 34

35 Venture Capital Fund (VCF) - Provide equity financing to targeted SMEs - In charge of shareholders - Support for enhancing SMEs strengthen SMEs strengthen

36 Venture Capital Fund in Thailand Venture Capital Fund in Thailand A) Venture Capital Fund for Enhancing Competitiveness of Thai Business B) SMEs Venture Capital Fund C) Innovation Development Venture Capital Fund

37 Media to access recent SMEs movement SMEs Today magazine SMEs Today magazine SMEs Shop Channel (UBC Channel) SMEs Shop Channel (UBC Channel) SMEs Chee Chong Rouy TV Program (Channel 11) SMEs Chee Chong Rouy TV Program (Channel 11)

38 IX. Policy measures for upgrading competitiveness of Thai SMEs A) Promotion of SMEs network through the development of cluster B) Employment of standards (especially on agricultural products) products) C) Capacity building through training, mentoring, provision of consultancy service, e-projects and SME university D) Creation of business opportunity through domestic and international business matching activities

39 SMEs Target Sector Indigenous - Light industry : textile, Leather, gems/jewelry, Printing matter, packaging - Engineering and electronics: metallurgy, machinery, mould, electrical appliances, automotive parts - Natural resources: food, medicine, herbs, wooden furniture, rubber products, ceramics, gifts, souvenirs, household decoratives 1.2 New wave - Animation, multimedia, computer games - Alternative Energy and energy saving 2.1 Retail 2.2 Wholesale 2.3 Trading firm 4.1 Manufacturing, Trading and service 4.2 Community products 3.1 Tourism industry: hotel, restaurant, souvenir shop tourism, spa, conference holding related-business (MICE) 3.2 Other services : information Technology, software (digital content), business consulting, health and beauty, construction design, logistics, education, entertainment 1. Manufacturing 2. Trading 3. Service 4. Regional and local Link

40 X. Implications on Business Potential Geographic complementarities Geographic complementarities - Russia: as gateway to the Commonwealth Independent States -Thailand: as a gateway to Southeast Asia and southern China Russias abundant source of raw material Russias abundant source of raw material - Thailand can import from Russia or penetrate the Russian market by direct investment in Russia (in forestry, jewelry, furniture and paper industry) and export to third countries Rapid infrastructure development and expansion of service sector in Russia: Rapid infrastructure development and expansion of service sector in Russia: - vast potential for Thai business which include spa and beauty, interior design, restaurant, and hotel

41 XI. Proposed Framework of Thai-Russian SMEs Cooperation Expansion of business matching to increase joint investment Expansion of business matching to increase joint investment Joint cooperation between private sectors, particularly chambers of commerce, in the following sectors: Joint cooperation between private sectors, particularly chambers of commerce, in the following sectors: energy sector energy sector metal industry metal industry natural rubber manufacture natural rubber manufacture jewelry industry jewelry industry tourism tourism Exchange of SMEs development policy through seminar/s conferences, study-visit, and training Exchange of SMEs development policy through seminar/s conferences, study-visit, and training Establishment of Russian-Thai Business Council (under ongoing process) Establishment of Russian-Thai Business Council (under ongoing process) Establishment of SMEs exhibition or pavilion to expand business partnership Establishment of SMEs exhibition or pavilion to expand business partnership

42 THANK YOU FOR YOUR KIND ATTENTION SAWASDEE KA!

43 Appendices: Other OSMEPs project for SMEs development

44 SMEs University SME University is consisting of: 1.E-SMEs University 2.Practical Curriculums through the University and College in Thailand 7

45 E-SMEs University Various Subject- E SME University 1.Entrepreneurships concept for strat-up SMEs 2. Introduction for Marketing 3. Introduction for SMEs Financial 4. SMEs Management for sustainable 5. Business Creativity & Innovation for SMEs 6. ICT & E-commerce for SMEs 7. Production Management & Service Businesses for SMEs 8. Business Strategy & Trend / Opportunity for SMEs 9. Advance Marketing for SMEs 10. Accounting and Financial Management for SMEs 11. Corporate Governance 12. Business Plan OSMEPAssumption U. 8

46 Financial Management General Management Sale & Marketing Management Manufacturing Management - Considering a start up company - Real case study - According to local smart businesses - Practical & OJT - Time & Situation - Law & Regulation Innovation Management New Technology Venture SME UNIVERSITY SMEs University Curriculum Model 9 Major 70: Practice 30

47 C) OSMEP E-Projects / Business Startup Business Improvement Business Expansion Business Maturity Virtual Coach E Mentor Digital Universit y E Biz Net E Market Place E Innovation Business Setup Coaching & Franchise Simulation E- Mentoring & Consulting E-Self Learning Tools E-Marketing Information Service Online Catalog Service R&D Information and SME- Researcher Matching 11

48 Virtual Coach Main Page Digital University Virtual Coach E BizNet E InnoMarket OSMEP e-Projects / 12

49 Warning System for Investment and SMEs Corners 1.Type of SMEs 2.Characteristics of Sector 3.Assets per Sector 4.Liabilities per Sector 5.Revenues per Sector 6.Total Sales per Sector 7.ROI per Sector 8.Economic Value Added per Sector 9.Financial Ratio per Sector 10.Export and Import per Sector 11.Employment Rates per Sector 12.No. of SMEs per Sector 13

50 Warning System for Investment and SMEs Corners SMEs Supply and Value ChainSMEs Export and Import Positioning SMEs Financial Situation PositioningSMEs Financial Health Positioning 14

51 Warning System for Investment and SMEs Corners Payab University Siam University Rangsit University Christian University and 4 more each year 15

52 SMEs Tool Kit Business Manual for start-up SMEs Marketing/ Sales/ Accounting/ HR/ Production/ Services/ ICT/ Sufficiency Economy including Good Governance Practical Guideline for SMEs and able to apply for own business which makes SMEs confident to run business. Interactive E-Book & Lesson Learn from selected SMEs entrepreneurs 16


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