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SMALL BUSINESS
VICHAYA PITSUWAN
The number of small businesses closures in the first five months of this year was 10% higher than in the same period last year, reflecting the poor economy, production cost increases, inflation and reduced consumer purchasing power. From January to May this year, 18,795 new SMEs were established while 5,448 closed _ 10% higher than in the first five months of 2007, according to figures released yesterday by the Office of Small and Medium Enterprises Promotion (Osmep).
''The figure makes clear that the current situation concerning oil prices and politics is too hard for these SMEs to handle,'' said Pak Tongsom, the Osmep deputy director.
The office is conducting a study on the proportional production cost increase in each industry as a result of more expensive crude.
Osmep warned that leather, glass, ceramics, furniture, gems and toys were the most worrying sectors that had underperformed and would be strongly affected by low domestic spending.
''SMEs in these sectors are likely to be the hardest-hit by the production cost increase,'' Mr Pak said.
In the service sector, spas, hotels and sporting services are also expected to be affected by fewer tourist arrivals and lower domestic spending, while the construction and real estate sectors would be affected by interest rate escalation.
However, Osmep hopes that SMEs for the export market would hold up better than other sectors.
Export values of SMEs are expected to hit 1.7 trillion baht this year, or 10% growth year-on-year. Last year, SME export values grew 10.8% to 1.5 trillion baht.The weakening baht should help the export sector, but higher production costs have reduced their profit margins from 6% last year to 3% this year.
Currently, Thailand has about 20,000 SME operators for the export market, representing about 90% of all exporters. These SMEs contribute 20% to total export value.
The Industry Ministry introduced some measures earlier this month to help SMEs deal with higher production and fuel costs.
''SMEs are not able to deal with higher production costs, and this is a concern,'' said Pramote Vittayasook, the director-general of the Industrial Promotion Department. ''The cost-saving projects would include energy-saving consultancy, cost and price management and operation support with the use of technology and IT to improve productivity.''
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