Up to 100,000 small and medium-sized enterprises (SMEs) could be forced to shut down within six months if the government fails to help them to cope with cash flow problems, the Federation of Thai Industries (FTI) warned yesterday.
Suphan Mongkulsuthee, the FTI’s new chairman, said the prolonged political turmoil has caused consumer spending to slow while the cost of living is on the rise. These factors have strongly affected SMEs, which account for a large portion of the industrial sector.
The FTI has asked the government to set a clear policy direction to help small entrepreneurs in tems of cash flow, he said.
Mr Suphan’s comment was made as the FTI’s Industries Sentiment Index (TISI) plunged to 84.7% in March — its lowest in 57 months.
"The index shows that SMEs are in crisis at the moment. If the political problem drags on, their cash flow problems will get worse and around 100,0000 will be forced to shut down, especially those in the retail sector," said Mr Suphan.
He said the FTI has negotiated with the caretaker government and financial institutes to distribute low-interest loans for SMEs to be used as working capital. It has also requested banks extend the debt payment period for another three to six months for both loan interest and principals.
However, the FTI expects the prolonged political strife will be eased as the Election Commission and the government have agreed on an election date. Negotiations between parties will pave the way for political stability and restore private sector confidence, he added.
According to the FTI, TISI in the SME sector dropped to 76.8% last month from 80.2% in February with the largest decline seen in the furniture, agricultural machinery and pharmaceutical sectors.
The index of medium-sized industry fell to 82.6% from 86.7% with cement, roofing and leather products sectors suffering the most. On the other hand, the TISI of large manufacturers rose to 95.4% from 90.5% with the manufacturers of air conditioners, refrigerators, electrical goods and electronics showing the highest increase.
The Office of Industrial Economics (OIE) yesterday released the monthly manufacturing production index (MPI), which dropped 7% year-on-year in the first quarter as a result of shrinking business confidence over the political strife. This month alone, the MPI contracted by 10.4%
Capacity utilisation averaged at 61.7% in the quarter with the manufacturing of automobiles, hard-disk drive, petroleum, home appliances as well as canned and frozen seafood showing the highest drops. Last month, capacity utilisation was 64.33%.