How SMEs stand on world's tourism map

The importance of small and medium-sized enterprises to the Thai tourism industry is cited in a report issued by the Paris-based Organisation of Economic Cooperation and Development on April 19. The reference is the only one to "tourism" in the entire report, Financing SMEs and Entrepreneurs 2012 - An OECD Scoreboard.

Although the tourism industry is excessively obsessed with the role of global brands or major multinational corporations, its real job-creating and economic-development prowess is primarily in the hands of the SMEs.

Because they lack proper organisation and representation, and hence do not have much of a "voice" in international travel forums, SMEs tend to be ignored by national and regional public sector policymakers, until crises strike.

As such crises, both man-made and acts of God, are growing in frequency, their impact on the SMEs has now become the subject of research and study in order to help formulate policies that will alleviate their impact.

SMEs are the bedrock of the Thai tourism industry, one of the country's major foreign exchange earning industries.

They range from inns, lodges and boutique hotels to sellers of herbal products, providers of traditional Thai massage services to the Otop shops which are now being increasingly used by tour operators in lieu of the scam-plagued fake jewellery rackets.

They also play equally significant roles in other industries such as agriculture, information technology, the automotive sector, and many more.

The OECD report is the first edition of what is described as an important step in filling the information gap on SME finance.

Writing in the foreword, OECD secretary general Angel Gurria, says the report provides an original framework to monitor trends in SMEs and entrepreneurs access to finance at the country level and internationally and a tool to support the formulation and evaluation of policies.

According to the report, "SMEs are important engines of growth, jobs and social cohesion. However, the creation, survival and growth of SMEs is often hampered by access to finance, a challenge that is at the core of this scoreboard on financing SMEs and entrepreneurs.

"The global crisis has exacerbated the financing constraints on SMEs. They have suffered a double shock: a drastic drop in the demand for the goods and services they provide and a credit crunch. These events have had a severe effect on SMEs cash flows and liquidity, forcing many into bankruptcy and contributing to record levels of unemployment in many OECD countries.

"Since the onset of the crisis, governments have responded with a number of different measures to support sales, prevent the depletion of SMEs working capital and enhance access to credit for SMEs."

Noting that the importance of SME finance is now widely recognised, the report says at the Pittsburgh Summit in 2009, G20 leaders acknowledged that access to finance provides growth opportunities for businesses and the economy as a whole.

"Financial inclusion is a pillar of the G20 multi-year action plan on development, and the G20 global platform for financial inclusion (GPFI) was launched in Korea in December 2010. The need to address the financing hurdles to SME growth was also underlined by G8 Leaders at the 2011 Deauville Summit."

The need of the hour to drive policymaking is quality data. Says the OECD report, "Better data can improve our understanding of business financing needs and provide a sound basis for informed policy discussions, as well as giving the suppliers of finance a more comprehensive assessment of their clients needs that enables them to design better products and services."

Hence, the OECD report provides what it claims is an original framework to monitor trends in SMEs and entrepreneurs access to finance at the country level and internationally and a tool to support the formulation and evaluation of policies.

As country coverage expands and progress is made on methodological issues, this OECD Scoreboard is expected to become an international reference for monitoring developments and trends in SME finance, it says.

The section on Thailand highlights the five-year portfolio guarantee scheme for SMEs set up by the Thai government in February 2008 and cites the role of the Small Business Credit Guarantee Corporation (SBCGC) in providing much-needed credit guarantees to viable small businesses which do not have sufficient collateral, with tourism SMEs being one of the beneficiaries.

Says the report, "This facility was fully utilised in 2009 but was expected to be increased in the future. This will accommodate the recovery in demand from SMEs in the export and tourism sectors. The SBCGC offers guarantees worth 2 million baht each and can assist a total of 15,000 SMEs. By the end of 2009, 21.4 billion baht in SME loans were government guaranteed.

"When taking into account the supply chain, where each SME may employ an estimated 20 workers, this scheme might have helped save 300,000 jobs," the OECD report says.

Imtiaz Muqbil is Executive Editor of Travel Impact Newswire at www.travel-impact-newswire.com. Twitter: @travelimpact