Small and medium enterprises (SMEs) are vital to the nation's economy. Yet, concerted strategies to fortify them remain abstract.
SMEs need state support. Not because they are weak but quite the opposite.
With over 3.1 million SMEs accounting for over 35% of gross domestic product in 2023, they are a significant force in the country's economy. Strengthening them only makes Thailand's economy stronger.
Despite their importance to the national economy, the challenge of designing effective measures to support SMEs persists.
To be fair, the government has at least 32 schemes to support SMEs in 2023. However, their effectiveness remains questionable due to a lack of assessment.
To determine what works and what SMEs need from state assistance, the Thailand Development Research Institute (TDRI) assessed two key SME promotion measures in 2023 for policy recommendations.
One is the "Shop Dee Mee Khuen" (Shop and Get Rebates) programme from the Revenue Department. The other is the investment promotion scheme for SMEs from the Board of Investment (BOI). Both exemplify the government's policy landscape, which affects the performance of SMEs and provides policy recommendations for more effective and targeted measures.
Aiming to stimulate consumption, the tax incentive measure "Shop Dee Mee Khuen" allowed taxpayers to use receipts from purchases made between Jan 1 and Feb 15, 2023, for tax deductions. For the first time, both paper and electronic receipts were eligible for tax deduction.
In just six weeks, nearly 30 billion baht was spent under this scheme, highlighting its success in boosting consumer spending. Meanwhile, over 65% of registered SMEs opted for electronic receipts, showing their positive response to the policy encouraging participation in the electronic tax system.
Yet, improvements can be made in at least two areas. First and foremost, simplify the process for starting SMEs to reduce red tape and ease accounting barriers for small businesses. This can be done by promoting private service providers to set up necessary systems for SMEs and their related subsidies, which are currently managed by the Office of Small and Medium Enterprises Promotion.
Next, signals of continued benefits and incentives for SMEs to remain in the tax system should be increased. For example, short-term measures like the Shop Dee Mee Khuen scheme and long-term initiatives like the Secondary City Travel programme, which benefits hotels and other businesses that issue electronic receipts. Effective communication with SMEs about business targets during the transition period is also essential to help them adjust to stricter regulations in the future.
In contrast to the tax deduction scheme, the BOI initiative to enhance competitiveness has even failed to attract most typical small SMEs.
Although the programme targeting SMEs has been ongoing since 2003, most SMEs find it challenging to participate at every stage, from accessing information to meeting the programme criteria.
Since this BOI programme targets businesses with advanced technology, innovations, and high contributions to the value chain, the majority of SMEs consider it irrelevant to their capabilities and needs.
In addition, the project proposal process is complicated, and strict accounting and tax system requirements exceed the capabilities of most SMEs.
As a result, SMEs' investment under BOI promotion accounted for only 4% of the total investment promotion value in 2023, amounting to only 36 billion baht.
At least two areas need an extra push for more SMEs to benefit from this BOI investment promotion scheme.
First, the government needs to boost SMEs' capabilities by integrating them with intermediary organisations such as the National Innovation Agency (NIA) and the Department of Industrial Promotion, which can incubate them, particularly in technology and innovations.
The BOI can also collaborate with the trainers to assist SMEs with innovation development and project application procedures. When ready, the intermediary agencies can help SMEs issue certifications and endorsements to apply for BOI support. This preparation helps SMEs grow and become ready for the next step while significantly simplifying the project application process.
Another channel is for SMEs to apply directly to the BOI but with assistance from the BOI and the Office of Small and Medium Enterprises Promotion to navigate the complex application process. Additionally, within both channels, the BOI should consider adjusting procedures and regulations to better suit SMEs' conditions.
To effectively nurture small and medium businesses under the country's limited resources, the government should set priorities to focus BOI support for entrepreneurs in key industries. This strategy should be complemented by proactive publicity and in-depth data collection and evaluation to ensure a positive response from consumers.
Importantly, when designing policies to support SMEs, the government should recognise their diversity. No single policy can answer all their different needs. Therefore, support measures should be varied and comprehensive to meet the needs of every group.
For example, BOI measures might suit SMEs aiming for growth, innovation, and international expansion, while the "Shop Dee Mee Khuen" measures are suitable for those needing to transition into digital and tax systems.
Besides these groups, most SMEs, however, focus on maintaining the business for subsistence and may only need occasional economic stimulation packages to boost sales. Further study is needed, however, to ensure that most of the money in the economic stimulus funds goes directly to SMEs.
Under this complexity, how can the government design effective policy support for SMEs? The answer ultimately lies in identifying the target groups. Once identified, the government can explore their challenges and find -- or design -- state mechanisms to assist them with ongoing tools to evaluate the results for further improvements.
Meanwhile, SMEs themselves should be proactive in business development and leverage opportunities specifically tailored to boost their growth.
The challenge of designing effective SME policies is ongoing, but with targeted support and streamlined processes, the synergy between state policy and entrepreneurial spirits will ultimately create a supportive environment for SMEs to thrive and thus become foundations for boosting Thailand's economic growth.
Chakorn Loetnithat is a Senior Researcher and Warawich Potranandana is a Researcher at TDRI. Policy analyses from the TDRI appear in the Bangkok Post on alternate Wednesdays. *This article is summarised based on findings from the 'Project of compilation of government policies and benefits for promoting MSME'.