Part. Situation and Economic Indicators of SMEs in 2012 and 2013

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1 Part 01 Situation and Economic Indicators of SMEs in 2012 and 2013

2 Chapter 1 + Gross Domestic Product of SMEs

3 1 Gross Domestic Product of SMEs The overall gross domestic product (GDP) of 2012 expanded 6.5%, a more substantial increase compared to that of merely 0.1% in the previous year. Although the Thai economy has recovered from the previous flooding, it still is being affected by the global economic slowdown. With an increase by 835,903.0 million baht from the previous year, 2012 GDP s value stood at 11,375,349.0 million baht, of which 12.3% (1,395,743.0 million baht) was attributable to agricultural GDP. Agricultural performance in 2012 was considered a fall compared to the previous year. As regards non-agricultural GDP, this was worth 9,979,606.0 million baht or 87.7% of the total GDP, a 6.7% increase compared to the previous year which showed a contraction of 0.3%. The GDP value of small and medium enterprises (SMEs) in 2012 was 4,211,262.7 million baht or 37% of the country s GDP whereby the GDP value of SMEs expanded 6.6%, an increase from the 0.6% rise in the year earlier. When considering GDP value according to the size of the enterprise, it was found that small enterprises (SEs) contributed more to the GDP than medium enterprises (MEs) with the GDP value of SEs in 2012 standing at 2,824,898.2 million baht, an increase of 6.5% from the previous year and at a proportion equivalent to 24.8% of the total GDP. Regarding the GDP value of MEs in 2012, this totalled 1,386,364.5 million baht, a 6.8% rise from the previous year, equivalent to 12.2% of the overall GDP. Office of Small and Medium Enterprises Promotion 3

4 Executive Summary Figure 1.1 Structure of Gross Domestic Product (GDP) in % 4.5% Agricultural Sector Non-Agricultural Sector 87.7% 37.0% 46.2% LEs SMEs Others Source : The Office of the National Economic and Social Development Board Compiled by The Office of Small and Medium Enterprises Promotion (OSMEP) Figure 1.2 Trend of the Proportion of SMEs GDP and the Growth Rate of GDP Based on the Size of the Enterprises from Proportion of Overall GDP of SMEs (%) (5.0) Proportion of SMEs GDP and the Growth Rate of GDP Based on the Size of the Enterprises from (2.0) (4.0) SMEs Country LEs SMEs Growth Rate (%) Source : The Office of the National Economic and Social Development Board Compiled by The Office of Small and Medium Enterprises Promotion (OSMEP) 4 Executive Summary White Paper on Small and Medium Enterprises of Thailand in 2013

5 As concerns the trend of the proportion of SMEs contribution to the country s overall GDP since 2008, the role of SMEs has continuously decreased whereas the role of large enterprises (LEs) and other enterprises has tended to remain stable or show a slight increase. Meanwhile, the agricultural sector has seen continuous growth especially over the last three years owing to the unceasing increase in demand for agricultural products in the world market. When considering the growth rate of enterprises of different sizes, SMEs still held their ground in 2012 as the engine of growth in the economic system of the country as shown by the higher growth rate of SMEs compared to that of the country and LEs. Figure 1.3 GDP Structure of the Country Categorized by Economic Activity from Percentage Mining Manufacturing Construction Trade and Maintenance Service Electricity, Gas and Water Supply Source : The Office of the National Economic and Social Development Board Compiled by The Office of Small and Medium Enterprises Promotion (OSMEP) Office of Small and Medium Enterprises Promotion 5

6 Executive Summary The GDP structure of the country as categorized by economic activity shows that the agricultural sector constituted 12.3% while the non-agricultural sector constituted 87.7%. A breakdown of the GDP structure of the non-agricultural sector reveals that the manufacturing sector made the most significant contribution to the economic system at 34.0% of the total GDP. Second was the service sector with 31.3%, followed by the trade and maintenance sector with 12.9%. The combined worth of these three economic activities totalled 78.2% of the overall GDP. Figure 1.4 GDP Structure of SMEs Categorized by Economic Activity from Percentage Mining Manufacturing Construction Trade and Maintenance Service Electricity, Gas and Water Supply Source : The Office of the National Economic and Social Development Board Compiled by The Office of Small and Medium Enterprises Promotion (OSMEP) 6 Executive Summary White Paper on Small and Medium Enterprises of Thailand in 2013

7 The GDP structure of SMEs in 2012 was still greatly related to the service, manufacturing, and trade and maintenance sectors. The service sector was the most important economic activity with 33.3% of the GDP, an expansion of 7.2%. Second was the manufacturing sector with 30.9%, however, in 2011 it shrank 4.3% compared to The third sector was trade and maintenance with 27.7%, an expansion rate of 5.2%. When comparing Figure 1.4, which shows the GDP structure of SMEs, to Figure 1.3, which presents the GDP structure of the country, it is found that the GDP structure of the country and that of SMEs are different. Concerning the country s GDP, the manufacturing sector was the most significant economic activity. However, as for the GDP of SMEs, the service sector was the most important. Nonetheless, in 2012, the country s economy grew more substantially when compared to the previous year. This is because domestic demand, both in terms of consumption and investment by the private sector, has been supported by the government s policies such as the increase in daily wage and the salary of civil servants. Added to this are the rice pledging scheme, first car scheme, first house scheme, and gradual reduction of corporate income tax. This, partly, encourages domestic expenditure while consumption and investment by the government sector insert their roles in supporting economic expansion. However, the export sector has experienced a slowdown due to the impact of the slowdown of the world economy coupled with a sluggish recovery in the industrial manufacturing sector for exports in certain fields. Office of Small and Medium Enterprises Promotion 7

8 Executive Summary Chapter 2 + International Trade of SMEs 8 Executive Summary White Paper on Small and Medium Enterprises of Thailand in 2013

9 2 International Trade of SMEs In 2012, the total export value of Thai goods were 7,091, million baht, equivalent to an increase of 5.71% from the year SMEs exports reached 2,043, million baht, accounting for 28.82% of the total export value, an increase of 3.67%. As regards imports, the total import value stood at 7,734, million baht, increasing from 2011 by 10.86%. SMEs imports were worth 2,466, million baht, accounting for 31.90% of the total import value, an increase of 3.52%. In 2012, as concerns international trade, the country s balance of trade showed a deficit worth 643, million baht. However, the trade balance of SMEs showed a deficit accounting for 423, million baht. Office of Small and Medium Enterprises Promotion 9

10 Executive Summary Table 2.1 The Export and Import Value from 2008 to 2012 Categorized by the Size of the Enterprises (Unit : Million Baht) Export (million baht) SE ME LE na. SMEs Total Import (million baht) SE ME LE na. SMEs Total , , ,042, , ,691, ,853, ,084, , ,985, , ,771, ,944, Trade Balance (million baht) SMEs Total - 80, , , , ,442, , ,563, ,194, , , ,963, , ,383, ,601, , , ,019, , ,359, , ,669, ,113, ,124, , ,761, , ,810, ,837, , , ,224, , ,643, , ,971, ,707, ,464, , ,290, , ,383, ,976, , , ,315, , ,878, , ,043, ,091, ,525, , ,895, , ,466, ,734, , , Proportion/ Total (2012, %) Growth 12/11 (%) Source : Thai Customs Department Compiled by The Office of Small and Medium Enterprises Promotion (OSMEP) Regarding the proportion of exports to overall GDP displayed in Table 2.2, the economy of the country depended greatly on exports as export value constituted 62.34% of the country s GDP in SMEs export value accounted for 48.53% of GDP, a drop from 51.07% in 2011, however. SMEs export value accounted for 28.82% of the overall exports of the country. 10 Executive Summary White Paper on Small and Medium Enterprises of Thailand in 2013

11 Table 2.2 Ratio of SMEs Exports to International Trade of Thailand and GDP Total Export (million baht) SMEs Export (million baht) Overall GDP at Annual Price (million baht) GDP of SMEs at Annual Price (million baht) Ratio of SME Exports to Overall Exports (%) Ratio of Overall Exports to Overall GDP (%) Ratio of SME Exports to GDP of SMEs (%) ,853, ,691, ,075, ,457, ,194, ,563, ,050, ,417, ,113, ,669, ,104, ,747, ,707, ,971, ,539, ,859, ,091, ,043, ,375, ,211, Source : Thai Customs Department / The Office of the National Economic and Social Development Board Compiled by The Office of Small and Medium Enterprises Promotion (OSMEP) The total number of exporting enterprises of the country in 2012 reached 39,869. Of this number, 22,095 were SMEs, a decrease of 1,834 exporters from As regards imports in 2012, the total number of importing enterprises was 80,426. Of this number, 37,260 were SMEs, a drop of 5,059 importing enterprises in total from Table 2.3 The Number of Exporting and Importing Enterprises from 2010 to 2012 Based on the Size of the Enterprises (Unit : Person/Enterprise) Number of Exporting Enterprises (person/enterprise) SE ME LE na. SMEs Total Increase/Decrease 19,406 2,704 2,155 12,860 22,110 37,125 Number of Importing Enterprises (person/enterprise) SE ME LE na. SMEs Total 33,220 3,327 2,560 30,717 36,547 69,824 21,157 2,772 2,178 11,721 23,929 37,828 38,787 3,532 2,655 28,825 42,319 73,799 19,399 2,696 2,180 15,594 22,095 39,869 33,912 3,348 2,552 40,614 37,260 80,426-1, ,873-1,834 2,041-4, ,789-5,059 6,627 Source : Thai Customs Department Compiled by The Office of Small and Medium Enterprises Promotion (OSMEP) Office of Small and Medium Enterprises Promotion 11

12 Executive Summary International Trade Situation of SMEs in Key Trade Partner Countries The overall SMEs exports to the top 20 trade partner countries with an export ratio of 80.43% of the total exports expanded 5.51% while the overall exports of the country to the top 20 trade partner countries rose 6.67%. Regarding export markets, the major destinations of Thai exports, including the overall exports of the country and the overall SMEs exports, were China, Japan and the United States with export ratios of %, %, and 9.93 % of the total export value in 2012 respectively. For SMEs, the export ratios were 11.08%, 9.99%, and 8.16% respectively, with a growth of 2.25% in the Chinese market. Nonetheless, in Japan and the United States, the exports declined 1.56% and 1.76% respectively. In 2012, the market with the highest growth in exports for SMEs was Australia, experiencing a rise of 31.49%. Second to Australia was Cambodia with an increase of 26.25%, followed by Laos with an increase of 24.39%. The export markets of SMEs experiencing the largest decrease were Singapore, with a 12.25% fall, the United Kingdom with a 9.56% decrease, and Germany with a 9.48% decline. In 2012, it was clear that the ASEAN market was the key trade partner of Thai SMEs with an increase in exports in several countries. As concerns the major markets of SMEs such as Japan and the United States, the exports slightly dropped whereas in the EU market, particularly the United Kingdom and Germany, exports fell at a reasonable level. Overall imports of SMEs from the 20 top-ranked countries with an import ratio of 89.72% of the total imports expanded 4.71% while overall imports of the country from the top 20 countries increased 11.22%. When considering import markets, the main import sources for Thailand were Japan, China, and Malaysia with import ratios of 20.03%, 14.94% and 5.30% of the total import value in 2012 respectively. The main sources for SMEs were China, Japan, and Switzerland with import ratios of 21.61%, 16.96% and 7.85% respectively and an expansion of 17.94% and 11.52% respectively. As for Switzerland, imports declined 13.14%. 12 Executive Summary White Paper on Small and Medium Enterprises of Thailand in 2013

13 Table 2.4 Export Value to the Top 20 Countries from 2010 to 2012 (Unit : Million Baht) Ratio/Total (2012, %) Growth 12/11 (%) Office of Small and Medium Enterprises Promotion 13 No Destination CHINA JAPAN UNITED STATES HONG KONG SWITZERLAND INDONESIA MALAYSIA AUSTRALIA VIETNAM MYANMAR CAMBODIA LAO REPUBLIC SINGAPORE KOREA,REPUBLIC INDIA UNITED KINGDOM GERMANY TAIWAN UNITED ARAB EMIRATES PHILIPPINES Total of Top 20 Countries Ratio/Total Total Source : Thai Customs Department Compiled by The Office of Small and Medium Enterprises Promotion (OSMEP) SMEs Total SMEs Total SMEs Total SMEs Total SMEs Total 160, , , , , , , , , , , , , , , , , , , , ,328, ,669, , , , , , , , , , , , , , , , , , , , , ,804, ,113, , , , , , , , , , , , , , , , , , , , , ,557, ,971, , , , , , , , , , , , , , , , , , , , , ,260, ,707, , , , , , , , , , , , , , , , , , , , , ,643, ,043, , , , , , , , , , , , , , , , , , , , , ,611, ,091,

14 14 Table 2.5 Import Value from the Top 20 Countries from 2010 to 2012 (Unit : Million Baht) Executive Summary White Paper on Small and Medium Enterprises of Thailand in 2013 No Import Country CHINA JAPAN SWITZERLAND UNITED STATES MALAYSIA KOREA,REPUBLIC TAIWAN GERMANY INDONESIA SINGAPORE AUSTRALIA INDIA SOUTH AFRICA HONG KONG ITALY VIETNAM UNITED KINGDOM FRANCE PHILIPPINES BELGIUM Total of Top 20 Countries Ratio/ Total (%) Total Ratio/Total (2012, %) Growth 12/11 (%) SMEs Total SMEs Total SMEs Total SMEs Total SMEs Total 345, , , , , , , , , , , , , , , , , , , , ,603, ,810, , ,211, , , , , , , , , , , , , , , , , , , ,477, ,837, , , , , , , , , , , , , , , , , , , , , ,113, ,383, , ,287, , , , , , , , , , , , , , , , , , , ,222, ,976, , , , , , , , , , , , , , , , , , , , , ,213, ,466, ,153, ,549, , , , , , , , , , , , , , , , , , , ,808, ,734, Executive Summary Source : Thai Customs Department Compiled by The Office of Small and Medium Enterprises Promotion (OSMEP)

15 Overview of International Trade Classified by Goods List As concerns the international trade value of goods according to the Harmonized System Codes, in 2012 the worth of Thailand s overall exports was highest for those goods in HS Codes 84, 85 and 87, equivalent to 16.18%, 12.61% and 10.58% of the overall exports of the country respectively. HS Code 84 covers machinery and parts as well as computers and accessories while HS Code 85 covers electrical machinery and parts, and HS Code 87 covers automobiles and parts. The proportion of SMEs export value for goods in HS Codes 84, 85 and 87 stood at 6.27%, 4.44% and 2.47% respectively. Goods constituting the highest proportions of exports for SMEs were those in HS Code 71 covering gems and ornaments, HS Code 39 for plastics and plastic-made articles, and HS Code 40 for rubber and rubber articles, accounting for 16.16%, 8.72% and 7.33% respectively. The exports for the first two categories expanded 14.62%, 4.67% from As regards rubber and rubber articles, exports decreased 13.12%. Regarding the import value of goods according to the Harmonized System Codes, in 2012 the worth of the country s overall imports was highest for those goods in HS Code 27 covering petroleum and coal, with the import proportion of 19.34%. Second was HS Code 85 covering electrical machinery and parts, constituting 15.65%. Third was HS Code 84 covering machinery and parts as well as computers and accessories, accounting for 14.52%. As for SMEs, goods constituting the highest proportion of imports were those in HS Code 71, gems and ornaments, HS Code 84, machinery and parts as well as computers and accessories, and HS Code 85, electrical machinery and parts, to the proportions of 16.07%, 15.25% and 12.61% respectively. The import of gems and ornaments declined 30.45% from In contrast, imports of machinery and parts as well as computers and accessories, and electrical machinery and parts expanded 22.46% and 10.99% respectively. Office of Small and Medium Enterprises Promotion 15

16 16 Executive Summary White Paper on Small and Medium Enterprises of Thailand in 2013 Table 2.6 Export Value Classified by the Harmonized System Codes (Unit : Million Baht) HS Export Goods Gems and ornaments Plastic and plastic-made articles Rubbers and rubber articles Machinery and parts, and computers and accessories Sugar and sugary snacks Electrical machinery and parts Grains Articles made from iron or steel Seasoning made from meat, fish or aquatic animals Automobiles and parts Total Value of Top 10 Items Total Export Value Ratio to Total (2012, %) Growth 12/11 (%) SMEs Total SMEs Total SMEs Total SMEs Total SMEs Total 273, , , , , , , , , , , ,669, , , , ,063, , , , , , , ,232, ,113, , , , , , , , , , , ,204, ,971, , , , ,036, , , , , , , ,519, ,707, , , , , , , , , , , ,244, ,043, , , , ,147, , , , , , , ,756, ,091, Executive Summary Source : Thai Customs Department Compiled by The Office of Small and Medium Enterprises Promotion (OSMEP)

17 Table 2.7 Import Value Classified by the Harmonized System Codes (Unit : Million Baht) Office of Small and Medium Enterprises Promotion HS Import Goods Gems and ornaments Machinery and parts, and computers and accessories Electrical machinery and parts Plastic and plastic-made articles Iron and steel Articles made from iron or steel Automobiles and parts Optic equipments Organic chemical supplies Fertilizer Total Value of Top 10 Items Total Import Value Source : Thai Customs Department Compiled by The Office of Small and Medium Enterprises Promotion (OSMEP) SMEs Total SMEs Total SMEs Total SMEs Total SMEs Total 286, , , , , , , , , , ,174, ,810, , , ,053, , , , , , , , ,516, ,837, , , , , , , , , , , ,652, ,383, , , ,071, , , , , , , , ,042, ,976, , , , , , , , , , , ,656, ,466, , ,123, ,210, , , , , , , , ,509, ,734, Ratio to Total (2012, %) Growth 12/11 (%)

18 Executive Summary Chapter 3 + Economic Indicators of SMEs 18 Executive Summary White Paper on Small and Medium Enterprises of Thailand in 2013

19 3 Economic Indicators of SMEs 3.1 Private Consumption The Private Consumption Index (PCI) addressed consumption in Thailand in This fluctuated, reaching its highest point in September However, the overall trend was downward. During the first quarter of 2013 in March 2013, the Private Consumption Index (PCI) expanded 1.4% when compared to the same period the year before. However, the PCI decelerated from the previous month with a contraction of 1.1% after a considerable rise in the period before. Overall, private consumption in 2012 rose from the previous year due to the expenditure entailed in the recovery from damage caused by flooding. This was coupled with expenditure on automobiles at a high rate, partly due to the tax rebate measure for first-time car buyers. As for the upcoming period, private consumption is expected to rise continuously boosted by satisfactory income and household employment resulting in greater consumer confidence and purchasing behavior. This is coupled with the stimulus from government measures such as the reduction of income tax and the second increase in the minimum wage. Furthermore, relaxed financial conditions are helping encourage greater purchasing and consumption. As concerns the minor components of the PCI in March 2013, they decelerated in accordance with value added tax collection and the lower import of consumer goods, especially in the category of durable goods such as electrical appliances and furniture. Nonetheless, expenditure on automobiles expanded at a healthy rate as evidenced by the handling of automobiles as ordered and the prompt marketing of entrepreneurs. Office of Small and Medium Enterprises Promotion 19

20 Executive Summary Thai Industries Sentiment Index (TISI) Figure 3.1 Thai Industries Sentiment Index regarding the overall number of orders between January 2012 and March Overall Number of Orders Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 Jul 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13 Feb 13 Mar 13 Current Month Next 3 Months Source : The Federation of Thai Industries Compiled by The Office of Small and Medium Enterprises Promotion (OSMEP) The Thai Industries Sentiment Index (TISI) for the overall number of orders between January 2012 and March 2013 reflected the strong confidence of the industry operators. Despite experiencing a slight decline, the TISI value was higher than the base value of 100 for 12 of the past 15 months. It was only in September 2012, October 2012, and March 2013 that the index was under this base value. The index of the overall number of orders was similar to the index of overall sales volume in level, direction and trend. Indeed, these two components of the index were very closely related. In March 2013, the index of the overall number of orders dropped from the previous month in terms of international orders. Meanwhile, the index of overall sales volume decreased from last month in terms of national sales volume. 20 Executive Summary White Paper on Small and Medium Enterprises of Thailand in 2013

21 The TISI for operating results indicated that the industry operators had less confidence, as shown by the industrial confidence index in operating results that continued to decrease from the beginning of the year 2012 reaching its lowest point in October After that, it continuously rose for two consecutive months before declining again up until March Such a trend was in accordance with the direction of the index regarding the overall number of orders and that of sales volume but was at a lower base value. As displayed in Figure 3.10, from February 2013 to March 2013, confidence in operating results, the overall number of orders and the overall sales volume took on very similar directions and trends. The confidence value was at the low level, reflecting the confidence as a whole of the industry operators who saw that the overall number of orders both in the domestic and international markets were falling. This was a result of the concern towards external economic factors which in turn had impact on operations. The increase in production cost was a major ongoing concern. The strength of the Thai baht and high cost of energy were also cases in point. At the same time, entrepreneurs had to designate a production plan in order to support a possible insufficiency of electricity when Burma stopped transporting natural gas to Thailand due to the maintenance of the gas field center platform in April. In addition, the droughts in the north and the northeast of Thailand had effect on agricultural produce. The problem of global economic recovery was one which also concerned operators during this period. Office of Small and Medium Enterprises Promotion 21

22 Executive Summary Figure 3.2 A Comparison of Indices regarding the Operating Results, the Overall Number of Orders, and the Overall Sales Volume between January 2012 and March A Comparison of Indices regarding the Operating Results, the Overall Number of Orders, and the Overall Sales Volume Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 Jul 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13 Feb 13 Mar 13 Overall Number of Orders Overall Sales Volume Operating Results Source : The Federation of Thai Industries Compiled by The Office of Small and Medium Enterprises Promotion (OSMEP) 22 Executive Summary White Paper on Small and Medium Enterprises of Thailand in 2013

23 3.1.2 Trade and Service Sentiment Index (TSSI) Figure 3.3 Trade and Service Sentiment Index of Sales Volume from January 2012 to March Wholesale Sales Volume Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 Jul 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13 Feb 13 Mar 13 Current Month Next 3 Months Retail Sales Volume Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 Jul 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13 Feb 13 Mar 13 Current Month Next 3 Months Sales Volume of Service Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 Jul 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13 Feb 13 Mar 13 Current Month Next 3 Months Source : The Office of Small and Medium Enterprises Promotion (OSMEP) Office of Small and Medium Enterprises Promotion 23

24 Executive Summary The Trade and Service Sentiment Index (TSSI) between January 2012 and March 2013 indicated that the overall confidence was at a dissatisfactory level as the index was below the base level of 50. Only the index value of the service sector was mostly above 50. The trend and direction, however, improved from May 2012 when the index value was at the lowest point in 15 months and was on a continuous rise until December The positive factors for the year 2012 were the overall economic condition of the country following an upward movement during the fourth quarter of 2012; the situation as regards cost of living; and the overall economy being rather stable. The negative factors influencing confidence during the fourth quarter included concerns about the national political situation, the continuous increase in operating costs, and the highly unstable global economy. Nonetheless, during the first quarter of 2013, Profit sentiment index was on a continuous decline. This was because during the fourth quarter of 2012 operators had high confidence owing to the public and the operators belief that there would not be any floods, resulting in the index during the fourth quarter of 2012 being higher than usual. During the first quarter of 2013, therefore, the index fell even though the situation remained normal. Nevertheless, in March 2013, the index rose as Songkran Festival - a major celebration in Thailand - was drawing near. In 2013, the government announced the extension of the Songkran Holiday allowing people to go on holiday and return to their hometowns for longer periods. Overall tourist numbers were successively high and the overall situation of consumption was still expanding. According to Figure 3.4, from May to June 2012, the indices of overall sales volume and profits were at the lowest point due to the impact of the domestic economic situation, the highly unstable global economy, and the public s concern about the divisive political situation regarding the national action plan for social reconciliation. Moreover, operators were affected by the higher cost of energy especially oil, leading to operators facing higher costs. Since July 2012, however, the direction and trend of the index resumed a continuous increase until December 2012 but did experience a fall from January to February In March 2013, the index of the sales volume and 24 Executive Summary White Paper on Small and Medium Enterprises of Thailand in 2013

25 the profitability index (PI) began to rise owing to government stimulus such as consumption, the structure of public income, 300 baht minimum wage policy, a starting salary of 15,000 baht for civil servants with a bachelor s degree, and the agricultural product pledging policy to increase agricultural income. Office of Small and Medium Enterprises Promotion 25

26 Executive Summary Figure 3.4 A Comparison of Sentiment Index regarding Profitability and Sales Volume between January 2012 and March Confidence in Profits and Sales Volume of Wholesale Sector Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 Jul 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13 Feb 13 Mar 13 Profit Sales Volume Confidence in Profits and Sales Volume of Retail Sector Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 Jul 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13 Feb 13 Mar 13 Profit Sales Volume Confidence in Profits and Sales Volume of Service Sector Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 Jul 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13 Feb 13 Mar 13 Profit Sales Volume Source : The Office of Small and Medium Enterprises Promotion (OSMEP) 26 Executive Summary White Paper on Small and Medium Enterprises of Thailand in 2013

27 3.2 Private Investment The report on private investment takes into account a number of indicators to reflect the overall investments of Thailand in 2012 and the trends in These indicators are: In January 2012, the Private Investment Index (PII) went up by 6.43% from the previous month and slightly increased by 0.12% compared to the same period of the prior year. Improvement in private investment was brought about by the expansion of all investment indicators, except an expansion of the domestic sales volume of commercial automobiles that experienced a contraction of 29.16%, and the growth rate of the domestic sales volume of machinery and parts dropped by 13.86% compared to the same period of the previous year. This was a result of the impact caused by the continuous flooding from the end of 2011 until the beginning of From January to March 2013, the PII increased but less so compared to the same period of the prior year as during that period the value of the baht appreciated. Added to this was the government s 300 baht minimum wage policy that came into effect nationwide, resulting in a slowdown of investments. Overall in 2012, the Private Investment Index (PII) increased by 15.22% from last year. Improvement of PII was a result of the expansion of the import of capital goods, the domestic sales volume of machinery and parts, and the domestic sales volume of commercial cars. The domestic sales volume of commercial cars, in particular, expanded by 54.44% from last year owing to the government s first car scheme. Second was the import of capital goods with an increase of 23.31% due to the benefits derived from the strength of the Thai baht. Office of Small and Medium Enterprises Promotion 27

28 Executive Summary Manufacturing Production Index The Manufacturing Production Index (MPI), reflecting the production level of the industrial sector, is used to indicate the trends of the production of industrial goods. The index will rise when the economy expands and drop when the economy slows down. Figure 3.5 shows the changing rate of the Manufacturing Production Index (Value Added) of the overall level of the country and in the context of SMEs. It clearly indicates that the Manufacturing Production Index continued to grow but not by much, especially at the overall level of the country. Since January 2012, the changing rate moved upward. The index reached its highest point at in March and slightly decreased between the end of 2012 and the beginning of 2013 before rising to in March Having been affected by the slowdown of the overall global economy and the stronger Thai baht during the first quarter of 2013, the country s exports were impacted. In addition, the expenditure of the domestic private sector experienced a slowdown due to the rising costs of living. Figure 3.5 Overall Manufacturing Production Index and SMEs (Value Added) Overall Manufacturing Production Index and SMEs MPI (Value Added) MPI_SME (Value Added) Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 Jul 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13 Feb 13 Mar 13 Source : The Office of Industrial Economics Compiled by The Office of Small and Medium Enterprises Promotion (OSMEP) 28 Executive Summary White Paper on Small and Medium Enterprises of Thailand in 2013

29 The Rate of Capacity Utilization of Thailand had increased to over 60 % since February 2012, reaching its highest point at 69.18% in May 2012 and dropping to 63.51% in December 2012 before rising to 70.35% in March Nonetheless, the Capacity Utilization Rate of SMEs was reasonably lower than that of the rest of the country at between 42.62% and 51.07%. The capacity utilization rate of SMEs shared the same direction as that of the overall level of the country, particularly the major industries for which Thailand is the base of production for export such as automobiles, electricity and electronics and textiles. It was also a supporting factor for the expansion of the Capacity Utilization Rate. Moreover, it shared the same direction as the expansion of the global economy reflecting the strength of Thailand s industry sector. After the recovery of the global economy, Thailand was ready to take orders worldwide and was able to handle products in time, creating confidence among trade partner countries. Office of Small and Medium Enterprises Promotion 29

30 Executive Summary Figure 3.6 Investment Confidence Index from January 2012 to March Investment in the Wholesale Sector Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 Jul 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13 Feb 13 Mar 13 Current Month Next 3 Months Investment in the Retail Sector Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 Jul 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13 Feb 13 Mar 13 Current Month Next 3 Months Investment in the Service Sector Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 Jul 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13 Feb 13 Mar 13 Current Month Next 3 Months Source : The Office of Small and Medium Enterprises Promotion (OSMEP) Executive Summary White Paper on Small and Medium Enterprises of Thailand in 2013

31 Employment confidence is another index for investment trends indicating the economic condition and direction of the country s growth. In 2011, Thailand faced the impact arising from the severe flooding across the country, resulting in the laying off of a large number of laborers especially in the industry sector. This continued to the beginning of 2012 in April when the government announced that the minimum wage of 300 baht a day coming into effect in seven provinces allowing some laborers to be reemployed. The employment index in the retail and service sectors escalated to the level of 51.9 and 54.0 respectively. As for the transportation sector, the index slightly dropped from the previous month to the level of The TSSI for employment among trade and service operators at the beginning of 2013 showed a continuous decrease due to the 300 baht minimum wage policy and the starting salary of 15,000 baht for civil servants with a bachelor s degree that came into effect across the country. This resulted in rising labour costs leading to a slowdown in employment. The index regarding employment in the trade and service sectors in March fell to 51.4 and 51.6 respectively. The index for employment in the wholesale sector increased to the level of Nonetheless, the Thai workforce needs to adjust itself to be ready for entering into the ASEAN Economics Community (AEC) and the resulting trade liberalization allowing the free transfer of skilled labour among ASEAN countries. This will certainly have an impact on Thailand. 3.3 Foreign Direct Investment (FDI) To increase the economic competitiveness of Thailand in the current economic situation, and especially for developing countries and emerging-market economies, Foreign Direct Investment (FDI) is required to encourage the smooth operation of economic activities. During economic recession, FDI in Thailand becomes a significant tool for economic recovery as it enables more capital to flow into the country, promoting the liquidity of the country s money market as well as any Office of Small and Medium Enterprises Promotion 31

32 Executive Summary businesses beset with financial difficulties. FDI also encourages business expansion and new investments leading to greater employment. Additionally, it creates the transfer of technology, management knowledge, and product development to meet the quality standards needed to compete in the global market. The volume of Foreign Direct Investment in Thailand in times of economic normality can indicate the economic status of the country. When the country s economy grows, there are several positive factors supporting economic expansion. Foreign investors have greater confidence in making investments resulting in the greater flow of capital into the country. On the other hand, when the economy starts to slow down and takes a downturn, foreign investment decreases accordingly Net FDI in 2010, 2011 and 2012 Statistics from the Bank of Thailand demonstrated that net FDI in Thailand in 2012 was 267, million baht in total, increasing from 2011 by 30, million baht or a 12.80% rise. The country with the highest net FDI was Japan accounting for 107, million baht or 40.20% of the total investment value but with a lower growth rate from 2011 of 20.37%. Moving up to second highest was the United Kingdom with an increase in FDI of 18, million baht, or 9.16% of the total investment value, with a higher expansion rate than 2011 of %. Dropping to third was the United States with an increase in FDI of 9, million baht or 8.53%, with a higher growth rate from 2011 of 66.37%. 32 Executive Summary White Paper on Small and Medium Enterprises of Thailand in 2013

33 Table 3.1 Displaying comparison of net FDI in Thailand from 2010 to 2012 classified by the source of origin No Country Japan The United States Singapore China Netherland Malaysia Cayman Islands France Mauritius Luxemburg Others Value (million baht) 106, , , , , , , , , , , , Country Japan Cayman Islands Switzerland The United States Hong Kong Denmark China France Singapore Mauritius Others Value (million baht) 135, , , , , , , , , , , Others 237, Source : The Bank of Thailand at 30 April 2013 Compiled by The Office of Small and Medium Enterprises Promotion (OSMEP) Country Japan The United Kingdom The United States Hong Kong France Netherland Cayman Islands China Denmark Switzerland Total Total Total Value (million baht) 107, , , , , , , , , , , , Proportion of Overall Investment Value (%) Growth Rate (%) Y-O-Y When considering the FDI value by category, the manufacturing sector remained the category with the highest investment value of 164, million baht or 61.95% of the total net FDI value. The expansion rate increased by 25.58% from the prior year. Second was real estate activities with the value of 24, million baht or 9.00%. However, the growth rate dropped 28.87% from the year before. Third was the financial and insurance activities with the value of 24, million baht or 8.99% with the expansion rate dropping 41.09%. The industrial manufacturing sectors with the highest investment value were computers and electronics, chemical supplies, rubber and plastic, automobiles, and trailers and half-trailers respectively. Office of Small and Medium Enterprises Promotion 33