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close this bookNeeds and Characteristics of a Sample of Micro and Small Enterprises in Thailand - Working Paper N5 - Micro and Small Enterprise Development and Poverty Alleviation in Thailand - Project ILO/UNDP: THA/99/003 (ILO-ISEP - ILO - UNDP, 1999, 102 p.)
close this folder1.0 Background
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View the document1.1 An overview of problems and needs of MSEs

(introduction...)

Micro and small enterprises (MSEs) are increasingly seen as potential creators of new employment opportunities and additional incomes contributing to improved social and economic well-being, as well as to the alleviation of poverty. Together with the financial and economic crisis of 1997, this has prompted the Royal Thai Government (RTG) to review its policy for promoting and supporting small and medium-sized enterprises (SMEs) in Thailand. In this context the United Nations Development Programme (UNDP) has engaged the ILO in a project to provide Support Services for Policy and Programme Development (SPPD) in the field of Micro and Small Enterprise (MSE) Development in Thailand, in order to provide information and recommendations to the policy formulation of the Royal Thai Government (RTG), as well as to the programme development procedures of international organizations and the donor community.

The SPPD project includes a series of technical inputs prepared by the ILO. They are:

· Working Paper 1: Review of BDS assistance and activities of support agencies for MSE development;

· Working Paper 2: Review of international best practices in business development services (BDS) appropriate to MSE development in Thailand;

· Working Paper 3: Review of policy, legal and regulatory environment for MSE development;

· Working Paper 4: Review of financial support services for MSE development;

· Working Paper 5: Review of problems and needs of MSE operators as experienced at the local level in selected urban areas.

· Working Paper 6: Although not originally planned, a substantial amount of information was gathered in areas including the definitions of MSEs, and their contribution to employment and the national economy. Consequently, this information was put together as working paper 6.

This report, working paper 5 in the series, consists of a review of problems and needs of a number of Thai urban-based MSEs. It is based upon the result of a survey of MSEs made in Bangkok and urban Phetchaburi (a province 120 km. south-west of Bangkok), and carried out during April - June, 1999. Considering the vast experience of the ILO in working with MSEs in developing countries, together with a number of studies previously undertaken by agencies in Thailand, the survey was designed to confirm or verify former knowledge of the MSEs. Hence only a small sample of 100 enterprises was aimed for in the survey, although in effect 104 enterprises were actually surveyed.

1.1 An overview of problems and needs of MSEs

MSEs as referred to in this project are those business enterprises characterized by size, as well as by the way they are operated. They are considered micro and small based on the size of their business volume, the value of assets, and/or the number of people working1. They are usually operated and managed solely by an individual entrepreneur. Unlike medium-sized and large enterprises which usually have a management team to oversee various business functions such as marketing, finance, operation, human resource development, technology management, engineering, and research and development, etc., in MSEs the entrepreneurs normally perform all these functions by themselves. Thus the effectiveness and efficiency of an enterprise of this type would depend solely upon the entrepreneur’s management skills (or the lack of them), unlike in medium and large enterprises where skilled managers are recruited from the labour market. In addition, while most medium-sized and large firms generally posses enough resources to recruit additional specialist services from outside when needed, most MSEs cannot afford this type of support.

1 See Working Paper Number 6, prepared by Maurice Allal.

Thus MSEs, especially when operating in the same environment as the medium-sized and large firms, are usually at a disadvantage when tapping into the normal services provided by both the government and private sector, such as those provided by financial institutions, government agencies, consultants, marketing channels, marketing promotions, etc.

Because of these disadvantages, MSEs - particularly those in developing countries where the service infrastructure and business environment have not yet been well developed - typically face operational problems which make it difficult to start-up and to expand or develop to reach their full potential. These problems can be generalized as follows:

· lack of access to financing;
· lack of access to the market;
· lack of skilled workers, or poor access to skill development for workers;
· lack of access to better technology and equipment;
· the lack of access to information vital to business management; and
· lack of business management skills.

In Thailand, the situation for MSEs is quite similar to that described above. However, when addressing these issues, the RTG usually considers these very small enterprises to be “small and medium-sized enterprises (SMEs)”, while recognizing that microenterprises are included in the lower end of the spectrum. Although quite a few studies and surveys have focused on the nature and problems of SMEs (with microenterprises implicitly included), they are mostly directed toward small and medium industry (SMI) - which means those SMEs operating in the manufacturing sector. In addition, it is not yet known whether a comprehensive study has ever focused exclusively on service or trade enterprises operated by MSEs. The latest comprehensive survey is one commissioned by the Department of Industrial Promotion (DIP) from a consulting company in 1997, which again focused on SMIs. Based on the findings of this survey, the problems facing Thai SMIs have been adequately summarized by the Director-General of the Department of Industrial Promotion (DIP)2 as:

· lack of technical and managerial capabilities;
· lack of access to greater market;
· lack of access to finance;
· lack of skilled workers and skills development; and
· lack of access to information vital to business.

2 Manu Leopairote, DG DIP, Role of SMEs in Reviving Economic Crisis.

As previous studies in Thailand have not clearly or specifically addressed microenterprises, nor did they clearly or specifically cover the service and trade sectors of MSEs, it was deemed necessary for this project to carry out a small survey of some of the urban-based MSEs in Thailand. The purpose of the survey is first and foremost a reality check against which all of the other working papers in this series can be reviewed. The survey was also planned to give a preliminary assessment of the problems and needs of Thai urban-based MSEs. The details of the survey methodology and results are explained in the following sections.