|Needs and Characteristics of a Sample of Micro and Small Enterprises in Thailand - Working Paper N°5 - Micro and Small Enterprise Development and Poverty Alleviation in Thailand - Project ILO/UNDP: THA/99/003 (ILO-ISEP - ILO - UNDP, 1999, 102 p.)|
|1.1 An overview of problems and needs of MSEs|
|2.0 Survey of selected Thai urban-based MSEs|
|2.1 Survey methodology|
|2.2 The survey sample|
|2.3 Results of the Bangkok survey|
|2.4 Results of the Phetchaburi survey|
|3.0 Characteristics, problems and needs of Thai MSEs|
|3.1 Characteristics of Thai MSEs|
|3.2 Problems and needs of Thai MSEs|
|3.3 Possible solutions to problems|
|4.0 Notes on statistical findings|
|4.1 Gender issues for entrepreneurs|
|4.2 The educational level of entrepreneurs|
|4.3 The age of entrepreneurs|
|4.4 The relationship between sales, asset value and number of workers|
|Annex I: Tables 2 - 31|
|Annex II: Figures 1 to 9|
|Annex III: List of enterprises surveyed|
|Annex IV: ILO Recommendation concerning General Conditions to Stimulate Job Creation in Small and Medium-sized Enterprises, 1998 (No. 189)|
The Phetchaburi survey includes 7 supported microenterprises, 7 independent enterprises, and 13 small enterprises. The results of the survey formatted according to the design of the questionnaire are shown below.
2.4.1 General information
The general information on the enterprises interviewed is shown in Tables 17, 18, 19, 20 and 21 in the annex to this Working Paper. Table 17 shows the information about the entrepreneurs regarding gender, age, and educational background. Similar to Bangkok, the survey shows that all of the supported microenterprises - both under DPW and DIP - are owned and operated by women. Their age range is between 30 to 60 with a majority in the 30-50 range. Their education is mainly at elementary and vocational level. When comparing the supported microenterprises to independent microenterprises, the profile shifts considerably. In the group of independent microenterprises there are almost as many female as male entrepreneurs. Their age profile is quite similar, concentrating at around the 30 to 40 and 40 to 50 ranges. However, the education profile shows a greater proportion at the higher level of education in independent microenterprises than supported microenterprises. It spreads quite evenly from elementary to high school to university levels, with the same concentration at high school and vocational levels.
In the small enterprises, the age and educational profiles are quite similar to those of independent microenterprises. However, the gender profile changes slightly. In this group, male entrepreneurs clearly outnumber the female, as can be seen in Table 17.
Table 18 shows the type of business of the enterprises interviewed. In the same manner as Bangkok, all of the supported microenterprises are in manufacturing and concentrated in food and garment products, while the independent microenterprises and small enterprises are more diverse both in terms of sector and product type.
The number of workers in enterprises interviewed is shown in Table 19. The definitions used in the survey, classify enterprises with less than 10 workers as microenterprises, while the small enterprises have between 10 and 50 workers. Most of the enterprises fit this definition, with exceptions in two areas. They are:
i) One of the supported microenterprises has more than 20 workers. This is a womens group formed within a cooperative, with 28 members making woven hats and bags. Although the business - especially the marketing and procurement - is conducted as a group, the manufacturing of products is done by the members individually and proceeds are returned to the members according to their output. Moreover, their operations are micro in nature, when compared with small enterprises. Therefore they are treated as microenterprises.
ii) There are 4 small enterprises with 10 and less workers. These enterprises reported that they normally employed more than 10 workers, but in recent times they had been operating with fewer workers. They had laid off some of their regular workers because the economic crisis had affected business. Even so, because of the size of the establishments and the way business was conducted, they are treated as small enterprises in this survey.
Table 20 shows the value of assets of the enterprises interviewed, as well as the ownership of business premises. Similar to that reported in Bangkok, the profile of value of assets of supported microenterprises is rather lower than independent microenterprises, and that of small enterprises is even higher. It also shows that while most of the microenterprises are operating from rented premises, most small enterprises own their business premises. This may explain the higher profile of asset value in the small enterprises, and suggests that they are more mature enterprises. As for supported microenterprises, other than working from home, their business transactions take place either in a community hall, on a community ground, or at temples which they neither rent nor own. It can be said that their business premises are not yet established. Thus it is not reported in the Table 20.
The commercial registration of enterprises is shown in Table 21. It was found that most supported microenterprises do not have commercial registration, while about half of the independent micro and all of the small enterprises have registered. Most enterprises said they registered to become a legal entity. Of those who registered, most reported that the procedure was simple and easy, while a few reported moderate difficulties, and only one saw it as complicated.
2.4.2 Enterprise start-up
Similar to the Bangkok survey, all of the enterprises interviewed started their business with their own business idea. The reasons they gave for starting up their businesses were as follows:
· have a business of his/her own;
· create a career; and
· earn a living.
As might be expected, the survey found that most of the entrepreneurs who quoted the third reason were in the supported microenterprises category. However, rather than having been laid-off from jobs as in Bangkok, the supported micro-entrepreneurs in Phetchaburi are those who have no job or no other better means of earning a living. As the DPW has not yet contributed as much to these enterprises as is the case in Bangkok, the Provincial Industrial Office (PIO) has been supporting these enterprises under a DIP programme of which is targeted specifically at the provinces.
Among the independent micro enterprises and small enterprises, the reasons for start-up are spread between the three statements, with a slight emphasis on the second. Many independent micro-entrepreneurs interviewed in Phetchaburi seem to have been determined to become self-employed right from the start of their career. After finishing formal education, they went to work with other enterprises for a few years with the clear aim of learning, gaining experience, and in some cases, earning money in order to be able to establish their own enterprises. One entrepreneur reported that in order to acquire the necessary skills, he paid money to become an apprentice in an enterprise of his choice.
As shown in Table 22, when starting up in business, most microenterprises used their own money, except for the supported microenterprises which began with government loans (DPW, DIP). However, unlike the Bangkok survey, almost half of the independent microenterprises interviewed reported that they had access to commercial bank loans. The proportion of small enterprises using bank loans for start-up is about the same as for the independent microenterprises.
The Phetchaburi survey suggests that finance from commercial banks in the provinces is probably more accessible than in Bangkok. This may suggest that while microenterprises and even some small enterprises in Bangkok seems to be rather informal and insignificant, in Phetchaburi - and presumably similarly elsewhere in other provinces of Thailand - they are considered quite significant within the local society. The results seen from the survey seem to indicate that micro as well as small enterprises in the provinces are considered more prestigious and more creditworthy than their equivalents in Bangkok. On the other hand, since many entrepreneurs interviewed are natives of Phetchaburi, they may have inherited assets or have access to family assets which can be used as collateral for loans. This could explain their comparatively better access to bank loans. Thus, while business opportunities may be better in Bangkok due to the greater market size, the means for starting up a business in Phetchaburi (and presumably in other provinces) are more accessible as indicated by the survey.
Table 22 also shows the number of years that the enterprises interviewed have been in business. As the support programme offered by the DIP has been available for several years for needy entrepreneurs here, it was found that the supported microenterprises are older than those in Bangkok. And while the number of years in business of the independent microenterprises is quite well distributed, with a concentration around 3-5 years, most small enterprises have been established for more than 5 or 10 years. This supports the prior observation that small enterprises are generally more mature firms than the microenterprises.
Table 23 shows the difficulties experienced in starting up, as reported by the entrepreneurs. It suggests that funding is still the greatest difficulty for both micro and small enterprises. In addition, difficulties in finding skilled workers, especially for small enterprises, are reported to be as significant as the funding issue, and more serious than in the Bangkok survey. This suggests that skilled workers and presumably skills development are more scarce in the provinces than in Bangkok. At the same time, difficulties in finding premises in Phetchaburi are much less severe than in Bangkok as seen from the survey (in Table 23).
2.4.3 Operational aspects
Table 24 shows the responses of the Phetchaburi micro and small enterprises on the operational aspects of their business. Similar to the Bangkok survey, since most enterprises are not engaged in businesses that require a high degree of operational technology, most enterprises seem satisfied with their present technology. The majority also claim that the quality of their outputs satisfies their customers.
Among the enterprises that expressed dissatisfaction with operational aspects, old and inadequate equipment was the main concern. Only a few are concerned about the lack of information about technology, or poor raw materials, which mostly affect small manufacturing enterprises. Hence, when asked about the possible improvements in their operations, only equipment improvements are cited (Table 24).
On the issue of workers skills, most of the enterprises interviewed expressed their satisfaction, as shown in Table 24. Relating this to the reasons why skilled workers for small manufacturing enterprises are difficult to find, it was explained in the interviews that most newly recruited workers were unskilled. They had to be trained on the job. Thus as the enterprises mature, workers skills are developed to the satisfaction of the entrepreneurs.
In common with the Bangkok survey, it was noted that when technology was discussed, most entrepreneurs were concerned only with that of their principal operations. They are either not aware of, or not interested in technology for their supporting activities, such as materials handling, information technology, etc., which could have helped improve their efficiency.
2.4.4 Marketing aspects
The monthly sales income of enterprises interviewed is shown in Table 25. As occurred in Bangkok, many Phetchaburi enterprises feel that their sales figures are sensitive, and refrained from giving answers. This, together with the fact that proper accounting systems are not commonly found in many micro and small enterprises (MSEs), may make the replies as reported in the table not very reliable. Most figures, especially those of the small enterprises, seem to be a little skewed towards the lower sales values. However, many enterprises reported that their business have been quite seriously affected by the financial and economic crisis, and therefore they may not be too far from being accurate.
Table 26 shows the market for the enterprises interviewed, and their assessment of the adequacy of their income. It is found that most Phetchaburi MSEs market their products and services within Phetchaburi, in nearby provinces and/or in Bangkok. In addition, four enterprises interviewed reported that their products are exported. They include one DIP-supported microenterprise making woven hats and bags (and which has also been assisted under a Royal initiated project); one palmwood products manufacturing microenterprise which has been approached by customers from abroad; one noodle factory (small) which is more than 20 years old, and a plastic-chip shipping-tray factory which moved from Bangkok to invest in Phetchaburi to take advantage of the Board of Investments (BOI) Zone 3 promotion. Of these, it was reported that the export market was developed and handled by their customers and not managed by the enterprises themselves.
On the adequacy of sales income, although most enterprises said that they had been quite severely affected by the financial and economic crisis, their sales income was still reported to be adequate. Only one of the supported microenterprises, two independent microenterprises (one trading and one services), and one manufacturing small enterprise reported that their sales income is inadequate. In all of these cases, the inadequacy is seen as being caused directly by the financial and economic crisis, which has reduced their sales income by more than 50 per cent.
In the same manner as the Bangkok enterprises, it was also noted from the Phetchaburi survey that marketing activities in most of the enterprises surveyed are passive in nature. Most enterprises do not have any market development or promotional activities. Their marketing generally relies on customers approaching the enterprises to create sales.
2.4.5 Financial aspects
Table 27 shows the source of funds for the continuing operation of the enterprises interviewed. It can be seen that most supported microenterprises still have no external financing other than the original funds received at their start-up, except for two supported microenterprises which are members of cooperatives and have obtained loans from these cooperatives.
However, unlike in Bangkok, more than half of the independent microenterprises in Phetchaburi use bank loans to finance their operations. Moreover, the majority of the small enterprises also use the bank loans, while one manufacturing independent microenterprise borrowed from a cooperative. This supports earlier observations that finance is probably more accessible to enterprises in Phetchaburi - and presumably in the provinces - than in Bangkok.
It was also noticed in the survey that most enterprises interviewed do not use proper accounting procedures, except for a few enterprises in which spouses or relatives are well-trained in accounting. Many small enterprises use outside accountants to make book entries for them. These book-keeping records are used only for registration and tax purposes and most of the time are inaccurate. They are seldom used as information for the financial or operational management of the enterprises. Other enterprises, especially microenterprises, may have at best only cash and inventory records, or none at all. As a result most of these enterprises pay tax on an estimated basis, rather than on the statement of their net income. Interviewees said that from time to time Revenue Department officials would visit and observe the business of the enterprises, make estimates on the volume of business and net income, and calculate the amount of tax that they have to pay. Similar to the Bangkok survey, the entrepreneurs interviewed had no idea whether the tax would have been higher or lower if they had had proper accounting procedures and records.
2.4.6 Legal aspects
The results of questions about legal aspects of business from the Phetchaburi survey are shown in Table 28. As stated earlier, most of the entrepreneurs know very little if anything about the civil law governing the legal aspects of their business. Even when the enterprise is registered, most have done so only registered only to avoid complications from government officials, rather than to receive any benefits from being legal. In these circumstances, four of the enterprises felt that taxes were too high. Of the group of 11 small manufacturing enterprises interviewed, two thought that labour laws were counter-productive; one had problems with the land use laws which had delayed his factory registration for several months; one truck/trailer body assembler has had difficulties with ambiguous transportation regulations, and one door/window panel business has had difficulties with laws controlling the manufacture of wooden products. Other than these, the majority of the enterprises interviewed responded that no law or regulation was a constraint to their business.
Likewise, most enterprises do not identify any law or regulation that is helpful to their business, except for one small enterprise which reported that the value added tax (VAT) reduction announced recently seems to be helpful to business (Table 28).
2.4.7 Business development services (BDS)
Table 28 shows the business development services (BDS) support received by the enterprises interviewed. Supported microenterprises reported receiving training, marketing advice and assistance when they attended fairs organized by government agencies. Still, four out of six DIP-supported enterprises said they had not received any assistance other than financial assistance. Of the independent micro and small enterprises, most reported that no BDS services have been received at all. Two independent microenterprises reported receiving support in the form of training and information from suppliers of equipment. One small enterprise received training from the Federation of Thai Industry (FTI) - the entrepreneur is the president of the provincial chapter - and one received training from Thai Productivity Institute, of which it is a member. In addition, two other small enterprises received training from equipment suppliers. Altogether 18 out of 27 enterprises interviewed have never received any BDS support service or assistance.
If the BDS as well as financial assistance were available or more accessible, the survey found that most of the enterprises did not feel that that these services would be helpful (Table 29). Again, the impression gathered from the interviews is that the reason most enterprises do not use the BDS is that they do not believe that these services will be effective for their particular enterprises, rather than not needing the services themselves. For example, most enterprises - especially manufacturing ones - feel that workers skills can be more effectively developed internally on the job, rather than from outside.
Among those who expressed a wish to use the BDS services, marketing assistance was identified as the greatest need, especially for the supported microenterprises. Other needs are for product development and premises respectively. There was no mention skills development needs. No enterprises interviewed expressed a desire for financial assistance (Table 29).
2.4.8 Business associations
Similar to Bangkok, with the exception of a few supported microenterprises which are obliged to be members of cooperatives or womens groups, the survey found that most enterprises are not presently members of any association or organization. However, a higher number of Phetchaburi enterprises are members of the provincial chamber of commerce and provincial chapter of the Federation of Thai Industry (Table 30).
Again, most enterprises interviewed are indifferent to, or do not feel that an association would be useful to their business, while only 5 out of 27 enterprises feel that an association would be useful. In particular, no supported microenterprises feel that an association is useful at all. This attitude towards associations seems to be based upon their experiences and observations of the existing associations, which they feel to be ineffective or irrelevant. All of the entrepreneurs agreed that an ideal association would be useful if it were properly established and run. However, most of them doubted whether such an association is possible in Thailand. Among the enterprises which feel that an association can be useful, a sectoral association of the same businesses was the preferred format (Table 30).
2.4.9 Business prospects and entrepreneurship
Table 31 reports on the entrepreneurship commitment and business prospects of the enterprises interviewed. Similar to the Bangkok survey, the commitment is measured by asking whether the entrepreneur would abandon the business if a steady job with comparable income were available. Only one supported microenterprise and one independent microenterprise reported that they would abandon their business, while no small enterprises would wish to do so. Likewise, the profile is quite similar when asked whether they would advise others to become self-employed. Although showing similar trends towards self-employment, these responses show a significantly stronger and more positive attitude than in Bangkok.
The business potential of the enterprises interviewed (as reported in Table 31) is an assessment made by the surveyor in the same fashion as in the Bangkok survey. The questionable response means that the business is not doing well and might fail in the near future if no radical improvement takes place. Struggling applies to those enterprises which are still viable but not yet stable, making their future quite uncertain at this time. Sustainable means those businesses that are stable and quite secure. However, their potential to grow further than at present seems limited. Finally, good potential means those enterprises with good business performance and which show good growth potential. A large proportion of the surveyed enterprises are in the sustainable and struggling categories, with a good proportion in good potential, and a few of questionable status. Table 31 shows no significant differences among each group of enterprises, and also no significant difference when compared with the Bangkok survey. It should again be noted that such profiles are affected by the financial and economic crisis in Thailand, since many of these enterprises have reported adverse effects.