SME’s unlikely to derive immediate AEC benefits

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SME’s unlikely to derive immediate AEC benefits

Last issue we looked at the overall situation for the upcoming ASEAN Economic Community (AEC) as seen from the editorial perspective of the 1 January edition of the English language newspaper The Nation.

It focused on the challenges faced by Thailand that needed to be overcome if the country is to derive the perceived benefits from the AEC.

In this same vein The Nation also drilled a little deeper, looking at Thailand’s small and medium enterprises, or SME’s, by way of talking with Pravit Pong, the CEO of Black Canyon (Thailand), one of the better-known coffee and food franchisers in the country.

Black Canyon has been operating in Thailand since 1993 with its Western-style coffee outlets, leading the way in bringing coffee as a lifestyle beverage to people who previously had only bothered with the instant variety at home or street vendors and small shophouse outlets.

Pravit was quoted as saying, “For those who have the capacity and study the markets in ASEAN well, the AEC offers great potential…”

Black Canyon, he said, had moved into the regional marketplace over a decade ago, opening a branch in Singapore in 2002. The company now has 50 outlets across eight countries, and plans to move into Vietnam soon.

Pravit said, from his experience, the major problems facing Thai SME’s are that most are family-run businesses and the management depends upon one or two senior family operators for decision-making. This leads to a lack of management skill to be able to expand into the broader regional marketplace.

Concomitant with the above, Thai SME’s lack knowledge of the neighbouring markets, and poor language skills (proficiency in the language of business, English) makes doing deals with those outside Thailand even more difficult. Thai SME’s do not invest time in studying the regional marketplace to find potential niches and opportunities.

Pravit also suggested most Thai SME’s have limited access to financial resources and cannot raise the capital needed to fund cross-border expansion.

The cost of setting up a business elsewhere in the region can be prohibitive, especially in countries like Singapore and Malaysia and Pravit suggests many Thai SME’s haven’t the financial ability to invest regionally even if they wanted to.

Of course, within ASEAN, most governments still maintain non-tariff barriers which are designed to protect their domestic markets. There are many laws and regulations which are not as clear and concise as might be hoped. Equally, most ASEAN members will not allow 100 percent foreign ownership of a business and finding local partners is not easy.

Pravit suggests the Thai government help Thai SME’s gain access to the regional marketplace by bringing groups of SME’s from neighbouring countries, especially Cambodia, Laos, Myanmar, and Vietnam, to Thailand to build up potential relationships.