23 Apr, 2012
Paris, (19 April 2012) – The importance of small and medium sized enterprises to the Thai tourism industry is cited in a report issued by the Paris-based Organisation of Economic Cooperation and Development. Thailand and Korea are the only Asian countries covered by the report, and the reference is the only one to “tourism” in the entire report, “Financing SMEs and Entrepreneurs 2012 – An OECD Scoreboard.”
First Reports in the Asia Pacific Travel Industry on SMEs
In 2009 and 2009, Travel Impact Newswire Executive Editor Imtiaz Muqbil compiled the first reports on the impact of the economic downturns on travel & tourism SMEs. Details below with downloadable links:
Strengthening Small and Medium Sized Enterprises in the Asia-Pacific Travel & Tourism Industry (ITB Asia, October 2008: Sponsored by ITB Asia, this report was the first of its kind and analysed the impact of the 2008-09 global economic crisis on the small & medium sized enterprises of the travel & tourism industry.
SME Report Part II (ITB Asia, October 2009): A sequel to the above report, this report was a compilation of articles showing how small & medium sized enterprises were affected by the global financial crises of 2008-09, and how governments, banks, consultancies and companies are moving to help. The study was designed to provide an early warning as well as a resource base for ideas to formulate a plan designed specifically for travel & tourism SMEs.
Although the tourism industry is excessively obsessed with the role of global brands (translation: the major multinational corporations), its real job-creating and economic-development prowess is primarily in the hands of the SMEs. Because they lack proper organisation and representation, and hence do not have much of a “voice” in international travel forums, SMEs tend to be ignored by national and regional public sector policymakers, until crises strike.
As such crises, both man-made and “acts of God,” are growing in frequency, their impact on the SMEs has now become the subject of research and study in order to help formulate policies that will alleviate their impact.
SMEs are the bedrock of Thai tourism, one of the country’s major foreign exchange earning industries. They range from inns, lodges and boutique hotels to sellers of herbal products, providers of traditional Thai massage services to the OTOP shops which are now being increasingly used by tour operators in lieu of the scam-plagued fake jewellery rackets.
They also play equally significant roles in other industries such as agriculture, Information Technology, the automotive sector, and many more.
The OECD report is the first edition of what is described as “an important step in filling the information gap on SME finance.”
According to the report, “Access to finance represents one of the most significant challenges for entrepreneurs and for the creation, survival and growth of small businesses. As governments address this challenge, they are running up against a major and longstanding obstacle to policy making: insufficient evidence and data. Better data is needed to understand the financing needs of SMEs and entrepreneurs and to provide the basis for informed institutional and public policy decisions.”
“This first edition of “Financing SMEs and Entrepreneurs: An OECD Scoreboard” represents a major step in addressing this obstacle by establishing a comprehensive international framework for monitoring SMEs’ and entrepreneurs’ access to finance over time.”
The report presents data for a number of debt, equity and financing framework condition indicators in 18 countries, including Canada, Chile, Denmark, Finland, France, Hungary, Italy, Korea, the Netherlands, New Zealand, Portugal, Slovak Republic, Slovenia, Sweden, Switzerland, Thailand, the United Kingdom and the United States.
Writing in the foreword, OECD Secretary-General Angel Gurría, says the report “provides an original framework to monitor trends in SMEs’ and entrepreneurs’ access to finance – at the country level and internationally – and a tool to support the formulation and evaluation of policies.”
According to the report, “SMEs are important engines of growth, jobs and social cohesion. However, the creation, survival and growth of SMEs is often hampered by access to finance, a challenge that is at the core of this Scoreboard on Financing SMEs and Entrepreneurs.
“The global crisis has exacerbated the financing constraints on SMEs. They have suffered a double shock: a drastic drop in the demand for the goods and services they provide and a credit crunch. These events have had a severe effect on SMEs’ cash flows and liquidity, forcing many into bankruptcy and contributing to record levels of unemployment in many OECD countries.
“Since the onset of the crisis, governments have responded with a number of different measures to support sales, prevent the depletion of SMEs’ working capital and enhance access to credit for SMEs.”
Noting that the “importance of SME finance is now widely recognised”, the report says at the Pittsburgh Summit in 2009, G20 Leaders acknowledged that access to finance provides growth opportunities for businesses and the economy as a whole.
“Financial Inclusion is a pillar of the G20 Multi-Year Action Plan on Development, and the G20 Global Platform for Financial Inclusion (GPFI) was launched in Korea in December 2010. The need to address the financing hurdles to SME growth was also underlined by G8 Leaders at the 2011 Deauville Summit.”
The need of the hour to drive policy-making is quality data. Says the OECD report, “Better data can improve our understanding of business financing needs and provide a sound basis for informed policy discussions, as well as giving the suppliers of finance a more comprehensive assessment of their clients’ needs that enables them to design better products and services.”
Hence, the OECD report provides what it claims is “an original framework to monitor trends in SMEs’ and entrepreneurs’ access to finance – at the country level and internationally – and a tool to support the formulation and evaluation of policies.”
“As country coverage expands and progress is made on methodological issues, this OECD Scoreboard is expected to become an international reference for monitoring developments and trends in SME finance,” it says.
The section on Thailand highlights the five-year Portfolio Guarantee Scheme for SMEs set up by the Thai government in February 2008 and cites the role of the Small Business Credit Guarantee Corporation (SBCGC) in providing much-needed credit guarantees to viable small businesses which do not have sufficient collateral, with tourism SMEs being one of the beneficiaries.
Says the report, “This facility was fully utilised in 2009 but was expected to be increased in the future. This will accommodate the recovery in demand from SMEs in the export and tourism sectors. The SBCGC offers guarantees worth THB 2 million each and can assist a total of 15,000 SMEs. By the end of 2009, THB 21.4 billion in SME loans were government guaranteed.
“When taking into account the supply chain, where each SME may employ an estimated 20 workers, this scheme might have helped save 300,000 jobs,” the OECD report says.