Second phase of economic stimulus will focus on SMEs
Deputy Prime Minister Somkid Jatusripitak unveiled the second phase of his stimulus plan to accelerate economic growth and its focuses on small and medium sized enterprises, as a third phase that includes incentives to increase foreign investment and speed up spending on infrastructure is being prepared.
While prominent bankers said the third phase would be most crucial, the small and medium enterprise (SME) stimulus measures carry great importance because the businesses can help provide depth to the economy and employ large numbers of people. Thailand was home to 2.7 million SMEs in 2012, the latest year for which statistics were available, comprising 98.5 percent of all enterprises. In the same year, SMEs accounted for 37 percent of gross domestic product and employed 80 percent of the workforce. Thai SMEs also contributed to 29 percent of total exports and 32 percent of total imports by value that year.
The SME stimulus will be divided into two parts. The first will increase SME liquidity by persuading state financial institutions to extend more loans to SMEs. The Thai Credit Guarantee Corporation will guarantee the loans and the Finance Ministry will use tax breaks to lower SMEs’ costs.
The Asian Development Bank has written that, “Since SMEs are so important for the Thai economy, it is important to increase their resilience. One of the ways to increase their resilience is to provide them with stable finance. SME credit, which amounted to 32.8 percent of total commercial bank loans in 2012, is still small in scale.”
The second part will strengthen the business prospects and operations of SMEs. The Commerce and Industry ministries will help SMEs adopt or improve e-commerce and assist them in finding online market channels.
Finance Minister Apisak Tantiworawong said the SME package will include a proposal to temporarily lower the corporate income tax from 15 per cent, but he did not disclose by how much.
The third phase of Somkid’s stimulus package will include increased incentives to encourage foreign direct investment and the acceleration of government spending on infrastructure. Mega-projects on the drawing board include 17 Transport Ministry projects worth $44 billion. Bidding on four Bangkok mass transit rail lines is scheduled start this year, as is bidding on six standard-gauge dual-track rail routes outside the capital.
“What we have to hope for is the acceleration of infrastructure mega-projects such as the completion of 4G, the second phase of Suvarnabhumi Airport, mass-transit projects, and double-track railways and motorways. These will definitely change the view of the private sector, which is financially ready to invest,’’ said Kobsak Pootrakul, executive vice president for international banking at Bangkok Bank.
Thailand Focus September 14, 2015
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