Arya News - This poses challenges for SME competitiveness and growth.
BANGKOK – Thailand’s labour market—particularly among small and medium-sized enterprises (SMEs)—continues to face mounting risks from both domestic and international factors, notably the impact of a new wave of global trade wars.These pressures are disrupting sales and production continuity.
At the same time, Thailand’s production sector has yet to make significant progress in innovation, leaving it unable to meet evolving customer demands across various levels.
This has contributed to declining sales, reduced production output, and falling employment levels, resulting in widespread business closures over the past year and into early 2025.
Danucha Pichayanan, Secretary-General of the National Economic and Social Development Council (NESDC), stressed that one critical issue in the labour market is the need for innovation and technological adoption to ensure the survival of SMEs.
According to the World Bank’s Thailand Economic Monitor – February 2025, Thai businesses adopt innovation in their operations at a lower rate than regional peers. Only 11.9% of Thai firms incorporate innovation into their production processes, compared to 40.9% in the Philippines, 37.9% in Vietnam, and 37.3% in Malaysia.
The report also highlights Thailand’s relatively low investment in research and development, which poses a structural barrier to business competitiveness.
This innovation gap may have contributed significantly to the wave of business closures in 2024, during which nearly 24,000 SMEs deregistered, and over 1,234 factories—mostly small and medium-sized—shut down.
These closures affected more than 35,000 workers, with the majority of the closed factories being in the manufacturing sector, where competitiveness remains a serious concern.
In response, the NESDC recommends expanding access to financing for Thai SMEs, enabling them to adopt innovation and technology to improve production processes, reduce costs, and maintain competitiveness in an increasingly volatile market.
Currently, SMEs employ over 12.9 million people across Thailand. Strengthening their competitive edge would not only stabilise employment but also boost incomes for millions of workers.
The World Bank’s latest survey on innovation activity among ASEAN businesses reveals that the Philippines and Vietnam lead the region in terms of innovation engagement, significantly outpacing Thailand, Indonesia, and Malaysia.
The findings, published in the Thailand Economic Monitor – February 2025, rank the five countries based on the prevalence of innovation in production processes, the introduction of new products and services, foreign technology adoption, and research and development (R&D) expenditure.
The Philippines tops the list, with 40.9% of businesses engaged in process innovation, followed by 32.9% introducing new products or services. Additionally, 11.2% of firms use foreign technology, while R&D expenditure accounts for 21.9% of business activity.
Vietnam ranks second, with 37.9% of businesses engaged in production process innovation, 23.2% introducing new products or services, 10.8% adopting foreign technologies, and 15.7% investing in R&D.
Malaysia follows with 37.3% of firms adopting process innovation, 23% using foreign technology, and only 3.5% introducing new products or services. R&D spending stands at 10.5%.
Indonesia leads the group in foreign technology adoption at 23.7%, but lags in process innovation (11.4%) and new product/service introduction (6.2%).
Thailand ranks lowest across all categories. Only 11.9% of Thai businesses engage in process innovation, 8.2% offer new products or services, 5.6% adopt foreign technology, and a mere 1.1% invest in R&D.
These findings underscore the substantial innovation gap Thailand faces, highlighting the untapped potential for investment in innovation and R&D. This gap poses a challenge for Thai SMEs to adapt and remain competitive in an increasingly fierce regional and global market.
In response, NESDC has called on both the public and private sectors to prioritise innovation in production processes. Doing so would not only enhance the global competitiveness of Thai SMEs but also help them scale and thrive on the international stage.