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Published on April 9, 2008

The Office of Small and Medium Enterprises Promotion (Osmep) plans to call on Deputy Prime Minister and Industry Minister Suwit Khunkitti to ease the Venture Capital Act to exempt corporate income tax for small firms.

A recent study by the Thailand Development Research Institute (TDRI) showed no enterprises qualified to gain from tax benefits under the venture-capital law, because its requirements were too high.

Under the law, a qualified company must have a minimum registered capital of Bt200 million, which made it impractical because few small-and medium companies met that condition.  "We are moving quickly to revise all impractical items as soon as possible to help local enterprises to gain benefits as well as boost their cash flow," said Osmep director-general Jhitraporn Techacharn.

The TDRI study also reported that only 0.32 per cent of total registered SMEs could gain tax incentives from the Board of Investment (BoI).

The BoI has promoted seven business categories, but they must be able to generate value-added products that will bring in 20 per cent of their revenue.

Moreover, promoted operators must use modern technologies and environmentally friendly production methods.

"Most SMEs don't qualify under BoI conditions, because they cannot access financial resources. They also rarely use new technologies that can create value-added products," she said.

Another big problem for SMEs is access to cash.

The SME Bank was also short of proper risk management skills, the TDRI said.

Jhitraporn said the office had proposed that Cabinet approve a fiscal budget for 2009 to subsidise interest rates for small companies that lack cash and are weighed down by bad debts.

"We plan to subsidise a few per cent of the normal interest rate," she said. "It will be allocated in the same way as the Machine Fund."

"We'll also encourage non-bankers to provide loans to SMEs by ignoring their collateral but allowing them to use asset-based lending."

This budget will target local operators in food, software, auto-parts, alternative energy and tourism industries. However, she did not reveal figures for the budget."

Chalida Ekvitthayavechnukul

The Nation