THE FLOOD crisis is not over just because floodwaters have receded as around 1.64 million small and medium enterprises (SMEs) face major challenges regarding capital and employment, raising the risk of liquidity crunches – or even business closures, Amarin TV said today (Oct. 2).
Mr. Saengchai Teerakulvanich, chairman of the Strategy Committee of Federation of Thai SMEs, revealed that the floods, affecting 29 provinces and Bangkok as declared by the government, has impacted SME operators across many areas.
Data from the Office of Small and Medium Enterprises Promotion (OSMEP) estimates that approximately 1.64 million SMEs could be affected, representing about 51% of all SMEs nationwide.
These businesses employ around 8.77 million people, accounting for approximately 64% of total private-sector employment in the country.
The affected areas can be categorised into several zones: the Northern region, comprising five provinces (Tak, Phitsanulok, Phetchabun, Nakhon Sawan, and Uthai Thani), with approximately 126,000 SMEs and over 380,000 jobs; the Central and Western regions, comprising 12 provinces (Lop Buri, Sing Buri, Chai Nat, Suphan Buri, Kanchanaburi, Ang Thong, Saraburi, Ayutthaya, Pathum Thani, Nonthaburi, Samut Prakan, and Nakhon Pathom), with approximately 512,000 SMEs and around 2.66 million jobs; and the Eastern region, comprising eight provinces (Nakhon Nayok, Prachin Buri, Chachoengsao, Sa Kaeo, Chon Buri, Rayong, Chanthaburi, and Trat), with approximately 270,000 SMEs and around 1.5 million jobs.
Additionally, in the Northeastern region, where there are four flood-hit provinces (Buri Ram, Chaiyaphum, Nakhon Ratchasima, and Surin), approximately 210,000 SMEs and around 581,000 jobs are affected.
As for Bangkok, a key economic hub, its 50 districts are home to approximately 544,000 SMEs (excluding small-scale vendors, hawkers, and street stall operators) and account for around 3.6 million jobs.
It should be noted that this assessment estimates the number of entrepreneurs and jobs within the affected areas; it does not imply that all SMEs will suffer the same level of damage. Some businesses may face severe impacts, while others might experience only minor disruptions and remain able to continue operations. It depends on local conditions and the severity of the situation.
Micro-SMEs: A vulnerable group requiring close monitoring
Among the SMEs expected to be affected, approximately 1.33 million are micro-SMEs accounting for about 80% of all SMEs in the affected areas. This group comprises roughly 588,000 service-sector businesses (including about 143,000 restaurants), 559,000 trading businesses (predominantly grocery stores, numbering around 167,000), 168,000 manufacturing businesses, and 15,000 agricultural businesses.
These micro-SMEs employ approximately 3.33 million people, representing about 38% of the total workforce within the SME group expected to be impacted.
Consequently, the impact extends beyond business owners to include employees and the families of SME entrepreneurs. It is estimated that a total of approximately 10 million people, comprising employers, employees, entrepreneurs, and their families, will be affected.
Potential for increased losses if recovery is delayed
The total value of the damage cannot yet be clearly assessed, as the situation requires ongoing monitoring—particularly regarding the time it takes for floodwaters to recede and for areas to be rehabilitated, especially in locations facing prolonged flooding. The impact tends to intensify over time.
Last year, the SME sector’s GDP stood at approximately 6.6 trillion baht, accounting for about 35% of the total GDP. The service sector held the largest share at 44% of SME GDP, followed by manufacturing (28%), wholesale and retail trade (22%), construction (4%), and agribusiness (0.4%).
However, the construction and construction materials sectors may see opportunities for expansion in the near future, as flood damage necessitates repairs and renovations for business premises, residences, and agricultural areas.
Meanwhile, the overall economy remains in a state of low growth; GDP expanded by approximately 1.9% in the second quarter, whereas SME GDP grew by only 0.8% during the same period. Consequently, the impact of the floods could affect GDP growth in the third quarter and potentially extend into the fourth quarter.
SME recovery does not occur immediately after floodwaters recede, as entrepreneurs require time to clear sites, repair facilities, manage damaged goods and raw materials, and secure the liquidity needed to resume operations.
Liquidity is a critical factor for business recovery.
After the waters recede, entrepreneurs face renovation and repair costs. Service businesses and restaurants, for instance, may struggle with issues related to odors, debris, and hygiene, while grocery stores and trading businesses must deal with damaged inventory and raw materials if they were unable to relocate stock in time.
The recovery timeline depends on various factors, with access to financing being one of the major challenges facing SMEs. Data from the OSMEP’s quarterly SME health check report for the second quarter, covering the period prior to the floods, reveals that SMEs facing continuous losses, undergoing debt restructuring, or holding non-performing loans (the “red group”) accounted for 12% of the total.
CAPTION:
An image of Mr. Saengchai Teerakulvanich overlaid on flooded farmland. Credit – PPTVHD36
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