4^th Meeting of the

OIC Task Force on SMEs

and the related Exhibition

Under the kind patronage of

H.E. Dr. Thaksin Shinawatra, Prime Minister of Kingdom of Thailand

Bangkok, Thailand

January 24-27, 2005

4^th Meeting of the OIC Task Force on SMEs

Bangkok, Thailand, January 24-27, 2005

Jointly organized by Islamic Chamber of Commerce & Industry (ICCI),

Islamic Development Bank (IDB), Department of Export Promotion, Ministry of Commerce, Kingdom of Thailand and Thai Islamic Trade and Industrial Association (TITIA)

                          ISLAMIC CHAMBER OF COMMERCE AND INDUSTRY:

            The Islamic Chamber is an affiliated organ of the Organization of Islamic Conference (OIC) and represents the private sector of 57 Islamic Countries. Its main role is to assist the entrepreneurs of OIC countries to develop capacities for sustainable industrial and trade development and promotion to mitigate possible marginalization due to negative impact of globalization, technology gaps and barriers to trade and industrialization. Islamic Chamber gives specific emphasis for the improvement of industrial development strategies, industrial support infrastructures, access to markets and finance. ICCI’s corporate strategy is to focus on activities that help to develop a competitive economy and promote environmentally sustainable trade and industrial development. The activities include provision of training courses and extending advisory services, information and technology, investment promotion, trade promotion, small enterprises development, expansion of services sector, awareness of privatization programmes and promotion of clean technologies.

GENERAL VIEW OF THE HOST COUNTRY – THAILAND:

Background:    A unified Thai kingdom was established in the mid-14th century. Known as Siam until 1939, Thailand is the only Southeast Asian country never to have been taken over by a European power. A bloodless revolution in 1932 led to a constitutional monarchy. Thailand has got an observer status of the Organization of Islamic Conference (OIC) in 1998. The Thai Islamic Trade and Industrial Association has got observer membership of the Islamic Chamber of Commerce & Industry in 2000.

Climate:           Tropical; rainy, warm, cloudy southwest monsoon (mid-May to September); dry, cool northeast monsoon (November to mid-March); southern isthmus always hot and humid.

Area                          :     Total: 514,000 sq km

                                         Water: 2,230 sq km

                                         Land: 511,770 sq km

Population                 :     64,265,276
Ethnic groups            :     Thai 75%, Chinese 14%, other 11%

Religions                   :     Buddhism 95%, Muslim 3.8%, Christianity 0.5%, Hinduism 0.1%, other 0.6% (1991)

Languages                :     Thai, English (secondary language of the elite), ethnic and regional dialects

Country name           :     Conventional long form: Kingdom of Thailand

Conventional short form: Thailand
Former: Siam

Government type     :     Constitutional Monarchy

Capital                      :     Bangkok

Economy - overview:

            Thailand has a free enterprise economy and welcomes foreign investment. Exports feature computers and electrical appliances. After enjoying the world's highest growth rate from 1985 to 1995 - averaging almost 9% annually - increased speculative pressure on Thailand's currency in 1997 led to a crisis that uncovered financial sector weaknesses and forced the government to float the baht. Long pegged at 25 to the dollar, the baht reached its lowest point of 56 to the dollar in January 1998, and the economy contracted by 10.2% that same year. Thailand then entered a recovery stage, expanding by 4.2% in 1999 and 4.4% in 2000, largely due to strong exports. An ailing financial sector and the slow pace of corporate debt restructuring, combined with a softening of global demand, slowed growth to 1.4% in 2001. Increased consumption and investment spending pushed GDP growth up to 5.2% in 2002 despite a sluggish global economy.

GDP-purchasing power parity        :      $429 billion (2002 est.)

GDP-real growth rate                    :      5.2% (2002 est.)

GDP-per capita                             :      purchasing power parity - $6,900 (2002 est.)

GDP-composition by sector           :      agriculture      :   11%

                                                           Industry          :   40%

                                                           Services         :   49% (2001)

Labor force - by occupation:             Agriculture     :   54%,

                                                           Industry          :   15%,

                                                           Services         :   31% (1996 est.)

Industries:      tourism; textiles and garments, agricultural processing, beverages, tobacco, cement, light manufacturing, such as jewelry; electric appliances and components, computers and parts, integrated circuits, furniture, plastics; world's second-largest tungsten producer and third-largest tin producer.

Natural Resources:   tin, rubber, natural gas, tungsten, tantalum, timber, lead, fish, gypsum, lignite, fluorite, arable land.

Agriculture-Products:     rice, cassava (tapioca), rubber, corn, sugarcane, coconuts, soybeans.

Exports                            :     $67.7 billion f.o.b. (2002 est.)

Exports-commodities      :     computers, transistors, seafood, clothing, rice (2000)

Exports-partners            :     US 19.6%, Japan 14.5%, Singapore 8.1%, Hong Kong 5.4%, China 5.2%, Malaysia 4.1% (2002)

Imports                            :     $58.1 billion f.o.b. (2002 est.)

Imports-commodities      :     capital goods, intermediate goods and raw materials, consumer goods, fuels (2000)

Imports-partners            :     Japan 23.0%, US 9.6%, China 7.6%, Malaysia 5.6%, Singapore 4.5%, Taiwan 4.4% (2002)

Debt-external                 :     $62.5 billion (2002 est.)

Economic aid-recipient   :     $131.5 million (1998 est.)

Currency                         :     Baht (THB)

Exchange rates               :     US$ 1 =  THB 38.00 (2004)

SMEs in Thailand:

Out of the total number of enterprises in Thailand, approximately 96% of them are SMEs and are therefore the driving force behind the expanding economy as they provide work experiences and generate employment.

SMEs cover business related to manufacturing, wholesale and retailing, and services. SMEs are categorized by the number of employees and fixed assets they have. Small enterprises are those that have no more than 50 employees or have fixed assets not exceeding 20 million baht (US$ 530,000.00) while medium enterprises refer to any enterprise which employs more than 50 workers but not over 200 and has fixed assets exceeding 20 million baht (US$ 530,000.00) but not over 100 million baht (US$ 2.64 million).

In 2000, an Act designed to promote SMEs was legislated by the government. Its major objective is to assist, promote and develop SMEs. The government also established several offices aiming at developing SMEs. Some of these include the Office of Small and Medium Enterprises Promotion, the Institute for Small and Medium Enterprises Development, and a transformation of the Small Industry Finance Cooperation in to Small and Medium Enterprise Development Bank of Thailand.

Several financial institutions, including state owned and commercial banks, have also rendered their support by providing credit facilities and advice to SMEs. Supporting SMEs to survive and grow at the same time is vital for the sustained economic growth as it boosts competitiveness. Successful SMEs promotion in various countries has confirmed that it needs close cooperation between the public and private sectors to systematically solve the SMEs’ major problems faced by SMEs include marketing shortage of capital, labour, limitation of production technology, management and access to public services. 

Master Plan for the Promotion of Thailand’s

Small and Medium Enterprises (2002-2006):

The Plan for the Promotion of Small and Medium enterprises in Thailand (2002-2006) is a strategic coordination plan to be utilized as a Master Plan for the promotion of SMEs in Thailand and to be implemented along the timeframe of the National Social and Economic Development Plan. The purpose is to facilitate related agencies and organizations in implementing their measures into action plans. The strategy of the plan had been developed by considering the weakness and strength of controllable internal variables, and external variables that may have influence on the limitations, threats and opportunities of SMEs. Moreover, in devising the plan, the fundamental guidelines from the ninth National Social and Economic Development Plan, the Act for the Promotion of Medium and Small Enterprises 2000, together with intention of government policies, views from implementing agencies and other related development efforts, and research projects related with the promotion of SMEs, have also been taken into account.

Policies for the Development of Small and

Medium Enterprises in Thailand (2002–2006):

1)   To develop SMEs so that they play a more important role in the overall economy and become main mechanism in supporting sustainable social and economic growth of the country with more priority being given to the grass-root and intermediate enterprises.

2)   To improve the efficiency of SMEs and increase their competitiveness by emphasizing the restructuring in the manufacturing, trade and service sectors, human resource development, production technology development, and good practice in management, so that both products and services in general and those of export-oriented can be upgraded and have potential in penetrating higher markets.

3)   To develop SMEs to become core of the economy, capable of strengthening the economy at the grass-root and community levels, while at the same time creating employment opportunity and income within community and locality by focusing the promotional strategies on the continual development and upgrading of SMEs from local to international level.

4)   To create entrepreneurial culture or society by encouraging birth of new genre of entrepreneurs who are knowledge based and possess analytical skills to become the driving force behind the growth of the economy in the new economic order.

OIC TASK FORCE ON SMEs:

            SMEs play a crucial role in any economy of the world. In most of developing countries, the over whelming majority of enterprises (more than 90%) are SMEs. They account for about 75% of the Gross Domestic Product (GDP), against 50% in the rest of the world. SMEs play an important role in the economic and social life and they have generated a large number of non-agricultural jobs, exports, sales and value added. They contribute to employment creation as well as to the improvement of skills by providing on the job-training to individuals who have already little experience and knowledge.

            SMEs are not only present in labour intensive sectors but also in all the economic sectors, such as agriculture, manufacturing industry and services (such as trade, tourism, transport, etc.). The most dynamic SMEs are those of Taiwan with 56% of exports; China with about 40 to 60% and South Korea with 40%. The total contribution of OIC Countries SMEs to exports is about 17%. The most significant SMEs in OIC Countries are Bangladesh with 70%, Pakistan 30% and Jordan 29% of exports.*

            Islamic Chamber of Commerce and Industry (ICCI) being a leading organization for private sector business development, gives high priority to industries production. Most of the Member countries have Small and Medium Enterprises (SMEs). As such, ICCI has decided to provide greater support services to SMEs in Member countries in General and Least Developed countries in particular.

            In this regard, ICCI submitted a proposal to the 23^rd Session of OIC’s Islamic Commission for Economic, Cultural and Social Affairs, held in Jeddah, Kingdom of Saudi Arabia in January 2000 for setting-up an OIC Task Force, to initiate a programme of activating the Private Sector in Least Developed and Landlocked Member States, by establishing a network of Small and Medium Enterprises in these countries. Accordingly the 23^rd Session of the Islamic Commission, held in January 2000 in Jeddah, Kingdom of Saudi Arabia through its resolution No. 5/23-E, recommended to the OIC General Secretariat to set-up the subject Task Force.

            This was endorsed through Resolution No. 5/27-E on Economic Problems of the Least Developed and Member States and adopted at the 27^th Islamic Conference of Foreign Ministers (ICFM), held in Kuala-Lumpur, Malaysia on June 27-30, 2000. Later, it was approved through Resolution No. 5/9-E(15) by the 9^th Session of the Islamic Summit Conference held in Doha, Qatar on November 12-14, 2000.

            In accordance with the ICFM Resolution, the Secretary General of OIC had been pleased to constitute the subject Task Force, with a mandate to meet at least once a year. The membership of this Task Force comprised the representatives from the General Secretariat of the Organization of Islamic Conference (OIC), Islamic Development Bank (IDB), Islamic Centre for Development of Trade (ICDT), Islamic University of Technology (IUT), Statistical, Economic and Social Research and Training Centre for Islamic Countries (SESRTCIC), SMEDA, Islamic Chamber of Commerce & Industry (ICCI) and some selected Chambers of OIC countries as well as United Nations Industrial Development Organization (UNIDO). Islamic Chamber of Commerce & Industry proposes to implement this resolution in a highly effective manner for rapid growth of industrialization in OIC Countries.

            In pursuance to the specific assignment provided through the resolution, a work programme for the Task Force on SMEs has been prepared by the Islamic Chamber. The main features of the programme for the promotion and development of SMEs are as follows:

1.      To conduct a survey for assessment of operational conditions of SMEs in a selected OIC Country.

2.      Organization of the OIC Task Force Meeting and Seminar on SMEs in a selected OIC Country.

3.      Organization of an exhibition of SMEs products in a selected OIC Country.

Meetings of the OIC Task Force on SMEs:

In view of the above, the 1^st Meeting of the OIC Task Force on SMEs was held in Dhaka, Bangladesh on January 27-29, 2002. Thereafter, in response to the kind invitation received by the General Secretariat of the Islamic Chamber from Ministry of Industry and Trade, Republic of Mozambique, the 2^nd Meeting of the OIC Task Force on SMEs and the related Seminar as well as an Exhibition was organized in Mozambique under the joint auspices of Islamic Chamber of Commerce & Industry, Ministry of Industry and Trade, Republic of Mozambique and the Islamic Development Bank on May 19-21, 2003 and the 3^rd Meeting of OIC Task Force on SMEs was held in Lahore, Islamic Republic of  Pakistan on March 16-18, 2004. The said event was jointly organized by Islamic Chamber of Commerce & Industry, Islamic Development Bank, Small & Medium Enterprise Development Authority (SMEDA) and Ministry of Industries & Production, Government of Pakistan. The purpose was to devise strategies for developing support programmes and institutional framework for creating a favourable socio-economic environment for development and growth of SMEs in OIC Countries.

4^th Meeting of OIC Task Force on SMEs:

The Preparation is underway for holding the 4^th Meeting of OIC Task Force on SMEs in Bangkok, Thailand on January 24-27, 2005. The said event is being jointly organized by Islamic Chamber of Commerce & Industry (ICCI), Islamic Development Bank (IDB), Department of Export Promotion, Ministry of Commerce, Kingdom of Thailand and Thai Islamic Trade and Industrial Association (TITIA).

Constraints:

            Manufacturing SMEs play an important role in the country’s economy, where they produce a wide range of consumer goods and provide employment. They also account for a substantial proportion of manufacturing output and make a major contribution to the country’s balance of payments. While SMEs have thus traditionally filled a crucial gap in the socio-economic development pattern of developing countries, yet the performance of their SMEs continues to be constrained by a number of weaknesses, including the absence of many critical support mechanisms, an adequate policy and regulatory framework, shortages and lack of access to capital, obsolete technology, low productivity, inefficient quality control, lack of management and marketing skills.

Networks of SMEs:

            Individually, SMEs are often unable to capture market opportunities, which require large production quantities, homogenous standards and regular supply. They also experience difficulties in achieving economies of scale in the purchase of inputs, such as equipment, raw materials and access to finance as well as consulting services, etc. Small size also constitutes a significant hindrance to the internationalization of functions, such as training, market intelligence, logistics and technology innovation, all of which are at the very core of firm dynamism. Furthermore, small scale can also prevent the achievement of specialized and effective internal division of labour, which fosters cumulative improvements in productive capabilities and innovation. Finally because of the continuous and fierce struggle to preserve their narrow profit margins, small-scale entrepreneurs in developing countries are often locked in their routines and unable to introduce innovative improvements to their products and processes and lack beyond the boundaries of their firms to capture new market opportunities.

            Through Networking, individual SMEs can address the problems related to their size and improve their competitive position. On account of the common problems they all share, small enterprises are in the best position to help each other. Through horizontal cooperation (i.e. with other SMEs occupying the same position in the value chain), enterprises can collectively achieve economies of scale beyond the reach of individual small firms and can obtain bulk purchase inputs, achieve optimal scale in the use of machinery and pool together their production capacities to satisfy large-scale orders. Through vertical cooperation (with some SMEs as well as with large-scale enterprises along the value chain), enterprises can specialize on their core business and give way to an external division of labour. Lastly, networking among enterprises, institutions providing business development services, and policy makers can help to shape a shared local development visions and give strength to collective actions to enhance entrepreneurial strategies. Such types of interaction between all different actors of the business system can be easier and more effective in those locations where a number of similar or related enterprises are clustered. In these locations, knowledge often circulates better and ideas are exchanged and developed in a collective attempt to improve product quality and occupy more profitable market segments.

Themes:

I.    Development of interfirm linkages among SMEs

      and between them and large firms:

-   These interlinkages may improve quality of production.

-   SMEs skills development and greater productivity, raise their competitiveness.

-   Interfirm and market network may raise marketing and sales opportunities.

II.   Obstacles to development of SMEs:

-   Regulatory constraints through changes in tax structure and other policy uncertainties.

-   Constraints on access to raw-materials and equipments.

-   Scarcity of skilled workers.

-   Increased cost of materials and machinery.

III.  Business Incubators in Economic Development:

-   Incubators in the context of SMEs Development in OIC Countries.

-   Technology and business incubators.

-   Types of Incubators and trends in incubation systems.

-   Case studies.

IV.       Scope for Small and Medium Enterprises operations through Electronic Commerce in OIC Countries, for marketing, sub-contracting and undertaking commercial transactions.

V.        Public-Private sector cooperation in respect of trade promotion measures, in raising SMEs capability for access to export markets.

VI.       Private sector support programme, incorporating integrated approach for professional development of SMEs entrepreneurial skills and technological capabilities for strengthening their competitive position.

VII.      Financing Small and Medium Enterprises and removing constraints regarding SMEs access to institutional finance.

Possible Outcome of the Seminar:

-  This will accelerate the pace of industrialization and its diversification in OIC Countries.

-  It will assist in development of technology based value-added production.

-  Provide assistance in growth of professional management in SMEs.

-  It will help in development of SMEs strategy for export marketing.

-  Private sector support programmes can be effectively provided for technology acquisition and technology transfer in industrial enterprises.

-  It will assist in development of sub-contracting among large and small enterprises in OIC Countries.

-  It will assist in launching sub-contracting Exchange Schemes. Professional Associations and National Chambers can set-up such an establishment.

-  Inter-firm linkages could be expanded among the OIC Member Countries.

Target Group:

1.       Members of OIC Task Force on SMEs.

2.       Islamic Chamber's member Chambers.

3.       Management and Marketing personnel of private sector business enterprises.

4.       Representatives of Cottage, Small and Medium Enterprises.

5.       Financial organizations personnel dealing with industrial and commercial sector loans.

6.       Representatives of public sector regulatory bodies operating under the Ministries of Finances, Commerce and Industry.

7.       Representatives of International Organizations.

Organization of the Seminar:

            The representatives from Member Countries as well as those belonging to OIC institutions and International organizations will be invited to participate in the Seminar. The respective countries chambers will be requested to nominate representatives from their own staff or those from the Private Small and Medium Business Organizations.

            The papers for the Seminar shall be contributed by the General Secretariat of the OIC and its Institutions, other International institutions as well as by representatives of members of OIC Task Force on SMEs, Member Chambers and those from Private Business Enterprises.

Participants' Contribution in Paper Presentation:

            Institutions / Experts desirous of presenting research papers on SMEs are cordially invited to contribute papers on various themes of the Seminar. A synopsis of the paper is required to be sent to the General Secretariat of the Islamic Chamber of Commerce & Industry by November 30, 2004. The synopsis will be reviewed and intimation regarding acceptance will be sent to the authors by December 06, 2004. The last date for receipt of final papers is December 31, 2004.

Venue:    The venue of the event is Queen Sirikit National Convention Centre, Bangkok.

Grand Opening Ceremony:     The grand opening ceremony of the event will be graced by H.E. Dr. Thaksin Shinawatra, Prime Minister of Thailand.

Meeting Language:              The 4^th Meeting of the OIC Task Force on SMEs will be conducted in English Language only.

Organizers / Contact Persons: