In today’s fast-changing economy, Small and Medium-sized Enterprises (SMEs) matter more than in the past. They create jobs, contribute to GDP value, and open up opportunities for innovation. Yet, while SMEs are often praised as the “Backbone” of the Thai economy, praises alone will not help them thrive. What they need are not just government handouts or temporary aid, but also a sustainable business ecosystem.

Beyond Small Shops

SMEs are more than corner shops or family businesses. Official definitions include firms with up to 500 million baht in annual sales for the manufacturing sector and 300 million baht for the services sector. Some firms employ as many as 200 workers. This diversity of business size not only makes them central to economic growth but also complicates policy decision-making. A one-size-fits-all approach is unlikely to work.

Three Challenges

First, the sheer variety of SMEs, from micro firms to mid-sized exporters, creates challenges. Policy aimed at one end of the spectrum may fail at the other.

Second, SMEs differ across industries. A factory linked to global supply chains faces very different pressures from a local retailer. Exporters must meet environmental and quality standards right away or risk exclusion. By contrast, the local retail market restricts growth because domestic purchasing power is limited. With household spending weak and consumer demand often stagnant, small retailers face constant pressure on sales and margins, leaving little room for real expansion

Third, support programs succeed only if entrepreneurs themselves are willing to adapt. Agencies can offer training or loans, but firms must choose to act. Without owner commitment, policy interventions often fade.

These challenges show that SME promotion is not just about helping individual firms. The bigger task is to create a business ecosystem that encourages self-improvement and lowers barriers to growth.

Building the Right Environment

This is why the idea of an “Ecosystem” matters. A strong ecosystem goes beyond competition; it builds networks among suppliers, customers and partners. These ties allow SMEs to gain knowledge, access financial resources, and explore new markets.

Ecosystems can be shaped through various reforms and programs: cutting red tape, offering incubators, promoting exports, supporting venture capital, and linking firms to technology. Crucially, the design should match each business stages, from startup to big company.

Studies worldwide confirm the hypothesis, in South Korea, in-house R&D drives SME success[1]. In the US and New Zealand, tourism incubators offering cheap finance support and expert advice strengthen the sector[2]. Scotland’s incubators create about 1,800 businesses a year[3]. Spain’s university spin-offs outperform other startups[4]. The lesson is clear: ecosystems produce the business outcomes.

The Korean Example

A good example is from South Korea where it created the Ministry of SMEs and Startups to push firms from local beginnings to global reach. Policies include cutting regulation, opening government procurement, supporting failed entrepreneurs with “second chances,” and expanding financial accessibility through angels, crowdfunding, and SME stock markets.

South Korea also invests heavily in research, protects intellectual property, builds smart factories, and fosters links between small and large firms. Export vouchers, branding support, and trade fairs further help SMEs compete abroad. Together, these measures show how a country can design an environment where SMEs not only survive but also have the potential to grow stronger.

Another example of ecosystem-building comes from Korea Credit Data (KCD) [5], a fintech unicorn that has transformed how SMEs manage their finances. Its flagship platform, Cash Note, began as a simple bookkeeping app but has since evolved into a super-app used by almost two million businesses nationwide. Beyond accounting, it now offers financial management tools, marketplace functions, networking opportunities, and even information on government policies. By integrating these services in one place, KCD lowers barriers for SMEs to operate more efficiently and connect to broader markets.

A Question for Thailand

Despite Thailand’s existing supports for SMEs, only piecemeal aid is not sufficient in a fast-moving economy. The task now is to create an ecosystem where firms can acquire resources, technology, and networks for themselves. Without such a system, Thai SMEs risk falling behind in both competitiveness and sustainability.

The Korean model proves that success comes not from scattered policies, but from integrated strategies that match the business life cycle. For Thailand, the question is no longer whether SMEs are important, as we have already known they are. The real question is… are we ready to build the environment they need to flourish on their own?

This article is part of a study on “Developing Tools to Measure the Success of SME Promotion” by TDRI, supported by the Office of Small and Medium Enterprises Promotion (OSMEP).

Chakorn Loetnithat, Yos Vajragupta and Tan Chaimadee are Researchersat the Thailand Development and Research Institute (TDRI). Policy analyses from the TDRI appear in the Bangkok Post on alternate Wednesdays. 

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[1] Song, M., & Ahn, Y. (2024). The determinants of SME success in the Long Run: An ecosystem perspective. Applied Economics, 1-19.

[2] Şchiopu, A., Vasile, D., & Ţuclea, C. (2015). Principles and best practices in successful tourism business incubators. Amfiteatru Economic Journal, 17(38), 474-487.

[3] McEwan, G. (2015). Delivering entrepreneurship training and support. Local Economy, 30(5), 568-576.

[4] Rodríguez-Gulías, M. J., Fernández-López, S., & Rodeiro-Pazos, D. (2016). Growth determinants in entrepreneurship: A longitudinal study of Spanish technology-based university spin-offs. Journal of International Entrepreneurship, 14, 323-344.

[5] https://www.morganstanley.com/im/en-sg/institutional-investor/about-us/newsroom/press-release/kcd-secures-krw-100-billion-from-ms-tactical-value.html and https://technews180.com/unicorns-soonicorns/south-korea-unicorns/