The Thailand government, taking cue from other South East Asian (SEA) countries, has entered the domestic private equity (PE) arena, to encourage the small and medium enterprises (SMEs) .
The Thai Cabinet has approved setting up of the first government SME private equity trust fund worth 25 billion baht ($762.2 million) , according to a government announcement earlier, today.
Finance minister Sommai Phasee said that the fund would commence in February 2015. The government plans to contribute 5 to 50 per cent of the registered capital in high potential SMEs. The initial funding of 500 million baht has been approved for the fund, which will be administered via the Small and Medium Enterprise Development Bank (SME Bank).
The move comes after the a flurry of policy decisions taken by the government to support the small scale sector. The recently announced measures include, a reduced import duty for industrial machinery for SMEs, a nano-finance scheme and the lowering of corporate income tax.
These measures are seen as part of the government’s focus on spurring growth in the small and medium enterprises (SMEs) by giving them easy access to finance. Recently, the SME Bank too, had announced a launch of a 100 million baht ($3.1 million) venture-capital fund to support high-potential SMEs
“We need to set up this fund to support small and the medium enterprises (SMEs), which account for more than one-third of the country’s gross domestic product (GDP),” said the finance minister while announcing the new government PE fund for SMEs, adding: “Many of them cannot run the business due to the shortage of financial liquidity. This fund will help them solve this issue.”
Yongyuth Mayalarp, the government’s spokesman, said on the government’s daily TV program that the funding (of the SMEs) would be divided into two phases. For the first phrase, each selected startup will be given five million baht ($0.15 million). In the second phrase, if the SME proves its high potential, it will be considered for further funding of up to 30 million baht ($0.91 million).
He said that this fund might also be granted the same tax incentives as a real estate investment trust (REIT).