Thailand is tightening payment rules for large companies dealing with smaller suppliers, seeking to ease cash-flow pressures on millions of businesses and reduce their dependence on borrowing.
The regulations, scheduled to take effect Nov. 2, will establish payment deadlines of 30 days for agricultural products and certain minimally processed goods, and 45 days for eligible transactions involving general trade, manufacturing and services, according to reporting by Borneo Bulletin and details published by Thailand’s Trade Competition Commission.
The measures are part of a broader government effort to address unequal bargaining power between large corporations and small and medium-sized enterprises, or SMEs, which frequently face financial strains while awaiting payments for goods and services.
Thailand’s SME sector could gain between 250 billion baht and 750 billion baht in working capital from shorter payment periods, depending on existing arrangements, according to estimates by the Thai Small and Medium Enterprises Council reported by The Nation Thailand.
Supree Thongpetch, president of the council, estimated that reducing payment periods from 60 to 45 days could free up approximately 250 billion baht. Cutting payment cycles from 90 to 45 days could potentially release as much as 750 billion baht.
The estimates represent potential improvements in business liquidity rather than direct government financial assistance.
The revised rules, published in Thailand’s Royal Gazette on Oct. 2, also seek to prevent larger buyers from delaying payments without reasonable justification or unilaterally changing contractual conditions.
Under the framework, covered companies must provide at least 60 days’ advance notice for changes to payment terms, subject to the regulations’ requirements. Large buyers may also be required to submit supporting evidence during investigations into potentially unfair trading practices.
The requirements generally apply to large businesses and major wholesale and retail operators generating at least 500 million baht in annual revenue in Thailand, according to The Nation Thailand. Violations involving unfair trading practices could result in administrative penalties of up to 10% of revenue in the year of the offense.
The changes are intended to strengthen the financial position of more than 3 million smaller businesses, many of which must pay employees, purchase materials and meet operating expenses before receiving money from larger customers.
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Delayed payments can force smaller suppliers to seek short-term financing, increasing costs and limiting their ability to expand production or invest in new operations.
Thailand’s Commerce Minister Suphajee Suthumpun has also directed attention toward the costs smaller companies face when operating through digital platforms.
At an Oct. 21 meeting, government agencies discussed fees and commissions imposed by platform operators, along with potential measures to improve competition in the digital economy, according to The Nation Thailand.
The initiative reflects a wider effort to reduce operating costs and create more balanced commercial relationships between businesses of different sizes.
Sudharma Yoonaidharma, chairman of the Trade Competition Commission, has identified prolonged payment periods as an obstacle to SME liquidity and business continuity, according to the Thai publication.
The commission intends to enforce the revised standards while helping businesses understand and comply with their obligations.
The payment reforms could provide a financial cushion for smaller suppliers by accelerating the collection of outstanding receivables and reducing the need for external financing.
Their ultimate impact, however, will depend on compliance by large buyers and the effectiveness of regulatory enforcement.
Source: Borneo Bulletin
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