2. The regional entrepreneurial ecosystem

The Fourth Thailand SME Promotion Master Plan (2017-2021), prepared by the Office of Small and Medium Enterprise Promotion (OSMEP), sets out the aim: “to foster the growth of Thai SMEs, enabling them to compete in the international arena, strengthening them to become a major driving force in the country’s economy”. It puts the emphasis on supporting all Thai SMEs to upgrade into smart SMEs, i.e. using appropriate technology to support their activities. The Chiang Mai and Chiang Rai regional innovation cluster can be at the forefront of this development with respect to integrating technology into start-up and scale-up SMEs in advanced agriculture and biotechnology and food-for-the-future.

The generation of innovative start-ups and scale-ups1 will be critical for the development of the advanced agriculture and biotechnology and food-for-the-future sectors in Chiang Mai and Chiang Rai because these are the firms that will exploit new R&D-based technologies and take them to international markets, hence generating regional income growth. Scale-up enterprises in particular make disproportionate contributions to the creation of new jobs and help build investment confidence in a region and attract inward foreign direct investment (FDI).

In recent years, both innovative start-ups and scale-ups have become an important target for public policy initiatives internationally. These policies seek both to create a favourable business environment in which innovative start-ups and scale-ups can emerge and to target specific potential start-up and scale-up firms and entrepreneurs with support such as advice, finance and networking.

This chapter examines the actions that need to be taken in Thailand to strengthen the Chiang Mai and Chiang Mai regional entrepreneurial ecosystem in advanced agriculture and biotechnology and food-for-the-future, in order to provide an environment in which innovative start-ups and scale-ups are encouraged. It argues that for the long term health of the economy, mechanisms need to be in place for the OSMEP to:

  • Identify successfully those start-ups and existing SMEs that are most likely to be innovative and become scale-ups and encourage others to develop the necessary characteristics for such a step.

  • Support them through the process by ensuring they have access to knowledge (technical, financial and business development knowledge), mentoring, contacts including international contacts, business acumen, opportunities to share infrastructure, especially technology infrastructure, and finance. Some of this involves the OSMEP acting directly and some through third parties including universities.

  • Ensure that successful innovative start-ups and scale-ups help others to follow by taking part in evaluations, information dissemination and future mentoring programmes. This itself feeds into the OSMEP work in seeding and identifying new innovative start-ups and scale-ups.

  • Lead this policy area and partner with other organisations to develop complementary activities for innovative start-ups and scale-ups.

There are challenges to overcome. In the Northern Region, there are too many very small firms which are not growing, few medium-sized firms, few technologically-advanced firms and low levels of financial capital. Only 0.47% of firms are classified as medium-sized (50-200 employees with a turnover of THB 500 million),2 whereas small enterprises account for 99.26% of enterprises. Similarly, only 1.2% of enterprises are in professional, scientific and technical services. Almost all capital is from sources internal to Thailand: 99.9% had no foreign investment or foreign share holdings3. There are very few major national and international firms in the key sectors which could act as anchor firms to mentor SMEs into new business models and introduce them into product and service value chains. Low levels of growth capital need to be addressed.

Furthermore, the Fourth Thailand SME Promotion Master Plan notes that Thai SMEs are likely to face increasing competitive pressures resulting from their lack of knowledge and capability in business management, weakness in technological capabilities, and limited capacity to grow and compete internationally. This suggests low levels of absorptive capacity – an organisation’s ability to identify, assimilate, transform, and use external knowledge, research and practice (Cohen and Levinthal, 1990).

A further issue is to address low entrepreneurial aspirations in Thailand in the areas of innovative and growth-oriented entrepreneurship.

The sections below review 10 pillars of the Chiang Mai and Chiang Rai regional entrepreneurial ecosystem corresponding to the OECD regional entrepreneurial ecosystem analytical framework. They identify policy issues to address in each pillar. Particular priorities in Chiang Mai and Chiang Rai with respect to innovative start-ups and scale-ups in advanced agriculture and biotechnology and food-for-the-future are:

  1. 1. access to finance for scale-ups;

  2. 2. talent and skills for entrepreneurship and innovation; and

  3. 3. entrepreneurial culture and networks.

The chapter annex offers an overall SWOT analysis of each pillar. The key issues are also outlined in Table 2.1 below.

In developing appropriate policies in these areas, it is essential to adopt a strong focus on start-ups and existing SMEs with the potential to grow, that have scalability (i.e. when their input increases, their output increases faster), and are innovative.

To be a player on the national or international scene, firms need to be conveniently connected with collaborators, funders, markets and suppliers. Sometimes physical connectivity is needed but good ICT connectivity can work very well and is sometimes more reliable. For ambitious firms in Chiang Mai and Chiang Rai, physical connectivity to other parts of Thailand’s domestic market and international markets is crucial, particularly with ASEAN countries. Connectivity with Bangkok is especially important.

There are two main airports and a number of smaller ones. Chiang Mai International Airport has some 10 million passengers a year, one-fifth of them international. It is a major gateway, with many flights to Bangkok and to China, Singapore and Malaysia. Chiang Rai International Airport is a main domestic gateway airport with frequent Bangkok flights. However there are no direct flights or trains running between Chiang Mai and Chiang Rai. The easiest way to get to Chiang Rai from Chiang Mai is by bus or car taking around three hours. Chiang Mai will benefit from a new rail route linking Chiang Mai to Bang Sue, with onward connectivity to Laos, Cambodia and Malaysia.4

ICT connectivity is improving. The “Digital Thailand” initiative aims to transform Thailand through the use of digital technologies in all socioeconomic activities by developing infrastructure, human capital, and other digital resources. There has been progress in putting the digital vision into action, for example through the implementation of “smart city” pilots in Phuket and Chiang Mai and large ICT infrastructure improvements such as extending the coverage of broadband internet to all villages.5

Moving physical goods through the supply chain from the North is costly. According to the World Bank Logistics Performance Index, Thailand ranks behind Malaysia and Singapore in overall logistics performance, but ahead of Cambodia, Laos and Myanmar (World Bank, 2018). Logistics costs are currently a limiting factor to importing and exporting. Most raw materials and finished goods are still moved by trucks, which is costly, and there is very little supply chain transparency and very little automation or technology to track processes or identify bottlenecks.

Demand opportunities for scale-ups in advanced agriculture and biotechnology and food-for-the-future are still in the early stages. However, the market for healthy, functional and medicinal foods is expanding as the trend towards healthier living and health-related products grows. The opportunities are being driven by increasing levels of wealth, improved education, targeted government health and wellness campaigns, and globalisation. ASEAN shoppers are increasingly aware of the importance of healthy living, fresh food, nutrition and product sourcing. Another driver will be growing appetites from Chinese consumers for quality agricultural products from Thailand.

The national government is supporting efforts to improve the value chain by focusing on technology and innovation in the following areas:

  • Upstream – farming systems, seeding, water, soil and nutrient management, harvesting.

  • Midstream – dehydrating, modifying food, packaging, increasing shelf life, food safety.

  • Downstream – marketing, distribution.

Branding the regional cluster to distinguish it from other places will enable start-ups and scale-ups to identify with it and use it in their marketing in international markets. A recurrent theme is a lack of a profile of regional success stories.

There is also significant potential to use public procurement in areas related to healthy food to stimulate start-ups and scale-ups in Chiang Mai and Chiang Rai. Box 2.1 gives an example of a scale-up policy in Canada which aims to scale up companies in health and biosciences by creating a platform for procurement of health innovations by a network of public and private sector health organisations.

Business development services suppliers provide advice, consultancy, management training and mentoring to scale-ups to help them improve their management practices and technologies and to develop entrepreneurial capacity.

Private business services suppliers are service minded, but costs are still high for SMEs. Therefore there is substantial reliance by SMEs on national public business development services programmes. For example, the OSMEP One-Stop Service is present in every province. It offers SMEs support with accessing researchers and experts, testing and analysis, standards and regulation, equipment and machinery and incentives to work with new technology so that they can scale up. However, these programmes provide largely basic support to large numbers of firms, and there is potential to offer public support to private providers to supply higher-quality, more specialised business development services to firms with scale-up potential.

The aim should be to upgrade SMEs through critical points in their development (e.g. start up, scale up, first export, new product). Product and market training services could include value chain competitive analysis, upgrading use of technology (especially digital technology), market analysis, business canvas models6, and managing risk and partnerships. Capacity building support should also be provided in intellectual property (IP) and IP protection.

Groups of innovative start-ups and potential scale-ups in advanced agriculture and biotechnology and food-for-the-future could also be supported with business development services to upgrade their business models at the same time as integrating R&D in their products. SMEs should be selected for more intensive business development support on the basis of their absorptive capacity although all SMEs need help in scanning for business opportunities, short to long term.

Common programmes and collective action between business support agencies are also required. This would be helped by the creation of an entrepreneurship hub through which business services and mentoring would be delivered to groups of SMEs.

A further consistent message from regional stakeholders in the provision of business services in the Northern region is that local intervention is needed in training the trainers who then mentor SMEs.

Scale-up entrepreneurship is favoured by the presence of highly-skilled entrepreneurs in a region. In advanced agriculture and biotechnology and food-for-the-future a key potential source of scale-up entrepreneurs is Science, Technology, Engineering and Maths (STEM) graduates from regional universities. However, a challenge is that many STEM graduates from Chiang Mai and Chiang Rai universities are attracted out of the region to work in large employers (like CP, Betagrow, Central Foods, Thai Union Frozen Foods and Thai-Bev) in Bangkok and other regions, which generally offer higher salaries and more diverse opportunities. This may discourage graduates from setting up their own firms. There are also few large enterprises in Chiang Mai and Chiang Rai where employees can receive training and experience in business and management that could help them in subsequently creating their own enterprises.

Potential innovative start-up and scale-up entrepreneurs can also be mentored locally or attracted from other regions and countries. There are government programmes in Thailand that support this, including Career for the Future Academy (run by NSDTA) for mentors and entrepreneurs; and the Smart Visa programme (run by BOI with NIA and DEPA) designed to attract highly-skilled workers, investors, executives and start-up entrepreneurs wishing to work or invest in targeted STEM industries in Thailand.

Serial entrepreneurs have been found to be an important driver of cluster development in many OECD countries. For example in Cambridge, United Kingdom, they have created many spin-out enterprises from the University and other companies (Beveridge, 2001). There is very little evidence of serial entrepreneurship in Chiang Mai and Chiang Rai as yet, but the Northern Science Park has created a fund to reinvest in entrepreneurs to “serialise” them. This would build on the expertise of alumni and develop them as mentors, as is the case in the Little Onion Factory (https://www.littleonionfactory.com/).

Training and mentoring needs to be more available for upskilling SME managers in firms with scale-up potential, for example in the areas of management, marketing and exporting. Mentoring could be organised into groups of SMEs with scale-up potential, enabling co-learning and increasing networking. In the past, management training programmes have been fragmented across agencies and short term. A better approach would be to create a platform management programme with different streams according to SME sector and size of firm and deliver a longer-term programme in co-operation across different government agencies.

Universities, especially Business Schools, should also be more involved in building management skills in industry. Their faculty could provide mentoring and consultancy to start-ups and scale-ups. They could also be involved in introducing continuous professional development for managers and technical staff, as is common in the UK for example.7

In general, there are shortages of skilled workers in agritech and biotechnology in Chiang Mai and Chiang Rai. Most of the relevant technical education is geared towards food sciences (Chong, 2019). A greater emphasis on STEM education as well as critical thinking and decision making skills would complement this and help fill shortages of a range of skills needed for a growing technology company – qualified software engineers, coders, technicians and research scientists etc.

Universities could help ensure that alumni have relevant business skills through developing joint scientific and engineering degree programmes with business schools, involving industry practitioners as well as scientists. An example is the MSc in BioBusiness at Birkbeck, University of London.8 This approach would be consistent with the National Biotechnology Policy Framework 2012-2021 in which the Thai government called for human resource development programmes to increase the number of graduates in the field of modern biological science.9 Joint programmes could be developed with international advanced agriculture firms.

Universities could also collectively adopt new models of teaching and new targets to address start-up and scale-up needs, e.g. through advanced apprenticeship programmes, internships, Masters dissertations on industry-relevant problems, or a classroom in a scale-up factory. The latter approach is illustrated by the Faculty on the Shopfloor as delivered by Coventry University in the United Kingdom (Box 2.2).

Universities in Thailand often have a problem in teaching the latest skills because of out-of-date teaching materials, kit and methods. Academic staff could be encouraged to apply for study leave to update their knowledge and practice abroad. This would be on an ‘education for return’ basis as is practised in Malta’s university where agreement to go often involves a contractual commitment to return for a period of time. Involving industry in syllabus development also leads to more up-to-date curricula.

Industry mobility schemes can also play a role in upgrading skills in SMEs. Existing public programmes in Thailand include Talent Mobility (operated by ONES), which relocates personnel temporarily from universities and public research institutions to the private sector to increase business competencies in innovation, and Work Integrated Learning (operated by ONES), a programme for producing vocational and undergraduate level workers for particular STEM sectors. In addition, students could undertake ‘on the job’ technology transfer to SMEs.

Start-ups and scale-ups need to be able to access the latest R&D relevant to their own product and service development in order to take innovations to market. The regional universities and science parks play a key role in injecting technologies into firms in advanced agriculture and biotechnology and food-for-the-future in Chiang Mai and Chiang Rai. However a key barrier is the absorptive capacities of existing SMEs.

A major strength of Chiang Mai and Chiang Rai is the knowledge resources and services that their universities are providing in advanced agriculture and biotechnology and food-for-the-future and their recent engagement with start-ups and scale-ups.

Table 2.2 lists universities and faculties with relevant specialist expertise and gives examples of their industry engagement practice.

A major asset and potential anchor for the regional entrepreneurial ecosystem is Chiang Mai University, which was designated as the first provincial university in Thailand. Its mission is to establish innovation in the region including through relevant R&D and generating appropriately skilled labour for industry development. The University has some 2 200 researchers.

In Chiang Rai, a key player is Mae Fah Luang University. Its tea and coffee institute provides specialist expertise to local firms and supports them to improve the standard of their products. The University has its own fund for researchers, which can be used for collaborations with regional start-ups and scale-ups, helps SMEs with IP issues, and helps firms apply for Ministry of Industry funding.

Rajabat University and Rajamangala University of Technology Lanna have somewhat different missions. Rajabat University trains teachers and has a budget from the government to leverage the University’s skills for local community development. It has no specific budget for SME development, but holds start-up competitions and organises seminars for start-up entrepreneurs. Rajamangala University of Technology Lanna is a vocational training university and organises a range of training and development activities with local industry.

However, the full potential driving role of these universities for the development of advanced agriculture and biotechnology and food-for-the-future in the regions is constrained by limited budgets to develop R&D that can be translated into commercial opportunities for SMEs in key industries for their regions. For example, although receiving government support, Chiang Mai University has to find matching funding for every project. It does this by submitting proposals to different ministries and to the Chiang Mai provincial government budget. Around half of the budget is from ONES.

In a promising development, Chiang Mai University has recently created a licensing holding company. This enables it to gain revenue by licensing technology to existing companies or tech start-ups. This should increase knowledge transfer to start-ups and scale-ups in a familiar model in advanced economies.

The Northern Science Park (NSP), established in 2012, is based at Chiang Mai University and is the bridge between university and industry. The responsible agency is the Science Park Promotion Agency. The NSP works on an open innovation concept, bringing in businesses to participate in R&D work as needed and seeking commercialisation opportunities. Its objectives include developing successful start-ups and scale-ups and providing opportunities to access venture capital.

The NSP works on a three-stage process from start-up through to scale-up: pre-incubation (3-6 months), incubation (up to 3 years) and acceleration (depends on company). It operates three models:

  • ‘Inside Out’. This involves licensing to an industry translational research fund to take research to proof of concept stage, and then to upscale the research, including IP protection.

  • ‘Outside In’. What industry wants. This means finding appropriate experts in the university (working with 45 members of staff) and offering appropriate consultancy and research inputs.

  • ‘Start-up Approach’. Start-up from research. This involves several sectors, students, alumni and academics.

The NSP has generated some 150 start-ups from 7 universities including approximately 50 in Chiang Mai. Some 17% are in medical and biotechnology, one-half are in agriculture, one-quarter in IT software and digital content, and 10% in energy. However, the largest of these start-ups had only 15 employees in 2019, so the NSP is some way from creating substantial scale-up activity. Most companies are at early stages of development with nearly half getting seed-corn funding and a small percentage waiting for fund-raising (5%). Exit is usually through acquisition.

The NSP might also encourage more commercialisation of R&D to start-ups and scale-ups in the regions by hosting NSTDA events in the field of advanced agriculture and biotechnology and food-for-the-future in the Northern Region. These events are designed to bring technology nearing market to potential SME customers, such as the Tech Shows held in Bangkok10.

Knowledge exchange from universities, research laboratories and science parks to start-ups and scale-ups in the regional cluster faces a substantial barrier in the low capacity of SMEs to absorb and apply the relevant technology developed by the universities and the NSP. This gap between university and industry is known locally as the Valley of Challenge. For example, a recent Global Entrepreneurship Monitor (GEM) National Expert Survey of Thailand (Guelich, 2018) reported that lack of R&D transfer from research institutions, universities and/or government agencies to enterprises is considered a major constraint by experts in Thailand. A number of aspects to this barrier lie in limited SME absorptive capacities.

Financing is an important aspect of the problem. Although there are some funding measures, such as the IRTC, which provides matching funding at 50% to develop R&D-based products in start-ups and scale-ups, there is a general lack of support for growth finance.

Also missing is a realisation by start-ups and scale-ups of the need to assert and protect intellectual property (IP). This is crucial for SMEs to take full advantage of innovations.

Lack of skills and networks can also be an issue. More could be done in Chiang Mai and Chiang Rai to transfer technology from universities to start-ups by involving a student who works with a researcher on the commercialisation. A mentoring programme can also play a role. There are a number of foreign mentors in Chiang Mai and Chiang Rai, often brought in by venture capital firms, who come for a number of days because they can see the high potential of an SME. Mentors also come to the regions from Bangkok. However, Thailand lacks a strong body of retired people working as mentors, which by contrast is very important in innovation clusters in other countries, including in Silicon Valley, United States.

Ecosystem leadership is about developing a vision and strategy for entrepreneurship and innovation that key local stakeholders support. It implies a system for identifying and addressing obstacles to the development of the advanced agriculture and biotechnology and food-for-the-future industries in Chiang Mai and Chiang Rai working across stakeholders. In some regional entrepreneurial ecosystems this leadership role is taken by prominent successful entrepreneurs, businesses, HEIs, or cluster management organisations. However, ecosystem leadership can also be driven by government actors working at the regional level in a way that brings together local stakeholders to assess how to respond to local issues.

The BOI, DIP and the OSMEP are key government departments and bodies leading policy support for SMEs and start-ups nationally. However, they work largely with a national lens and do not focus strongly on identifying and responding to regional bottlenecks affecting entrepreneurship development in particular driving sectors for future growth of the Thai economy, such as advanced agriculture and biotechnology and food-for-the-future in Chiang Mai and Chiang Rai.

Provincial government could potentially work in collaboration with the national government organisations to help with tailoring of SME and entrepreneurship policies to regional needs. However, the provincial level of government has currently not made strong impacts on regionalising the nature of SME and entrepreneurship support.

Another option for generating the necessary regional entrepreneurial ecosystem leadership is the creation of a cluster management organisation for advanced agriculture and biotechnology and food-for-the-future in Chiang Mai and Chiang Rai. This could work with national and regional government ministries and agencies, HEIs, research laboratories such as NSTDA, science parks, and private firms and their representative organisations, including the Federation of Thai Industries and Chambers of Commerce. It would identify regional bottlenecks in the development of the advanced agriculture and biotechnology and food-for-the-future sectors and develop tailored and co-ordinated solutions. The OSMEP could take a leadership role in setting up this organisation and providing basic operational resources.

A shared policy strategy needs to be developed involving all these stakeholders and setting out the respective roles of the different public ministries and agencies. It could be modelled on regional strategies profiled by the European Entrepreneurial Regions project,11 which identifies and rewards European Union regions developing an outstanding and innovative entrepreneurial policy strategy. As well as identifying the issues that policy needs to address and prioritising the policy interventions in areas such as business advice, finance and skills, developing a regional entrepreneurial ecosystem development strategy for Chiang Mai and Chiang Rai (potentially focused on the advanced agriculture and biotechnology and food-for-the-future cluster) would help address other policy challenges affecting the regions, such as increasing coherence across the interventions of different public bodies, making programmes more sustainable over time, and improving policy performance by setting goals and measuring outcomes.

Finance is a key area where start-ups and scale-ups need support. Very small firms do not have spare capacity for innovation and growth unless funded. Access to bank loans is important, but access to equity finance and a range of alternative financing instruments such as business angel investment and crowdfunding are also vital aspects of a healthy regional entrepreneurial ecosystem.

In terms of access to bank loans, there are a number of obstacles for start-ups and scale-ups in Chiang Mai and Chiang Rai. Based on a Bank of Thailand study, as many as 5.2 million SMEs received loans from Thai commercial banks in 2017. However, the DIP has identified the following significant barriers to accessing bank financing, which are often likely to be particularly important for potential scale-up enterprises:

  • Lack of historical records and information at financial institutions.

  • Complexity and difficulty of the application procedures.

  • Lack of loan collateral.

  • High up-front costs (e.g. 3% of desired credit line).

  • Inflexible credit plans and facilities.

  • Failure of banks to regularly review SME performance.

  • Lack of alignment between the key performance indicators (KPIs) of banks and SME pain points.

  • Lack of competition among banks for SME business and lack of diversity of financing offers.

  • Aggressive pursuit of businesses that do not require capital by banks.

Venture capital is available, including through the firms listed in Table 2.3, and the government has introduced tax privileges for investors to boost supply, such as income tax exemptions for incomes from investments. However, venture capital is generally in short supply in Thailand. Domestic investments could be complemented by foreign venture capital. However, foreign venture capital firms often have difficulty finding suitable businesses in Thailand due to the restrictions of the Foreign Business Act and the fact that larger deals are constrained by the limited numbers of SMEs in Thailand with an Asian region or multi-national focus. Thailand’s banking regulations are not conducive to conducting international business. The inability to trade in U.S. dollars or hold foreign currency and the high cost of letters of credit are also significant obstacles for SMEs.

The Market for Alternative Investment is a stock exchange for smaller firms in Thailand. SMEs can raise capital there if they have over THB 1 million in paid-up capital after IPO. It provides a platform to raise capital at a lower paid-up level than in the stock exchange of Thailand. In 2016, there were 134 listed companies with a market capitalisation of THB 425 billion. Of these, the only company from the advanced agriculture and biotechnology and food-for-the-future sectors in Chiang Mai and Chiang Rai was Sunsweet in Chiang Mai. The other companies listed were mainly health service firms or property and construction firms. There were none in Chiang Rai.

There is an array of government support programmes that help start-ups and scale-ups to access finance for their development. Current national schemes which are relevant in providing funding to support start-ups and scale-ups advanced agriculture and biotechnology and food-for-the-future in Chiang Mai and Chiang Rai are:

  • Start-up Voucher (operated by the NSDTA). This supports market expansion for tech start-ups. It offers up to THB 800 000 covering up to 75% of eligible expenses for a market study and consultancy fees from a marketing expert to access foreign and domestic markets. The voucher appears to be effective. However, the focus should be on developing technologies needed in the future. Quality control and feedback also need more consideration.

  • Innovation Vouchers (operated by the NIA).

  • Technology and innovation-based Enterprise Development Fund (operated by the MHES). This offers a matching grant or ‘conditional recoverable’ grant for the development of new products or services or new production/service processes. Target groups are university or vocational education students or students who graduated not over 7 years ago, university or research institution personnel, SMEs, and start-ups which affiliate with universities or research institutions.

  • Competitiveness Fund Programme (operated by the BOI). This is a new finance programme for private sector companies in 10 target industries.

  • Research Gap Fund (operated by the NSTDA).

  • R&D and innovation tax incentives (operated by the NSDTA). All private sector companies are eligible for a tax incentive of between 200% and 300% of R&D and innovation (R&D&I) expenditures up to a project value of THB 3 million. Eligible costs include R&D, training, automation and equipment, IP and technology acquisition, design and IP registration.

  • Credit guarantees (operated by the Thai Credit Guarantee Corporation – TGC). This is a state-owned specialised financial institution. This aims to ensure that viable SMEs with good credit and at least three years of operational experience have access to bank loans and are not constrained by their lack of capital. A scheme could also be developed to permit SMEs to use IP as collateral. The TCG typically charges SMEs 1.0-2.0% annually based on their annual credit limit.

  • Corporate Income Tax exemption (operated by the Ministry of Finance). Under this programme, start-ups can receive corporate income tax exemptions when they obtain venture capital and business angel investments.

  • Innovation and Technology Assistance Programme (ITAP) (operated by the NSDTA). This comprises 18 networks that provide finance for innovation and consultancy. Three of the networks are in the North, accounting for some 13% of ITAP-supported projects in food and agriculture. A new programme ITAP Innovation-Driven Entrepreneurship is being launched for SMEs taking research from lab stage into commercialisation stage with a focus on business growth. However, a bottleneck lies in an insufficient budget for a blanket approach that would enable the programme to cover all SMEs coming forward for support and the problem of lacking a mechanism in current conditions that could channel support only to suitable SMEs that have absorptive capacity.

  • SMEs Private Equity Trust Fund (operated by the Government Savings Bank). This Fund is worth THB 2 billion for private equity investments in start-ups, scale-ups and SMEs.

  • Venture Capital Fund (operated by the OSMEP). This is a public venture capital fund that invests in innovative SMEs. The scale of investment has currently been limited, reflecting difficulties in identifying appropriate targets. In the Venture Capital for SME-OTOP programme, government banks provide another source of capital for SMEs through joint investment.

  • The Small and Medium Enterprise Development Bank of Thailand (SMED Bank) is a state-owned bank that supports SMEs through venture capital funding and business consulting workshops.

However, there is as yet little explicit targeting of the schemes above on those start-ups and scale-ups with the most potential for innovation-based growth in the sectors with potential to drive future Thai economic growth, including high potential firms in advanced agriculture and biotechnology and food-for-the-future in Chiang Mai and Chiang Rai. It is concerning that there are several examples of export-orientated SMEs from Chiang Mai and Chiang Rai (i.e. some of the firms with the highest aspirations) moving to Singapore in order to obtain risk-willing capital. A further obstacle is that there is not enough complementary consultancy, advice, mentoring and other support provided to start-ups and scale-ups alongside the financing.

Furthermore, business angel finance is essential. As Politis (2008) demonstrates, business angels perform a number of important support roles for the businesses they invest in alongside finance, by including business mentoring, network development and due diligence in their interactions. While smart money exists in Thailand, what is desperately short is the kind of finance which brings mentoring into the financing process. Where the Northern region is particular weak is in angel investors. For example, no investments are listed in Chiang Mai and Chiang Rai in the Thailand Startups organisation list of angel investors.12

There is scope for local policy makers to work with local business people and financial organisations to develop a community of business angels with a specific focus on advanced agriculture and biotechnology and food-for-the-future. A model could be the London’s Angels programme in MedCity, which brings potential investors together with life sciences experts. It is aimed both at people who are experienced investors as well as people who have little or no experience in the life sciences sector http://www.angelsinmedcity.org.uk/.

Crowdfunding is supervised by the Securities and Exchange Commission but needs to be expanded and much better targeted to smart SMEs and scale-ups. An initiative could be taken to stimulate the creation of a crowdfunding platform for innovative SMEs with a Northern regional focus.

Two major local regulatory conditions, one enabling and one a bottleneck, dominate for innovative start-ups and scale-ups in advanced agriculture and biotechnology and food-for-the-future in Chiang Mai and Chiang Rai. The enabler is the creation of a cluster-based special economic zone (SEZ), Food Innopolis, providing tax incentives to innovative food enterprises located at the NSP at Chiang Mai University, as well as in various other locations in the country. Through the SEZ, investment projects in specific food-related industries are exempt from corporate income tax for five to ten years with a 50% reduction in tax for a further five years (or an additional two years of exemption). In addition, the projects have access to further key national programmes and incentives. Eligible investments can include R&D and scientific testing activities.

The bottleneck is the slow-moving registration process involved in gaining Thai Ministry of Public Health, Food and Drug Administration (FDA) approval for new innovative products. Backlogs occur in the process to obtain licenses for moderate- to high-risk medical devices, novel foods, food supplements, and innovative herbal products. Stakeholders report that the FDA lacks sufficient qualified officers to examine technical dossiers to assess the quality, efficacy, and safety of products. As many of the start-ups and scale-ups in advanced agriculture and biotechnology and food-for-the-future in Chiang Mai and Chiang Rai are innovating through developing health-related products, they need FDA approval before they can market. However, the process is not timely. To get around the problem, many Thai SMEs now seek approval through the Singapore FDA in order to sell products domestically and internationally, which also gives wider credibility and branding. The problem is being addressed nationally but further support could also be offered locally, for example by business development services consultants, to support SMEs through the process without unnecessary delays.

Attitudes to entrepreneurship are very positive in Thailand, particularly in the North of Thailand. According to the Global Entrepreneurship Monitor (GEM), some 74% of male adults in the North of Thailand perceived entrepreneurial opportunities in 2018, which is the highest rate in the country. The percentage of women in the North who view entrepreneurship as a desirable career choice was also the highest in the country at 81% (Guelich, 2018). On the other hand, Thais have a high fear of failing compared to other ASEAN countries, 64% for females and 56% for males (Guelich, 2018). This may explain why many Thai entrepreneurs are reluctant to be a ‘first mover’ and may also contribute to a ‘copy culture’, whereby entrepreneurs are more comfortable starting a business based on an existing model.

There is particular potential to stimulate more growth-oriented entrepreneurship among women in Chiang Mai and Chiang Rai. The GEM survey indicates that in 2018, women entrepreneurs accounted for 32% of start-up entrepreneurs in Bangkok, but only 11% in the North. Furthermore, female entrepreneurs were less likely than men to expect to grow their companies and much more likely to be fearful of failure (69%), perhaps because they are “entrepreneurs of necessity” (Guelich, 2018). In seeking to support an entrepreneurial culture, there is a need to recognise gender differences and provide appropriate support for women entrepreneurs.

There are many initiatives offered by banks and entrepreneurs to help build an entrepreneurial culture by offering networking and funding to help entrepreneurs to grow their businesses. Examples include NEXT Real by Land & Houses, Kaisikorn Bank’s S100 and Everest programmes, SME Transformation, and Siam Commercial Bank’s (SCB) Innovative Entrepreneur Programme and Young Entrepreneur Programme. Participants pay high fees to attend but are given access to very successful business people and entrepreneurs. These tools help to promote entrepreneurship and develop positive role models.

Two networks of entrepreneurs are present in Chiang Mai and Chiang Rai, one local and one national. The local one is key for the development of the regional innovation cluster: Chiang Mai Entrepreneurship Association was founded by Thai and international entrepreneurs in Chiang Mai to “connect entrepreneurs, build an ecosystem and develop local talent.” This network could be further supported at the regional level, for example by hosting joint network events and developing a regional profile for successful entrepreneurs in the Association.13 This would further help build the local entrepreneurial culture.

There is also a case for developing a dedicated public programme focused on influencing attitudes to entrepreneurship among the populations from which high-value start-ups and scale-ups are most likely to come in advanced agriculture and biotechnology and food-for-the-future in Chiang Mai and Chiang Rai. In particular, this includes researchers and graduates in relevant university departments and managers of existing SMEs in the sectors. As well as awareness-raising on entrepreneurship opportunities and issues, policy needs to provide people from these populations with finance, help and incentives to change the mind-set of potential entrepreneurs to become aspirational and ‘smart’. In particular, universities can play key roles in improving entrepreneurial culture, both by embedding high-quality teaching of entrepreneurship throughout the curriculum and through working on innovation and business development with local start-ups and scale-ups.

One of the key existing initiatives to promote an entrepreneurial culture is the Startup Thailand initiative, launched by the National Innovation Agency (NIA) in 201614. It involves eight start-up ecosystem development programmes designed to build up awareness, increase ease of doing business, strengthen the ecosystem, and provide incentives and support. These programmes help start-ups to utilise local resources for their product and service development and help support entrepreneurship in potential driving sectors of Thailand’s future growth (“locomotive” industries).15 Programme 4 is entitled ‘Startup regionalism’. This national initiative needs to be better exploited in the Northern region in order to develop grassroots communities, as has been the case with a the Startup Canada initiative (Box 2.3).

A further option to support entrepreneurship in Chiang Mai and Chiang Rai is to harness the talents of the many highly-skilled and often entrepreneurial return migrants coming back from Bangkok and abroad for entrepreneurship. The OSMEP could introduce a programme providing some resources in order to organise and lubricate the processes of integrating those who are interested in entrepreneurship into the entrepreneurial ecosystem by funding awareness-raising, mentoring and networking activities. As has been found in the Czech Republic (Bernard et al., 2013), returnees have often acquired highly valuable knowledge and know-how as well as personal contacts for entrepreneurship projects. Their participation in social networks focused on entrepreneurship and involvement in entrepreneurship support initiatives is therefore desirable. They may wish to start businesses themselves, or they may be able to advise local entrepreneurs about opportunities using their networks and knowledge. Universities could facilitate this by leading in creating and maintaining networks of entrepreneurs and asking return migrants to speak to potential entrepreneurs, complementing the Entrepreneurial University programme introduced by ONES.

Networks are important for start-ups and scale-ups by giving access to knowledge about technologies, markets, suppliers, and other opportunities. They are also important to co-ordinating actors in developing and implementing a regional entrepreneurial ecosystem strategy.

There is an increasing number of networks and networking events in Chiang Mai and Chiang Rai, such as in tea and coffee, which support entrepreneurs and serve to raise the profile of the cluster nationally and internationally. However, there are also weaknesses in the networks related to:

  • lack of involvement of larger companies and ‘smart firms’ in local networking activities;

  • lack of engagement of universities in local networking activities, other than those set up by the universities or the NSP themselves;

  • lack of trust between firms; and

  • an absence of coordination of and between networks.

Thus a local policy intervention is needed to identify how the network provision can be strengthened, including how to incentivise relevant academics (and students) to play a full part in networks and how to support larger SMEs and entrepreneurs with links to university-based knowledge. A lead on co-ordination is also required.

Three types of networks operate in Chiang Mai and Chiang Rai that are relevant to advanced agriculture and biotechnology and food-for-the-future:

  1. 1. Networks of generic SME representative bodies and their regional sub-bodies – Chambers of Commerce and Federation of Thai Industries (FTI);

  2. 2. Sector-specific cross-boundary initiatives – Thailand Food Valley North; and

  3. 3. The national TCELS network and national networking bodies.

These are discussed below.

The Chambers of Commerce and the Federation of Thai Industries are important membership and networking organisations active in the Northern Region that also provide support for industry development. The Chamber of Commerce in Chiang Mai has 700-800 members in a range of sectors, with a weighting towards medium-sized firms. One of its main roles is export promotion for SMEs in conjunction with the OSMEP. The Federation of Thai Industries (FTI) is a non-profit organisation with government and private sector support. Its activities include a programme for the development of the agro-food industry start-ups, including financial support to acquire machinery and channels for on-line marketing. The FTI Biotech Industry Group in Chiang Mai has some 30 member companies, including about 20 companies which are relatively advanced. More than 100 are showing an interest in joining. However, in spite of FTI efforts to encourage larger healthcare companies to join the club, they have not yet joined.

There is an opportunity to make greater use of these networks to channel university research to start-ups and scale-ups in the advanced agriculture and biotechnology and food-for-the-future sectors. An example of good practice is the Innovation Longan project.16 This is led by the FTI Chiang Mai Chapter with partnership from the Research and Development Innovation Service, NIA, and NSTDA Northern Network. Longan is one of the prize fruits grown in northern Thailand, especially in Lamphun province in Chiang Mai. The Innovation Longan project helps local SMEs to differentiate their products and access new markets exploiting active ingredients of longan – anti-oxidant and anti-carcinogenic nutrients suitable for medicine and supplementary foods – by introducing new product and process innovations researched by Chiang Mai, Maejo, Kasetsart and other universities. The initiative steers university research towards areas with business development feasibility and market potential and promotes market-oriented innovations to SMEs and investors. More projects of this kind could be developed.

Thailand Food Valley is a cluster initiative with 300-400 member firms spanning small, micro and large companies. It includes a geographical focus in the north in the form of Thailand Food Valley North, which includes ‘Command Centres’ in Chiang Mai and Chiang Rai. The initiative includes networking among the members, as well as services for SMEs such as training in innovation, help to develop prototypes and product packaging through Chiang Mai University and government funding support for marketing, including sending entrepreneurs on study visits aboard, especially to the Netherlands. The project has an inclusive board representing key stakeholders in the food industry as well as provincial government authorities. It receives NIA funding and a grant from the JICA association. The Chiang Mai Command Centre is in the local office of the FTI, and has two full-time employees and many advisers.

The Food Valley initiative is not yet fully mature. The member firms work together but most of the companies are low tech, many of the entrepreneurs are in the early stages of development of their projects, the entrepreneurs are still not keen to work with universities and the public sector, a culture of collaboration among the firms is missing and there is no innovative ‘anchor firm’ for the network. The only major firm, Sunsweet (700 employees) was listed on the stock market in 2018. It undertakes contract farming and collaborates with other companies and has only recently begun to be more advanced in biotech, including starting an R&D department. In this context, more investment and budget is needed to support Food Valley to develop clear consistent plans, strong co-ordination, a professional management system, and co-investments and joint activities. Sunsweet has connections in 40 to 50 countries and could act as a potential anchor for the development of the whole cluster. Government funding will be needed as members are not yet at the stage of being able to finance the activities solely through paying membership fees.

The Thai Biotechnology Industry Association (ThaiBio) is a Bangkok-based national organisation that supports the country's biotechnology businesses to grow sustainably and achieve international competitiveness (http://www.thaibio.or.th). A regional branch covering Chiang Mai and Chiang Rai is needed. An international inspiring practice example is provided by One Nucleus, a local specialist network that was originally funded by a regional development agency in the east of England, United Kingdom (see Box 2.4).

The Thailand Centre of Excellence for Life Sciences (TCELS) is a national initiative based in Bangkok, which includes networking for life sciences firms, together with mentoring and consultancy for SMEs, training for entrepreneurs in areas such as IP protection, and support in connecting firms to organisations that can help with access to finance. It also funds university research to develop technology to strengthen the life science ecosystem, including research with potential for start-ups and licensing, and uses a database for matching businesses to university research opportunities. It also approaches university lecturers in relevant subjects to be unpaid mentors, and has identified mentors in Chiang Mai and Chiang Rai universities. In one of its projects, TCELS works with NSP on a digital health cluster with funding from the OSMEP.

To build its network, TCELS is attempting to find an organisation in each region to act as a focal point and to recruit members. In 2019, it had no member companies in Chiang Mai or Chiang Rai. An option for building networking for advanced agriculture and life sciences firms in Chiang Mai and Chiang Rai is therefore to support the development of a stronger regional branch of TCELS.

Overall, establishing global, regional and local collaborative networks is a key goal of the Thailand 4.0 Strategy (Maesincee, 2018). The various programmes discussed here are designed to build networks of entrepreneurs and SMEs that can share infrastructure and technology and have access to R&D and consulting services. However, there are too many government organisations with the same or similar goals working independently with little collaboration. An overall lead network would help bring together the key members and services.

There is strong potential for the development of the advanced agriculture and biotechnology and food-for-the-future sectors in the Chiang Mai and Chiang Rai regions, which will support the development of key strategic industries for the Thai economy as a whole. However, future development of the sectors in these regions requires more start-ups and especially scale-ups. There are both strengths and weaknesses in the regional entrepreneurial ecosystem in this respect. The priority areas to address in terms of overcoming bottlenecks and releasing more innovative entrepreneurship are the pillars of the regional entrepreneurial ecosystem concerned with access to finance, regional entrepreneurial talent and skills, entrepreneurial culture, and networks. In addition, specific measures can be promoted in other areas. The key policy recommendations in line with this agenda are set out below. The OSMEP is ideally suited to lead by providing plans, quality control, incentivising people and organisations to take part and targeting public financial support to give maximal leverage.


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