*ENTREPRENEURIALISM AND LABOUR MARKET POLICIES
IN CHIANG RAI PROVINCE, THAILAND
John Walsh, Assistant Professor,
Shinawatra International University, Thailand
Sittichai Anantarangsi, PhD. Candidate, Shinawatra International University,
Thailand
Abstract
Research in the northern Thai province of Chiang Rai shows a very active and
entrepreneurial small business sector. The sector is vibrant but profits and
productivity are low, while there are few genuinely value-adding activities. Much of
the business sector is dominated by Sino-Thai family-owned businesses which operate
according to core and periphery models, with comparatively low levels of trust and
commitment between employers and employees and with growth policies based on
diversification rather than growth of business sophistication. As a new industrial
estate is planned for the province, together with an expansion of the riverine trade on
the Mekong and a completion of a fourth bridge across the river all planned for
Chiang Rai, there are many opportunities emerging for new entrepreneurial activities.
However, one major constraint preventing Thai and foreign (principally Chinese)
investors from realizing their plans effectively is the labour market. Currently, there is
insufficient effort to match the supply and demand for skilled labour in the region,
while Royal Thai Government (RTG) agencies and policies lack co-ordination,
support and statistical capacity. Above all, many labour market policies are opaque
and do not follow the rule of law (e.g. unregistered migrant workers, below minimum
wage payments) so that salaries are kept low and motivations for creating higher
value-adding activities are not properly supported. This paper examines these issues
and makes necessary policy suggestions concerning how to improve the labour
market in Chiang Rai for future entrepreneurial activity. The prospects for broadening
these proposals to cover the whole of Thailand (and further afield) are also
considered.
1
Introduction
The northern part of Thailand, centred on the province and city of Chiang Rai, is a
mountainous region with generally low levels of communications and transportation.
It has, historically, been a place of transit for migrants passing from north to south
along river valley routes. Its land is not the most fertile in the region and the level of
cultivable land is constrained by the mountainous terrain. This has limited the
population numbers in the region, since communities in the area, separated by rugged
terrain, tended to restrict their size to the ability of the surrounding countryside to feed
them with accumulated agricultural surpluses.
The remoteness of the region, based on its limited transportation links, has made it
more difficult for centralized states based in capitals such as Chiang Mai, Bangkok,
Luang Prabang and Kunming to exercise effective control over it from a distance.
Local communities were able to achieve autonomy under most conditions and, in the
modern age, ethnic groups rebelling from centralized states have been able to use the
geography to their advantage in the struggle for independence. Two types of groups in
particular have helped shape the modern history of Chiang Rai. The first is composed
of ethnic groups suffering what they consider to be persecution by centralized
governments and who have used the production and smuggling of illegal drugs to help
sustain an armed campaign for independence. The combination of remoteness and
geography helped inspire the term ‘Golden Triangle’ for the region where several
countries meet and across which it has been possible for people to move quite freely
away from official intervention. Although opium fields have been largely eradicated
with the assistance of American aviation support, synthetic drugs such as
methamphetamines have replaced heroin and opium production, although not entirely.
Inevitably, these events have contributed to a climate of lawlessness in the area and
the integrity of officials has been compromised in a number of cases. The building of
casinos in the border regions intensifies the lawlessness insofar as it promotes the
cash economy and incentives for bribery. Although, of course, most people live lives
of quiet lawfulness, they nevertheless exist in this milieu.
The second migrant group to have an impact on the region in this context is the
Kuomintang Chinese, who entered Thailand as their struggle against the Chinese
Communist Party began to fail. Many leading Kuomintang elements fled to Taiwan
where a new state was proclaimed but the Battalion 93 troops were stationed in
southern China and preferred to make their stand across the Thai border. In due
course, the Thai government provided them with citizenship en masse in return for
military support against the drug lord, Khun Sa (Zhang Qifu) who had established a
de facto independent support under his own autocratic control straddling the ThaiBurmese border region (Sturgeon, 2005, pp.106-18). Those Chinese involved have
established their own homes and businesses in the area, often based on the tea and
tourism sectors. The presence of numerous hill tribes people, who have entered (or reentered) Thailand during the past century and may be living in circumstances which
are unofficial or semi-official, represents a flexible labour market pool which is drawn
upon to support these activities. However, the remainder of the region is dominated
by agricultural activities, specifically relating to the subsistence rice farming that
characterises mainland Southeast Asia, supplemented by additional agricultural
production or craft manufacture at a small scale.
2
Income earning opportunities are limited by a combination of factors, as the
abovementioned indicates. The effective minimum wage rate prevalent in the region
provides income below the poverty line for a family breadwinner and it is far from
certain that even this amount will be received in casual employment conditions.
Clearly, there is a need for existing and future entrepreneurs to be able to enhance not
only their own income-creation but also that of other members of the labour market in
the region. The research reported upon in this paper included personal interviews with
more than 50 individuals in various fields, conducted as part of a doctoral program
concerning the formation of labour market policy for developing areas of Thailand.
Interviews were conducted in Thai or Chinese as appropriate and subsequently
transcribed for content analysis. They followed a semi-structured agenda approach
which enables respondents to explore issues of relevance to them while still ensuring
that issues of universal importance are covered as required. This approach has yielded
successful results in previous research projects (e.g. Reid, Walsh and Yamona, 1999
and Reid and Walsh, 2003). Snowball techniques were used to identify subsequent
respondents for interviewing and the process continued until it became clear that little
if any new information was being recorded. The analysis has been integrated with
secondary data sources and presented in a variety of formats.
The Labour Market in Chiang Rai Region
Chiang Rai province is composed of 16 amphurs and two semi-amphurs, with a total
area of some 11,678,369 square metres or 7,298,981 Rai.1 The distance from Bangkok
is about 729 kilometres. The region is bounded by Burma to the west, Laos to the east
and Chiang Mai Province to the south. The total population of Chiang Rai is just 1¼
million people. There are some 1,233,559 people in Chiang Rai or 610,205 male and
623,354 female. The labour force in Chiang Rai is about 714,094 people and 225,435
workers are in the private sector, with only 43,723 workers registered for social
security, since the economy of Chiang Rai is based on agriculture and is largely
informal in nature. Casual labour patterns extend throughout the province with
average daily wages of between 80-120 baht. Barter and labour exchange is also
common. A principal source of labour is the hill tribes people who mostly live in
mountain villages, together with Thai workers aged over 40 - most younger workers
have migrated elsewhere for work.
The labour market is subject to change from a number of mostly external effects.
These may be summarised as follows:
* Changing macroeconomic conditions: interviewing took place during the military
junta government (September 2006-December 2007), when the region was subject to
martial law and considerable uncertainty about the future. Government decisions
made during this period were marked by opacity and occasional irrationality.
Problems were exacerbated by the increased price of oil and the inflationary pressures
this exerted, the emerging global financial crisis and the incipient signs of food
shortages and high agricultural commodity prices.
* Changing infrastructure conditions: as part of both bilateral and multilateral
international agreements, treaties have been established which have an impact upon
international terms of trade, for example the Thai-Chinese Free Trade Agreement
(FTA), which has led to a significant increase in the amount of agricultural produce
1
Figures are provided by the Statistical Office of the Province of Chiang Rai.
3
imported into Thailand from China, to the benefit of consumers overall but the
detriment of Chiang Rai regional farmers who can no longer compete with the
imports. Agreements have also been witnessed in the realm of physical infrastructure,
specifically with bringing more trade along the River Mekong and constructing a
fourth bridge across the river so as to link the Greater Mekong Subregion countries
with enhanced road transport links joining Kunming in the north with Singapore in
the south.
* Lack of enforcement of the rule of law: labour market wages are inevitably
depressed by the presence of unofficial or semi-legal labour, such as that provided by
some hill tribes people who have little education and experience great difficulty in
obtaining appropriate certificates. This makes low level harassment a regular threat to
affected people. There is a great deal of evidence that migrant workers, brought in
from neighbouring countries, suffer from molestation and abuse from officials and
from those ostensibly helping them obtain jobs. In a recent case, 54 illegal Burmese
migrant workers were found dead from suffocation in a refrigerated truck supposed to
be transporting them to the south of Thailand (Bangkok Post, 2008).
In an environment of Schumpeterian creative destruction, these factors offer both
opportunities and threats for those involved. The role of government is or should be
principally aimed at those who lose from changes and who are vulnerable to negative
changes because of inability to adapt. These include those with lower levels of
education and older workers less able to complete retraining courses.
Few large scale enterprises exist in the Chiang Rai region, especially in the private
sector. Young people with good qualifications, especially at undergraduate level,
customarily have to move away from the region in order to find employment
opportunities commensurate with their abilities and experiences. This results from not
just the lack of opportunities in the local market but also the seniority-based salary
system prevailing in Thailand, as elsewhere in East Asia. This means that people are
paid more, on an automatic basis, according to their initial qualifications (and any
subsequently obtained) as well as increments based on length of service. A
consequence is that individuals with undergraduate degrees will routinely expect to
receive more than one with a vocational qualification, irrespective of the fact that the
latter will normally be rather more ready to contribute to a business, especially a small
or medium-sized business, than the former from the beginning. This situation is
exacerbated by the fact that individuals graduating with undergraduate degrees every
year greatly outnumber those with vocational degrees. Some efforts have been made
to increase the number of vocational students in the Chiang Rai region but these suffer
from the problem of over-centralization of decision-making, which means that a
number of the courses offered are inappropriate insofar as subsequently locallyavailable employment opportunities are concerned. Other problems also exist, largely
as a result of mismatches between supply and demand and lack of resources and
capacity on behalf of service providers. Gek-Boo Ng, former head of the Asia-Pacific
Office of the ILO, has more than once commented on the importance of technical
capacity for gathering, redacting and disseminating labour market statistics and this is
one particular area where enhanced capacity could be of direct assistance (Walsh,
2007).
There is also a qualitative or psychological aspect to the labour market of the Chiang
Rai region, which is similar to that found in most of the rest of Thailand and other
4
parts of the GMSR. This may be described, in the demotic, as the ‘sabai sabai’
culture. This term indicates a feeling of ease and relaxation which precludes
preoccupation with stress or concern with the future. The extent to which this really
exists depends upon anecdotal evidence as much as anything else but it is widely
believed to be a widespread phenomenon, especially away from the urban areas and it
appears to be believed more particularly by overseas investors and executives.
The Role of Entrepreneurs
Marshall (1997 [1890]) observed that entrepreneurs were necessary to improve
organization and coordination in the way that old commodities are created and helps
find new ways to make them (and new products as well). Entrepreneurs, according to
him, must understand their own industries and be leaders, as well as to understand (or
predict) future changes and the willingness to make decisions based on those
predictions, juggling risks as necessary. This, according to Mill, requires ‘no ordinary
skill.’ (Mill, 2004 [1848]). Many people have a degree of entrepreneurial skill which
they are able to bring to bear without any kind of formal training or education. Market
traders, for example, if successful are able to identify and absorb the relevant skills
and competencies and put them into practice without formal training. However, bad
money drives out good and, irrespective of natural skills and abilities, entrepreneurs
given obvious money will choose unsustainable activities more often than is desirable.
Chiang Rai sees many businesses which simply replicate each other and make little if
any attempt at differentiation or improvement on existing offerings. Much of the
differentiation that does take place results from foreign investment and it is not clear
to what extent any of the benefits of that investment are retained in the local economy.
There is a need for local entrepreneurs to build upon existing and potential
competitive advantage for their own benefits. It is the responsibility of the RTG to
ensure that these actions are facilitated in a way that employs local labour and passes
benefits to them, both directly through income generation and indirectly through
permitting transfer of skills and technology so that individuals are encouraged to
establish their own firms. The still very important overseas migrant labour market is
also a necessary part of this process.
Labour Market Policy
Thailand has generally operated a labour market policy (LMP) regime based on the
Japanese or East Asian model. This is to some extent because of the strong influence
of inward investment in the country from Asian partners, particularly companies from
Japan. This model is based on the understanding that individual firms will act to
promote national development goals and, consequently, government will support
firms directly. The firms involved then take such actions as they deem necessary to
ensure the appropriate level of training and human resource development (HRD)
among personnel. In line with the patriarchal nature of much of Thai management,
which partly stems from Confucianist concepts inherent within management systems
of ethnic Chinese, there is little role for labour or trade unions in determining the
nature of HRD or of decision-making at the executive level. Indeed, labour unions
have been banned for extensive periods during the modern development era and, in
the continuing absence of a political system encouraging ideology-based political
parties, the interests of labour have been supported, if at all, by a combination of
charitable organisations and radical elements such as the Communist Party of
Thailand (CPT). Where large scale unionisation has taken place, it has done so within
large, professional, public sector organisations. The priority for unions in these cases
5
has mostly been to protect their own interests, as has been seen in recent years in
campaigns against privatisation and free trade agreements. In combination with
opaque regulations and regulatory systems, combined with innate corruption, the
economy works still to ensure a constant stream of labour market entrants willing to
work in a manufacturing industry which relies on low costs, particularly low labour
costs, for competitiveness. Low levels of protection for workers, low levels of
education and restrictions on freedom of association and collective bargaining mean
that most entrepreneurs appear to think first of a business that takes advantage of that
competitiveness. In Chiang Rai, this results in the creation of tea plantations
employing casual, seasonal labour and related activities such as tea houses and tea
exports, using the twin target markets of tourists and Taiwan, with connections forged
during the Kuomintang period.
Such businesses can be successful in their own terms but are constantly subject to
negative external shocks. Over the last few years, tourism in Thailand as a whole has
been negatively affected by the 2004 tsunami, scares over SARS and avian influenza
(bird flu), high oil prices and the weakening global economy. Entrepreneurs with low
capital asset costs and a very flexible workforce can simply hibernate through
problematic periods; workers who lose their income will be more vulnerable and the
temptation to work in risk-taking jobs or become migrant workers intensifies.
LMP, therefore, must recognise the vulnerability of workers without imposing
regulations which will be unlikely to be policed properly and which may discourage
entrepreneurs from establishing or continuing their businesses. When workers can add
value to those businesses and can share in the proceeds, then all major stakeholders
are winners. However, it would require education on all sides to ensure that those
stakeholders appreciate the importance of this. Other adjustments are of a very large
scale and would require considerable social and cultural change to effect: this includes
the abandonment of the seniority system in employment, by which employees receive
an automatic incremental salary increase based on length of service rather than
performance. The system is gradually being reformed in some private and public
service organisations but its hold on the popular imagination, not to mention being
embedded in bureaucratic structures and systems, remains tenacious. Perhaps more
important would be the enforcement of the rule of law in employment. With respect to
migrant labour, in particular, the presence of unofficial workers acts constantly to
depress prices and to pressurize safety standards. Research has indicated that the
presence of migrant workers does not negatively affect the wage-earning ability of
Thai workers (Bryant and Rukumnuaykit, 2007), yet there is nevertheless
considerable prejudice against such migrants in society more widely (e.g. Theeravit
and Semyaem, 2002).
Summarizing the areas of assistance required:
•
Funding: a variety of schemes have been provided with the aim of offering
funds at the village level, either to remediate the longstanding problem of
farmer indebtedness or else to enable entrepreneurial borrowing and business
creation or expansion. Inevitably, success has been inconsistently recorded;
some high-profile cases of failure have received negative media coverage.
Better education of those involved might help to reduce the problems
involved;
6
•
•
•
Education: various initiatives have been launched to promote local wisdom in
education, arising from different bodies and individuals. These can be useful
but there are wider areas of importance within education to be improved.
These include the balance between provision of undergraduate and vocational
school seats, the inability of so many graduates to contribute in the workplace
from the start of employment and the seniority employment system. An
integrated planning process including forecasts for future requirements of
various skills and competencies is required;
Regional development: programs such as One Tambon One Product (OTOP)
have achieved considerable levels of success in some cases, although
necessarily it takes some time and cannot be assured in all cases, since not all
local products are suitable for national and international markets. Relieving
pressure on urban spaces and services by providing negative incentives for
labour migration has yet to be measurably witnessed. Consistent support for
this program and its fellows is required over the long-term. More education
will be helpful for those involved in terms of basic business lessons,
accounting and bookkeeping and similar competencies;
Rule of law: discussions of the appropriate level of the minimum wage is
largely irrelevant when it is likely that people in unregulated industries will
not be paid according to the existing provisions. Small-scale entrepreneurs
also suffer from harassment in some cases from lack of proper documentation
or compliance with little-known regulations.
These issues tend to merge with each other on a policy-making basis. One constant
theme is the need for better and more focused education. The current economic
system relies on the need to produce workers with good, diligent and obedient
attitudes with just the few years of education necessary to work successfully in a
factory context. This is no longer sustainable in a situation of globalization in which
hyper-competitiveness in manufacturing negates the advantages that low labour costs
might once have offered. The quest for added value is increasingly important.
Recommendations
Thailand is far from being alone in having a governmental system that promotes
short-term rather than long-term thinking with policies properly funded and
implemented throughout their lives. The political situation from 2006 to the present
indicates the extent to which the veneer of democracy can be stripped from the
country. The events prevented many of the policies of the democratically-elected Thai
Rak Thai government could not be continued, despite their popularity and success,
while the junta-appointed government had little sympathy for business or labour and
introduced no important legislation to support their interests. The creation of the PPPled coalition government at the beginning of 2008 helped to crystallize at least some
of the pro-poor policies promoted by the PPP, which was the successor to Thai Rak
Thai. This coalition is somewhat narrower than that encompassed within TRT and has
less propensity to support new business. Further, it is a coalition that is threatened by
dissolution in the courts, owing to legislation initiated in the junta period which might
be used to cause some parties, the PPP possibly included, to be dissolved for alleged
electoral irregularities. This pressure has restricted cabinet members from being able
to concentrate on developing policy platforms and enacting them appropriately. Many
media outlets have taken a stoutly anti-populist stance which means that pro-poor and
pro-business policies have received at best skeptical receptions. It is beyond the scope
7
of this power to consider ways in which the inherent instability of the Thai political
system can be strengthened and improved. However, it would be helpful if the
Ministry of Labour and other relevant government agencies could be enhanced
through: improved technical capacity in collection and analysis of statistics; greater
clarity in terms of future bureaucratic reform; resolution of duplicate provision of
services across ministries; better communications in terms of matching supply and
demand of training, employment opportunities and future forecasting.
Village funding schemes and programs for regional, rural development are
particularly helpful in promoting small-scale entrepreneurialism. However, borrowing
for investment is an activity that has inherent risks within it. Those risks could be
reduced to some extent by greater education in basic business skills in the local
context. Successful micro-finance schemes tend to maintain credibility by ensuring
that loan takers also receive proper counseling as to how they will use the money,
how to plan for repaying the loan and how to build a sustainable competitive
advantage. Currently, this provision would test the limits of resources available for the
RTG and there may be a need for either a private sector partnership or else
involvement of charitable or philanthropic organisations.
Conclusion
Improvements in infrastructure and significant changes in the business environment is
having substantial effects on the ways in which people in Chiang Rai do business and
changing the nature of competitive advantage there, as elsewhere. The development
of port facilities, despite the problems of constraint from customs, represents new
areas of business opportunity, for example. The increase in tourists, whether for ecotourist or ethnic minority tourism or else to visit casinos, also provides scope for
entrepreneurs. In neighbouring Laos and Burma, many similar opportunities are being
captured by migrant Chinese, who moved to the region specifically for this purpose or
else spotted opportunities while in the region for contract work. The RTG will wish to
ensure that, in Thailand, the majority of these opportunities will be made available for
Thai citizens and, to do so, it is necessary to facilitate the process by identifying likely
future opportunities, assessing the kinds of skills and competencies necessary to
exploit those opportunities and providing the possibility that Thai people will enter
the labour market equipped with those skills and competencies. As this paper has
indicated, this is a complex process with numerous interlocking elements.
Bureaucratic imperialism, especially in a milieu of constant potential instability,
makes it particularly difficult to find a consensus of leadership in solving any of these
problems. What may be required, in terms of the future research agenda, is to consider
specifically a small number of particular industries and the work inherent within them
and identify the likely configurations of the future.
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