Applying sufficiency economy principles to the service industry in Thailand

The services sector in Thailand has mushroomed in recent years, with tourism and hospitality, retail and finance all seeing major expansion. The first of these, tourism, is responsible for some 10% of the country’s GDP, with 29.88m tourists visiting the country in 2015. This provided the government with some BT2.21trn ($66.5bn) in revenue in 2015.

Rapid Development

In 2013, Thailand achieved the status of 10th-most-visited country in the world, with Bangkok the most visited city after London. This remarkable achievement has been made in a relatively short space of time, too. In 1995, Thailand saw only 6.9m international tourism arrivals, according to the World Bank. Today, the number is four times that.

Such rapid expansion has not come without a cost, however. Sometimes, environmental protection regulations have not kept up with developments. Where they have existed, these rules have not always been enforced, leading to uncontrolled building development, pollution and the destruction of the very attractions the tourists come to visit. In the World Bank’s “Travel and Tourism Competitiveness Report” for 2015, Thailand ranked as low as 116th out of 141 countries for environmental sustainability. The categories where it fared the poorest were stringency of environmental regulations (103rd), concentrations of particulate matter (123rd), the number of environmental treaty ratifications (104th), and the percentage of threatened species (109th).

Tourism projects that take account of the need for sustainability and work with the ideas of sufficiency economy have, however, been gaining ground. The Tourism Authority of Thailand has made a major push to promote the so-called seven greens of tourism – campaigns that range from making tourists aware of the impact they have on the environment to encouraging corporate social responsibility initiatives by hospitality and tourism businesses. Community-based tourism has also developed in tandem with these ideas. Such projects usually also involve a percentage of profits going towards community development. From the 1990s onwards, responsible tourism has also made strides – an idea that also dovetails with the principles of sufficiency economy. Responsible tourism seeks to minimise the sector’s negative impact on local communities, indigenous cultures, animals and the environment.

Pioneers

One of the key pioneers in sufficiency economy and tourism is Chumphon Cabana, a beach resort and diving centre on the eastern coast of the Gulf of Thailand. After the 1997-98 Asian financial crisis and a round of bad flooding, the centre stood on the brink of collapse. These events led to a rethink, and management decided to take a new approach that involved planting rice and vegetables and raising chickens within the resort to enhance prudence and cut costs. This was done using organic, natural agricultural techniques to avoid pollution from chemical fertilisers and pesticides while improving soil quality.

The resort has acted as an ambassador for the sufficiency economy in the local community. Knowledge has been shared and the initial reluctance of local farmers to accept natural agricultural techniques has been gradually dispelled by the results achieved. Rice yields from land treated with chemical fertiliser and pesticide averages 6-7 barrels per 0.4-acre plot, but natural agriculture at Chumphon Cabana yielded eight barrels in the first year, rising to 10 in subsequent years, due to improved soil and plant quality.

Another tourism development that illustrates ideas of sustainability and sufficiency economy is Tongsai Bay, on Koh Samui, which opened in 1987 and went on to become the island’s first five-star resort. The family-owned Tongsai Bay has implemented a green tourism policy from the beginning – unlike many of its neighbouring competitors. Indeed, the rapid development of the island has transformed Koh Samui. The island saw some 857,071 tourist arrivals in the first 10 months of 2015. These numbers are set to rocket when new air routes open in 2016.

This has brought considerable benefits in terms of income for the island’s tourism businesses and employment for the islanders, yet has also had a major impact on the social, cultural and environmental bedrock of the island. The result has been reforestation, the wearing out of local water resources and the devastation of many local plant and animal populations.

Tongsai Bay has worked against this degradation by establishing itself as a niche eco-resort, minimising its impact on the local eco-system. The resort obtains all its furniture and building materials from certified sustainable sources, often using recycled wood and tries to source employment and services locally, too. These ideas are becoming more widespread in Thailand. In Phuket, for example, in 2014, the provincial authorities opened a sufficiency economy village, Ban Tha Chat Chai, which has reached out to students of sustainable tourism from ASEAN.

A Regional Focus

The government, too, has an important role here. The Designated Area for Sustainable Tourism Administration (DASTA) is a state agency charged with identifying and developing zones around the country where tourism could be could be developed in a sustainable way. It has had six areas gazetted as designated areas: the Chang Islands in Trat province and their vicinity; Pattaya City and its vicinity; the historical parks of Sukhothai-Si Satchanalai-Kamphaeng Phet; Loei; Nan Old Town; and Uthong Ancient City. The idea is that DASTA will ensure sustainable tourism development of these in three dimensions: social, environmental and economic. Projects located in the designated areas are to be community-based tourism (CBT), produce low carbon emissions and be creative – recalling the emphasis on innovation in sufficiency economy.

The government is also pushing for pilot projects in 19,000 villages that are based on sufficiency economy principles. In January 2016, the governor of Buri Ram province, near the Cambodian border, also announced that sufficiency economy would provide the framework for the development of the area.

A 2012 survey by Chiang Mai Rajabhat University of tourism businesses in Chiang Mai, Chiang Rai and Mae Hong Son also found a strong correlation between business success and the application of sufficiency economy’s core principles. The survey, which looked at 2389 companies, found that those enterprises that applied the concepts of moderation, reasonableness, prudence and knowledge showed a stronger correlation with profitability than those that did not. Among the categories, only virtue seemed to be more strongly correlated with a lack of profitability, but the difference was marginal.

Financial Sector

Meanwhile, the Thai financial sector has been key in the development of sufficiency economy, particularly given its role in the 1997-98 Asian financial crisis, when the sector became widely considered illustrative of the country’s disregard for moderation, reasonableness and prudence.

Financial sector liberalisation in the early 1990s had led to a surge in short-term foreign debt, which local intermediaries were inexperienced in dealing with and which exposed the economy to major risks. Excessive borrowing and lending also worked against the long-term interests of the country and the sector. Following the crisis, there was a period of consolidation and reorganisation, however, with banks and other financial intermediaries taking much greater note of the concepts of sufficiency economy.

The need for self-immunisation thus became widely recognised, leading to a reduction in foreign debt and a strengthening of reserves. More prudent lending and borrowing policies were enforced by the central bank, along with stronger regulation and greater transparency. The country has also adopted successive financial sector master plans, starting in 2004, with a view to carrying out structural improvements. Thailand was thus able to avoid much of the fallout from the 2008 global financial crisis. The sector still faces challenges, however. Household debt continues to rise and savings fall, while access to mainstream financial institutions remains limited outside urban centres. One significant attempt to address these issues was the One Million Baht Village Fund, introduced in 2001, which aimed to improve credit access for the rural poor. Community-generated microf-inance schemes have also been a feature of rural areas for many years, with these local intermediaries often following the sufficiency approach.

The services sector demonstrates some remarkable, sustainable and sufficiency-economy-based projects. However, more needs to be done. Achieving a balance between the major investment that tourism brings with the need to maintain the environment remains a challenging task. The hope is that development of this key industry will be achieved with due reference to sustainability and the ideas promoted by King Bhumibol Adulyadej in his far-sighted approach.

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The Report: Thailand 2016

Sustainability chapter from The Report: Thailand 2016

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