Development of the Sufficiency Economy Philosophy in the Thai Business Sector: Evidence, Future Research & Policy Implications

Development of the Sufficiency Economy Philosophy in the Thai
Business Sector: Evidence, Future Research & Policy Implications
By
Sooksan Kantabutra
Email: sooksan.k@cmmu.net

Abstract
This paper examines current state of the development of the Sufficiency
Economy Philosophy in the Thai business sector. Available empirical
evidence in Thailand is discussed. The paper also compares and discusses
‘Sufficiency Economy’ businesses in Thailand and sustainable enterprises in
the West, followed by ten derived ‘Sufficiency Economy’ business practices.
Practitioner-oriented literature is also reviewed, including confusion among
the Sufficiency Economy Philosophy, Corporate Governance and Corporate
Social Responsibility. Future research directions are discussed, and policy
implications are provided.

Corporate sustainability has become a mantra for business leaders of the 21st
century and beyond, possibly because increasingly rapid change has had a fundamental
impact on business organizations since the 1980s. Numerous scholars around the world
(e.g. Avery, 2005; Kantabutra, 2006; Piboolsravut, 2004; Wilson, 2003) are seeking an
alternative approach to the prevailing Anglo/U.S. business model which promotes a
short- term, shareholder-value approach and arguably does not lead to sustained business
success. They criticize that the Anglo/U.S. approach to capitalism and business is
seriously flawed, and does not bring the quality of life to individuals and societies that
many people desire.
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What is then a possible alternative? In Europe, the Rhineland capitalism model is
seen as an alternative approach to corporate sustainability (Avery, 2005). It is concerned
about the long-term sustainability of an enterprise and its relationships with many interest
groups, not just with shareholders (Albert, 1993). The quest for an approach to corporate
sustainability appears similar in Asia. The employee-oriented approach to corporate
sustainability in Japan is also an alternative. Japan human capitalism, with its strong
employee focus, places Japan at the most advanced stage of capitalism (Ozaki, 1991).
Doing so, Japan achieved sustained economic success, despite a recent, long recession.
Taking another different alternative, South-East Asian businesses often work under a
model that relies on governments taking an active role in creating, shaping and guiding
markets. They require firms to take considerable responsibility for the social welfare of
their employees (Stiglitz, 2002). Being able to sustain its businesses and economies,
Singapore is a highly successful example of this business model.
In Thailand, most businesses appear to adopt the Anglo/U.S. approach of short-
term, shareholder-value to business (Kantabutra, 2006), a reason many went bankrupt in
the 1997 Asian economic crisis. An approach called Sufficiency Economy Philosophy
was then reiterated by His Majesty King Bhumibol Adulyadej as an approach to
corporate sustainability in the country (Suwanraks, 2000). Unlike in the agricultural
sector where the ‘New Theory’, arguably an agriculture version of the philosophy, is well
established, the Sufficiency Economy Philosophy in the business sector is still relatively
underdeveloped. Following the 1997 TDRI Year-end conference, this paper examines
the current state of the development of the Sufficiency Economy Philosophy in the Thai
business sector.
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Generally, sustainability grounds the development debate in a global framework,
within which a continuous satisfaction of human needs constitute the ultimate goal
(Brundtland, 1987). Therefore, corporate sustainability can accordingly be defined as
meeting the needs of a firm’s direct and indirect stakeholders (e.g. shareholders,
employees, clients, pressure groups, communities), without compromising its ability to
meet the needs of future stakeholders as well (Dyllick & Hockerts, 2002). Towards this
end, firms are required to maintain and grow their economic, social and environmental
capital base while actively contributing to sustainability in the political domain. In this
paper, a business is ‘sustainable’ when it meets the following three conditions: (a) deliver
strong financial performance, (b) have the ability to endure economic and social
difficulties over time, and (c) can maintain a leadership position (Avery, 2005).
The following section introduces the Sufficiency Economy Philosophy. The paper
then discusses available empirical evidence in Thai businesses. To find support for
policy development, a Western approach to corporate sustainability, called Rhineland, is
introduced to determine if it shares any commonalities with the Sufficiency Economy
Philosophy in business. Both approaches are compared and discussed. Based on their
commonalities, ten ‘Sufficiency Economy’ business practices are derived. The
practitioner-oriented literature is then reviewed, followed by future research directions
and policy implications.

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LITERATURE REVIEW

Sufficiency Economy Philosophy
Thailand’s Sufficiency Economy Philosophy stems from remarks made by His
Majesty King Bhumibol Adulyadej throughout his 58 years of the throne (NESDB,
2004a). It stresses the ‘middle’ path as the overriding principle for Thai people’s conduct
and way of life at the individual, family, and community levels. Within the philosophical
framework, choice of balanced development strategies for the nation in line with the
forces of globalization is allowed, with the need for adequate protection from internal and
external shocks. In particular, after the Asian economic crisis in 1997 in which numerous
business organizations in Thailand went bankrupt, His Majesty reiterated the philosophy
as the way to recovery that would lead to a more resilient and sustainable economy
(NESDB, 2004b).
The Sufficiency Economy Philosophy framework (see Figure 1) comprises three
components and two underlying conditions (Piboolsravut, 2004). First, Sufficiency
entails three components: Moderation, Reasonableness, and requirement for a Self-
immunity system, i.e. the ability to cope with shocks from internal and external changes.
Second, two underlying conditions necessary to achieve Sufficiency are Knowledge and
Morality. ‘Sufficiency Economy’ requires breadth and thoroughness in planning,
carefulness in applying knowledge, and the implementation of those plans. As for the
Moral/Ethical condition, ‘Sufficiency Economy’ enforces the conditions that people are
to possess -- honesty and integrity -- while conducting their lives with perseverance,
harmlessness and generosity. The Sufficiency Economy Philosophy serves as a guide for
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the way of living/behaving for people of all levels, and is scalable with universal domain
applicability, including business organizations (Piboolsravut, 2004).
Balance & Sustainability
Moderation
Reasonableness
Self-immunity
Knowledge & Morality
Figure 1 Sufficiency Economy Philosophical Framework
In business organizations, Puntasen et al. (2003) reviewed royal speeches and
business examples His Majesty King Bhumibol Adulyadej initiated to derive seven
business practices that are consistent with the Sufficiency Economy Philosophy. These
Sufficiency Economy business practices are as follow: (1) appropriate use of technology
(i.e. use of inexpensive, but technically sound technology); (2) appropriate manufacturing
capacity consistent with business’ ability to manage; (3) no greed and focus on short term
profits; (4) emphasis on honesty in entire business operation. (i.e. fair to consumers,
workers, customers and suppliers); (5) emphasis on risk diversification (i.e. various
products and/or ability to adjust products); (6) focus on “down side risk management”
(i.e. do not create unmanageable debts); and (7) focus on responding to local, regional,
domestic and international markets respectively.
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More specifically, a theoretical model (see Figure 2) has been developed for
business organizations (Kantabutra, 2006). This model, derived from the empirical and
theoretical literature, suggested that corporate leaders wishing to sustain their business
success espouse a vision characterized by clarity, brevity, stability, challenge,
abstractness, future orientation, and desirability or ability to inspire. Moreover, content
of the vision should contain reference to Moderation, Reasonableness, the need for Self-
immunity mechanism, Knowledge and Morality. A corporate leader espousing such a
vision should then develop a business strategy and plan to achieve the vision,
communicate the vision to organizational members, realign organizational processes to
suit the vision, empower and motivate organizational members. The leader should also
be passionate about the vision, emotionally committed to the vision, and behave
consistently with the vision. As for organizational members, they should share the
leader’s vision, emotionally committed to the vision and use the vision to guide their
daily business activities. A leader who does so can expect to be able to sustain his/her
business performance in the long run. It must be noted that the definition of corporate
sustainability here is rather narrow. It should have included social and environmental
outcomes as their performance indicators.
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Figure 2 Model Relating Vision-based Leadership to Sustainable Business
Performance
Kantabutra (2006, p. 44-45) offers a prototype business to demonstrate how one
can apply the Sufficiency Economy Philosophy, as shown below.
‘The vision of Siam Ceramic Thailand is “to be the best provider of ceramic tableware
in the world through moderation, diversification and morality.” To ensure attainment of
the vision, Siam Ceramic Thailand leaders communicate the vision to organizational
members who then interpret and use the vision to guide their daily decision-making
and business activities. Siam Ceramic Thailand leaders also develop strategic business
plans accordingly and redesign organizational systems (e.g. recruitment, performance
appraisal, organizational structure) to suit the vision, thus empowering members to
perform their relevant duties to achieve the vision. Those members who act
consistently with the vision are rewarded accordingly.

In terms of the seven commonly shared vision attributes discussed above, this vision is
brief and clear, pointing directly at a prime goal. While desirable, the vision is also
stable, unlikely to be affected by technology and market change. No matter how far it
is projected into the future, this vision will still be meaningful. The vision is also
abstract since it is inclusive to all organizational interests. Anyone at Siam Ceramic
Thailand can use the vision to guide his/her work. Clearly, the vision is future-oriented
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since it indicates a long-term perspective and the future environment in which it
functions. Given the current status as the leading ceramic tableware in Thailand,
aiming to be the best in the world is very challenging.

As for vision content, to be the best ceramic tableware provider is consistent with the
components of reasonableness and self-immunity and the underlying condition of
knowledge. Siam Ceramic Thailand reasonably focuses on its core competency or what
they know and do best. In doing so, it develops a self-immunity mechanism for itself
by minimizing risk possibly stemming from carelessly entering a new market with
which it is not familiar. Yet, another aspect of the component of self-immunity is the
introduction of some diversification. To deal with future unexpected issues arising
from rapid changes in the market, law and regulation, Siam Ceramic Thailand
diversifies its products and market to minimize risk from relying solely on a few
markets or products. In addition, although there is a high market demand worldwide for
its tableware products, Siam Ceramic Thailand refuses to take more orders when it
does not have sufficient capacity to manufacture, consistent with the component of
moderation. Siam Ceramic Thailand is genuinely concerned with a wide range of
stakeholders, including employees, suppliers, customers, future generations, the
environment and society at large. It takes care of these stakeholders well, even though
doing so brings about higher cost and lower profitability. This practice of stakeholder
focus is consistent with the underlying condition of morality.

Espousing such a vision, Siam Ceramic Thailand has been successfully exporting their
products throughout the world for over 50 years, weathering economic ups and downs.’

Given that shared values provide the common standard which people can use to
guide their business decisions and actions (Senge, 1990) and shared values/purpose, or
ideologies are preserved in the most enduring and successful corporations (Collins &
Porras, 1997), Kantabutra (2005a) also proposes that a business organization develops
shared corporate values that promote the practice for corporate sustainability. Derived
from Western sustainable enterprises and “Sufficiency Economy” businesses in Thailand,
these corporate values are valuing human resources, embracing ethical business practices,
focusing long-term, nurturing innovation, and caring for a wide range of stakeholders.
This subsection has reviewed the available theoretical literature on the application
of the Sufficiency Economy Philosophy in business organizations. The next subsection
reviews available studies examining sustainable businesses in Thailand, adopting the
Sufficiency Economy Philosophy as a research framework.
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Empirical Evidence
Among the first reported studies of the Sufficiency Economy in business
organizations, Puntasen et al.’s study (2003) examined 296 Thai SMEs, from six groups
of industries (food and beverage, clothing and leather products, wood, paper and printing,
rubber and plastic, metals and non-metals, and machinery and transport equipments),
which successfully went through the 1997 economic crisis, whether their business
practices were consistent with the seven Sufficiency Economy business practices. They
concluded that all SMEs which successfully went through the crisis conducted their
businesses according to the seven Sufficiency Economy business practices. They point
out that, particularly in times of economic difficulty, these SMEs were able to well apply
the seven practices.
In their further study of two royally initiated projects, Puntasen et al. (2003)
identified two additional business practices of the Sufficiency Economy Philosophy: (a)
frugal use of resources with highest effectiveness and (b) employment creation (e.g. no
unnecessary replacement of human labor by technology). Puntasen et al. (2003)
recommended that future studies use all nine Sufficiency Economy business practices in
their investigation.
As part of the study, Puntasen et al. (2003)’s concluded that SMEs from different
industries applied the seven practices differently. SMEs which have a high ratio of
export focus on a different set of the seven practices than those with a low ratio of export.
Therefore, the export volume determines how an SME adopts the seven practices. SMEs
with a high ratio of export focused respectively on careful planning on manufacturing
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consistent with their capacity, low risk management, and efficient use of resources and
inexpensive, but technically sound technology. In doing so, the SMEs adapted
themselves to the competitive business environment. SMEs with a low ratio of export
focused respectively on efficient use of resources and inexpensive, but technically sound
technology, and being honest with employees, raw material suppliers and consumers.
Although Puntasen et al.’s (2003) study lends support for the Sufficiency
Economy Philosophy that Sufficiency Economy SMEs had the ability to sustain their
businesses during the economic crisis, it did not explore in great depth the process by
which the SMEs applied the philosophy. Later research sponsored by the Sufficiency
Economy Movement subcommittee at the National Economic and Social Development
Board examined three sustainable businesses in Thailand. Unlike Puntasen et al. (2003),
these studies adopted the three components and two underlying conditions of the
Sufficiency Economy Philosophy as their research framework to explore the process.
Since the studies needed to understand the process, the case study approach to
research was adopted. The three case studies are Sa (the fibre of mulberry trees) products
business (Kantabutra, 2005), a jewelry business (Nuttavuthisit, 2005), and a cement
conglomerate (Kusumavalee, 2005). All were chosen because they (a) have reasonably
strong financial performance, (b) export their products overseas, thus being challenged by
the force of globalization, (c) have successfully gone through the 1997 economic crisis,
demonstrating their ability to deal with difficult economic and social difficulties, and (d)
can maintain a leadership position in their relevant market.
Consistent with Puntasen et al (2003), the Sa paper products business adopted
and/or invented its own technologies (e.g. color formula, water treatment system, recycle
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