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Understanding Sufficiency Economy Concept and Its Applications: a View from Thailand. Kobsak Pootrakool 1 June 2007. Outline. Introduction What is Sufficiency Economy? How Can We Apply Sufficiency Economy? How Much Success Thailand has thus far in Applying the Concept?. I. Introduction.

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understanding sufficiency economy concept and its applications a view from thailand
Understanding Sufficiency Economy Conceptand Its Applications: a View from Thailand

Kobsak Pootrakool

1 June 2007

outline
Outline
  • Introduction
  • What is Sufficiency Economy?
  • How Can We Apply Sufficiency Economy?
  • How Much Success Thailand has thus far in Applying the Concept?
i introduction
I. Introduction

Sufficiency economy is one of the most misunderstood topics, both in Thailand and abroad:

  • For the poor
  • For farmers/agricultural sector
  • Doing nothing
  • Anti-globalization
slide4

Why is this the case? Why is there so much misunderstanding concerning this concept?

1997-1999 speeches

ii what is sufficiency economy
II. What is Sufficiency Economy?

His Majesty has been talking about sufficiency economy since 1974.

It is a concept that come from his extensive experiencesafter visiting one village after another village and see what works and what does not work.

Then in 1997 after the crisis, he began to use the term“Sufficiency economy”.

sufficiency economy philosophy
Sufficiency Economy Philosophy

"Sufficiency Economy" is a philosophy that stresses the middle path as an overriding principle for appropriate conduct by the populace at all levels. This applies to conduct starting from the level of the families, communities, as well as the level of nation in development and administration so as to modernize in line with the forces of globalization.

"Sufficiency" means moderation, reasonableness, and the need of self-immunity mechanism for sufficient protection from impact arising from internal and external changes. To achieve this, an application of knowledge with due consideration and prudence is essential…. At the same time, it is essential to strengthen the moral fibre of the nation, so that everyone, particularly political and public officials, academic, businessmen at all levels, adheres first and foremost to the principle of honesty and integrity.(1999)

main components of sufficiency
Main Components of Sufficiency

(1) Moderation

Sufficiency(พอเพียง)

(2) Reasonableness

(3) Self-Immunity

Conditions(1) Application of knowledge with due consideration and prudence

(2) Adherence to the principle of honesty and integrity

other related concepts
Other related concepts
  • Stand on your own feet
  • Do not be too extravagant
  • Do not over-extend yourself
  • Do not live beyond your mean
  • Do not be too greedy
  • Do not borrow for no good reasons
slide10

“Sufficiency is moderation. If one is moderate in one’s desires, one will have less craving. If one has less craving, one will take less advantage of others. If all nations hold this concept … without being extreme or insatiable in one’s desires, the world will be a happier place. Being moderate does not mean to be too strictly frugal; luxuriousitems are permissible, but one should not take advantage of others in the fulfillment of one’s desires. Moderation, in other words, living within one’s means, should dictate all actions. Act in moderation, speak in moderation; that is, be moderate in all activities.”

(1998)

how does se relate to neoclassical economics
How does SE relate to Neoclassical Economics?

Y

MaxS (1+r)-tE[U(C,..,t)]

Subject to Budget Constraints

A

Optimality

Preference

Budget Constraint

X

applications of neoclassical economics

Prudence

Person

Applications of Neoclassical Economics

Neoclassical economics tries to understand human choices and explains the observed pattern using the optimizing framework

Risk Loving

Social Status

Lack of Self Discipline

Addiction

Risk Averse

Short-sighted

Long-sighted

Envy

Prudence

Human behavior

similarity between se and neoclassical economics
Similarity between SE and Neoclassical Economics

Prudence Person

(1) Moderation

(2) Reasonableness

(3) Self-Immunity

From the view point of neoclassical economics, the behavior of those who adhere to sufficiency economy philosophy will be similar to the behavior of “prudence persons”. So, in a sense SE is normative about people preferences.

difference between se and neoclassical economics
Difference between SE and Neoclassical Economics

Neoclassical Economics

Sufficiency Economy

Optimality

Middle path

  • Depend on Preference, and Constraints to Maximize Utility
  • Choose middle path based on moderation, reasonableness and self-immunities as a rule of thumb
how does se relate to development economics
How does SE relate to Development Economics?

Development of the country must proceed in stages. First of all, there must be a foundation with the majority of the people having enough to live on by using methods and equipment which are economical but technically correct as well. When such a secure foundation is adequately ready and operational, then it can be gradually expanded and developed to raise prosperity and the economic standard to a higher level by stages. … if one focuses only on rapid economic expansion without making sure that such a plan is appropriate for our people and the condition of our country, it will inevitably result in various imbalances and eventually end up as failure or crisis as found in other countries. (1974)

No need to be a tiger

slide16

III. How Can We Apply Sufficiency Economy?

1. Daily life

2. Economic Development

- Moderation

- Reasonableness

- Self-immunity

- Agricultural Sector

- Private Sector

- Government Policy

Think before you buy

Sufficiency Club (ชมรมคนพอเพียง)

Sufficiency Economy

problems of past economic development
Problems of Past Economic Development

GDP/Capita

Poverty rate by provinces, 2000

Poverty rate

- Poverty

- Weakness in the grass root

- Other developmental problems

thai agriculture in the recent past monoculture
Thai agriculture in the recent past - Monoculture
  • Problems from Monoculture
  • Problems from Supply/Demand Adjustment
  • Weather
  • Debt Problem- Migration and weakness of the villages
new theory for agriculture
New Theory for Agriculture

1. First step The aim is to let the farmers be able to support themselves (self-sufficiency) especially concerning rice. If the main problem is water then they should dig a pond in their land to make sure that they have enough water for farming and household usages which they might need support from the government or private sector in digging the pond. 

2. Second step Farmers should work together and create a cooperative to reduce the cost of production and for saving purposes as well as social security and together they will also have more negotiating power in selling their products to the markets.

3. Third step For developed communities, further expansion of the production process and commerce such as cooperative stores or rice milling factories can rely further from the cooperation from commercial banks or oil companies in improving their livelihood.

example from kam pla laay koan kean
Example from Kam pla laay - Koan Kean

Diversifiedagriculturesand other benefits

two approaches in economic development
Two Approaches in Economic Development

Old Development Paradigm

Development under SE Concept

grass root development
Grass root development

Previous Government

Sufficiency Economy

  • Must be on the basis of
    • Not live beyond one means and not over-
    • extend oneself
    • Self-discipline
    • Not borrow unnecessarily
  • Money, Capital & Opportunities
    • One million Baht fund
    • People bank
    • Asset securitization
    • OTOPs
    • Tourisms / SMEs
examples
Examples
  • Thinking about others Saha Farm
  • Self immunity Hana
  • - Prudence and not too greedy
  • Thinking about staffs 7-11
  • Cautious expansion Golden place

Pricing moderately

Do not borrow unnecessarily

Empathy to your staffs

Building your foundation

back to sufficiency economy concept
Back to Sufficiency Economy Concept

How to make sure that private sector is more in

line with sufficiency economy

ReasonablenessThinking about all risk involved

Moderation

within one means and not overextend

Greater Prudence

Better risk management

Long term and sustainable Investment

Self-Immunity

implications of se on government policies
Implications of SE on Government Policies

1. Macroeconomic Management

2. Government Policy Design

3. Alternative Development Strategy

slide30

Implications of SE on Government Policies

ModerationReasonablenessSelf- immunity

Adequate SavingEnergy Security National Risk Manag..

1. Macro Management

Mega-project, Growth, Inflation, Budget Deficit

Adjust design of governmental projects to make people to be more sufficient (Village funds, Debt forgiveness, Educational reform etc.)

2. Gov. PolicyDesign

Adjust the balance of economic development frameworkRural along side with Industrial development, Strong communities Quality growth, No need to go fast, Emphasis on public well-being

3. AlternativeDevelopmentStrategy

slide31

How about the recent government policies on 30% reserve requirement and the amendment to the Foreign Business Act?

Isolated incident

iv how much success thailand has thus far in applying the se concept
IV. How Much Success Thailand has thus far in Applying the SE Concept?
  • We are in the experimental mode and in the process of implementing the SE concept into the economy
  •  Some success in agricultural sector
  • Success in getting people to become aware of the concept
  • but still not the right understanding (from survey)
  • We also put more emphasis on teaching and instilling the concept since young age. Same as instilling saving culture. But it is a difficult fight with consumerism & advertisement
  • Success in getting discussions going: but a little bit too much
  • Some successes in some of the government policies design but more have to be done
  • Limited success in business sector
sufficiency economy as a new approach to development
Sufficiency Economy as a New Approach to Development

A work in progress – but with great promises

A framework that can work within the market system that will bring more balance and equitable growth which will truly increase the well-being of the general public in the long run

for each individual
For each individual

A philosophy for people to find the meaning for themselves

“Sufficiency Economy does not have to be complete, just half or even a quarter will be enough. … Last year, I thought that everyone understand this. … But recently, in fact last month someone who should understand this well because he has been working in the filed of development for sometimes say that sufficiency economy is very good and we have do it for one quarter of the country. … The meaning of sufficiency economy and one quarter figure is not one quarter of (the land area of) Thailand but one quarter of our action.”(1998)

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