Social enterprises are no proxy for welfare

Text by Werapong Prapha
Photo by Sarot Meksophawannakul

In Feb 2015, the National Reform Council approved a draft law entitled the “Social Enterprise Act”, which is aimed at promoting and institutionalising the social enterprise movement in Thailand.

In essence, the law will help to recognize a social enterprise through formal registration, with their own favourable taxation structure. The act will also give the private sector incentives to invest in social enterprises, along with government support through pooled funding.

Finally, the act will provide opportunities for the capacity-building of social enterprises and for the subject to be taught in our educational system.

Despite the act’s good intentions, we must carefully examine the rationale and likely impacts of the law. Although social enterprises are becoming a significant part of social change, we should not be over-optimistic and expect them to be the definitive answer to Thailand’s local and national economic challenges.

Three key concerns emerge with the new law. First, subjecting social enterprises to layers of bureaucracy will likely kill the creativity which social enterprises are celebrated for. The draft law demonstrates that if a social enterprise requires support, it must be formally registered. This would inevitably subject social enterprises of all sizes and structures to rigorous and unnecessary bureaucratic check-lists.

The aim of such bureaucracy is to enable the government to formally support social enterprises in terms of capacity building and funding. However, the possibility of “over-bureaucratisation” will deter many social enterprises from starting up, due to high set-up costs and compliance requirements.

Second, and most worrying of all, it sees that the draft legislation envisions social entrepreneurship as a form of social welfare assistance. Unfortunately, this misses the point of what social enterprises stand for.

One government committee member has described this legislation as a way to “support social development in all aspects, particularly the role of the private sector in integrating economic, social and environmental development under one social organisation which provides services as a private sector”. He went further and quoted a social enterprise in the UK as helping to employ former inmates to work in their organisations, thus helping to reintegrate them into society.

While the ambitions are commendable, we must be realistic about the role of social enterprises in Thailand. This is not to say that social enterprises should remain in their comfort zones and forget about scaling up. However, one must recognise that the social enterprise movement won’t replace mass social welfare programmes, where the state can tackle basic social problems across a vast population in simpler and cheaper ways.

Social enterprises should instead be viewed as flexible tools which can design and offer replicable solutions to fill in gaps and complement government programmes – with a clear scope of responsibility and realistic goals.

Finally, the law does not focus enough on local communities’ engagement in the design of social enterprises’ structures. We have seen and heard of social enterprises that have noble objectives to help marginalised and vulnerable groups.

Nonethless, many of these enterprises don’t incorporate local participation into their business smodels. This could be detrimental to the locals once such enterprises leave the communities.

One way to tackle this challenge is to support local engagement in the designing of social enterprises’ srtcutures. If that succeeds, the enterprises can ultimately be owned by the community members and gaps left by traditional development organisations and local governments can be filled.

One example of a community-owned social enterprise is the Fisherfolk project in Prachuap Khiri Khan. In the past, small-scale fishermen suffered from the negative impacts of overfishing and unfair market systems imposed by middlemen and large corporations.

Therefore, the local communities realised they had to strengthen their capabilities to become stronger market actors in order to create sustainable change.

Consequently, Fisherfolk was born to provide a business platform for local communities to participate in the fishing industry and link formalin-free and sustainable seafood directly to the consumers. In the end, Fisherfolk offered a specific and practical market solution for their communities. While their goal to scale up, attract more capital and build capacity should be supported by the government, Fisherfolk should not be expected to replace the existing national-level social welfare programmes for marginalized fishing communities.

Although social enterprises are emerging forces for social good, we must not be too optimistic about the role that they will play in society. Thus, the draft law should not lead to expectations that social enterprises will provide the final transformative solutions to reduce poverty and inequality in Thaialand, or worse, a replacement for some social welfare schemes.

Rather, the law should primarily aim to support social enteprrises to fill in gaps and seek out innovative ideas to help complement the activites of mass social welfare programmes.

This article is reproduced here with permission from the author Werapong Prapha. Werapong Prapha is private sector coordinator at Oxfam, Thailand. 

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