Regulation can hinder—not help—Asia’s social enterprises, analysts say

Across Southeast Asia, social enterprises are helping narrow inequality and create livelihood opportunities. But governments could be supporting ethical business the wrong way.

As more Asian nations consider laws to promote social enterprises, analysts on Thursday warned that legislation could hold back, not help the growing number of ethical businesses.

Thailand last week passed a social enterprise act that gives tax breaks and other incentives to registered ventures that aim to deliver a positive social impact while turning a profit.

Such ventures can register if they generate half their revenues from the business, and reinvest 70 per cent of profits.

“The law makes it possible for social enterprises—and their supporters—to receive various benefits,” said Vichit Charadsooksawad, director of the industry law division of the government’s advisory council, who helped draft the law.

“It recognises the role that social enterprises can play in solving social, economic and environmental challenges,” he said on Thursday at a regional conference in Bangkok.

The tax breaks are not that important—we want the sector to grow first.

Alfie Othman, head, Singapore Centre for Social Enterprise

Across Southeast Asia, social enterprises are helping narrow inequality and create livelihood opportunities.

Thailand is among the few countries in the region with legislation aimed at such ventures.

Vietnam revised its enterprise law in 2014 to provide a legal definition of social enterprise, while Myanmar set up a committee to promote inclusive businesses and impact investing.

Malaysia had a three-year strategy to promote social ventures that ended last year, while the Philippines had drafted a bill to reduce poverty through social entrepreneurship.

But regulation is not always needed or desired, Tristan Ace, who heads the British Council’s social enterprise programme, said on the sidelines of the conference.

“There is a difference between recognition and regulation. Recognition sends an important signal to the market that it is being taken seriously,” he said.

“But when you have a sector in a nascent stage of growth, you don’t want to restrict it too much. Regulation can come later,” he told the Thomson Reuters Foundation.

Instead, governments must first help the sector develop talent, and improve access to finance, said Ace.

This view was echoed by Alfie Othman, who heads the Singapore Centre for Social Enterprise, which provides training and other resources for ethical entrepreneurs.

“We are opposed to regulation—it would kill innovation in the sector,” he said. “The tax breaks are not that important—we want the sector to grow first.”

Meanwhile in Indonesia, there is a discussion on whether a new law is needed, said Romy Cahyadi, chief executive at Instella, which supports social enterprises.

“Some social enterprises want greater clarity and recognition as legal entities,” he said.

“The government plans to include social enterprise in the five-year national plan. We believe that’s a good approach.”

Thailand has a long history of social enterprises, with the quirky Cabbages and Condoms restaurant set up in 1975 to fund AIDS projects and sexual-health education programmes.

It has since grown into a chain of restaurants and resorts in Thailand and overseas.

“When we began, even the term ‘social enterprise’ was not used. We made good money without any government support, and paid tax like any company,” said founder Mechai Viravaidya, known as the “godfather” of Thai social business.

“More than legislation, what we need is awareness and education,” he said.

This story was published with permission from Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers humanitarian news, women’s and LGBT+ rights, human trafficking, property rights, and climate change. Visit http://news.trust.org.

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