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TitleEntrepreneurship and socio-economic transformation in Thailand and Southeast Asia
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Page 1

hulalongkorn niversity

French Institute of cientific Re.earch
for Development in Cooperation

' %ai{ana


edited by
Amura Pongsapich

Sornchai Ratanakomut
Xavier Oudin

Pascale Phelina
Jean-Christophe Simon


Proceeding of the Seminarof Bangkok. February 1993
Chulalongkorn niver. ity

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Table 3:Compliancewith LabourRegulations,by Size*

Ecuador Thailand Tunisia

2-5 �~�1�O Total 1-5 +5 Total 2-4 5-10 + 10 Total

Social security 24 54 26.7 70 81.7 73.3 16 7 13 15

Minimum wage 91 91 91 61.8 65.9 63.1 n.a. n.a. n.a. 90**

Maximum working hours. 39 69 41.5 60.1 65.9 62 54 70 87 60
Source:Results of the surveys, 1991; n.a.: not available.
* Percentageof enterprisesemployingat leastone wageearner. **Estimated.
Note: Thai firms with less than 20 employees were not liable to social security contribution at the
time of the survey; entrepreneurs were askedif they "agreed" with the regulations concerning social
security. Thus, one should be very careful incomparingthose figures with actual rates of compliance
in Ecuadorand Tunisia.There is heavysuspicionthat thosepercentagesdo not actuallyreflect the rates
of compliance that would occurif entrepreneurs were actually liable to pay those contributions. For
Tunisia, the figures represent the percentage of entrepreneurs which comply strictly with labour
regulations; thus, the other entrepreneurs of the sample either comply only partly with those
regulations,or do not complyat all.

The link between sizeandcompliance with regulations is once again obvious: the larger the
firms, the more frequently they comply with labour regulations, except for Tunisia, where smaller
firms pay their social securitycontributionsmorefrequentlythan the larger ones. This paradox can be
explained by the fact that, since the burden of contributions falls heavily on the global payroll of
Tunisian enterprises'' and is afunction of the numberof wage workers, those who hire more than one

.or two wage workers generally do not declareall of them. 54 percent of firms employing between 5
and 10 people say they pay contributionsonly for some of their wage workers, while this proportion
is zero for firms employing 1 to 5 persons (they either pay contributions for all of their declared
employeesor noneof them).

3.3 Reasonsfor not Complyingwith Labour Regulations

Among the reasons given by entrepreneurs not complying with minimum wage and social
securityregulations,it is interestingto compare two kindsofanswers:on the one hand, some consider
compliance with regulations as "too expensive"; on the other hand, some others say they are "not :
concerned", they "do not know" them, or "procedures are too complex" and "there is a lack of
information" (see table 4). In the firstcase,evasion of obligations is truly a matter of purpose, and
firm owners intend to bypass an obstacleendangeringthe profitabilityof their business. In the second
case, motivesare not so clearand seem to relate more to a lackofinformationfrom governments.

In Tunisia, if we consider the cases of minimum wage and social security laws, the most
frequent answer of firm owners on this matter concerns the cost of compliance ("too costly"). In this
country, labour lawsare morerestrictivethan inEcuadorandThailand,especiallydue to the absenceof
specific exemptions targeted toward smallestablishments,and entrepreneursevade these regulations

6- In Tunisia, social securitycontributions represent theequivalentof a 33 per cent rise in the monthly
payroll, which is a very heavy burden for small firms.


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because they cannot economically afford to comply fully with them. Nevertheless, therelatively "lax"
attitudeof the governmentis also reflected by theentrepreneurs'answers: thesecondmost frequent

answer is that there are "no controls" from civil officers. Thus, labourregulationsmay be restrictive,

but poor enforcement of those regulations is apparently a major cause of non-compliance.

Table 4: Reasons for not Complying with Labour Regulations*

Minimum wage Social security Maximumworking hours

Ec. Thai. Tunis. Ec. Thai. Tunis. Ec. Thai. Tunis.

Unaware / not concern d 47 44 2 40 23.8 2 n.a 13.7 33

Procedures too complex / - 6 - 7 2:4 1 n.a. 1l.8 -
lack of information

Too ·costly 21 3 47 4 2:4 45.5 n.a. 33.3 -
No controls - 9 20 4 7.1 29 n.a. 2 56
New activity /
new employee 5 - - 21 ' - - n.a. - -
Employee refuses 2 - - 12 - - n.a. - -
Other reasons 26 38 31 11 64.3 22.5 n.a. 39.2 11

Total 100 100 100 100 100 100 n.a. 100 100
Source: Results of the surveys, 1991; n.a.: notavailable,
*Percentageof the answers given byentrepreneursevading labour laws totally or partly; except for
Ecuador: percentage of reasons given for each employee not affiliated.

TheEcuadorianand Thai cases show different types of constraints anddifferentattitudesfrom
entrepreneurs:the main reasons for not complying with minimum wage and social security laws are

ignoranceof legal obligations, assumed non-liability and, to a lesser extent, lack of information and

complexity ofprocedures.One feature of the Ecuadorian case is of some interest: a certain number of
entrepreneurs (12%�~�f the sample) say they do not pay social security contributions because their wage
workers refuse to contribute;sincethe minimum wage is very low, they prefer to get the total amount

of their gross salary rather than "lose" a part of it through social contributions.

Thai entrepreneurs,unlike their Tunisian counterparts, do notgenetallyconsiderlabour laws as
an obstacleto the growth of their activity, even if the type oforganizationof Thai firms makes it
difficult to comply fully with regulations.It must be noticed that the survey took place during a period

when scarcity of labour, and especially skilled labour, was particularly acute: institutionalconstraints,
which are lessburdensomethan in othercountrieslike Tunisia, were thereforebetteraccepted.
Moreover, the forthcoming measures designed to strengthen workers' protection are following a global
growth trend in the Thai economy(andespeciallyin manufacturing activities). Thus, several factors
can explain thegreatercomplianceof Thai entrepreneurswith labour regulationscomparedwith
Ecuadoriansand Tunisians: the needfor skilled labour, a lessrestrictiveregulatoryframeworkand

growth rates that allow them to bear the cost of complying with laws. Thaientrepreneurs,however,
complain about the provision oftheminimum wage law. The main reason given byentrepreneursfor
not complyingwith the minimumwageis that it is "too costly". Manyentrepreneursexpressthat the


Page 348

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