Take small business, for example. In other countries, such enterprises work according to a set of simple accounting principles. Basically, a business has income and it has costs. If you have more income than costs, then you’re making a profit and you sit behind your desk with a big smile on your face. However, if people aren’t buying your goods or have become bored with your services, then your income could fall below your costs. Under these unhappy circumstances you will lose both your money and your smile.
That’s in other countries. Here, businesses don’t work quite like that. I am reminded of the unique nature of Thai accountancy while chatting with a couple of friends. The wife is thinking of starting a business and cites as an example the lady who runs the noodle soup kitchen a few doors down from the police station. You may know it. The wife says that this lady’s noodle soup business is very successful and makes lots of money. That’s why the lady that runs the noodle soup kitchen has a big smile on her face, though she doesn’t sit behind a desk so much as stand in a cloud of steam behind the boiler that contains the hot stock from which she makes her noodle soup.
The husband is a little sceptical about the economics of this noodle soup business. ‘Doesn’t she work out of a shop house?’ he asks.
‘Oh, yes,’ replies the wife. ‘She has a brand new shop house on three floors. She sometimes sleeps there if it’s too late to go home. It’s very convenient; a very beautiful shop house.’
‘The rent on that shop house can’t be cheap,’ muses the husband. ‘Then she’s got to buy noodles and vegetables and pork and fish sauce as well as gas and electricity. And what about the start-up costs? She’s got quite a lot of cooking equipment that can’t have been cheap. Then there are the plastic tables and chairs, the bowls and spoons. It all had to be paid for.’
‘Spoons don’t cost much,’ interrupts the wife.
‘No, but it all adds up. If you think of the original cost of setting up the restaurant and the rent and other running costs, it’s difficult to see how she could sell enough bowls of noodle soup to break even, let alone make the healthy profit that you’re saying she makes.’
‘The kitchen equipment is very smart. She’s very happy. It’s a very good business.’
‘That’s my point. It is very smart. I don’t see how she can be paying for it when a bowl of noodle soup is only 30 baht.’
‘Even so, how can she afford to pay the rent?’
‘Oh, that’s easy. She doesn’t have to pay the rent, her husband does. And he paid for the cooking equipment and the tables and chairs; possibly also the spoons. It’s OK because he’s a farang.’
This is where Thai accounting practice diverges from the system used in other countries and why Thai small businesses are so successful. While in other places entrepreneurs struggle with the realities of profit and loss, Thais have discovered how to wipe out all of their business costs at a stroke, by means of the farang. For those unfamiliar with the term, its official meaning, broadly, is ‘Westerner’. But in this context it means more than that. When someone says of a Thai businesswoman, ’Her husband is a farang’, what they mean is that she has access to unlimited wealth; she has a briefcase full of neatly bundled banknotes; she has the key to Fort Knox; she has a vast treasure trove filled to the ceiling with chests of gold coins, barrels of jewels and baskets of pearls.
If your husband is a farang you needn’t ever worry about money again. The costs column in your business accounts disappears as if written in fading ink and you are left with only income, which in the absence of outgoings becomes profit. As you stand behind your soup counter, smiling through the meaty steam, you can be confident that yours is one of the most successful noodle soup stalls in Pattaya. It could be the most successful noodle soup stall if it weren’t for that other lady in Soi Khao Noi. She’s not the wife of a farang, of course, but the widow of a farang, and that’s better still.
Or look at a big business like Homeworks—that’s the DIY and homewares store you see around the place. There’s one in south Pattaya, on the Sukhumvit Road. When you go into Homeworks, five or six nice-looking young people hanging around the door in corporate uniforms say sawadee to you. As you proceed you become aware of more and more of these employees. They’re standing around in groups, sitting on the display beds, loitering behind the shelves of lightbulbs and chatting busily to each other, possibly about last night’s TV soap or who kissed whom behind the store room. If you spend too long in one place, one of these assistants will pounce on you and follow you to the check-out where their ID card is scanned along with your goods, so they can get the commission from the sale that they had no part in making.
When I’m in Homeworks, we customers are usually outnumbered by these employees. Since all these people do is annoy shoppers, why does the company employ so many of them? You’d think the shareholders of Central (that’s who owns Homeworks) would be hard-headed investors, yet somehow they have been seduced by magical Thai accounting into accepting that the employment costs of these crowds of pointless assistants is somehow justified. There’s something mysterious going on here that has nothing to do with mathematics, but what?