PHUKET AUTHORITES BEGIN WITCH HUNT ON FOREIGN BUSINESSES – The next couple of months could prove interesting on the holiday island of Phuket, Thailand as the Phuket Business Development Office (BDO) claims it has now identified 82 businesses of ‘suspected’ breach of Thailand’s Foreign Business Act (FBA) by using Thais as ‘nominees’ in order to obtain majority control in the business.
Thailand, as with many developing countries, has a number of policies in place to protect local businesses and employment against being squeezed out by foreign companies.
It is illegal in Thailand for any foreigner to own more than 49% of a Thai company. This issue is often overcome by foreigners using lawyers to set up what is commonly known as a Thai Nominee Company whereby the foreign investor holds 49% and a number of Thais, generally three, hold the remaining 51%
These Thais in fact have little or no commercial interest in the company and they certainly do not profit from the company’s activities. However widespread this practice may be it remains illegal and for years the Thai Government has been threatening to enforce the FBA in order to stamp out foreigners profiteering at the expense of Thai nationals.
According to Phuket’s BDO chief, Nimit Kangkajit, his department has identified 75 suspects running a total of 82 businesses that are illegally using Thai Nominees and they intend to investigate and close down any foreign run businesses that are not complying fully with Thai law.
After years of making such threats the question remains why now are the Thai authorities prepared to close down such companies?
The answer lies mainly due to the perceived threat that the ever increasing Russian presence is having on Phuket and other key tourist destinations, such as Pattaya.
Pattaya has a very seedy reputation of sea, sun, sex, sex and more sex; it’s where foreigners are able to engage in all levels of depravity regardless of the legalities.
For decades Pattaya has been primarily run and protected by the police who make their money either by owning one or more of the thousands of girl bars or by providing ‘protection’ services for foreign bar owners.
Over the last couple of years Russians have begun to move in and take over. The police feel powerless to stop the onslaught and it is widely known that the Thai Police fear getting on the wrong side of what is perceived as mainly Russian Mafia.
In Phuket the situation of Russian businesses being set up is causing Thai nationals to lose out on tourist related business. The argument from the Russian quarter is that the Thais are not able to communicate with Russian tourists and often attempt to rip them off by over-charging on everything from excursions to taxi fares.
Recently a number of protests were initiated by Tuk Tuk and Taxi Drivers in order to force local authorities to take action against Russian businesses.
We contacted one local foreigner who runs a small businesses; he has asked to remain anonymous for fears to reprisals.
“Only 82 businesses? This shows just how inept the Thai authorities are. There are approximately 18,000 foreign owned businesses in Phuket and it’s likely that 95% are owned and operated through a Thai Nominee Company. This practice has been going on for years and the Thais have never enforced the law due to the vast sums of foreign investment involved.
If only 82 businesses are being targeted it is highly suspicious and considering the on-going hatred the Thais have for Russians it’s likely that a large proportion, if not all, of these are Russian owned businesses.
The Thais are xenophobic and certainly narcissistic and as they continue to enforced their nationalistic agenda that ‘Thailand is for Thais only’ this will only increase the spiraling decline in tourism.
The truth is that tourists are nothing less than cash cows and the Thais don’t want any competition. This allows them to continuously rip-off tourists in all manner of scams without having to compete in a free market of fair trade. It’s sad, but true, that Thais simply do not have an adequate level of education to understand how business works or how to operate a successful tourist industry. It’s all about here and now; tomorrow doesn’t exist.”
I have to date written a number of articles on tourism, the property market and foreign business in Thailand and yet despite the stories I have been passed by expatriates Thailand remains capable of luring suspecting foreigners to step up businesses and buy property.
The truth is those foreigners are not able to own businesses or property without 51% of the asset being controlled by a Thai. Recently this year the Thai Government announced a crackdown on foreign property ownership mainly due to advert attention away from the illegal land grabs Phuket officials have been involved in.
This situation has gone quiet but some pundits suggest that if the Thai authorities ever bothered to clamp down on foreign property and business ownership it is likely they would be able to confiscate over 95% of businesses and properties.
Thailand is not, regardless to what the realtors and Thai lawyers may tell you, a friendly place to do business or set up home. The laws are draconian and the Thais do not like foreigners owning anything that may be perceived as taking something away from a Thai.
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