A large Chinese-language billboard explicitly offering a service to help customers obtain passports and citizenship for several countries, observed in Huai Khwang district last month, has again sparked a controversy regarding nominee businesses in Thailand.
An influx of cheap products, illegal tours, restaurants and supermarkets using Thai nominees have spread in the country, prompting local business operators to voice their concerns to the government as Thai producers and service providers could be damaged without proper preventive measures.
PRONE TO ILLEGAL BUSINESSES
Surawat Akaraworamat, vice-president of the Tourism Council of Thailand, said the country is vulnerable to illegal and nominee businesses because of lax law enforcement, which also leads to corruption and bribery, unlike in developed countries.
Mr Surawat said nominees and price-dumping tours returned to Thailand starting last year as tourism recovered following the pandemic.
These foreign tour operators, particularly Chinese, want to expand their market share, making Thai tour operators less competitive and unable to stay in business.
Many of these foreign enterprises span the entire tourism supply chain, offering tours, restaurants and hotels, which eventually drain tourism income from Thailand, he said.
Earlier, the Tourism Department warned that more than a hundred tour operators are at risk of legal violations for using nominee or price-dumping strategies.
Mr Surawat said he believes there could be more than 100 such rule-breaking companies, considering these tactics are used not only by Chinese firms, but also Russian and Indian entities.
He said most of them can make money from major cities, such as Bangkok, Phuket and Chiang Mai, especially after the Russia-Ukraine war started, as licensed tour companies targeting the Russian market encountered obstacles to operate their businesses.
Many Russians fled their country and work illegally in Thailand by opening businesses and tours to serve Russian tourists, said Mr Surawat.
"Illegal foreigners have been exploiting our resources to make money," he said. "If the government neglects stricter law enforcement, more local legal operators may have to exit the industry soon.
Sisdivachr Cheewarattanaporn, president of the Association of Thai Travel Agents, said some Chinese tour operators have been offering cheap packages, disguised themselves as multi-level marketing firms or insurance companies organising overseas trips to Thailand.
Packages were sold that featured cheap membership fees, with members awarded tour programmes in Thailand that were illegally led by unlicensed tour guides. Such packages have been openly sold on Chinese online platforms, he said.
Mr Sisdivachr said the new 60-day visa-free scheme for foreign tourists from 93 nations would allow more foreigners to illegally work in Thailand.
Typically, those visiting Thailand for tourism tend to stay less than a month, he said.
Some foreigners may find a way to set up a nominee tour business to reap the benefits from Thailand's flourishing tourism industry, said Mr Sisdivachr.
"Cheap travel packages have left a negative image of Thai tourism, instead of depicting it as a high-quality destination as promised by the government," he said.
A billboard at Bangkok's Huai Khwang intersection claimed to offer multinational passport and citizenship application services in Chinese language. The ad caused an uproar on social media last month and was later removed. (Photo courtesy of Pai Charudul Facebook account)
NOMINEE PREVENTION
Jaturon Phakdeewanit, director-general of the Tourism Department, said the department already completed inspections of around 60% of the businesses suspected to be operated by nominees, with a total of 100 companies on the list.
From March to July, the licences of 38 tour companies were revoked.
Prior to the visa-free scheme, the Tourism Department collaborated with the Consular Affairs Department to share a list of licensed tour companies, aiming to reduce the visa approval time for those using legal operators.
However, when the government announced the visa-free scheme, this method was cancelled.
To seek alternative methods, Mr Jaturon said the department assigned the Provincial Office of Tourism and Sports in 77 provinces to inspect tour companies and ask for tour group job orders that include tour itineraries, instead of leaving this duty to department staff and Tourist Police.
He said he believes these preventive measures and punishments for nominee businesses are sufficient.
Those convicted as nominees are banned from operating a tour business for five years. Those convicted under criminal law could face a maximum two-year prison term and up to 100,000 baht in fines.
Illegal foreign owners can be charged with immigration violations and working without a work permit.
While some operators suggest increasing the guarantee fee for licensed tour companies to prevent nominees, Mr Jaturon said this method may not help because most foreign owners have lots of liquidity.
If the guarantee amount is too high, it could limit the opportunities of small operators to compete, he said.
To prevent zero-dollar and price-dumping packages, the department set a minimum price for tour packages, particularly for Chinese tourists, of 1,000 baht per night.
Tourists admire the sights along the Chao Phraya River aboard a hop on-hop off boat in Bangkok. Apichart Jinakul
EATING UP THE COMPETITION
The Thai Restaurant Association warns that foreign restaurants pose a greater threat to Thai restaurateurs.
Thaniwan Kulmongkol, president of the association, said foreign restaurants are mushrooming in Thailand and their expansion is poised to accelerate because of government indifference and a failure to promote the local industry.
In the past year, new Chinese restaurants and supermarkets surged in many parts of Bangkok such as Huai Khwang district, teeming with Chinese hot pot eateries and bustling shops, including chain branches from different regions of the mainland.
The influx raised concerns among locals about Chinese influence and inflation, as some Chinese establishments source the majority of their raw materials from that country, even furniture used to decorate businesses, said Ms Thaniwan.
This phenomenon reminds her of Chinese zero-dollar tours, where Thailand barely benefits from tourism arrivals, sparking concern that some of these restaurants might be nominees for illegal activities.
"Bringing ingredients from the motherland may add to the authenticity of dishes, but this practice will affect the Thai restaurant industry," said Ms Thaniwan.
She said opening a business in a foreign country such as China is not easy for Thai firms because of stringent regulations and mandates, yet starting a foreign business in Thailand is more conducive.
Ms Thaniwan urged the authorities to tighten law enforcement of such establishments.
"The authorities should strictly regulate nominee restaurants through in-depth investigations of business registrations and licensing, as well as work permits," she said.
"If there is a silver lining to this story, at least the young generation is starting to be aware of this kind of business model."
FRESH CONCERNS
The Federation of Thai Industries (FTI) is alert to the nominee issue, which it said will increase problems for Thai businesses now struggling to deal with the influx of Chinese goods into the Thai market.
For example, one steel factory is suspected of being run by a Chinese entrepreneur through a Thai executive, said Kriengkrai Thiennukul, chairman of the FTI.
This factory was allegedly previously owned by a Thai, but ownership later changed hands, raising concerns about usage of nominees to run businesses owned by foreigners, he said.
Nominee businesses would have an unwelcome impact on government tax collection, which affects the country's revenue, said Mr Kriengkrai.
"We are worried about Thai nominees working for foreign entrepreneurs," he said.
"This could deal another blow to local businesses, especially those run by small and medium-sized enterprises."
The nominee issue is a trade and investment concern for companies doing business in both China and Thailand, according to the federation.
To solve these problems, the Joint Standing Committee for Commerce, Industry and Banking is in talks with Chinese authorities about a plan to set up the Thai-Chinese Centre for Business Sustainability to ensure businesses operate under the laws of the two countries, said Mr Kriengkrai.
CRACKDOWN BEGINS
Auramon Supthaweethum, director-general of the Department of Business Development (DBD), reported on the progress of investigations into Thai legal entities that may be considered nominees, meaning they use Thai nationals as proxy shareholders to conceal foreign ownership and conduct business in Thailand. This violates the provisions of the Foreign Business Act of 1999.
This year the department plans to examine 26,019 nominee cases across four business sectors: tourism and related businesses, real estate trading, hotels and resorts, and logistics.
These investigations are in six major tourist provinces: Chiang Mai, Chon Buri, Surat Thani, Phuket, Bangkok and Prachuap Khiri Khan.
As a result of investigations, the department identified 495 legal entities that require on-site inspection.
The DBD, in collaboration with partner agencies, has conducted on-site inspections of 221 legal entities focusing on establishment location, source of funding for business operations, and shareholding arrangements.
Ms Auramon said anyone who assists, supports, engages in business with, or holds shares on behalf of a foreigner to help them conduct business in violation or circumvention of the law faces severe penalties.
These penalties include imprisonment for up to three years, a fine ranging from 100,000 to 1 million baht, or both, as well as a fine ranging from 10,000 to 50,000 baht per day until the violations have been resolved.
The DBD partnered with six agencies -- the Tourism Department, the tourism permanent secretary's office, Tourism and Sports Ministry, Department of Special Investigation, Tourist Police Bureau and the Immigration Bureau -- to sign a memorandum of understanding on Dec 13, 2023.
The agreement calls for a joint operations centre to solve the problem of nominee tourism businesses, focusing of four areas of cooperation: business registration and licensing, information sharing, supervision and prevention, and tourism business promotion.
She said the goal is to raise the standard and quality of tourism businesses to ensure sustainability.
"Entrepreneurs who can identify companies that are at risk from nominee businesses are encouraged to inform the department for investigation and further action, in cooperation with related agencies," said Ms Auramon.
Visitors from China are pictured upon arrival in Bangkok. Mr Surawat says nominee and price-dumping tours have returned to Thailand as tourism recovered following the pandemic.