Rajesh Rai | Phuentsholing

Since January 2020 to date, 115 businesses suspected of fronting in Phuentsholing have voluntarily cancelled their licenses. Of that, 60 were trading licenses and 55 for services such as bars, restaurants, and workshops.

A Phuentsholing regional trade official said that there were 274 (179 trading and 95 services) businesses suspected of fronting in the town, including the 115. 

From the remaining 159 license holders suspected of fronting, the trade office said 124 have submitted statements for non-involvement in fronting and 18 licenses were cancelled due to non-renewal or expiry of validity in the licensing system.

Further, 16 licenses were cancelled after the license holders didn’t turn up to update and explain to the trade office despite notices being served, and a license was dropped due to information mismatch.

Regional director for trade, Sonam Dhendup said that all these 274 firms were marked as “suspected fronting.”

“We called them and explained. We told them they know better whether they were practising fronting or not,” he said. “We gave them the opportunity. So 115 voluntarily cancelled their licenses.”

Sonam Dhendup said they could not distinguish correctly or exactly if the suspected fronting license holders are actually fronting cases.

The trade office has been raising awareness of the new penal laws and likely penalties.

“We want to make it clear. If they come forward, it would be good. We don’t want people to be taken by surprise when the law is implemented,” he said.

Meanwhile, the country’s biggest trading hub is also considered as the breeding ground for fronting businesses due to the porous border.

Without proper laws, fronting, which is generally an act of leasing licenses to non-Bhutanese has been thriving in the town presenting a huge challenge in stopping the revenue outflow. According to the trade office, Bhutanese license holders make easy money through commissions without making any investment or taking business risks.

However, with the new Act, fronting businesses will be treated as criminal offences and penalised beginning next year.

Fronting business between Bhutanese will be charged for violation for the first conviction and petty misdemeanour and cancellation of license if convicted for the second time.

It would be a felony of the fourth degree or value-based sentencing, whichever is higher, if fronting takes place between Bhutanese and a non-Bhutanese and between non-Bhutanese license holders.

A businessman said that fronting was in every sector in Phuentsholing such as trading, services, travel agents, and boulder export.

“Now some may have shifted to Thimphu,” he said.

He said that when there were persons without Nu 100,000 in their accounts, nor any past transactions, it was difficult to believe them holding import licenses.

“The licenses must be provided considering all these,” he said. “An import business needs huge investment.”

A Phuentsholing resident, Karma Tshering Dorji said that the government must first close the bigger entities operating in fronting. The smaller ones would automatically dissolve, he added.

“Bhutanese must think of bringing in foreign direct investments rather than engaging in fronting with non-Bhutanese,” he said.

He said that the fronting laws between Bhutanese were irrelevant.

“If leasing of licenses between Bhutanese is fronting and criminal, the government must now think of engaging people in business and entrepreneurial training, and not just leave it to the new law,” he said.

Edited by Tshering Palden