ACC investigation slows business in P/ling

Several business entities have closed shop and banks expect a drastic drop in imports

Trade:  In the aftermath of the ongoing Anti-Corruption Commission’s (ACC) investigation, several business entities in Phuentsholing, mostly grocery stories, have stopped importing commodities.

Shelves in some of the shops that used to be packed with goods and commodities are today empty, including their adjoining stores.

Kuensel found that non-Bhutanese run many of these establishments, while the license holders are Bhutanese. Locals in the town say it is the fear of the commission shutting their shops that have made them to stop import.

One of the shopkeepers in the town said he was planning to quit his business. The owner is currently looking for potential buyers. “We stopped importing since April,” the shopkeeper said.

Although another shopkeeper operating with a Bhutanese license, said he is awaiting consignment, neighbouring shopkeepers say the particular shop is also planning to call it quits.

A tyre shop and another hardware shop also have minimal stock in their showrooms. Informal sources hint the shops could have also stopped importing, including diverting some products.

Local businessmen also said that a furniture manufacturing entity has shut its shop recently. Two shops of fronting cases had also cancelled their licenses.

Since ACC started closing shops in Phuentsholing starting April this year, 24 business licenses have been suspended to date after the commission found a prima facie (based on impression) case of corruption.

About a week ago, four shops were suspended. One of these shops, locals said had then just brought in some truckloads of consignments, which were supposed to get distributed to business establishments across the country.

Although some bank officials say there is not much change in the rupee outflow through Real-time Gross Settlement (RTGS), going by the current trend, local entrepreneurs hint that import figures could drastically change this month.

T-Bank officials in Phuentsholing said there was not much difference as their RTGS transactions were mostly to do with Tashi’s businesses and less with other clients.

A bank official said there was a drastic decrease in their clients who came to do RTGS transactions. “We hardly see them these days,” the official said, requesting anonymity.

According to sources, Punjab bank made a transaction of 909 RTGS worth Nu 528.27 million (M) in March. The figures dropped to 644 RTGS transactions worth Nu 222.10M in May.

However, the figures of Indian rupee (INR) outflow in RTGS increased in June with Nu 350.01M. These transactions were made only from Phuentsholing, the official said.

Bank of Bhutan (BoB), meanwhile made RTGS transactions worth Nu 2.5 billion (B) across the country in April and Nu 2.3B in May. The bank made transactions worth Nu 2.7B in INR in June and its officials said there was not much effect.

Sources said most business entities in Phuentsholing did their RTGS transactions with Druk Punjab National Bank.

Meanwhile, Kuensel learnt that ACC has currently detained three non-Bhutanese for interrogation. Since the investigation started on April 20, the commission also has frozen properties of four individuals.

ACC has been suspending business licenses and closing shops for investigation for alleged tax evasion through corrupt practices, one being under-declaring of goods imported and over-declaring also led to alleged of INR diversion.

INR was allegedly diverted through manipulated and false invoices on non-taxable essential items such as rice, oil, and sugar. A business entity would declare import at customs and ask for INR in banks in the form of demand drafts and RTGS.

Local entrepreneurs say tyres are taxed higher in India than in Bhutan leaving room for malpractices and collusion between Bhutanese and Jaigaon business entities. Tyres, which were imported under Bhutanese business licenses, are alleged to have never entered the country as it was diverted to Jaigaon.

Import figure of corrugated galvanised iron (CGI) sheets is another case.

Despite the fall of housing construction following the rupee crisis in 2011, the country still imported 7,021,050 kg of CGI sheets worth Nu 457.39 million.

In between 2010 and 2014, Bhutan Trade Statistics (BTS) show highest CGI imports occurred in 2012, which, many say was startling because financial institutions didn’t allow loans for housing after the INR crunch. BTS shows an import of 8,327,427kg corrugated worth Nu 591.99 million.

When the housing and construction was booming in 2010, the country had imported 6,433,519.65kg of CGI sheets worth Nu 394.98M.

Locals in Phuentsholing say the corrupt practices happening were a result of fronting. The representative for the business community in the town, Phuntsho Wangdi said his biggest fear was about what would happen once the ACC team left.

“It may come to square one,” he said. “We need a strong check and balance, which is missing today.”

Although open illegal buying-selling INR has dropped, the Bhutanese currency value has dropped to an all time low in two years. Shopkeepers in Jaigaon are asking eight percent extra on the actual price, with some even charging 10 percent in certain services. Most of the shopkeepers are adamant. Daily rush to the ATMs in Jaigaon is a regular sight.

By Rajesh Rai, Phuentsholing

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