Phuentsholing, the country’s commercial hub, is a hotspot for fronting. Since the majority of imports enter the country through the town, fronting in the city is as old as the businesses.
Fronting is a practice where businesses are operated completely by a person in the name of another license holder. Fronting practices are rampant especially in retail trade like grocery and hardware.
While the government is vigilant, tracking down fronting and subsequent crackdowns is always a problem.
The Department of Trade (DoT), the prime monitoring agency for business, said that without proper guidelines to track down the practice, the agencies concerned are unable to trace it.
“People resort to different practices in order to skip the investigation. Though, we see many doing it, on interrogation the proprietor always says that the workers are their employees so we cannot take action. It’s very difficult,” said Regional Director of the DoT in Phuentsholing, Pem Bidha.
The regional Director said that fronting happens from a small paan shop to major businesses where the entire transactions are carried out by other people in the name of license holders.
Since rules and regulations to operate business in the bordering town are not in effect as of now, the committee in charge to coordinate the routine check-ups headed by drungpa and all the sector heads is helpless.
Whole businesses including bank accounts are handled by the practitioners.
Financial institutes refuse authorities to check the bank account statement of the businesses without a court warrant, which is mandatory. “Checking the business house’s bank cheque signatory accounts is one of the ways we can track down fronting but this also is very challenging,” said the DoT Regional Director.
The Department however keeps constant tabs on business practices and questions suspects. Due to insufficient manpower, the Department is handicapped in this regard too.
The Trade Liberalization Policy in the bordering towns framed for the businesses in Phuentsholing, Gelephu and Samdrup Jongkhar is still under revision. Though it was discussed in the last parliament session, it is yet to come into effect. The Director said that the business monitoring committee including trade department will follow the guidelines once it become effective.
Absence of exact definition to counter fronting is another challenge. Some people award the ‘Power of Attorney’, the power bestowed upon staff to run the business. “But we can’t ascertain the practice as fronting,” said Pem Bidha.
But “Power of Attorney” is different from fronting in the sense that though the power to operate bank accounts is given to the person who operates the business, the license holder is solely responsible to operate the business without transferring the works to another person.
Also, the department since last year has started creating awareness on the practice of fronting among the business community in Phuentsholing. The officials also briefed businesses on the cancellation of the licenses if caught fronting.
Last year, the department suspended 47 business licenses in Phuentsholing following the Anti Corruption Commission’s recommendation after investigation. Their licenses are not renewed so far. The renewal depends upon the court’s verdict.
Meanwhile, Bhutanese businessmen in Phuentsholing said that fronting is rampant and the government needs to look into it. “The he government sends youth abroad but if provided opportunity, they would thrive doing business here,” said a businessman adding up to 70% of business in the city runs through fronting.
An Indian businessman who runs a paan shop said he pays Nu 1,000 monthly as hire charge to the owner.
Krishna Ghalley from Phuentsholing