Fronting and housing crunch continues to plague Phuentsholing

Fronting and housing crunch continues to plague Phuentsholing

While Phuentsholing town has seen tremendous developments over the decades, the main problems that need to be resolved are the issues of fronting and housing crunch.

The residents here say the issues have become chronic despite efforts from the successive governments.

The practice of fronting, the residents say, has been there since time immemorial along the bordering Bhutanese towns. Phuentsholing is no exception. But nothing from the policy and the law enforcement agencies could curb the practice.

While one might see many businesses in Phuensholing, the real traders often are not the ones like it seem, as most are being operated by traders from across the border. So are similar with the dubious signboards.

A town resident says it’s interesting to look around and see which shops are open in the town when the border gate is closed especially for important occasion like the elections in the two countries or certain festivals.

“Almost 70% of the shops in and around Phuentsholing are closed,” he said.

It’s the easy money that lures people into such practice, according to him. A Bhutanese license holder only has to give his/her business license on hire to be operated by somebody from across the border and get the monthly payment. It’s an easy way of earning for the Bhutanese. They get paid without having to face business operation headache.

One main reason for this practice is because of the competition from the Indian traders across the border. This has been a major challenge for the Bhutanese traders to operate business in the town. The prices and the availability of goods and services in Jaigaon, India are some other factors that make Bhutanese customers to throng there, besides the liberty to bargain.

Many shops in every street in Phuentsholing have shopkeepers from across the border. The only exception is those who have been legally granted business licenses by the government in the early 60s.

Meanwhile, the trade department has taken and is taking measures to counter this practice in Phuentsholing, Gelephu, Samdrup Jongkhar and Samtse towns by making license holders sign an undertaking that they will not engage in fronting.

However, a report by the Anti-Corruption Commission (ACC), mentions that after signing the undertaking, neither did many license holders abide by the rule, nor did the authority concerned adequately monitored its implementation as many licenses were found to have been leased to non-Bhutanese for a monthly commission.

As the Sales Tax, Customs and Excise Act of the Kingdom of Bhutan requires businesses to maintain books of accounts and documents for tax computation purposes for five years, the ACC findings revealed that the implementation and enforcement of the laws, rules and regulations were weak.

From April to December 2015, the ACC completed investigation of 30 fronting cases in Phuentsholing, which have been sent to the Office of the Attorney General (OAG) for prosecution and included 27 cases of fronting involving 36 licenses. The ACC also sought restitution of Nu 594.79mn from these cases to the state.

“Phuentsholing as a commercial hub of the Kingdom and an important port through which 80 percent to 90 percent of imports enter Bhutan must be sanitized as the country cannot afford to risk the financial, social and political ramifications it entails,” stated the report.

Meanwhile, the trade department along with other stakeholders recently listed 98 business establishments, which it says need to be confirmed for fronting. The enforcement agencies say they encounter challenge in identifying fronting cases.

According to the agencies, it’s difficult to track down a fronting case. The license holders call them their employees and we are made to accept it.

The Regional Director of the trade department in Phuentsholing, Pem Bidha said it has become a challenge for the department as most businesses employ Indian laborers to run their businesses.

“Also, some might have closed as their employees are residing in the border town of Jaigaon, and they could not come due to the sealed border gate,” she said.

 According to the Regional Director, the trade department has been collecting information to establish whether this is an indication of fronting practice in Phuentsholing. The department, along with the stakeholders, would now investigate the closed businesses.

The housing crunch, meanwhile, is another chronic issue confronted by the people living in Phuentsholing.

With the increasing population annually, many continue to live across in the Indian border town of Jaigaon. Most people residing there comprise employees of the Pasakha Industrial Estate and employees of other private companies in Phuentsholing, who cannot afford the exorbitant rents in the town.

While the effort from the National Housing Development Corporation Limited (NHDCL) has helped in providing affordable housing to people living in Phuentsholing, though the allocation of 506 units with additional 48 units for those who resided in Gol building and relocation elsewhere, still hundreds of people are residing in Jaigaon.

And after some tenants from Jaigaon moved in the NHDCL’s units, the landlords there have also increased the rent for new tenants who are continuously moving in.

“Since there is no indication of another project, the ultimate resolution for us is to resort to Jaigaon even if the rents are higher,” a resident said.

NHDCL’s Chief Executive Officer Thinley Dorji confirmed that the corporation currently does not have any plans to start another housing project in Phuentsholing.  Meanwhile, with the completion of Phuentsholing town development project, it’s expected that the housing crunch would be resolved to some extent. However, this would be something to wait and watch at least for now.

Krishna Ghalley from Phuentsholing