Fears about Thailand becoming a failed state have grown recently because of its failure to enforce laws, allowing cross-border crimes to erode public confidence in the country’s safety and security.
These incidents have already affected Thailand’s tourism sector as the Chinese market ebbed in the first two months of this year, as did those of Taiwan and Hong Kong, whose residents fell victim to scammers.
Business operators have expressed concerns over weak law enforcement in Thailand, including entanglement with corruption, believing it will eventually impact the economy if the government fails to protect the country from crime and similar threats posed by those who exploit legal loopholes for personal gain, such as foreign businesses using nominees.
Failed mechanisms
A “failed state” refers to the inability of a government to exercise essential functions, such as maintaining law and order, providing basic public services, protecting human rights, and ensuring economic stability.
This often triggers widespread corruption, political instability, violence, and a lack of effective governance, leading to a breakdown in social and economic systems.
Paisarn Suethanuwong, a committee member of the Professional Tourist Guides Association of Thailand, said the Thai tourism industry lacks strict law enforcement against illegal actions committed by foreigners.
For many years local guides have faced competition from foreign guides employed by tour companies to serve foreign tourists, especially in the Chinese market, he said.
“Allowing illegal foreign guides to persist in major destinations opened the door to other nominee businesses, including tour companies, transport and real estate, causing local operators to lose income,” said Paisarn.
He said some officials are believed to be helping these foreigners. For instance, despite clear evidence, Paisarn said officers only warned foreigners caught acting as tour guides and let them go, with the police claiming they were just a group of friends traveling and were not working as tour guides.
Similar cases involving foreigners are not prosecuted to the fullest extent of the law, he said.
At the airport, foreigners freely serve foreign tourists without any inspection by authorities, said Paisarn.
He said the current 60-day visa-free scheme for tourists from 93 nations offers a loophole for foreigners to work illegally in the country.
Many foreigners also misuse certain visa types for incorrect purposes and overstay their visa, such as holding a student visa while conducting business or providing tourism services to their compatriots, according to Paisarn.
Recent news reports about the Immigration Bureau’s failure to collect biometric data from 17 million travllers who entered and exited Thailand may have contributed to overstays, he said.
“Though we already have comprehensive laws in place, such as Section 12 of the Immigration Act, which prohibits foreigners from entering the country for employment purposes, the problem is our enforcement is not strict enough,” said Paisarn.
Unfixed loopholes
Thanet Supornsahasrungsi, president of the Association of Chonburi Tourism Federation, said Pattaya is a major destination affected by investors renting out their residential units as short-term accommodation for many years.
He said some condos in the city are well-known for having many Chinese tourist bookings through online travel platforms or their own partner networks, which is against a law that requires a rental period of at least 30 days.
Thanet said Chinese investors buy many units in these properties, some through nominees, meaning the juristic person cannot follow the law or manage benefits for local residents.
While the government eased rules to allow accommodations with no more than eight rooms and 30 guests to operate as non-hotel businesses, aiming to help homestays and guesthouses, he said this created a loophole for some foreigners to buy several single housing or villa units registered under this business type.
Roughly half of the total rooms offered to tourists in Pattaya are condos, said Thanet. Addressing this issue requires collaboration on inspections and strict law enforcement by authorities, including the provincial administration, which is responsible for hotel regulations, he said.
Sisdivachr Cheewarattanaporn, president of the Association of Thai Travel Agents, said local security measures have not kept pace with the booming tourism industry and do not tackle loopholes allowed by the 60-day visa-free policy.
He said foreigners coming here for leisure travel typically stay less than a month. Thus, reducing the visa-free duration to 30 days is reasonable, while those wanting to stay longer can utilize one of many long-stay visas available that have proper screening measures, said Sisdivachr.
He said the government’s efforts to eradicate online scam networks and grey businesses are not effective enough to bolster tourism confidence.
Meanwhile, illegal foreign businesses and foreigners continue to steal jobs from locals at major Thai tourism destinations, said Sisdivachr.
Tourism and Sports Minister Sorawong Thienthong said the Tourism and Sports Ministry and the Interior Ministry are drafting a new Hotel Act dedicated to small and medium-sized hotels, which is expected to be read in parliament in March.
Sorawong said the ministry continues to promote the benefits of booking legally registered hotels and accommodations among tourists, amid emerging reports of illegal daily condo rentals.
In the future, the ministry plans to discuss the issue with online travel agents, urging them to list accommodations that are legal and safe for tourists, he said.
Stricter enforcement needed
Thaniwan Kulmongkol, president of the Thai Restaurant Association, said in her 30 years in the industry, she has never witnessed such a dramatic rise in foreign restaurants as now.
The most popular foreign restaurants in Thailand are Japanese and Italian, said Thaniwan, but they tend to draw less public and media attention compared with Chinese restaurants because of their different business strategies.
For instance, some Chinese restaurant chains often launch numerous locations simultaneously, making them more noticeable, she said.
Restaurants typically have a positive economic influence on local communities because they usually source ingredients and equipment locally. However, some Chinese hot pot eateries appear to only rent space in Thailand, while importing their furniture and ingredients entirely from China, said Thaniwan.
Another issue is the standard of staff training for restaurants, as many hire employees without ensuring they meet industry training standards, she said.
The ministerial regulation on hygiene for places that sell food requires all food handlers involved in preparing, cooking, selling or serving food to have food safety training. Thaniwan said she believes many employees in Thailand’s restaurant industry lack this essential training.
“Unsafe food can pose a risk to diners,” she said.
In addition, restaurant regulations are complex and owners must obtain numerous licenses, including those to operate a restaurant and sell alcohol. Thaniwan said it is unlikely all restaurants comply with these requirements.
“Some restaurants open without obtaining the necessary approvals. When authorities arrive for inspections, they apply for permits afterward. This approach is not a responsible way to do business,” she said.
Thaniwan also raised concerns about the transparency of inspections by the police. She urged more rigorous enforcement of laws, particularly for nominee restaurants that do not comply with regulations.
“Thailand does not need new laws. We already have plenty, but they are not being enforced properly,” said Thaniwan.
She said laws must be applied equally to both Thai and foreign restaurant operators.
Meanwhile, Thaniwan noted the restaurant inspection process in Thailand is not as stringent as in other countries. However, the process of obtaining certifications from various agencies, including the Public Health Ministry and local administrative organisations, is complicated.
Somchai Pornrattanacharoen, honorary advisor to the Thai Wholesale and Retail Trade Association, said retail stores in Huai Khwang believed to be owned by Chinese are increasing, to the point this neighbourhood is being called “Yaowarat 2” or “The second Chinatown”.
He attributed this increase in businesses to an influx of Chinese tourists before the pandemic, which created a cultural exchange and consequently spurred demand for Chinese products in Thailand.
Somchai expressed concern that an influx of cheap products from abroad will decrease the competitiveness of Thai wholesale and retail operators.
In addition, without strict government oversight, there is a risk of illegal businesses and corruption among officials, he said. A priority should be authorities’ insufficient inspections of illegal businesses, said Somchai.
“There is no need for new laws. We already have enough laws in place. We should focus on enforcing existing regulations, possibly adjusting some rules such as the taxation of foreign workers,” he said.
To protect Thai small and medium-sized enterprises (SMEs), Somchai said the government should conduct thorough inspections of foreign shops, checking if they are legitimate, comply with tax regulations, and whether their products meet Thai standards.
He said there is no need to increase civil service staff as the current workforce is adequate, but it is crucial for civil servants to intensify their inspections of illegal businesses. Somchai proposed while foreigners should be permitted to open shops in Thailand, the government must establish a system for fee and tax collection, allocating that revenue towards initiatives aimed at enhancing the competitiveness of Thai SMEs.
Low barriers to entry
Dhanant Subhadrabandhu, president of Thailand Post, said competition in the local express delivery market continues to intensify, especially in 2022 when several foreign players in Thailand launched below-cost pricing strategies.
He said the major stakeholders of global players have been expanding their market share, with the price wars bound to affect the logistics ecosystem over the long run.
Dhanant said the express delivery business must be properly regulated to prevent below-cost pricing practices and to create a guarantee of service quality for consumers. There are six major players in the sector, including Thailand Post.
He said starting this business in Thailand is easy, as operators can register with the Department of Business Development, either directly or indirectly through a joint venture. Without stricter rules, the domestic market is at extreme risk of a monopoly, which would hurt consumers in the near future, said Dhanant.
The Digital Economy and Society Ministry recently directed its working group to collaborate with Thailand Post to revise the arcane Postal Act of 1934, creating better regulation of postal and logistics services and improving service quality.
Possible solutions
Aat Pisanwanich, an independent analyst in international economics, said foreign capital, particularly from overseas investors, has been increasingly invested in various businesses in Thailand, including the purchase of condos, affecting some residents.
“What is frightening is foreign capital has slowly been taking over businesses in Thailand, especially Chinese capital. Within five years, many businesses here are projected to be in the hands of foreign investors, particularly SMEs that lack potential and could be taken over by foreign capital,” said Aat.
In the past the government has ignored this issue and has yet to produce any measures to prevent the domination of businesses by foreign capital, he said.
Aat suggested more regulations be established for foreign investment in Thailand, such as a requirement to use a certain amount of locally produced raw materials, with 30-40 percent of the total materials used in production a typical rule.
He said foreign investors could also be required to support Thai suppliers as part of their supply chain, as the government did with its electric vehicle incentives, aiming to ensure the sustainability of the local industrial sector.
Aat pointed to Laos, where Chinese capital has taken over agriculture, wholesale, retail, casinos, and the development of special economic zones. Laws in Laos allowed this takeover because the nation needs foreign investment to develop.
This article first appeared in the Bangkok Post.
