Phuket is already the cruising centre of the Andaman Sea. Given the many advantages offered by both the island and the surrounding region, within a few years Phuket could be the most important boating destination in Asia. This would provide a significant boost to Phuket’s economy and to the island’s already substantial international image. But outdated laws and regulations are blocking the realization of this enormous potential.

As of this writing, rumour had it that the Thai national government was going to repeal or radically amend excise tax legislation adversely affecting the yachting industry. Virtually everyone in that industry agrees that this move alone would do much to help realize the true potential of Phuket-based boating.

Still, several other laws need repeal, amendment or reinterpretation, if Phuket and the rest of Thailand are to reap the benefits that rightly should be theirs.

THE ADVANTAGES

Phuket is a big island with a big, complex personality. One of its great advantages is that it can be all things to all people.

Hotel accommodation ranges from inexpensive bungalows to some of the most famously luxurious resorts in Asia. Its convention and incentives facilities are attracting large and growing numbers of business travellers. As seaside resorts go, it’s one of the dining capitals of the world. It has a vibrant and varied nightlife.

Lush tropical settings and quality facilities support an exceptional variety of land and sea recreations. Scenic, superbly designed golf courses are one big draw. First rate, internationally accredited scuba instruction is available at all levels up to master instructor, and some of the live-aboard dive cruises have few rivals in the world. Any number of anglers around Asia prefer Phuket-based gamefishing. The sailing is unsurpassed.

The annual Phuket King’s Cup, Phang Nga Bay, and Phuket Invitational regattas are glittering successes, while Phuket has long been notorious as a Siren island that enthrals round-the-world sailors for years, if not forever.

Phuket has all that, and it has secluded, classically peaceful coves and beaches. More importantly, for the long term, it’s the main base for exploring many other scenic islands, most of them uninhabited; hundreds and hundreds of kilometres of coastline; richly biodiverse terrestrial and marine national parks; and the enormous expanse of the Andaman – a deep, clean sea full of fish and coral, extending from the northern border with Burma to the southern with Malaysia and, in the west, to India’s Andaman Islands. And the area boasts a six-month high season of superb sailing conditions, with splendidly scenic Phang Nga Bay offering 12 months of sailing.

THE OPPORTUNITY

Yachting – boating of all kinds – could be Phuket’s single biggest recreational attraction, contributing handsomely to the local and national economies.

For years, in fact, Phuket has been on the verge of a boating boom. Yacht charters, marinas and local boat-building could rapidly develop to the extent they supported the biggest and best local boating industry in Asia. Other sectors of the local economy – from sports diving to gamefishing to hotels and catering to carpenters, machinists, grocers and beach-umbrella operators – would find new jobs and new income.
Experts estimate that the boating industry should be bringing in many millions of baht more in foreign currency and creating thousands of new jobs.

It’s sometimes argued, to the contrary, that encouraging foreign-flagged sailing yachts to operate charters here will be taking jobs away from Thai nationals. This is not the case. There has been virtually no indigenous tradition of recreational sailing in Thailand, for example, so there are few Thai-flagged sailing yachts and few Thai skippers and crews, at present, able to run sailing charters. That means using foreign-flagged vessels to meet the demand, at least for the time being. And one of the benefits the yachting industry will bring the country, aside from the many jobs in boat maintenance, repair, building, provisioning, etc., is the training of yacht crews. As Khun Thana Tharadolparb, Harbour Master at the Phuket Boat Lagoon, points out, some Thai boat captains are now driving taxis or selling food in the streets. Local marinas are investing in condominiums and more hotel rooms – in real estate, rather than true marina facilities. If the laws were different, the Boat Lagoon would instead be expanding its berthing. Just as many other Thai investors would be pouring money into recreational boating.

Commercial yachting attracts just the sort of affluent, longer-stay visitors that are ideal for Phuket. Typically, they’ll spend 1-2 weeks at sea. They’ll buy about US$50 worth of food and liquor per person per day, while each boat will spend some 20 to 25 percent of its value on repairs and maintenance every year. This alone will pour money into local pockets and generate lots of new employment. These visitors, in many cases, will then stay ashore and spend yet more money on accommodation, food, and entertainment. They’ll also distribute money and jobs more broadly, says Vincent Tabuteau, managing director of the upmarket East West Siam travel company, since the boats will visit out-of-the-way beaches and villages not frequented by tourists.

And local investors would begin building Thai-flagged yachts – some of them on Phuket itself, where a yacht-building industry would almost certainly flourish – bringing still more jobs and revenue to the area, with boats no doubt being built for the export market as well. The proportion of Thai owned, operated and crewed vessels would expand, and future licensing procedures for foreign-flagged boats would presumably take account of that.

Environmental benefits would also accrue from a more leisure-oriented local boating industry. Both the industry as a whole and the typical boating visitor tend to be kind to the environment. Besides that, local Thai sailors and others could find alternatives to jobs in commercial fishing, for example, and regulations concerning inshore fishing might be better enforced while reducing conflicting interests between local villagers and recreational boating operators and tourists.

In short, the whole of the local economy would share in the new prosperity. And the national economy would benefit, with more Thai investors drawn to the boat-building, marina, and chartering industries. Meanwhile, more and more of the Thai public themselves would become interested in recreational boating, in turn boosting the market for all related services.

But what is really happening is that many yachts are moving to Langkawi, local marinas are turning more to real-estate development, while local service companies (carpentry, painting, etc.) are losing business, and may have to start axing jobs.

THE OBSTACLES

As recently as 1996, the prospects for Phuket’s boating industry looked hugely promising. So far as the yacht charter business went, Thai Marine Leisure’s Jan Jacobs said this: “Phuket is gaining recognition from big charter organizations all over the world – Nigel Burgess, for example, and Camper & Nicholson, the world’s most important charter agents. People are looking at us.” The then-manager of the Phuket Yacht Haven felt that, aside from the greatly increased interest in marinas, the most significant development that year on Phuket was the upsurge in the boat-building industry. The marina at the Boat Lagoon, meanwhile, had been expanding their berthing by 30 percent a year for the previous three years, and they were still filled to more than 95 percent of capacity. The proportion of Thai to foreign-owned boats, furthermore, was steadily changing. In 1993, only about 2 percent of the boats moored at the Boat Lagoon were local; the rest were foreign-owned. By 1996, between 10 and 15 percent were Thai owned. Then this, along with all the other boating developments, was nipped right in the bud.

SO WHAT HAPPENED?

The most obvious culprit was the new excise tax – legislation passed, without input from the industry itself, that effectively strangled the fledgling recreational boat-building industry while stalling the growth of both marinas and yacht chartering.
At the same time, inevitably, the tax failed to raise its target revenues. It was a classic case of shooting yourself in the foot. According to builders, a boat that would have cost 736,000 baht ($23,780) at the old tax rate was instead going to cost 1.5 million baht. Even though the law was designed to punish the rich, in practice it made boats prohibitively expensive for middle-class consumers, the very group who had been driving increased demand. In fact, the tax favoured those who bought bigger boats – customers who would simply bring in boats built and flagged elsewhere, thereby denying the government even those revenues it might have collected under the older, less oppressive tax.

“I don’t think we have key people in the government who really understand recreational boating,” says Mr Radab Kanchanavant, Phuket King’s Cup Regatta Organising Committee member and Co-Commodore of the Yacht Cruising Association of Thailand. “They fail to see the big picture. They seem to assume that owning a boat is like owning a Ferrari, and simply want to tax boats as luxury items. They don’t understand how recreational boating could contribute to tourism and the economy. Boating, properly encouraged, will generate more government revenues as well as more income, jobs and training for locals.”

One basic problem is that a recreational sailing vessel with an inboard auxiliary engine is without definition in Thai law. By default, then, it is assimilated to the category of commercial trading vessels. This can entail a major difficulty for would-be charter operators.

The Thai Vessel Act regulates the registration of boats; and boats with engines that are engaged in “trade” – that is, vessels which are carrying goods or passengers from one port to another – must be 70 percent Thai owned and fly a Thai flag. To get the Thai flag, the owners have to pay an average of 40 percent of the value of the vessel in import duties and fees, plus insurance, freight and other costs of getting the boat to Thailand – all this before setting up a company that is 70 percent Thai owned, which would often mean that the owners of the charterboat would have to sell part of their share in it. This is not an attractive proposition; and it is little wonder that boat-charter operators would avoid Thailand, despite the patent attractions of the area. Certainly, it’s unrealistic to expect foreign investors to put up money for infrastructure or boats on the basis of the current situation.

Another key problem is the number of different agencies that are involved. The web of responsibility is bewildering. The Harbour Department, under the Thai Navigation Act, handles vessels trading in Thai waters. The Ministry of Labour becomes involved when there are foreign crew members on board. Negotiations are also required with Trade and Communications, Customs, Immigration, the National Environment Board, and the police, whether the Tourist Police or the Immigration Police.

THE ANSWERS

Thailand could quickly recover what should be its pre-eminent place in the regional boating industry. Stated succinctly, the answers are these: (1) repeal the excise tax immediately; and then, without delay, (2) reformulate the laws regulating recreational boats.

“We should explore what other, successful models have done,” suggests Khun Thana at the Boat Lagoon, “and do the same here. That means we first have to change outdated laws.” (According to Bill O’Leary, manager of Aman Cruises, all the authorities would have to do is copy the Turkish laws regulating foreign charter boats.) For starters, visiting yachts should be given permits good for indefinite stays, as they are in Malaysia and Singapore. “We want to keep them here as long as possible. And they’ll spend more, the longer they stay.”

Thana also thinks that allowing foreign-flagged yachts to charter in Thai waters is a good thing. He suggests that they could be issued with 2- to 5-year permits, to begin with, and then be gradually phased out as more and more Thai-flagged boats became available to meet the demand. O’Leary, agrees: “Drop the regulation that outlaws foreign-flagged charters. At the moment, it’s only encouraging illegal operators. Charter operators should be charged a fee or a percentage of revenue. Boats would come in from all over the world.

“And the law that stipulates seventy percent Thai ownership of commercial boating operations? Bring it back to fifty-fifty. Fifty percent is hard enough; seventy percent is ludicrous. As it stands, Thailand’s got all the boating destinations, while Malaysia’s got all the tax breaks. Take off all import taxes on boats, as they’ve done in Malaysia.”

It’s possible that the idea of making the Phuket governor one of the Taksin government’s new “CEO governors” is going to make it easier to bypass the morass of different departmental jurisdictions and policies. It may be one way of cutting the Gordian knot, where the Cabinet, upon the advice of informed authorities, simply declares certain legislation changed. As of this writing, it remained to be seen whether such measures would indeed be implemented or prove effective. In any case, more legislative reform would still be needed.

More Laws Or Fewer?

Yachting – recreational boating of all kinds – could be Phuket’s single biggest recreational draw. “But,” warns Tabuteau and others, “we shouldn’t let the number of boats grow past the saturation point, where cruising becomes nothing more than running from bay to bay trying to beat someone else to the next mooring or berth in a marina. This is the situation in Turkey now, and we should learn from that experience. The industry has to be regulated.”

“A boating boom would be good for Phuket and the whole country,” agrees K. Thana. “But we should never get too greedy. The growth has to be controlled in terms of boat numbers and environmental pollution. We should require septic tanks, for example, aboard any vessel wanting admittance to a marina; and we should apply severe and strictly enforced penalties to boats that flush fuel tanks at sea.” To some extent, then, more laws are needed. As Bill O’Leary says, a fair number of locally built boats would never get a proper marine licence in other countries. Laws would also have to reassess the seaworthiness of all commercial passenger-carrying boats, while regulating the quality of skippers and crews.
 

The various elements – boat- building, marinas, chartering, diving and gamefishing live-aboards and daytrips – all have a synergistic effect on one another. Together, they add up to something greater than its parts. “But,” as Tabuteau says, “the development has to be managed. Amending laws doesn’t mean letting anyone do anything they like. We still need to control numbers and manage resources. That’s why, to some extent, it’s perhaps not such a disaster that we aren’t getting all the boats right now. We may not be prepared as yet.” By analogy, one could point to the over-supply of sea canoes operating in Phang Nga Bay, where too many people recognized what was initially a good idea and were allowed to set up operations without sufficient control.
 

Given the current situation, of course, no one is worrying about an over-supply of yachts in local waters. “Everybody knows Phuket is a good destination,” says Andy Dowden, managing director of Phuket Yacht Services and another pioneer of Phuket-based yachting. “Lots of people want to invest in the boating industry, but inappropriate and sometimes outmoded laws are holding everything back.”


Seize the Day: Opportunities Won Vs Opportunities Lost

Langkawi has taken away 50 percent of Phuket’s business since 1996,” says K. Thana, Harbour Master at the Boat Lagoon. “Six years ago they had one marina and about 300 boats. Today they’ve got 800 boats in at least three marinas, and right now they’re building 500 additional berths.” Phuket, meanwhile, is left with a couple of marinas and an ever-dwindling supply of yachts to fill them.

As it stands, Hong Kong and Singapore are the Southeast Asian leaders in boating equipment and number of boats. But Thailand leads all others in terms of cruising grounds. If we ask who should be the overall leader, however – which country in fact has the greatest resources in terms of scenery, quality cruising grounds, support services (actual or potential), complementary recreational activities and services, and cultural attractions – then the answer is clearly Thailand and Indonesia. Indonesia has potentially even better cruising grounds, perhaps, but until that country achieves greater political stability, for one thing, the potential will never be realized. Burma is another sleeping giant, adds Aman Cruises’ Bill O’Leary, although it might be some years before either Burma or Indonesia presents serious challenges to Phuket’s pre-eminence. In the meantime, Phuket should be serving as the gateway to the Mergui and Indonesian archipelagos.

In the meantime, however, Malaysia is reaping the fruits of archaic and ill-advised Thai laws. People in the local boating industry believe that, in the past few years, some 30-50 percent of the privately owned boats previously staying in Thailand have moved to Langkawi.

THIS SUGGESTS AN INSTRUCTIVE ANALOGY.

Some years ago, Greece decreed that foreign-flagged yachts would not be allowed to operate charters in Greek waters. Turkey, on the other hand, passed a law saying that such vessels could pay, in advance, a tax based on the number of berths on board, and receive either six-month or one-year renewable charter licences.

At the time, the Turkish port of Marmaris had around seven yachts moored at an old wooden jetty. Ten years later there was a modern marina with accommodation for 1,200 yachts. The marina was full. Many of these vessels were taking charters – well-to-do tourists with money and time to spend from all over Europe and the rest of the world; and the amount of revenue that these boats were bringing into the country was staggering. Many of these yachts would instead have based themselves in Greece, had that country been more welcoming.

Indonesia has passed a law allowing yachts to buy charter licences against five percent of revenues. Malaysia also actively encourages the chartering industry, with modern marinas and related facilities going into Langkawi and other areas. The Malaysian government dropped import duties on yachts brought in by Malaysian citizens.

It would be a pity if Thailand were to suffer the same fate that Greece did.
 

“In July 2001,” says Thana, “I tried to book a berth on Langkawi for a client – a yacht that had to sail away from Phuket because of Thailand’s six-month rule. The marina told me, ‘Sorry, we’re absolutely full; we’ve got boats backed up waiting.’
“But if the laws are changed, we can take the business back. For sure.” As he and practically everybody else in the boating industry says, those people would rather be on Phuket.

Another Perspective: Phuket’s CEO Governor.