KOH PHANGAN, THAILAND – Thai authorities raided a Ukrainian-led luxury villa project on Koh Phangan, halting a 1.18 billion baht development amid a wider crackdown on foreign-controlled tourism businesses.
Luxury tourism project under scrutiny
On Friday, Thai authorities carried out another raid on a foreign-backed tourism real estate company on Koh Phangan. Ukrainian promoters saw their plan to build 20 high-end villas for wealthy foreign tourists, worth 1.18 billion baht, thrown into disarray. Police inspected the construction site, questioned workers and interviewed the Ukrainian managing director, while detaining an undocumented worker from Myanmar.
Suspected proxy ownership and seized documents
Officials seized business records and company documents to verify Thai ownership and said further legal action, including arrests, remained possible. Thai authorities, including police and local officials, investigated the luxury villa development over suspected illegal foreign ownership structures. Ukrainian investors were suspected of using Thai nominees to hold shares in two companies linked to the project, whose combined registered capital exceeded 100 million baht.
Azerbaijani electrician arrest triggered probe
The wider investigation followed the 4 November arrest of an Azerbaijani man who had been working illegally as an electrician. Authorities later found links between him and two limited companies, raising concerns about possible nominee arrangements and efforts to circumvent property laws as part of a nationwide crackdown on proxy shareholders in Thai firms. On Monday, Poonpong Naiyanapakorn from the Department of Business Development announced tighter scrutiny of new company registrations, including more detailed information on shareholders and directors.
Government moves to curb small foreign control
All firms registered at addresses hosting more than five companies were to face closer checks, with the stated aim of eliminating foreign control of small Thai firms that use Thai nominees to bypass strict ownership rules. The current enforcement campaign focused on foreign tourism activities and the southern islands, with Koh Phangan targeted in raids that had been under way for at least two months. Police on the island strictly applied foreign ownership and employment laws, including the 10 November arrest of an Italian expatriate for woodworking at home after he was asked to make a wooden picture frame for 3,000 baht.
November site raid uncovers investor network
On Friday, 21 November, police and officials inspected the villa construction site near Koh Koma in Moo 8 under orders from Pol. Maj. Gen. Suwat Suksri, commander of the Surat Thani Provincial Police. Immigration police, tourist police and the Koh Phangan District Administration joined the operation to identify illegally working foreigners and examine the project’s ownership structure. During the inspection, authorities reported evidence of a network of foreign investors using Thai nominees as proxy shareholders, with Thai nationals holding shares in the companies on behalf of the foreign backers.
Illegal workers and management structure in focus
Investigators also found a Myanmar national working illegally on the site who had entered Thailand without permission, prompting immediate legal action under immigration law. The previously arrested Azerbaijani man faced charges for illegal employment, and local police said the main concern was the villa project’s management structure. Pol. Col. Apichat Chansomret, superintendent of Koh Phangan Police Station, said investigators were focused on the role of Thai nominees.
“The main concern is the management structure of the project. While the managing director is Ukrainian, Thai nominees hold controlling stakes, which is why authorities are gathering evidence for legal proceedings against all parties involved.”
said Pol. Col. Apichat Chansomret, superintendent of Koh Phangan Police Station.
High-priced villas marketed to foreign buyers
The company was marketing villas for up to 59 million baht each, with more than 20 units under construction when the raid took place. Authorities were examining both illegal employment practices and potential breaches of the Foreign Business Act. Police said the evidence, including what they cited as registered capital figures, pointed to possible violations of laws governing foreign participation in Thai businesses.
Part of broader enforcement drive on foreign investors
Officials stated the case formed part of a broader government drive to enforce foreign investment rules and monitor projects suspected of using nominees to evade legal restrictions. The Koh Phangan development highlighted the growing presence of high-end, foreign-backed property projects on the island, with luxury beachfront villas drawing the attention of investors and regulators alike. Police continued to review corporate records, employment contracts and construction documents, and said further inspections could follow if new evidence emerged.
Multiple undocumented workers under review
Police officers reported finding several foreign workers on site whose legal status remained under review, confirming that the Azerbaijani and Myanmar nationals had worked without proper permits. Local and national authorities coordinated closely to enforce the Foreign Business Act, labour laws and immigration regulations at the project. According to Pol. Maj. Gen. Suksri, the operation reflected the government’s commitment to upholding legal standards in foreign-invested projects on the island.
Evidence of multiple legal breaches
Investigators said they were documenting the full extent of nominee arrangements and assessing whether Thai nationals had acted knowingly or unknowingly as proxies. They also examined whether foreign investors had directly managed operations despite ownership restrictions. Police confirmed that the evidence gathered would support prosecutions for multiple offences, including illegal employment, unauthorised business management and immigration violations.
Potential test case for luxury real estate
Officials said the Koh Phangan villa scheme had become a focal point for scrutiny of foreign investment in Thai real estate and could set a precedent for similar projects nationwide. Authorities continued to examine financial records and corporate filings, while interviews with investors, staff and Thai nominees were ongoing. Police indicated that the findings would be forwarded to prosecutors for possible charges once the evidence review was complete.
Clear message to small foreign tourism investors
Officials repeatedly stressed that any foreign investors who violated Thai law would face legal action and that the investigation remained fact-based and procedural, focused on documented breaches. At the same time, the enforcement drive on Koh Phangan sent a broader signal to small and medium-sized foreign tourism investors. The message conveyed was that foreign tourism developments should be reserved for Thai nationals rather than smaller overseas operators.
Contrasting FDI pledges and weak inflows
In Bangkok on Monday, the Department of Business Development (DBD) reported 869 approved foreign investment projects, totalling 276.736 billion baht in value, an 11% increase on the previous year led by Japan, the United States, Singapore, China and Hong Kong. However, the World Bank assessed Thailand’s net foreign direct investment as “muted”, noting that the latest official figures reflected pledges or projections rather than realised inflows. In February 2025, the World Bank reported a decline in manufacturing FDI, especially in auto production, and a significant net outflow of investment equivalent to 1% of GDP in the second quarter of 2024.
Foreign Business Act emerges as trade flashpoint
Analysts cited in the report said the Thai government sought large FDI projects led by major international firms but had struggled to translate targets into reality, while showing little appetite for smaller investments that might compete with domestic entrepreneurs. This stance had turned the Foreign Business Act into a key issue in recent trade talks, particularly with the United Kingdom, the United States and the European Union. Over the same period, Thailand’s GDP growth was described as the lowest in Southeast Asia for more than a decade, apart from conflict-hit Myanmar.
Economic impact of aggressive enforcement
The November 21 inspection on Koh Phangan, which uncovered a complex network of foreign investors, Thai proxies and undocumented workers, was one of a series of raids that had thrown dozens of businesses on the island into legal uncertainty. The aggressive enforcement campaign had significant implications for the local economy and tourism sector as projects were stalled or reassessed. While the government argued it was protecting Thai entrepreneurs, critics warned that pushing out foreign investors risked curbing growth and leaving Thailand less competitive than neighbours such as Vietnam and Indonesia, which actively courted foreign capital.
World Bank warns of restrictive investment climate
According to the World Bank, Thailand’s restrictive foreign investment regime remained a major obstacle to faster economic expansion. The persistence of muted net FDI despite repeated official announcements of “record” commitments underlined what observers described as a widening gap between government rhetoric and economic reality. Many international investors were reportedly reluctant to commit significant resources in a business environment where ownership rights appeared uncertain and enforcement unpredictable, a perception reinforced by the high-profile Koh Phangan villa raid and the continuing crackdown on foreign-backed tourism projects.