Arya News - Almost every craft retailer in Thimphu and Paro pays undisclosed commissions to tour guides for customer referrals, driving up souvenir prices for foreign visitors and eroding trust in Bhutan`s handicraft sector.
THIMPHU – Almost every craft retailer in Thimphu and Paro pays undisclosed commissions to tour guides for customer referrals, driving up souvenir prices for foreign visitors and eroding trust in Bhutan’s handicraft sector.
According to a study by the Competition and Consumer Affairs Authority (CCAA) titled “Bhutan’s Craft Sector: Building Fair Competition, Protecting Consumers”, paying commissions in exchange for directing tourists to specific shops is practiced by 94 percent of surveyed retailers.
Commission rates typically range from 10 to 25 percent of a sale, with 20 percent being the most common cut.
The report links this practice directly to inflated markups, stating that international tourists are frequently charged 10 to 50 percent more than local buyers for identical items.
Retailers likely recover these commission payouts by shifting the costs directly onto foreign visitors.
While commission-based referrals occur in many tourism-dependent economies, the CCAA warns that undisclosed kickbacks embed hidden costs unrelated to quality or craftsmanship, incentivising guides to steer visitors toward shops offering the highest payout rather than the best value.
To address this, the CCAA recommends that the government, in coordination with tourism associations, require retailers and guides to disclose commission arrangements to tourists at the point of sale or referral.
The CCAA also suggests examining the practice as part of a broader review of price transparency across the sector.
Enforcement dilemmas and compliance risks
Handicraft Association of Bhutan Executive Director Chorten Dorji said that guides rarely bring tourists to a craft shop without receiving a payout, which he said ranges from under 10 percent to 15 percent or more.
While acknowledging that transparency is urgently needed, he highlighted the core challenge. “Transparency is required, but how you actually track it down is the real issue.”
He suggested that the Goods and Services Tax (GST) system could aid enforcement since every transaction, including service charges, must now be accounted for.
“It has to come with a GST tracking system. Through GST, we will be able to track it,” he said.
However, he warned of a potential loophole. If a shop fully complies with GST rules and declares its payouts, tour guides may simply bypass it to take visitors to non-compliant shops instead, undercutting retailers who follow the law.
Chorten Dorji said that nearly all guides operate under this commission model, with the exception of a few responsible senior guides.
Widespread misrepresentation of imported goods
The study also raised severe concerns regarding product authenticity across Bhutan’s long-established craft economy, where 58 percent of shops have operated for over a decade.
Nearly half of surveyed retailers admitted that imported goods are occasionally passed off as locally made, despite 84 percent of foreign buyers actively asking to verify a product’s origin before purchasing.
Sourcing patterns vary significantly across product categories. Bamboo, cane, wood products, and yathra (woven wool) are almost entirely produced domestically, reflecting Bhutan’s local craft strengths.
Conversely, metal and ceramic items are overwhelmingly imported due to Bhutan’s limited industrial base. Textiles sit in the middle. Despite strong domestic weaving capacity, most retailers stock a mix of local and imported textiles, citing high domestic prices and limited variety.
“Practices such as the misrepresentation of imported goods as local, undisclosed tour-guide commissions, and nationality-based price differentials are each individually understandable responses to competitive pressure,” the CCAA report stated. “Yet collectively, they risk eroding the trust on which the sector’s reputation and, by extension, part of Bhutan’s tourism brand ultimately depend.”
Calls for licensing overhaul and origin traceability
To safeguard genuine Bhutanese craftsmanship, the CCAA recommended a comprehensive reform package, including a national craft certification scheme, mandatory origin disclosure rules, commission transparency, and investment in artisan training.
Retailers themselves ranked mandatory point-of-sale origin disclosure, backed by legal penalties, as their top priority after skills development.
Chorten Dorji said that addressing the sector’s issues requires tackling a broader lack of professional integrity among guides who misrepresent product origins.
He proposed introducing a strict dual-licensing system that distinguishes genuine Bhutanese handicrafts from imported commercial items. Under current government standards, a handicraft must be at least 60 percent handmade and no more than 40 percent machine-assisted.
Items falling short of this standard, he argued, should be categorised under a general trading license rather than a handicraft license.
“We are pushing back against this unfair competition. It should not simply be discouraged, there should be a level playing field,” Chorten Dorji said, advocating for strict import labeling and a product traceability system at points of entry.
He added that comprehensive guide ethics training must accompany these measures, warning that addressing individual problems in isolation leaves systemic loopholes unaddressed.