This first article of a two-part series explores growing concerns over the infiltration of Semporna's tourism industry by foreign investors.
Semporna, on Sabah’s southeastern coast overlooking the Celebes Sea, has long captivated visitors from around the world. Yet behind its booming tourism industry lies a darker reality.
Some foreign investors are reportedly exploiting the surge in tourist arrivals by operating illegal tourism-related businesses, diverting tourism revenue away from licensed local operators while also raising security concerns.
This was confirmed by Eastern Sabah Security Command (ESSCOM) commander Datuk Victor Sanjos, who told Bernama in an interview that the extraordinary influx of tourists and revenue, if not managed in full compliance with the law, can provide the “perfect camouflage for dangerous illegal operations and administrative abuses”.
Semporna is part of the Eastern Sabah Safety Zone (ESSZone). If, in the past, the authorities were looking for visible threats like cross-border piracy or armed incursions, their attention now has increasingly turned to a quieter but equally troubling challenge – the infiltration of the town’s booming tourism industry by foreign investors.
Victor, who was appointed ESSCOM commander in 2023 and has over 30 years of experience in law enforcement, has alerted Putrajaya to this “silent infiltration” and the federal government has given ESSCOM the green light to take action against the illegal operations.
FOR PROFIT
Sabah welcomed 3.8 million visitors last year, generating RM8.74 billion in tourism receipts. Of the tourist arrivals, 2.29 million comprised domestic travellers, while the remainder were international tourists.
Semporna alone received 560,077 visitors in 2025, with another 157,673 arrivals recorded during the first four months of this year.
The primary concern raised by government authorities, ESSCOM and local business groups is that some foreign operators are creating an “enclave economy” by controlling multiple segments of Semporna’s tourism ecosystem. Their businesses span travel and tour services, transportation and logistics, scuba diving operations, as well as food and beverage outlets and commercial retail establishments.
This gives them influence over almost every link in the tourism supply chain. From the moment tourists arrive at the airport until their departure, many are channelled towards services provided by foreign-owned companies, limiting opportunities for local operators to benefit from the tourism boom.
Victor revealed that a number of these foreign investors set up businesses in Semporna using the ‘Ali Baba’ modus operandi, where they use the names of local individuals to register their businesses on their behalf while retaining actual control of the operations.
Many such companies providing accommodations, he added, have been found deliberately violating Malaysia’s Registration of Guests Act 1965, which requires accommodation operators to register guests and maintain records of their personal particulars.
“The actions of these operators (in Semporna) go far beyond breaching civil regulations or evading taxes. They effectively blind security agencies monitoring our border areas,” he said.
He added that the operators do not submit guest manifests or visitor profiles to ESSCOM, creating dangerous “black holes” in the guest registration system that severely hamper security agencies’ ability to respond should incidents such as cross-border kidnappings occur.
“If a tourist is abducted from one of those premises, we have virtually no way of tracing their movements, unlike tourists staying at proper hotels or resorts (which send their guest manifests),” Victor said.
(The Ministry of Home Affairs and the police may issue special directives or impose licensing requirements on hotels located in high-risk areas, such as ESSZone, mandating the regular submission of guest manifests. While authorities have the right to request guest manifests, several tour operators in Semporna, according to ESSCOM, have refused to comply on the grounds that no tourists are currently using their services. In reality, bookings by foreign tourists are fully sold out through tourism chains, directly contradicting the operators’ assertions.)
Victor stressed that accurate visitor records have been crucial in maintaining ESSZone’s zero kidnapping record since January 2020, following the successful rescue of three Indonesian nationals who were abducted in the last reported cross-border kidnapping incident.
He warned that ESSCOM would not tolerate operators, whether licensed or otherwise, who boycott or ignore directives issued by the authorities.
“Any resort, hotel or accommodation provider that chooses to behave this way will face firm action. I regard it as a direct affront to the government’s efforts,” he said, signalling that the era of “invisible operators operating with impunity in Semporna is now over”.
He also pointed to some unscrupulous operators who have been ferrying tourists and recreational anglers illegally across international maritime boundaries into foreign waters.
“When they are detained by the neighbouring country’s security authorities, we are the ones who have to work to bring them home, even though they knowingly violated international border laws,” he said.
BIGGER THREAT
Victor’s greatest concern extends well beyond incomplete tourist records or administrative lapses. As an expert in commercial crime investigations – he pioneered Bukit Aman’s Cyber Crime Division in 1997 – he sees a far more sophisticated threat potentially developing behind the illegal businesses in Semporna.
“It’s like planting durian trees but ending up with coconut palms. What begins as a seemingly harmless issue can evolve into something entirely different… something far more dangerous than anyone anticipated. It may appear insignificant at first, but it can eventually grow into a major security threat,” he said.
According to Victor, it will all start with foreign investors using local nominees to establish businesses in Semporna. Once their operations are firmly established, however, the local employees who initially helped meet regulatory requirements are gradually replaced by workers from the operators’ own country, eventually creating “foreign enclaves”.
“This is what I fear,” he said, describing what he believes is a silent but dangerous form of encroachment.
If allowed to develop, such foreign enclaves, he warned, will also result in significant economic leakages from Semporna and Sabah.
Because many of these businesses operate illegally, their entire commercial ecosystem is based overseas, with the financial transactions done via online platforms.
“These illegal operations will drain the local economy. Since their business transactions are all conducted online abroad, neither the people of Semporna nor our country will benefit from the income generated,” he said.
As a security expert with extensive experience tracking commercial crime syndicates, Victor sees these potential foreign enclaves as an ideal breeding ground for the next generation of organised crime.
He said their businesses could eventually evolve into operational bases for international syndicates, particularly online scam networks that have become increasingly prevalent across the region.
Illegal premises with access to unrestricted overseas financial transactions create a high-risk environment that can easily be exploited, he pointed out.
“One day, these places could become scam centres. I spent 26 years fighting scam syndicates, so I know exactly how these threats begin,” he said.
DEFENDING SEMPORNA
Recognising the long-term security implications, Victor said Putrajaya has taken a firm stance against foreign investors in Semporna who do not comply with the local laws.
“Several months ago, the federal Cabinet instructed me to take action, and I now have to submit monthly progress reports directly to the Cabinet,” he said.
Despite his strong warnings and concerns over emerging security threats, Victor stressed that ESSCOM’s objective is not to stifle Semporna’s tourism.
He said the crackdown is essential to preserving one of ESSCOM’s biggest achievements, namely convincing several countries to lower their travel advisories for Sabah’s east coast.
Most recently, on June 15, Japan’s Ministry of Foreign Affairs downgraded its travel advisory for eastern Sabah, citing the region’s improving security situation.
For Victor, the formula for sustaining Semporna’s economic success is straightforward.
“Semporna remains open for investment, but compliance with the law is non-negotiable.
“We fully support tourism growth and economic development, but everyone must operate within the law. Anyone who wishes to enjoy the beauty of Sabah's eastern waters must play by the rules. There is no longer any room for invisible operators,” he said.
To eliminate the “black holes” in the hotel guest registration system and prevent the formation of foreign enclaves, Victor has outlined a long-term strategy that positions the local community and licensed businesses as the first line of defence.
He envisions every stakeholder in Semporna’s tourism ecosystem, from tour guides and boat operators to licensed resort owners, working in synergy as the authorities’ “eyes, ears and mobile radar”.
Victor issued his strongest warning yet, reminding the illegal operators just how fragile Semporna’s tourism industry is.
“All it takes is one tourist going missing or being taken across the border, and the entire tourism industry here could collapse.
“Believe me, that was exactly what happened after the Lahad Datu intrusion in 2013,” he said.
RECKLESS BUSINESS CULTURE
Former senior police officer Tan Sri T.C. Goh, now a Sabah business icon, also shed light on the dark underbelly of Semporna’s economy.
He said the area’s massive tourist crowds have attracted a reckless foreign business culture that routinely bypasses local laws.
“There’s a sharp contrast between the law-abiding local businessmen and these foreign operators with a damaging ‘profit first, consequences later’ mentality,” he said.
Even more alarming is how the ownership of these illegal businesses is intentionally designed to remain invisible.
Goh, a Malaysia-China Business Council member and president of the Federation of Chinese Associations Sabah, said the foreign syndicates use local physical assets to “heavily manipulate their financial records overseas”.
“They only send a bare minimum amount of money to Semporna to cover the basic costs (of operating their businesses). The actual profits never show up here. So what is left for Semporna and our country… nothing,” he said.
Semporna Bumiputera Tourism Operators Association supreme council member Syukryn Abdul Salam said local entrepreneurs who strive to comply with the law often find themselves burdened by complex bureaucracy, while unlicensed foreign operators continue to penetrate the tourism market.
“Licensing has become one of the biggest challenges for domestic operators because so many government agencies are involved, each with its own regulatory requirements.
“However, the efforts undertaken by ESSCOM and various non-governmental organisations have been a tremendous help, and we truly appreciate their support,” he said.
Syukryn, who operates Maglami-Lami Tour and Travel Sdn Bhd, voiced the local industry’s strong opposition to the growing number of foreign investors operating in the shadows without proper registration and licenses.
“The presence of underground foreign operators is not only distorting the market through unfair competition but also marginalising legitimate local businesses like ours that are fully committed to complying with the laws,” he said.
Syukryn said local entrepreneurs are fully capable of driving Semporna’s tourism industry in a transparent and sustainable manner, but they require continued government support to meet regulatory requirements.
He said stronger collaboration between the authorities and legitimate local operators would not only strengthen a lawful tourism ecosystem but also serve as a strong defence against the emergence of shadow threats.
Meanwhile, Chen Xiuying, a 34-year-old marine biologist from Hainan, China, chose to seek the services of a fully licensed, locally partnered operator for her recent diving and island-hopping trip in Semporna.
“Tourism operators who abide by the local laws clearly provide a much more professional and higher standard of service. They invest in proper staff training, well-maintained diving gear and reliable transport. For us, it is a safe, worry-free experience,” she said.
She added that supporting local operators ensures tourist money actually stays in Semporna, thus contributing to the local economy.
“High-quality tourism starts with us tourists choosing operators who respect local legal frameworks,” said Chen, who toured Sabah for a month with her husband.
Marcus Vee, a 29-year-old banker from Singapore, was highly impressed with the services provided by his Semporna tour guide.
“Following local laws is the ultimate reflection of good customer service. When an operator respects the rules, it shows they genuinely care about the well-being of their guests.
“When I went on an island-hopping trip, it gave me total peace of mind knowing that our boat was fully accounted for by the local maritime authorities,” he said.