two simple rules

I have two simple rules in class:

1. No cell phones
2. 0% on the assignment/test for cheating/copying/filling in answers for friends

If my students follow the rules, class will be fun--movies, music, games, etc. If they don't, well, vice versa. Throughout the however months I've been teaching, I've encountered cheating and copying (synonymous from here on out) as huge problems with my students. It's bizarre, considering their level of education. I'm not big on comparing America and Thailand but it's hard not to in this situation. If  students in an American college were caught cheating/plagiarizing or anything of that nature, they'd be dis-enrolled with a snap of the finger.

Before I go on, let me explain how testing works at this college:  If a student gets less than 50% on a test, they must retake the same exam, passing with no less than 60%. The first score stands as their grade while the second is just to ensure they understand the material. Retaining 50% of classroom material is mandatory to pass English class while it's 60% for each nursing subject.

Two students were caught cheating on the midterm I recently gave. Student A was copying another student during the actual test (December 20) and student B was copying answers written on her ruler during her retest (January 18). After repeating my rules day after day and before any assignment/test, I don't feel any remorse or pity for wanting to slap their foreheads with a big fat red zero.  But will it happen? I don't know. Ultimately, the future grades of these students are not in my hands (even though I am their teacher). And! After a discussion with boss lady, apparently, it's more of an inconvenience to fail students because: 1) there won't be an English teacher at the school next semester and 2) it will cost their parents more money.

My frustrations go far beyond the simple fact of cheating and even further than the numerous times they've done it; students cheat because they can. If nothing is done to effectively correct this behavior, what's the point of teaching? I was told by one of the Thai English teachers that most students don't care about learning English because they don't need it, they're already on a career path that doesn't require much of the language outside of medical terms. If the students don't care and if the administration doesn't seem to either, again, what's the point? 

This clearly is not a case for economics but the Glass Ceiling theory comes to mind, explaining that advancement or success is impeded by a force invisible to the eye. In this case (and from my heavily-biased-butt-hurt observation), the administration's view of English as venial and their lack of urgency to address the issue are the impeding forces that contribute to the limited, half-assed efforts put forth by the students. If an administration is apathetic to the epidemic, it comes as no surprise that students will follow suit. All the blame, however, should not be placed on the administration. The students should know better and I could have very well done a better job ensuring everyone understood the material. But! Until cheating, copying, and plagiarism are seen as problematic and followed up with appropriate actions to deter future incidences, a perpetual cycle of pseudo-learning will continue.

The question is:  

What can I do to combat the cheating endemic among my first and second year students?

Any suggestions?