Bhutan rests hopes for economy on new PM

Bhutan rests hopes for economy on new PM

In the years following Bhutan’s political reform, the country’s economy and infrastructure still lag behind. Heavily dependent on India for aid, Bhutan must attract more foreign investment and strengthen its private sector.

After King Jigme Khesar Namgyel Wangchuck implemented the final phases of his father’s political reforms, Bhutan became one of the global community’s newest democracies. The transition from isolation to the international markets has not been without significant challenges.

In the wake of the opposition’s victory in the July 2013 parliamentary elections, Prime Minister Tshering Tobgay is leading efforts to reform the Bhutanese economy and to lower unemployment. The number of changes the country has undergone in a short period is dramatic, including a recent policy shift away from the often touted gross national happiness (GNH) indicator. Mr. Tobgay described it as, “In the last few years, we have transformed beyond recognition — politically, economically and socially.”

Infrastructure a priority

One of Mr. Tobgay’s goals is to reconfigure Bhutan’s construction sector as a way to employ more Bhutanese citizens. The country’s infrastructure development has been largely dependent on Indian businesses and labor. With a a rising national debt, the Bhutanese government is considering expanding its tourism industry to increase its ability to get revenue.

Sonam Dorji with the Association of Bhutanese Tour Operators said there was a lack of accommodations in the central and eastern part of the country. Efforts are underway to rectify this problem. Sixty-three new hotels for foreign tourists are now under construction.  However, some hikers have warned that, for the $250 daily fees, Bhutan’s service sector is still inadequate when compared to Nepal’s competitive prices.

Bhutan seeks more tourists, investment

The government is delicately loosening its rules on the number of tourists allowed to enter the secluded country. The national air fleet, Drukair, announced that it would would add flights to Bhutan from Mumbai. Around 70,000 Indians visit Bhutan annually.

Leading tourism as the top generator of revenue is the hydropower sector. India has been primarily responsible for the development of hydropower in Bhutan. The two countries signed a new bilateral agreement in April to expand hydropower. Four new hydroelectric projects are expected to generate approximately 2120 megawatts. Three more projects, including Punatsangchu I and II as well as the Mangdehchu project are on track to be completed by 2018.

The new Bhutanese government is hoping to attract more private sector investment from India. Mr. Tobgay indicated that infrastructure development projects with India could include special economic zones, dry ports and industrial townships based on the Public-Private-Partnership model.

Societal challenges remain

An estimated 80% of Bhutan’s population is involved in the production of agriculture. The government is cautiously aiming to become the world’s first completely organic food producer.

On April 30th, the UN Human Rights Council released a report that chronicled Bhutan’s mistreatment of ethnic and religious minorities in the country. Independent media is also suffering as private news outlets are unshielded from the country’s economic troubles.

The danger posed to Bhutanese journalism is being circumnavigated by new telecommunications technology. Many young Bhutanese are turning to social media to discuss politically and culturally sensitive topics. A new trend of online social activism helped lead to the release of Bhutanese citizens sentenced to prison for violating the Bhutanese Tobacco Control Act.

Entrepreneurial innovation in the past has been curtailed by government bureaucracy, but with a growing demand for consumerism and a rapid increase of urbanization in Thimphu, Bhutan faces a potential fiscal and social conundrum. Bhutan’s new government under Mr. Tobgay will continue on the path of economic liberalism, lifting social restrictions and fighting political corruption. This is precisely the type of leadership Bhutan needs at this critical juncture.

About Author

Chris Solomon

Chris Solomon is a Middle East Analyst and works for a U.S. defense consultancy in the Washington DC Metro Area. He has presented at the University of Maryland’s School of Public Policy, on the U.S. strategy to combat ISIL. Chris’ writing has also appeared on NATO's Atlantic Treaty Association, Raddington Report, Small Wars Journal, and Syria Comment. He holds an MA in International Affairs from the University of Pittsburgh’s Graduate School of Public and International Affairs (GSPIA). You can follow Chris on Twitter @Solomon_Chris