My Country

  Bhutan - its place on the earth

Bhutan is a small independent nation perched in the Himalaya. It borders with India in south, east and west and China in the north. It is a landlocked country with some of the most formidable mountainous terrain in the world, ranging from 100 meters to 7,500 meters above sea level. It is the only kingdom still flourishing from hundreds of such kingdoms that once existed from the Himalayas to the south end Indian subcontinent. It has an area of 38,394 sq.km and population of roughly around 700,000

The small nation known locally as Drukyul is popular and known for its philosophy of Gross National Happiness (GNH). The philosophy that takes the happiness of its people to measure its progress and development as a nation. In other word development in totality should at the end lead to the sum total of the happiness and wellbeing of its people.

Bhutan is one of the few countries that have been successful in mitigating the risk of spread of the Covid-19 in the country. The country witnessed only two covid-19 related death; however, these patients already had exiting medical conditions.

Government and Development Philosophy

Bhutan is a democratic constitutional monarchy. Democracy is a gift from the Throne to the people of Bhutan. It happened in a systematic process with the wisdom of the enlightened monarch. The uniqueness is that it was given from the throne without the demand of the people.

Bhutan’s development is guided by the overarching Philosophy of Gross National Happiness (GNH). A philosophy that considers the overall happiness and wellbeing of the people as the overall measure of its progress and development. GNH has four pillars and nine domains that guides the overall socio-economic development in the country. 

The four pillars of GNH are:

• Sustainable Economic Development
• Environmental Conservation
• Preservation and Promotion of Culture
• Good Governance

Economy

Bhutan has a population of 735,553 (PHCB 2017). The GDP in 2019 was USD 2.84 billion and nominal GDP per capita was USD 3,411.94 recording the GDP growth rate of 5.46% (NSB) and inflation rate of 5.15% as on July 2021. The generally unemployment rate is 5% and the youth unemployment rate stands at 22.6% in 2020. Bhutan’s economy is driven by hydroelectricity. The GDP contribution of the hydropower is 14% and contributes 26% of annual revenue. The agriculture sector contributes 14% and employs 51.1% of the working population. The Druk holding and investment Limited, a holding company and the investment arm of the Royal Government of Bhutan contributes about 40% of the government’s revenue.

Balance of trade in 2020 was USD -245 million, with India alone was USD -104.88 million (Bhutan Trade Statistics, 2020). The debt to GDP ratio stands at 113%, mainly accounted for by external borrowings chiefly for hydropower construction.

Bhutan is set to graduate from a least developed country status by 2023. All is fine on the social and per capita indicators. Of grave concern is the third indicator on Economic Vulnerability with a score of 13% lower the threshold of 31.9. Bhutan’s economic vulnerability is evidenced by the year on year negative balance of trade and the Government revenues falling short of expenditures despite 19% of revenues being accounted for by grant.

Non-hydro sector apart from tourism faces constraints related to country's challenging investment climate including high trade cost and small domestic market. Even the job creation outside the public sector and agriculture has been limited over the years. Industries remain less competitive except for few power intensive industries which are supported by the competitively priced green energy from its hydropower.

Competitiveness

On the positive note, Bhutan has some distinct competitive advantages for the economic growth and development. The economic development policies identifies following competitiveness for the economic development:

• Political stability
• Peace and security
• A vibrant and living culture
• Natural and pristine environment
• Geo-economic location and open access to the emerging Indian market
• Reliable and competitively priced energy
• Nation of GNH
• Wide use of English language

Ease of Doin Business

Bhutan ranks 89th position out of 190 in the World Bank Ease of Doing Business. Countries with a higher ranking in the ease of doing business is said to benefit from higher entrepreneurial activity.

Introduction of FDI as development Strategy

Bhutan introduced Foreign Direct Investment (FDI) as one of its economic development strategies and began with the formal opening of the economy through the adoption of FDI Policy, 2002 and its implementation in 2005 (MoEA, 2017). The FDI's contribution to GDP was just 0.51% in 2019. The total stock was estimated at USD 141 million in 2019 (UNCTAD, 2020). Majority of the FDI comes from India mainly in the manufacturing industry, followed by Singapore and Thailand. Table below shows the percentages of the FDI from different countries/regions: 

Region	Percentage of FDI inflow
Asia	65%
Europe	22%
America	10%
Oceania	3%

While most of the FDI projects in service sector and IT is located in the west, majority of the FDI projects in manufacturing are located in the southern part of Bhutan. With the revision of FDI policy in 2019, Bhutan allowed FDI is CSI sectors.

Investment Opportunities

The competitively priced electricity, proximity to the large Indian market, political stability and  pristine environment and culture provides Bhutan competitive for investment in the following sectors:

Energy Intensive Industry - competitively priced electricity and proximity to the large Indian market has attracted investment in large energy intensive industries particularly the ferrosilicon, ferro-alloys, steel, ferro-alloys industries and cement industry.

The competitively priced green energy, the cool climatic condition in the interior of the country and the political stability provides an excellent investment opportunities in Data Centers.

Agriculture and Food Processing - The geographic feature and micro climatic condition across the country provides favourable climate for agriculture and food processing industry. The pristine environment, clean air and water provides perfect condition for large scale organic farming.

Bioprospecting - Bhutan is recognized as the 10th global hotspots of biodiversity in the world. The constitution of Bhutan mandates 62% of the land to be under forest cover for all times to come.  Presently about 72 % of land is under forest cover and about 7000 vascular plants and different species of fauna thrive in these luxurious forests out of which about 82 are endemic to Bhutan (Wangchuk, 2004). These endemic species may contain varieties of distinct new bioactive phytochemicals that has the potential to the development of drugs for eliminating the human sufferings. 

Of the many vascular plants, one that of interest is Hemp/Cannabis. The evolving knowledge on the medical benefits of the cannabis is generating interest in investment into cannabis. Preliminary researches have found out that Bhutan land race cannabis has high content of THC, CBD, terpenes and other cannabinoids that makes it economically viable for investments. Read more on Bhutanese cannabis in my page - Landrace - Bhutanese Cannabis.

This is an interesting paper I found on bio prospecting in Bhutan: Research: Bioprospecting in Bhutan

Information Technology - reliable supply of clean energy, fast internet and communication facilities, pool of young english speaking people and IT graduates clubbed with its pristine environment, political stability and thriving and living culture and heritage provides an enabling environment for investment in Information and Technologies and IT enabled services.

The support of the government in automation and digitization is another enabling environment that makes Bhutan a right place for investment in IT sector.

Water - Bhutan is endowed with abundant water resources. With glacial lakes, high altitude wetlands, snows, ice, fresh water, lakes, running stream, rivers and ground water, Bhutan has one of the highest availability of water in the world. With average flow of 2,238m3/s, Bhutan generates 70,572 million cubic meters per annum, i.e. 94,500 cubic meter per person per year, highest in the region.

Water plays an important role in the Bhutanese economy, culture and religion. The major sectors of Bhutanese economy such as agriculture, tourism and hydropower are majorly dependent on water. For instance, the agriculture that employs more than half the Bhutanese population (54%) consume 90% of water and contributes around 15% to GDP. Similarly, the hydropower through run-of the river is the highest revenue generator to the country. Likewise, the tourism in the country is attracted due to its pristine natural environment and vibrant culture. The abundance of the natural clean water has helped preserve the lust of greenery supporting various biodiversity, making Bhutan one of the 10 top biodiversity hotspot in the world.  The tourism is one of the major economic sector contributing about about 20% of the non-hydro revenue into the Bhutanese economy.

Investment opportunities related to water:

• R&D in water sector
• Hydrogen
• FDI and PP in drinking and irrigation 
• Organic Agriculture
• Industries for high value mineral and natural water
• Water recreational parks for tourism