The government in the midst of Rupee crunch is banking upon the long term impacts of mega projects like the Education City, the Amo Chhu Township, among other projects to ease the INR crunches.
With the DHI INFRA spearheading these projects, The Bhutanese spoke to its CEO, Kinga Tshering on that matter.
“After the development of the Education City and the Special Economic Zones (SEZ) and Amo Chhu projects, since these projects would be developed through the FDI, we hope the investments will be made either in Rupees or USD. That way the country will generate revenue in INR or USD through exports of goods and services,” said Kinga Tshering.
However, Kinga Tshering said since most of the goods and services will be again imported from India, some amount of pressure was bound to be on the INR and that there would also be some other multiplier effect downstream both positive and negative, where the projects will generate revenue in INR or require expenses in INR.
In terms of risk mitigation or the INR outflow, Kinga Tshering said the key was to first raise financing from outside in INR for these projects, since the local banks will not have the capacity to fund these projects and will also not be able to meet the INR requirement.
The second strategy was to focus on export oriented products and service and upscale them, so that they will be able to generate revenues in USD and INR.
The third strategy was to request the government to consider addressing issues like double taxation and exemption of excise duty with the GOI firms investing in Bhutan.
“We could also request the government if GOI could be requested to ask their Reserve Bank of India and other banks to include lending to projects in Bhutan as a priority lending sector,” said Kinga Tshering.
The projects are ambitious ventures, the Amo Chhu project is worth Nu 4.5bn, for which 670 acre of land has been acquired for the development of the township. The town is said to have numerous infrastructure development projects coming up in the surrounding area, like tourism for instance.
The Education City project is a Nu 1bn project. The estimated cost said to be borne by the government sums up to about Nu 500mn. The benefit this project is expected to bring will be in the guise of 4000 plus foreign students resulting in inflow of foreign currencies.
In addition to these two mega projects, the third focus by the DHI INFRA is on the SEZs. Samdrup Jongkhar, Samtse and Gelephu are some potential SEZ areas that are being considered.
“In Bhutan our industries like the silicon in Pasakha among other use just 10% of power and the rest all goes to India and our huge market is India, so we can utilize it on that front,” said Kinga Tshering.
“Taking all of the above mega projects into consideration the first thing required to do is to analyze the inflow and outflow of currency, which will be depending on the FDI policy,” Kinga Tshering said.
He added that a detailed analysis of the impact of these projects to the INR demand and supply will need to be done even at the national level with the help of agencies like National Statistical Bureau and the RMA.
“Whatever will be coming in from these mega projects, there will be a final analysis of it, which might take months or for the time period. The analysis of the cash flow will be done,” said Kinga Tshering.