The Bhutanese Leading the way.
The Bhutan Chamber for Commerce and Industry (BCCI) has come up with a comprehensive plan that aims to enhance private sector growth and competitiveness and in doing so strengthen the country’s economy.
The plan titled ‘Private Sector Development The Way Forward,” charts out various areas that the government can focus on to strengthen growth and also highlights existing problems and issues.
The plan is expected to be presented by BCCI to the cabinet next month.
A BCCI official said, “Usually what happens is that the private sector waits for the government to do something. I think the time has now come for the private sector to come up with its own solutions. It is also good that the government is allowing the BCCI to be more proactive.”
This detailed proposal is significant as it is the first major proposal of its kind from the private sector that has born the worst brunt of the rupee and credit crisis since 2012. It is also in the backdrop of the government coming up with its own private sector development policy.
The Challenges
In terms of challenges to the private sector the BCCI lists issues like policy coordination and harmonization, legal constraints, financial constraints, infrastructural constraints, taxation issues and land holding patterns.
Under policy coordination the report says “Different policies are framed by different Ministries as per their own mission and objectives, the fulfillment of which requires huge amount of national revenue. Most of the policies remain unimplemented because of insufficient resource, lack of human resource capacity and changing government.”
Under legal constraints the report says that the policies like EDP and FDI have not been found to be business friendly while others like stringent immigration rules hamper business.
The report also talks of the difficulty of the private sector in getting finance or credit from Financial Institutions given the restrictions imposed on them and liquidity issues with them. It also talks of service and processing related is-sues with banks and the lack of a financial market to raise funds.
In terms of infrastructure the report, among other things, points out issues like the slow development of industrial estates and the lack of dry ports, lack of public investment in essential infra-structures such as warehousing, cold storage and freezer storage system and lack of also basic infrastructure like roads.
For taxation the report quoting a World Bank study says businesses in Bhutan spend 274 hours complying with tax rules to pay 43% of their profits in tax. It points out issues like
complexity of the tax system leading to noncompliance and evasion and incidences of double taxation.
The report also says that scattered land holding and ownership hinders the promotion of large scale commercial farming. It says that among the wetland 74% are scattered and below 5 acres. Only 26% of the wet land is above five acres with the same problem for orchards.
Economic Opportunities
The report broadly lists out a number of areas of economic opportunity where both the public and private sector can play a role.
It talks of agricultural commodities for food and cash crops to meet local and international demand, minerals and mineral products like dolomite, gypsum etc, taking tourism to other Dzongkhags, attracting foreign students for Buddhist studies and others and starting private health care.
The report further points out areas like construction and housing sector, medicinal herbs and cordyceps, trans-port and communication, infrastructure development like roads, tunnels and etc under the Public Private Partnership model.
It says that in financial services high risk project financing and venture capital financing is only at an embryonic stage .Within financial service sector, services like mutual funds, unit linked savings schemes, insurance and reinsurance, venture capital financing etc have not entered into the Bhutanese market.
Bhutan can develop capital market for trading of shares and securities which will mobilize better savings according to the report.
The report says Bhutan also has potential in ICT services, manufacturing industry which includes the cottage industry and also other ancillary services like electronic repairs and maintenance, mechanical workshops, driving training, rural artifacts and artisans, and other creative industries.
The Way Forward and Three Pillars
The document in a unique approach has focused the cross cutting priorities of the private sector under three pillars.
One pillar is ‘Improving investments and business climate’ whereby there is support for policies that will increase the ease of doing business, expand financial and capital markets, improve innovation, entrepreneurship, knowledge and skills, facilitate policy dialogue, improve the institutional and operational frameworks for public-private partnerships (PPPs) and strengthen cross border economic interaction.
The second pillar is ‘Access to social and economic infrastructure’ that focuses on basic infrastructure like communication, transportation, distribution networks, markets, energy supply systems, irrigation, water supply, roads that are essential to private sector development.
It also talks of improving social infrastructure like health and education facilities like higher education in science and technology, vocational training and health related infrastructure services.
The third pillar is ‘Enterprise Development’ where it says that the main problem for Bhutan’s Medium, Small and Micro Enterprises (MSMEs) is the difficulty in accessing financing. It recommends a host of measures to make it easier for MSMEs to get financing. It also talks of initiatives that create opportunities to link local enterprises into the supply chain of international enterprises, provide enterprises incentives for promoting technologies and knowledge leading to ward greener industrial products and deepen its partnerships with others involved in MSME development, including co-financing technical assistance programs.
Areas of special Emphasis
The report also focuses on some areas which need special emphasis and these are agriculture, construction, services and tourism, mineral resource management and general infrastructure development.
In a unique move the BCCI in its report strongly advocates for agricultural development. The report says that agriculture supports more than 62% of the total population in Bhutan, holding much promise for poverty reduction and employment generation.
The report calls for the government to put in massive inputs in rural infrastructure like rural roads, irrigation, storage facilities, access to markets, conservation systems and supply networks.
It says there is need for increased linkages with the private sector, by promoting PPPs in agricultural projects and programs. It points out that fallow agricultural land can be utilized through pri-vate sector engagement in commercial scale production.
The report says that there should be subsidy on farming inputs and ‘minimum sup-port price’ for essential farm produce for food security for farmers and to encourage the farmers to opt for market driven farm production.
The report also recommends a cluster chain approach of one Dzongkhag three products to make agriculture viable along with value chain support.
In construction the report says that the formation of clusters in construction in-dustries involved in production of construction materials will increase its efficiency and achieve the formation of self reliant and vibrant construction sector in Bhutan.
In terms of tourism the BCCI recommends a comprehensive Tourism Development Policy that would serve as a guide towards sustainable tourism. It brings out issues like expanding tourism products to areas like adventure sports, meditation and etc, spreading tourism to the Central, East and Southern regions, setting up tourism infrastructure, simplifying visa processing, harmonizing rules and revisiting the tariff structure among others.
In mining the report proposes that the draft Mineral Development Policy be adopted soon after extensive consultation with the private sector. It talks of giving suit-able incentives for the mineral sector, harmonizing laws, mineral prospecting as a PPP model, identification and prioritization of mining zones, provide foreign technical expertise for mining activities. The report says that
the government should put in place practical mechanism to technically assess and con-firm the suitability of mineral and mining activity in terms of its impact to the community or locality and to
the surrounding environment rather than simply witnessing an entrepreneurial initiative succumb to the unqualified intentions of the community members.
The report says that for the overall development of private sector, public infrastructure needs to be upgraded like roads, railway connections, bonded warehouse, transport equipment and etc. It says that private sector involvement through the PPP model will help Bhutan’s development.
The report says with the implementation of the report, the Bhutanese economy as a whole led by private sector will march towards being a self reliant economy with in-crease in GDP, per ca pita and become an internationally attractive business destination.
