Building Industrial Muscle

I t is good to know that the government is actively pursuing the development of four Industrial Estates after having mobilized some funds.

With the lessons learnt from the recent economic crisis, we have to diversify our economic basket and one of the most important items in the basket is industry.

The 267 acre Pasakha may contain the most controversial, environmentally dirty and talked about businesses, but ultimately it is these factories that constitute a significant chunk of tax from the private sector.

Industrial Estates not only bring in tax revenue but they also create jobs. The estate can also spin of related activities like ancillary or subsidiary industries that supply the main factories. For example the government can promote those industries that employ Bhutanese and use Bhutanese raw materials like food products etc.

Bhutan has a distinct power edge when it comes to such estates as we have reliable and cheap power. With many upcoming mega hydro projects it is only advisable that instead of just exporting everything we use some of it to create further revenue and jobs.

Studies done by both the government and the private sector in the past have shown that it is more beneficial to use the electricity in Industrial units.

The government of the day must ensure two things which area a rarity in Bhutan when it comes to government projects. First it must be built in time, and secondly quality must be ensured.

If the estates get too delayed then it will miss the bus when Mangdechu comes on line in 2016 followed by Punatsangchu I in 2017. Currently many industrial projects are stuck due to the lack of either land or electricity.

The estates also cannot be built so hastily like our domestic airports, which while meeting the time deadline had to be shut down again for basic renovations after a few months.

The handing back of three estates from DHI to the government has already lost valuable time, but the government must buck up and ensure that bureaucrats implementing the project don’t move at the regular civil service pace. Otherwise the projects will miss all completion dates.

It is interesting to note that the Industrial Estates are not a new phenomena but it was there in the 10th plan. However, lack of funds, lack of prioritization and red tape ensured they did not take off. The culture of letter writing and long waits and silences in the bureaucracy for e.g. in getting NEC clearances for the estates shows that we can and need to move a lot faster.

The government will also have to be careful of capacity and overburdening understaffed people. The Industries department apparently only has five engineers and they are generally not experienced enough to alone handle such big projects. Maybe other ministries and agencies can work together to help instead of working on islands and achieving little.

A bad habit of Industrial Estates and Special Economic Zones is in giving long tax breaks which are not advisable or economically feasible. Bhutan already has a huge advantage in terms of cheap power and a free trade agreement with India. As shown elsewhere, giving excessive tax breaks only ensures that Industries benefit and not the country or its people.

It will also be important to learn all the lessons from Pasakha and other factories around Bhutan. Firstly the NEC should do its job to ensure that environmental norms especially for air pollution and emissions are met. Secondly the government should ensure that it does not become just another ‘fronting’ operation. We should instead welcome long term players even if they come from outside. Thirdly adequate infrastructure both inside the estate and outside it should be provided. Fourth there should be proper studies done before allowing industries so that they all don’t shut down with a small change in rates or policies in India.

It is only after having a strong Industrial base that Bhutan’s economy can truly start evolving to the next level, and we can truly become self-sufficient.

There can be economy only where there is efficiency
Benjamin Disraeli

 

 

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