Doing Business in Bhutan

The Better Business Summit is a concrete step towards Bhutan telling the world, and more importantly, itself – that it is ready and open for business.

There are three aspects of the summit that particularly stand out. One is the importance given to the summit by the government – with the presence of the PM, ministers and heads of BCCI, DHI, and other dignitaries in the summit.

The second aspect is that of the three key groups of our economy coming together, which are government agencies and corporations, the private sector, and potential investors.

The third interesting aspect is that instead of being the usual ‘Agony Aunt’ session with people just highlighting the problems – instead, the summit involves stakeholders actually talking to each other and trying to come up with solutions.

Even if no real mega deals are signed or any significant business moves are made, the summit will play a part in slowly changing the mindsets, attitudes and perceptions held towards business matters and the private sector in Bhutan.

Bhutan, for the last three years or so, has been undergoing an unprecedented modern economic crisis with the Indian Rupee and credit crisis, which has created a severe impact on several sectors of the economy, from the big industries to housing sector and more.

The crisis has also given the much needed jolt to the collective consciousness of Bhutan whereby – it became amply clear that we need to do much more to strengthen and improve our economy.

There has been much churning going on in Bhutan, especially among the government agencies and the private sector, since the crisis started. The crisis demonstrated, with a startling clarity, that any economic problem faced by the country eventually affects everyone. For example, the government requires the private sector to do well so that it can raise its tax resources to generate the funds required for salary hikes and to meet developmental goals.

To get a better understanding of Bhutan’s current situation and future path, we have to also be aware of the historical context.

Bhutan in the middle ages was a self-sufficient entity. Apart from agriculture, Bhutan had two main sources of revenue, one of which was the control over large tracts of fertile land in the Assam and Bengal Duars conquered from neighboring princely states, and the other was a thriving three way trade with Tibet-Bhutan-India and vice versa.

In fact, a senior British officer in his argument, for annexing the Assam and Bengal Duars to the British Empire, with his superiors was that it would make Bhutan dependant on the British. The loss of the Duars and other territories after British aggression had a major economic impact on Bhutan. The closing of the northern border in the 1950’s further narrowed Bhutan’s economic options.

Despite attempts from Bhutan’s side and the coaxing of their own officers, Britain was not willing to invest in Bhutan’s development – and was content on having an independent buffer state to the north.

All of that changed with India gaining independence and the geo-political developments in Bhutan’s north. The twin development led to an easy and natural strategic alliance between the two countries that suited the security and strategic needs.

The decades that followed saw Bhutan coming out of its isolation where a lot of infrastructure was put in place with assistance from foreign donors, especially India. This coupled with various other political and economic reforms expanded the role of the government considerably.

The main focus of the government bureaucracy was focused on developmental needs of a country coming out of isolation and economic backwardness. This sophisticated and strong bureaucracy was also put to use to develop strong and profitable state-controlled companies.

The main game plan to achieve economic self-sufficiency was also government centric through mega hydropower projects.

The time, today, has come to undertake the next step of Bhutan’s development with a largely educated, healthy, young and aware population, which is a result of developmental activities of the past.

More than hydropower or mines, Bhutan’s true resource lies in unlocking the potential of its human resources. The time has come for the government to give up its paternal role, and instead, use its experience and institutional strength in playing the role of active facilitators – to make Bhutan more investment and business-friendly.

The government of the day will also have to ensure that the economic path taken by Bhutan must ensure employment scope, equitable wealth distribution and minimal negative impact on the environment as it grows. The private sector, itself, can no longer be seen as the harbinger of unproductive crony capitalism or shops selling the same goods all over. It is time for new ideas and decisive actions on all fronts – to ensure our collective economic future.

“The best way to predict your future is to create it”

Peter F. Drucker