Govt revamping FDI and EDP to make them more pragmatic and kick start the economy

The PDP government is in the process of studying and making some changes to the existing, Economic Development Policy (EDP) 2010 and the Foreign Direct Investment Policy (FDI) 2010 to promote economic activities and make Bhutan more investment friendly.

Minister for Ministry of Economic Affairs (MoEA) Lyonpo Norbu Wangchuk said, “We need a pragmatic blue print and some pragmatic policies to guide both the government and the private sector.”

The Minister said that given that the policies had come out in 2010, it was naturally time to revamp it, and he said there was also a need felt to make the policies more oriented to the ground realities and needs of the economy.

He said the revamp of the EDP and FDI policies was already works in progress and the government would in the near future come out with new versions.


In the case of FDI the first target for the ministry would be to formulate the policy in such a way that the so far dismal rate of FDI investment in Bhutan can significantly shoot up. The total FDI in Bhutan since the implementation of the policy since 2010 has been only around Nu 4 bn.

The Minister said, “One of the biggest FDI’s so far has been the International Finance Corporation investing 25 mn USD into BNB but if you think of it its nothing as this would the salary of a single high level corporate executive abroad. We need to get much bigger investments into Bhutan.”

With that aim in mind the MoEA will be looking at removing or changing some FDI policies which are not seen as being conducive to investment. The minister could not share all the changes as it was still being studied but he gave a few areas of change.

Lyonpo said one issue would be the repatriation of dividends in convertible currency or rupee. The current FDI policy only allows companies in the priority list to repatriate dividends to a maximum limit of USD 5 mn for 10 years. The minister said that this needs to be re-looked at as it was a stumbling block for investors, and it was ridiculous that foreign investors earning in local currency could not repatriate their dividends in a foreign currency.

The minister also said that it was also a time to relook at investment caps which, though well intentioned in the priority lists, were too high. Currently minimum amount required to investment in various sector of the Bhutanese economy ranges from Nu 20 mn to Nu 200 mn.

One of the other changes could be a relook at the exit clause when foreign companies want to wind up businesses and go back. The minister said that it should be made easy and less cumbersome for companies to close if they want to.

Lyonpo said there was also need to relook at landownership issues under FDI, make it in consonance with other laws and also get other stakeholders involved.

The various FDI Rules and Regulations 2012 will also be revamped by the government to ensure it is easier to invest in Bhutan and also reduce any unnecessary red tape.

The minister said that Bhutan’s FDI needed to be competitive at the international stage because emerging economies were all going all out trying to attract investments by offering attractive incentives and thus investors had options. He also said the needs of investors kept changing and thus the policy must be up to date as well.

Highlighting the importance of FDI, the minister said that Bhutan needed FDI to overcome its natural economic constraints like a small domestic economy, lack of capital, lack of technology lack of expertness and also use FDI to make Bhutan self reliant and export oriented.

Bhutan’s first FDI policy came out in 2002 which was seen as being conservative. The FDI policy 2010 was more liberal than its previous counterpart and coupled with the EDP 2010 offered various incentives to invest in Bhutan.

The FDI 2010 became notable in part due to its strong GNH centric approach. Big sectors like industrial manufacturing and mineral mining which are actually among two of the biggest sectors of the economy after Hydropower and Tourism were kept out of the priority list for investments. It had also drawn up a nega- tive list keep out harmful industries like chemicals or less ‘healthy’ ones like fast food outlets.

Despite being a comparatively more liberal policy than its 2002 counterpart the FDI policy 2010 failed to attract any significant investment in Bhutan.


The EDP when launched in 2010 as the umbrella economic policy of the government generated huge expectations of the Bhutanese economy which eventually did not take off and instead Bhutan was faced with a economic crisis from 2012 onwards with the rupee shortage and credit crunch problems.

The EDP 2010 policy’s vision which said, ‘To promote a green and self reliant economy sustained by an IT enabled knowledge society guided by the philosophy of GNH,’ summed up the content and purpose of the policy.

The policy had heady ambitions of making Bhutan an organic brand and encouraging the concept of ‘Brand Bhutan’ across an array of products and services. It wanted to make Bhutan into an Education Hub, Medical Tourism Hub, Financial Services Hub, IT hub etc. It also talked about organic farming, food processing, renewable energy, information and culture industry, electronic manufacturing, green technology in industry and etc.

The EDP was notable for the five year to ten year tax breaks given to many companies and especially the ones that fell in line with the EDP’s policy vision. The large tax breaks to companies which were meant to stimulate the economy and encourage investments did neither in the end.

The MoEA Minister said that the first aim of the government in revamping the EDP would be to bring it in line with its own economic policies that focused on the five jewels of Hydropower, Agriculture, Tourism, Small and medium enterprises and Mining and the nine measures to strengthen the business environment and support the five jewels.

The nine measures focus on policy improvements, removing red tape and facilitating a good business environment, infrastructure expansion in roads, ICT and airports, import substitution and controlling inflation.

“It has been around four years since the policy has been implemented and it is time to see what the bottlenecks are and how EDP is facilitating the aspirations articulated in the policy and also weather these are the right aspirations,” said the minister. Lyonpo said that the EDP will undergo a thorough review and more importantly the private sector would also be on board. “There are two important players in the EDP of which one is the government and the other is the private sector. The government needs to bring the private sector along, address their needs and treat them as equal partners,” said the minister.

The minister also admitted that the EDP in its current form had failed to make a significant contribution to kick starting the Bhutanese economy.

Check Also

Loan deferral to be more targeted after June 2024

The loan deferral is coming to an end for various sectors in June 2024 and …

Leave a Reply

Your email address will not be published. Required fields are marked *