The Ministry of Industry, Commerce and Employment (MoICE) in collaboration with Bhutan Chamber of Commerce & Industry (BCCI) and Voice for Green Change Partnership (V4GCP) identified five key issues that hinder Foreign Direct Investment (FDI) inflows concerning the Foreign Direct Investment Policy 2019.
Among the most significant barriers is the complex and time-consuming approval process. Investors face delays due to a lack of streamlined procedures, with no centralized point of contact or single-window service to guide them through the regulatory environment. As per the report on business regulatory process review, this bureaucratic inefficiency discourages potential investors from pursuing opportunities in Bhutan.
Equity restrictions are another major concern. Currently, foreign investors are limited to a 49% equity share in joint ventures, particularly within the manufacturing sector. This restriction prevents foreign companies from gaining full control over their operations, which could deter larger firms from entering the market.
The policy’s high minimum investment requirement, set at Nu 5 million for small-scale production, has also proven to be an obstacle, particularly for the IT and services sectors. Many potential investors in these fields may find this threshold too high for their business models, limiting their interest in establishing operations in Bhutan.
Another challenge is the travel and visa restrictions. Obtaining a business investor visa is a burdensome process, and travel restrictions further hinder foreign investors from visiting Bhutan to explore opportunities firsthand. This issue makes it difficult for investors to assess the market, meet potential partners, or establish connections, which could ultimately impact their decision to invest.
Moreover, Bhutan has struggled to effectively brand itself as an attractive destination for foreign investment. Without a strong, coordinated strategy to promote the country globally, Bhutan remains relatively unknown to many international investors, resulting in missed opportunities to attract capital.
To address these challenges, MoICE, BCCI and V4GCP have outlined several recommendations aimed at transforming Bhutan’s investment climate.
In the short term, they propose a streamlined approval process for foreign investments by minimizing initial approval requirements, as long as investors comply with the country’s operational regulations, including those related to environmental impact. This initiative is designed to speed up the process and make it more efficient for investors.
In addition, creating a single-window for investors is also recommended as this centralized service will guide investors through all the necessary steps, reducing bureaucratic delays and making it easier for them to navigate the regulatory environment.
For smaller investments, the government can automate the approval process, which will help accelerate decision-making and reduce administrative burdens.
They have also recommended to remove the equity restrictions in the manufacturing sector without the need for a local partner.
To make the investment environment more accessible, lowering the minimum investment threshold, particularly in the technology and services sectors was also recommended. This will make it easier for smaller investments to take root and for sectors like IT to thrive in Bhutan. At the same time, the process for obtaining business investor visas could be simplified to ensure foreign investors can easily travel to Bhutan for scoping missions, meetings, and other activities.
To improve Bhutan’s visibility on the global stage, planning a national branding campaign like an Investment Summit to promote the country as a top investment destination was also recommended.
Looking toward the medium-to-long-term, enhancing the capacity of the MoICE to better handle FDI inflows and provide more comprehensive support to foreign investors was recommended by the private sector.
They also added that strengthening economic ties with neighboring countries, like India and Bangladesh will also be a priority, as these relationships can help deepen regional value chains and encourage more cross-border investment.
In addition, focusing on improving the country’s infrastructure, particularly in internet connectivity was stated as a critical detail. They suggested upgrading fiber optics and cable infrastructure through investments in order to boost the country’s digital capabilities.
Developing the agribusiness sector by investing in logistics and storage infrastructure was suggested so that it would help facilitate the export of high-value agricultural products and create more opportunities for foreign investment in the sector.