Bhutan Industry Sectors

By: EconomyWatch Content   Date: 10 March 2010

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The private industry sector in Bhutan has not been able to play the desired role and make a significant contribution, despite the construction of several hydroelectric projects. According to a report published by the Asian Development Bank (ADB) in November 2009, Bhutan’s government needs to look beyond hydropower projects and foreign aid to improve the private sector and grow it. The report further emphasized the need for the government to create more employment, focus on infrastructure and rethink its dependency on migrant labor. 

Bhutan Industry Sectors: Bhutan’s Industries

The global economic crisis, like most countries, also affected Bhutan. According to the ADB report, the slowdown could affect tourism and industrial development due to the reluctance of foreign investors to invest more capital. However, as far as the 10th five-year plan was concerned, the slowdown would not have any direct impact on the plan. The slowdown also affected the government’s plans to improve the business environment. Since Bhutan shares a close trade and economic relationship with India, the impact of the slowdown is not expected to be as severe as other countries.

 

Bhutan’s hydropower industry accounts for 32% of the nation’s economy. The dependency on a single sector is a potential risk factor, the report states. As an alternative revenue generation sector, the government is promoting tourism, which also hopes to generate employment.

 

Bhutan has applied for membership of the World Trade Organization (WTO). The advantage of WTO membership is that it will allow Bhutan access to the global markets and improve its import capabilities. On gaining WTO membership, Bhutan will have to reduce tariffs on imported goods. This is not expected to have a major impact since Bhutan enjoys a free-trade agreement with India that facilitates imports.

 

The World Bank’s “doing business survey 2010” has ranked Bhutan 126 out of 183 economies on economy-friendly business environments. The low rank in the ease of doing business scale is what is hampering the growth of private sector industries. The survey further showed that Bhutan, in comparison with its South Asian counterparts, is better placed to enforce contracts, employ workers and register properties, but performs below par in ease of doing business, getting credit and protecting investors.

 

 


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