Free WordPress Themes


The Kingdom of Bhutan, a small landlocked country in South Asia aims to attract foreign investors through several reforms whilst working on diversifying its economy.

December 2015

Known to many as the Kingdom in the Clouds, Bhutan is a landlocked country in South Asia at the eastern end of the Himalayas. Often overshadowed by its two powerful neighbours – China and India – Bhutan is mostly known as a wellness and spiritual destination.

Over the last few decades the government has embarked on far-reaching economic and political reforms. Based on a newly drafted constitution, Bhutan held the first democratic election in 2008 and thereby completed the transformation from absolute to constitutional monarchy. According to UNCTAD (United Nations Conference on Trade and Development) the country’s development strategy is based on what the government calls “Gross National Happiness” (GNH) – a unique holistic concept combining material well-being with an individual’s spiritual, emotional and cultural well-being.

While it still intends to hold onto its unique happiness concept, the government aims to attract investment into the country through aggressive reform policies that might transform the country into more than just a tourism destination. “Guided by this concept, the government formalised a new economic policy in 2010 and continues to transform and diversify the traditional economy,” says a recent UNCTAD report based on the views of public sector representatives with regards to investing in Bhutan.


With a population of about 738,000, Bhutan has a small domestic market. “Nonetheless, there are varied opportunities for small and medium sized investors as well as larger transactional corporations such as the tourism sector,” the UNCTAD report reads.

According to UNCTAD construction is booming due to rapid urbanisation, particularly around Thimphu, the nation’s capital. Estimates from the World Bank say that GDP grew around 6.3% in the 2014/15 year with construction, especially of hydropower dams, tourism and increased grant-financed capital spending driving the growth.

While Bhutan’s economy is largely dependent on natural resources, especially agriculture, the World Bank says that GDP is projected to accelerate in 2015/16 to a 6.8% growth rate, driven by massive hydropower construction.

A member of the South Asian Association for Regional Cooperation (SAARC) since 1985, Bhutan and SAARC member States signed a framework agreement in 2004 on the South Asian Free-trade Area (SAFTA) under which most products should be traded with zero customs duties by the end of 2016. “This would enable duty-free access to a market of more than 1.65 billion people and could establish Bhutan as a business hub in one of the world’s economically most dynamic regions,” says the UNCTAD report.


Bhutan is an exclusive destination that touts itself as a mental, spiritual, cultural and emotional holiday; as a result tourism has been one of the main drivers in the development of the private sector and one of the government’s foremost priorities.

According to UNCTAD the number of visitor arrivals climbed to a total of 64,000 visitors in 2011 of which non-regional tourist arrivals accounted for about 37,000.

“Under its ‘Accelerating Bhutan’s Socioeconomic Development’ project, Bhutan aims for a strong increase from tourists in the Asia region, for which new flights are being put in place. In line with a constantly growing number of arrivals, revenues from international tourists have increased accordingly from just about USD 2 million in the late 1980s to about USD 48 million in 2011. In 2009, hotels and restaurants contributed about 2.21% to Bhutan’s GDP,” says the UNCTAD report.

The fast growth of the tourism sector has given rise to numerous other opportunities such as transport, telecommunications, banking, insurance and other business services. Loknath Chapagai, of the Ministry of Economic Affairs of Bhutan says in a paper that in recent years the government put in place measures and reforms to attract FDI with specific incentives to promote tourism, especially in the development of hotels. According to Chapagai in 2013 the hospitality sector emerged as Bhutan’s most approved FDI projects compared to other sectors – evidence of a growing tourism industry.

Pages: 1 2    Continue reading...