A Peek Into The Proposed Draft Of Bhutan’s Foreign Direct Investment Policy 2019

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The process of FDI approval and clearances will be fast-tracked.

(Source: Asian Development Bank)

 

By Tshering Dorji Kuensel

Should the draft of Bhutan’s Foreign Direct Investment (FDI) Policy 2019 come through, small-scale production and manufacturing activities will be allowed to explore partnerships with foreign partners and investors. Moreover, the process of approval and clearances will be fast-tracked.

This is one of the major changes in the proposed draft of the 2019 FDI policy, which is still pending for comments from the Gross National Happiness Commission (GNHC).

However, the requirement that FDI in the manufacturing and service sectors with maximum foreign investors’ equity of 74 percent and minimum project cost of Nu 50m and Nu 25m for manufacturing and services respectively (except for those in the Negative List), remains intact.

Some changes proposed in the draft FDI policy

The draft policy states that the government will allow FDI in selected small-scale production and manufacturing activities to foster the induction of new technology, skills and to enhance market access.

Photo: FDI Report 2017

 

The minimum project cost of these projects will be Nu 5m and the maximum foreign investors’ shareholding shall be at 49 percent.

While investors from India are allowed to invest in INR, exception is made for small-scale activities.

In addition to the two schedules of priority list stipulated in the existing FDI policy, another schedule is added to the priority list to accommodate small-scale activities.

Proposed visa rules

As for visas, the draft FDI policy only permits multiple entry visas and route permits to foreign investors, board of directors and expatriate workers.

In the existing policy, multiple entry visas, route permits and exemption of international tourist tariff is extended to foreign students enrolled in Bhutanese schools and institutes, patients and escorts visiting Bhutan for treatment in addition to the above.

The new policy also mandates the FDI division to function as an investment promotion agency and to provide single window services to FDI businesses in the country.

“The department shall approve/reject proposals falling under the Priority Sector Activities and Small-Scale Activities whereas for the Other Activities, the authority shall rest with the Project Approval Committee constituted within the Ministry,” the draft policy states.

The existing policy also prescribes the basis for approval and denial of proposed FDI activities, which is now removed from the draft. The negative and prohibited list remains unchanged.

The criterion in the existing policy is based on Gross National Happiness principles, employment, revenue contribution, foreign exchange earnings, value addition and innovation.

Some new sectors proposed in the draft

The new schedule in the priority list comprises of value-added agro-based products like dairy based processing, fruits, vegetable, food and confectionery processing, herbal and medical products and honey-based products.

 

Photo: Bhutan Natural

 

Another section in the new schedule includes forest-based production like value-added hand-made paper products, integrated wood and bamboo products and cosmetics. Another section on souvenir and ceramic products has also been added to attract more FDIs.

The draft policy has removed foreign investment in hydropower. In the existing policy, FDIs in the hydropower are based on the sustainable hydropower policy. Currently FDI in small and micro hydro power plants are permitted. 

However, the draft FDI policy allows foreign investment in other renewable energy but the size of investment is based on the Alternative Renewable Energy Policy of 2013.

In education, the new policy requires a minimum of Nu 300m worth of investment and 74 percent foreign ownership in contrast to the Nu 200m investment and 100 percent ownership in the existing policy.

As for infrastructure facilities, the existing policy allows investment based on PPP. However the new policy allows 100 percent investment.

For instance, FDI in waste management facilities, as per the existing policy, should be returned to the government upon the expiry of the term. This clause has been removed in the draft FDI policy.

 

This article first appeared in Kuensel and has been edited for Daily Bhutan.

 


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