Bhutan – A Hidden Gem For Foreign Direct Investments

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Of the total FDIs, 65 percent of the investors are from Asia, 25 percent from Europe, nine percent from America and the rest are from the Oceania region.

Bhutan has to date approved 64 foreign direct investment (FDI) projects. (Source: The Diplomat.)

 

By Tshering Dorji | Kuensel

Bhutan has to date approved 64 foreign direct investment (FDI) projects worth Nu 34 billion since the country allowed foreign investment in 2002.

According to the FDI annual report 2017, the country approved five projects in 2016. This means that since then, in a span of about a year and half, 10 FDI projects have been approved.

Sources from the economic affairs ministry said that 19 more projects are approved in principle in 2017 and the first quarter of 2018. This would take the total number to 83.

Where do the FDIs come from?

Of the total FDIs, 65 percent of the investors are from Asia, 25 percent from Europe, nine percent from America and the rest are from the Oceania region.

Overall, India is the largest investor in the manufacturing sector while the top investments in the service sector came from both Singapore and Thailand.

A breakdown of the FDIs by sectors

Around 38 percent of the FDIs are in the hotel industry, which is one of the hard currency earners with the potential to create employment.

The ICT sector has also attracted 17 percent of the investment with a total of 11 projects established so far.

Source: Kuensel

There are only four FDIs in the power intensive manufacturing industries and another four involved in financial services. The figure is doubled in the case of agro and dairy sectors.

Creation of jobs for Bhutanese through FDIs

According to the annual report, FDI companies have created 4,871 jobs as of 2016, of which 93 percent of the employees are locals. This is a huge jump as compared to the year 2010, where 2,341 jobs were created.

Although the report states that the implementation of the 2002 FDI policy started in 2005, a few FDIs have already existed before the adoption of the policy.   

For instance, companies like the Bhutan National Bank and the Bank of Bhutan already had shareholders from the International Finance Corporation and the State Bank of India respectively even before the implementation of the FDI policy.

The jobs created by these two agencies also accounted for the employment opportunities which the FDIs created.

So far, Bhutan Mountain Hazelnut Ventures has employed the highest number of people at a figure of 872.

The FDI companies in 2016 contributed about Nu 1.6B in the form of taxes to the government’s coffer which formed about 7.5 percent of the total revenue.

Source: Kuensel

The FDI projects are mostly located in the western dzongkhags of Thimphu, Paro and Chukha, with the former two in the service sector and the latter in manufacturing.

Measures taken to enhance the investment climate in Bhutan

During the ‘Better Business Summit’ held on May 17 and 18, the senior industry officer of the FDI division within the economic affairs ministry, Sonam Lhamo said that several reforms have been implemented to improve the investment climate in Bhutan.

For instance, the recent revision in FDI policy has taken into account the feedback from the private sector. In complementing the efforts, she said that e-regulations have been made online and that the investors’ guide is also available online in 100 international languages.

Moreover, the minimum investment threshold from foreign investors were reduced from 20 percent to 10 percent and FDI companies are even allowed to own land. Some relaxation has also been made on the repatriation of dividend back to the investor’s country in hard currency.

In addition, the country’s industrial area is estimated to be increased by six folds with the completion of the industrial estates. Moreover, the supply of reliable power will be realised after the commissioning of hydropower projects in the country.

Sonam Lhamo also highlighted the fiscal incentives initiated and the improved ranking on the ease of doing business in Bhutan.

With a young and well-educated population that is increasingly web-savvy, as well as its pristine environment and emphasis on development based on the concept of Gross National Happiness, Bhutan is still a hidden gem for foreign investors to discover.

 

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

 


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