Pondering the path to business growth in Bhutan
By Curtis S. Chin
Like most Americans based in Asia, I won’t be attending any of the U.S. presidential debates in person. Indeed, for the first of the debates that have now taken place, I was in the midst of my third trip to Bhutan. If I were I to hold my own town hall meeting, however, there would be a few simple questions I would want to hear the answers to – and policymakers in Bhutan may well want to ponder them too.
For three and one-half years, I served under Presidents George W. Bush and Barack Obama as U.S. ambassador to the Asian Development Bank (ADB) – an international financial institution that is focused on poverty reduction and that is now Bhutan’s largest multilateral development partner, having provided some US$325 million in assistance since 1982. The United States and Japan are the ADB’s co-equal largest shareholders.
I now serve as a senior fellow and executive-in-residence at a regional institution in Thailand focused in part on educating and building the capacity of future leaders in business, government and civil society from across the Asia-Pacific region, including Bhutan.
No matter who sat in the Oval Office or at the U.S. Treasury Department though during my time in government, I found that at some point our prescription for economic growth in some of the world’s smallest and least developed nations was straightforward – improve the bureaucracy, regulate fairly, intervene rarely and stamp out corruption. Investment, capital and business confidence and growth would follow.
For Bhutan, a recent ADB overview makes clear that despite the country’s economic growth and progress in meeting a range of development goals, significant challenges remain. These include insufficient private sector involvement in economic development, and “administrative limitations” on expansion of the private sector in Bhutan.
With that in mind, other everyday people, with everyday problems, might join me in asking four simple questions of all political candidates and would-be leaders:
Is our government bureaucracy hindering or fostering economic growth?
Around the world, the track record of government’s performance is mixed. During my recent stay in Haa Valley two weeks back, I read with much interest a newspaper report on one management consultancy’s assessment of Bhutan’s relatively large public sector.
Yet, whether in Thimpu or Washington, D.C., a real fight against bureaucracy is less about new organization charts, and more about assessing what works and what does not. And then, getting rid of the latter. It’s not just the size, but the service quality, of the bureaucracy that matters. The reality also is that not everyone can work in the civil service.
How are regulations impacting job creation?
With growing numbers of educated-but-unemployed youth in Bhutan, this is one of the most critical questions. Whether or not businesses and investors are faced with too many or too few regulations, some level of regulation is essential. Yet, rules also need to be enforced fairly, transparently and equally. We must also ask policymakers if ill-timed or excessive regulations, albeit well-intentioned, are imposing too high an economic cost, particularly on the small and medium-sized businesses that are the heart of any economy.
While in Thimpu, I took note of recent rule changes impacting businesses ranging from automobile dealers no longer able to easily import cars to small shops adjusting to “car free” days. While balancing a range of policy goals, officials should also ensure that near-term private sector job creation and growth do not lose out to red tape and regulatory excess.
When is government intervention appropriate?
Governments in Asia have rightly been criticized for seeking to pick winners and losers, often distorting markets and hurting competition. Bhutan’s big neighbors to the north and the south – China and India – provide numerous examples of intervention gone awry. Even in the United States, government involvement in business unfortunately has been increasingly accepted as par for the course, given recent bail-outs of troubled industries.
Too often, however, government interventions and inefficiency can go hand in hand. Policymakers need to ensure such interventions, if any, are limited and a matter of last resort.
What more can be done to root out corruption?
Throughout the world, corruption and cronyism also go hand-in-hand. The United States is not immune, ranking only 24th on Transparency International’s 2011 Corruption Perception Index, which looks at perceived levels of public sector corruption, with the lower the number, the better the ranking.
To Bhutan’s great credit – and in marked contrast to 75th ranked China and 95th ranked India – the Kingdom ranks 38th out of more than 180 rated countries and territories. That is 7th best in the Asia and Pacific region. Allegations of favoritism or leniency must be investigated, institutions strengthened, and individuals held accountable if people are to keep their confidence in the public sector.
At the heart of the above four questions is the notion that policymakers must commit to tear down new walls being built of bureaucracy, regulation, interventionism and corruption. This lower-cased “bric” – more so than the much touted emerging BRIC economies of Brazil, Russia, India and China – may well pose the bigger challenge to Bhutan’s business development.
During the time of Bhutan’s first election, I had the opportunity to travel around the country, gaining a better understanding of the positive impact of ADB-financed road networks and rural electrification projects. I also saw first-hand though how hydropower, while providing some 40 percent or more of the nation’s income, did little to provide direct employment.
Like nations everywhere, even a special place like Bhutan needs to constantly focus on innovation, infrastructure improvements and a policy environment that will foster job growth and drive the economy forward. Here, no questions asked – the private sector must be a critical partner and participant in this effort.
Curtis S. Chin served as the U.S. Ambassador to the Asian Development Bank (2007-2010). He is now a senior fellow and executive-in-residence with the Asian Institute of Technology, and a managing director with River Peak Group.