DHI to finance entire recurrent expenditure by 2030

From 2008 to 2017, DHI and Group covered 50.30% of the total recurrent expenditures

The government’s investment arm, Druk Holding and Investments (DHI), has set an ambitious target to fund the entire recurrent expenditure of the government projected at Nu 68.77bn by 2030.

This is one of DHI’s 10-year plan, according to its publication ‘Into the next decade: a Roadmap for DHI and Group’.

In fact, DHI contributed 50.78% of the recurrent expenditure in 2017,which grew from 44.87% in 2008. In the last decade from 2008 to 2017, DHI and Group covered 50.30% of the total recurrent expenditure.

In the next decade, DHI plans to accelerate growth and double its contributions to government revenue. This is also in line with the country’s proposed new economic development goal to attain upper middle-income country status with GNI per capita of at least US$ 11,000 by 2030.

An official at DHI’s Corporate Performance Department said though the target looks ambitious, it is achievable.

 “In order to increase the overall contribution to the government revenue, DHI will continue to enhance performance of its subsidiaries and make new investments,” said the DHI official.

DHI’s contributions constitute dividend paid by DHI to finance ministry, DHI’s standalone income tax, income taxes of its subsidiaries (where DHI has controlling stake) and payments made to the government on account of royalty energy. 

The payment of royalty energy will increase with the addition of new hydropower plants under Druk Green Power Corporation Limited.

From Nu 4,364.28mn in 2008, DHI’s total contribution to the government revenue increased to Nu 12,253.28mn in 2017, registering a compounded annual growth rate (CAGR) of 10.88%.

DHI’s standalone revenue increased from Nu 4,508.43mn in 2008 to Nu 7,922.98mn in 2017. The return on equity averaged at 8.55%.

All the returns came from the companies that were transferred to DHI during its formation, mainly the hydro sector companies (DGPC and Bhutan Power Corporation). Averaging at 86.56%, the combined dividend income from DGPC and BPC did not drop below 84% in the past five years.

In its first 10 years (from 2008 – 2018), DHI contributed a total dividend of Nu 30,116mn to the finance ministry. Dividend contribution increased from Nu 1,463.85mn paid for FY2008 to Nu. 4,038.23mn paid for FY2017.

Prior to DHI’s inception, the finance ministry collected a total dividend of Nu 8,257.22mn from 2002 to 2006, accounting for 25.10% of the government revenue.

With the transfer of government-linked companies to DHI back in 2007, the total dividend income for 2008-2013 increased to Nu 11,708.432mn and to Nu 30,116.00mn for the 10-year period.

Today, DHI’s dividend contribution accounts for 42% of total government revenue. In addition to dividend payments, for the first 10 years, DHI also contributed Nu 16,125.40mn in income tax and the Group companies contributed Nu 40,089.19mn as income taxes.

Further, DGPC also makes a royalty payment averaging Nu 2,300mn a year, accounting for at least 15% of annual energy generation.

DHI also aims to increase the Bhutan Future Fund, established on 11 November 2017 with a seed fund of Nu 300mn, to Nu 30bn by 2030 primarily to maintain adequate liquidity.

The Fund will be used only in times of urgent national requirements and will not be used for the normal investments, operational and capital expenditures of DHI.

The DHI official explained that the Fund’s size would be increased mainly through transfer from after tax earnings of resource-based companies. “We will contribute more not only through paying tax and giving dividends but also by earnings,” he said. 

Basically, DHI has adopted three key themes to guide the Group through the new decade – performance excellence, economic transformation and human capital excellence.

“DHI knows that the Group will have to cope with major challenges, especially in meeting people’s growing expectation. But there is a strong belief that with the commitment and hard work of the boards, managements and employees, the Group will achieve unprecedented growth in the coming decade,” states the DHI’s report.

Chencho Dema from Thimphu