Discussion to begin soon with India to ease doing business

The government implemented the buyback scheme through the FCBL which in turn tries to sell the Bhutanese produce to India

The import regulations, the closing of informal routes, and systems going online have made doing business with India more difficult during the time of the Covid-19 pandemic as many of these policies and certification requirements were not required earlier.

However, with the relaxation in the country now, the government is working to discuss various alternatives of doing trade, especially with regard to RNR (Renewable Natural Resource) commodities, with the Government of India. Economic Affairs Minister Loknath Sharma said that the government is seeking clarity and trying to understand certification, requirement, and restriction and has been continuously in discussion with India, which is also the closest market.

“With the emergence of Covid-19, some protocols have been placed in doing trade between the two nations. Besides, there are import policies and certification requirements in each country due to pesticides, risk of diseases, and non-tariff barriers to improve domestic production,” Lyonpo said.

The minister said that Bhutan does not enjoy many of these benefits like during the vegetable season.

“We produce excess commodities requiring export as consumption is much less but these benefits during the off-season.”

According to the minister, the timing of vegetable output is the same in India and Bhutan and the “economy of scale” at commercial rate makes vegetables from India cheaper and abundant.

“We are required to export everything farmers’ produce and thus cannot play a dynamic policy of import or export adjustment,” Lyonpo said, adding that the Ministry of Agriculture and Forests (MoAF) is also working on RNR export strategy to even export to other countries.

According to the Lyonpo, problems had been more to do with areca-nuts, potatoes, and ginger as these commodities are restricted in India, according to their import policy.

“Other vegetables, we have been able to export but the price is always an issue as it has to compete; so the government is working on to ease doing business with India after relaxation,” Lyonpo added.

The minister explained that the buyback scheme is a policy the government applied to solve the problems of ginger and areca-nuts. Export of areca-nuts was not possible last year and similar with ginger this year.

“The price may not be profitable but what we need to know is the current price of ginger across is approximately Nu 15 and government-provided between Nu 20-30 as per the quality,” Lyonpo said, adding that this is a huge support measure to keep farmers financially sound.

The minister added that the government implemented the buyback scheme through the Food Corporation of Bhutan Limited (FCBL), which in turn tries to sell the Bhutanese produce to India. The gap will be borne by the government.

However, the export prices of goods increased by 8.95% and 10.16% in the first and second quarter of 2021 respectively compared to the same quarters of the previous year.

The increase in both quarters was mainly due to prices of base metals and other manufacturers which increased by around 24% and 33%.

The increase was mainly driven by an increase in the prices of ferrosilicon. Further, mineral products, cement, and electricity groups also recorded an increase of more than 5% in both the quarters, while chemicals, plastics, textile, and apparel groups recorded a drop in prices for both the quarters compared to the previous year.

In addition, the prices of wood, pulp, and paper recorded an increase of 9.27% in the second quarter of 2021 after a drop in prices since the third quarter of 2018.

Prices of food and beverages went up by 3.50% in the first quarter, but dropped in the second quarter by 5.82%.

The year-on-year import prices of goods increased by 6.48% in the first quarter and 14.13% in the second quarter of 2021. The increase of 14.13% in the second quarter was the highest thus far since 2015.

The increase was driven by an increase in the price of metals and metal articles by 37.54%, and mineral products, cement, and electricity by 35.73%.

The increase in the price of ferrous products within metals and metal articles was the main contributor with 24.54% in the first quarter and a 44.06% increase in the second quarter.

Meanwhile, the terms of trade index improved in the first quarter of 2021 by 2.32% compared to the first quarter of 2020. However, it declined in the second quarter by 3.48% compared to the same quarter of the previous year.

The quarterly terms of trade declined by 0.27% in the first quarter of 2021 compared to the fourth quarter of 2020 and further declined in the second quarter by 0.79% from the first quarter of 2021.

Further, an increase in terms of trade means more quantity of imports that can be funded by a fixed quantity of exports, while a decrease in terms of trade means the smaller quantity of imports can be funded by a fixed quantity of exports.

Kinley Yonten from Thimphu