Earning convertible currency is the economic focus

Earning convertible currency is the economic focus

The PM said that for the Bhutanese economy to improve, it is imperative to focus on areas that will generate convertible currency 

The government has various policy interventions to sustain Bhutan’s economic growth momentum. For an economy to improve, the government is focusing more on convertible currency and inevitably on investments that will bring in more convertible currency.

In order to do so, several measures have been adopted, such as a cottage and small industry (CSI) market outlet, which will be established in Perth, Australia.

 Additionally, a total of 43 new domestic medium and large projects worth

Nu 15.69bn have been approved in principle beginning December 24 last year. Further, eight foreign direct investment (FDI) projects worth Nu 356.29mn have been approved and seven projects worth Nu 3.64bn have been given in-principle approval in 2022.

The above was highlighted by Prime Minister (PM) Dr. Lotay Tshering as he presented the State of the Nation in the Third Parliament’s 8th session on December 8, 2008.

“For our economy to improve, we need more convertible currency and our focus is inevitably on such investments,” the PM said as he shared that eight FDI projects are already underway and seven more are on its way. Meanwhile, the government is giving renewed focus on hydropower.

Touching on important aspects of the economy, the PM said the economy recorded a growth of 4.1% in 2021, a 14.1 percentage point increase from 2020, supported by accelerated public expenditure and implementation of development projects.

The Gross National Income (GNI) recorded a growth of 4.1% in 2021, which is an increase of 11.24 percentage points compared to -7.13% in the previous year.

“The increase in GNI in 2021 was due to a decrease in the net outflow of primary income as compared to the previous year. The economy is projected to grow at 4.5% in 2022,” he said.

Concerning submissions made by people that if they are given more dollars, which will enable them to do more business, the PM said, “While we totally understand that, besides the limited foreign currency reserve, we must be mindful that it could result in activities that are draining on our reserve. Everything we consume, and our daily habits have implications on our dollar reserve,” he said.

According to the State of the Nation Report, one of the government’s interventions to sustain the economy is also focused on trade facilitation.  With trade facilitation, an online system called Bhutan Trade Fin Net is being developed to facilitate cross-border trade and transactions by automating and integrating import licenses and clearances.

“This system will be integrated with other relevant government agencies to facilitate the issuance of clearances to simplify the licensing procedure and improve public service delivery. The system will be launched later this month,” states the report.

However, the distribution system for fast-moving consumer goods was implemented in 2021 to streamline and strengthen the existing distribution system and ensure quality products are available at fair and competitive prices in the market.

Similarly, a product-based distribution system for three hardware products (electrical wires, electrical cables, and pipes) was rolled out in June. To facilitate trade, logistic arrangements such as dry ports are being constructed in Gelephu, Pasakha, and Nganglam.

Other import aspects of the report is the national export strategy, which was launched in August 2022. The strategy would address institutional, legal, and regulatory environment, trade and business infrastructure, standards and certification, the building of productive capacities, and export promotion.

The report also informs that following the ratification of the Preferential Trade Agreement (PTA) between Bhutan and Bangladesh during the sixth session of the third Parliament in 2021, the PTA has been notified for implementation with effect from 1 July, this year.

The implementation of the PTA will promote and expand bilateral trade between the two countries with duty-free market access for 16 additional products of Bhutan into Bangladesh.

The report also underlines the agreement on the movement of traffic-in-transit and its protocol, which was finalized during the 3rd joint working group meeting held in Dhaka in June and subsequently endorsed by the 8th CSLM held in September for signing between the Royal government and the Government of Bangladesh.

The agreement will allow the movement of traffic in transit (both imports and exports) for Bhutan through Bangladesh with access to the seaports of Mongla, Payra, and Chattogram.

The MoU on the use of inland waterways for the transportation of bilateral trade and transit cargo between Bhutan and Bangladesh was renewed for a period of five years in August. Six additional ports of call have been added.

According to the report, Bhutan and Thailand agreed to enter into a preferential trade agreement during the 4th Joint Trade Committee (JTC) meeting held in April and to work towards enhancing trade between the two countries to an annual target of USD 120mn by 2025.

The government has maintained continued engagement in the regional forums such as BIMSTEC and attended the 20th and 21st Meetings of the BIMSTEC working group on rules of origin (WG – ROO) held virtually in Dhaka, Bangladesh, on 10–11 January and 18-19 October. The negotiations on all other BIMSTEC trade instruments are ongoing.

However, Bhutan’s export of agricultural products such as potato, ginger, areca nut, and apple among others was restricted to India due to their domestic regulations during the year.

The PM also said that Bhutan was able to negotiate the removal of certain restrictions and secure exemptions for the export of these products.

Meanwhile, the overall import until September this year increased by 46.2% compared to the same period in the previous year, whereas exports increased by 10.4% only.

“What we import and what we export are completely different in terms of quality. We import a significant amount of ‘finished goods’ while we only export ‘raw materials’. The difference is clearly visible here,” the PM said.

However, Bhutan’s import of key raw materials and essentials from India such as sugar, wheat flour, wheat grains, and coal among others, were also severely impacted during the year as India restricted the export of these items due to their own internal shortages and domestic regulations.

“The government successfully negotiated various exemptions and allocations for Bhutan to ensure the general public and private sector were not impacted.”

Another intervention, according to the report was streamlining the system, such as lifting the moratorium on bar licenses. Restaurants are now allowed to serve wine and liquor without requiring a separate bar license.

The report states that 15 units of the old service center in Changzamtog, Thimphu have been remodeled and renovated. The remodeled units are provided as additional space at minimal rent for new start-ups. They can also avail various business development support services.

The CSI sector has been identified as one of the priority sectors for development in the 12th five-year plan. “Support was extended to 14 informal businesses such as metal craft, recycling plants, cane and bamboo, tailoring, agro-processing, biscuits, and nettle processing among others in the form of technology, equipment and capacity building,” the report says.

A total of 124 participants consisting of proprietors, managers, and employees of CSIs were trained in business management in Trongsa, Bumthang, Thimphu, Punakha, Wangdue phodrang, and Tsirang dzongkhags. The training focused on basic bookkeeping, product costing, and pricing.

Further, a total of 180 CSIs were supported to procure equipment and machinery under the industrial development grant scheme, essential service scheme, and innovation voucher scheme worth Nu 30.19mn.

Physical products of CSIs were promoted in 10 dzongkhags, eight new CSI products were launched, and promotional audio-video advertisements were aired for 16 CSI products through mainstream media and social media platforms. An online product directory system was developed to facilitate CSIs in showcasing and promoting products. The online directory features multiple product images, price information, and contact details.

Kinley Yonten from Thimphu