FDI Reform policies instrumental in the surge
Bhutan’s ambitious push to attract foreign direct investment (FDI)
is gaining notable traction, with the country achieving nearly half of its Nu 500 billion target
midway through the 13th Five-Year Plan. According to the Ministry of Industry, Commerce and Employment (MoICE), Mid- Term Review, total approved FDI as of April 2, 2026, stands at Nu 225.87 billion—marking a significant milestone in the country’s economic transformation agenda. The major contributors to the current figures are the approved Khorlochhu and Dorjilung Hydropower Projects. Excluding hydropower, the figure is Nu.
69.335 billion.
The progress reflects a combination of large-scale project approvals and targeted policy reforms designed to make Bhutan a more attractive and investor-friendly destination. And behind the surge, most notably are the series of reforms to the country’s FDI framework, which has played a crucial role in improving investor confidence and simplifying processes.
“Our FDI Rules and Regulations 2025 adopt a negative list approach, where sectors restricted for FDI are clearly specified,” an MoICE official said. “We also define priority sectors, project costs, and maximum foreign ownership limits to streamline the process.”
This shift toward a more transparent and rules-based system marks a departure from earlier frameworks that were often perceived as complex and restrictive. By clearly outlining where investments are permitted—and where they are not—the government has reduced uncertainty, enabling investors to make more informed decisions.
A key feature of the revised regulations is the emphasis on long-term, responsible investment. The rules require a minimum foreign ownership threshold of 20 percent, ensuring that investors maintain a meaningful stake in their ventures. “Portfolio investments or foreign ownership below this threshold are not allowed, thereby ensuring that investors have a sustained commitment to Bhutan’s economic, social, and environmental objectives,” the official added.
Bhutan is actively encouraging foreign participation across both manufacturing and service sectors, with clearly identified priority areas. In manufacturing, focus sectors include agriculture, animal husbandry, forestry-based industries, water-based products, and renewable energy. Meanwhile, the service sector is opening up opportunities in hospitality,
wellness, education—including technical and vocational education and training (TVET)—healthcare, air transport, infrastructure, information technology, waste management, and financial services.
To further incentivize investment, the government offers a range of benefits under the Fiscal Incentives Act 2021. These include tax holidays, concessionary tax rates, investment allowances, and exemptions on customs duties. Such measures are designed to offset initial costs and improve the overall viability of projects, particularly in emerging sectors.
The government has also made significant strides in simplifying administrative procedures. Approval processes have been streamlined, with clear turnaround times (TAT) established for project clearances. The Invest Bhutan division continues to function as a one-stop service center, providing investors with comprehensive guidance on regulatory requirements, taxation, labor laws, and foreign exchange procedures.
In addition, reforms have expanded foreign equity caps in certain sectors. For example, agriculture—traditionally a sensitive sector—now allows up to 100 percent foreign ownership, reflecting growing confidence in the country’s regulatory safeguards. Policies have also been updated to facilitate the repatriation of capital and dividends, as well as the import of raw materials and machinery, further easing operational constraints for investors.
Recognizing that access to land and finance remains a critical bottleneck, the government is taking steps to address these challenges. Industrial parks are being developed in strategic locations, equipped with essential infrastructure to support business operations. At the same time, investors are allowed to access financing from both domestic and international sources, broadening avenues for capital mobilization.
Efforts are also underway to strengthen the pipeline of investment-ready projects. By working closely with private sector stakeholders, the government aims to identify, refine, and package viable opportunities that align with market demand. Complementing these efforts are targeted promotional campaigns, including international roadshows and investment summits, aimed at showcasing Bhutan’s unique value proposition.
Despite the strong push for economic growth, Bhutan remains firmly committed to preserving its environmental and cultural heritage. All FDI projects are subject to rigorous screening processes to ensure alignment with national priorities. Environmental impact assessments are mandatory where applicable, and investments must comply with Bhutan’s constitutional mandate to maintain forest cover.
Continuous monitoring mechanisms are in place to ensure that projects adhere to environmental standards and contribute positively to long-term sustainability goals. Monitoring and evaluation also play a central role in assessing the broader impact of FDI. The Department of Industry publishes an annual report tracking key indicators such as investment inflows, employment generation,and tax contributions. This data-driven approach allows policymakers to evaluate the effectiveness of reforms and make necessary adjustments.
While challenges remain—particularly in land access and financing—the overall trajectory of Bhutan’s FDI journey is encouraging. The government’s focus on quality over quantity, combined with its commitment to sustainability, positions the country as a distinctive investment destination.
“Our goal is to attract investments that support sustainable growth while protecting our environment and culture,” the official said. “We are creating an enabling environment that benefits both investors and the nation’s long-term development.”
Sherab Dorji, Thimphu
