From the Investment and Portfolio Management Strategy
Bhutan requires a robust investment strategy that emphasizes the effective management of its state-owned assets, the improvement of regulatory and legal frameworks, and a focus on boosting real return on assets (ROA) and return on equity (ROE). By cultivating an investment climate characterized by transparency, efficiency, and sustainable profitability, Bhutan can establish itself as an appealing destination for foreign investment. The above was woven around discussions on Investment and Portfolio Management Strategy during the Bhutan Innovation Forum, where panelists shared that the Gelephu Mindfulness City (GMC) can be promoted as an investment destination.
Chencho T. Namgay, director on investments, Druk Holding Investment (DHI), during the forum pointed out that the investments in Bhutan are largely being driven by market opportunities and that foreign direct investments (FDI) into the country have always been limited.
He said that the growth of FDI has been generally limited by markets. Though there are concerns relating to administrative challenges, regulatory challenges, policy changes, the director said that these are being addressed over time.
Recently, there has been reports of FDI regulations, review and changes in developing countries have generally been positive and towards promoting investments. However, smaller and developing countries are constrained by market opportunities, and therefore growth has been limited. Therefore, “I think, in a way, we could look at GMC as a strategy,” he said. Though GMC as a special administrative region today is a black blank canvas, Chencho T. Namgay said that the best laws promoting business and the best policies related to promoting business can be adopted in the GMC. And therefore, if the challenges are related to policy and regulations, legacy issues, he said, “all these, generally, would be addressed through GMC and therefore be promoted as an investment destination.”
Further, as GMC is strategically located as a gateway to Southeast Asia, opportunities can be leveraged with good governance and dynamic leadership. Investors can look at GMC from the opportunity perspective.
For the ease of investors, capital investment should be used for capital infrastructure to build the city and corporate capital for the companies that investors would be looking at.
Cyrus Hiramanek, Founder and Senior Managing Director of M Klein and Company, said that investors are generally looking for scalability. They are looking for long term duration of capital work and they can invest, and they’re looking for returns.
Infrastructure investors, who come to build GMC, will have certain criteria and parameters. They would evaluate their investment, different from capital market investors.
Amarit Charoenphan, Managing Partner of Aim Ventures spoke about the need to look at “mindful capital” to be able to respond to the unique needs and challenges of the Bhutanese entrepreneurs.
Amarit brought forward a fund called Gen AI fund. The Gen AI fund plans to invest in about 20 AI companies out of Southeast Asia. About 500 of those entrepreneurs emerge within 18 months. Most of them are built on building on top of the application layer, which is building up after there’s already a data center. He said, “They’re trying to figure out how to find specific use cases for not just Bhutan,” but for India and other markets, and actually “build their companies out in record time”.
Amarit added that there are investors looking at a type of venture capitalist (VC) that is actually merging the practices of being not just an investor or a mentor, but also an advisor and somebody who helps the founder go through a lot of their stress and challenges.This actually is an investment in ensuring that companies do not fail very early on because of basic missteps, “such as founder breakups, mismanagement stress or making unwise decisions because of the pressure of being a young entrepreneur building a new company.” “I hope that the concept of rebranding a city, the entrepreneurs and also capital should flourish in the GMC.”
Meanwhile, John Pfeffer, Pfeffer Capital LP said abundant renewable energy, hydro and geothermal, proximity to and a friendly relationship with a huge market, India are reasons that make GMC an investment destination.
“The GMC is perhaps first step towards really opening up and reforming the whole country beside very impressive depth and breadth of senior leadership in the country.” He appraised, “In addition to the King’s own vision, and strategic effectiveness, and using hydro energy to mine Bitcoin and other things, His Majesty clearly, directly, indirectly, assembled a great team of leadership across government, DHI, the state of state-owned enterprises, who are professional, informed and collaborative.”
He also noted that there’s the FDI route, for those who would be investing along the renewable energy connectivity data center. However, it requires effort and expertise and specific set of circumstances.
Concerning the areas from where infrastructure capital would come, director of investment, DHI, said that Bhutan definitely needs GMC because of the need to accelerate economic activities. He added that the world also needs GMC as the pilot project, as an experimentation to see whether it works. He said that those who agree with this proposition will come together. “At this juncture, it would be difficult to bring individuals or largely capitalistically driven investors, but engage with philanthropic funds and multilateral agencies to gain the traction,” he said, so that GMC moves forward and to help develop a model that can be emulated elsewhere.
Cyrus added that as long as the vision can be communicated appropriately and executed, the funding could flow in. He talked about having the appropriate conversations with some of the large sovereigns that have the capital that they want to deploy and those who are going to take a longer dated term of investment. The need for initial investors that are going to come and help build the infrastructure, besides multilateral institutions like IMF and World Bank was highlighted.
By Sangay Rabten, Thimphu