Facilitating private sector development and participation
Several governments have spoken at length about the private sector’s importance in the country. However, the Bhutanese private sector in general remains the same. The assistances provided by governments have failed to instill the entrepreneurial spirit in the hearts of people. The private sector has not been doing well and one of the main reasons is the business environment.
Thus, it is encouraging to see the government acknowledge the need to create a more efficient and business-friendly environment and improve Bhutan’s investment climate, regulations will be streamlined, simplified, and eliminated based on a comprehensive review of existing policies. “Monitoring and evaluation mechanisms will be put in place for continuous assessment of the impact of regulatory reforms. Policies for energy, mining, environment, trade, competition, tourism, and foreign direct investments, among others, will be amended to be more business-friendly,” the plan document says. Apart from other support, the government says that “while acknowledging the significant contribution of state-owned enterprises (SOEs) to economic activities and budget revenue, the government will encourage the gradual privatization of SOEs that could be operated more efficiently by the private sector.”
The 13th Five Year Plan (FYP) document states that, wherever feasible, government services will be outsourced to the private sector, including the construction and operation of facilities such as dry ports and industrial parks. “Public-private partnerships (PPPs) will be pursued to utilize private sector resources, expertise, and innovation in providing critical public infrastructure and services, with shared risks. A business-friendly policy and regulatory climate, where innovation and privatization can thrive, will be ensured. The government will identify several infrastructural projects to pursue through the PPP model, with government involvement to ensure success and future replication.”
The 13th FYP also aims to create a conducive ecosystem that increasingly accommodates private initiatives and allows diverse professions and activities to thrive. By promoting a “government-facilitated and private sector-led” growth model, the plan seeks to make the private sector the engine of growth.
The government will also create a dedicated ‘one-stop service delivery point’ for all public services and businesses. The services of different agencies will be available from one point and delivered by one person, ensuring that citizens need not travel from one office to another to access services. Starting in Thimphu, this initiative will be implemented across all dzongkhags. It will be complemented by regulatory reforms to ease doing business, and every effort will be made to ensure that current electronic service portals work seamlessly.
A robust entrepreneurship culture is critical for innovation, productivity, and sustained economic growth. To support entrepreneurship and job creation, the government will establish new and improve existing start-up centers to incubate and nurture innovators and special talents. Manufacturing industries, including cottage and small industries, will be promoted with the development of dry ports and industrial parks. Reforms in business licensing and the tax framework will allow specialization or focus on specific activities rather than businesses having to be importers, suppliers, and manufacturers all at once. Currently, without an industry license, entrepreneurs cannot be part of the industry supply chain as taxes are levied for the import of goods that are part of the supply chain.
Efforts will be made to improve access to finance, particularly for smaller businesses. This will include designing financial incentives, credit schemes, and investment engagement programs, complemented by fostering financial literacy. The overall financial ecosystem will be enhanced through regulatory reforms that promote capital markets and ensure seamless coordination among different actors. The listing of companies will be encouraged to help deepen the capital market and provide an alternative investment avenue for the general public. Additionally, the government will inject liquidity into financial institutions to enhance private sector access to credit where appropriate while encouraging alternative means of lending beyond collateral-based lending.
Private sector participation will be enhanced through privatization and divestment, PPPs, and outsourcing. This will involve collaboration between the public and private sectors to leverage expertise, resources, and market-driven practices, resulting in higher investment, job creation, innovation, and improved efficiency.
An Economic Development Board (EDB) chaired by the Prime Minister has been established since January 29, 2024. The EDB will carry out necessary reforms in the economic and public sectors to address investment constraints, resolve policy conflicts related to businesses, coordinate stakeholders, and monitor the performance of key players. The EDB will be empowered and adequately resourced to effectively raise funds and promote investment and business over the long term.
By Tashi Namgyal, Thimphu
