The Green Growth Agenda

Climate Resilience, Natural Capital and Quality Jobs Key to Sustainable, Inclusive Growth in Bhutan, says the World Bank

In the past two decades, Bhutan has achieved significant economic and development progress, while preserving its unique natural heritage. In the face of emerging development challenges and increasing climate change risks, it will be critical for the country to enhance climate resilience, diversify economic activities, and create quality jobs in the private sector to maintain green and inclusive growth, say two new World Bank reports launched on March 12.

The ‘Bhutan Country Environmental Analysis: Taking the Green Growth Agenda Forward’ examined Bhutan’s development trajectory and explored opportunities to ensure sustainable and green growth. Bhutan is the world’s first carbon-negative country and is known as a global leader in forest and biodiversity conservation, with 70% of its area covered by forests.

“Bhutan has proved to the world that economic growth is possible without hampering the environment. Bhutan is among the countries with the largest share of renewable natural capital per capita in the world,” said Abdoulaye Seck, Country Director for Bhutan and Bangladesh.

“To support its development needs, the country can mobilize additional resources by exploring opportunities to monetize emission offsets through voluntary carbon markets and enabling policies for private green investments.”

The country is highly vulnerable to climate change. One of its most challenging climate risks is hydrological, making its most important economic sectors—hydropower and agriculture—vulnerable to climate impacts. While hydropower has kept Bhutan’s emissions and sustainability agenda on track, high dependence on this sector leaves Bhutan’s economy vulnerable. It also faces other emerging environmental challenges resulting from urbanization, pollution, and waste management.

Bhutan’s forests, protected areas, agricultural lands, energy and minerals – it’s “natural capital”, when sustainably harnessed, can support economic diversification and resilience, which in turn will help fast track recovery from COVID-19 and ensure sustainable growth.

The Bhutan Labor Market Assessment highlights that the country needs more and better jobs in the private sector to absorb the growing educated workforce in urban areas, while ensuring that access to productive jobs is inclusive. Currently, quality jobs are mostly concentrated in the public sector and mostly employ men and high-skilled workers. Women, low-skilled, and rural workers are mostly employed in low-productivity agricultural jobs as self-employed or family workers, with limited options for upward mobility.

Outside of the public sector, employment quality in nonagricultural sectors remains poor. Overwork—defined as working more than 48 hours a week—is prevalent and affects 63 percent of the workforce. One out of three salaried employees have no written contract from their employer. Due to a lack of attractive options, unemployment among educated workers has steadily increased since 2019. In addition, the average number of migrating Bhutanese workers has increased to more than 5,000 a month in early 2023, compared with less than 500, on average, one month before the pandemic.

On the other hand, private sector firms face labor shortages and limited linkages between employers and training institutes, which affect their growth and productivity.

“Tackling labor market reforms is critical as Bhutan approaches the threshold for upper-middle-income status. The country can adopt policies to create quality jobs in promising sectors, while adopting reforms across the entire economy to improve conditions for firms to grow and boost human capital accumulation,” added Seck.

By Tashi Namgyal, Thimphu