Official advocates a blueprint on the private sector development for next 10 years, while WBG underlines other measures
Bhutan’s private sector emerged as a topic that was highlighted as the Royal Government of Bhutan and the World Bank Group (WBG) jointly launched the Bhutan World Bank Group Country Partnership Framework (CPF) for 2025-2029, on May 20, here at Thimphu. According to the Bank, the private sector in Bhutan is largely comprised of low-productivity micro-enterprises and the role of the state continues to loom large. Additionally, the private sector faces multiple regulatory hurdles, limited access to finance and markets, and ineffective payment systems.
Commenting on the Bank’s statement and adding on to it, a senior corporate official based in Thimphu said Bhutanese private sector is still at a nascent stage largely dominated by construction, service and tourism, and trade, of which substantial portion are small and medium sized enterprises contributing to less than 50% of the GDP. According to the official, if Bhutan’s private sector is to play a dominant part in the mainstream economic development, “then it should be dynamic, competitive, and inclusive, driving economic growth through innovation, entrepreneurship, and job creation.” “It also should operate efficiently within a transparent regulatory environment, encourage fair competition, and support businesses of all sizes—from start-ups to large enterprises,” he said.
The official further mentioned that the private sector should promote social inclusion by generating employment across different regions and demographics, including youth, women, and marginalized groups. “Moreover, in today’s context it should uphold ethical standards, environmental responsibility, and good corporate governance, contributing to sustainable development. Crucially, an ideal private sector should collaborate with the government to shape policies, invest in skills, and build infrastructure, ensuring long-term economic and social progress.”
Further, the official noted that though the Government has put in efforts to stimulate the growth of Bhutanese private sector through various interventions starting from improving the entrepreneurship ecosystem, providing subsidies, building infrastructure to identifying the markets, there seem to be a missing link in delivering these initiatives in a structured format.
“To address this, a blueprint on the private sector development for next 10 years carefully crafted based on our economic competence and deliberated at a national level would be crucial. Among other aspects, the blueprint must focus on improving the business environment by simplifying regulations, strengthening legal frameworks, and promoting good governance,” he underlined. Apart from this, he added that ensuring better access to finance through diversified financial instruments and improving financial market infrastructure would be key in encouraging the growth of the private sector.
“Beside additional investment in essential infrastructure like energy, transport, and digital connectivity, reforms in education and skills training aligned with market needs, establishing a strong institution for coordination and public-private dialogue would be crucial,” he highlighted, adding that the roadmap must incorporate mechanisms for monitoring progress, mobilizing resources, and ensuring inclusivity so that growth benefits all segments of society.
Meanwhile, the World Bank Group in the CPF underlines that to promote the private sector development and enable effective and efficient delivery of policy reform, economic management and implementation capacity need to be strengthened. Under its overarching goal: Accelerate growth and job creation while safeguarding Bhutan’s cultural heritage and fragile ecosystem., one of the key outcomes is increased private investment.
The Bank states that this Outcome supports increasing private investment in job-rich sectors, creating more and better jobs through an integrated One WBG approach, adopting an “If and Then” approach. “This outcome will address institutional and regulatory barriers that have impeded IFC and MIGA from enabling and mobilizing private investment in Bhutan and stood in the way of greater domestic and foreign investment. ‘If’ key reforms take place, ‘then’ WBG will be well placed to help Bhutan boost the private investment it needs to accelerate growth and job creation and meet its ambitious target of increasing private investment to 60 percent of GDP by 2029 (up from 32. 8 percent in 2024).
The key reforms prioritized are: extension of External Commercial Borrowing to the financial sector; revision of Foreign Direct Investment (FDI) policy and legal framework, making it more attractive for foreign investors to do business in Bhutan; policy changes to allow the creation, enforcement and perfection of security interest over immovable collateral for foreign lenders at par with domestic lenders; changes in government policy on State Owned Enterprises (SoE) reform to improve effectiveness and allow for more opportunities for private sector; and creating a legal framework for venture capital to provide firms with alternative financing mechanisms. These reforms will be supported through a series of Development Policy Credits focused on growth and jobs. The “if and then” approach will allow for a phased approach where progress in structural reforms will determine the choice of WBG engagement instruments and the level of ambition. This CPF outcome would contribute to the following Scorecard Outcome Areas: more private Investment; effective macro and fiscal management; and more and better jobs including in, for example, agriculture and renewable natural resources, tourism and the digital sector.
Additionally, the WBG will help strengthen economic management as a central element of a strategy to create more and better private sector-led jobs and also support improvements to the business environment and financial systems, with a particular emphasis on improving access to finance and payment systems.
To support the diversification agenda, the WBG will adopt a sectoral lens in line with the “Jobs Accelerator” initiative in the South Asia Region.
Meanwhile, the Bank states that His Majesty’s vision for the Gelephu Mindfulness City (GMC) is that it spearheads private sector job creation in Bhutan. It mentions that the prospective demand from having over 1 million people living in Gelephu creates a significant market opportunity for the rest of Bhutan as modernized and efficient value chains develop to supply the organic food, timber and other products and services needed in Gelephu, as well as a vehicle to build the skills needed to enable Bhutan’s workers to participate directly in the job opportunities offered by GMC. “As such, WBG support to Bhutan’s efforts to diversify the economy and attract more private investment will leverage GMC for good job creation in the rest of the country and support active linkages between both economies, in line with the ‘one country, two systems’ approach.” The CPF underscores that the WBG’s support of GMC during the CPF period will initially be limited to technical assistance for the multiple workstreams, based on demand, and by helping to facilitate investments by the domestic and foreign private sector through the WBG Guarantee Platform’s instruments.
Aligned with Bhutan’s 13th Five Year Plan, the new CPF sets out the priority areas for WBG support during the 13th Five Year Plan and focuses on the overarching goal of ‘accelerating economic growth and job creation while protecting Bhutan’s social balance and fragile ecosystems. The CPF focuses on three critical and interlinked outcomes: increasing private investment and job creation, enhancing resilience to climate and disaster risks, and strengthening infrastructure and connectivity. The new CPF builds on decades of successful collaboration between Bhutan and the World Bank Group. Over the next five years, the WBG will provide financing support and technical assistance to help achieve the objectives of the CPF.
In what is said as taking the CPF to new heights, the WBG will pump in USD 35 million a year and bring in a total of a billion dollars over the period of five years.
Ugyen Tenzin From Thimphu
