Vague policies hindering FDI

While there are ample FDI opportunities in Bhutan, investors are hesitating for the want of a clear-cut policy distinguishing them from the rest

Unclear Foreign Direct Investment (FDI) and fiscal policies are hindering investors from investing in Bhutan and the trend has been going on for so long. This, according to the Bhutan Chamber of Commerce and Industry (BCCI), has thawed potential investors from making their headway into the Bhutanese economy.

The president of BCCI, Tandy Wangchuk said that the chamber has brought the investors and delegations in the country for four times as there is a big scope for FDI in the country. However, the president said that even if the investor wanted to invest in Bhutan, due to unclear FDI policy, economic development policy, and fiscal incentives, amongst others, many investors are hesitating to invest in Bhutan.

According to the president, there are many clauses and restriction of FDI in Bhutan, many investors are not convinced on the conditions and barriers of FDI policy in Bhutan like in other countries.

“Many investors shares that due to vague FDI policy in Bhutan and no proper guidelines on return of dividends, investors are reluctant to invest in Bhutan,” the BCCI president said, adding that, in future if the government makes proper policy and guidelines then it will be very easy to achieve the FDI target of Nu 100 billion (bn) by 2034.

In addition, Tandy Wangchuk shared that the government should develop a format wherein especially before the bigger investor comes to Bhutan, potential business area should be shared to the investors.

“After sharing the potential areas for businesses and if there are issues with the policy, then the investors should ask the chamber where the chamber will be answerable to them as per the government standing rule.”

The president cited that with such a format, the chamber will then be able to see the outcomes of the investors once they reach Bhutan. After the delegation reaches Bhutan, the second step should be signing of the Memorandum of Understanding (MoU).

For instance, the Ministry of Industry Commerce and Employment (MoICE) informed the chamber that the Ministry will be working close with the relevant government agencies knowing the importance of intervention of the FDI policy amongst others in the country.

Similarly, MoICE’s Secretary, Tashi Wangmo said that the business delegates have huge potential and opportunity to establish businesses in Bhutan.

“With the country’s objective to fulfill the target gross domestic product (GDP) of USD 10bn by 2034, Bhutan targets to increase the FDI to Nu 100bn,” Tashi Wangmo said, adding that private sector has the potential to help fulfill the target and that the government will review the policy with regard to FDI with concerned government agencies.

Meanwhile, FDI in Bhutan is predominantly from Asian countries, which constitutes 67%, followed by 16% from Europe. 51% of the projects have FDIs from India followed by Singapore at 15 % and Thailand at 10%.

A total of eight FDI projects worth Nu 356.3mn were approved in the year 2022, indicating a decline by Nu 357mn. As of December 2022, the country saw a total of 101 FDI projects worth Nu 4362mn. The country has not been able to attract FDI projects at par or above the pre-pandemic level, according to the FDI annual report 2022.

The FDI report also states that the country received the highest FDI in 2018 with 16 FDIs worth Nu 6781mn. Twelve projects worth Nu 1.17bn and ten projects worth Nu 2.1bn were approved in 2020. Of the eight projects approved in 2022, six were in the service sector and two in the manufacturing sector.

However, during the same year, three projects withdrew from the country including two in the information technology-enabled service sector (ITES) and one in the hotel sector.

During 2022, the hospitality sector constituted 36% of the FDI projects followed by IT/ITES at 22%. The FDI companies in Bhutan employed a total number of 4,601 Bhutanese as of December 2022. The service sector employed 65% of the employees while the manufacturing sector employed 35%.

Sherab Dorji from Thimphu