Economy & Social Life in Bhutan
Economy and Social Life:
The Bhutanese Economy has undergone significant changes since the inception of planned economic development in the 1960’s. Within a span of 40 years the country has transformed itself from predominantly subsistence agrarian to a modern trading economy with expanding regional and global economic ties.
Agriculture is still the main source of livelihood for about 79 percent of the people who live in rural areas. Agriculture sector, including horticulture and livestock rearing contribute to about 39.5 percent of the GDP. Majority of the farmers practice agriculture based on traditional methods, although farm mechanization and the hybrid seeds have been introduced since the inception of planned economic development. The major crops of Bhutan include: rice, maize, wheat and potatoes. Cash crops like apples, mandarins and cardamom are also cultivated for export. There are also pastoralists who rear cattle and yaks and lead a nomadic life.
Bhutan is endowed with enormous hydroelectric potential. With an estimated potential to generate about 30,000 MW of electricity, this sector is expected to contribute substantially to the economy.
The manufacturing sector in Bhutan is small and is mainly dependent on agro mineral-based industries. This sector contributes about 9.6 percent to the GDP. The main product includes processed food, cement, Ferro silicon, calcium carbide, and wood based industries.
The Royal Government of Bhutan in the economic development endeavors, aims to strike a balance between the paces of economic development and need to preserve Bhutan’s unique cultural heritage and pristine natural environment.
Renewable Natural Resources
Renewable Natural Resources (RNR) which includes agriculture, livestock and forestry play a vital role in the national economy. The contribution from the agriculture sector, including horticulture and livestock rearing to GDP was 21.4 percent in 2006 while its contribution towards employment activity was 64.2 percent in 2007. Exports of primary products from this sector accounted for around one- tenth of total exports in 2004 and contributes significantly in enhancing rural household food security, consumption and income.
The forestry sector contributes substantially to the national revenue through its wood and non-wood forest products. Forest wood is not only used for domestic consumption of fuel, fodder and timber but also for exports through various products such as furniture and handicraft items. Among the non-wood forest products such as medicinal plants, mushrooms, bamboos and spices, the products which fetch high value in the international market are cordyceps and masutake.
Forests have always played an important role in Bhutan’s socio-economic development. Protection of water-sheds and river catchments has contributed greatly to the development of hydropower. In addition, forests form an integral part of farming systems and is linked to agriculture and livestock development
RNR will continue to be one of the largest contributors to national income and employment, particularly among the rural population.
Geology and Mines
Bhutan is endowed with rich mineral resources that have allowed sustainable growth of a mineral based industry and export base. Mineral resource exploitation and value addition has helped generate employment and is contributing towards poverty alleviation. As of 2006 its contribution to GDP was 2.3 percent.
The minerals that are being currently exploited include limestone, dolomite, gypsum, coal, talc, chemical grade quartzite, marble and construction aggregates. A number of mineral based industries such as cement plants, ferro-silicon plants, gypsum based plants and a carbide plant are in operation and they depend on mining industry as the raw material. Many more mineral based industries are expected to be established in future.
The mineral resources are one of the bases for private sector development, employment generation and generation of Rupee and hard currency reserve. The government gets benefit in terms of royalty of about Nu 150 million a year from these industries, apart from the 30 percent corporate income tax.
Despite being a landlocked country Bhutan is blessed with abundant renewable natural resources such as water, forest, wind and sun that can be tapped to meet the growing energy needs.
The major source of energy in Bhutan has traditionally been firewood which still represents the major source of energy consumption. Until 1980s, the electricity generation was based on small diesel generating mini and micro hydel stations that provided limited electricity supply. With the commissioning of the Chukha Hydro project in the 1980sm, Bhutan substantially increased its electricity generation and became a significant exporter of electricity to India.
Hydropower energy production is Bhutan’s singular comparative advantage which has been tapped effectively through a mutually beneficial and highly successful partnership with India. The revenue earned from Chukha (336MW), Tala (1020MW), Kurichu (60MW) and Basochho (64MW) has enabled the country to be economically more self-reliant. During the fiscal year 2006-2007, the GDP contribution from the energy sector was 12.4 percent and the revenue contribution from the energy sector alone was 45 percent of the revenue contribution from the electricity sector alone was 45 percent of the national revenue. With further augmentation of the capacity by 2020, the energy sector is expected to dominate all other sectors in terms of its contribution to the GDP. Bhutan has an estimated 30,000 MW hydropower potential, an annual energy production capability of close to 120,000 GWH. Currently, only 5 percent of this vast potential has been tapped.
Bhutan also has a good potential for harnessing solar potential for harnessing solar and other renewable energy resources besides hydropower.
Manufacturing and Industrial Sector
The manufacturing sector in Bhutan is mainly dependent on agro, forest and mineral based industries. The manufacturing sector which deals with mineral processing, agriculture and agro-processing, forestry and wood-based industries, livestock-based industries, light industries including power intensive industries contributed over 36 percent to GDP in 2006. The manufacturing sector received a boost to its growth after 1987/88. The sector witnessed a growth rate of 13.5 percent per annum which is attributable largely to the increased output from some of the larger industries. This sector is expected to grow in the next few years with the commissioning of more energy intensive industries, which are under varies stages of construction.
Mineral deposits that are commercially exploited include marble, dolomite, gypsum, limestone, ferro silicon, chemical grade quartzite, iron ore and slate. In addition, copper, gypsum, lead, tungsten, zinc, coal, beryl, mica, pyrites, tufa, and talc have been found, primarily through an exploration programme.
The industrial sector is in a nascent stage with predominantly small sized enterprises. A few large scale industries that have been established include cement, wood products, processed fruits, alcoholic beverages, calcium carbide, steel and ferro alloys.
Industries establishment (in numbers) December, 2007
Production & manufacturing- 1,254
Services – 14,923
All sectors- 26,261
Bhutan has evolved from a closed economy to a trading nation. Today, business houses employ over 20,000 people who are directly or indirectly engaged in retail or wholesale business. Bhutan’s strategic location between the two most populous countries also offers immense opportunity to become a more vibrant trading nation.
The trade sector is currently limited to trade in goods and is classified according to annual turnover. The service and production/ manufacturing are classified as the industrial sector.
Domestic trade in the country comprises a distribution system of Wholesalers and retailers. The Wholesale and retail regulations provide the enabling framework of the trading sector to grow under normal conditions of market competition.
The government has streamlined distribution of goods and ensured consumer protection and fair competition. Since April 2006, dramatic licensing reforms were implemented to promote the growth of trading enterprises. The micro trading category was de-licensed to facilitate self employment. The distribution system in the country is being developed under the international trading regimes.
Bhutan’s volume of international trade has increased significantly in recent years. Trade is heavily concentrated in the SAARC region and accounted for 75 percent of Bhutan’s total trade in the year 2006.
At the bilateral level, Bhutan and India have enjoyed free trade since the two countries signed a treaty of friendship in 1949. A formal agreement on trade and commerce between the two countries was signed in 1972. In 2007, nearly 82 percent of Bhutan’s total exports were to India, comprising electricity, cement, timber, wood products, minerals, cardamom, food products, potatoes, oranges, raw silk and alcohol. Over 69 percent of Bhutan’s total imports are from India which includes petroleum products, rice, automobile and spares, machinery and fabrics.
Bhutan also has a Preferential Trading Arrangement (PTA) with Bangladesh and is pursuing further trade liberalization initiatives with Bangladesh through negotiations for deeper reductions in tariff, elimination of product coverage under the existing PTA. Bhutan also intends level with Nepal and Thailand.
Bhutan is currently diversifying its trading base through the expansion of both bilateral and multilateral trading arrangements. Bhutan is currently a member of South Asian Free Trade Area Agreement (SAFTA) under SAARC and negotiations on BIMSTEC free trade Agreement and accession to WTO are at an advanced stage.
To support the growth of foreign trade, the government helps exporters with the distribution of information and organization of market research missions, trade missions and trade fairs. The government has undertaken market research for fruits and processed fruits in South East Asia, essential oils in Europe, hand-made paper in Europe, traditional medicines in Europe, traditional medicines in Europe and wood products in South East Asia.
Top Ten Exports
2. Records, Tapes and other recorded media for sound or other recorded phenomena
3. Palm Oil
4. Stranded Wire and Cables
5. Portland Cement
6. Copper wire
7. Copper bars and rods
9. Calcium Carbide
10. Ferro silicon
Top Ten Imports
2. Copper wire
3. Crude Palm Oil
7. Electro-Mechanical Appliances
8. Passenger Cars
10. Refined cupper and copper alloys
Other Export Potentials
According to a study conducted by the International Trade Center (ITC), there is a niche market for Bhutanese bottled water in Singapore, Japan, Taiwan and the United States. Among spices ginger, chillies, garlic and turmeric have a global market. There is also a large potential market for Bhutanese woven textiles which remain unexploited so far.
Bhutan and WTO
Bhutan joined as an observer to the World Trade Organization in April 1998 and formally applied for membership in October 1999. The memorandum of foreign trade regime was submitted in 2003 and initial offers on goods and services in 2005. Since then, Bhutan has maintained momentum on the accession process and held its fourth working party meeting on January 30, 2008. The country is in the last lap of the accession process and expected to accede soon.
Trade Liberalization and Foreign Direct Investment Policy
Since the development of a formal private sector in 1987 the country has embarked on the programme to gradually liberalize trade, industries and financial policies to encourage and facilitate the development of the private sector. In 1996, it introduced customs tariff schedule, representing a significant reduction of customs duty on a range of imports from third countries. To support trade liberalization, the Foreign Exchange Regulations was introduced in 1997, removing several restrictions on foreign exchange transactions. An important element of the liberalization process has been the development of legislations and transparent rules and procedures.
Several legislations have been enacted and adopted to strengthen the legal framework. These, among others, include the Bankruptcy Act, 1999; Movable and Immovable Properties act, 1999; Companies Act, 2000; Environmental Assessment Act, 2000; Sales Tax, Customs and Excise Act, 2000; Income Tax Act, 2001; Industrial Property Act, 2001; and the Copyright Act, 2001.
The government approved the Foreign Direct Investment Policy (FDI) in December 2002 and the FDI Rules and Regulation in 2005. The policy adopts a positive list approach that encourages investment both in the services and manufacturing sectors. It is envisaged that with the opening of the economy to FDI, it will stimulate private sector investment and contribute to industrialization of the economy.
Bhutan belongs to the eastern Himalayas which forms part of the ten global bio-diversity ‘hotspots’ in the world and one of the 221 global endemic bird areas. Almost three fourths of the land area is covered by forests of alpine, temperate and sub-tropical species that are a natural habitat for a diversity of flora and fauna. Its various eco-systems harbor some of the most exotic species of the eastern Himalayas.
Considering its size, Bhutan probably has the greatest biodiversity among Asian countries. The country has received international acclaim for its commitment to the maintenance of this biodiversity, reflected in its decision to maintain at least 60 percent of the land area under forest cover for all times to come and designate more than one quarter of its territory as national parks, reserves and other protected areas.
Bhutan’s long commitment to the maintenance of biological diversity and productively is rooted in its understanding of the importance of forest systems to the survival strategies of remote and isolated communities, its beliefs and customs, and understanding of sustainable development. The country has placed environmental conservation at the core of its development strategy and is treated as a set of concerns that must be mainstreamed in its overall approach to development planning and must strengthened by law.
The first ‘modern’ legislation enacted in 1969 was replaced by the ‘Forest and Nature Conservation Act, 1995 which is specifically aimed at protecting the country’s forests and wildlife. Since then many laws enacted are directly or indirectly related to the conservation of the environment.
More than 60 percent of the common plant species of the eastern Himalayas can found within Bhutan. The wealth of floral species include 5,400 vascular plants, 360 species of Orchids, 46 species of Rhododendrons, Junipers, Magnolia, Blue Poppies, Edelweiss, Gentians, Primulas, Artemisia, Daphne, Giant Rhubarb, carnivorous plants, high-altitude plants and over 500 species of medicinal plants. Botanists consider the entire country as one beautiful park.
Bhutan is haven to a wide range of animals. Along its southern border, subtropical forests have Elephants, Tiger, Gaur, Wild Water Buffalo, Hog Deer, Clouded Leopard, Swamp Deer and other mammals and birds characteristic of Indo- Malayan species. The high Himalayan fauna include the Blue Sheep, Yaks, Takin, Snow Leopard, Wolf, Marmot and Musk Deer which are some of the species found in the high altitude. Temperate Zone is home to Tiger, Leopard, Goral, Himalayan Black Bear, Red Panda, Sambar, Wild Pig, Barking Deer and the rare Golden Languar which is endemic to Bhutan, and other species characteristic of the pale arctic realm. The species of fauna are abundant because the great majority of Bhutanese, for religious reasons, neither hunt nor fish.
The rich forests of Bhutan harbours an estimated 770 species of birds which include the Himalayan Griffon, the unique high altitude Wader, the Ibisbuill, the spectacular Horn bill, Barbets, Sunbirds, Fulvettas, Yuhinas, Cuckoos, and many more. Bhutan has about 464 resident bird species. These non resident birds are migratory, moving up and down the mountains depending upon the seasons and weather conditions. Around 50 species are known to be winter migrants. These include ducks, Waders, birds of prey, Thrushes, Finches and Buntings. About 40 species of summer visitors or partial migrants to Bhutan include Cucokoos, Swifts, Bee-eaters, Warblers, Flycatchers and Drongos. The country has more than 28 species of internationally endangered birds. They are Pallas Fish Eagle, White-bellied Heron, Satyr Tragopan, Grey- bellied tragopan, Ward’s Trogaon, Blyth’s Kingfisher, Yellow- rumped Honeyguide, Rufous throated Wren Babbler, Red-headed Parrotbill, Chestnut-breasted Partridge, Ward’s Trogon, Wood Snipe, Dark Rumped Swift, Grey- crowned Prinia and the Beautiful Nuthatch all of which brees in Bhutan. The country also has a great variety of endangered species like the Satyr Pheasant, Peacock Pheasant, Raven and the Rufous- necked Hornbill. Greater spotted Eagle, Baer’s Pochard, Imperial Eagle and Hodgson’s Bush chat are also found. The country is also an important wintering ground for the vulnerable Black-necked Crane.
Nature Reserve and Biodiversity
As Bhutan is committed to the preservation and protection of its rich environment, various efforts of the government include afforestation and re-forestation programmes on barren, degraded and clear-felled areas; extension and education programmes to promote people’s participation in the protection and management of forest resources; implementation of pilot schemes to promote social forestry in the form of community and private forests in several parts of the country.
Further, Bhutan has set aside approximately 29.96 percent of the country’s total land area as national parks, nature reserves, wildlife sanctuaries and conservation areas. This includes four national parks, four wildlife sanctuaries one strict nature reserve, enriched with vascular plants, orchids, rhododendrons, medicinal plants and other rare and endemic species. Almost 9.53 percent of the country has been declared as biological corridors in which wildlife sanctuaries and a chain of nature reserves connect the protected areas to ensure that the wild animals and birds can move freely within a vast natural range The corridors form a ”Gift to the Earth” from the people of Bhutan. Nine national parks and wildlife sanctuaries have some of the rarest animals in the world and form a haven for a number of the world’s rare and endangered species.
Another 3, 737 sq. km area in the northern frontier of the country has recently been declared as the new national park. Each of this parks and sanctuaries has its own special character and are home to endangered animals, birds and plants.
Bhutan is one of vary few developing countries where the natural resource base remains intact
Name of protected
Area in square km
|Royal Manas 1,000 Zhemgang, Sarpang sub-tropical forest, habitat for
National Park tiger, elephants, leopard,
|Jigme Dorji National Park 4200 Gasa, Thimphu, Paro Punakha Habitat for takin, snow
Leopard, blue sheep, rare
Alpine plant species
|Jigme Singye Wangchuk 1,400 Trongsa, Zhemgang Pristine upland broad leaf
National Park Wangdue, Sarpang Tsirang forests, habitat for
Clouded leopard, tiger
|Bomdeling Wildlife 1,300 Trashiyangtse, Lhuentse Upland broad forests,
Sanctuary Mongar winter roosting area of
Black- necked crane
|ThrumsingLa 768 Bumthang, Mongar, Old growth fir forests with
National Park Lhuentse, Zhemgang varieties of rhododendron,
Prime habitat for red
Panda, tragopan and
|Sakteng Wildlife 650 Trashigang Pristine mixed coniferous
Sanctuary forests, highest number
Of rhododendron plant
|Phibsee Wild 278 Sarpang Natural sal forest, habitat for
Sanctuary spotted deer
|Torsa Strict Nature 644 Haa, Samtse Pristine temperature forests
|Khaling Wildlife Sanctuary 273 Samdrup Jongkhar Temperature forests, only
Habitat of pigmy hog
The National Environment Commission
The National Environment Commission (NEC) was first established as a Secretariat under the Planning Commission in October 1989 with the directives to incorporate environmental issues into the overall development planning process of the country. In 1992, it was de-linked from the Planning Commission with the objective to institutionalize environmental impact assessments for all development projects. Today, NEC is a high level multi-sectoral body and the highest decision making and coordinating body on all the matters relating to the protection, conservation and improvement of the natural environment.
With a mission to maintain a sustainable path of enlightened development through preservation of the environmental wealth of the kingdom, the NEC is mandated to develop, review and revise environmental policies, plans and programmes; for mulate, review and revise environment related Laws/Acts and monitor enforcement of the same; mainstream environment into the country’s developmental policies, plans and programmes; promote environmental policies, plans and programmes; promote environmental awareness amongst Bhutanese; adopt, review and revise environmental standards for the country; monitor ambient air and water quality and land-use changes promote and ensure an efficient system of gathering and sharing environmental information; promote and conduct environmental research; coordinate and facilitate the implementation of bilateral and multilateral environmental agreements, conventions, treaties or declarations; coordinate and monitor cross- sectoral issues related to water, forestry and mineral resources and waste management in the country.
Royal Society for the Protection of Nature
Founded as a citizen based non- profit environment organization in 1987, the Royal Society for the Protection of Nature (RSPN) works on environment conservation and sustainable development throughout the country. With a mission to inspire personal responsibility and actively involve the Bhutanese in the conservation of the kingdom’s environment, RSPN programmes are based on its five year strategic plan and focus primarily on the following thematic areas:
(i) The integrated conservation and development programs (ICDP) aim to establish strong linkages between environmental conservation economic welfare of communities;
(ii) Environment education and advocacy that seeks to raise environmental awareness and engage students/ individuals in schools, institutions, and communities across the country
(iii) Species and ecosystem conservation that seeks to protect selected endangered species and ecologically significant areas.
(iv) Membership programs: to promote citizen participation and build local support for environmental conservation;
(v) Emerging issues under which the organization seeks to respond to emerging environmental problems such as solid waste management and climate change.
The organization invests in networking and collaboration with donors and relevant national and international agencies for realization of its goals and objectives. Institutional development and capacity building for research and increased public involvement in environmental programs are priorities of the organization for sustained conservation efforts.
Bhutan Trust Fund
For Environmental Conservation is the developing world’s first environmental trust fund. It was established in 1991 as a collaborative venture between the Royal Government of Bhutan, United Nations Development Program, and World Wildlife Fund. In May 1996, the Fund was legally incorporated in Bhutan under Royal Charter. The Fund is governed by the Royal Charter, and a Management Board that was fully Bhutanese in May 2001. The direct leadership of His Majesty King Jigme Khesar Namgyel Wangchuk, as Chairman of the Board, has ensured the Fund remains an effective, apolitical conservation grant making organization providing core, long-term funding to conserve Bhutan’s natural heritage. In return, Bhutan has pledged to maintain 60 percent of its total areas under forest cover in perpetuity, a commitment since enshrined in the Constitution of Bhutan. The endowment was capitalized with USD20 million, through a USD10 million grant from the Global Environment Facility, and matching contributions from the governments of Bhutan, Denmark, Finland, the Netherlands, Norway, and Switzerland, and World Wildlife Fund. It has since grown to USD40 million, through prudent, pioneering investments in the international capital markets. To date, the Fund has spent USD9 million in several successful conservation interventions and general operations.
Jangsa Animal Saving Trust
Was established as a non-profit charitable trust which was initiated by a few citizens to cover the expenses relating to the establishment and maintenance of the Buddhist practice of tsethar (to save the lives of animals). Presently, the trust maintains about 600 bulls, 40 yaks, 137 pigs, 23 sheep, 2 goats and 9 ducks in the eastern and northern regions of the kingdom of Bhutan. There are also 10 goats, 2 buffaloes and 2 pigs cared for in a village near Kalimpong in the hills of West Bengal, India. A further 58 bulls have found a home in Siliguri, India. Finally, at the monastery in Kalimpong, 4 bulls and a cow have also found refuge from being slaughtered.