An account of socioeconomic progress

Tshering Dorji

Vision 2020: Economy: The year 2020 has been set as critical phase for the nation when the government has charted a vision in 1999. It is supposed to be the year when the country and its people are able to face the future with pride and confidence.

Are we there?

One of the core foundations of Bhutan 2020 is economic self-reliance because it is identified as a derivative to foster unique identity, achieve unity and harmony, maintain stability and secure the country’s sovereignty. 

After two decades, the country is still contemplating to achieve food self-sufficiency let alone economic self-reliance.

The vision, according to Khandu Wangchuk, former Prime Minister, who held the office two times (2001-2002 and 2006-2007) and also served as trade minister and foreign minister, is born out of Drukgyal Zhipa’s aspiration to achieve self-reliance.

“This document has been very carefully crafted as a vision for peace, prosperity and happiness of our people and nation,” he said adding that leaders of the day must update and revise it to ensure long-term national interest superseded the short-term political commitments. This is why the said that document is still relevant.

Bhutan has charted a unique path of Gross National Happiness (GNH) and the vision in 2020 is to maximise GNH, socioeconomic progress being one of the main pillars.

Despite progress the country made, the document stated that the pace of change would be “so great that it seems to propel us into the future.”

Socioeconomic changes must be what the country seek, instead of completely driven by the forces that compels the people to accept what is or has come.

Socio-economic conditions in 2020

What would Bhutan look like in 2020?

The nominal GDP at market price in 2003 is estimated at Nu 28B, which increased by manifolds to Nu 168B today. However, the country seems to be lagging in bringing about a structural transformation.

The year 2020 is viewed by many as the breakthrough moment in economic history because by then Bhutan is supposed to harness most of the hydropower potential, bringing in enormous revenue from which social activities could be pursued, and by which local industries could be developed.

In 1999 Bhutan has already developed more than 20 hydroelectric schemes, ranging from mini hydel to Chukha, and installed diesel generators. This has electrified 39 towns, 375 villages covering over 31,639 households.

The country’s potentials were seen to reside in two main areas: the further development of hydropower potentials and the development of small and micro enterprises. Until 1999 only an estimated 2 percent of hydropower potentials have been utilised and the energy produced was used for the development of natural resource-based processing industries, besides exports.

The end of 11th Plan envisages 2,500MW of power. In that period the country could harness a little over 1,600MW.

Hydropower, the supposed bedrock of economy took a turn when the first elected government embarked on an ambitious journey to harness 10,000MW by 2020. When geological glitches in implementation of Punatshangchhu I and II made headlines, the second government halved the target. The third government is keen on the 2,500MW Sunkosh and completing the 640MW Kholongchhu, concrete actions are being anticipated.

The hydropower sector is also seen as the driver of other sectors like manufacturing and mining. The Bhutan 2020 stated that Bhutan is known to possess deposits of lead, zinc, copper, tungsten, graphite, iron, phosphate, pyrite and gold, although the commercial value of these deposits has in most cases not yet been assessed. 

“Although the abundant and cheap power we are able to produce will make it possible to transform these and related potentials into new natural resource-based industries, the technologies required will typically be capital intensive and labour extensive,” it stated.

Today, the sector is being questioned as relenting a Dutch disease (Putting all eggs in one basket). The sector has not generated employment, contributed to growing imports and thereby distorting the current account balance.

However, hydropower is the growth driver because Bhutan’s economic growth is contingent on the construction and commissioning of hydropower plant. This is more appropriate today since the sector is associated with government investment.

Even in 1999 hydropower has been the driving force behind the nation’s economic development and government investment is still dictating the economic growth. For instance, growth has started to hit the lowest figure every five years since 2013 because five-year planned period ended and so did the government investment, in turn affecting the private investment and activities.

Since the Sixth Five-Year Plan, government had declared that the private sector should play an increasingly important role in fostering economic growth and as a source of employment and steer economic growth. Today the country is still mulling over private sector development.

Although the country has made considerable progress in developing its economy, it is still in its infancy. It is not yet fully monetised. “The nation’s economic structure is still shallow and narrow, with the main impulses to economic growth having so far come from the exploitation of our vast hydropower potentials and the establishment of natural resource-based industries that make use of the cheap power we are able to produce,” the document stated.

Establishment of dry ports was envisaged on the back of power production. Full-scale industrialisation, for instance, is also anticipated with the generation of power and there lies the solution of unemployment, technology transfer and building skilled manpower.

Not quite there

At the core of the vision is economic self-reliance because it is a derivative of all principles on which Bhutan 2020 was founded.

In 1999, Bhutan’s reliance on external assistance was seen as posing two-fold challenge. Although the revenue base is recognised as being narrow and inelastic, there are opportunities for achieving an increase in tax and non-tax revenues and these should continue to be explored as a matter of priority. In fact tax revenue has been one of the major sources of domestic financing.

While the country is still meeting 100 percent of recurrent costs, the goal is to finance the nation’s development entirely from its own coffers.

Overall level of ODA has declined since the early 1990s and an ever- greater share is being used to combat emergencies. In addition, several important bilateral donors had progressively reoriented their policies along the lines that distinguishes between poverty and commercial cooperation.

Today, even as the country prepares to graduate from LDC in 2021, the former government has requested for an extension till the end of 12th plan, considered as milestone for Bhutan. Even then, the economic vulnerability index is still not met, and even greater is the risk that it might pull back the country to LDC if not handled with care.

However, the risk seems infinitesimal for Bhutan, according to experts because Bhutan’s assistance is largely bilateral and that it has very less to lose from the LDC fund.

Even then, the nation’s economic structure is still narrow and shallow and determined efforts must continue to be made to diversify the economy so as to reduce vulnerabilities, promote self-reliance and to generate productive employment.

Notwithstanding the progress made in coverage of road network, telecommunication and social infrastructure, as stated in the document, the pace of technological advancement is propelling at a superior pace. The document may require an overhaul on the back of 21st century economic roadmap priority.

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