Thukten Zangpo
Paro—Bhutan’s clean energy resources and access to the vast Indian market offer promising opportunities for attracting foreign investment.
This was one of the key themes during discussions at the Bhutan Innovation Forum, which concluded on October 3.
With robust frameworks in place, the country’s portfolio of green and renewable assets—especially its hydropower—holds considerable promise for attracting institutional investments, including sovereign wealth and pension funds.
The director of Investments at Druk Holding and Investments (DHI), Dr Chencho T. Namgay, said that Bhutan’s Foreign Direct Investments (FDI), driven by market opportunities, have been limited because of administrative, regulatory, and policy challenges.
Currently, the government is reviewing the FDI policy.
“With the Gelephu Mindfulness City (GMC), the best laws and policies promoting business in the FDI can be adopted and the challenges can be addressed,” he said.
He said that its proximity to Southeast Asia and a population of 4 billion people within its catchment area offers the GMC a unique opportunity for businesses.
Initially, the GMC will explore funding from philanthropic organisations and multilateral institutions, as attracting capital-driven investors may prove challenging.
FDI inflow has remained low over the years, declining from USD 16.9 million in 2017 to USD 11.9 million in 2023. This downward trend has raised veritable concerns about the country’s ability to attract foreign investments.
The managing director of M. Klein and Company, Cyrus Hiramanek, said that investors are looking for scalable, long-term investments of capital and returns.
He said that infrastructure investors that will come to build the GMC will have certain criteria and parameters that will evaluate their investments, which is different from the capital market investors.
However, Cyrus Hiramanek said that the unique advantage of the GMC lies in its access to India’s extensive market and Bhutan’s clean renewable energy. “The GMC will be a major source for strategic investors as well as public and private investors because of less red tape, no corruption, and good governance.”
The founder of Pfeffer Capital LP, John Pfeffer, identified four compelling reasons to invest in Bhutan: abundant renewable energy (hydro and geothermal), favourable relations with India, the GMC’s potential as a transformative development project, and strong leadership at various levels of government.
He suggested renewable energy connectivity and data centers as viable FDI options. However, he said that there is a need to restructure Bhutan’s power pricing agreement as what Bhutan gets in summer by export is paid in winter through import of power.
The managing partner of Aim Ventures, Amarit Charoenphan, said that Bhutan should look at mindful capital to be able to respond to unique needs and challenges of Bhutanese entrepreneurs. “There are lots of optimism and challenges. However, with the adoption of new technology and AI, Bhutanese entrepreneurs can leapfrog.”
He added that the emerging practice where venture capitals are willing to receive lower or non-market returns or blended finance is best for the GMC.
Amarit Charoenphan said that there is a lot of competition from other cities, such as Dubai and Abu Dhabi, for foreign investments, adding that the GMC could differentiate itself through unique certifications, such as a GNH (Gross National Happiness) certificate.