The level of innovation in Bhutan’s agribusiness firms is low, according to a World Bank report, which calls for the government to establish entrepreneurship and innovation hubs.
The report, which was released last month, points out gaps and offers recommendations to increase agribusiness, specifically non-farm enterprises and business-enabling environment in which they operate.
The report shows that only one in 100 agribusi-nesses has a website compared to one in six in other busi-nesses. It was also found that agri-business firms invest less in research and development.
“Agribusiness firms in Bhutan are less likely than other businesses to have made innovations in logistics, management, or marketing,” the report says.
It has been observed that the country’s agribusinesses are not well networked, especially with external markets. Most farmers and traders sell to Bangladeshi or Indian merchants operating inside Bhutan.
“This practice limits their exposure to the valuable networking that leads to innovation in product types, product quality, marketing, and distribution,” says the report. “The Bhutan Export Association (BEA) and Bhutan Chamber of Commerce and Industry (BCCI) should be supported in efforts to help their members reach out to and explore export markets in Kolkata, Dhaka, and beyond, including markets in Singapore, Hong Kong, and Dubai.”
One way to do it is to provide a grant to the BEA and the BCCI that will help each institution address the capacity-building needs of their membership base to reach export markets.
“Labour is less available and costlier for agribusinesses as compared to firms in other sectors, yet farm mechanization remains low,” states the report.
The World Bank suggests that banks find ways to provide more large loans for capital investments and to explore mechanisms for leasing agribusiness machinery and equipment to small entrepreneurs, among others. The current arrangements favour leasing to cooperatives.
While the former Agriculture Machinery Center (AMC) was restructured into two agencies: AMC (with focus on training and research and development) and the Farm Machinery Corporation Limited (with focus on sales and services), the resources of both the agencies have been underutilised.
The report pointed out that before investing further in these organisations as a means of introducing more effective mechanisation, the government should critically examine the reasons for this underuse.
The World Bank also recommends development of the Brand Bhutan label by creating a legal and regulatory framework to properly manage Brand Bhutan, including the regulation of quality and other standards for the brand.
The study assesses Bhutan’s agribusiness sector and recommends steps the government could take to increase the sector’s growth. The analysis was based primarily on Enterprise Survey conducted in 2015 and was supplemented by extensive literature reviews and fieldwork.
The report was prepared at the request of the economic affairs ministry to inform the ministry’s economic development policy, the key strategic and planning document for Bhutan’s economic growth.
The recommendations are intended to support the economic affairs ministry’s proposal to transform Bhutan’s agribusiness sector into an engine of economic growth and a tool for poverty reduction.