MB Subba

The 21st Century Economic Roadmap task force has finalised a draft report, which sets an ambitious target of a high-income economy by 2030 with a per capita income of USD 12,375.

Accordingly, the task force has set a GDP target of USD 10 billion (B) within the 10 years with an annual growth rate of 10 percent. It entails a cumulative investment of about Nu 1.5 trillion assuming a much higher level of incremental capital-output ratio (ICRO) of 2.8 than historically recorded ICOR of 7.

Under the best-case scenario, the taskforce projects Bhutan’s total GDP at Nu 965 billion by 2030.

Highlighting the investment requirements, the report states that as a share of GDP at 55 percent, the country’s investments have averaged some of the highest rates seen gobally.

Cumulatively, if the economy can enhance the efficiency of the capital, the additional investment required would be just 136 percent more than what the country invested in the last decade, it projects. Between 2008 and 2018, the government invested Nu 646B.

A substantial part of the capital required for these investments will have to be mobilised from the financial institutions and the capital market. However, the task force points out that both the banking sector and the capital markets are still at a nascent stage. Moreover,  critical players like credit rating agencies, investment banks and venture capital/PE (private equity) funds are missing in the financial eco-system.

To enable the flow of resources towards their most productive purposes, the roadmap emphasizes an ecosystem that makes investment and employment generation as frictionless as possible.

The taskforce states that approach to overseas development assistance (ODA) calls for support based on building productive capacities through commercial exchange. It adds Bhutan should also increasingly orient its approach towards exploring and harnessing the synergies between ODA, FDI and private sector development.

The draft document will be submitted to the high-level roundtable, which is chaired by the prime minister, and comprises heads of the other three arms of government, leaders of political parties and the Bhutan Chamber of Commerce and Industry president, among others.

Member secretary of the taskforce member, Rinchen Samdrup, said that the taskforce is concretising the report while most consultation works have been completed. “The expert groups have completed their task. We are connecting the dots as it not the final report,” he said.

He said that there was some delay due to the lockdown and that there would be some concrete development by mid February. “We are trying to redifine the narrative of the economy,” he said, adding that the report has not been submitted to the high level committee.

He said the road map is unique because it was formulated in deference to the Royal Vision articulated during the 112th National Day in 2019 and therefore transcends politics and short-term goals.

The national taskforce’s report takes recognizance of the Covid-19 pandemic and states that given the restrictions the country can achieve meaningful growth only from 2022. But it highlights the need to make use of current standstill to focus on initiating critical policy reforms.

The economic roadmap articulates the overarching vision of “a dynamic, prosperous, inclusive and sustainable economy”. But it limits the strategies to the next 10 years, stating that it is a futile exercise even to fathom what the entire 21st century has in store for the economy.

The taskforce identifies human capital as the most enduring and adaptive source of prosperity. Bhutan, it states, is at the cusp of a demographic dividend and that the government must proactively support its productive engagement.

The economic roadmap, it claims, will be the first step towards sustained prosperity for the 21st century.

Reform initiatives

The taskforce’s report highlights some principles and approaches to make the regulatory environment more dynamic to achieve the target.

It recommds review and simplifying the overall regulatory regime and licensing procedures and adopting a licensing reform charter as a base for the reform efforts.

The task force states that a government-wide principle of “Allow first, regulate later” should be mainstreamed. “These would result in a fundamental shift in the way we operate as the emphasis would shift from preemptive measures to requiring regulations to adapt to new businesses.”

The task force recommends establishing an Economic Development Board under the Prime Minister’s Office (PMO). Past experience, it says, has shown that just having good ideas and pronouncing new policies is not enough.

The board is being proposed as one of the most significant interventions to carry out the necessary reforms in the economic and public sectors. It states that it is critical that the board be empowered and resourced adequately since it must primarily pursue and demonstrate business-related outcomes, which requires a statutory mandate to raise funds, ensure sustainability, and carry out its long-term mandate of promoting investment and business.

The taskforce emphasises the need to facilitate the shift of workers to sectors that generate more output is critical to ensure distributional outcomes and improvements in economy-wide productivity. At present, it says, the average productivity of the entire economy is quite low with agriculture occupying the bottom spot.

As per its observations, huge productivity differentials exist across sectors and the sectors with limited employment potential rank as the most productive. Such productivity gaps are a feature of developing countries as resources are yet to be allocated to their most productive purposes.

The draft roadmap suggests building a strong and inclusive economy by promoting a strong private sector and improving the regulatory environment through an effective but facilitating bureaucracy.

The task force suggests bridging Bhutan’s technological divide and with the frontier to support innovation, creativity, and enterprise and build a knowledge-based society through a strong education system and technology. It highlights the need to instil a culture of hard work, dynamism and excellence in works.