The government approves six projects in 2021 

Thukten Zangpo

The country recorded a 40 percent decline in foreign direct investment (FDI) in 2021, according to the Department of Industry (DoI).

The government approved six FDI projects worth Nu 0.71 billion (B) last year. Ten FDI projects worth Nu 2.10B were approved in 2020.

The department’s report states that both the number of FDI projects and capital investments dropped by a third in 2020 globally due to the Covid-19 pandemic.

There are currently a total of 96 FDI projects worth Nu 43.31B in the country. About 68 percent of them have started commercial operations.

The country received three projects each in the manufacturing and service sectors, which was the lowest in the last five years.

Two existing FDI projects were converted to domestic projects in 2021. The government approved 16 FDI projects worth Nu 6.78B in 2018, which was the highest in the past five years. In 2017, seven projects worth Nu 0.36B were approved.

In principle, however, the department approved nine projects in 2021. Three projects in the manufacturing sector and six in the service sector are at various stages of the approval process.

According to the department, 64 percent of the investors are from Asia. India, which contributes about 50 percent of the total FDI, remains the biggest investor, followed by Singapore at 18 percent, and Thailand at 11 percent.

The service sector dominates the overall FDI composition with a 78 percent share. The hotel sector has the highest number of FDI projects, accounting for 38 percent in 2021.

The share of FDI in the information technology or information technology-enabled service sector increased to 21 percent in 2021 from 19 percent in 2019.

Forty percent of the FDI projects are concentrated in Thimphu and the remaining are located in Paro and Chukha.

In 2020, the country received capital inflows worth Nu 0.42B (USD 3.54 million (M) and INR 175.38M).

The inflow of convertible currency declined by 77 percent and inflow received from Indian investors declined by 77 percent compared to 2019.

“The capital inflows could have been higher, but most of the projects could not be started because of Covid-19,” the DoI report states.

A total of 4,747 Bhutanese were directly employed by 57 operating FDI projects as of December 2020.

The report states that except for the hospitality sector, all FDI companies retained their employees on the payroll in 2020 despite the pandemic.

It revealed that 73 percent of the total employees were retained on regular salaries.

About 2.6 percent of the employees in the sector received partial salaries from the company and Druk Gyalpo Relief Kidu (DGRK).

Some 22 percent of the employees in the hotel industry were fully dependent on the DGRK.

The 57 operating FDI companies contributed to about Nu 0.8B in tax in 2020, which was a decline of almost 48 percent from 2019.

The hotel industry, dairy, agriculture, water bottling, and beverage industries reported an income decline of 75 percent to 100 percent in 2020.