Good on corruption, not so on competitiveness

Speakers at an ADB workshop appraised Bhutan’s business climate thus

 B-Index: Bhutan has done well on the corruption rate, the most difficult parameter of ease of doing business index, however its “open but closed” trade system is resisting national competitiveness.

National competitiveness is the ability and performance of a country to sell and supply goods and services, in relation to the ability and performance of other countries in the same market.  The more competitive the country is, the more global attention it gets.  This would promote doing business and result in more foreign investment.

In a high-level workshop on improving national competitiveness organised by the Asian Development Bank (ADB), the former trade minister of South Korea, Taeho Bark, pointed out that Bhutan’s economy is open, yet closed. “Open to some extent but highly dependent on India,” he said.

He suggested that the country should diversify its sources by facilitating multi-lateral trade.  By doing so, he said, the country could gain much from the open market.  For instance, it might reduce tariff and other cost of imported goods and services, while exploring new market for domestic produce.

Another frail feature of Bhutan’s trade system, he pointed was the lack of infrastructure for trade and a weak trade policy.

“Accession to world trade organisation is beneficial for Bhutan,” Taeho Bark said.

Another speaker at the workshop was the former prime minister, energy and finance minister of Georgia, Nika Gilauri, who shared the Georgian experience of climbing from 112th to 37th in doing business index in a span of one year (2006-07) and eventually to the top 8 in eight years.

He said a major reform in procedures, taxation, public service delivery and macroeconomic stability made it possible for Georgia.

Some of the procedures, licensing, permit and approvals, he said, were just there to provide “artificial employment” and some to assist corruption, in case of Georgia.

“It was also very difficult to change the mindset of civil servants, who don’t like change,” he said.

Landlocked geography of a country, he said, need not necessarily mean low trading across the borders.

Nika Gilauri said, as revealed by Transparency International, Bhutan is doing well on the corruption front, the most difficult parameter, but needs improvement in business reforms, marketing campaign and macroeconomic stability.

“Digitalisation is absolutely not necessary,” he said, pointing out that, even if it required manual paperwork, procedures must be simplified, and then digilisation may help more.

The chief executive officer of SAARC development fund, Karma, who was one of the participants, said these otherwise avoidable procedures are the biggest inefficiencies in the economy and has huge implications on the country’s GDP.

On the macroeconomic stability, experts pointed out the country’s current account deficit, running over 25 percent of GDP, but also said it was al right to have deficit as long as it was stable.  This means that maintaining deficit on account of investments like hydropower is not a big concern, but the handling a deficit for consumption is a problem.

The economic affairs’ officiating secretary, Sonam P Wangdi, said the country would have easily managed its current account, had it not been for the mega hydropower projects.

On doing business, it takes 131 days to obtain a construction permit in Bhutan, 72 days to get electricity, 165 days to trade across borders, and 86 days to register a property, among others.

The officiating secretary said a lot of these figures are misinformation.  He said all goods exit to India in 30 minutes from the border towns.  But the consideration has been on the port in Kolkata.

“We have electricity available, but getting transformers took time, and we never had a bankruptcy case,” he said, adding that the country was not as bad as it seemed, and that some issues needed to be sorted out among the stakeholders.

By Tshering Dorji

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