Thukten Zangpo

The government aims for Nu 500 billion worth of foreign direct investment (FDI) projects as pledged for the next five years from the draft 13th Plan’s target of Nu 100 billion.

This was shared by the Minister of Industry, Commerce and Employment, Namgyal Dorji, during the third Meet-the-Press on April 26.

Bhutan had FDI worth of Nu 48.61 billion as of last year, Nu 43.62 billion in 2022, and Nu 43.31 billion in 2021. Hotel sector had the highest number of FDI with 34.9 percent, followed by information technology or IT-enabled services with 21.7 percent in 2023.

Despite several FDI policy reviews, the country failed to attract FDI over the years; revised policy is expected to be submitted to the Cabinet for approval soon.

The ministry would conduct another round of presentation for the private sector before the submission of the revised policy to the Economic Development Board and then to the Cabinet, the minister said.

He added that the current review exercise was targeted towards making the investment regime more conducive. “Some of the issues under discussion are the access to foreign exchange, payment gateway, provisions related to immigration, and the priority sectors where FDI will be promoted.”

The existing FDI projects in the country include agro-based, forest-based, education, IT services, hospitality and tourism, and mineral-based.

Although priority sectors under FDI are currently under discussion, the minister said that the government was looking forward to expanding more investment areas.

“The government intends to stimulate economic growth, generate employment opportunities, attract capital and technology inflow and increase foreign exchange reserves through the promotion of FDI,” he added.

The Department of Industry is currently developing a dedicated web portal with all the information needed for an investor.

The department is also working on streamlining the process of obtaining clearance for businesses and working towards becoming a member of the World Association of Investment Promotion Agencies, a global reference point for FDI.

The President of the Bhutan Chamber of Commerce and Industry, Tandy Wangchuk, in a recent private sector consultation meeting, said that the private sector had recommended including sweat equity of 15 percent in the FDI policy.

The sweat equity refers to a person or company’s contribution toward a business venture or other project. It is not monetary and comes in the form of physical labour, mental effort, and time.

The president also said that the discussions were underway to accommodate investors to invest in four-star and below hotels where FDI policy 2019 only allows for four-star and above hotels.

The members of the private sector raised their concerns that the FDI policy which states that the purchase of capital goods in convertible currency should not exceed the local investor’s share of equity if the foreign investor’s share of equity is insufficient to meet the total requirement.

With the limited provision on convertible currency, the members said that the convertible currency was not adequate.

Observers also say that the country’s small market, high transportation cost, relatively young and narrow-base private sector, high cost of finance, the lack of skilled professionals and the need to import almost everything, starting from plant and machinery to most of the raw materials, still pose challenges.

Other challenges are difficulty in acquiring government approvals and bureaucratic delays, according to FDI companies.