Thukten Zangpo 

With the government approving eight new foreign direct investment (FDI) projects worth Nu 356.29 million (M) in 2022, Bhutan now has 101 projects worth Nu 43.62 billion (B) today, according to the FDI annual report 2022.

Bhutan has not been able to attract FDI projects at par or above the pre-pandemic level.

The country received the highest, 16 FDIs worth Nu 6.78B, in 2018. Twelve projects worth Nu 1.17B and 10 projects worth Nu 2.1B were approved in 2020.

Of the eight projects approved in 2022, six were in the service sector and two in the manufacturing sector.

However, during the same year, three projects: 2 in the information technology-enabled service sector (ITES) and 1 in hotels withdrew from the country.

In principle, nine projects were issued FDI registration certificates in 2022, of which seven are in the manufacturing sector and two in the service sector.

About 87 percent of the 101 FDI projects are in the government’s priority sector, mostly located in Thimphu, Paro, and Chukha.

The hotel sector has the highest number of FDI, contributing to 36 percent; information technology or ITES with 22 percent.

According to the department of industry under the Ministry of Industry, Commerce and Employment, the hotel sector’s share of the overall FDI declined from 42 percent in 2019 to 36 percent in 2022. “This is an indication of the receiving FDIs in a diversified sector, a shift from hotels to other sectors.”

The FDI in information technology or ITES increased from 19 percent in 2019 to 22 percent in 2022.

Power-intensive manufacturing increased from five percent in 2019 to eight percent in 2022.

The 49 operating-FDI projects employed 4,601 Bhutanese as of December last year.

Considering the employees in the projects that have not started commercial operation and expatriate workers, the employment figure increased to 5, 279.

FDI companies employed a total of 105 foreign or expatriate workers. For every single expatriate working in the country, there are 39 locals employed.

By sector, the service sector employed 65 percent and the manufacturing sector employed 35 percent.

Financial services generated the most jobs for Bhutanese with 31 percent.

The information technology or ITES employed 581, an average of 67 Bhutanese in the manufacturing sector; the service sector employed 103 on average.

The country’s 67 percent of the FDI projects are received from investors based in Asia. About 16 percent are from Europe and 10 percent from America.

India is the major source of investment in Bhutan with 51 percent share, followed by Singapore (15 percent) and Thailand (10 percent).

In 2021, Bhutan received capital inflow worth Nu 680M, up from Nu 423M in 2020. Inflows in convertible currency were recorded at USD 6.82M and that in India Rupee at 175.57M.

Inflow of convertible currency, according to the report, has increased by over 48 percent.

For the year 2021, the operating FDI companies contributed Nu 1.3B in tax (salary tax, custom duties, and corporate tax). This was an increase by 63 percent as compared to the previous year.

For 2020, the operating FDIs contributed Nu 796M in tax. It was down by almost 48 percent from 2019. Tax contribution was Nu 1.53B in 2019.

The tax contribution in 2020 saw a decline because of the impact of the Covid-19 where 65 percent of the 57 operating businesses’ income was down by 65 percent.

The State of the Nation 2022 report stated that the FDI policy is being reviewed to make the investment environment-friendly and attract FDI through creating a brand image of dependability and trustworthiness as a nation.