Thukten Zangpo

The government has set an ambitious target to increase the manufacturing sector’s share of GDP from Nu 24.61 billion in 2023 to Nu 43.59 billion by 2029, with an average growth rate of 10 percent.

However, achieving this growth outlined in the 13th Plan will require the government to address key challenges confronting the industry sector, particularly access to market, access to finance, and skilled labour shortages, among others.

The industry sector, constituting production and manufacturing, services, and construction, contributed 45.84 percent to GDP with Nu 117.72 billion in 2023.

Medium and large industries contributed 42 percent to GDP, valued at Nu 107.85 billion while cottage and small industries accounted for 3.84 percent of the GDP, valued at Nu 9.88 billion.

The recently released ‘Industry Census of Bhutan 2024’ report identifies access to market as a major pain point for the industry sector, affecting nearly 42 percent of the industries in the country. Around 33.5 percent of the industries reported facing difficulties with access to finance, and 17.3 percent facing skilled labor shortages.

Further, access to raw materials affected 8 percent of the industries, access to power 7.2 percent, and access to land 6.7 percent. Access to technology impacted 6 percent of the industries.

Industry sector stated that logistics affected 5.6 percent of the industries while 4.6 percent faced competition from imported goods.Policy issues affected around 1.2 percent of the industries.

The industry sector recommended policy interventions as the top concern, with 41.32 percent of industries highlighting its importance.

This was followed by access to finance at low interest rates with 23.86 percent. Around 8.7 percent of industries recommended improving access to the market.

Other recommendations included access to logistics and technology enhancements to improve the overall business environment.

To uplift the industry sector, the government plans to have the industrial transformation map ready by August this year. The government will also approve the revised foreign direct investment (FDI) policy in the next two weeks.

In the 13th Plan, the government plans to promote manufacturing industries, including cottage and small industries, through the development of dry ports and industrial parks.

To ensure supply of necessary inputs, plans are underway to make raw materials accessible and available. The government will also undertake measures to ensure availability of skills and expertise.

The production sector will be enhanced by attracting FDI, revamping and upscaling the start-up centre, and through public-private partnerships.

Reforms in business licensing and tax framework will be undertaken to allow specialisation and focus on specific activities rather than businesses being categorised as importer, supplier and manufacturer all at once.

To support entrepreneurship and job creation, the government will improve existing start-up centres and build new ones to incubate and nurture innovators and special talents.

The financing support includes grants and low-cost credit for start-ups, new product development, and upscaling, and tapping into capital markets for financing.

As of December 2023, there were 24,692 industry licences, of which 6,231 licenses were non-operational. 

The small-scale industries were the highest, accounting for 70.59 percent of the total industries, followed by cottage-scale at 24.75 percent, medium-scale at 3.01 percent, and large-scale industries at 1.65 percent.

The service industries dominated across all scales of industry, accounting for 84.81 percent, followed by production and manufacturing with 10.42 percent and contract with 4.77 percent.