The 21st century economic roadmap must begin with the change in mindset and this new way of thinking should be ingrained in every Bhutanese mind, Prime Minister Dr Lotay Tshering said.
For now, the country has just recorded another submissive GDP growth of about 3 percent in 2018, one of the lowest.
While the government is working on a roadmap for 21st century, Lyonchhen said the government is working on means to absorb shocks in the short term.
The last time the economy saw its lowest growth was in 2013, when there was change in government, recording a growth of about 2 percent. In 2018, growth was recorded at 3.03 percent. Going by the trend, GDP growth takes a dive whenever the five-year plan ends.
The finance minister, Namgay Tshering said that GDP is primarily driven by public sector investment. Major players in the private sector, he said are construction-based, driven by infrastructure development, which are in turn contingent on government plans.
Lyonchhen said that the economic downturn today is the result of seeds that must have been sown 10 to 15 ago. “The government has no idea whether the monetary regulations and economic policies of the past are wise and intelligent enough.”
However, going ahead, he said the Macroeconomic Framework Coordination Committees (MFCC) and the central bank has been asked to come up with short-term interventions to absorb shock and frame a long-term strategy. “Our economy should not mirror what is happening in New Delhi,” he said adding that Bhutan’s economy has never recorded a roborst growth when Indian economy was dipping.
The 21st century economic roadmap, according to Lyonchhen is not about building road and infrastructure. It is about creating a unique economy that is entirely Bhutanese and not dictated by few sectors and economies. ICTsisation of schools, so that class three students will talk computer and cyber security.
The Digital Drukyul, he said will be one of the base of 21st century economic roadmap, where every Bhutanese will have a digital identity, electronic patient record system would be instituted, tax administration will be brought online and single window system service will be available.
“We must change the way we do things and our system needs to cleaned up and this cannot be done overnight when finance ministry still pay for the salaries of few messengers,” he said.
If it is the short-term glitches in the economy, Lyonchhen said he is not worried because the government has 70 percent of the budget for the current fiscal year to spend, which will drive the economic activities.
In the coming fiscal year, a capital budget of Nu 28B would be pumped into the economy and this will mostly benefit the construction sector.
The finance minister said that current economic downturn is due to the negative growth in construction sector because there was a substantial gap in the economy without capital budget. This is attributed to the election period and time lapse in implementation of the 12th Plan.
Moreover, Lyonpo said that Mangdechhu was nearing completion and construction works slowed down. However, with the capital expenditure of the government increasing, he said that the government is anticipating a growth of 7.5 percent in 2019, which is one of the highest across the world.
Other hiccups in the banking sector concerning growing NPL and slowdown in loans, the finance minister said, is a concern. While loan portfolio in hospitality and construction sector is high, NPL are also very high on these sectors.
In the last six months, he said two rounds of meetings were held among the government, RMA and Financial institutions. “Neither the government, nor the central bank has put moratorium on loans, but banks are asked to rationalize their services,” Lyonpo Namgay Tshering said.
Given the economic dynamics and market size, he said some financial institutions like the Royal Insurance Corporation of Bhutan and Bhutan Insurance Limited might want to explore securitisation of loan, instead of competing with other banks for housing and construction loans. Even within the commercial banks, he said they are asked to specialize on certain ventures.