Bhutan’s natural resources belong to the people of Bhutan. Those representing the people in the highest decision making body, the Parliament, thought otherwise.
In a surprising decision, the National Assembly rejected the recommendation of the Council to allocate mines to the State Mining Corporation Ltd. Members, mostly elected on the promise of economic prosperity and reducing inequality, even criticised the recommendation on the grounds of private sector development.
Private sector has to develop. There is no doubt about it. In fact, every government commits to private sector development. However, mining alone will not develop the sector. Since the 1980s, the private sector has been operating 67 mines and quarries. How much has the private sector developed? Where is the private sector? The private sector we know today is limited to a few business houses owned by prominent elite citizens.
Besides, given the richness, mining has become a sensitive issue. It has created a stark inequality that is against the provisions of the Constitution and the vision of the country. Failure to vest the rights with the state, could also be tantamount to the State violating its constitutional duties of “minimising inequalities of income, concentration of wealth, not promoting equitable distribution…” In other words, the government must not favour particular groups or promote patronages of the few.
Mining is lucrative. We are not surprised if a lot of lobbying went into convincing the people’s representatives to oppose an opportunity for the State to relook at redistributing the richness dug from natural resources. The sector, the elected representatives are trying to protect are a handful of people. For instance, three promoters own 70 percent of a mining company with one owning more shares than the 30 percent owned by the general public. In another, the promoter owns more than double the 30 percent owned by the public.
It has been long recognised that even after paying taxes, royalties or dividends, the bigger pie is always gone. Making most of the loopholes in the regulations, there are arrangements made to pass on a large proportion of income to promoters or relatives through the creation of sister companies. The Royal Audit Authority once pointed out a financial implication of over Nu 1.1 billion in four years as a result of such arrangements. This translates to revenue loss to the government. The sister companies, audit noted, had minimal commercial or marketing benefits to the principal company. To put it bluntly, it borders tax evasion by fine-tuning vague legislation.
The findings are not new and elected governments are aware of it. The lease term has expired and it has provided a window of opportunity. The decision we hesitate to make today will be nothing compared with the implications.
The process of development has produced some big companies. Due to their influence, governments would be forced to listen to them. It is said that questions on natural resources or financial strategies are often strongly influenced by big companies, while the national democratic participation is overruled.
In Bhutan, our governments are elected on popular pledges and not on ideologies. In the developed world like in the Scandinavian countries that follow a social democratic ideology, benefit of the majority is at the centre. In the absence of an ideology, it is safer to let state resources be used for the benefit of the people.
From the past year’s experience, returns to the government coffer are bigger when the State mines natural resources. In the wake of the Covid-19 pandemic, what the government needs is revenue to ensure the wellbeing of the people and nudge back the economy. And we know that the impact of the pandemic is going to last for at least a few years. The risk of Covid-20 or Covid-21 is not ruled out.
The government will be criticized for holding on to the mines, especially at a time when it is also promoting the private sector. But the question is not about who digs more. It is about who benefits more. We hope that this will be decided with wisdom and clarity.