With eight new foreign direct investment (FDI) projects worth Nu 356.29 million (M) approved in 2022, Bhutan now has 101 projects worth Nu 43.62 billion.

FDI projects, small or big, should be welcomed. It is a good source of hard or convertible currency. As an import-driven economy, FDI, if successful, could come to the rescue of our fast-depleting convertible currency. While what we import is 100 percent finished goods, our exports are limited or mostly in the raw form whether it is limestone or dolomite. If we are banking on our biggest export still, electricity, it is only in neighbouring India.

The export of electricity can only offset, at best, the import of fossil fuel. In this context, FDI should be promoted, encouraged and welcomed. Before the Covid-19 pandemic, the country was well on its way to attracting foreign investors. There were 16 FDI projects worth Nu 6.78B, in 2018 alone. Twelve projects worth Nu 1.17B and 10 projects worth Nu 2.1B were approved in 2020. There had been some hurdles on the way with the pandemic disrupting investments.

FDI could still be a solution for Bhutan. When Bhutan opened its door to investors, the selling points raised the antenna of foreign businesses. An English-speaking workforce, low-emission development, political stability, transparency, cheap power or clean energy from hydroelectricity and clean air appealed to investors. However, as investors are finding out, there are challenges that conflict with our advantages.

Political stability, ease of doing business, transparency and a clean environment matter to business, especially foreign companies exploring avenues for profit. Bhutan presents the perfect business environment. However, for many, business efficiency that results in bigger profits is the priority. Political stability or a clean environment are added advantages.  Infrastructure, logistics and connectivity play a crucial role in attracting or driving away investments.

Our challenge, despite all the advantages claimed, is in the ground reality. Poor infrastructure, especially roads, the long distance and uncertainties from policy changes could discourage investments. We lack infrastructure. As a landlocked country, surface or road transportation is the biggest bottleneck. We have invested in building roads since the first Five Year Plan. It is still the biggest hurdle for investors, local or foreign today.

The FDI policy is being reviewed to make investment environment-friendly and attract FDI through creating a brand image of dependability and trustworthiness as a nation. While this is our advantage, our hurdles restrict investments. This is evident from the areas of FDI in the country today. Of the eight projects approved in 2022, six were in the service sector.  Only two were in the manufacturing sector. Today, the manufacturing sector takes advantage of cheap or subsidised energy, the only advantage over others. With the growing focus on alternative sources of clean and cheaper energy, the only advantage could disappear, forcing us to look to other alternatives to attract FDIs.

The hotel sector has the highest number of FDI, contributing to 36 percent, and information technology with 22 percent. Even here, the share is declining with FDI declining from 42 percent in 2019 to 36 percent in 2022.

As FDIs shift from hotels to other sectors, we need to improve our infrastructure, especially roads, if we are to attract FDIs with our other advantages like political stability and clean air, peace and friendliness.