… loses more than 5,000 employees since 2020

Thukten Zangpo  

The country’s manufacturing sector has stagnated for a decade, averaging a growth of 4 percent. Going by figures, the sector’s share of GDP has been declining over the years.

Its share to GDP at 9.06 percent in 2012 saw a decrease to 7.51 percent in 2017 and 5.86 percent or Nu 11 billion (B) in 2021, according to the National Accounts Statistics.

With the economic crisis induced by the pandemic, the country lost more than 5,000 employees from the sector since 2020, according to the Labor Force Survey report.

From 24,685 persons employed in the manufacturing sector in 2020, it fell to 19,577 in 2022. It was 6.8 percent of the total employed in 2022.

However, the current plight of the manufacturing sector is not only because of the pandemic, job creation in the sector saw low even before the pandemic.

Manufacturing sector, after contracting by 20.76 percent in 2020, recorded a growth of 2.69 percent in 2021.

A study by the Bhutan Chamber of Commerce and Industry in its Private Sector Recovery Plan estimated a revenue loss of Nu 2.83B in 2022 and Nu 2.99B in 2023 in the manufacturing and production sector because of the pandemic.

Without Covid-19, the Chamber estimated that the sector could have generated a revenue of Nu 14.4B and Nu 15.2B in 2022 and 2023 respectively.

The country’s rising trade deficit could often indicate that domestic manufacturers are losing business to manufacturers in other countries. Imported goods are cheaper compared to domestic produced goods and Bhutan mostly exports low-value added goods.

The country’s trade deficit of Nu 18.38B in 2020 rose to Nu 48.14B as of September 2022.

As the country develops, reforms should be introduced to shift workers from low income agriculture to the high paying production and manufacturing sector. Agriculture sector employs nearly half of the country’s population. 

As Bhutan aims to double the country’s GDP from USD 2.5B to 5B by 2029, the government plans to increase the GDP share from the manufacturing sector from 6 percent to 15 percent by 2029.

Finding the sector has potential growth in the economy, the government wants the sector to generate high paying jobs by attracting new foreign direct investments in the export-oriented sectors.

Currently, the manufacturing sector has attracted investment mainly in food and agro-processing and power-intensive industries.

Bhutan’s export basket has remained stagnant in the past decade, where leading exports include electricity and base metals with a high market concentration in the region.

There were 2,766 licences in manufacturing and production units in the country of which 1616, more than half, were cottage scale businesses in 2021. About 252 businesses in the sector closed between 2019 and 2021.

The sector has 99 large and 183 medium-scale industries licensed in the production and manufacturing sector as of 2020. However, only 56 percent were operational.