On May 7, 2021, Mr. Koji Yamada (Chief Advisor, CST-JICA Fablab Project in Bhutan) invited a Bhutanese friend and me to his hometown in Ogaki, Gifu, Japan. We visited a few roadside shops and were surprised to see products from Yamada san’s mother’s vegetable garden. Similarly, on another trip to Ishinomaki, Miyagi, led by Professor Mitsuyoshi Yanagihara and accompanied by Professor Tsuyoshi Shinozaki and Professor Akihiko Kaneko, such shops were set up to revitalize the economy after the devastation caused by the Great East Japan Earthquake in 2011. Such shops were also common in places like Takasaki (Guma prefecture), near Tokyo and far-flung prefectures like Yamaguchi and Hokkaido. These shops are called “Michi no eki” translated in English as “roadside stations.”  

The Japanese Michi no eki is very different from the roadside stations found in other parts of the world. While Michi no eki has its humble origins tied to the old post towns and Shichido Ekiro (or public roads connecting seven regions of Japan), the current system was first launched in 1993 with 103 self-sustaining government-certified public facilities run by local communities. As of 2023, there are over 1,204 stations across Japan, each with five key features as follows:

1. Shops selling local products and promoting the products through food courts; 

2. Free amenities include clean toilets, parking and picnic tables, and even free Wi-Fi; 

3. Tourist attraction activities;

4. Provides services such as post, ATM, bus stop, etc.; and,

5. Serves as an evacuation center during a disaster emergency.  

These characteristics have made Michi no eki, an important pillar for local and regional development. Despite Japan’s status as an industrialized country, its industries are concentrated in a few places due to its topography. Under such circumstances, Michi no eki provides a marketplace for small and medium producers (mostly farmers) to sell their goods and attract tourists to the region, strengthening the local economy. As a result, Japan’s small industries have played a crucial role in making the country an industrialized economy. As the economy expanded, countless new products and process opportunities unfolded, and the resources and creative ability of the small firms shifted, resulting in the expansion and diversification of enterprises. 

Bhutan’s context

Historically, Bhutan did not have marketplaces like Michi no eki, limiting the development of entrepreneurial skills and facilities. Producers and traders used to travel to villages to sell their products in exchange for local products. For example, during harvest season, people from central Bhutan would travel to Punakha and Wangdue, selling their bamboo baskets in exchange for cereals. However, with modernization, private entities sprang up along the motorable roads, selling various goods and services. Recently, the government has made efforts to develop roadside sheds for farmers to sell vegetables and to construct toilets along highways. Still, these infrastructures are not integrated and are located in different places. This gives rise to various issues regarding operation, maintenance, and sustainability. Also, unlike privately-operated counterparts, these places do not have proper management oversight with stakes in those establishments, resulting in a shorter infrastructure lifeline. Therefore, a Michi no eki system is much suited for Bhutan.

Bhutan can benefit immensely from implementing Michi no eki system because traditional producers and service providers such as blacksmiths, carpenters, stonemasonry, weavers (textile and bamboo), potter (clay and wood), and other artisans once catered to the demand of our economy. These traditional producers produced various goods and services and practised subsistence farming. However, with the advent of modernization, mass-produced and cheap goods inundated the market, pushing traditional producers out of the market and making them dependent solely on farming, which was already a major occupation in the country. If we look at the industrialized countries, we can still see these traditional producers. But in Bhutan’s case, they had no adjustment period to migrate from a barter trading system to a cash-based one. Whether these traditional producers are relegated out of the market due to competition is not evident because today, we still see few pockets within the country where they provide goods and services under a barter system. Another reason for relegation would be that they produce less quantity, which is unsuitable for establishing shops for their products. Thus, in terms of productivity, they have moved backward due to modernization rather than forward. A Michi no eki system will provide a collective marketplace for improving people’s income and productivity. 

We can implement a Michi no eki system in Bhutan with the same characteristics but not limited to the following:

Shops and restaurants run by the people in the community (employees could be anyone residing in that community) with locally-sourced materials or domestically-manufactured products. The imported goods sales should be restricted to prevent direct competition with private roadside shops and restaurants;

Free amenities, such as toilets, parking, bus stop and picnic areas, should be provided free to attract travelers. These facilities should not be considered unbeneficial, as they are key in attracting visitors; 

Tourist attractions should be identified and developed within Michi no eki to attract domestic and foreign visitors. In Japan, Michi no eki management capitalizes on the historical legacy to create tourism products. In places where they cannot, they improvise, for example, some bring in train models for display, some build Ferris wheels, and some develop hot spas and hot springs;

Public and other related services, such as Bhutan post, insurance companies, etc., should be encouraged to open an integrated counter at these facilities. Independent contractors should be employed to provide such services and incorporate more services in the future as needed; and 

These facilities can also serve as evacuation centers during natural disasters, as they have the necessary facilities to cater to the needs of evacuees.  

The development of Michi no eki can be combined with the Lung-chok Gongphel programme, a customized version of the Furusato Nozei system proposed on February 4, 2023, in the Kuensel publication. Financing for such infrastructure can be done through the Lung-chok Gongphel programme and product development can also be done to cater to both of these programmes. Additionally, such facilities’ construction costs will be minimal as the government already invests in developing vegetable sheds and toilets. This is a mere improvement to the current programme and upon completion of the construction and setup of the facilities, the management, operation and maintenance should be handed over to the local communities. Government intervention should only be limited to technical assistance and market diversification facilitation.    

Implication on Bhutan’s Economy

While many countries are adopting Artificial Intelligence and the Internet of Things, some may question the need for proposals like Michi no eki in Bhutan. It’s true that the government has already implemented policies such as fiscal incentives, special economic zones, foreign investment promotion and various other initiatives, but these initiatives have not been able to drive productivity or diversify the economy as desired. Furthermore, as the size of our economy grew, the productivity generated by the hydropower industry is being diluted by the lack of productivity in other sectors. In other words, the incremental gain in revenue is exceeded by the incremental cost. So, despite the commencement of two major hydropower plants in recent times, economic growth has been sluggish. Low productivity, lack of human capital accumulation and lack of other facilities call for deep-rooted solutions that are basic to the development process. 

To address this, it’s important to improve the productivity of other sectors. While the government has supported the development of farmers and artisans, their productivity has been low, which limits their contribution to economic growth. The Michi no eki system provides a platform for traditional producers and farmers to sell their products, creating employment opportunities and enabling them to add value to their products and earn higher net income. It also gives domestic consumers access to buy authentic Bhutanese products. For example, most of us do not have a knife produced in Bhutan despite owning a few knives at home, and this is a result of lack of places to buy such products. 

Further, it will also do away with the middle-men culture for those still surviving artisans, which will help cut down the price of products and make the supply chain more efficient. Also, as the country develops, most modern amenities are concentrated in the places like Thimphu, Paro and Phuentsholing. The Michi no eki system will spread such modern amenities to far-flung places. Further, as more such facilities are developed, they will accumulate more products and human capital enhancing productivity. 

As more small and traditional producers participate in producing goods and services, we will have surplus production that will enable us to export. Such has been the trend in countries such as Japan and Switzerland, which have similar characteristics to Bhutan. However, such proposals may meet with criticism citing the inability of the Bhutanese to have similar ingenuity and fortitude or concerns due to the small domestic market. These attitudes are not valid, and we can look to Bhutanese success stories as evidence.

Textile Industry: the Bhutanese success story

The textile industry is at the pinnacle of success for any particular local industry in Bhutan. Although there are no available data to substantiate this claim empirically, one can assess the robustness and dynamism of any industry by looking at its supply chain. Starting from raw materials such as threads and yarns to weavers, tailors and finally, the retailers, almost all of the economic agents in this industry deal in a single product and are able to thrive doing so. Further, increasingly younger generations are coming up with various design ideas, giving them an edge in the market. This indicates a healthy and robust industry but, at the same time, has ample competition. In economics, such a market is called a perfectly competitive market, with many vertical and horizontal producers and no single player dominating the market. This market development is the result of mainly three factors. First, our national policy of preserving and promoting our traditional attire. Second, the limited government role, that is, the government intervened in the market only to facilitate the industry and not to regulate it by providing timely training to tailors, weavers, etc. Third, as Bhutanese, we take pride in wearing our handwoven dresses. Thus, despite cheaply available dresses made from imported materials, there is enough demand to create a robust and dynamic market. Because of this robustness of the textile industry, it has also given rise to many other products sold as souvenirs, such as purses, bags, curtains, etc. 

Looking at the success story of our textile industry, we view that such a model can be replicated for other traditional industries but with relevance to modern times. We see that Michi no eki system and Lung-chok Gongphel programme have the capabilities to make these industries as good as our textile industry. Currently, in the Bhutanese economy, we see that lack of productivity is one of the core issues, and such programmes aim to enhance productivity and accumulate human capital. To conclude, we quote His Excellency Lee Kuan Yew, “The first step in solving a problem is in the ability to identify it and not ignore it.” and Professor Thomas Sowell, “There are no solutions, there are only trade-offs, and you try to get the best trade-off you can get.” 

Contributed by,

Pema Dorji,

Professor Mitsuyoshi YANAGIHARA, Nagoya University