Private sector not impressed with government

Governance: In its third year in governance, Prime Minister Tshering Tobgay presides over a much-improved economy. But when it comes to strengthening the private sector, the government gets a mixed report card.

Private sector representatives acknowledge the government’s willingness to change things around and build a vibrant private sector. However, they feel that the government’s efforts have not yielded concrete results.

In what was a morale blow to the government, the president of Bhutan Chamber of Commerce and Industry (BCCI), Ugen Tsechup Dorji resigned in December last year before completing his tenure. The Vice-Chairman of Singye Group of Companies cited lack of enabling environment to contribute as BCCI president as the reason for his resignation.

Interim President Chen Chen Dorji heads the chamber. He said the former president has already made his views public through media and chose not to comment on the situation of the private sector.

President of Association of Bhutanese Industries (ABI), Sonam Tobgay Dorji, said the industries are not doing well despite the government’s willingness to support the private sector. He believes that the government should do more on the policy front for industries to thrive.

Some of the major problems facing the private sector are bureaucratic red tape and lack of one-window service.

The president said opportunities often slip from hands as the government agencies take a long time to approve business proposals. “By the time the projects get through the business idea would have been outdated,” Sonam Tobgay Dorji said.

According to him, mining and tourism are the only sectors that are thriving today. Other businesses, he said, are “just surviving”.

A businessman, requesting anonymity, said the government’s support so far has been limited to verbal assurances and that most of the issues remain to be addressed. “Some improvements have been made but they are not adequate for the private sector to thrive,” he said.

Government happy with performance

The government claims that it has brought significant improvement in the business environment through various reforms.

One such reform that was aimed at reducing administrative and policy bottlenecks for the private sector was the endorsement of the Licensing Policy 2015. It aims to do away with duplicative works involved in acquiring a license and operating business.

The government also constituted the Better Business Council, one of the main objectives of which was to improve the Ease of Doing Business index. The World Bank Group ranked Bhutan 71 among 189 economies around the world in its annual Doing Business 2016 report released recently.

Bhutan is currently the easiest country in South Asia to do business, at least on paper. Today, it takes 15 days to start a business and the entrepreneurs have to complete eight procedures, according to the report.

Finance Minister Namgay Dorji said the government has done a good job in the first half of its tenure and that it is upbeat it will perform even better in the second half. “We are happy about the performance of the young Cabinet,” he said.

Lyonpo Namgay Dorji said that the government has delivered despite lack of experience of serving in past cabinets. “We can do much better in the second half of our tenure,” he assured.

On the GDP front, the government’s record is noteworthy. During the first half of the government’s tenure GDP growth rebounded from 2.05 percent to 5.5 percent. In absolute terms, GDP expanded to Nu 119.5B last year, up from Nu 105B in the previous year.

In other areas, the shortage of Indian Rupee has eased with the opening of currency exchange counters. Banks have restarted loans for various purposes and interest rates have been slightly lowered.

However, fundamental problems remain although GDP growth has rebounded. The country’s economic growth is dependent on hydropower, with the sector contributing about a quarter of the GDP.

Trade deficit last year reached Nu 32.8B, widening by about Nu 11.6B compared with 2014. The decrease in the unemployment rate remains insignificant from 2.9 percent in 2013 to 2.6 today.

Opposition

points out fault

The opposition party dismisses the government’s claims that significant changes have been made in strengthening the private sector and the economy.

Opposition leader (Dr) Pema Gyamtsho said, “They (the government) can no more blame the previous government for their inability to deliver their promises, as they did in the past.” While more than 50 percent of its tenure is over, he said the government has delivered only 10 percent of its promises.

(Dr) Pema Gyamtsho said it was only on paper that Bhutan’s position in ease of doing business had improved. “The Ease of Doing Business index improved because of some changes in the assessment system, and not because doing business became easier,” he said.

Another issue that dogged the government was the legality of the Business Opportunities and Information Centre (BOiC), confusion over which remains.

Nonetheless, some industries started doing better than others with the coming of the present government.

President of Wood Based Industries Association (WBI) Rinchen Khandu said market for wood based products improved after the construction sector regained life as banks restarted lending. “There was no market for our products when construction loans were not available,” he said.

The WBI President, however, said the growth of wood based industry has been hampered by lack of enough supply of timber. He added that with the acquisition of the Wood Craft Centre by the Druk Holding and Investments (DHI) the private wood based industry has lost the level playing field.

“Since the DHI and the Wood Craft Centre are government firms, they get timber at better prices more easily than us,” he said.

Meanwhile, with the Indian economy expected to improve in the coming years the private sector is optimistic about their future.

ABI President Sonam Tobgay Dorji said the Indian government’s ambitious programmes such as “Make in India” are expected to drive the Indian economy. “A healthy Indian economy is good for Bhutanese industries,” he said.

He also believes that the government could learn a lot from the Indian economic policies and replicate some of them in the Bhutanese context to benefit the private sector. He said industries in India’s northeastern estates enjoy more attractive fiscal incentives than the ones enjoyed by Bhutanese industries.

“The only advantage we have (in Bhutan compared with neighbouring countries) is cheap power but we pay more in other forms. We need reforms to improve the industries,” he said.

MB Subba