Inflow of FDI brings capital and expertise into the country

FDI: One of the latest foreign direct investment (FDI) company in the country, AdrukA Pvt Ltd, provides import quality furniture and has employed 50 Bhutanese.

The company has already provided home made furniture to a few high-end hotels in the country.  AdrukA’s CEO Ugyen Dhendup said Bhutan was expecting a sharp increase in tourism over the next 10 years and AdrukA hopes to bring value to the country’s manufacturing sector, by creating more jobs and supplying high quality sustainable products to the newly developed properties.  AdrukA is a FDI joint venture with AA Corporation from Vietnam.

Another recent FDI, Thimphu-based luxury hotel, Le Meridien, employs over 100 Bhutanese.  Most of the employees are Bhutanese, with only a few expatriate workers, in the high-end hotel.

The hotel, which boasts of providing high salaries, is one of the most renowned chains, which employed Bhutanese mostly without skills and experience. “Most of the employees are Bhutanese,” one of the hotel officials, said.

However, the FDI projects that have come to Bhutan, such as these, are far from enough.

Since the FDI policy was first conceived in 2002, the country has received 58 FDI projects Economic affairs minister, Norbu Wangchuk said in the parliament recently.

He said 31 projects had come in the service sector, and the rest in the manufacturing and production sector.

In the last two years, during the present government’s tenure, economic affairs minister said 16 projects have been approved.  He said an additional 12 “in-principle” approvals have also been granted.

The in-principle approvals have been for hotels, manufacturing and production, hydropower, medical services, animal feed, caustic soda and beer, among others.

The FDI projects have come from Thailand, the British Virgin Islands, India, Singapore, Bangladesh, Canada, Nepal, Hong Kong, Switzerland and Malta.

“The government is trying to attract FDI,” the economic affairs minister said. “It’s very difficult for a small economy with small population to attract FDI. We have a small market,” he said.

Highlighting the importance of FDI for an economy, lyonpo Norbu Wangchuk said, with FDI comes technology and expertise. “One of the benefits, we get opportunity to trade with big economies.”

The joint secretary of the economic affairs ministry, Sonam P Wangdi, said that though the FDI policy was amended, the government has not been able to attract enough FDI. 

“Yet, the inflow isn’t sufficient. We’re way behind,” he said.  He added that the global inflow of FDI is USD 1.23 trillion.

The joint secretary said that the government had not been able to do well in attracting FDI primarily because of fund constraints.

According to the United Nations Conference on Trade and Development (UNCTAD), the FDI inflow to Bhutan stood at USD 21 million in 2013, on a downward trend since 2009.

The UNCTAD’s investment policies head, Joerg Weber, who was in the country last week, said that countries around the world spend a lot on advertising their economies to attract FDI. “However, the downward trend in FDI is common around the world,” he said.

He added inflow of FDI helps to create better paying jobs. “I have heard there is shortage of jobs in Bhutan,” he said.

“There’s a lot of work to be done to attract FDI in Bhutan,” he said. “But Bhutan isn’t alone facing the difficulty to attract FDI,” he said.

However, the economic affairs minister Norbu Wangchuk felt that the economy was recovering.  Lyonpo said that the 2.1 percent GDP in 2013 was the greatest departure from the Indian economy, with which Bhutanese economy was closely knit.  He said that the Indian economy was growing at 6 percent at that time.

“FDI is important because it brings capital and expertise,” he said. “And most importantly, it brings market with them.”

Lyonpo Norbu Wangchuk also shared that the government was coming under fire for what he called putting all the eggs in one basket. “But we’re diversifying the sector,” he said, adding that the Bhutan Hydropower Service limited (BHSL) in Jigmeling, Gelephu was one of the examples of diversification of hydropower sector.

“The hydropower service has saved a lot of money from going out,” he said.  On hydropower and tourism, he said a lot of investors had shown interest to come to Bhutan.

“I believe that we’ll be able to be in the top five positions if there’s a tourism competitiveness report,” he said.  He added that Bhutan’s inherent nature and geography attracted a lot of tourists, which lured investors.

However, he said that the agriculture sector should be one of the prime areas of investment. “Organic farming can be attractive for FDI,” he said.

“He said that the world economy is integrated and that Bhutan has no choice but to compete with the world. There is rush in the mineral sector,” he said. “But perhaps, we don’t want to rush in this sector,” he said.

Despite the disadvantages like the mountainous terrain, Bhutan still enjoys some advantages over neighbouring countries in terms of attracting FDI. “We have no strikes, obstructing works,” he said.

MB Subba