All of us, the Bhutanese, would have reflected on the words of wisdom of His Majesty The King expressed through the Royal Address on 17th of December 2024 at Changlingmethang to the people of Bhutan and beyond. Further, these days, the national newspaper Kuensel has been covering  the news on the government’s efforts to improve the quality of constructions through the establishment of a mobile monitoring unit to inspect the construction sites of buildings and infrastructures to curb the substandard constructions (Kuensel, December 31, 2024). And on January 1, 2025, the Kuensel published an article titled “Red tape and inefficient policies hold bad private sector: review of business regulations revealed major hurdles in business environment.” Against this backdrop, I am writing this perspective pertaining to the woes of small-scale industries in particular and small businesses in general.

Reflecting on the powerful messages of the Royal Address, there seems to be no option, at the moment, other than implementation of the Diamond Strategy. Are our government agencies and the private sector, and also all the Bhutanese mentally prepared to create and construct a system that is parallel to that of GMC so that “two systems” can be merged to “one system” after ten years. Onus falls on every Bhutanese.

The private sector as the engine of growth has been the persistent policy of the Royal Government of Bhutan – pre-and post democratic forms of governments. Cottage and small-scale industries spread across the country are the backbone of a country’s economic growth. These small industries are something like the middle class people in a country, which constitute a large number of populace. If the middle class is doing well economically, it is the indication of a country’s economic growth. This is why many countries focus on the income enhancement of the middle class. Similarly, small-scale industries dominate the industrial landscape of a country.

     Despite the well-intentioned policy of the government to promote cottage and small-scale industries, things on the ground tend to paint a gloomy picture, making it difficult for them to sustain and survive let alone succeed. Contradictory rules amongst various stakeholders and territorial protectionism aggravate the situation. Thus, it was timely for the government to review, revise and reform the business regulations. “The Government’s Executive Order on January 29 directed the MOICE to evaluate Bhutan’s business regulatory processes to simplify regulatory frameworks and reduce compliance burdens, thereby fostering a conducive business environment” (Kuensel December 30, 2024, p: 2). The government and the private sector represented by BCCI are making concerted efforts to ease the doing of business through the simplification of regulatory frameworks as reported in Kuensel.

     Simplification of regulatory processes is one factor of many factors that need to be addressed collectively – the Government, public cooperation’s the private sector that constitute small and large businesses, industries, construction companies, consumers and clients.

“A business ecosystem is a network of organisations that work together to create and share value for a common set of customers. It is a dynamic arrangement that includes suppliers, distributors, customers, competitors, and government agencies’ (Google).

     Many economists attribute the success of the Chinese manufacturers, particularly the high-tech companies, to the prevalence healthy business ecosystem. Big companies support the growth of small ones in the larger interest of the nation and its economic growth. In some developing countries, the big businesses, which have a lot of advantages, subsume if not consume small businesses. Bhutan is no exception.

The following are some of the challenges facing the small scale industries in Bhutan..

The small size of

domestic market

The small size of domestic market poses unprecedented challenges for a small industry. For example, the demand for different sizes of nails in the entire eastern region in the past few years has been about 3 to 4 tons  per month against the production capacity of 20 to 30 tons of a wire factory established in the Phutshorabtenling, Motonga,  Samdrupjongkhar, Such hardware products cannot be exported to India let alone other countries due to various reasons, one of which is the abundant availability at competitive price.  However, the local products substitute the importation of hardware items thereby saving the forex

Lack of support from big businesses and

contractors

Big contractors and also big businesses procure all types of materials, be they constructional materials, from outside the country despite the fact that some constructional materials are manufactured locally with good quality.

For example, Silicon factories procure charcoals from across the border instead of encouraging and promoting local products. A small factory producing char coals in Sengor, Mongar was closed down. Contractors could purchase hardware items that are locally manufactured at a negotiated price depending upon the volume of business. Their patronisation will go a long way in the building of dynamic and strong economy in the country.

Wrong perception and psyche of our people

It is perceived that things across the border are always cheaper. True, certain things are cheaper on the other side because of many factors including labour cost. For example, our people  purchase CGI sheets from Gudama, Daranga, Assam although these sheets are cheaper in Samdrupjongkhar because of tax free. Item. This psyche prevails upon the procurement of materials such as chain link mesh for fencing. According to an anonymous person, a large chunk of chain link mesh were procured from across the border supposedly at cheaper rate in 2022. On the scrutiny of data, the suppliers compromised quality, quantity and technical specifications. They resorted to such unethical practices because they know that concerned agencies rarely inspect the materials at the delivery sites.

Lacklustre monitoring system

The establishment of a monitoring unit to move around and inspect the construction sites to ensure the quality of constructions is a good move. However, as has been the case in the past, the enthusiasm would fast diminish and the things would soon be back to square one. Further, the need for inspection of goods delivered at sites both in terms of specifications, standards and quantity is vital to contain corruption and ensure the supply of materials as per the technical specifications.

One of the reasons as always given and as reported in the Kuensel quoted above is the shortage of engineers who are overloaded. Have we really assessed and scrutinised the workloads of engineers and other staff. My experience as a Chhukha Dzongdag was not the shortage of staff but distribution of works and also comprehensive job descriptions and specifications of each of the staff. While I respect the integrity and industry of our engineers and technical professionals, there are some who find some reasons for their inability to go for field visits.

Shrewd traders and suppliers capitalise on the absence of regular site visits by engineers and senior officials. However, I had come across that some Dzongdags would visit the sites during week-ends and take actions on the spots. I have mentioned in my book “Leadership Qualities, Skills and Styles” that it is of paramount importance for our leaders to make field visits instead of attending workshops, which are not so impactful.

The lacklustre inspection of not only the quality of constructions but also the supply of materials both in terms of quality and quantity as per the samples and quotations needs to be addressed.  Regular inspections at the sites would avert the problem of supplying poor quality of materials, thus benefiting the beneficiaries and reduce the wastage of resources..

Our experience in regard to the supply of stationeries in 1987 would shed some lights on the criticality and vitality of inspection at the  points of delivery of goods. Under the Government Order in November 1987, the Honourable Minister of the then Ministry of Social Services and I were involved in the procurement of large quantity of stationeries and other instructional materials required by the Department of Education for schools and institutes across the country. Submission of samples as per specifications is one thing and the inspection at the point of delivery was another thing.  A team visited the Educational Central Stores in Phuntsholing, and inspected randomly resulting in the rejection of truckloads of stationeries. Regular inspections at the point of delivery would avert the supply of poor quality and less quantity of materials in a transparent manner.

Too many cooks spoil the broth

The talk of the street is that people jump on a bandwagon of a successful business, particularly the small ones. The business of futsal is quoted as a classical example in Bhutan. Similarly, there are now more than seventeen chain-link manufacturers, which, except three old ones, were established in 2024, triggered by the announcement of the government for the requirement of huge quantity of chain-link mesh for fencing, procurement of which would be limited to local manufacturers. Every Bhutanese has a fundamental right to venture into any business. However, every stakeholder must be governed by business ethics in a GNH country in order to promote a healthy competition without comprising the quality of goods and products.

There is a need to promote a good business environment that allows a fair and just competition amongst manufacturers. Further, it is immensely imperative for the government agencies to visit the sites of factories to examine the production capacity and capability (number of machines), human resource (employment of nationals), laboratory and other facilities. According to the rumour, briefcase businesses indulging in commonly branded as ‘fronting’, the definition of which is complex, is still prevalent.

Incentivisation and motivation

There is a need for the government agencies to continuously monitor, supervise and guide the small- scale industries established by enthusiastic young people. When things do not go well, their enthusiasm get diminished and they are easily vulnerable to pressures that will have an impact on their mental stability. What is happening now is that some projects initiated by young people are forgotten soon after the opening ceremony – publicity fanfare. 

All government stakeholders should work together to promote local industries that become the envy of other countries. Given the size of our country and the visionary and clairvoyant leadership of our Boddhisattva King, we can promote a healthy and conducive business environment.

It is necessary to keep encouraging young people and motivating them by sponsoring them for short courses related to their fields both within and outside the country. Trainings or briefings before introduction or implementation of rules, policies, software systems must be organised for young and enthusiastic entrepreneurs. Policies and systems such as software systems change suddenly, and at times, young and innocent business entrepreneurs are penalised aggravating the woes of small industries in particular and small businesses in general. Some of our enforcement agencies wait for the mistakes to be made like predators wait for their preys. Confusion amongst law enforcement agencies in the implementation of a rule is another source of disincentivisation. Their demeanour and attitudes matter in the conduct of businesses while all must comply with the laws of the lands and regulations.

Conclusion

Procurement system has been a bane of contention. The disease of corruption, perceived or real, in procurement of materials can be cured if all stakeholders carry out their responsibilities mindfully, honestly and diligently in the interest of the overall improvement of the system in a GNH and Buddhist country so that small industries become a beacon of  hope for healthy business ecosystem, the engine of economic growth.

Contributed by Zangley Dukpa, Former Health Minister