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… needs diversification, innovation and not more of the same 

Staff Reporter 

The recovery path for the private sector is riddled with challenges but a panel consisting of industry leaders and analysts said that the sector also has opportunities for innovation and change.

The private sector is hit with high borrowing interest rates, policy changes and an acute shortage of skilled workforce impeding their efforts to recover from the pandemic according to representatives from the sector during an online panel discussion last week.

The Managing Director of Wangchuk Group of Companies Ltd, Chencho Tshering said that she fully supports the sustainable tourism policy. “I think it is time now for us to reflect and really understand at what cost we are really maintaining or practising sustainable tourism policy.”




Chencho Tshering, who has over the past 20 years been a tour operator and a hotelier, said that the hospitality industry was bearing a huge portion of the costs of this policy.

She said that the hotel industry suffers from a very low occupancy average of 40 to 45 percent as opposed to what should be around 60 to 65 percent to maintain a healthy hotel industry.

“With the change in the tourism policy as of September this year and the increase of the SDF from USD 65 to USD 200, it has drastically reduced the number of arrivals.”

She said that figures from the Department of Tourism’s records of arrivals in October 2019 and 2022 show only 12 percent of arrivals in comparison to 2019.

A  Department of Tourism census of 2021 shows that there are 1.2 million rooms available in the market. Going by this trend, the industry would see only about 37,000 arrivals in 2024. “This does not sound good,” ChenchoTshering said.




If these 37,000 tourists spent an average of seven nights, the hotels would get an average of 23 percent.  “We have to keep in mind that this has been calculated for the peak season arrival of this October, if you average out the low seasons and high seasons, this is going to drop further,” she said.

She said that the only solution is to obviously increase the number of arrivals by restructuring the Sustainable Development Fund (SDF).

Chencho Tshering also said that hoteliers are subject to high finance costs of borrowing while constructing hotels or while operating hotels. Most hotels in Bhutan are heavily debt-financed and we account for more than Nu 13 billion in debt to the banks.

“All these hotels would not be standing if it was not for the generous support received from His Majesty The King by way of relief funds, in the form of interest waivers and salaries for our workforce and we remain ever grateful,” she said.




The hospitality sector has been given a two-year deferment by the government and the banks collectively. “The big question to ask is, is this deferment enough to save our industry?” she said.  Reducing the lending rates for the industry could be a long-term solution to this problem.

The low average room rates are caused mainly because of the oversupply of rooms in comparison to the demand of tourists arriving here which could be addressed by better managing the supply of rooms in the market based on industry averages.

She also suggested low-interest grants for hotels that did not meet the criteria to cater to tourists and had to exit the industry “to ease the transition of moving out of the hotel business into other businesses”.

The Joint Managing Director of RSA Pvt Limited, Singye Namgyal said that the manufacturing sector despite its importance, the share of the sector has remained stagnant over the past 25 years with a declining export-to-GDP ratio.




He said that manufacturing is a potential growth sector in Bhutan and can generate employment on a large scale in a relatively short time and lift productivity. The sector plays a key role in sustaining economic growth especially in newly industrialised countries. Indeed, empirical studies reveal almost no countries, except Arabic nations have achieved high-income status without the sector accounting for at least 18 percent to GDP.

He said that the hydropower manufacturing linkage has determined the success and outlook of the sector. “Currently, our competitiveness is based largely on the availability of cheap energy, about two or three cents per kilowatt hour. This is amongst the lowest in the world.”

In the longer term, our competitiveness must increasingly depend on human capital. Considering the capital-intensive nature of manufacturing, it would appear logical to promote large-scale units.




“If the share of manufacturing to GDP is to increase to 18 percent, productivity will also require a quantum leap and this will require investments in more productive capital, and therefore, a more reliable and dynamic credit regime,” he said.

The Chief Executive Officer of CSI Markets, Sonam Chophel said that the CSI industry is confronted with many challenges.

“Low scale of economy, challenges in the supply chain, infrastructure, huge competition from imported goods from excessive imports, low adoption of technology which is impeding the expansion of the sector,” he said.

He said that 90 percent of the businesses are still at the level of sole proprietorship and low scale of employment, this has to diversify.

“Most businesses in Bhutan rely on imported materials which creates unfavourable balance of trade in the country and also the rise of unemployment which is forcing young people to look for opportunities abroad,” he said.




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A guest speaker at the forum, Reinhard Wolf said Bhutan may not be able to compete with India and other countries when it comes to mass production.

He has been working in the RNR sector in Bhutan for the past five years. “Therefore, the slogan, ‘low volume, high value’ which was used especially for the tourism sector may also apply to the entire private sector.”

Reinhard Wolf is also the President of German-Bhutan Himalaya Society. He said that Bhutan could use its low-price energy as a competitive advantage when thinking about the revival of the private sector and could establish energy-intensive industries.

Bhutan needs diversification and innovation and not probably more of the same, he said. “This may also be true for agriculture which still employs a considerable part of the workforce.”

Chencho Tshering said that the only solution is to obviously increase the number of arrivals by restructuring the Sustainable Development Fund.




Reducing the lending rates for the industry could be a long-term solution to this problem.

She said that policy intervention to raise the national minimum wage could resolve the shortage of skills in the country. 

“We’ve to now be innovative in the way we develop our product and price our product as well as how we market ourselves in the world,” she said.

Singye Namgyal said that the manufacturing sector is currently constrained by a lack of robust value chain, lack of access to convertible currency to import raw materials for manufacturing, high logistics costs and a lack of skilled human resources.




He proposed access to convertible currency to purchase raw materials for our manufacturing units, extending income tax holidays to industries exporting to India, projecting electricity tariff for a longer duration, and allowing and encouraging banks to implement cash flow-based financing for projects.

Sonam Chophel said that there are many new initiatives happening in the CSI sector and the government is also placing a high priority on the sector.

“We need some strategic reforms in regulations which sometimes may challenge the very economic, political and social status quo but doing so is essential to unlocking our full potential of the private sector,” Sonam Chophel said.

This would open new market opportunities and also encourage young people to look for opportunities.




“Better framework to improve ease of doing business, skilling workers, promoting international trade, and removing non-tariff barriers, among others,” he said.

Friedrich Naumann Foundation for Freedom South Asia organised the forum.

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