The president of Centre for Bhutan Studies, Dasho Karma Ura, talks to our Sr Reporter Yangchen C Rinzin on the ambitious 13th Plan and the country’s goal to become a high-income nation in the next decade, including a wide range of issues. 

The total budget for the 13th Plan is more than Nu 512 billion (B) with the ambitious plan to transform Bhutan into a high-income GNH country. What kind of repercussions should the government be careful about while undertaking such a huge budget and plans?

$12,000 per capita and $10 B GDP by 2034 have been thrown around, and I am obliged to talk in $ terms. Exchange rate used is 83.7 to get Nu equivalent. The 13th Plan size is up by 63% on the 12FYP. The break-up of Nu 512 B in 13FYP is Nu 267 B ($3.19 B) is for current expenditure and Nu 245 B ($ 2.9 B) for capital investment. Capital expenditure for 13FYP is double of Nu 116 ($ 1.4 B) in 12FYP, but for increase in real terms, this capital expenditure must be adjusted by inflation. The annualized government capital expenditure is $580M, which is not at all ambitious in comparative terms.

The first risk from this government capital budget is that it is in fact too low to generate a consistently high GDP growth rate and reach $10 B by 2034. The government and the private capital investment together make up total capital investment every year. In addition to $580M from the government, $586M can be foreseen from the private sector. Yearly hydropower investment may be in similar order. Sum of all three sources will be still short of $4 B per year needed every year till 2034. I worked this required sum on an envelope. The stock of capital needed to match a GDP of $10 B in 2034 will have to be around $60 B that year. Such shorthand method (I assumed capital-output ratio of 6:1) is used for quick thumb-rule estimation. But realistically, it seems to be worse than 10:1.

To put into historical perspective, Bhutanese economy makes a yearly investment in the economy of about $1 B, including all hydropower investments. To invest $4 B a year will compel us to take incredible amount of FDI or foreign loans privately or officially. Both acts will increase foreign stake on the assets of the country. It sounds good. Then profits will flow out later.  Meanwhile the country’s repays debt for a long time. Official debt is already about 132% of GDP. That is the second risk. It is embedded in neo-liberalism and capitalism.

The third risk is macroeconomic imbalance of which inflation is an example. Barriers exists to various kinds from access to right and timely things such as: labour and skill, supply sources, technology, foreign currency, routes and logistic, better tariff and non-tariff conditions etc. For example, Bhutanese stone cargo trucks having to wait one week at custom’s gates is immensely expensive. All these can drive up inflation as a risk. Officially inflation rate is low because of the method used underestimates it. But each consumer knows better from the severe loss of purchasing power. GDP growth is aggregate demand growth, but if the supply of these goods and service do not increase proportionately, inflation will just shoot up. Bureaucratic controls can make a huge difference to the cost. Top-down bureaucracy has worsened in recent years, and this frustrating reality is not obvious to top bureaucrats because of the lack of an authentic and inclusive ecology of communication.

Bhutan aims to increase GDP to USD 10B by 2034. Will we achieve this goal by 2034 going by the current pace of economic growth? Can we increase GDP without compromising the core values of GNH?

USD10 B GDP and the associated per capita income of $12,695 (Nu 1 millions at today’s exchange rate of Nu 83.7 per $) was first mooted in June 2020 meeting, set up for formulating an economic road map for the 21st century. They took a 10-year view, since a century is ungraspable for anybody. The national task force and its supporting four other groups came out with such ideas. So, it existed before this government. In that meeting, I expressed my strong reservations about the technically deficient estimations behind the Nu 1 millions plus per capita by 2030 then. A centralized bureaucracy, which is an issue, can evangelize a motto, a hope, a dream, a fantasy even though there are no credible details. Perhaps that is the nature of dreams human beings inhabit.

The first known per capita estimate is $317 in 1981. But all these numbers are crude approximations and calculation of GDP remains a major task for improvement. It is not merely statisticians but economists who have contribute to strengthen its precision. The hypothetical assumptions on proportions of intermediate consumption and measurements of gross outputs need serious revisions.

To keep things in perspective, in 2023, per capita income is $3,833. GDP is $3 billion. In nine years, it must roughly grow 3.3 times, a gigantic leap.  Just to keep things in perspective, in the last 63 years we have reached $3,833 per capita income. To reach $12,695, per capita income must increase by $ 886 per year every year. Average Bhutanese income will grow by a minimum of Nu 74,000 per year every year. Growing fast is easy in the initial stages. Fantastic!

In the June 2020 meeting, the UN system’s group led by Gerald Daly had done the most extensive work on social goals and human needs, while the short document by the private sector focused on outlining bureaucratic obstructions. A high official made a cliched and mechanical mention of $12,695 per capita target by 2030, without any empirical work. He parroted that number because he said that the World Bank standard of high income is that number. All heard the source of his imaginaries which today is globally debated if not discredited as wrong intellectually. A new economic system will be nothing like the neo-liberal one. And measuring what we value will not be GDP in the future. Because of likelihood of planetary collapse, visions even of degrowth is on the horizon in international fora. Yet in the meeting, no foundational Buddhist view on economy and governance, ontology and relationality, were not brought into the meeting by high officials exhibiting political legitimacy and Buddhist symbolic colors. Great compartmentalisation, silos within silos!

Anyone can calculate a simplistic scenario. In paper projection, if GDP grows in real term by minimum of 11% or so every year for the next 10 years it is feasible. It is arithmetically true, devoid of any reality. Coherence in arithmetic is different from coherence with reality. We must assess whether it is feasible, by fleshing its implications in terms of new plants and machines, manpower, buildings, vehicles, finances, land, construction, raw materials, etc. I have not seen any detailed input-output matrix to establish feasibility. Just to keep things in perspective, the GDP growth rate in last several years have been only 4% to 5% per year.

A simplistic arithmetic that illustrates paper feasibility can go as follows. Assuming a capital output ratio of 1:6, the value of wealth, i.e., stock of capital that produces $ 10 billion GDP should be six times more, i.e. 60 billion by 2034. Using the same capital output ratio, the market value of the wealth (in terms of plants and machines, land and buildings, financial instruments etc.) The stock of capital in Bhutan’s economy today could be about $ 17 billion though no one really knows with any precision. At the same time, even if we do know more about it, it is wrong to think that a nation is worth only $ 17 billion or whatever. So many things of value to life and society lie outside and beyond stock of capital account. Elon Musk may be worth $250 billion, which is extrinsic and exchange value. Least we debase ourselves; the smallest gewog is infinitely worth more. It has intrinsic value, with potential of unfolding flourishing and abundance of all lives in it. Anyway, what is worth of worth? An accounting framework does not answer it, It is philosophical and humanistic.

Apart from any deeper questions, it is challenging to raise the level of stock of capital, i.e., wealth, from about $17 B today to $ 6 billion at the minimum by 2034 to be consistent with that kind of GDP level. To reach that level of wealth and income, Bhutan must add new stock of capital in the order of US$ 4 billion every year if it must raise the GDP 3.3 times by 2034. The simplest way to understand this is that we must make a yearly investment worth US $ 4 billion. To remind ourselves, foreign aid per year, including GOI’s generous aid, is $ 50 m per year.

In every sector, investment is assumed to expand in the $10 billion  economy scenario. FDI, skilled workers, business environment and infrastructure are assumed to improve and increase. Check reality. Farming (crop sector) is assumed to grow by 8 percent per year.  Farming GDP growth has been negligibly low in 2021, and negative for the last two years. As the domain of livelihood for 41% of the population this is concerning. Further there are not yet convincing plans to increase every year from now onwards                           

11 percent  growth per year in mining, 10 percent  per year in manufacturing, 11 percent per year in water-based industries and 15 percent in digital sector and so forth besides mere projections. So, it is merely numbers that do not have concrete investment plan. No doubt bureaucracy will defend that they are working on it; gestation period is long.

If manufacturing must expand by 10 percent every year, the workforce has also to multiply enormously. At present, only 14 percent are employed in manufacturing. Cost of capital, i.e., interest rate is still abnormally high. Labour and skilled manpower supply might be a crucial constraint in all these areas.

Infrastructure expansion is just picking up as budget is being released. Bank loans have been restarted, but a huge number of borrowers are struggling and are inhumanely stressed, unable to clear their monthly repayment because of the general economy wide lack of business they have faced.

In the meantime, we have witnessed a severe loss of skilled workers, and emergence of a more control-oriented and centralised bureaucracy in several key domains. Those bureaucrats embodying colonialist and totalising values are simply new phenomena delaying progress. The government and the opposition together have many challenging systemic issues to be tackled, because all legislations are joint product of the parliament. The ecology of communication between bureaucracy, people, and politicians must become respectful, authentic, inclusive, and reflective. Untapped strength and solutions will emerge from a collaborative society. As expected, this government might be as dynamic as it has been when it ruled before.

The 13th Plan is happening against the backdrop of an institutional transformation agenda, recent graduation from LDC status, and post-pandemic recovery. Bhutan aims to use the 13th Plan to “rebalance GNH” by concentrating on economic transformation. How do you see the roles of GNH evolving as we chase our developmental goals? How can we “rebalance” GNH in the context of changing priorities?

Bhutan graduated from LDCs. This attainment might be partly false, depending on the authenticity and validity of GDP estimations. But that is another discussion. Anyway, Bhutan has gradually lost substantial aid, whether due to a statistical sleight of hand or due to a true achievement. If our economy were so large, sufficient revenue increase would have compensated for a decline in aid: the government could have met its expenditure. The small scale of our tax base, and limits reached on rates of direct and indirect taxation shows very little space. Diplomatic and non-diplomatic grant mobilization must be once again intensified. We can do much better than getting a total of $ 50 m grant a year for 7,00,000 people, i.e., $ 71 per person per year. Bureaucrats worth their training investment should raise project money for their official projects, and for the country.

Humanitarian CSOs like Tarayana, Renew, Bhutan Nuns Foundation, Loden, Disability Bhutan, Jangsa Animal Saving Trust, and mega-temple building lamas like Khenpo Karpo, Lam Tsering Wangdi, and Lama Kelzang, have been outstanding in this regard. I cannot list all; I should stress that CSOs have broadened social engagement and external resource mobilization.

The 13th  FYP proudly incorporates many GNH indicators as baselines. The plan is intended to improve the conditions of GNH. District budgets are distributed with higher weights attached to their respective score of reverse of GNH index so that those with lagging performance get more resources. HPM Dasho Tshering Tobgay has extended application of GNH in governance seriously, as he did with GNH Business Certification in his previous tenure. GNH needs further intellectual and statistical advancements as a marvelous legacy of HM the IVth King.

The living standard domain of GNH is the most correlated with GDP because GNH living standard domain measures income, housing, utilities, material assets etc. These components have seen rapid progress though not equally all over Bhutan. Data from three waves of GNH survey reveals that increase in income (GDP) do not necessarily improve many crucial determinants of happiness. So independently from GDP, such things as psychology as measured by frequency of negative emotions and positive emotions; incidence of stress; quality and frequency of bonding relationship of belonging and trustworthiness among individuals, friends and families in a community; availability of time for cultural events together; minimum adequate time for sleep, exercise-activity, and socialization; freedoms and lack of victimization; presence of generosity and lack of enmity among people; high quality of ambient environment, without pollution and waste; preservation of community values, practices and local languages etc., are broader factors in happiness. These aspects do not get much discussed in governance elsewhere as the states conventionally has been engaged in delivering jobs, health, education, welfare benefits, and security etc. What Bhutan has delineated through GNH are important determinants of human happiness. Thanks to His Majesty the Fourth King, the government’s commitment to GNH has enabled much of the society to aim at what other nations have recently initiated as Beyond-GDP initiatives.

The 13th Plan is an inclusive Plan that has come up with a rogramme to transform governance by adopting a whole-of-society approach such as breaking silos and central local collaboration. This programme will be driven by the governance cluster, including the Centre for Bhutan and GNH Studies. How do you think an institution like CBS could contribute to timebound interdisciplinary research or achieve this programme?

Interdisciplinary research at CBS was enabled by His Majesty the King in 2020. To make use of this slow-growing interdisciplinary capacity on a broader scale, this government has assigned CBS to support decision makers in various ministries by collecting and analysing data towards an increasingly evidence-based policies and programmes. Cross disciplinary work is prized nowadays in global academia, and especially in evidence-based policy research that ought to be carried out under acceptable protocols and ethics.

CBS staff carried out evaluations of nine flagship programmes of the 12th FYP. This was a valuable new experience for them and useful for the Cabinet and ministries. It is a step forward in governance as evaluations must be done, for ethical and procedural purposes, by an external agency. The nature of democratic governance is strengthened by checks and balances of various kinds, and external evaluation of projects is one of them. A student should not be his or her own examiner. An implementor should not be the assessor of his project outcome. An evaluation should be a constructive, learning-intensive, open and a respectful process for all. It must never be like an auditing exercise to find faults and penalise. It is not a procedural review. In 13th FYP CBS has been assigned to conduct: (1) evaluations of outcomes of some of works of all the four so-called clusters of government organizations every year; (2) evaluation of 13 FYP at the end of its implementation; (3) and some selected national policies and programs every year.

Apart from the economic transformation, Bhutan is still facing migration challenges. What is your perspective on it and the risk the country could have in terms of economy, identity, sovereignty and sustainability?

Simplistic demographic scenario building in the past, which was a statistical error, overestimated population growth, and family planning went into overdrive. In addition, in the last century, a substantial number of people from rest of the country migrated to the five districts of western Bhutan. As Gelephu Mindfulness City grows, we might witness a sizeable migration of the people from the rest of the country to the southern borders of Bhutan, thinning farming population. Both the outlying uninhabited borders and newly densified borders can become more vulnerable for different reasons.

Policies did not expect such large-scale emigration of youth abroad that took place in the last three years. There are also lessons here for future changes in policies and regulations. No economy can grow for a long time without increase in workforce or increase in aggregate demand. There are already aged and disability afflicted gewogs and villages. Kidu or royal welfare services and social security support are gladly being contemplated before events surprise us, and before people become desolate and feel meaningless. At the least, the suicidal, the severely stressed, the poor, the depressed, the destitute, and the disabled are at the center of policy attention, and that is a great part of Bhutan’s GNH. Economy exists for fulfilling human needs and social objectives. Valoirising GDP and profits on their own are a form of fundamentalism and fetishism.  Sovereignty is the only thing worth fetishizing, even if there is no GDP growth at all.