Support for the private sector

There are a lot of expectations rested on our private sector.  It is the engine and the driver of economic growth, and solution to a mounting unemployment problem.  Such is the importance of the sector, long recognised, at least theoretically.

The sector, despite all its shortcomings, has matured.  Today, they are even confident enough to ask for a share in constructing mega projects, like the hydropower ones.  This is encouraging, because a thriving private sector can provide the alternative, especially in creating jobs.  Government jobs are saturated, and jobseekers are asked to look beyond the civil service.

But there are problems aplenty for the sector to grow.  For them to thrive, there should be proper policy guidelines in place.  That alone is not enough.  They need finance, and in huge amounts.  There are only a handful of private sector companies, who have the capacity to invest without borrowing.  The rest, big or small, need access to finance.  Unfortunately, this seems to be not happening.  It has become the biggest hurdle for them.

Going by an Asian Development Bank’s report, a huge chunk of the sector, 30 percent, attribute lack of access to alternate finances as their greatest constraint to business development.  This group includes small and medium-sized firms that could employ many Bhutanese.  And local banks have not been generous with the sector.  Their contribution to the sector is a mere 6.4 percent in 2014.

Banks have to be assured that their money is repaid with interest.  They are business entities themselves.  Beyond financing small firms or businesses, they do not have the capacity to lend enough for mega projects.  It is where the private sector will have to look beyond.

The economic development policy allows external commercial borrowings, but the policy is incomplete.  On one hand, they allow borrowing from foreign banks, on the other, they are not willing to provide sovereign guarantee, which is a must to avail loans from foreign banks.  Borrowing from foreign banks is complicated, and the government will be taking a massive risk in standing guarantee for private firms.  Private sector must convince the government that they can be trusted.

There will be economic growth when the private sector grows.  Jobs will be created and real growth begins when the economy churns out meaningful employment opportunities.

There is a huge expectation from the private sector to contribute to the gross domestic product.  How much they contribute will also depend on how much the government makes conducive polices, including fiscal polices, like access to finance.

The tables have turned.  Until recently, it was the government that felt the private sector was not developing as expected.  Today, the sector is feeling government policies are biased against them.  What we can take from this is that there is a feeling of confidence among the private sector.  We should encourage the private sector for the right reasons to drive businesses, the right kind of businesses.

1 reply
  1. irfan
    irfan says:

    That picture of the golden mahseer was kind of irresistible for a fish lover like me. Sorry for this, but I am a fish lover in the sense that I love eating fishes. These are considered esteemed and expensive food fishes and I thought it was about their production that’s getting considered. But it seems it’s only for conservation, protection and management and doesn’t mention production for food.

    In one of my earliest visit when a guide mentioned about districts which are covered with snow for a considerable time of the year, I inquired about a world class ski facility in the country. But the guide was not aware of anything like ski tourism. After noticing the recent real estate development in the capital city, I inquired whether it’s possible to buy a small apartment as a summer home. But it’s obviously not possible.

    Disadvantages of being a land locked country are well aware of, but so many districts and human settlements within the country are still geographically locked. When that costly last mile connectivity reaches them, we need to deal with rural-urban migration. At the policy levels, the development needs for the very local environment probably has to make way for creation, development and even conservation of a sustainable growth environment for the entire economy. May be that’s when the private sector will be presented with a lot more resources and potentials for capacity creation. Creating a sustainable market for its economy is still the biggest challenge for the private sector and the small population is still an advantage for the economy in many ways. But being a developing country now, things are bound to change.

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