The 13th Plan will address longstanding economic challenges to fuel growth 

Staff Reporter

The 13th Plan is ambitious, with a total budget outlay of Nu 512 billion, that is excluding another Nu 527 billion that will be spent on building new hydropower projects to achieve the installed capacity of 5,000 MW by the end of the plan period. 

However, budget alone will not suffice as a number of challenges impede growth and development in the country. The13th Plan document therefore outlines a comprehensive strategy to tackle these persistent issues.

According to the 13th Plan document, the country’s economic landscape has been marked by high administrative costs, regulatory inefficiencies, and policy uncertainty.

These issues have created a challenging investment climate, reflected in Bhutan’s position of 89th out of 190 countries in the World Bank’s 2020 ‘Doing Business’ report. To counteract these barriers, the 13th Plan emphasises the need for streamlined bureaucratic procedures and regulatory reforms to enhance business efficiency.

In the 13th plan, a key thrust is to address low productivity across various sectors.

In 2022, the agriculture sector, which employed the largest portion of the labour force, contributed a modest 14.67% to the Gross Domestic Product (GDP). In contrast, the industry sector, with a smaller workforce, contributed a substantial 31.82% to the GDP. The service sector, while generating over half of the GDP, suffers from a significant skills mismatch.

In the 13th Plan, the government will rectify these imbalances by improving the productivity of key sectors and ensuring that economic growth is more evenly distributed.

Infrastructure limitations have also been a significant obstacle. High transportation costs, due to Bhutan’s rugged terrain and landlocked position, have inflated the cost of business operations.

The 13th Plan will address these concerns by focusing on enhancing infrastructure, including the development of national highways, cross-border railway links, and industrial estates. By improving connectivity and reducing logistical barriers, the plan aims to create a more favourable environment for economic activity.

Another major issue is the underdeveloped private sector. Bhutan’s private businesses, predominantly small-scale and dominated by sole proprietors, face high production costs and limited access to finance.

The plan outlines measures to stimulate private sector growth by increasing foreign direct investment, improving access to finance, and supporting new industries and start-ups. By bolstering the private sector, the plan aims to foster a more competitive and innovative business environment.

Bhutan’s financial ecosystem also presents challenges. The nascent state of the banking sector and capital markets, coupled with restrictive foreign investment laws and high borrowing costs, have limited the ability of businesses to expand.

The 13th Plan aims to address these issues by developing the financial sector, improving access to capital, and enhancing financial regulations.

Addressing the skills gap is another priority of the 13th Plan. High youth unemployment and a mismatch between education and market needs have hampered economic diversification. The plan proposes solutions such as targeted training programmes, skills development, and increased support for vocational education.

The 13th Plan also focuses on increasing sustainable contributions to GDP by diversifying and greening the economy. This includes investing in new growth sectors, such as renewable energy and digital technology, and promoting environmentally friendly practices. The plan aims to reduce carbon emissions, enhance energy efficiency, and leverage Bhutan’s natural resources for economic benefit.