Bhutan’s development is often hailed as a success story. Yet, if we take a closer look at the private sector—the much touted engine of growth—the reality is far less optimistic. The private sector growth in the country has been sluggish, constricted by a spate of systemic barriers, over-regulation, and a lack of support for new and emerging businesses.

A majority of our economy is controlled by a handful of big businesses, many of which emerged in the 1970s, at the dawn of modern development in the country. These early entrants were often beneficiaries of government subsidies, favourable policies, and direct state support. And this first-mover advantage allowed these businesses to monopolise key industries, from manufacturing and mining to services.

But what has followed for the next generations of entrepreneurs is nothing short of stifling.

Most entrepreneurs face a reality in which creating a new business—or even surviving as a startup—is nearly impossible. This is not just a matter of market competition. The business ecosystem is simply not conducive for new, innovative ideas.

Over-regulation is a glaring issue that permeates the business landscape. Instead of facilitating, the regulatory environment has become so complex that it constricts growth.

The government’s initiatives to support small and medium-sized enterprises and startups have been few and far between. Many of the schemes are either underfunded, poorly executed, or ultimately ineffective. Some are one-off initiatives without a long-range focus. And most of these initiatives do not address the underlying structural issues that stifle private sector growth.

Access to finance is a major challenge for new businesses. Yet, the financial institutions are over-protected. Despite raking in billions of ngultrum each year, the financial institutions continue to impose exorbitant interest rates, making it difficult for small businesses to access affordable credit. Entrepreneurs are squeezed between the need for capital and the high costs of borrowing.

Unlike the public sector, which enjoys generous pay hikes, from time to time, and a host of other perks, private sector employees are treated like second-class citizens. There are no preferential loans, no subsidies for housing, and little to no financial support for private-sector workers.

The yawning pay gap between the public and private sectors is another growing concern. Yet, there is no effort whatsoever to develop policies to offset the impacts of these pay hikes on private sector employees. This has created a situation in which private sector employees are caught in a vicious cycle of low pay, high costs, and limited access to resources. And this situation is breeding a growing sense of inequality and frustration within the private sector.

How about offering tax rebates on house rent for private sector employees or incentivising companies with more than than 10 employees through contribution to their provident funds for a certain number of years? These kinds of targeted policies would go a long way in reducing the burden on small businesses and workers, while ensuring that the private sector grows in a more sustainable way.

The Economic Stimulus Plan (ESP), which was supposed to jumpstart the economy, is yet to take off. Considering the complex criteria and reluctance of financial institutions, the ESP will most likely serve those who already have access to finance. This will further widen the divide between the haves and the have-nots.

Ultimately, without radical reforms, the current system will only force young, productive Bhutanese to leave the country in search of better opportunities abroad.