Bhutan: Regional grouping a must for economic revival


Bhutan must create reliable relationships with other countries that can offer the framework of an international community. One such community can be the South Asian Network.

The economy of the small and landlocked Himalayan kingdom of Bhutan is predominantly based on agriculture, accounting for 60 percent of employment, along with cottage industries, tourism, hydroelectricity and local manufacturing. However, following the Covid-19 pandemic, the economy has more or less crumbled with a 3.5 percent contraction in real GDP (2020). While the World Bank suggests an annual GDP growth rate of 1.8 percent in 2021, the various ways of achieving the figure still remains unclear, with the structural framework for execution too remaining rudimentary.

The structural weaknesses in the nation’s economic institutions are now a part of this developmental emergency, requiring some serious rebooting of the financial system. Even though economic  stimulus package and recovery plans from the current pandemic-induced economic crisis have been rolled out by the United Nations Development Programme (UNDP), the creation of an international community that can come forward for help has become the need of the hour.

Three important pointers put forth by the UNDP specifically for the developing countries include resources to help stop the spread of the virus, support to respond during the outbreak itself and resources to prevent the economic collapse of developing countries. The pandemic will require the creation of partner networks that can build a system and work across the system. This is all the more relevant to the marginalised and vulnerable groups, minimising the long-term impact, responding to the challenges.

Can India help?

India is undoubtedly Bhutan’s largest trading partner, accounting for around 80 percent of exports and 84 percent of imports. While India too is going through a strenuous economic recovery, the recent statements by Indian Ambassador to Bhutan, Ruchira Kamboj, are reassuring. It was clearly mentioned that the lockdown has opened yet another opportunity to strengthen the relationship between the two countries with the seamless movement of essential as well as non-essential commodities. Additionally, re-prioritisation of schemes under the 12th Five Year Plan for  Bhutan to accentuate the economic targets too has occurred with an Economic Stimulus Plan of Nu 30 billion.

Allocation of resources for health is a part of this plan and requires special mention. Issues like hygiene, sanitation to the availability of proper health management systems and waste management systems have been mentioned as crucial pillars of the third criteria specified in the official document. India, in this situation, can be a major aid partner.

One of the foremost necessities of Bhutan is the procurement of the Covid-19 vaccine from India. Bhutan’s Ambassador to India Vetsop Namgyel has stated that “Vaccines in India are the ones which will be easiest to administer and transport. Most countries will benefit from it. India is known to produce in bulk quantities, once approved it can be rolled out quickly.”

However, this idea has its own set of challenges as the most important border-points between India and Bhutan at Jaigaon and Phuensholing respectively are yet again under a serious threat of the virus. A new lockdown for two weeks has been imposed as reports of people not going through the seven days of quarantine are coming through.

Such circumstances have supposedly given rise to new Covid cases in the capital of Thimpu and Paro, with the country’s first-ever Covid-19 death reported now. The government could not hold on to the closed borders for a very long time as India is also a very important destination for Bhutanese labour market as well. It is close and easily accessible through varied ways of connectivity like roadways, railways and airways.

Reliable relationships

Bhutan must create reliable relationships with other countries that can offer the framework of an international community. One such community can be the South Asian Network. The entire region has had a total regional economic output contraction of 6.7 percent. Nonetheless, the World Bank has predicted the region to grow by 3.3 percent in 2021 and 3.8 percent in 2022, thereby giving an opportunity for landlocked countries like Bhutan to move forward along with the rest.

The country can invest in its primary highlights like tourism and hydroelectricity to bolster economic strength once again as a part of the joint cooperation mechanism, to get not only the region back on track but also helping itself out of the situation.

This article originally appeared in ORF South Asia Weekly.


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