Development Economics in Bhutan


Bhutan GDP per capita - 2668 US dollars, Bhutan GNI per capita - 2380 US dollars, US GDP per capita - 51638 US dollars, US GNI per capita - 55980 US dollars

1. Overview of Bhutan

Bhutan is a small Himalayan constitutional monarchy that made the transition from absolute monarchy to parliamentary democracy in March 2008. Bhutan has one of the world’s smallest and least-developed economies. Until a few decades ago, it was agrarian with few roads, little electricity, and no modern hospitals. Recent interregional economic cooperation, particularly involving trade with Bangladesh and India, is helping to encourage economic growth. Connections to global markets are limited and dominated significantly by India.

Robust economic expansion in Bhutan is supported by rapid growth in industry and services. One driver of growth in Fiscal Year 2016 (ended 30 June 2016) was the construction of three major hydropower projects, which has been under way for several years, and another was hydropower generation mainly for export, which rose by 14.8% from a year earlier. Tourism earnings declined by 9.5% to $69.4 million because of concerns over earthquakes in the Himalayas following the devastating quakes in Nepal in April and May 2015, and because tourist agencies often sell combined tours to Nepal and Bhutan. Nevertheless, the service sector is expected to be shored up by robust wholesale trade in construction-related goods and intensified government spending.

2. Bhutan's economic development in comparison with Senegal's and Somalia's

Economic Development of Senegal and Somalia

Politically, Senegal is one of the most stable and has a quite strong democratic institution. It gained independence from France in 1960. 23% of the population lives in the Dakar region, which makes up 0.3% of the country's territory. (GDP at 14.79 billion USD and GDP per capita: 1046.59 USD) Constant economic growth rate of 6.5% in 2016. GDP per capita growth is also increasing. This makes Senegal the second fastest growing economy in West Africa. Its primary sector is the fastest growing sector (agriculture, fishing, etc....) due to good rainfall. The service sector is also improving due to advances in transport and communications. (main export: Refined Petroleum).

In Somalia, the school collapsed in 1980s and since then there has been a lack of education contributing to the low economic development. There has been also a lack of government action since the dictatorship had collapsed as well. The country is also dealing with famine and lack of political and social coherence.

Other Health and Education Indicators

Maternal death is defined by the World Health Organization (WHO) as "the death of a woman while pregnant or within 42 days of termination of pregnancy, irrespective of the duration and site of the pregnancy, from any cause related to or aggravated by the pregnancy or its management but not from accidental or incidental causes."

Gross enrolment ratio, primary, both sexes (%) - Total enrolment in primary education, regardless of age, expressed as a percentage of the population of official primary education age. GER can exceed 100% due to the inclusion of over-aged and under-aged students because of early or late school entrance and grade repetition.

Corruption Perception Index of Bhutan

Higher-ranked countries, such as Bhutan (rank 27), tend to have higher degrees of press freedom, access to information about public expenditure, stronger standards of integrity for public officials, and independent judicial systems. But high-scoring countries can't afford to be complacent, either. While the most obvious forms of corruption may not scar citizens' daily lives in all these places, the higher-ranked countries are not immune to closed-door deals, conflicts of interest, illicit finance, and patchy law enforcement that can distort public policy and exacerbate corruption at home and abroad.

Trade Balance

As of 2014 Bhutan had a negative trade balance of $68.2M in net imports. As compared to their trade balance in 1995 when they had a positive trade balance of $345k in net exports.

IMPORTS - In 2015 Bhutan imported $465M, making it the 181st largest importer in the world. During the last five years the imports of Bhutan have decreased at an annualized rate of -9.5%, from $787M in 2010 to $465M in 2015. The most recent imports are led by Refined Petroleum which represent 15.5% of the total imports of Bhutan, followed by Planes, Helicopters, and/or Spacecraft, which account for 12.3%

EXPORTS - In 2015 Bhutan exported $214M, making it the 175th largest exporter in the world. During the last five years the exports of Bhutan have decreased at an annualized rate of -8.6%, from $336M in 2010 to $214M in 2015. The most recent exports are led by Ferroalloys which represent 49.7% of the total exports of Bhutan, followed by Electricity, which account for 17%.

Post March 2012, Bhutan experienced an economic crisis and its aftermath, which was a wake up call for Bhutan to prepare for the situation henceforth.

In view of the economic recession, the Bhutan Chamber of Commerce & Industry (BCCI) conducted a study to explore and comprehend the trade situation in Bhutan. The findings reported very high trade deficit despite the abundant resources present. This prompted BCCI to examine further the potential economic opportunities within Bhutan. This would ameliorate the existing negative trade balance and steer Bhutan towards a greener economy.

Through the consumption of local goods, which entail minimum environmental impacts and immense contribution towards rural welfare, BCCI will be able to instigate growth by the means of import substitution and employment creation.

In 2013, BCCI embarked on a nationwide research on the economic resource mapping with a concept of “One District Three Products” (ODTP). The research reported various opportunities for all the twenty dzongkhags primarily on the production of agro products and tourism.


Bhutan has evolved from a closed economy to a trading nation that exhibits a high degree of dependence on trade. The trade openness index was estimated to be around 75% in 2005/06 and reflects the Royal Government’s commitment to a liberal trade policy. The trade sector was also the highest contributor to national revenue and accounted for around one third of total national revenues in 2005/06, exceeding electricity revenue generation by a percentage point.

Exports have grown rapidly but overall the country’s trade deficit continues to widen due to an even faster growth in the value of imports. For most of past plan periods, the country has consistently been an import dependent economy with imports exceeding 60% to 70% of GDP. As a result of the huge and rising import bills, trade deficit climbed to a record Nu.10 billion in 2005/06 but has decreased thereafter. The export portfolio both in terms of products and markets is very narrow with the top ten commodities accounting for over 80% of the total export values and with 94% of these exports bound for India.

The Tenth Plan recognizes trade as a tool for economic growth and poverty alleviation. In view of the narrow trade portfolio in terms of products and destination markets, the country has been diversifying its trading base through the expansion of both bilateral and multi-lateral trading arrangements. This assumes particular importance in light of the fact that given that the small and limited size of the domestic market, the broad economic strategy must necessarily revolve around a natural resource export oriented strategy. Hence the RGoB’s efforts will focus on diversifying exports and trading markets through securing a better integration into the regional and international trading regime. Bhutan is currently a member of SAFTA and negotiations on the BIMSTEC Free Trade Agreement and accession to the WTO are at an advanced stage. Bhutan is also considering membership in the Bangkok Agreement. Bhutan shall continue to play an active role in all regional forums such as SAARC & BIMSTEC.


Most countries in the world have current account deficits. Moreover, most balance of payments problems usually arise in connection with current account deficits, mainly due to an excess of imports over exports over long periods of time. Current account deficits for short periods of time, or current account deficits that alternate with current account surpluses, do not generally pose problems.

As the central bank does not have endless amounts of foreign currency reserves to pay for a current account deficit, it must do so either through loans (borrowing from abroad) or by selling some of its physical or financial assets; all these methods result in inflows of foreign exchange. Yet both borrowing and sales of assets may pose problems if pursued for a long time.

Created By
Klaudio Kyjovský

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