Bhutan is a small landlocked country in South Asia with a population of 763,249 in 2022 and a GDP per capita of Nu. 248,334.31 (equivalent to USD 3026.99) in 2021. Located in the eastern Himalayas, Bhutan shares borders with Indian to the south and China to the north. It has access to the large Indian market through the states of West Bengal and Assam in the south.
Bhutan’s long- term development is guided by the philosophy of Gross National Happiness (GNH). The spirit and intent is to “maximize the happiness of all Bhutanese and to enable them to achieve full and innate potential as human beings”. This development model places equal importance to sustainable socio-economic development, promotion and preservation of culture, conservation of environment and good governance.
Investment Opportunities in Bhutan
Over the last few decades, socio-economic progress has greatly reduced the number of people below poverty line, increase in GDP per capita and improvement in living standard. According to the World Bank, Bhutan has managed an annual average economic growth of over 7% in the past decade. Further, according to the Asian Development Bank, Bhutan is one of the emerging economies in the region.
As Bhutan aspires to make its economy more resilient and play an active role in the global economy, the Royal Government has undertaken a number of economic expansion and diversification initiatives. One such initiative is a concerted effort by the Royal Government to attract Foreign Direct Investment (FDI) by liberalizing the FDI regime, reforming its economic policy and creating a conducive investment climate. FDI began in as early as 2002 with the adoption of the FDI Policy. The policy and regulations have also been revised in 2010 and 2019 to align with the changing needs and conditions.
Bhutan is strategically located in a region surrounded by emerging economies with vast market opportunities. Particularly, India is Bhutan’s major trading partner constituting over 80 percent of Bhutan’s external trade. Bhutan and India have a free trade agreement on Trade in Goods.
Bhutan is a member of the South Asian Association for Regional Cooperation and enjoys free trade with member countries under the South Asian Free Trade Area. Bhutan is also a member of the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation which provides access to a huge market of over 1.73 billion people in the region.
Stable political and economic context provides an enabling factor for boosting a predicable business environment. Bhutan is the most peaceful country in South Asia and 19th most peaceful country in the world according to Global Peace Index 2022. It ranks 25th in the world and 1st in the Asia according to Transparency International’s Corruption Perception Index (2022), indicating as less corrupt.
Bhutan also has a rich culture and as a carbon negative country, there is clean air and a well preserved natural environment with 71 per cent forest cover.
Thanks to free public education, Bhutan offers an educated workforce with good command of the English language since the medium of instruction is English in schools and tertiary institutes.
When it comes to possible areas of investment in Bhutan, our FDI Policy of 2019 contains a list of priority sector activities that are open for foreign investment. Proposal under the priority sectors are fast tracked for approval and 100 percent foreign ownership is allowed in some service sectors such as hotel and resorts, health, and IT park development. Education and wellness centre, sports and recreation facilities are some of the sectors open for 74 percent ownership by foreign investors. Small-scale production and manufacturing activities like agro-based products, value added forest products are open for 49 percent ownership by foreign investors. These sectors are governed by sector specific laws, policies, standards and procedures.
To encourage investments in Bhutan the Fiscal Incentives Act of Bhutan 2021 provides a list of incentives for foreign investors, which includes the following:
- Tax Holiday of 5 to 10 years in High Priority Sectors;
- Concessionary tax rate of 5% for Newly Established Businesses and 15% for Existing Businesses;
- Sales Tax and Customs Duty exemptions to business under High Priority Sectors;
- 30% additional tax deduction on the cost incurred by any business carrying out and for any construction projects using locally manufactured construction materials;
- Investment allowance.
- Concessionary Customs Duty rate of 3% on permissible raw materials and primary packaging material.
While return on investment is important, profit should not be the only consideration for investing in Bhutan. Business projects that are aligned with GNH principles and are successfully implemented will naturally enjoy local support and appreciation. Just imagine how good it would be to establish a world standard school or college in Bhutan that will provide quality education to local and foreign students. Or a high quality wellness center or hospital that will treat and rejuvenate medical tourists in a very peaceful environment. Why not have a joint venture in herbal medicine in a country that has been traditionally referred to as the land of medicinal plants? Or consider the possibilities of IT related business in a country that produces clean power at a very good price.
Business ventures and economic partnership with Bhutan against the backdrop of GNH and its values and principles will provide a special experience for the investors. Being value based commercial activities, these business ventures will also be more durable and resilient in today’s world of unbridled consumerism and increasing environmental challenges. Investors will derive an extra sense of satisfaction that the profits they make from their investments are from business ventures that are in harmony with the principles of environmental conservation and the promotion of Gross National Happiness.
Further, investors are ensured business predictability and maximum value for their money through the impact created by contributing to achieving Sustainable Development Goals.
We welcome you to invest in Bhutan.
For further information, you may visit the Ministry’s website: www.molhr.gov.bt and look for FDI related documents under the Department of Industry. You can also email us at firstname.lastname@example.org or email@example.com