May 30, 2018
Bhutan has to date approved 64 foreign direct investment (FDI) projects worth 500 million US Dollars since the country allowed foreign investment in 2002.
According to the FDI annual report 2017, the country approved five projects in 2016. This means that since then, in a span of about a year and half, 10 FDI projects were approved.
Sources from the economic affairs ministry said that 19 more projects are approved in principle in 2017 and the first quarter of 2018. This would take the total number to 83.
Of the total FDIs, 65 percent of the investors are from Asia, 25 percent from Europe, nine percent from America and the rest from Oceania region.
India is the largest investor in the manufacturing sector and maximum investments in the service sector came from Singapore and Thailand.
Around 38 percent of the FDIs are in the hotel industry, which is one of the hard currency earners with the potential to create employment. ICT sector has also attracted 17 percent of the investment with a total of 11 projects.
There are only four FDIs in power-intensive manufacturing industries and four in financial services. The number doubles in case of agro and dairy activities.
According to the annual report, FDI companies have created 4,871 jobs as of 2016, of which 93 percent are locals. In 2010, 2,341 jobs are created.
The report states that the implementation of the 2002 FDI policy started in 2005. However, few FDIs existed before the adoption of the policy.
For instance, companies like the Bhutan National Bank and Bank of Bhutan had shareholders from International Finance Corporation and State Bank of India respectively even before the implementation of the FDI policy. Jobs created by these two agencies are also accounted for employment opportunities the FDI created.
However, the Bhutan Mountain Hazelnut Ventures has employed the highest number of people at 872.
The FDI companies in 2016 contributed about Nu 1.6B in the form of taxes to the government coffer, forming about 7.5 percent of the revenue.
FDI projects are mostly located in the western dzongkhags of Thimphu, Paro and Chukha, the former two in the service sector and the latter in manufacturing.
During the Better Business Summit held on May 17 and 18, senior industry officials of the FDI division with the economic affairs ministry, Sonam Lhamo said that several reforms are being taken to improve the investment climate.
For instance, the recent revision in FDI policy has considered the feedback from the private sector and minimum investment threshold from foreign investors were reduced from 20 percent to 10 percent. FDI companies are also allowed to own land.
Some relaxation has also been made on repatriation of dividend to the investor’s country in hard currency.
In complementing the efforts, she said e-regulations have been made online and that the investors’ guide is available online in 100 international languages.
She also highlighted on the fiscal incentives and improved ranking on the ease of doing business. Besides, the country’s industrial area is estimated to increase by six folds with the completion of industrial estates and increase in reliable power after the commissioning of hydropower projects.
Despite the efforts and the often-touted unique selling points that the country uses to attract FDI, the size of foreign investment flowing into the country is lowest in the region.