What Lessons can Bhutan Learn from Singapore?

By : Krishna Adhikari

Economic growth and development in Bhutan is reasonably high especially after considering the fact that it is one of the poorest and least developed countries in the world. With a population of about 700,000 and an area of 46,000 square kilometers, it is a very small economy. Bhutan is sandwiched between two economic giants, China and India, making it very venerable to stiff competition. Bhutan’s GDP grew at an average of 8.2% during 2000-2009, making it one of the rapidly growing economies in the region. In fact, the world bank forecasts show that the growth would significantly strong in the coming three years although a bit lower then at the start of the millennium. A large part of the growth has been due to the significant resources invested to tap its hydropower potential (http://www.youtube.com/watch?v=hXIl2WdMp8k) and the promotion of tourism.

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Although Bhutan is slightly larger than Singapore and has one of the most difficult terrains in the world, there are lessons that the country could learn from the developmental strategies employed by Singapore to enhance its own economic prospects. As Singapore made history with the following steps, I believe Bhutan also has the potential to take the road already taken:However, such impressive growth figures do not provide a detailed picture of the country’s economy. The United Nations Development Program indicates that 30% of the population is below poverty line living on less than US$ 1.25 per day. Bhutan’s economy is mostly dependent on agriculture and livestock providing livelihood to over 80% of the population. There are barely any industries except for some mineral and mining industries. The country is very dependent on external aid for its developmental programs and its major trading partner is India, which provides 70% of its imports and is the market for 80% of its exports.

  1. Diversify: Bhutan is very much dependent on few sources of income. Hydropower, minerals and mining and tourism are its core economic drivers. Although constrained with inaccessible landscape and lack of adequate infrastructure, Bhutan would have to diversify to other areas for economic growth. Singapore became a successful economy vastly due to the investment made in the service sector, which should also become a priority area for the Bhutanese growth model.
  2. Infrastructure Development: Being a landlocked country, Bhutan’s only transport option is the roads. The high peaks and narrow valleys do not provide adequate options but the country needs to upgrade its transport facilities to encourage production. As the population mainly depends on agricultural products, swift transport of such perishable items could facilitate better returns. (http://www.youtube.com/watch?v=8srZd6J9xy4)
  3. Balanced Regional Growth: Singapore is just a city so it did not have the difficulties Bhutan faces in encouraging growth in all parts of the country. Bhutan could develop proper sites for its industrial projects and provide incentives to foster private investments.
  4. Combat Corruption and Misuse: Bhutan relies on external aid for all its developmental activities and it would be wise to create proper measures to enhance accountability and transparency. The government debt is about 70% of the GDP and any misuse could only increase the burden on the government and the society.
  5. Sustainability: Sustainable growth has been a philosophy for Bhutan and its protection programs for the environment certainly suggests so. However, waste management, illegal logging and infiltration are areas where the government could improve. The government could also learn from Singapore’s growth of trying to increase environmental growth as opposed to maintaining what is available.

While these areas of concerns, if addressed properly, should propel Bhutan to higher economic growth, there is still a question of funds for such programs. Bhutan has started allowing a few FDIs and with appropriate regulations, should encourage investments in areas where the government is unable to do so. Human capital could also be a major investment opportunity and the country should encourage proper education system to enhance that.

References:

http://data.worldbank.org/country/bhutan

http://www.worldbank.org/en/publication/global-economic-prospects/regional-outlooks/sar#2

http://siteresources.worldbank.org/BHUTANEXTN/Resources/BhutanEconomicUpdate.pdf

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