An investment

guide to Bhutan
Opportunities and Conditions 2013
UNCTAD
The United Nations Conference on Trade and Development (UNCTAD) was established in 1964
as a permanent intergovernmental body. Its main goals are to maximize the trade, investment
and development opportunities of developing countries, to help them face challenges arising from
globalization, and to help them integrate into the world economy on an equitable basis. UNCTADs
membership comprises 193 States. Its secretariat is located in Geneva, Switzerland, and forms
part of the United Nations Secretariat.

ICC
The International Chamber of Commerce (ICC) is the world business organization. It is the only
body that speaks with authority on behalf of enterprises from all sectors in every part of the world,
grouping together thousands of members, companies and associations from 130 countries. ICC
promotes an open international trade and investment system and the market economy in the
context of sustainable growth and development. It makes rules that govern the conduct of business
across borders. Within a year of the creation of the United Nations it was granted consultative
status at the highest level (category A) with the United Nations Economic and Social Council. This
is now known as General Category consultative status.

Notes
The term country as used in this study also refers, as appropriate, to territories or areas; the
designations employed and the presentation of the material do not imply the expression of any
opinion whatsoever on the part of the Secretariat of the United Nations concerning the legal status
of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers
or boundaries. In addition, the designations of country groups are intended solely for statistical or
analytical convenience and do not necessarily express a judgment about the stage of development
reached by a particular country or area in the development process.

References to tons are to metric tons.

While every reasonable effort has been made to ensure that the information provided in this
publication is accurate, no business or other decision should be made by the reader on the basis
of this information alone, without a further independent check. Neither UNCTAD nor ICC accepts
any responsibility for any such decision or its consequences.

This document has not been formerly edited.

UNCTAD/DIAE/ITI/2013/1
Copyright United Nations, 2013.

ii I An investment guide to bhutan Opportunities and Conditions 2013

Why invest in Bhutan

Investment opportunities in high-end ecotourism, information and communication technologies

(ICTs), infrastructure, education, power generation, as well as organic farming and agricultural
processing.

Opportunities for publicprivate partnerships in higher education, infrastructure, property

development, hotels and ICTs.

Provision of industrial infrastructure in special economic zones.

Free trade agreement with India, providing access to the US$1.7 trillion Indian market, and
member of the South Asia Free-trade Agreement.

An investment guide to bhutan Opportunities and Conditions 2013 I iii

Acknowledgements
A great many individuals and institutions have contributed to this project and to the production of
this guide. These include a large number of government officials and company executives who
participated in the consultations in Bhutan.

Note to the reader

This document is published as part of the UNCTADICC series of investment guides. The
publications in this series are intended for the use of foreign investors who are largely unfamiliar
with the countries covered.

They are thus designed to offer overviews of potential locations for investment, rather than constitute
exhaustive works of reference or provide detailed practical instruction. They do, however, offer
pointers to sources of further information in the private as well as the public sectors.

There are two other features of these publications that the reader will find worth noting. One is that
they are third-party documents, intended to offer a balanced and objective account of investment
conditions. Their principal advantage in drawing the attention of investors to the countries they
cover is credibility. The other feature is that both their general structure and some of their specific
content are the result of consultations with the private sector.

About the what investors

say boxes
In producing this guide, UNCTAD carried out a large number of individual meetings with investors,
firm managers and business association representatives. The results of these consultations are
summarized throughout the guide in the what investors say boxes, whose content should be
seen as no more than indicative of private-sector opinion in Bhutan.

iv I An investment guide to bhutan Opportunities and Conditions 2013

Preface
Foreign direct investment has come to be widely recognized over the past decade as an important
contributor to growth and development. It can bring capital, technology, management know-how
and access to new markets.

The Investment Guide to Bhutan is the concrete product of a collaborative venture by the United
Nations Conference on Trade and Development (UNCTAD) and the International Chamber of
Commerce (ICC). The objective of this project is to bring together two parties with complementary
interests: companies that seek new opportunities and countries that seek new investors. This is
not always a straightforward exercise, for firms are driven by their global strategies as much as
lured by specific opportunities, and countries have economic and social objectives that transcend
attracting foreign investment.

The UNCTADICC investment guides are thus properly seen as parts of a process, a long-term
process at the heart of which is an ongoing dialogue between investors and governments. The
guides themselves are the product of a dialogue, including that occurring among and between the
representatives of business and government during the workshops that precede the completion
of the guides. It is our hope that the guides will in turn contribute to the dialogue, helping to
strengthen and sustain it. We are convinced that in the long run it is this alone that will create
conditions increasingly conducive to greater flows of investment.

Supachai Panitchpakdi Jean-Guy Carrier

Secretary-General Secretary-General
UNCTAD ICC

An investment guide to bhutan Opportunities and Conditions 2013 Iv

The UNCTADICC series
of investment guides
An Investment Guide to Ethiopia, 1999; new edition in new format, 2004
Guide de linvestissement au Mali, 2000; new edition in new format, 2004;
revised edition translated into English, 2006
An Investment Guide to Bangladesh, 2000
An Investment Guide to Uganda, 2001; new edition, 2004
An Investment Guide to Mozambique, 2001
An Investment Guide to Nepal, 2003
An Investment Guide to Cambodia, 2003
Guide de linvestissement en Mauritanie, 2004
An Investment Guide to East Africa, 2005
An Investment Guide to Kenya, 2005; new edition, 2012
An Investment Guide to Tanzania, 2005
An Investment Guide to Rwanda, 2006; reprinted, 2008; new edition, 2012
An Investment Guide to Uzbekistan, 2007; revised edition, 2009
An Investment Guide to the Silk Road, 2009
Guide de linvestissement au Bnin, 2010
An Investment Guide to the Lao Peoples Democratic Republic, 2010
Guide de linvestissement au Maroc, 2010
Guide de linvestissement aux Comores, 2011
An Investment Guide to Zambia, 2011
Guide de linvestissement dans la rgion de lOriental du Maroc, 2011
Guide de linvestissement au Burkina Faso, 2012

Download all guides and find more information online at

www.theiguides.org

New iGuides
Rwanda: www.theiguides.org/rwanda
Burundi: www.theiguides.org/burundi

vi I An investment guide to bhutan Opportunities and Conditions 2013

Abbreviations
A
ACC Anti-corruption Commission
ASEAN Association of Southeast Asian Nations
B
BCCI Bhutan Chamber of Commerce and Industry
BEA Bhutan Electricity Authority
BIMSTEC Bay of Bengal Initiative for Multi-sectoral Technical and Economic Cooperation
BIS Bureau of Indian Standards
BPC Bhutan Power Corporation
C
CIC community information centre
CIT corporate income tax
D
DGPC Druk Green Power Corporation
DHI Druk Holding and Investments
DHPS Department of Hydropower and Power Systems
DoI Department of Industry
DoT Department of Trade
DPR Detailed Project Report
DRE Department of Renewable Energy
DPT Druk Phuensum Tshogpa (Peace and Prosperity Party)
E
EBA Everything But Arms Initiative
ESCAP United Nations Economic and Social Commission for Asia and the Pacific
F
FDI foreign direct investment
FDIRC FDI Registration Certificate
FYP Five Year Plan
G
G2C Government-to-Citizen
GDP gross domestic product
GNH Gross National Happiness
GSP Generalized System of Preferences
I
IBRD International Bank for Reconstruction and Development
ICAO International Civil Aviation Organization
ICC International Chamber of Commerce
ICSID International Centre for Settlement of Investment Disputes
ICT information and communications technology
IDA International Development Association
IFAD International Fund for Agricultural Development
IMF International Monetary Fund
IT information technology
ITES information technology-enabled services
ITU International Telecommunication Union

An investment guide to bhutan Opportunities and Conditions 2013 I vii

L
LDC least developed country
M
MDGs Millennium Development Goals
MFN Most-favoured nation
MoEA Ministry of Economic Affairs
MoLHR Ministry of Labour and Human Resources
MW megawatt
N
NEC National Environment Commission
NLC National Land Commission
NPL ratio non-performing loans to total loans ratio
P
PDP Peoples Democratic Party
PPP publicprivate partnership
PUP Peoples United Party
R
RICB Royal Insurance Corporation of Bhutan
RMA Royal Monetary Authority
RRCO Regional Revenue and Customs Office
RSEB Royal Securities Exchange of Bhutan
RUB Royal University of Bhutan
S
SAARC South Asian Association for Regional Cooperation
SACEP South Asia Cooperative Environment Programme
SAFTA South Asian Free-trade Area
SAPTA South Asian Preferential Trade Agreement
SEZ special economic zone
SME small and medium-sized enterprise
SOE State-owned enterprise
T
TCB Tourism Council of Bhutan
TNC transnational corporation
TRAINS Trade Analysis and Information System
U
UNCTAD United Nations Conference on Trade and Development
UNDP United Nations Development Programme
UNESCO United Nations Educational, Scientific and Cultural Organization
UNIDO United Nations Industrial Development Organization
UNWTO World Tourism Organization
UPU Universal Postal Union
W
WCO World Customs Organization
WHO World Health Organization
WMO World Meteorological Organization
WTO World Trade Organization

viii I An investment guide to bhutan Opportunities and Conditions 2013

Table of Contents

Acknowledgements iv
Note to the reader iv
Preface v
The UNCTADICC series of investment guides vi
Abbreviations vii

I. INTRODUCING BHUTAN 1
Bhutan at a glance 3
Country and people 4
History and government 5
Market size and access 6
Government policy priorities 8
Privatization and publicprivate partnerships 9

II. THE OPERATING ENVIRONMENT 11

Economic environment 11
Trade and investment 12
International trade 12
Foreign direct investment 14
Infrastructure and utilities 16
Information and communications technology 16
Energy 17
Transport 17
Health services 20
Education 21
Labour 22
The financial sector 23
The private sector 23

III. THE REGULATORY ENVIRONMENT 25

Institutional and regulatory framework 25
Entry and exit 26
FDI business registration and licensing process 26
Employment permits and expatriate employment 27
Land acquisition 28
Construction permits 28
Trade licensing and customs clearance 29
Exit 30
Rights of investors 31
Equal treatment and protection of property 31
Intellectual property rights protection 31
Dispute resolution 31
Repatriation of dividends and capital 31
Competition policy 32
Tax system 33
Double taxation agreements 34
Incentives for investors 34
Fiscal incentives 34
Non-fiscal incentives 35

An investment guide to bhutan Opportunities and Conditions 2013 I ix

 IV. AREAS OF OPPORTUNITY 37
Tourism 37
Power generation 42
Infrastructure 43
Agriculture and related industries 44
Information and communications technology 46
Education 47
Government priority sectors 48

Appendices 49
Appendix 1. Priority sectors, restrictions and prohibitions 49
Appendix 2. List of approved FDI projects in Bhutan 52
Appendix 3. Sources of further information 55
Appendix 4. Business hours 57
Appendix 5. Major laws and regulations affecting foreign investment 57

Bibliography 59
Government of Bhutan 59
Third-party sources 59

Photo credits 60

Artist at the National Institute for Traditional Arts and Crafts, Thimphu, Bhutan.

xI An investment guide to bhutan Opportunities and Conditions 2013

What investors say about Bhutan

Repair shop for IT hardware, Thimphu, Bhutan.

Overall, private-sector representatives interviewed by UNCTAD are positive about the

business environment in Bhutan. Most importantly, managers and investors consistently
cited the Governments open, flexible, and forthcoming approach throughout all phases
of the business establishment process and day-to-day operation. Bhutan is a virgin land
in terms of FDI and it was often emphasized that the authorities are working proactively
with potential investors to overcome hurdles that might result from the young regulatory
framework. The interviewees emphasized the Governments readiness to entertain
innovative ideas that are in line with the countrys development philosophy, giving investors
the chance to define and shape entire sectors with numerous opportunities for investment.
In this context, many also cited the Governments capacity and effectiveness, although
some processes are still perceived as overly complex, time consuming, or unclear. While
the regulatory flexibility was generally appreciated, some interview partners emphasized
that the Governments FDI strategy should be more strongly rules based. In addition to the
investment-friendly Government, private-sector representatives consistently cited the high
political stability and absence of crime as significant advantages for investing in Bhutan.

Interviewees also cited the young but rapidly developing private sector as a driver for policy
change and improved availability of productive resources. Beyond Bhutans domestic
market, investors emphasized the paramount importance of India as trade partner, market,
and abundant source of skilled and unskilled labour. For both Bhutan and its southern
neighbour, private-sector representatives were very optimistic about the stable and reliable
growth prospects over the medium and longer term. At the same time, there appears to
be significant potential for deeper regional integration, not least due to remaining tariff and
non-tariff barriers as well as behind-the-border constraints.

While reports about the core areas of the investment climate paint a very favourable picture,
remaining challenges were cited in the areas of transport infrastructure, human resources,
access to finance, and administrative efficiency.
Source: UNCTAD.

An investment guide to bhutan Opportunities and Conditions 2013 I xi

Buddha statue, Thimphu, Bhutan.
Introducing Bhutan
Bhutan at a glance

Formal name Kingdom of Bhutan

Political system Constitutional monarchy

Head of State King Jigme Khesar Namgyel Wangchuck (crowned on 6 November, 2008)

Prime Minister Tshering Topgay (elected July 2013 in the country's second democratic election)

Legislature Bicameral parliament: National Council (upper house) with 25 non-partisan seats; 20 members
elected by each of the 20 electoral districts (dzongkhags) for five-year terms and 5 members
nominated by the King.
National Assembly (lower house) with 47 seats; all members elected by direct popular vote for
five-year terms.

Borders Landlocked between China (470 kilometre border) and India (605 kilometre border)

Surface Area 38,394 square kilometres

Population 738,000 with an estimated growth rate of 1.71% in 2011 (estimates, based on 2005 census)
Urban population share: 33.9%
Population aged 014 years (% of total): 29.4%
Population aged 1564 years (% of total) 65.8%
Population aged 65+ years (% of total): 4.8%
Old age dependency ratio: 7.26% of working population
Life expectancy at birth: 63 years
Median age: 24 years

Density 19.2 people per square kilometres

Country code BT

Languages Dzongkha (official). English is widely spoken, especially in urban areas, and used as language
of instruction in schools

Climate Varies regionally; hot subtropical, humid climate in southern plains; temperate and drier in
central valleys; seasonal monsoon in western region; alpine conditions with severe winters and
cool summers in Himalayas

Religion 75% Mahayana Buddhist; 25% Hinduism

Time Zone UTC +6

Administration 20 districts (Dzongkhags): Bumthang, Chukha, Dagana, Gasa, Haa, Lhuntse, Mongar, Paro,
Pema Gatshel, Punakha, Samdrup Jongkhar, Samtse, Sarpang, Thimphu, Trashi gang, Trashi
Yangste, Trongsa, Tsirang, Wangdue Phodrang, Zhemgang; some districts have subdistricts

Currency Bhutanese ngultrum = 100 chhetrum

Pegged at par with Indian rupee, which is also widely accepted

GDP US$1.65 billion at current prices (2011)

GDP per capita US$2,234 at current prices (2011)

Human Development Index Ranked 141 out of 187, Index 0.522, medium high (2011)

Source: UNCTAD secretariat, based on UNCTADStat, United Nations Development Programme (UNDP), World Bank.

An investment guide to Bhutan Introducing bhutan I1

Map of bhutan

2I An investment guide to bhutan Opportunities and Conditions 2013

Country and people
The Kingdom of Bhutan, called Drukyul or The
Land of the Thunder Dragon in the national
language, is a small Southern Asian country
of about 738 thousand people. Landlocked
between China and India, the country covers
38,394 square kilometres.
Bhutan is a forested, rugged and mountainous
country with the Himalayas in the north and
smaller foothills in the southern border region.
Several swift rivers, largely unnavigable, cut
through the numerous valleys and make
water an abundant resource. The pristine
landscape is a natural attraction in itself and the
countrys topography has a vast potential for
hydroelectric power generation. Ecologically,
the country can be divided into different zones
with distinct climates: While the southern plains
are hot subtropical and humid with seasonal
monsoon in the south-west, the central valleys
are more temperate and drier. The Himalayan
region to the north, rising up to about
7500 metres, is dominated by alpine conditions
with severe winters and cool summers.
An investment guide to Bhutan Introducing bhutan I3
The population, approximately a third of which
lives in the few urban areas, is made up of four
broad ethnic groups, although their division
is becoming more and more blurred. The
Ngalop are of Tibetan origin and live mostly
in the western and northern districts while the
Sharchop are of Assamese/Burmese origin
and comprise the biggest ethnic group of the
country. Aboriginal and indigenous tribal groups
constitute a third group. They mostly embrace
the Hindu system. There is also a sizable group of
ethnic Nepalese (Lhotshampas), which mostly
live in the southern lowlands. The majority of
the population (75 per cent) are adherents to
Mahayana Buddhism, which is also the State
religion. The Bhutanese Buddhism is closely
related to Tibetan Buddhism and Bhutan is
scattered with monasteries, convents and
religious structures. Bhutans society is strongly
rooted in its traditions. One of the Kings
central endeavours is the protection of cultural
traditions and religious values.
History and government
Pre-modern Bhutan was politically consolidated
in the seventeenth century with the emergence
of a theocratic government built on the
social and spiritual structures of Buddhism.
Following internal conflicts and frictions along
the countrys south-western border, Ugyen
Wangchuck reunified the country and was
chosen to be Bhutans first King in 1907,
introducing a hereditary monarchy as form of
State. The country remained largely isolated
from the outside world and only cautiously
started to open up in the 1960s. The Indian
Government began to provide funding and
technical assistance to Bhutan. In this way,
the southern neighbour helped to develop
large infrastructural programmes such as
one to promote all-weather roads, as well as
basic government entities such as the health
and educational institutions. Although India
continues to be the largest single provider of
development aid Bhutan also receives aid
through multilateral and bilateral development
partners. Bhutan expanded its diplomatic
efforts and joined the United Nations in 1971,
the International Monetary Fund (IMF) and
the World Bank in 1981, and the South Asian
Association for Regional Cooperation (SAARC)
in 1985.
Over the last decades the Government has
embarked on far-reaching economic and
political reforms (see box 1). Based on a
newly drafted constitution, Bhutan held the
first democratic election in 2008 and thereby
completed the transformation from absolute
to constitutional monarchy. The countrys
development strategy is based on what the
Government calls Gross National Happiness
(GNH) a unique holistic concept combining
material well-being with an individuals spiritual,
emotional, and cultural well-being. Guided by
this concept, the Government formalized a
new economic policy in 2010 and continues

What investors say: quality of life

The quality of living for expatriate workers was described as high in the capital Thimphu.
Workers have access to high quality accommodation and a variety of leisure activities such
as golf. The pristine nature allows for a variety of outdoor recreational activities. Private-
sector representatives generally felt very positive about Bhutans peaceful and stress-free
environment. In Bhutans more remote areas, life conditions were described as relatively
challenging due to the lack of physical infrastructure. Our interview partners appreciated the
high level of public safety and very low crime rates throughout the country. They perceived
Bhutan as a very secure and trustworthy environment, both in the private as well as the
professional sphere.
Source: UNCTAD.

4I An investment guide to bhutan Opportunities and Conditions 2013

to transform and diversify the traditional democracy, political reform is still ongoing. The
economy, which has historically largely been Government is continuing its efforts to foster
based on subsistence agriculture and animal a culture of democracy, build institutions, and
husbandry. After the successful transition to improve governance structures.

Box 1. Transition from absolute to constitutional monarchy democratic reforms in Bhutan

For over a century, Bhutan was an absolute monarchy ruled by the Wangchuck Dynasty. Over the last decade the fourth King,
Jigme Singye Wangchuck, and his heir, the current King Jigme Khesar Namgyel Wangchuck, led the country into its gradual
transition to democracy.

Early 2007, in a move to familiarize Bhutans population with a more participatory political system, the King ordered a mock
election to be held in which citizens could choose between four hypothetical parties running on fictional platforms. Shortly
thereafter, real political parties were legalized and started registering for the 20072008 parliamentary elections.

In December 2007, Bhutans citizens directly elected 20 candidates for the parliaments non-partisan 25-seat upper house,
the National Council. The remaining 5 seats were filled by nominations of the King. Subsequently, in March 2008, 79.4 per
cent of registered voters elected representatives from two registered parties, the Bhutan Peace and Prosperity Party (DPT) and
the Peoples Democratic Party (PDP), to the parliaments new 47-seat lower house, the National Assembly. Bhutan's second
parliamentary elections were held five years later in July 2013. The King is the head of State. At the same time, the parliament
can impeach the King by a two-thirds majority. In July 2008 the new parliament adopted the countrys first constitution.

While Bhutan's elections have been described as free, fair, and very well organized by international observers, the country is still
struggling to foster a political culture, including a competitive political opposition. The monarchy remains extremely popular with
the public. The country held its first local-government elections in late June 2011.

While transparency of the political process is still limited in some areas of the Government, corruption and graft remains very low.
Transparency International ranks it as the 36th best of 178 countries globally in terms of perceived corruption.

Sources: Freedom House, Election Commission of Bhutan, Kuensel Newspaper, Economist Intelligence Unit, Transparency International.

Box 2. Gross National Happiness and the GNH Index

The all-encompassing guiding principle for policy formulation and the basis for the Governments long-term development strategy
is the aim of maximizing GNH. The spirit and intent of this concept as articulated in the Bhutan Vision 2020 is to maximize the
happiness of all Bhutanese and to enable them to achieve their full and innate potential as human beings. Bhutans current
development strategy summarizes that GNH does not in any way exclude or deny the importance of economic growth but
strongly advocates achieving a harmonious balance between the material and non-material dimensions of development.

Propounded as an alternative development model based on Buddhist spiritual values by the fourth King Jigme Singye Wangchuck
at the beginning of his reign in 1972, GNH has also been enshrined in the countrys constitution as unifying principle of policy
design.

Bhutans current development strategy translates this holistic, multidimensional concept into four pillars: sustainable and equitable
socioeconomic development, environmental conservation, preservation and promotion of culture, and good governance. In an
attempt to operationalize the concept and quantitatively measure development progress to this end, the Government developed
a composite GNH Index. It is based on 33 measurable indicators grouped under nine principal domains: (1) living standard, (2)
education, (3) health, (4) ecological diversity and resilience, (5) good governance, (6) community vitality, (7) cultural diversity and
resilience, (8) psychological well-being, and (9) time use and balance.

Bhutans unique approach of using happiness as a strategic framework for development has generated considerable international
attention in recent years. Governments in an increasing number of advanced economies are starting to measure national well-
being in an attempt to move beyond conventional economic indicators. In late 2010, the United Kingdom of Great Britain and
Northern Ireland was among the first to introduce such measures.

Sources: Government of Bhutan, Gross National Happiness Commission.

An investment guide to Bhutan Introducing bhutan I5

1 I Agreement on Trade,
Commerce and Transit Market size and access
between the Government
of the Republic of
With a population of about 738 thousand
India and the Royal
Government of Bhutan people, Bhutan itself has a small domestic
of 2006. market (see table 1 for a regional economic
overview). Nonetheless, there are varied
opportunities for small and medium-sized
investors as well as larger transnational
corporations (TNCs), such as in the tourism
sector and related up- and downstream
services. Construction is booming due to rapid
urbanization, particularly around Thimphu, as
well as due to hydropower projects, which
are the most important driver of economic
growth. Publicprivate partnerships (PPPs)
are encouraged for infrastructure projects.
Domestic consumption is largely dependent on
imports, potentially opening up opportunities in
import substitution.
However, contrasting with the small size of the
domestic market, in terms of population and
purchasing power, is the free-trade agreement
between Bhutan and India, which provides
investors in Bhutan automatic access to one
of the largest and most dynamic markets in
the world.1 Under this agreement, trade with
India is duty free and transacted in Bhutanese
ngultrum and Indian rupees. The agreement
also regulates transit rights through India for
trade with third countries. Bhutan has also
signed an agreement with the Bureau of
Indian Standards (BIS) that extends the BIS
certification scheme to Bhutan. Through the
Table 1. The South Asian Market
Comparative Economic Indicators
Bhutan has the second highest GDP per capita in the region
Economy
Sri Lanka
Bhutan
India
Pakistan
Bangladesh
Nepal
Southern Asia d)
Source: UNCTAD, based on UN DESA Statistics Division.
a) at current prices
b) based on constant 1990 US$
d) Developing economies in Southern Asia, excl. Afghanistan, Iran, Maldives
6I An investment guide to bhutan Opportunities and Conditions 2013
scheme, Bhutanese firms can apply for the
well-established Standard Mark and use it for
exports to India, hence improving credibility
with Indian consumers.
The Government has also undertaken efforts
to conclude free-trade agreements with
other countries. Thus, in March 2010, the
Governments of Bhutan and Nepal resumed
talks about a preferential trade agreement,
based on a draft exchanged a few years
ago. Most recently, in May 2011, the two
Governments intensified talks about a draft
protocol, establishing preliminary lists of
products and agreeing on rules of origin.
Trade with Bangladesh is conducted within
the framework of a bilateral trade agreement
originally signed in 1980. In 2009, the agreement
was renewed and its scope expanded to a
new trade route in eastern Bhutan and the
number of commodities which receive duty-
free treatment in both countries.
In addition to bilateral arrangements, Bhutan
has been a member of the South Asian
Association for Regional Cooperation (SAARC)
since 1985. In 2004, the SAARC member
States signed a framework agreement on the
South Asian Free-trade Area (SAFTA) under
which most products should be traded with
zero customs duties by the end of 2016 (also
see box 3). This would enable duty-free access
to a market of more than 1.65 billion people
and could establish Bhutan as a business
GDPa) GDP per capitaa) Avg. GDP growthb)
billion US$ 2011 US$ 2011 annual 2001-2011
59,16 2810,83 6,18%
1,65 2233,84 7,90%
1944,07 1565,91 7,83%
209,32 1184,27 4,72%
107,48 714,18 5,94%
18,16 595,82 3,79%
2339,83 1443,45 7,35%
Commercial building in the centre of Thimphu, Bhutan.
hub in one of the worlds economically most
dynamic regions. The member countries also
aim for reciprocal double taxation avoidance
agreements.
Bhutan has also joined the Bay of Bengal
Initiative for Multi-sectoral Technical and
Economic Cooperation (BIMSTEC). The
Initiative sees itself as a link between SAARC
in the West and the Association of Southeast
Asian Nations (ASEAN) in the East. In 2004,
the members agreed on a Free-trade Area
Framework and set up a Trade Negotiating
Committee and working groups to help
negotiate the agreement. The free-trade area is
expected to come into effect by 2017.
Thus, potential investors should take into
account these nearby market opportunities,
which are accessible through preferential trade
arrangements, when considering locational
aspects of investments in Bhutan,
As regards market access to major developed
markets, Bhutan as a least developed country
(LDC) enjoys preferential treatment for a large
number of agricultural and industrial products
through the Generalized System of Preferences
(GSP) and the European Unions Everything
But Arms Initiative (EBA), which guarantees
duty-free trade of a vast variety of products.
Bhutan submitted its application for accession
to the World Trade Organization (WTO) in
1999. A Working Party Report was circulated
in December 2007. However, the process is
currently dormant. Access barriers, particularly
to developed markets, are primarily of non-tariff
nature and linked to logistical constraints.
Being landlocked, most merchandise exports
and imports are transported by road through
the Indian port of Kolkata. There are several
border control and customs points for goods
between India and Bhutan, the biggest of which
is the southern industrial hub of Phuentsholing.
Other bilateral customs points are Samtse,
Gelephu, and Samdrup Jongkhar. In January
2005, Bhutan signed a memorandum of
understanding for the establishment of railway
links to the five border town in Bhutan from the
nearest corresponding railheads in India that
would ultimately enable access to the Indian
rail network. In addition, the 20072027 Road
An investment guide to Bhutan Introducing bhutan I7
2 I See www.gnhc.gov.bt.
Box 3. SAARC and SAFTA
SAARC was established by Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan, and Sri Lanka in December 1985 to
promote economic, social and technical cooperation and development in the region.

An important component under the associations goal to strengthen collective economic self-reliance is SAFTA. It builds on the
South Asian Preferential Trade Agreement (SAPTA), which became operational in 1995 and constituted the regions first step of
institutionalized economic cooperation. In 1996, SAARC member countries took their efforts a step further and decided to start
negotiating the SAFTA. A Framework Treaty on SAFTA was adopted in January 2004 and most negotiations in the areas of tariff
liberalization, rules of origin, and sensitive lists were completed by 2006. Implementation started the same year. The framework
agreement envisages SAFTA to be fully effective for LDC member States such as Bhutan by 2016 (2013 for non-LDCs). In its
current form, the agreement is confined to trade in goods but efforts are ongoing to incorporate trade in services and investment.

Beyond the Free Trade Agreement, SAARC membership improves Bhutans say in regional affairs and makes it a respected
partner in a region that is strongly dominated by the economic power of India. For the first time, the annual SAARC summit was
hosted by Bhutan in 2010 from 28 to 29 April. Among other cooperation efforts, member States signed an agreement to further
the inclusion of services in SAFTA. Another central theme of the summit was regional cooperation in the area of climate change.

Sources: UNCTAD secretariat, SAARC secretariat, World Bank.

Sector Master Plan provides for the upgrading Diversification of the economic base;
of the domestic road network. 
Harnessing and adding value to natural
resources in a sustainable manner;
Increasing and diversifying exports;
Government policy priorities Promoting Bhutan as a global brand;

The long-term vision of Bhutans Government
is articulated in the Vision 2020 plan. Rooted
in the principles and values embodied in the
concept of GNH (See box 2), it draws the picture
of a democratic, internationally recognized,
and socially equitable society. It envisages that
hydropower receipts will be used to develop a
high degree of economic self-reliance, finance
rising social-sector investments, meet the
growing physical infrastructure development
requirements, and continue to diversify the
countrys economy.
Building on this, the Governments medium-
term policy priorities are defined in the national
eleventh Five Year Plan (FYP), covering the
years 20132018, whose theme is self-
reliance and inclusive green socioeconomic
development.2
The new Economic Development Policy (EDP)
describes the countrys path to becoming
a middle income country by the end of this
decade. Released in April 2010, it sets out
strategies to reduce unemployment and
achieve economic self-reliance, including:
Promoting industries that form the basis for
Bhutans brand image;
Reducing dependency on fossil fuel especially
in respect to transportation.
The EDP defines areas of economic opportunity
with incentives for each sector (see chapter III).
It introduces a variety of policy and regulatory
reforms such as a new land use policy and a
new project approval framework (also see box
4). Based on the GNH philosophy, the guiding
principle for economic development can be
described as high value, low impact.
Building on the EDP, the new Foreign Direct
Investment policy, finalized in May 2010,
increases the general maximum allowance
foreign investors equity to 74 per cent
(70 per cent before), earmarks selected sectors
for a 100 per cent equity share allowance, and
introduces a negative list for sectors such as
media, mineral mining and general health
services. At the time of writing, the Government
was finalizing the Mineral Development Policy
that formalizes regulations on sustainable
mining.

8I An investment guide to bhutan Opportunities and Conditions 2013

Privatization and
publicprivate partnerships
In November 2007, the Government established
Druk Holding and Investments Limited (DHI)
as a sovereign holding company to efficiently
manage the countrys State-owned enterprises
(SOEs). The shares of most entities have been
transferred to the company, which now owns
99 per cent of the total Government holdings
and is itself owned by the Ministry of Finance.
DHI held total assets of 119,233.17 million
in 2011 and its net worth was Nu 45,390.41
million in 2011.
The Governments portfolio of SOEs plays a
significant role in the economic development
of Bhutan and accounts for a large share of
the countrys economy. These enterprises
cover a diverse range of businesses, including
firms such as Bhutan Agro Industries
Limited (a processing company of fruits and
vegetables), Bhutan Board Products Limited (a
producer of particle boards and wood panels),
Bhutan Development Finance Corporation
(a development financial institution), Bhutan
Broadcasting Service (the national radio and TV
station), State Trading Corporation of Bhutan
Limited (an importer and retailer of cars), Druk
Computer work for the Bhutan Digital Livelihoods Project in the Thimphu TechPark, Thimphu, Bhutan.
Air (the national airline), and Druk Green Power 3 I More information at www.
dhiinfra.bt.
Corporation Limited (the owner and operator
of Bhutans hydropower infrastructure). Druk
Green Power remains Bhutans largest SOE
with net assets worth 38 per cent of total
government-held assets.
DHI also manages and oversees Druk Green
Power Corporation (DGPC), into which all
other hydroelectric power companies have
been consolidated. DGPC is the largest source
of the Governments income, contributing Nu
5,847 million (US$128 million) of revenue in
2010.
DHI also acts as a facilitator for PPPs, working
with investors and developers. Large-scale
developments planned or underway include
the Education City project, special economic
zones in Dhamdum, Jigmeling and Motanga,
the Amochu Land Reclamation and Township
Development, an international convention
centre in Thimphu, the Chivasom Wellness
Centre at Phuakha, the Thimphu TechPark and
specific mining and industry projects.3
Care has been taken to equip DHI with a
transparent and efficient corporate governance
structure that minimizes political decisions and
guarantees accountability.
An investment guide to Bhutan Introducing bhutan I9
View of Thimphu, Bhutan.
The operating
environment
Guided by the concept of GNH and its
ambition to be a middle-income economy
by 2020, the Government of Bhutan aims
to promote economic diversification with a
minimal ecological footprint. The attraction
of foreign direct investment (FDI) is deemed
to play a key role to achieve this vision. The
improvement of the investment and operating
environment is hence high on the agenda of
Bhutans Government.
Economic environment
The biggest impetus to economic growth
comes from hydropower projects (see figure 1).
Large spikes in domestic output are explained
by hydropower projects coming on stream,
such as Chhuka (19861988) and Tala, the
largest plant so far (20062008). When Tala
was commissioned in 2007, overall annual
GDP growth jumped to 19.7 per cent. While
electricity, water and gas accounted for below
1 per cent of GDP in 1980, the sectoral share
increased to around 20 per cent of GDP in
recent years.
Figure 1. Real growth of selected sectors and overall GDP (percentage year-on-year change)
annual % chg.
80%
Gross Domestic Product
Electricity and water
60%
40%
20%
0%
2001 2002 2003
-20%
Source: UNCTAD secretariat calculations, based on Bhutan Ministry of Finance.
The Government continues to see hydropower
as one of the economys central pillars and
expects it to further underpin economic growth
in the coming years, with more projects being
planned and implemented. It also expects
hydropower to be the main channel of achieving
economic self-reliance and plans to spend
revenues from electricity exports to improve the
conditions for private-sector development and
for the diversification of the countrys economy.
Looking at the origins of GDP over time, the
clearest trend can be seen in the agricultural
share which more than halved from 46.3 per
cent in 1980 to 20.5 per cent in 2009. Agricul-
ture historically constituted the most important
part of the economy in the form of subsistence
farming and animal husbandry. More recently,
the sector started a transformation towards
the production of more cash crops. The Gov-
ernment is working to improve market access,
introduce new horticulture crops, and increase
overall agricultural productivity.
In line with the Governments economic policy
priorities, the industrial sector has seen a
constant increase over the same period,
Manufacturing
Hotels & restaurants
2004 2005 2006 2007 2008 2009
An investment guide to Bhutan THE OPERATING ENVIRONMENT I 11
from 15.3 per cent in 1980 to nearly 40 per
cent in 2009. The industrial structure of
the manufacturing industry remains mostly
small in size and dominated by State-owned
enterprises. Measures are put in place to
promote the development of a manufacturing
cluster in the southern region of Phuentsholing,
including the creation of special economic
zones, infrastructural improvements, and the
development of product certification schemes.
The construction industry is strongly driven by
infrastructural projects, especially the large-
scale hydropower projects.
The service sector is identified by the
Governments 2010 Economic Development
Policy and the current FYP as a special
priority sector. Tourism and hospitality services
are seen at the core of the service sector
development. The Government targets a
25 per cent share of tourism in total GDP
by 2017. In 2009, the hospitality industry
accounted for around 2 per cent of all
services, though this probably undervalues the
contributions of up- and downstream linkages.
Other sectors include the financial service
industry, which currently sees high growth
rates, as well as telecommunications.
Inflationary pressure has risen in the past years
and continues to be high at 8.84 per cent year-
on-year from 2010 to 2011. Rising food prices
have exacerbated this trend. Core inflation in
Bhutan closely follows the Indian economy due
to the peg of the ngultrum to the rupee. Over
the last years, the rupee experienced volatility
as a consequence of large portfolio investment
inflows, putting pressure on the peg. At the
same time, high Indian inflation continues to
reinforce a downward bias on both currencies.
Trade and investment
International trade
The promotion and diversification of trade
is a central priority of the Governments
economic development programme. It aims to
further simplify administrative procedures and
promote deregulation in order to boost investor
confidence (see box 4).
Bhutans trade regime is strongly determined by
its close economic ties to neighbouring India,
which absorbs a large share of Bhutanese
exports under a free-trade agreement. The
economy is strongly import dependent. The
Government hence wants to avoid higher costs
of imports through trade barriers and aims to
further liberalize its trade regime. Bhutan is a
member to BIMSTEC and SAFTA, both of
which aim to put in place regional free-trade
agreements (see chapter I for more details).

Box 4. The 2010 EDP in the area of trade and investment

The 2010 EDP sets out wide-ranging macro- and microeconomic reforms and policy measures, including the definition of eight
areas of economic opportunity.

In the area of trade and investment particularly, the EDP includes the following policy reform measures, amongst others:
Enactment of a Trade Development Act to improve the countrys trade policy framework;
Improvement of export and market promotion activities, including through economic diplomacy, trade fairs, and trade missions;
Development and promotion of a Brand Bhutan nation branding and product certification scheme, which draws on Bhutans
unique values and GNH development philosophy;
Development of a PPP policy framework;
Revision of Bhutans FDI policy and development of a Bhutan Investment Act;
Accession to international conventions on dispute settlement;
Development of a framework for anti-dumping measures, anti-subsidies and trade safeguards;
Negotiation of mutual recognition agreements and conformity assessment procedures;
Negotiation of transit and transport agreements with neighbouring countries;
Harmonization of customs documentation, procedures, and formalities.

For a list of all areas of economic opportunities, relevant incentives and reforms, see chapter III.

Source: Government of Bhutan, Economic Development Policy, 2010.

12 I An investment guide to bhutan Opportunities and Conditions 2013

In 2011, India was the biggest export market
and received 84.7 per cent of Bhutanese
exports. It also provided 64.6 per cent of
imports to Bhutan. Other important trade
partners include Bangladesh, China, Japan,
Japan and Republic of Korea (see table 2).
of capital goods (machinery, mechanical/
electrical appliances, and transport goods)
and a slowing of hydropower exports due to
increasing domestic demand. Rising exports
of base metals and intermediate goods slightly
counterbalanced the decline.

Hydropower produced by the Chhukha,

Table 2. T op export and import markets of Kurichhu and Tala plants accounts for more
Bhutan in 2011 (percentage of total) than a third of all Bhutanese exports (42 per
Export Markets Import Markets cent of total merchandise exports in 2009).
India 84,7% India 64,6% Base metals such as iron, steel, and copper
Bangladesh 8,6% Japan 5,5% constitute another important export category,
representing 29 per cent of total exports in
Nepal 1,6% China 5,1%
2009. Agricultural exports, mostly potatoes
Japan 1,3% Republic of 4,7%
Korea and oranges, continue to play a minor role for
Nigeria 1,2% Switzerland 3,0%
Bhutans trade performance (around 5 per cent
in 2009).
Other partners 2,6% Other partners 17,1%
Source: UNCTAD. The countrys imports of petroleum-based
products have risen steadily, mainly due
the increase in the number of vehicles and
Overall, Bhutan experienced a relatively heavy machinery. This trend underlines the
steady increase in both exports and imports countrys rising dependence on fossil fuels
between 2000 and 2010. At the same time, and other intermediate commodities, which
the trade deficit increased steadily up to are mainly used in Bhutans construction
fiscal year 2004/05. Bhutan recorded its first and manufacturing sectors. The construction
trade surplus in 2006/07 in light of strongly boom, driven by the large-scale hydropower
increasing exports to India. In the last two projects, also induces an increase in capital
years, however, the trade balance deteriorated goods imports such as construction machinery.
on the back of a sharp increase in imports In 2009, mineral fuels accounted for a 20 per

Figure 2. Major exports and imports of Bhutan, 2009 (percentage of total exports)

Major exports in 2009 Major imports in 2009

3% 5%
4%
5% 23% 20%

12% 42%
5%
5% 20%

29% 10%
17%

Electricity Machinery, mechanical/electrical equipment

Base metals and articles thereof Mineral products incl. fuels
Mineral products incl. fuels Base metals and articles thereof
Vegetables, fruits, nuts, tea and similar items Transport vehicles
Chemical products Vegetables, fruits, nuts, tea and similar items
Machinery, mechanical/electrical equipment Wood and wood pulp products
Other Other

Source: UNCTAD secretariat calculations, based on Bhutan Department of Revenue and Customs data.

An investment guide to Bhutan THE OPERATING ENVIRONMENT I 13

cent share of all imported commodities.
Construction related commodities such as
iron and steel, machinery, technology used
in the construction of hydropower plants,
and transport vehicles are other important
imports.
Foreign direct investment
Bhutan has affirmed its clear commitment
to fostering private-sector development and
attracting FDI through the 2010 Economic
Development Policy, the 2010 Foreign Direct
Investment Policy, and the 2010 Framework
for Private Participation in Infrastructure. In
the last three to five years, FDI has come to
play an increasing role in Bhutans economy
and became a cornerstone of economic
development, particularly in the growing
tourism sector. Guided by the philosophy of
GNH, the Governments efforts to attract FDI
follow the approach of high value, low impact.
Overall, however, Bhutan is still considered
virgin territory in terms of FDI.
The country had only limited foreign direct
investments until the early 2000s. Initially,
FDI inflows were almost exclusively directed
towards the hospitality sector. One of the
earliest such investors was Aman Resorts in
2001. The hotel group owns and manages
Figure 3. FDI inflows and stock, 2000 to 2010
Stock
Stock, current US$ million
160
Flows, current US$ million
140
120
100
80
60
40
20
0 0
2000 2001 2002 2003
Source: UNCTAD FDI/TNC database www.unctad.org/fdistatistics.
14 I An investment guide to bhutan Opportunities and Conditions 2013
25 upscale hotels and resorts worldwide and
has developed five lodges across Bhutan with
72 rooms in total.
In 2002 the Government approved a first
formal FDI policy which came into effect in
2005. Subsequently, FDI inflows in tourism,
manufacturing, and services (banking and
security) further increased. In 2007, FDI
inflows spiked at US$72.3 million as a result of
hydroelectric investments. Overall, from 2000
to 2010, the country accumulated FDI stocks
of about US$155.5 million (see figure 3). A
total of 29 FDI projects had been approved at
the time of writing. Of this, three projects were
approved prior to adoption of the countrys
first FDI Policy in 2002 and 26 projects were
approved after adoption of the first FDI policy
document.
Under the 2010 FDI policy framework, the gen-
eral maximum allowance of foreign investors
equity increased to 74 per cent (70 per cent
before), a 100 per cent equity share allowance
in selected sectors is permitted, ownership of
land by FDI joint venture companies is allowed
and a list of prohibited activities (see chapter
III and appendix 1 for details) was introduced.
The Government is also working on a mineral
development policy that would formalize
regulations on sustainable mining.
Flows
80
70
60
50
40
30
20
10
2004 2005 2006 2007 2008 2009 2010
Main building of the Thimphu TechPark, Thimphu, Bhutan.
Overall, the Government is pursuing an
ambitious reform programme to make Bhutan
an attractive investment destination. It is also
looking beyond traditional greenfield projects
and seeks to promote investments into PPPs).
To this end, the 2010 Framework for Private
Participation in Infrastructure complements the
FDI policy and enables large-scale infrastructure
projects such as airports, highways, recreational
facilities, etc. to be developed in a PPP model.
Additionally, the Government is currently
developing a more comprehensive PPP policy
in cooperation with the World Bank.
Two landmark PPP projects that are currently
being developed by DHI are the Education
City project and the Thimphu Tech Park. The
Education City is part of the Governments
wider efforts to improve secondary and tertiary
education and aims to develop a 1,000-
acre (approximately 404.7 hectares) campus
with academic blocks, residential units, and
recreational facilities between the countrys
international airport Paro and the capital
Thimphu. The Thimphu Tech Park project
aims at establishing an IT park and related
infrastructure in proximity to the countrys
capital. The PPP project is currently being
implemented jointly by a property development
company from Singapore and the DHI. The
first development phase was completed in
November 2011 and first tenants started
operations in early 2012.
The Government of Bhutan, through the Minis-
try of Economic Affairs also seeks to establish
special economic zones (SEZs) through a PPP
developer. Three potential sites have already
been identified (Samdrup Jongkhar, Sarpang,
and Samtse) and the Governments holding
company DHI is currently planning the project
implementation.
An investment guide to Bhutan THE OPERATING ENVIRONMENT I 15
Infrastructure and utilities service (dial-up and broadband) and the
dominant player in mobile communications
Information and communications technology (nearly 80 per cent market share in 2010).

The Government continues to promote the
development of ICT as a platform for sustainable
development and economic diversification
to the benefit of the populations well-being.
It aims at delivering ICT infrastructure to all
205 gewogs (village blocks). In early 2011,
the Government was on track to achieving
this goal by providing fixed-line and mobile
network access to over 96 per cent and 97 per
cent respectively in all gewog centres. Mobile
teledensity stood in 2011 at 70 per cent of the
population and Internet access at 19.7 per
cent.
The market for ICT services is relatively well
defined given Bhutans small domestic user
base. One fixed-line operator, two mobile
network operators and four Internet service
providers are registered with the countrys
telecommunications regulator. The State-
owned Bhutan Telecom Limited was the first
provider of ICT services and is still the only
operator of fixed-line communications. It is
also the only provider of country-wide Internet
Almost all mobile subscribers use prepaid
services (97 per cent of subscribers) and the
vast majority of Internet users access the web
using mobile broadband services (90 per cent
of Internet users), almost exclusively via EDGE/
GPRS (98 per cent of mobile Internet users,
3G is available in Thimphu, Phuentsholing
and Paro). This brings the mobile broadband
penetration rate to about 12 per cent of the
population, comparable to the average of
lower middle income countries. Since fixed-line
broadband is only available in a limited number
of urban locations, the market for mobile
broadband continues to grow. As of 2010,
Bhutan has a stable international Internet
bandwidth of 330 megabit per second (Mbit/s).
Given the small number of actual users,
the available capacity of Bhutans network
infrastructure can be seen as internationally
competitive, particularly when compared with
regional and income-based averages.
Internet user fees are relatively inexpensive
compared to the regional average, tele

Table 3. Selected information and telecommunications technology indicators

Bhutan Southern Asiaa) Lower-middle
incomea)
2000 2009 2009 2009
Access
Telephone lines (per 100 inhabitants) 2,5 3,8 3,0 12,7
Mobile cellular subscriptions (per 100 inhabitants) 0,0 46,9 45,5 57,8
Fixed Internet subscribers (per 100 inhabitants) 0,1 1,0 1,3 5,5
Personal computers (per 100 inhabitants) 0,9 2,0 3,3 4,5
Quality
Population covered by a mobile network (% of total pop.) - 56,7%b) 61,0% 77,0%
Fixed broadbrand subscribers (% of total subscribers) 0% 9,2% 51,3% 40,1%
Mobile broadband subscribers (% of total subscribers) 0% 89,6% - -
International Internet bandwidth (bits / second / person) 2 222 31 151
Affordability
Residential fixed line tariff (US$ / month) - 3,00 3,00 4,70
Mobile cellular prepaid tariff (US$ / month) - 2,00 1,20 7,10
Fixed broadband Internet access tariff (US$ / month) - 10,00 14,60 30,40
Sources: World Bank ICT At-a-Glance, ITU World Telecommunication/ICT Indicators 2011, Bhutan Ministry of Information and communcations
Annual Info-Comm and Transport Statistical Bulletin March 2011.
a) Regional averages calculated using weighted average of latest available data point for each country or territory for reference period.
b) Figure for 2010.

16 I An investment guide to bhutan Opportunities and Conditions 2013

communications user fees are a little above or
at the regional average. Small business rates,
on average, range from US$47 to US$57,
depending on plan and included bandwidth.
Currently, the Government is working to
improve the reach and efficiency of the existing
network. It also aims to further mainstream ICT
in its development programmes and poverty-
alleviation initiatives. These efforts include the
connection of further districts to the national
broadband network, the development and
implementation of eGovernment initiatives and
Government-to-Citizen (G2C) services, and the
construction of community centres (CICs) in all
village blocks to improve last mile access to
ICT resources.
Energy
As per the Electricity Act 2001, the power 4 I Based on data of the
United States Energy
tariff is arrived at by taking into account the Information Administration
actual cost of supply and not the market or and the International
opportunity cost. The subsidy that is availed Energy Agency
(http://www.eia.gov/
from Royalty power is directed to the low emeu/international/
voltage consumers, hence the electricity tariff elecprih.html).
at low voltage is cheap.
Transport
For a landlocked country, an efficient and reliable
transport network both within the country as
well as within the region plays an especially
important role for competitiveness and broad-
based socioeconomic development. At the
same time, Bhutans rugged terrain poses
significant technical and economic challenges
in the development of an adequate physical
infrastructure.

Bhutans electricity tariffs are among the lowest
in the world, making it an ideal investment
destination for high energy consumption
services such as data storage. Under the
current tariff schedule, the price for one
kilowatthour of low-voltage electricity ranges
from US$0.02 to US$0.04, depending on
the demand. For comparison, the average
2008 household price for one kilowatthour
was about US$0.113 in the United States of
America and about US$0.206 in Japan.4 The
current and future tariff structure (in ngultrum)
is presented in table 4.
Bhutans current transport network remains
inadequate, with a limited road network, no
navigable waterways, and no domestic rail
network. The Government is aware of these
constraints and is undertaking significant
investments to upgrade the infrastructure
and improve main and feeder road networks,
especially in rural areas. Infrastructure
development is a central priority in the countrys
current FYP (see box 4 above). Complementary
to the Governments efforts, multilateral and
bilateral development partners continue to
provide technical assistance and funding.

Table 4. C
 urrent and future (at the time of writing) domestic electricity tariffs, households and
commercial (in ngultrum per kilowatthour)
Customer Category August 2010 1 July 2011 1 July 2012
to 30 June 2011 to 30 June 2012 to 30 June 2013
0-100 kWh (Nu./kWh) 0,85 0,85 0,85
101-300kWh (Nu./kWh) 1,47 1,54 1,62
LV
300+ kWh (Nu./kWh) 1,94 2,04 2,14
LV bulk (Nu./kWh) 1,94 2,04 2,14
Energy charge (Nu./kWh) 1,63 1,71 1,79
MV
Demand charge (Nu. /kW/month) 95 105 115
Energy charge (Nu./kWh) 1,51 1,54 1,54
HV
Demand charge (Nu./kW/month) 85 105 105
Wheeling (Nu./kWh) 0,111 0,111 0,111
Sources: Bhutan Electricity Authority, Annual Report 2010/2011.
LV, MV, HV: Low, medium, high voltage.

An investment guide to Bhutan THE OPERATING ENVIRONMENT I 17

 Gate of Bhutan, border crossing with India, Phuentsholing, Bhutan.

5 I According to the 2005 Road transport
Census.
6 I Travel time between In 2010, there were 6,920 kilometres of roads,
Phuentsholing and about 40 per cent of which were paved or
Thimphu is about 6 hours
otherwise surfaced. The existing network
for about 180 kilometres.
connects major villages and provides an
7 I Based on data from the
Transport 2040 Integrated increasing amount of farm and access roads in
Strategic Vision (draft) rural areas. Still, about 53 per cent of the rural
August 2011.
population cannot reach an all-weather road
within 20 minutes walking distance and about
9.7 per cent of the total population still lives
more than six hours walking distance away
from the nearest all-weather road.5
Most of the Bhutans personal and commercial
traffic travels along the EastWest national
highway (Lateral Road), which also connects
the capital Thimphu with the southern industrial
hub of Phuentsholing and the Indian border.
Nearly all imports go through the Indian port of
Kolkata and are transported to Phuentsholing
by road. Like the majority of roads in Bhutan,
the Lateral Road is narrow with steep gradients
and sharp turns, making it inadequate for the
countrys increasing traffic and the growing
number of commercial vehicles. Furthermore,
severe weather and tectonic activity frequently
cause roadblocks or temporary hazards. As a
result, traffic usually moves extremely slowly.6
The incidence of road traffic fatalities, currently
at about 17 per 10,000 vehicles per year, is
already much higher than in neighbouring
countries (Indias is a little above 12 per 10,000
vehicles per year) and slowly increasing.7
Overall, the poor state of the road network
and the countrys difficult geographic situation
significantly increase the cost of doing
business in Bhutan. This is particularly true in
the countrys remote eastern districts, where
transport costs are high.
The 20072027 Road Sector Master Plan sets
out how the Government plans to upgrade
and expand the existing network, often with
significant support of international partners

18 I An investment guide to bhutan Opportunities and Conditions 2013

such as the Asian Development Bank, the
World Bank, the Government of India, and the
Government of Japan. Priorities include the
expansion of feeder roads, capacity and safety
upgrades of existing roads, the construction of
more bridges, and the construction of a second
EastWest highway in the less mountainous
south. The Government is also developing a
warehousing and distribution facility (dry port)
in the border town of Phuentsholing.
Rail transport
Bhutan currently does not have a domestic rail
network, but the Government recognizes the
significant capacity and efficiency gains that
could be realized through a rail link with India.
In January 2005, Bhutan and India signed
a memorandum of understanding for the
establishment of railway links to the five border
towns in Bhutan from the nearest corresponding
railheads in India that would ultimately enable
access to the Indian rail network. One of the
links includes a 17.5 kilometre track to connect
Hasimara (in West Bengal) to Phuentsholing
in Bhutan. Survey of the five links was carried
out in 2007/08 and the two Governments are
currently working to implement the project.
This important infrastructure development
project has the potential to remove one of
Bhutans most pressing behind-the-border
constraints by significantly reducing ground
transportation costs and improving access to
Drukair aircraft at Paro International Airport, Paro, Bhutan
the Phuentsholing industrial hub. The rail link
will promote private-sector development in the
border region and allow for varied investment
opportunities.
The Government is also planning to establish
a dry port at the terminus of the rail link. As of
June 2011, it has identified Toribari within the
Phuentsholing municipality as optimal location
for such a facility.
Air transport
Reliable and flexible air transport is critical for
the development of Bhutans tourism sector
and economic diversification. Currently,
however, Bhutan has only one international
airport, Paro, and one international air operator,
the wholly State-owned Druk Air.
Paro International Airport is located about
50 kilometres west of the capital Thimphu and
is certified for narrow-body aircraft up to the
size of an Airbus A320 or Boeing 737. Given
the high-elevation, high-terrain environment
and the lack of an instrument landing system,
flight operations are often disrupted by weather
conditions. During the winter season, high
velocity winds can lead to service cancellations
or delays, or flight diversions of the incoming
flights. Cargo facilities remain limited and the
existing terminal infrastructure is inadequate for
peak-season tourist inflows.
An investment guide to Bhutan THE OPERATING ENVIRONMENT I 19
Druk Air, which started operations in 1983,
currently operates direct connections to
destinations in Bangladesh, India, Nepal,
Singapore and Thailand using Airbus A319
aircraft. ParoBangkok and ParoDelhi are
the most popular routes. In 2010, Druk Air
transported a total of 132,615 passengers,
compared to 42,900 in 2002 and just about
2,800 in 1983.
The Government is aware of the pressing need to
improve its air transport network and is currently
seeking domestic air service operators to
improve access to the countrys eastern region
and the central Bumthang district, cutting travel
times from several days to a few hours. This
could help unlock the Bhutans vast tourism
potential in the more remote regions and make
non-tourism ventures much more accessible
to firm managers, using both commercial as
well as general aviation. In the longer term, the
Government may also upgrade Gelephu airport
for international operations. This would not only
free up capacities in Paro, but also allow for a
much safer and reliable approach due to better
geographical conditions, potentially even using
bigger airplanes. Most importantly, it would
also help private-sector development around
the southern hub of Gelephu.
assistance could, amongst other benefits, also
allow for safer conduct of a wider array of out-
door tourism activities.
Health services
Bhutans Government has made consistent
and substantial progress in the provision of
public health services, bringing the country
well on track to achieving the relevant
Millennium Development Goals (MDGs), a set
of development targets defined by the United
Nations. Human and physical resources have
been expanded at an impressive speed.
However, some fundamental challenges
remain, particularly in rural areas.
Primary health care coverage currently stands
at about 90 per cent of the population. In
2007, on average, an urban dweller lived
19 minutes away from the next basic health
unit, while a rural dweller walked about
84 minutes. In 2005, about 90 per cent of all
households were estimated to have visited a
health facility at least once a year. Advanced
emergency treatment is available at Thimphus
Jigme Dorji Wangchuck National Referral
Hospital.

In addition, the Government plans to introduce
a domestic helicopter service for search and
rescue operations, but not for scheduled op-
eration. Given Bhutans challenging geography,
the availability of helicopter based emergency
With better access to facilities, health outcomes
have improved accordingly. Life expectancy
increased significantly from an estimated
54 years in 1990 to about 68 years today, with
only a minor difference between males and

What investors say: infrastructure

First and foremost, interview partners highlighted Bhutans extremely competitive electricity
prices. Electricity is easily availability in all urbanized regions and power outages are not an
issue, which stands in stark contrast to other countries of the region. Investors and firm
managers were also positive about the countrys telecommunications network, although
shortages were reported in the area of broadband Internet connectivity.
The countrys transportation infrastructure, however, is a major concern for the private sector.
Concerns were raised about the countrys insufficient road network and the associated high
costs for ground transportation. The road between Thimphu and Phuntsholing was cited as
a particular concern. Interview partners greatly welcomed the opening of Bhutans domestic
air service and described it as a major improvement of the overall business climate. Many
also welcomed the on-going improvement and development of the countrys road network.
Source: UNCTAD.

20 I An investment guide to bhutan Opportunities and Conditions 2013

females. Under-five mortality declined from
139 per 1000 live births in 1990 to 56 per
1000 live births in 2010. Child immunization is
nearly universal.

The Governments current development

priorities include the training of more qualified
health workers, particularly doctors, and the
expansion of physical infrastructure. The
Government is also carefully monitoring the
incidence of HIV/AIDS. While the number of
reported cases is still very low, the number of
new infections has been increasing sharply
over the last years.

Education Headquarters of the Royal University of Bhutan, Thimphu, Bhutan.

Substantial progress has also been made in the

improvement of Bhutans education system.8
Basic education consists of seven years of
primary schooling and four years of lower
and middle secondary schooling. This can
be followed by two years of higher secondary
education as well as tertiary education.
Language of instruction is English and education
is free up to the tenth grade. The general level of
English language proficiency is very high.
Literacy rates, estimated based on data from
the 2007 Bhutan Living Standard Survey, still
show strong ruralurban as well as gender and
generational divides. The overall literacy rate
stood at about 55.5 per cent. Disaggregated
indicators are significantly biased towards male,
urban populations, with disparities increasing
sharply for older age groups. Gender gaps are
nearly absent for the younger generations, in
which about 75.8 per cent are literate.
Tertiary education is organized under the 8 I Data in this section
is based on Bhutans
umbrella of the decentralized Royal University 2011 National Human
of Bhutan (RUB), which was established in Development Report and
2003 and currently includes ten constituent the Ministry of Education
Annual Education
public colleges and one private college. In Statistics 2010 and 2011.
2010, 6,245 students were enrolled in a tertiary
education course under the RUB. Additionally,
another 4,083 students were enrolled in a
tertiary education course abroad, mostly in
India. Gross enrolment at the national tertiary
level is about 11 per cent, compared to about
15.5 per cent in lower middle-income countries
and 11.4 per cent in South Asia.
The Government is working to expand and
diversify the tertiary education system and
eliminate gaps in infrastructure, access, and
efficiency. The current system induced a
mismatch between student skills and knowledge
on the one hand and labour market needs on

Table 5. Key health indicators

1990 2000 2010a)
Millennium Development Goal 4.1
139 89 56
Children under five mortality rate (per 1,000 live births)
Millennium Development Goal 4.3
93% 78% 98%
1 year-old children immunized against measles (% proportion)
Millennium Development Goal 6.1
<0.1% <0.1% 0,20%
People living with HIV, 15-49 years old (% of population)
Life expectancy at birth (years) 54,19 63,148 68,021
Per capita government health expenditure (US$, avg ex rate) - 42 80
Sources: World Health Organization Global Health Observatory Data Repository, World Bank WDI, United Nations Statistics Division.
a)
2010 estimates where available, otherwise 2009 is used

An investment guide to Bhutan THE OPERATING ENVIRONMENT I 21

9 I The World Bank / the other hand. To this end, the Governments
International Finance
Corporation, Enterprise
priorities include a comprehensive overhaul
Survey Bhutan. of its technical and vocational education and
Available online at training programmes, including an improved
www.enterprisesurveys.
org (accessed 26 June link between university and vocational training
2013). courses. More on opportunities in the education
sector can be found in chapter IV.
Labour
About 68.6 per cent of Bhutans 726 thousand
people were participating in the labour force in
2010. The overall participation rate of women
was slightly lower than that of men (63.9 per
cent versus 73.6 per cent), which compares
very favourably to the South Asian average
of 37 per cent versus 82 per cent. About
3.3 per cent of the total labour force was
unemployed in 2010, down from 4 per cent
in 2009. Youth unemployment, currently at
9.2 per cent, is a concern. Overall, the biggest
source of employment with about 60 per
cent is the agricultural sector, where almost
everyone works in self- or family-employment
arrangements.
support the view that there is a widening skills/
knowledge gap. At the same time, the World
Bank study also finds that competitiveness
as measured by labour productivity is high,
particularly in the service sector. While average
labour costs per worker are higher than in
other countries of the region (about 45 per
cent higher than in India), unit labour costs are
amongst the lowest in the region (almost half of
Bangladeshs unit labour costs).
Bhutans labour regulations are mainly contained
in the 2007 Labour and Employment Act, which
is the countrys first comprehensive labour
market legislation. It includes provisions on
employment conditions including minimum age,
terms and enforcement of contracts, employee
compensation, working hours, holidays, dispute
resolution, and workers representation, among
others. Additionally, some regulations pertaining
to employee compensation and the recruitment
of foreign workers still derive from the 1994 Wage
Rate, Recruitment Agencies and Workmens
Compensation Act. The new framework has
successfully improved labour market efficiency
by reducing legal uncertainty, improving workers
rights, and ensuring flexibility.

Bhutans labour force, although comparatively
well educated, cannot fully meet the needs
of the evolving private sector. A 2009 survey
of 250 Bhutanese firms by the World Bank
finds that 12.6 per cent of firms cite the lack
of labour skills as a constraint for the private
sector.9 Growing rates of youth unemployment
Under the provisions of the 2007 Labour and
Employment Act the Government set a national
minimum wage across all industries of Nu
100 per day or Nu 3,000 per month (US$2.19
and US$65.57, respectively). Full-time employ
ees are entitled to a minimum of 9 public
holidays per year and 1.5 days of paid leave

What investors say: human resources and labour

While some firm managers reported high productivity of the existing labour force, a key
concern is the lack of skilled labour throughout all sectors. Interviewees generally confirmed
that there is a strong mismatch between a well-educated and English-speaking population
on the one hand and a lack of relevant job-market qualifications on the other hand. As a
result, there are few well-trained workers. Some private-sector representatives described
that the apparent attractiveness of government jobs vis--vis private-sector jobs makes it
hard to find employees with a strong entrepreneurial spirit. At the same time, it was pointed
out that workers generally learn quickly and seem receptive to on-the-job training.
In addition to domestic labour shortages, interview partners reported difficulties in the
recruitment of Indian workers due to complex procedures and quantitative caps. Some
private-sector representatives also described immigration and visa rules for expatriate
workers as relatively restrictive.
Source: UNCTAD.

22 I An investment guide to bhutan Opportunities and Conditions 2013

per month. Standard working hours must
not exceed eight hours per day or 48 hours
per week. Employers must grant a minimum
maternity leave of eight weeks and minimum
paternity leave of five days, each with full pay.
The financial sector
With a rapidly evolving real economy backed
by sound macroeconomic fundamentals,
Bhutans financial sector has seen significant
growth in recent years. The countrys financial
system consists of four commercial banks, one
development bank, two insurance companies,
one pension fund, and one securities
exchange.10 All bank and non-bank financial
institutions are regulated by the countrys central
bank, the Royal Monetary Authority (RMA). The
legal and regulatory framework of the central
bank was significantly strengthened with the
enactment of a new RMA Act in 2010. This,
together with the new 2011 Financial Services
Act, gave the RMA a large degree of autonomy
and a robust mandate to supervise the growing
financial sector. The RMA has recently reiterated
that it does not plan to grant new commercial
banking licences until the end of 2013.
Insurance sector
Two insurance companies are currently
operating in Bhutan, the Royal Insurance
Corporation of Bhutan Limited (RICB) and
Bhutan Insurance Limited. The partially State-
owned RICB was the first provider of insurance
in the country and offers general insurances
as well as a variety of credit and financial
products. RICB also provides the vast majority
of housing loans and is the sole provider of life
insurance in Bhutan. Its competitor Bhutan
Insurance Limited only offers general insurance
products. The superior market position of RICB
vis--vis Bhutan Insurance Limited is reflected
in the firms financial positions with a total asset
value of US$130 million versus US$6.33 million
in March 2011. Unlike the commercial banking
sector, the insurance sector is open for new
market participants to foster competition.
Stock exchange
In 1993, the Royal Monetary Authority
supported by the Asian Development Bank
initiated the development of a capital market 10 I As of the second
quarter of 2011, these
and a stock exchange in Bhutan. The Royal were the Bhutan
Securities Exchange of Bhutan (RSEB) was National Bank, the
established in late 1993 with a total of four listed Bank of Bhutan Ltd.,
Druk PNB Bank Ltd.,
companies and an overall market capitalization T-Bank Ltd., Bhutan
of about US$8.6 million. As of 2010, a total Development Finance
of 20 companies were listed with an overall Corporation Ltd., Royal
Insurance Corporation
market capitalization of about US$218.95
million. Although the number of trades slowly
of Bhutan Ltd., Bhutan
Insurance Ltd., National
Pension & Provident
increased over the years, the exchange still
Fudent, and the Royal
only opens for trading twice a week. In 2010, Securities Exchange of
Bhutan Ltd. For publicly
the overall traded value of securities was about
listed companies
US$13.94 million. The RSEB is regulated by the abbreviations
the Royal Monetary Authority. correspond to the stock
symbol. The government
holds shares in Bhutan
National Bank, Royal
The private sector Insurance Corporation of
Bhutan (both minority),
Bank of Bhutan, and
The umbrella organization that represents Bhutan Development
Finance Corporation
the private sector in various national, regional (both majority).
and international policy forums is the Bhutan
11 I Comprehensive
Chamber of Commerce and Industry (BCCI), information about the
which is itself part of the regional SAARC project background,
scope, and progress
Chamber of Commerce. The BCCI currently can be found online at
has 41 members representing various sectors http://www.gnhc.gov.bt/
and subsectors of the countrys small but absd (accessed 27 June
2013).
growing business community. In addition to its
headquarters in Thimphu, the chamber also
has four regional offices across the country.
Including through the BCCI, the Government
has intensified its dialogue with the private
sector in recent years.
To improve communication and cooperation
between the various arms of government and
the private sector, the Ministry for Economic
Affairs has reconstituted the Private Sector
Development Committee in 2009. The
committee consists of 25 members, 14 of which
are from the private sector and 11 of which
are government officials, and is chaired by the
Minister for Economic Affairs. In July 2011 the
committee was upgraded with a secretariat to
further institutionalize the dialogue and act as
focal point for private-sector development.
Beyond the various regulatory reforms outlined
in earlier chapters, the GNH Commission
secretariat has worked to promote public
sector delivery and private-sector development.
The Accelerating Bhutans Socioeconomic
Development initiative has defined performance
targets for the various branches of government
and sectors.11
An investment guide to Bhutan THE OPERATING ENVIRONMENT I 23
Terraced rice plots in a rural area near Phunaka, Bhutan.

24 I An investment guide to bhutan Opportunities and Conditions 2013

The regulatory
environment
Bhutan has embarked on ambitious regula
tory reform and private-sector development
programmes in recent years. The current FDI
and economic policy framework represents
a major step towards a more liberalized
investment regime and more conducive
business regulations. However, while macro
economic and longer-term aspects such as
political stability, good governance, and access
to electricity compare very favourably to other
investment destinations in the region, several
regulatory constraints remain. The World
Banks Doing Business project particularly
identifies a lack of procedures to resolve
insolvency, complex regulations for trading
across borders, and cumbersome procedures
to get a construction permit. Nevertheless, the
Government has made significant progress in
its efforts to provide an enabling environment
for investors.
This chapter presents the legal aspects of
the investment environment together with the
administrative procedures for doing business
in Bhutan.
Institutional and regulatory
framework
Foreign direct investment in Bhutan are
coordinated and monitored by the DoI at
the Ministry of Economic Affairs (MoEA). The
Ministry acts as the countrys investment
promotion agency and focal point for investors.
Table 6. Foreign ownership restrictions
Degree of foreign ownership allowed
100 per cent
Up to 74 per cent
Up to 51 per cent
No foreign ownership
See appendix 1 for full details and minimum capital requirements.
In addition, Bhutans State-owned holding
company, DHI, acts as the lead developer and
venture partner, including in PPPs, for larger
infrastructure development projects such as
the Thimphu Tech Park or the Education City
Project. Regulation and supervision of all
projects, however, remains with the DoI/MoEA.
In 2010 the legislature passed a comprehen
sive overhaul of Bhutans economic develop
ment strategy and regulatory environment,
consolidating the most relevant provisions for
foreign investors in the Economic Development
Policy and the complementary Foreign Direct
Investment Policy. With the streamlined
regulations, investors face a three-tier structure
of foreign ownership that is applicable to both
new as well as to existing entities (see table 6).
Except for some specific provisions and
incentives set out in the 2010 FDI Policy, foreign
investment projects are subject to the same
laws, rules, and regulations that are applicable
to domestic firms. This right to equal treatment
is formalized in the FDI Registration Certificate
(FDIRC), which is issued by the Ministry of
Economic Affairs upon application by foreign
investors (see below).
International investment treaties
Bhutan is not a member of the Multilateral In-
vestment Guarantee Agency or the International
Centre for Settlement of Investment Disputes
(ICSID). To date, it has also not yet signed
bilateral investment treaties or double taxation
treaties with international partners. Relevant
Sectors
Education services (except technical and vocational institutions), health,
five-star hotels, infrastructure,research and development, head office services,
IT and IT-enabled services inside SEZs.
Agro-based production, forest-based production, water-based products,
manufacturing, IT and IT-enabled services outside SEZs, construction services,
waste and water supply management, four-star hotels, technical and vocational
institutions, transport and related services, consultancy services.
Financial services
Negative list sectors including media and broadcasting, hotels rated three starts
and below, arms and tobacco.
An investment guide to Bhutan THE REGULATORY ENVIRONMENT I 25
12 I Note that this provisions for double taxation avoidance and a comparable domestic firm. The issuance of
summary reflects the
requirements of the
investment protection are, however, part of the FDIRC does not, however, constitute a full
licensing scheme that the SAARC treaties (compare with section on approval of the project.
was in place at the time taxation below).
of writing, particularly In a next step, investors submit a business
the provisions of the
2005 FDI Rules and plan to the DoI/MoEA. Investors shall submit
Regulations, the 2010 three copies of the business plan, one of which
FDI Policy, and the 2010 Entry and exit will be forwarded to the National Environment
Economic Development
Policy. This process Commission (NEC), if applicable. The NEC
may change as a result FDI business registration and licensing is a statutory body mandated to develop,
of the revision of FDI process implement and monitor the Governments
rules and an ongoing
simplification project The anchor point for establishing an FDI environmental policies and standards. Since
in cooperation with the environmental conservation is a central pillar
International Finance business in Bhutan is the FDI Division at the
Corporation. DoI/MoEA. The MoEA also chairs the FDI of Bhutans philosophy of GNH, all projects
13 I The relevant FDI Facilitation Committee, which is a multi-agency (except those in the exempted/delegated list)
Registration Application body that facilitates and promotes FDI. must undergo screening by the NEC, which
Form can be found then issues an environment clearance for
in schedule III of the
2005 FDI Rules and
Prospective investors need to go through the the venture. Simultaneously, the prospective
Regulations, available following business registration and licensing investor registers/incorporates the FDI
online at http://oag. process:12
gov.bt/wp-content/
business with the Registrar of Companies (see
uploads/2011/02/ table 7 for fees).
Foreign-Direct- To start the business licensing process,
Investment-Rules- investors first need to apply for an FDIRC. To
and-Regulation-
initiate the process, investors are invited to
2005-English.pdf (last Table 7. Company registration incorporation fees
accessed December submit a formal FDI Registration Application,13
Incorporation Fee, by authorized share capital
2011). including a more detailed summary of
the venture, a description of the investor, Share capital not exceeding Nu 1 million Nu 1,000
past audited accounts, and CVs of local Share capital between Nu 1 million
Nu 1,500
shareholders. Based on the formal application and 2 million
the DoI/MoEA then issues the FDIRC, which Share capital exceeding Nu 2 million Nu 2,000
will convey the right to be treated equally to Source: Schedule IV, Companies Act of of Bhutan, 2000.

At the control desk of Ugen Ferro Alloys Pvt. Ltd., Pasakha Industrial Estate, Phuentsholing, Bhutan.

26 I An investment guide to bhutan Opportunities and Conditions 2013

 14 I Also compare World
Bank Doing Business
What investors say: governance and administrative 2012 Economy Profile
Bhutan.
efficiency
Interview partners strongly appreciated the high degree of political stability and absence of
corruption. Many said that the Government is exemplary in its commitment to principles of
good governance and sound financial management. Optimism was also expressed about
the establishment of an Anti-corruption Commission (ACC), which was seen to be very
vigilant and effective. The Governments development plans were perceived as credible
and constructive.
While private-sector representatives generally described the Government as a reliable
partner, some cited the Governments inexperience with FDI and lack of technical
understanding as an issue. Interview partners cited delays in some approval processes due
to lack of government capacity. At the same time, the Government was characterized as
keen to understand investors concerns. Access to high-ranking Government officials and
line ministers does not appear to be a challenge.
Source: UNCTAD.

After the environmental and all relevant sectoral
clearances have been issued, if the proposed
activity falls under the non-priority lists, the
Project Approval Committee decides (based on
evaluation criteria) about the ultimate approval
of the project. The proposed businesses
falling under the priority list of activities are not
subject to assessment against the evaluation
criteria and are approved by the Department
of Industry upon receipt of required clearances.
Finally, the business must obtain an industrial
licence at the Regional Trade and Industrial
Office under the MoEA.
In addition to the formal registration process,
companies are required to apply for a taxpayer
identification number and register for income
tax, acquire a company seal within a year of
incorporation, and open a bank account under
the name of the company.14
Employment permits and expatriate
employment
Bhutans Department of Labour/ Ministry of
Labour and Human Resources (MoLHR) is the
coordinating agency for labour market needs
of foreign investors. In addition, Bhutans
Department of Immigration as well as the
Ministry of Foreign Affairs are relevant points of
contact for the employment of foreign nationals.
Bhutans 2010 FDI Policy includes provisions on
three aspects of employment: (a) Employment
of (skilled) expatriate workers, (b) employment
of unskilled or semi-skilled workers, and (c)
requirements on the employment of Bhutanese
nationals.
(a) Any FDI business that has successfully
applied for an FDIRC (see above) is entitled to a
minimum of five work permits for professional,
managerial and technical expatriate staff during
the business establishment phase. The permits
are allocated to the business entity and are
annually renewable. Multiple-entry visas (that
is, visas exempt from the international tourist
tariff) are issued to the foreign investor, the
board of directors, all expatriate staff, and
their immediate family members. In addition,
the MoLHR can approve additional expatriate
workers if the business cannot meet its
labour market needs by recruiting Bhutanese
professionals. The MoLHR will also approve
additional short-term permits for professionals,
technicians and consultants at request of the
business.
(b) During the establishment phase of the FDI
project investors can recruit an unrestricted
number of unskilled and semi-skilled expatriate
workers. During the business operation phase,
the number of unskilled and semi-skilled

An investment guide to Bhutan THE REGULATORY ENVIRONMENT I 27

15 I Available online at www. expatriate workers will be regulated more
molhr.gov.bt (follow link
"Labour Net").
closely by the MoLHR.
16 I For the Thimphu (c) FDI businesses are required to progressively
Thromde, this form can
be found online at www. train and employ Bhutanese workers and
tcc.gov.bt. professionals after the venture has been
17 I Both regulations are established in order to attain a ratio of 1:5,
readily available on that is, one expatriate permit for every five
the website of the
Department of Urban Bhutanese workers, by the fifth year of
Development and commercial operation. Exceptions, however,
Engineering Services
at www.dudh.gov.bt
might be granted for specific sectors such as
(last accessed January research and development, health or education
2012). or for specific labour market requirements.
18 I For the Thimphu District
Municipality, this form The overall procedure to recruit foreign workers,
can be found online
based on the 2007 Immigration Act and the
at www.tcc.gov.bt/
forms/siteplan.pdf 2007 Labour and Employment Act, can be
(last accessed January complex. The DoI/MoEA in its function as
2012).
anchor point for FDI as well as the MoLHR can
assist prospective investors. A brief summary
is provided here.
Companies will first need to apply for an
approval to recruit foreign workers with the
MoLHR through its online platform LabourNet.15
Applications are supposed to be approved
within approximately one week. For workers
with Indian citizenship, businesses are required
to sign an agreement with their respective
Regional Immigration Office. Other foreign
workers need to apply for a visa with Bhutans
Department of Immigration. The Department
will then issue a clearance that can be used
to enter the country and apply to the nearest
Regional Immigration Office for a full work
permit within seven days of arrival.
Land acquisition
FDI companies in Bhutan can own or lease
land based on the provisions of the 2007 Land
Act of Bhutan. In the acquisition process, FDI
ventures registered under the Companies Act
are treated like any domestic legal person. The
responsible statutory body dealing with land
allotment is the National Land Commission
(NLC) and its secretariat, which manages
cadastral surveys and keeps the national land
record called Thram.
While the NLC secretariat processes land
transfers and coordinates between different
government bodies, potential investors will
need to work through the local government
28 I An investment guide to bhutan Opportunities and Conditions 2013
or municipal authorities to apply for the
transaction. In case of land acquisitions around
Thimphu, this would be the Thimphu Thromde,
formerly the Thimphu City Corporation.
To initiate the transfer, investors need to
complete the land transfer form that is
available through the local authorities.16 The
local authority verifies the submission and
transmits it to the NLC or Ministry of Agriculture
for decision. The transfer is processed by the
local authority of the Ministry of Agriculture as
appropriate.
The lease, or Lag Thram, grants full ownership
and flexibility to the FDI Company. Subject to
the relevant laws and provisions of the Land
Act, the owner can freely transact the acquired
land title.
Construction permits
Investors applying for a construction permit
need to work with local government or
municipal authorities to obtain the necessary
documentation. In case of building projects
around Thimphu, the responsible implementing
authority would be the Thimphu Thromde.
At the national level, the Department of
Urban Development and Engineering
Services at Bhutans Ministry of Works and
Human Settlement is responsible for overall
coordination and technical backstopping.
The required procedures, fees, and permits,
as well as general provisions on architectural
requirements are formalized in the 2002 Bhutan
Building Rules. The Traditional Architecture
Guidelines, also available from the Ministry,
provide further details on what the Government
sees as appropriate building design principles.17
In a first step, investors need to request
an official site plan and, if needed, a plot
demarcation. This can be done by submitting
a simple form together with the relevant
land ownership certificate (Lag Thram, see
above) to the responsible local authorities.18
Investors can then apply for a building permit
by submitting the relevant form along with
architectural drawings and plans to the local
authorities. As noted above, building plans must
be in line with Bhutans Traditional Architecture
Guidelines as well as the general structural and
safety requirements. After the building permit
Worker sorting pieces of ferrosilicon, Pasakha Industrial Estate, Phuentsholing, Bhutan.
has been obtained, investors can request and
receive pre-construction and construction
work inspections, and will ultimately be issued
an occupancy permit by the local authorities.
Trade licensing and customs clearance
Bhutans trade policy, regulation and monitoring
is organized under the Department of Trade
at the MoEA. The Department of Revenue
and Customs under the Ministry of Finance is
in charge of customs clearance. Any goods
imported from countries other than India
require an official import licence, which can
be obtained from the Department of Trade by
registered retail/industrial licence holders and
any company registered in Bhutan. In addition
to the standardized application form, specific
industries might need to provide additional
Table 8. Official entry/exit points for movement of goods from/to third countries
Bhutanese Side
Phuentsholing
Samtse
Gelephu
Sarpang
Samdrup Jongkha
Paro
Source: Bhutan Ministry of Finance.
documentation (for example, businesses in the
tourism industry might need approval from the
Tourism Council of Bhutan). Bhutan does not
maintain official quota restrictions on imports
from India or third countries.
Most goods arrive at the southern industrial
agglomeration of Phuentsholing, which is the
countrys busiest border check point. There
are six official entry/exit points for goods from/
to third countries, which, with the exception
of air transport, require a transit through India
(see table 8). Bhutan continues to improve the
efficiency and capacity of its customs clearance
point, especially in Phuentsholing.
Procedural requirements and associated
time and costs for trading across borders to
and from Bhutan are roughly in line with or
Indian side Mode of transport
Jaigaon, West Bengal
Chamurchi, West Bengal
Hathisar, Assam Land
Ulta Pani, Assam
Darranga, Assam
All destinations by air Air
An investment guide to Bhutan THE REGULATORY ENVIRONMENT I 29
19 I Sources include slightly more cumbersome than the regional imports, Bhutan levies duties on its imports
UNCTAD Trade Analysis
and Information System
averages, according to the World Banks 2012 of 57.8 per cent for agricultural goods and
(TRAINS) and World Doing Business report. table 9 lists required 13.7 per cent for non-agricultural goods,
Bank, 2010, Bhutan documents for a hypothetical trade transac- compared to a South Asian regional weighted
Trade Brief, World Trade
Indicators 2009/10: tion. average of 13.4 per cent.19
Country Trade Briefs,
Washington, DC.,
World Bank (available at Tariff structure Levies and charges
http://www.worldbank.
org/wti) and information Goods imported from India under the bilateral Bhutan levies excise duties based on ad-
from the Government of free-trade agreement are not subject to valorem rates on alcoholic beverages only
Bhutan information.
customs duty. For goods imported from third and the rates of duty range from 30 to 75 per
countries Bhutan applies ad valorem duty on a cent. Bhutan sales tax is collected at the point
cost, insurance and freight basis, calculated at of entry (valued based on freight-on-board
entry point. Weighing the most favoured nation price) or at the point of sale (valued based on
tariff rate by a trade partners share in total sales price).

What investors say: licensing and approval

While managers and investors did not report encountering significant difficulties with the
general business licensing procedure, some interview partners described the process of
applying for sector clearances as time consuming and not fully transparent. Given Bhutans
strong record of conservation, a comprehensive environmental clearance is required for those
investment projects which are not exempted. It appears that applications for environmental
clearances can be complex and require detailed documentation for sophisticated and
complex projects. Interviewees have reported significant delays in the investment approval
process due to these requirements. Some rules and regulations were described as unclear
or not comprehensive enough, such as the current regime for the settlement of investment
disputes.
Private sector representatives described the tax system and the procedures for paying taxes
as no impediment to doing business, but rather found the current system to be transparent.
In the area of customs and trade approval, interview partners saw general procedures
as efficient, but noted that substantial tariff and non-tariff barriers were remaining. The
continued reform efforts of the Government to provide an enabling regulatory environment
were consistently rated as very constructive.
Source: UNCTAD.

Table 9. Documents required for trading

Import documents Export documents
1. Bill of lading 1. Bill of lading
2. Certificate of origin 2. Certificate of origin
3. Commercial invoice 3. Commercial invoice
4. Customs import declaration 4. Customs export declaration
5. Import licence 5. Insurance certificate
6. Insurance certificate 6. Packing list
7. Letter of guarantee (for transit through India)
8. Packing list
Source: World Bank Doing Business 2012 Economy Profile Bhutan; Government information.
Note: Based on a hypothetical, domestically owned firm with no foreign ownership and the shipment of a 20-foot dry-cargo container filled with
10 tons of traded goods. Costs reflect all official fees, but do not include customs tariffs and duties or costs related to ocean transport.
For more information see www.doingbusiness.org/methodology/trading-across-borders (last accessed December 2011).

30 I An investment guide to bhutan Opportunities and Conditions 2013

Exit
The investor is free to exit from a venture in
accordance with the Bhutanese law. There
are no limitations posed on disinvestment.
Investors have the right to fully repatriate their
invested capital and any capital gains secured.
Rights of investors
Equal treatment and protection of property
Foreign investments registered under Bhutans
2010 FDI Policy are subject to the same laws,
rules, and regulations as any domestic venture.
Regarding nationalisation, expropriation or any
other measure taken which has the effect of
nationalization and expropriation or otherwise
curtailing the rights of the foreign investor,
the 2010 FDI Policy guarantees that the
Government will carry out such measures only
in a non-discriminatory manner. The law also
provides that in such cases the compensation
paid will be prompt, adequate, effective and fair.
Intellectual property rights protection
Intellectual property rights legislation in Bhutan
covers copyrights, patents, industrial designs,
trademarks, traditional knowledge and plant
variety protection.
Copyrights are governed by the 2001
Copyright Act, which sets out the conditions
to receive domestic copyright protection.
Patents, industrial designs and trademarks
are governed by the 2001 Industrial Property
Act. The Intellectual Property Division of the
Ministry of Economic Affairs is responsible
for the implementation of the Copyright Act
and the Industrial Property Act, and efforts
are underway to ensure that these laws are
operationalized. In this regard, registries now
exist for copyrights, trademarks and industrial
designs. Plant variety protection and traditional
knowledge related to biological resources are
governed by the 2003 Biodiversity Act, which
is administered by the Ministry of Agriculture.
A gene bank has been established and efforts
are currently underway to establish a national
access and benefit sharing policy under which
traditional knowledge will be documented in
order to implement the provisions of the 1992
Convention on Biological Diversity, to which
Bhutan is a party.
Bhutan is a member of the World Intellectual
Property Organization and has signed the
1883 Paris Convention for the Protection of
Industrial Property, the 2000 Madrid Agreement
concerning the International Registration of
Marks, and the 1886 Berne Convention for the
Protection of Literary and Artistic Works.
Dispute resolution
Bhutan is actively working with international
partners to implement global best practices
in dispute resolution. At present, it has not
yet signed the 1966 International Convention
on the Settlement of Investment Disputes
between States and Nationals of Other States
(the ICSID or Washington Convention) or the
1958 Convention on the Recognition and
Enforcement of Foreign Arbitral Awards (the
New York Convention). Bhutan has not yet
incorporated the provisions of the United
Nations Commission on International Trade
Law, Model Law on International Commercial
Arbitration into its national domestic legislation.
Bhutan has signed and ratified the 2005
Agreement on the Establishment of SAARC
Arbitration Council, which is currently being
implemented by the SAARC member States
and will provide a reliable instrument at the
regional level.
As a result, the current framework does not
yet allow access to an international arbitration
procedure with legally binding and enforceable
arbitral awards. However, the 2010 FDI Policy
provides that investors have the option of
ad-hoc dispute settlement using good office,
mediation, conciliation and arbitration, or as
per the mutually agreed framework between
the parties. The policy also provides that parties
also have the option to adjudicate their dispute
before the Royal Court of Justice of Bhutan.
It is not clear, however, to what extent arbitral
awards can be enforced in this framework.
Repatriation of dividends and capital
Bhutans capital account is not fully liberalized.
The Government maintains a strict foreign
exchange regulation scheme. Exchange
An investment guide to Bhutan THE REGULATORY ENVIRONMENT I 31
Safety instructions at a joint venture site of the SKW Metallurgie Group in the industrial zone Pasakha, Phuentsholing, Bhutan.
controls are not applicable to the Indian rupee,
which circulates freely in Bhutan. For investors,
the 2010 FDI Policy includes relevant provisions
on the repatriation of dividends and capital.
Registered foreign investors to Bhutan are
entitled to a foreign currency account with one
of Bhutans commercial banks. Investors are
generally allowed to repatriate any invested
capital as well as capital gains in the original
currency of investment. Subject to the relevant
taxes, net earnings can be repatriated in their
respective currency. For dividends earned
in ngultrum through investment ventures in
the priority service sectors (see appendix 1),
investors can purchase up to US$5 million per
year from Bhutans Royal Monetary Authority
for the first ten years of operations.
Competition policy
Given the countrys small industrial base, Bhutan
currently does not have a comprehensive
legislative framework for competition policy
or formalized antitrust regulations. The
basis for government anti-trust interventions
derives from Article 9 paragraph 10 of the
32 I An investment guide to bhutan Opportunities and Conditions 2013
Constitution: The State shall encourage and
foster private-sector development through fair
market competition and prevent the growth
of commercial monopolies. Two laws (1995
Rules and Regulations for Establishment and
Operation of Commercial Ventures and 2006
Micro, Retail and Wholesale Trade Regulation)
govern domestic commerce, but do not contain
concrete provisions on competition policy. To
remedy to this, the Government with assistance
from UNCTAD has prepared a competition
policy paper which, when adopted by the
cabinet, will be applied by all line Ministries and
sector regulators so as to ensure coherence
between the various economic policies and the
development of a well functioning market.
In this regards, issues of bid rigging and public
procurement have been handled by the ACC,
created in 2006 under the Anti-corruption Act
of Bhutan. The ACC established a committee
comprising all relevant stakeholders to put in
place guidelines for public procurement policies
that will ensure transparency, prevent bid
riggings or illegal practices. In order to prevent
corruption in the construction sector, the ACC,
in conjunction with the Royal Audit Authority
and the Ministry of Finance, revised the
procurement manual and bidding documents.
Bhutans Department of Trade has in the past
taken small-scale, ad-hoc steps to increase
competition and protect Bhutanese consumer
interests. Additionally, Bhutan has several
sectoral regulatory agencies, most importantly
in ICT (Bhutan InfoComm and Media Authority)
and electricity (Bhutan Electricity Authority).
In 2012, the Consumer Protection Bill
was adopted in parliament. This law is
comprehensive and covers the rights and
responsibilities of consumers, misleading
advertising and false representations, safety
standards for goods and services and
guarantees with respect to title, quality and
matters such as manufacturers guarantees.
The law also set up an institutional framework
for enforcement at the national and the local
levels (Dzongkhag).
In the absence of a formalized competition
policy it can be assumed that the Government
scrutinizes potential investment projects in 20 I Note that economy-wide
and sector-specific
terms of their impact on domestic competition fiscal incentives,
during the formal FDI approval procedure. including tax holidays,
are discussed below.
Tax system
Foreign investment ventures are taxed under
the same rules and rates as any domestic
company. The legislative framework for
Bhutans tax system is provided by the Income
Tax Act of 2001 and its amendments as well as
the Sales Tax, Customs and Excise Act of 2000
and its corresponding rules. The principal taxes
include a business/corporate income tax, a
personal income tax, a property transfer tax,
the Bhutan Sales Tax, and a municipal tax.20
Corporate income tax (CIT)
All FDI ventures incorporated under the
Companies Act of Bhutan are subject to
Bhutans CIT. Bhutan levies a 30 per cent tax
across all sectors and income classifications.

Table 10. Summary of tax rates

Statutory rate Tax base
Business income tax 30% Net profit
CIT 30% Net profit
Property transfer 5% Sale value of the property
Rural land tax 0.2% to 2.5% Land value
Personal income tax
below Nu 100,000 0% Income
Nu 100,001250,000 10% of amount by which net taxable income exceeds
Income
Nu 100,000
Nu 250,001500,000 Nu 15,000 plus 15% of amount by which net taxable
Income
income exceeds Nu 250,000
Nu 500,0011,000,000 Nu 52,500 plus 20% of amount by which net taxable
Income
income exceeds Nu 250,000
Nu 1,000,001 and above Nu 152,500 plus 25% of amount by which net taxable
Income
income exceeds Nu 1,000,000.
Bhutan sales tax on domestic goods and services
Hotel services 10% Selling price of goods or services
Cable TV/cinema 30% Selling price of goods or services
Beer 100% Undiscounted price of goods or
services
Cement 5% Selling price of goods or services
Aerated Water 30% Selling price of goods or services
Source: Bhutan Ministry of Finance.

An investment guide to Bhutan THE REGULATORY ENVIRONMENT I 33

Personal income tax
Personal income tax rates for citizens and
residents are at a progressive rate ranging
between 0 per cent and 25 per cent (see
table 10). Taxable income includes:
(a) Salary income including non-licensed con-
sultant fees;
(b) income from real property;
(c) dividend income;
(d) interest income from fixed deposits;
(e) income from cash crop;
(f) income from other sources.
Expatriate employees are fully liable to Bhutans
income tax.
Bhutan sales tax
Sales tax is collected by a sales tax collecting
agent at the point of sale for selected goods/
services and at the point of entry of most goods.
Tax rates range from 5 to 100 per cent (see
table 10), although some goods and services
are zero rated or exempt from taxation.
Fiscal administration and calendar
The tax year in Bhutan runs from 1 January to
31 December. Firms must file their tax returns
(using form CIT-2 for entities incorporated
under the Companies Act) to their regional
revenue and customs office on or before
31 March following the tax year. A unique
taxpayer number, which is allocated at the time
of company registration, must be quoted in all
tax filings.
Vegetable vendor at the green market in Lobesa, Bhutan.
34 I An investment guide to bhutan Opportunities and Conditions 2013
Double taxation agreements
Bhutan does not yet have any double taxation
avoidance agreement. It is a signatory of the
SAARC Agreement on Avoidance of Double
Taxation and Mutual Administrative Assistance
on Tax Matters. Since ratification in 2006, the
Government is actively working to implement its
provisions. To this end, Bhutan has held three
successful rounds of negotiation with India.
Incentives for investors
Fiscal incentives
Any FDI venture incorporated in Bhutan is
entitled to the same incentives that apply to
any domestic business. Specifically, the 2010
Economic Development policy differentiates
between general incentives and sector-specific
incentives that are applicable to the priority
sectors listed below and in appendix 1.
General fiscal incentives for all investors
include:
Custom duty and sales tax exemption for
import of machinery (except spare parts)
directly related to the manufacturing of
a product or utilized in the provision of a
licensed service valid for manufacturing and
service industries until the end of 2019.
Sales tax exemption on import of permissible
raw materials and primary packaging
materials valid for manufacturing industries
until the end of 2019.
Indian Oil petrol station, Bhutan.
Corporate or business income tax exemption
for export earnings in convertible currency by
manufacturing units valid for businesses
established until end of 2015 for a period of
ten years, not valid for ventures in the tourism
sector.
Reinvestment allowance as tax deductible
expense for up to 25 per cent of total
reinvestment valid for all new investments
undertaken until end of 2015.
Research and Development expenditures are
fully tax deductible.
Companies undertaking capital investments to
over-comply with environmental standards are
allowed an income tax rebate of 15 per cent of
upgrade expenditures.
All incentives related to exports of goods or
services are only applicable if the share of value
added is at least 40 per cent.
Non-fiscal incentives
Other than the tax incentives, the 2010 FDI
Policy aims to provide facilitation services and
administrative simplifications for prospective
investors. All sectors and activities prioritized by
the Government are fast tracked for approval
and clearance procedures. For prospective
investors in the areas of tourism and ICT, a
single window clearance scheme has been
established at the Tourism Council of Bhutan
and the Department of Information Technology
and Telecom, respectively. Additionally, the
Government designated FDI focal points across
all agencies relevant to foreign investors. The
Government is currently assessing the need to
formalize its investment promotion activities in
a statutory investment promotion agency.
As described above, the 2010 FDI Policy also
entitles investors to employment permits for a
minimum of five expatriates.
An investment guide to Bhutan THE REGULATORY ENVIRONMENT I 35
Colourful painting of a Bhuddist theme as wall decoration in a building, Bhutan.
Areas of opportunity
Bhutan is welcoming private-sector invest
ments and PPPs in a number of sectors
Tourism
including infrastructure, tourism, information
Bhutans tourism potential lies in its unique
and communications technology, education,
value propositions of pristine and untouched
and agribusiness. Tourism has been one of the
nature, rich and living culture, and mental
main drivers in the development of a vibrant
and spiritual wellness (also see box 5). The
private sector and one of the Governments
countrys all-embracing GNH philosophy is
foremost priorities. In addition, Bhutans
a tourist attraction in itself and the guiding
authorities are open to other innovative project
principle for the Governments high value,
proposals given they are in line with the
low impact tourism strategy, which positions
countrys GNH development philosophy. One
Bhutan as an exclusive destination while
such example from the agricultural sector is the
preserving the countrys natural and cultural
Bhutan Mountain Hazelnut Venture described
heritage. A central feature of this approach is
in box 8.
a price floor that requires every tourist to pay
The following sections provide a description of a minimum daily all-inclusive package rate
some of Bhutans most attractive sectors for of US$250 per day per person. (Package
investment. A full listing of the priority sectors is cost includes: accommodation in a minimum
provided in appendix 1. three star category accommodation, meals,

Taktsang Palphug Monastery, also known as The Tiger's Nest, Bhutan.

An investment guide to bhutan Areas of opportunity I 37

transport, guides and equipment for trekking.)
All aspects of tourism policy and regulation are
coordinated by the countrys central tourism
authority, the Tourism Council of Bhutan (TCB).
The number of visitor arrivals climbed to a total
of some 64,000 visitors in 2011of which non-
regional tourist arrivals accounted for about
37,000. Under its Accelerating Bhutans
Socioeconomic Development project, Bhutan
aims for a strong increase from tourists in the
Asia region, for which new flights are being put in
place. In line with a constantly growing number
of arrivals, revenues from international tourists
have increased accordingly from just about
US$2 million in the late 1980s to about US$48
million in 2011. In 2009, hotels and restaurants
contributed about 2.21 per cent to Bhutans
GDP. Considering the industrys strong forward
and backward linkages, this figure likely
understates the true economic benefit and job-
creation potential of the countrys sustainable
tourism strategy. Overall, fast growth of the
tourism sector gives rise to numerous other
opportunities in complementary services such
as transport, telecommunications, banking,
insurance and other business services.
Arrivals are subject to strong seasonal variation
driven by weather and the occurrence of
cultural festivities, with the majority of tourists
Woman in traditional dress turning prayer mills at the Chimi monastery, Lobesa, Bhutan.
38 I An investment guide to bhutan Opportunities and Conditions 2013
arriving in spring (March to May) and autumn
(September to November). More than 40 per
cent of tourists came from Europe, about a
third from the Asia Pacific region, and some
23 per cent from North America. The number
of tourist arrivals from the Asia Pacific region
has increased recently and is expected to
further grow with the launch in 2012 of direct
flights connecting Bhutan with Singapore and
Mumbai. In terms of single countries, visitors
from the United States still form the largest
group of arrivals, followed by Japan, the United
Kingdom, Germany, and France (see figure 4).
In addition to the more traditional offerings in the
area of cultural tourism, which include guided
tours to Bhutans numerous monasteries and
temples as well as visits to cultural festivals,
the TCB is developing new products and
investment opportunities in the areas of niche
adventure tourism, safari-like ecotourism
and wellness. In 2009, about 90 per cent of
tourists came mainly for cultural or recreational
holidays, and about 10 per cent came mainly
for trekking. Tourists spend an average of
US$330 per person per day and stay for an
average of eight days.
Currently, most of Bhutans hotel capacities
are located in the western circuit around
Paro, Thimphu, and Punakha. The region is
Figure 4. Tourist nationalities by region over time and by country in 2009
Tourist nationalities by region over time
100%
Other
80% Asia and Pacific
60%
North America
40%
20%
Europe
0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: UNCTAD secretariat calculations, based on Tourism Council of Bhutan last supplied figures.
Note: Figures only include international tourists paying in convertible currency.
home to several cultural festivals (Tsechus)
and numerous religious sites, including the
prominent Tigers Nest temple complex.
It is also the region that is easiest to access
for international tourists. In addition, there
are several hiking and cross-country cycling
trails. Accordingly, international luxury hotel
chains have successfully established high-
end properties in this region (see box 6 for an
investor story about Amanresorts). All in all, of
the 119 hotel properties registered with the
TCB in 2010, eight were rated as five-star and
five were rated as four-star accommodations.
Guest relations and logistics were handled by
676 licenced domestic tour operators.
Realizing the great potential of tourism as a
driver for socioeconomic development, the
Government pursues an ambitious and com-
prehensive development strategy. The strategy
aims to further develop the destination Bhutan
as a well-recognized brand, create a supply of
high-end hotels, and provide necessary ame-
nities and infrastructure, particularly aviation.
A cross-cutting development project for the
tourism sector is the Accelerating Bhutans
Socioeconomic Development initiative (see
box 7). To improve the supply of skilled labour
for the tourism sector, the Government has
established the Royal Institute of Tourism and
Top 10 tourist nationalities in 2009
21%
13%
27%
8%
3% 7%
3%
4% 5%
4% 5%
United States Thailand
Japan Australia
United Kigdom Netherlands
Germany Australia
France Netherlands
China
Hospitality in cooperation with the University of
Applied Sciences of Salzburg in Austria. The
institute offers a two-year diploma programme
in tourism and hotel management and aims
at improving vocational training for tourism
related services.
Across all of its sectoral development initiatives
the Government sees foreign investors at
the heart of Bhutans tourism industry and
promotes investments into four- and five-star
hotels and resorts throughout the country. The
Government aims to broaden Bhutans tourism
portfolio not only to include new regions and
seasons, but also to diversify tourist activities.
Investors are particularly encouraged to
focus on nature-based activities, including
adventure tourism (rafting, trekking, mountain
biking, ballooning) and safari-like ecotourism
(camping, wildlife, bird and butterfly watching).
Based on the countrys strong Buddhist
heritage, the TCB also promotes spiritual
wellness and spa offerings. Moreover, there is
scope for development of hospitality services
for meetings, incentives, conferencing, and
exhibitions.
In terms of regions, the Government aims to
promote a more diversified tourist offering in
Bhutans central, south and eastern regions.
An investment guide to bhutan Areas of opportunity I 39
21 I The development of While the current tourist hub of Paro/Thimphu/
five-star hotels with full
ownership requires a
Punakha offers a mix of all products throughout
minimum investment the year, the TCB aims to develop three more
of Nu 200 million; the circuits with differentiated appeal. It envisages
development of four-
star hotels requires a to establish Bumthang and Trongsa as
minimum investment Bhutans cultural heartland with numerous
of Nu 25 million and
a maximum of 74 per
cultural festivals (Tsechus), the ancient Nabji
cent of foreign equity pilgrim site and community-based trekking in
ownership. See 2010 the Jigme Singye Wangchuck National Park,
FDI policy, schedule II
for details. several mountain biking trails, the Jambey and
Kurjey Lhakhang temples, and the Duer hot
spring. The Bumthang region can be accessed
via the newly constructed Bumthang Domestic
Airport (Bathpalathang airport), located close
to the village of Chamkhar.
South of the Bumthang/Trongsa region lies
the Royal Manas National Park, the oldest and
most important protected reserve in Bhutan.
Managed under a comprehensive conservation
plan, the 1,057 square kilometre park is home
to tigers, leopards, rhinos, and elephants as
well as a wide variety of bird species. In this
region, the TCB would like to promote tourism
products with a focus on safari-like ecotourism,
complemented with bird watching and outdoor
activities like river rafting. In addition to the
impressive ecosystem, the region offers hot
springs and a variety of hiking, cycling, and
rafting trails.
Bhutans remote eastern region in Trashigang
and Trashiyangtse can be visited throughout
the year and could serve as an unexplored
hub for community-based tourism offerings
and as untouched retreat for meditation and
wellness. The region is home to the remote
twin villages of Merak and Sakten, where the
semi-nomadic brokpa people herd yaks on the
open pasture. In addition, there are a variety of
hiking trails as well as bird and wildlife viewing
opportunities. Access to this region is possible
via the Yongphula Domestic Airport.
Bhutans current FDI policy allows up to
100 per cent ownership of projects establishing
luxury hotels and resorts (five stars and above)
and up to 74 per cent ownership of projects
establishing four-star hotels. The Government
also allows full foreign ownership for the
development of outdoor sports and recreational
facilities.21
Beyond the general provisions for foreign
investors, the Government provides sector-
specific fiscal and non-fiscal incentives,
including:
Ten-year income tax holiday for high-
end hotels and resorts established until
December 2015;

Box 5. Bhutans rich natural and cultural heritage as an attraction for tourists
Despite being a small country, Bhutan boasts a diverse and rich cultural heritage rooted in Buddhist values and traditions.
Buddhism is vibrant and alive in Bhutan, with religious sites such as monasteries, prayer wheels, and stupas dotting the country.
Paro Taktsang, an elaborate temple complex commonly known as Tigers Nest, is probably the best recognized temple in Bhutan
and has to some extent become a cultural icon for the country.

Tourists can experience Bhutans well-preserved traditions through numerous festivals and rites taking place throughout the
year. Many villages have unique multi-day celebrations for various occasions, most of which include colourful mask dances or
other performances. The most widely known of these festivals is Tshechu, which not only constitutes an important religious
celebration, but also serves as yearly social gathering for villagers.

Bhutans ubiquitous Dzong architecture and traditional clothing are equally proof of the countrys living traditions. After gradually
and carefully opening to the outside world, the preservation and promotion of Bhutans heritage remains one of the central
endeavours of the King. Given the countrys long isolation and well-preserved traditions, it is sometimes described as a mythical
Shangri-La.

The Kingdoms natural heritage is equally impressive, with dramatic valleys and vast woodlands. Bhutans biodiversity, including
its complex forest ecosystems, various streams, and marshlands, is preserved through numerous parks and reserves. In addition
to its unique flora, Bhutans fauna boasts a wide range of species including leopards, Bengal tigers, pandas, langurs, bears and
a variety of deer. Bhutan is also host to 16 bird species that are endangered worldwide, including the white-bellied heron and
the Pallass fish eagle.

Sources: UNCTAD secretariat, Tourism Council of Bhutan.

40 I An investment guide to bhutan Opportunities and Conditions 2013

 Box 6. Investor story: Amanresorts Amankora luxury lodges across Bhutan
Amankora Resorts represents a success story for Bhutans high-end tourist industry. Amankora, which derives its name from
aman Sanskrit for peace and kora Dzongkha for circular pilgrimage operates five lodges throughout Bhutans
western and central valleys. The venture is part of Amanresorts, a chain operating 25 exclusive boutique hotels around the world
in often remote, natural settings. Most of Amankoras roughly 2,000 annual guests hail from the United States and Europe. In
addition to Amankoras wholesale operations, local tour companies bring in an additional 20 to 25 per cent of guests.

Established in 2001 with a US$10 million participation of the International Finance Corporation, the US$26 million venture
now employs about 400 Bhutanese across its five lodges. Its business model capitalizes on the unique value proposition of
Bhutans tourism sector: nature, culture, and wellness. Instead of just visiting a specific lodge, guests are invited to embark on
an individually tailored journey that will visit all of Amankoras properties across Bhutan. Amankora was the first foreign company
allowed to open a series of properties in Bhutan. Based on this network of lodges, guests can tour the numerous cultural or
religious sites, go on treks throughout the country, or visit one of the local communities. The properties also feature wellness,
meditation, and spa facilities influenced by Bhutans spiritual heritage.

Consistent with Bhutans tourism approach of high value, low impact and mandated by the International Finance Corporations
environmental standards, Amankora lodges are built in an ecofriendly manner, tours are designed to minimize the environmental
impact, and hotel operations aim to integrate with the local economy and community.

Source: UNCTAD secretariat interviews, Amanresorts.

Box 7. Accelerating Bhutans socioeconomic development tourism projects

Bhutans Gross National Happiness Commission secretariat targeted tourism as one of six key sectors to stimulate economic
growth and generate jobs, with a sector-specific goal of attracting 100,000 tourists and generating 25,000 direct and indirect
jobs.

Targets include:
Development of two to three additional tourist circuits including the development of new products (see box 5 above);
Establishing a domestic aviation network with airports in Yonphula in the very east of the country, Bumthang in the centre,
and Gelephu in the south;
Identification of around 500 acres (approximately 202.3 hectares) of land in the new tourist circuits. Various models of creating
quality supply are planned, for example, partnerships between communities and private sector. International investors are
envisaged to play a key role in the development of high-end supply;
Expanded tourist amenities like road permit waivers and electronic payment systems;
Review of current tourist accommodation including the introduction of a star-based rating system. As of January 2012, only
accommodations rated 3 stars or above will be allowed to host tourists;
Improved price transparency and flexibility;
Streamlined tourism governance, including through an improved mandate and legal standing of the TCB as the countrys
foremost tourism development body. The reinforced TCB will subsequently develop a comprehensive National Tourism Strategy.

Recent successfully implemented reforms include the launch of credit card facilities, simplified visa processing, the launch of a
new cultural tourism product in the east, and a newly implemented star rating system.
Sources: TCB, the GNH Commission secretariat, Accelerating Bhutans Socioeconomic Development initiative website at www.gnhc.gov.
bt/absd (last accessed December 2011).

Exemption of customs duty and sales tax ares) of earmarked land for tourism develop-
on imports of outdoor equipment, kitchen ment, available for a renewable lease period
equipment, hotel furniture, fixtures and of up to 30 years;
selected goods;
F
 ast-tracked, single-window clearance
Full repatriation of dividends in the currency process for tourism-related projects through
of earnings; the Tourism Council of Bhutan, including for
Up to 500 acres (approximately 202.3 hect- the leasing of new land.

An investment guide to bhutan Areas of opportunity I 41

22 I A sian Development Power generation
Bank 2010, "Preparing
the rural renewable
energy development The country has a vast capacity for
project", appendix A, hydropower generation. With its deep valleys
paragraph 10.
and swift rivers, the countrys topography
lends itself to the development of run-of-the-
river type hydropower projects. Since 1974,
when the first major project was undertaken
in cooperation with the Government of India,
hydropower has become the primary source of
energy for meeting domestic energy demand.
Most importantly, export revenues from
water-generated electricity have become the
main engine of growth for Bhutans economy
and the platform for broad socioeconomic
development. As per the National Revenue
Report of 201011, the hydropower sector
has contributed about 19.3 per cent of the
total revenue. Hydropower continues to be
dominated by Bhutans close ties with India,
which acts as a financier, provides technical
assistance, and imports a vast share of the
produced electricity.
The installed capacity of the existing four
hydropower plants stands at 1,480 megawatts,
which accounts for about 5 per cent of the total
hydropower potential of the country. Actual
generation, however, is strongly dependent on
seasonal water flows. In Bhutans dry winter
season from November to February, when river
flows decrease sharply, generation capacity
drops to about 288 megawatts, while domestic
demand has reached up to 274.24 mega
watts in February 2012. Given that the
increase in domestic demand is expected to
exceed generation very shortly, short-term
government measures to address the issue
of winter peak time shortages are currently
being discussed and include imports from
India, the temporary diversion of streams,
the construction of reservoirs and improved
load balancing. Further, due to construction
of mega hydroelectric power plants, which
require construction power, the government
is finalizing import of power from India during
the lean season through energy banking
arrangement with a neighbouring Indian utility.
Expansion of generation capacity will help to
redress peak time shortages and continue to
drive economic growth and development. The
Royal Government of Bhutan has embarked on
42 I An investment guide to bhutan Opportunities and Conditions 2013
the initiative to develop an additional capacity
of 10,000 megawatts by 2020. Ten projects
will be built through an intergovernmental
loan/grant scheme and through joint ventures
with Indian Public Sector Undertakings, under
the programme to add 10,000 megawatts
of capacity by 2020. Surplus power from
these power plants, that is, after meeting the
countrys internal demand, will be exported
to India. Additionally, Bhutans State-owned
hydropower company DGPC is also involved
in construction of 126 megawatts Dagachhu
Hydroelectric plant which is being build under
the PPP model. (see table 11 for hydropower
projects that are installed and planned for
construction by 2020).
Since Bhutan has abundant hydropower
potential and is not endowed with fossil fuels,
electricity generation by diesel or other non-
renewable sources is negligible. For non-
electric applications, firewood has traditionally
been the main source of energy, with about
1 million to 1.2 million tons being consumed for
cooking and heating every year. Additionally,
liquefied petroleum gas and kerosene are
imported for cooking, heating and lighting.22
The countrys transport sector is solely driven by
imported petrol and diesel. In context of its rural
electrification programme, the Government
currently explores other renewable energy
sources such as solar, wind, and biomass.
Household access rates to electricity remain
low, making electrification programmes
an important development priority for the
Government. As of 2008, only 54 per cent of
rural households had access to electricity. In
mid 2011, the Government provided access to
73 per cent of all households and is on track to
achieve full rural electrification by 2013.
Electricity also accounts for a significant
share of government revenues under the
existing intergovernmental agreement with
neighbouring India. After the first turbine of
the Tala plant was commissioned in 2006,
government hydropower revenue has roughly
doubled and the share of revenue generated
by exports to India has stabilized at over 90 per
cent. Future hydropower projects will continue
to underpin this significant revenue stream (see
figure 5).
Table 11. Hydropower generation capacity installed and planned
Project Installed/projected capacity Status Completion/construction schedule
Chhukha 336 installed 1998
Basochhu 64 installed 2004
Kurichhu 60 installed 2002
Tala 1020 installed 2006
Puna-I 1200 under construction 20082016
Puna-II 1020 under construction 20102017
Mangdechhu 720 under construction 20102018
Sankosh 2560 projected 20122021
Amochhu 540 projected 20122019
Kuri-Gongri 3400 projected 20142023
Chamkharchhu-I 770 projected 20122021
Bunakha 180 projected 20122018
Wangchhu 570 projected 20122020
Kholongchhu 600 projected 20122019
Source: Bhutan Royal Monetary Authority, Annual Report 20092010; Government information.

Figure 5. Government hydropower revenue, by generation source (left axis) and market
(right axis, percentage of total hydropower revenue)

16000 100
Ngultrum million, current

14000
% share of export revenue (right axis)
12000 90

10000

Chukha plant Kurichhu plant

8000 80
Basochu plant Tala plant

6000

4000 70

2000

0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Source: UNCTAD secretariat calculations, based on Royal Monetary Authority of Bhutan Annual Reports 2006/2007 and 2010/2011.

Infrastructure of numerous industrial facilities as well as

residential and non-residential buildings. The
Bhutans rapid socioeconomic development construction sector represented about 12 per
and urbanization in recent years put pressure on cent of overall economic activity in 2009 and
the countrys physical infrastructure, requiring construction related commodities continue
expansion and upgrading of the countrys to account for a significant share of Bhutans
transport network and the construction trade balance.

An investment guide to bhutan Areas of opportunity I 43

Given the lack of both technical capacity as
well as skilled labour in domestic construction
companies, numerous opportunities open up
for foreign investors in the design, construction
and operation of large-scale infrastructure and
general building projects. Significant demand
exists for projects in the areas of airport
infrastructure, highways, bridges, viaducts,
elevated highways, tunnels, ropeways/
cable cars, logistics facilities such as dry
ports, land reclamation, geotechnical and
hydraulic engineering, sewerage infrastructure,
water management, residential buildings,
and recreational facilities. Bhutans rugged
topography, widespread surface erosion, and
extreme weather conditions pose significant
construction challenges and open opportunities
for specialized international contractors.
In 2010, the Government formalized a
framework for the implementation of infra
structure projects through PPP models. The
framework provides for a transparent and
competitive procurement process following
internationally accepted practice. In addition,
the framework allows the Government to
choose PPP investors as strategic partners
without selection process for ventures with
Landscape with paddy rice fields in the Paro valley, Bhutan.
44 I An investment guide to bhutan Opportunities and Conditions 2013
up to 26 per cent foreign ownership. It also
prescribes that government-owned companies
such as DHI, the sovereign development
and holding company, have to follow fair and
transparent bidding procedures similar to
the provisions set out in the framework. The
framework provides flexibility with regards to
the contractual design and partnership model
(including but not limited to build-operate-
transfer, build-own-operate-transfer, build-
operate-lease-transfer). The Government is
also working on development of PPP Policy
with the World Banks support.
Irrespective of the specific contractual
arrangements, all fiscal and non-fiscal incentives
granted to investors under the provisions of the
2010 Economic Development Policy and the
2010 FDI Policy are fully applicable.
Agriculture and related
industries
There is scope for a variety of foreign direct
investments in the commercial agricultural
sector and related industries, including in
Figure 6. National agricultural production in 2010, by commodity

Of which
Potato 56.2%
Chili 8.6%
Of which Vegetables, Ginger 5.2%
spices, oilseeds Other 30.0%
Paddy 49,9% 27%
Maize 40.1% Cereals
Wheat 3.4% 48%
Other 6.6%
Of which
Fruits
25% Mandarin orange 72.2%
Apple 10.1%
Areca nut 10.0%
Other 7.7%

Source: UNCTAD secretariat calculations, based on data from Bhutan Ministry of Agriculture and Forests/Food and Agriculture Organization
CountrySTAT database.

organic farming, biotech, poultry and dairy
farming, floriculture, apiculture, and horticulture.
While the countrys physical infrastructure
and a lack of skilled labour are still concerns
for larger-scale commercial operations, a
significant number of farmers already engage
in the production of cash crops such as fruits
(mainly mandarin oranges and apples) and
potatoes. Figure 6 provides an overview of
agricultural commodities produced in 2010.
The commercialization of agriculture is one
of Bhutans primary development goals and
investors can expect the Government to be very

Box 8. The Mountain Hazelnut Venture a large-scale agricultural FDI project

The Mountain Hazelnut Venture, incorporated in July 2010, imports hazelnut plantlets from neighbouring China in order to
produce and process a large number of high-quality hazelnuts for export. The Venture aims to invest about US$30 million for
planting around 10 million hazelnut trees in an area of 20,000 acres (8093.7 hectares) in Bhutans remote eastern districts.
When the project reaches maturity in six to eight years it could produce and export between 20,000 to 40,000 tons of hazelnuts
annually. This would represent between 3 to 5 per cent of the global market, which produced about 726,400 tons of hazelnuts in
2010/2011 and is currently dominated by Turkey and Italy. By 2020, hazelnuts could account for a significant share of Bhutans
exports.

The true value of the project, however, lies beyond its commercial operations. The venture, which is managed by a team of less
than a dozen expatriates and Bhutanese nationals, is aligned with Bhutans development priorities and might eventually benefit
between 10,000 and 15,000 households in the countrys most remote areas. The Venture works closely with rural communities
to plant the hazelnut trees. It also trains and supports local farmers in tending and harvesting the steep slopes. The Venture
then buys back the nuts at a guaranteed price and transports them to a central processing facility, which will be set up in one
of Bhutans industrial hubs.

Overall, the Government of Bhutan and the Mountain Hazelnut Ventures chairman and founder Daniel Spitzer, an American social
entrepreneur, hope to address the issue of ruralurban migration by enabling farmers to generate a reliable and sustainable
income without having to leave their traditional communities. The project also hopes to reduce soil degradation and improve
rural market access, both in terms of infrastructure as well as financing. In addition, the Venture pledged to contribute 20 per
cent of net earnings to a Bhutanese trust fund.

The Mountain Hazelnut Venture is an example for an innovative investment project that builds on Bhutans natural environment,
which is climatically favourable for the cultivation of hazelnuts, abundant labour, and very supportive Government.
Source: UNCTAD secretariat interviews, Forbes Asia Magazine.

An investment guide to bhutan Areas of opportunity I 45

supportive of relevant FDI project proposals.
An example is the Mountain Hazelnut Venture
described in box 8. The Government is also
undertaking institutional reforms to facilitate
investments, including an improved framework
for agricultural financing and a comprehensive
overhaul of the countrys land use policy that
would enable investors to gain easier access
to large parcels of arable land.
As one of the Governments priority sectors,
investments in the agricultural sector are
eligible for sector-specific fiscal incentives.
These include an exemption from sales tax
and import duties for all farm machinery and
any other agricultural inputs as well as a
10-year income tax holiday for commercial
farming and related processing of its products
units established until end 2015. FDI projects
engaging in commercial farming of organic
crops are eligible for a 15-year tax holiday.
Information and
communications technology
In addition to mainstreaming ICT as a tool
to improve public service delivery and
governance, IT and IT-enabled services (IT/
IT training at the Rigsum Institute of Information Technology and Management (RIIT&M), Thimphu, Bhutan.
46 I An investment guide to bhutan Opportunities and Conditions 2013
ITES) feature prominently in the Governments
private-sector development initiatives. The
sector can effectively capitalize on Bhutans
strengths of high political stability, abundant
and sustainable electricity, low unit labour
costs and an English-speaking population.
Opportunities for investors include outsourcing
of data centres, software development,
business process outsourcing in the areas of
back office operations, transaction processing,
content development, design and animation,
geographic information system services, and
related sectors, both for export as well as for
domestic consumption. Further opportunities
might arise in up- or downstream services.
As part of the Governments efforts to create
a favourable environment for foreign IT
investors, the Thimphu TechPark has been
developed as a flagship ICT project near the
countrys capital. The project was designed
and financed in cooperation with the World
Bank and is currently being implemented as
a PPP between the Governments holding
company DHI and a property development firm
from Singapore. The first development phase,
providing 50,000 square feet of office and data
centre space across a five-acre campus, was
completed in November 2011. The complex
is precertified with a Leadership in Energy and
Environmental Design platinum rating. Later
stages aim to provide 250,000 square feet
spread over 18 acres. The parks infrastructure
includes fully serviced offices and warm shell
space with power and mains redundancy, by
lease or by licence, and a variety of business
facilities such as a shared conference
centre, videoconferencing facilities, and a
centralized online platform for printing, postal
and transport services. To support smooth
operation of the tech park, the Government
continues to improve the countrys general
telecommunication infrastructure, including
through the opening of a second international
telecom gateway in the South of the country. In
the longer term, the Government considers to
set up further technology parks.
Parallel to the development of physical ICT
infrastructure, the Government seeks to build
a strong local talent base. It aims to increase IT
literacy across schools by mainstreaming ICT-
related elements into secondary and tertiary
curricula, training teachers, and setting up
computer labs in schools. Under the auspices
of the Royal University of Bhutan, efforts are
under way to set up an IT Entrepreneurship
Development Programme as well as a distance
learning system for IT skills. Additional training
arrangements already exist with the private
sector, including with global technology firm
Infosys, which trains Bhutanese software
engineers at their corporate university in
Mysore, India. In total, about 1,200 Bhutanese
have received professional education or
training in IT skills.
The Government has fast tracked the business
licensing process and put in place numerous
incentives to attract international investors. IT/
ITES ventures established in context of the tech
park are granted full foreign ownership, ventures
outside the park are granted a maximum
foreign ownership of 74 per cent. A single
window clearance process for investors has
been established with Bhutans Department of
Information Technology and Telecom. Beyond
the general incentives granted to foreign
investors under the provisions of the 2010
Economic Development Policy and the 2010
FDI Policy, the Government provides sector-
specific fiscal and non-fiscal incentives for ICT,
including:
T
 en-year tax holiday for the operation of IT/
ITES businesses within the tech park and
exporting 80 per cent of their products or
services;
E
 xemption of customs duty and sales tax on
imports of computers, related hardware and
software;
R
 epatriation of dividends in the currency of
earnings.
The Government also aims to further improve
the regulatory regime for IT/ITES businesses,
particularly in the areas of data security, privacy
and intellectual property. The Government
is working with the relevant international
organizations to revise its intellectual property
law (see previous chapter). In addition, efforts
are under way to strengthen the role of the main
industry body, the International Technology
Association of Bhutan, with a view to improve
the dialogue between the private sector and
the Government. At the time of writing, 72
domestic IT/ITES firms were represented
through the Association.
Education
With its political stability, central location in
South Asia, close ties to India, English-speaking
population, and natural and cultural attractions,
Bhutan is positioning itself as a knowledge
hub and an academic centre for the region.
Prominent in these efforts is the Education
City Project, a 1,000-acre (approximately
404.7 hectares) campus designated to host
secondary and tertiary academic infrastructure,
residential units, cultural and recreational
facilities, and a sports complex. The campus
will be strategically located in Wang Sisina,
about 30 minutes away from both Thimphu
and Paro. DHI Infra, the Governments
infrastructure development company, is in
charge of the project, which will be developed
in cooperation with an international investor
through a design-build-finance-operate-own-
transfer PPP model.
The Government hopes to cater to national and
international demand for higher education and
hence aims to attract both domestic as well as
international investors both as tenants for the
An investment guide to bhutan Areas of opportunity I 47
Headquarters of the Royal University of Bhutan, Thimphu, Bhutan.

Education City and to establish themselves
independently. In India, demand for high-quality
higher education strongly outstrips supply,
drawing a significant number of Indian college
graduates abroad while attracting international
universities to set up shop in the region. Bhutan
is currently soliciting expressions of interest
from leading universities as well as international
tertiary education and vocational institutions.
Targeted thematic areas of studies include
biodiversity and environmental science, climate
change, sustainable development, health and
nursing, hospitality and tourism, hydropower
and energy, religious studies including Buddhist
philosophy, politics and democracy, and the
study of the GNH.
specific fiscal and non-fiscal incentives,
including a tax holiday of 10 to 15 years from
the actual date of operation for institutions
established until 31 December 2015, an
exemption of customs duty and sales tax for
educational materials such as textbooks and
teaching aids, a simplified visa regime for
developers and prospective students, and a
one-stop shop for project development.
Government priority sectors
A full listing of the priority sectors is provided in
appendix 1.

In addition to the incentives granted to foreign

investors under the provisions of the 2010
Economic Development Policy and the 2010
FDI Policy, the Government grants sector-

48 I An investment guide to bhutan Opportunities and Conditions 2013

Appendices
Appendix 1. Priority Sectors, restrictions
and prohibitions

Priority sectors
Production and manufacturing
Sector Minimum Maximum Other
investment (US$) foreign equity requirements
Agro-based production:
i. Organic farming
ii. Agro processing
iii. Biotechnology
iv. Poultry
v. Fisheries 364,000 74% None
vi. Floriculture
vii. Health food
viii. Animal feed
ix. Apiculture
x. Horticulture
xi. Dairy
Forest-based production 910,000 74% None
Energy: Based on Sustainable Hydropower Policy (2008)
i. Hydropower
ii. Solar and wind
Based on Renewable Energy Policy (draft)
iii. Other renewables
Manufacturing of water-based products 910,000 74% None
Other manufacturing:
i. Electronics
ii. Electricals 910,000 74% None
iii. Computer hardware
iv. Building materials

Young woman at a traditional loom in the National Institute for Traditional Arts and Crafts Zorig Chusum, Thimphu, Bhutan.

An investment guide to bhutan Appendices I 49

Services
Sector Minimum Maximum Other
investment (Nu) foreign equity requirements

Education:
i. Primary
3.64 million 100% High end
ii. General secondary
iii. Higher

Technical and vocational institution 455,000 74% None

Health:
i. Specialized medical services
ii. Specialized dental services
3.64 million 100% None
iii. Specialized medical laboratory services
iv. Specialized diagnostic-imaging services
v. Specialized traditional medical services

Internationally known
Hotels/resorts five stars and above 3.64 million 100%
hotel chains

Four-star hotels 455,000 74% None

Infrastructure facilities:
i. Multi-dwelling residential buildings
ii. Non-residential buildings
iii. Outdoor sports and recreation facilities
such as golf courses, botanical gardens
and others
iv. Highways, bridges, tunnels and roads
v. Airfield runways/airports PPP Model wherein
vi. Industrial estates, industrial parks facility returns to
3.64 million 100%
vii. SEZs, agricultural economic zones Government on expiry
viii. IT parks of term
ix. Economic cities
x. Knowledge cities
xi. Sport cities
xii. Health/wellness centres
xiii. Dryports
xiv. Land reclamation
xv. Other similar activities

Established firms
Research and development 182,000 100% employing minimum of
5 experts

Head office services 91,000 100% None

IT and IT-enabled services: 91,000 100% None

i. IT/ITES inside IT Parks and SEZs
ii. IT/ITES outside IT parks and SEZs 455,000 74% None

Established firms
Consultancy services 182,000 74% employing minimum of
5 experts

As per Financial
Services Act.

Financial services 455,000 51% Note: RMA does not

plan to grant new
commercial banking
licences until 2013

50 I An investment guide to bhutan Opportunities and Conditions 2013

Services (cont.)
Sector Minimum Maximum Other
investment (Nu) foreign equity requirements

Construction services 1.82 million 74% None

PPP model wherein

Waste management:
facility returns to
i. Recycling of domestic waste 455,000 74%
Government on expiry
ii. Waste management services
of term

PPP model wherein

Water supply and management, urban water facility returns to
455,000 74%
treatment and supply Government on expiry
of term

Transportation and related services:

PPP model wherein
i. Green and non-fossil fuel-based
facility returns to
transportation 455,000 74%
Government on expiry
ii. Mass transportation
of term
iii. Railways, ropeways, cable cars

All sectors and activities not listed are generally open for foreign investments with a maximum foreign
equity share of 74 per cent and a minimum project investment of US$910,000 for manufacturing
and US$455,000 for services. No foreign ownership is permitted in the following sectors:

Prohibitions
Sector

Media and broadcasting

Distribution services including wholesale, retail and micro trade

Mining for sale of minerals in primary or raw form

Hotels rated three stars and below (based on criteria of the Ministry of Tourism)

General health services

Industries that do not meet the Rules of Origin requirements

Activities that violate any relevant laws of Bhutan

Activities that threaten national security and public order

Activities that have harmful effects on public health, environment and Bhutanese morals and culture

Arms, ammunitions and explosives

Production of hazardous chemicals (defined by the National Environmental Commission)

Activities based on imported waste

Production, display and sale of pornographic materials

Gambling and betting

Tobacco and tobacco-based products

An investment guide to bhutan Appendices I 51

Appendix 2. List of approved FDI projects in Bhutan

As of November 2012
Company name Activity Contact address

G4S Security Services Private security G4S Security Services (Bhutan) Pvt. Ltd.
(Bhutan) Pvt. Ltd. services P.O. Box: 740
Lower Chhubachu
Thimphu
Tel-333444; Fax-324837
Saint Gobain Ceramic Silicon carbide Saint Gobain Ceramic Materials Bhutan Pvt. Ltd.
Materials Bhutan Pvt. Ltd. Point of contact: Mr. Avijit Sarkar (Finance Manager)
P.O. Box: 275
Plot No. L-14
Pasakha Industrial Estate
Pasakha
Tel-261166/261212; Fax-261339
SKWTashi Metal and Alloys Calcium Silicon SKWTashi Metal and Alloys Pvt. Ltd.
Pvt. Ltd. Point of contact: Mr. S.N. Golder
TCC Complex
P.O. Box: 382
Phuentsholing
Tel-25296; Fax-25296
Met Trade Bhutan Ltd. Aluminium Met Trade Bhutan Ltd.
and tin Point of contact: Mr. Sukesh Kumar Jain (CEO)
P.O. Box: 358
Phuentsholing
Tel-254001; Fax-254009
East West Company Pvt. Ltd. Hotel East West Company Pvt. Ltd.
Point of contact: Mr. Ugyen D. Dorji (Director)
P.O. Box: 1376
Thimphu
Tel-17139999; Email: udorji@gmail.com
Haven Resorts Pvt. Ltd. Hotel Haven Resorts Pvt. Ltd.
Points of contact: Mr. Varim Srimachota and Mr. Rangsee Tuengpant
Thachukha
Dop Shari
Paro
Tel-270999; Fax-270888
Bhutan Eco Ventures (P) Ltd. Hotel Bhutan Eco Ventures (P) Ltd.
Points of contact: Dasho. Topgyal Dorji / Mr. S.K. Giri
P.O. Box: 222
Paro
Tel-271597; Fax-271513 (Tel-252650; Fax-252282)
Ugen Ferro Alloys Pvt. Ltd. Ferro silicon Ugen Ferro Alloys Pvt. Ltd.
Point of contact: Mr. Rishi Prasad Agarwal
P.O. Box: 126
Dekilingka Apartment, 1st Floor, Room No. 202, Pelkhil Lam
Phuentsholing
Tel-253971/251698; Fax-253970; email: ufal@druknet.bt
Quality Gases Pvt. Ltd. Oxygen and Quality Gases Pvt. Ltd.
nitrogen Point of contact: Mr. Jamyan Loden (Managing Director)
Plot No. U-II, Upper Terrace,
P.O. Box: 197
Pasakha Industrial Estate, Pasakha
Tel-261254; Fax-261256

52 I An investment guide to bhutan Opportunities and Conditions 2013

As of November 2012 (cont.)
Company name
Bhutan Resorts Pvt. Ltd.
Dralha G.G. Steel Pvt. Ltd.
Samden Tech Pvt. Ltd.
Druk PNB Bank Ltd.
Thimphu TechPark Pvt. Ltd.
Nak-Sel Boutique Hotel and
Spa Pvt. Ltd.
Druk Presidency Pvt. Ltd.
Zimdra Foods Pvt. Ltd.
Lhaki Steels and Rolling
Pvt. Ltd.
Himalayan Safari Lodges
Pvt. Ltd.
Bhutan Hotels Pvt. Ltd.
Activity Contact address
Hotel Bhutan Resorts Pvt. Ltd.
Point of contact: Mr. John E. Reed (General Manager)
P.O. Box: 831
Thimphu
Tel-331333; Fax-331999
Steel Dralha G.G. Steel Pvt. Ltd.
Point of contact: Ashi Deki Choden (Chairman)
P.O. Box: 105
Industrial Estate
Phuentsholing
Tel-252284/253809; Fax-252696
Internet Samden Tech Pvt. Ltd.
services P.O. Box: 1342
Chang Lam
Thimphu
Tel-333333/333335; Fax-333331
Banking Druk PNB Bank Ltd.
Norzin Lam near Main Traffic
Thimphu
Tel-324497/325936; Fax-333156; email: corporate@drukpnbbank.bt
IT park Thimphu TechPark Pvt. Ltd.
Point of contact: Mike Holland (CEO)
P.O. Box: 633
Thimphu
Tel-17959699; email: enquires@ttp.bt
Hotel Nak-Sel Boutique Hotel and Spa Pvt. Ltd.
Point of contact: Sonam Wangmo (CEO)
P.O. Box: 641
Langang Geog
Paro
Tel-323270/322965; Fax-322960; email: rainbow@druknet.bt
Plaster of Paris Druk Presidency Pvt. Ltd.
6 KM Norbuling
Samdrup Jongkhar
Tel-251164; Fax-251074; email: gmj.joshi@gmail.com
Dairy products Zimdra Foods Pvt. Ltd.
Point of contact: Mr. Satyen Parekh (Managing Director)
P.O. Box: 336
Phuentsholing
Tel-252188/251245; Fax-253002
Email id: zimdrafood@druknet.bt
Steel Lhaki Steels and Rolling Pvt. Ltd.
Apartment No. 1, Maysel Apartment
Phuentsholing
Tel-251640/17608566/17647105; Fax: 252909
Email id: lhakisteels@yahoo.com
Hotel Himalayan Safari Lodges Pvt. Ltd.
P.O. Box: 1213
Thimphu
Tel-336319/17617360 17111222; Fax-327392
Email id: ynorbu@druknet.bt
Hotel Bhutan Hotels Pvt. Ltd.
Point of contact: Ms. Yeshey Tshogay (Managing Director)
P.O. Box: 1570
Thimphu
Tel-337200; 17113008
An investment guide to bhutan Appendices I 53
As of November 2012 (cont.)
Company name Activity Contact address
ManidheepaMohsin Hotels Hotel ManidheepaMohsin Hotels and Resorts
and Resorts Pvt Ltd Point of contact: Ms. Rinzin Pem
C/o Managing Director,
Bhutan National Bank,
Thimphu
Dagachhu Hydro Power Hydropower Dagachhu Hydro Power Corporation Ltd.,
Corporation Ltd. Dagana.
Bhutan Concast Pvt. Ltd. Billets/Ingots Bhutan Concast Pvt. Ltd.
P.O.Box: 261
Samdrup Lam
Phuentsholing
Bhutan H2O Pvt. Ltd. Water bottling Bhutan H2O Pvt. Ltd.
Susuna, Naja Geog
Paro.
Neethsel Pvt. Ltd. Pharmaceutical Neethsel Pvt. Ltd.
Toribari
Chhukha.
Koufuku International Pvt. Dairy Mr. Kinzang Tobgay
Ltd. Associate Director
Druk Holding and Investment
P.O. Box No. 1127
Thimphu
Shaun Communication BPO/KPO Mr. Sunny Jaiswal
Bhutan Pvt. Ltd. Shaun Communication Bhutan Pvt. Ltd.
Thimphu TechPark Pvt. Ltd.
P.O. Box:
Thimphu
AdrukA Pvt. Ltd. Furniture and Mr. Ugyen Dhendup
interior fill-outs Changaydhaphu
Post Box No.: 105/1648 (GPO)
Thimphu
Source: Ministry of Economic Affairs / Department of Industry.

Grocery in Paro, Bhutan.

54 I An investment guide to bhutan Opportunities and Conditions 2013

Appendix 3. Sources of further information

Ministry of Economic Affairs

Department of Industry
Foreign Direct Investment Division
P.O. Box 141
Thimphu, Bhutan
Phone: +975-2-321733
Website: www.moea.gov.bt

Government agencies Ministry of Foreign Affairs

P.O. Box 103
Ministry of Finance Gyalyong Tshokhang
P.O. Box 117 Thimphu, Bhutan
Thimphu, Bhutan Website: www.mfa.gov.bt
Phone: +975-2-322223/322514/322271
Fax: +975-2-323154 Ministry of Labour and Human Resources
Website: www.mof.gov.bt P.O. Box 1036
Thonsel Lam, Lower Motithang
Tourism Council of Bhutan Thimphu, Bhutan
Post Box 126 Phone: +975-2-333867
Thimphu, Bhutan Fax: +975-2-326731
Phone: +975-2-323251 Website: www.molhr.gov.bt
Fax: +975-2-323695
Email: info@tourism.gov.bt Druk Holding and Investments
Website: www.tourism.gov.bt P.O. Box 1127
Thimphu, Bhutan
Royal Monetary Authority of Bhutan Phone: +975-02-336257/336258
P.O. Box 154 Fax: +975-02-336259
Thimphu, Bhutan Email: info@dhi.bt
Phone: +975-2-323111 Website: www.dhi.bt
Fax: +975-2-322847 National Environment Commission
Website: www.rma.org.bt P.O. Box 466
Thimphu, Bhutan
Ministry of Education
Phone: +972-2-323384/324323/326386
P.O. Box 112
Fax: +975-2-323385
Thimphu, Bhutan
Email: secretary@nec.gov.bt
Phone: +975-2-325325 Website: www.nec.gov.bt
Fax: +975-2-325183
Website: www.education.gov.bt Gross National Happiness Commission
Secretariat
Ministry of Information and Communications P.O. Box 127
P.O. Box: 278 Thimphu, Bhutan
Thimphu, Bhutan Phone: + 975-02-325192/325850/321053
Phone: +975-2-322144/322567/323017/324439 Fax: +975-02-326779
Fax: +972-2-329207/326180 Email: info@gnhc.gov.bt
Website: www.moic.gov.bt Website: www.gnhc.gov.bt

Department of Information Technology and Telecom National Land Commission

P.O. Box 482 Secretariat
Thimphu, Bhutan P.O. Box 142
Phone: +975-02-323215/322925 Thimphu, Bhutan
Fax: +975-02-328440 Phone: +975-02-321743 / 321745
Email: invest.it@ditt.gov.bt Fax: +975-02-321746
Website: www.dit.gov.bt Website: www.land.gov.bt

An investment guide to bhutan Appendices I 55

Business associations Selected development partners
Bhutan Chamber of Commerce and Industry (BCCI) United Nations System in Bhutan
P.O. Box 147, Doebum Lam United Nations House
Thimphu, Bhutan. P.O. Box 162
Phone: +975 2 322742 / 324254 Thimphu, Bhutan
Fax: +975 2 323936 Phone: +975-2-334570
Email: bccihrd@gmail.com Fax: +975-2-328526
Website: www.bcci.org.bt Email: registry.bt@undp.org
Website: http://www.unct.org.bt
Bhutan Association of Tour Operators
Doebum Lam, Post Box 938 SNV Netherlands Development Organization
Thimphu, Bhutan P.O. Box815
Website: www.abto.org.bt Langjophaka
Thimphu,Bhutan
Hotel Association of Bhutan Tel: +975 2 322900
Mr. Ugyen Wangchuck, Sectretary Fax: +975 2 322649
Phone: +975 177113344 Email: bhutan@snvworld.org
Website:http://www.snvworld.org/en/ countries/bhutan/
Association of Bhutanese Industries
Pages/default.aspx
P.O. Box 54
Phuentsholing HELVETAS Swiss Intercooperation and Swiss
Bhutan Agency for Development and Cooperation
Phone: +975 5 251340 P.O. Box 157
Fax: +975 5 251341 Dungkar Lam, Lower Mothithang
Email: abi@abibhutan.com Thimphu, Bhutan
Website: www.abibhutan.com Phone: +975-2-322870
Fax: +975-2-323210
IT Association of Bhutan
Email: helvetas@druknet.bt
Phone: +97 02 335668
Phone: itab@druknet.bt Japan International Cooperation Agency (JICA)
Website: www.itab.bt P.O. Box 217
Thimphu, Bhutan
Phone: +975-2-322030
Fax: +975-2-323089
Consulting and law firms
Useful websites
PricewaterhouseCoopers Pvt. Ltd. India Government Information Portal
Sucheta Bhawan www.bhutan.gov.bt
11 A Vishnu Dighambar Marg
New Delhi 110 002 Ministry of Economic Affairs
India www.moea.gov.bt
Phone: +91 11 2323-2916/2321-0891-99/ 41150000
Fax: +91 11 2321-0594/96 Ministry of Finance
www.mof.gov.bt
UC Associates Law Firm
Lhaki Building National Statistics Bureau
Post Box No. 249 www.nsb.gov.bt
Thimphu, Bhutan
Tourism Council of Bhutan
Deloitte India www.tourism.gov.bt
7th Floor, Building 10 Tower B
Gross National Happiness Commission
DLF Cyber City Complex, DLF City Phase II
www.gnhc.gov.bt
Gurgaon 122002, India
Phone : +91 (0124) 679 2000 uensel Newspaper Online
www.kuenselonline.com

Bhutan Chamber of Commerce and Industry

www.bcci.org.bt

56 I An investment guide to bhutan Opportunities and Conditions 2013

Appendix 4. Business hours

General business hours

Summer timing (MarchOctober): 9 a.m. to 5 p.m.
Winter timing (NovemberFebruary): 9 a.m. to 4 p.m.

Appendix 5. Major laws and regulations affecting

foreign investment

Name/title (of the law) (year) Description of coverage of the law

Foreign Direct Investment Policy (2010) Current economic and FDI policy framework,
Economic Development Policy (2010) including most important provisions for investors
Foreign Direct Investment Rules and Regulations (2012)

Enables large-scale infrastructure projects to be

2010 Framework for Private Participation in Infrastructure
developed in a PPP model

Companies Act (2000) Law under which FDI projects would be incorporated

Sales Tax, Customs and Excise Act (2000) Relevant provisions on taxation
Rules on the Sales Tax, Customs and Excise Act (2000)
Income Tax Act (2001)

Labour and Employment Act (2007) Relevant labour laws, including provisions on
Occupational Health and Safety Rules (2006) minimum wage.

Environmental Assessment Act (2000) Environmental standards

Regulation for Environmental Clearance of Projects (2002)
Regulation on Strategic Environmental Assessment (2002)
Natural Environment Protection Act (2007)
Waste Prevention and Management Act (2009)

Land Act (2007) Relevant regulations on land acquisition and

Building Rules (2002) construction activities.

Copyright Act (2001) Intellectual Property laws.

Industrial Property Act (2001)

Foreign Exchange Regulations (1997)

Bankruptcy Act (1999) Other provisions that might be relevant in the
Anti-corruption Act of Bhutan (2006) operation of an FDI venture.
Bhutan Information Communications and Media Act (2006)
Immigration Act (2007)

Source: UNCTAD secretariat, based on various Government resources.

An investment guide to bhutan Appendices I 57

Memorial Chorten, Thimphu, Bhutan.
Bibliography
Government of Bhutan
Bhutan Electricity Authority (2011). Annual Report 2010/2011. Thimphu, Royal Government of Bhutan.
Gross National Happiness Commission (1999). Bhutan 2020: A Vision for Peace, Prosperity and Happiness.
Thimphu, Royal Government of Bhutan.
Gross National Happiness Commission (2009). Tenth Five Year Plan 20082013, Volume 1: Strategic Policy
Perspectives and Dimensions and Sectoral Objectives [Poverty Reduction Strategy Paper] and Volume 2:
Programme Profile. Thimphu, Royal Government of Bhutan.
Gross National Happiness Commission (2011). Tenth Five Year Plan 20082013: Mid Term Review Report.
Thimphu, Royal Government of Bhutan.
Ministry of Agriculture and Forests (2011). Bhutan Renewable and Natural Resource Statistics, November 2011.
Thimphu, Royal Government of Bhutan.
Ministry of Education (2011). Annual Education Statistics 2011. Thimphu, Royal Government of Bhutan.
Ministry of Finance (20072011). National Budget Reports, various issues from 2007/08 to 2011/12.
Thimphu, Royal Government of Bhutan.
Ministry of Information and Communication (2011). Transport 2040 Integrated Strategic Vision Draft.
Thimphu, Royal Government of Bhutan.
Ministry of Information and Communications (2011). Annual InfoComm and Transport Statistical Bulletin 2011.
Thimphu, Royal Government of Bhutan.
Ministry of Labour and Human Resources (2011). 9th National Labour Force Survey Report 2011.
Thimphu, Royal Government of Bhutan.
National Statistics Bureau (20052010). Bhutan National Statistical Yearbook, various issues from 2005 to 2010.
Thimphu, Royal Government of Bhutan.
National Statistics Bureau (2010). National Account Statistics 2009. Thimphu, Royal Government of Bhutan.
Royal Monetary Authority of Bhutan (20002009). Annual Report, various issues from 2000/01 to 2009/10.
Thimphu, Royal Monetary Authority.
Royal Monetary Authority of Bhutan (20092011). Selected Economic Indicators, various issues from December 2009
to June 2011. Thimphu, Royal Monetary Authority.
Tourism Council of Bhutan (2010). Annual Report Bhutan Tourism Monitor 2010. Thimphu, Tourism Council of
Bhutan.

Third-party sources
Asian Development Bank (2010). Asian Development Outlook 2010: Macroeconomic Management Beyond the Crisis.
Manila, Asian Development Bank.
Asian Development Bank (2011). Asian Development Outlook 2011: SouthSouth Economic Links.
Manila, Asian Development Bank.
Economist Intelligence Unit (2011). Bhutan 4th Quarter 2011 Main Report and August 2011 Main Report.
London, The Economist Intelligence Unit.
International Monetary Fund (2010). Bhutan Assessment Letter for the World Bank. (September 2010).
Washington DC, International Monetary Fund.
International Monetary Fund (2010). Bhutan: Poverty Reduction Strategy Paper Joint Staff Advisory Note.
IMF Country Report No. 10/181 (June 2010). Washington DC, International Monetary Fund.

An investment guide to bhutan Bibliography I 59

International Monetary Fund (2011). Bhutan: 2011 Article IV Consultation Staff Report. IMF Country Report
No. 11/123 (June 2011). Washington DC, International Monetary Fund.
International Monetary Fund (2011). International Financial Statistics Database. Available online at http://www.imf.org/
external/data.htm (last accessed December 2011, subscription required).
International Telecommunication Union (2010). World Telecommunication/ICT Indicators Database 2010,
available online at http://www.itu.int/ITU-
D/ict/publications/world/world.html (last accessed December 2011, subscription required).
Freedom House (2011). Freedom in the World 2011, Country Report Bhutan. New York, Freedom House.
The World Bank (2009). World Trade Indicators Database, available online at
http://go.worldbank.org/7F01C2NTP0 (last accessed December 2011).
The World Bank (2010). Bhutan Investment Climate Assessment Report: Vitalizing the Private Sector,
Creating Jobs. Volume 1 Summary Report and Volume 2 Complete Report. Washington DC, The World Bank.
The World Bank (2010). Country Partnership Strategy for the Kingdom of Bhutan for the period FY11-14.
Report No 56577-BT. Washington DC, The World Bank and International Finance Corporation.
The World Bank (2011). Bhutan Economic Update, September 2011. Washington DC, The World Bank.
The World Bank (2011). Doing Business 2012: Doing Business in a More Transparent World,
Economy Profile Bhutan. Washington DC, The World Bank and International Finance Corporation.
The World Bank (2011). World Development Indicators Database. Available online at
http://data.worldbank.org/data-catalog/world-development-indicators (last accessed December 2011).
The World Bank and Bhutan National Statistics Bureau (2010). Small Area Estimation of Poverty in Rural Bhutan.
Technical Report, August 2010. Thimphu, Royal Government of Bhutan / National Statistics Bureau.
The World Bank and the International Finance Corporation (2009). Enterprise Surveys Bhutan Country Profile 2009.
Washington DC, The World Bank.
United Nations (2011). The Millennium Development Goals Report 2011: Main Report and Statistical Annex.
New York, United Nations Inter-Agency and Expert Group on the MDG Indicators.
United Nations (2011). United Nations Commodity Trade Statistics Database (United Nations COMTRADE).
Available online at http://comtrade.un.org (last accessed December 2011).
United Nations Conference on Trade and Development (2011). Trade Analysis and Information System
(UNCTADTRAINS), accessed through World Integrated Trade Solution (WITS). Available online at
http://wits.worldbank.org (last accessed December 2011).
United Nations Conference on Trade and Development (2011). UNCTADStat Online Database, available online at
http://unctadstat.unctad.org (last accessed December 2011).
United Nations Conference on Trade and Development (2011). World Investment Report 2011: Non-Equity Modes
of International Production and Development. New York and Geneva, United Nations.
United Nations Development Programme (2011). Bhutan National Human Development Report 2011 Sustaining
Progress: Rising to the Climate Challenge. Thimphu, Royal Government of Bhutan / Gross National Happiness
Commission.
World Health Organization (2011). Global Health Observatory Data Repository, available online at
http://apps.who.int/ghodata/ (last accessed December 2011).

Photo credits
UNCTAD
Page 58: Stephen Shephard

60 I An investment guide to bhutan Opportunities and Conditions 2013