Bhutan walks down the ladder on trade
Bhutan’s huge national income from the sale of hydropower to India is almost consumed by the increasing trade deficit, which has grown by 3.5 times in the last fiscal year than that of a year before.
Increased trade deficit from Nu 4 billion to Nu 14 billion within a period of one year is clear indication of the country’s growing dependency on import for livelihood. The projection of developing a self reliant economy is unlikely to be attained as projected by the new economic policy looking at the way country’s gradual dependence on India for most products except hydropower.
Bhutan has in the last few years proposed to develop its economy based on hydropower ignoring the importance of developing other essential industries. The government has invested its time and energy to exploit the hydropower potential at best to tap the opportunity of increasing power demand in the sub-continent. The power market has not remained limited to India but the country has also signed agreement with Bangladesh for power trade very recently.
Investment in other sectors remains in dark. Bhutan’s immense potentials on mineral and timber besides agriculture remain ignored and untapped. However, prioritization of only one sector over others would in long tern turn Bhutanese economy dead. A country must not rely on one particular industry to make is economy vibrant – its collapse will invite disasters that are beyond repair.
Even with huge hydropower plants coming up, the government statistics released recently say this sector, along with agriculture, has not performed well to improve self sufficient economy. Import was triggered by 35 percent intermediate and capital goods compared to 7 percent last year. Intermediate and capital goods accounted for 69 percent of the total imports as a result of increased investment in construction industry.
On the other hand, mineral and mineral based-industries contributed to increase the export figures to 3 percent from 2 percent in the previous fiscal year. Mineral’s share in export is around 40 percent. Bhutan exported Nu 12 billion worth of mineral in the last fiscal year.
Mineral share in export is vivid evidence on potentiality of the country’s mineral resources. Very few mineral ores have been exploited under Indian supervision whose correct mineral extract potentials are little known to Bhutan. It is essential that Bhutan develop refinement plants within the country to reap benefits of the abundance of its mineral resources. Accepting the fact that mining companies are the major source of earning for the government in last fiscal year, additional attention is required here too.
Mineral industries not only boost exports to downsize the trade deficit but also increase national revenue that will help diminish the budget deficit. To note in short, Bhutan’s budget deficit has been increasing. In the last fiscal year, only 52 percent of the total budget outlay was covered by the internal revenue while foreign assistance covered around 34 percent. Mineral and agricultural industries will have double benefits for Bhutan, should they be taken seriously – pulling down trade and budget deficits.
When the government picked up hydropower as priority sector for investment, the essential sector like agriculture and agriculture-based industries has moved down the ladder by 6 percent. Its share in total exports has decreased from 8 percent in the previous fiscal year to 7 percent in the last fiscal year.
Around 93 percent of the Bhutanese trade is with India followed by 3 percent with Bangladesh and 3 percent with Hong Kong. Until recently when Bangladesh showed interest to buy power from Bhutan, India was the only market for hydropower produced from Bhutanese mega plants. India’s longer term plan to shift into nuclear power energy will eventually turn Bhutanese power plants useless. As per Bhutan-India agreement on hydropower, the mega plants, many of which are under construction, will be fully owned by Bhutan only after few decades, or when Bhutan pays back the loans. It is likely that India might, by then, be ready with nuclear plants for power generation and no more in need of power supply from Bhutan. Bhutanese strategist might not have realised the fact that hydropower market will collapse in India, if not in the sub-continent, when nuclear plants in India start operation.
It is at this point that Bhutan’s economy is certain to face accident. To avoid it, the only way out would be to diversify the trade, pay more attention to national industries which are beneficial for the country in longer run and which earn consistent incomes. To abide by what new economy policy underlines, to be self sufficient, it is essential that all sectors are given equal importance, made parallel investments and all daily needs are met with internal productions as far as possible.