Last week, the Cabinet approved the much awaited Economic Development Policy for Bhutan. The private sector has been waiting for the final document. But as of now the government has been tight-lipped about EDP.
The document, when in its draft form, raised a lot of discussions. The draft had highlighted massive changes in loosening the license regime.
New IT parks, according to the draft, will get a tax-holiday for 15 years. To boost small and medium industries, cottage startups will not have to pay rent for the land they receive. In the manufacturing sector, the import of raw materials could get excise duty exemptions. To boost environment friendly industries, businesses that became more eco-friendly could get a corporate tax money back of 15%.
Tourism in the eastern part of the country is expected to get a major boost with the document proposing a 50% cut on the royalty. The tourism proposal and tax exceptions for industries in remote areas would definitely change the economic landscape of eastern Bhutan, which has always lagged behind in development.
One major area of contention was the clause on commercial borrowings for the private sector from sources outside the country, like loans from international financial institutions including the Asian Development Bank. The private sector was quite excited with this clause, as the local financial market was small and could not fund for huge projects. But there were objections from the Royal Monetary Authority as the central bank feared that if the companies that borrow from outside could not raise enough money to pay back the loan, the situation would pose a danger to Bhutan’s foreign reserves.
But such a scenario would only arise if the government stands guarantee for the foreign loans. And private sector sources had earlier said no such borrowings would depend on the government for guarantee. According to a presentation made by the economic affairs ministry secretary, Sonam Tshering, during the graduate orientation program in September, the goals of the Economic Development Policy are the following: achieve economic self reliance, generate employment, harness and add value to natural resources sustainably, promote entrepreneurship, promote industries that build the Brand Bhutan image, diversify the economic base, and to increase and diversify exports.
The draft plan is quite ambitious. According to the document, the Bhutanese economy will be self reliant by 2024. The GDP per capita will be US$ 5000 and domestic revenue will be US$ two billion. The hydropower revenue will rise to US$ 1 billion and unemployment will drop to less than one percent.
But with reports that certain clauses may have been changed in the final document, a lot of speculations are in the air. Since the Cabinet has approved the document, the government needs to make the document public. Rising speculations will only send negative messages.
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