Private And Public Sector Role In Modern Bhutan Economics Essay

Ending its ego imposed isolation in the sixtiess, Bhutan ‘s cardinal development activities day of the month back merely about 20 old ages. However, it has embarked on a far-reaching development scheme based on the end of hiking “ Gross National Happiness ” a holistic construct uniting stuff wellbeing with an person ‘s religious, emotional and civilization well-being.

The existent economic growing has averaged around 7 % a twelvemonth since the 1970s, ensuing in an addition in Gross Domestic Product ( GDP ) per capita from $ 51 in 1961, so the lowest in the universe to $ 830 by 2004 and it reached at $ 1320.0 in 2008 was one of the highest GDP in the Asiatic Region. Get downing from a practical absence of economic substructure and societal service in the early 1960s, the state has made enormous advancement in presenting basic services.

As the private and public sector are the two custodies of the economic system. The function of the private sector in the procedures of the production turns the economic system paralyzed. Role of the both sector is required to give drift to the economic growing of the state. All economically advanced states gave particular attending towards the enlargement of the private sector. It does non increase production but besides create employment chances to the people.

However, the authorities is looking to private sector to supply investing in support of growing and employment chances for a turning figure of Bhutanese school departers. The authorities recognizes that, while it has long been the chief engine of economic growing. This state of affairs must bit by bit germinate with an progressively greater trust upon private sector activities as the chief motor for the development. Nowhere is this true with respect employment coevals. Therefore, this paper will fundamentally speak on the function of private and public sector drama in economic development every bit good as indexs of economic and their part towards GDP and besides the restraints face in development of private and public sector in Bhutan.

Table of contents

Sl no.

Torrid zones

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Brief history of private and public sector development of Bhutan



Index of economic development of Bhutan



Contribution of public and private sectors towards GDP of Bhutan



Employment part from both the sectors



Constraints in development of private and public sector in Bhutan









The populace sector is the portion of the economic system where goods and services are provided by the authorities or local governments. These goods and services are sometimes provided free and in other instances consumers have to pay a monetary value. The purpose of public sector activity is to supply services that benefit the populace as a whole. This is because it would be hard to bear down people for the goods and services concerned or people may non be able to afford to pay for them. The authorities provides these goods and services at a cheaper monetary value than if they were provided by a net income devising company. As a citizen, everyone is the portion to the proprietor of such public goods and services like roads, infirmaries and schools.

However, assorted goods tried to give ballad formation for the populace sector in economic system. Therefore, it chiefly helps in bring forthing employment chances and even it gain foreign exchange through export and it farther assist in advancing competition in the private sector, covering with negative outwardnesss and redistributing income and balance regional development and societal justness in state. In Bhutan, public sectors chiefly help to bridge the spread erected by income inequalities, to accomplish the ends of self trust and minimising regional disparities in the state.

The private sector consists of concern activity that is owned, financed and run by private persons. These concerns can be little houses owned by merely one individual, or big multi-national concerns that operate around the universe. In the instance of big concerns, there might be many 1000s of proprietors involved. The end of concerns in the private sector is to do a net income.

For illustration, if single owns private house in state, the member bears the cost and bask the existent benefit. In general, they are meant to profit everyone in society. In add-on, the Government acknowledges the private sector as the chief engine of future income growing and employment coevals to the young persons. The chief aim of the private sector in Bhutan is chiefly to increase productiveness within Bhutanese society, employment in state through publicity of endeavors development information engineerings and it help in enabling services sectors and it even better to entree to finance. Therefore, this mini undertaking aims to concentrate on the function of public and private sectors play efficaciously in economic development of Bhutan ( land of boom firedrake ) at current cost.

Brief history of private and public sectors in Bhutan

In the 1950s, the state and its economic system remained closed and stray. The lone private sector was in agribusiness and trade. Today, the private sector includes touristry, fabrication, conveyance, information communications engineering ( ICT ) , and the power intensive industries. The journey has been fast compared to other economic systems but this celerity has necessitated the authorities to go on playing a close parent function of all time since. Prior to the outgrowth of the private sector, few enterprisers existed. They would purchase little measures of basic goods from India, transporting these goods on animate beings or their ain dorsums to Tibet to interchange with wool and salt, which they so sold in Bhutan.

Every facets of development are predicated to the ability to derive entree to goods and services. The geomorphology of a state continue to work much as it did a century and half ago, except in those countries where roads have reached, ensuing to a widening spread between the rich person and have non.

Resulting into the economic growing has, in bend, fostered private sector development at this minute in the state. At present Bhutan ‘s private sector is runing in a broad scope of activities from power intensive industries such as Hydropower, cement, ferroalloys and Ca carbide ; a scope of light fabricating industries in countries such as fruit processing, some excavation companies which mine and process locally available merchandises ; a group of proverb factory and other up-stream processing industries around the wood industry, a group of service industries back uping the touristry sector ; and a fast turning building sector. The Royal Government recognizes that, while it has long been the chief engine of economic growing, this state of affairs must bit by bit germinate with an progressively greater trust upon private sector activities as the engine for development.

Bhutan had experience the modern system of economic system until at the terminal of ego imposed policy of isolation in state since 1961. The male parent of modern Bhutan, the late male monarch Jigme Dorji Wang chow ended the age old policy and bought the state into the international mainstream whereby the economic liberalisation is the of import reform taken by the late male monarch besides other socio-political reforms. The true modern Bhutanese economic system started with origin of First Five Year Plan ( 1st FYP ) in 1961. Today Bhutan is in the advancement of the tenth FYP and the state has achieved so much within half a century. In modern Bhutan the populace sector has contributed so much to the growing of economic system since Bhutan is welfare orientated state. The beginning of 1st FYP was the first measure towards transforming the rural swap economic system to modern economic system. The province undertook ventures in the fabrication and service sector there was no possible in the private sector during those yearss, ( be aftering committee, 1996 )

Indexs of Economic Development of Bhutan

The most frequently used index of development is a sustained rise in the existent per capita income. In recent old ages, nevertheless, this index has been found desiring in certain critical respects. For this ground, non income indices have been devised. One such index is the physical Quality of life index. Another one is named “ basic needs attack to development ” . The most recent one is the Human Development Index which includes income as one, but non the lone component in bespeaking development.

The followers are the indexs of economic development of Bhutan.

Per capita income:

Per capita income of Bhutan was estimated as $ 150 in twelvemonth 1988. As of March 2006, Bhutan per capita income more than doubled, to $ 1,321.Bhutan nevertheless in the olden times was much poorer than India but today with the increasing economic growing Bhutan ‘s per capita income is about twice as India. The per capita income in the twelvemonth 2008 was $ 1900 ; this galloping per capita income indicates the economic development.

National income

Harmonizing to Simon Kuznets, and other economic experts, respects national income instead per capita income is more utile for bespeaking development. A rise in national income enlarges absolute size of an economic system, even if the per capita income does non raise much. Such an enlargement indicates big chances for farther growing. Therefore, national income is one of the most of import indexs of economic development.

Human development index

Human development index ( HDI ) is socio economic steps that focus on three dimensions of human public assistance.

Life anticipation

Table1: Bhutan ‘s life anticipation at birth


Life anticipation at birth

















Beginning: hypertext transfer protocol: //

The above statistics in table 1 tendency to picture the positive tendency in the life anticipation. In the twelvemonth 2003, life anticipation rate was 53.58 which subsequently drastically increased to 66.71 in the twelvemonth 2010. Higher the life anticipation means positive index of economic development. It all indicates the development in wellness, instruction and other societal services.

Literacy rate

In this new epoch of modern universe, instruction is most imperative indexs of development and strong arm to last. Literate human population will do momentous part to the economic development of any state. Therefore, higher criterion of instruction and literacy rate is the grade of socio economic advancement of the state.

Other steps

It includes followers:


With tonss of developmental activities taking topographic point in Bhutan the poorness rate has been worsening as many people are occupied in some of the occupations. While Bhutan ‘s poorness analysis studies besides show that, the poorness rate in Bhutan has decreased from 31.7 per centum to 23.2 per centum from 2004 to 2007.


The features of Bhutanese economic system were described as the coincident growing in both unemployment and the economic system. Now with many private sectors coming up and with revised policy unemployment has reduced from 4 % in 2009 to 3.3 % in 2010.The figure shows that the unemployment rate has dropped by 0.7 % .This clearly indicate the development of a Bhutanese economic system.

Contribution of public and private sector towards GDP of Bhutan

Private sector part to economic growing in Bhutan is really important. In 2007, the agribusiness farm animal and forestry sector was surpassed by the electricity sector for the first clip as the most of import subscriber to the national economic system. The latter now contributes near to a one-fourth of the GDP or 23.4 % as compared to 18.6 % for the agribusiness, farm animal and forestry sector, and 13.5 % and 6.4 % for the building and fabrication sectors severally in 2007. As in past old ages, Bhutan ‘s major trading spouse was India with 92 % of Bhutan ‘s imports and exports over the 9th program period coming in from and traveling to India. Exports are dominated by sale of hydro-electricity and mineral merchandises to India, of which electricity histories for around half of entire exports with an increasing inclination. Hence, hydropower has for over the last two decennaries constituted the major national export and gross earner and today the sector contributes near to a one-fourth of GDP and about 40 % of entire national gross

Table 2: Gross Domestic Capital Formation in Current Prices ( Million Nu. )

In Current Monetary values









Govt. machinery & A ; Equipment









Private machinery & A ; Equipment









Govt. Construction









Private Construction









Beginnings: National Accounts Statistics ; 2000-2007 & A ; Statistical Yearbook of Bhutan 2010.

Table 2b. gross domestic capital formation at current monetary value.




























Fig 1. Gross domestic capital formation of both sectors.

The above statistics in table 2 and figure 1 tend to picture the existent Gross Domestic Capital formation of both the sectors. During 2009, the gross domestic capital formation increased from Nu.14435 million in 2008 to Nu.18262 million in 2009. The comparatively high capital formation was due to figure of big building activities undertaken within the state. The import of machinery and equipment by authorities and private sectors for the development activities besides boosted the capital formation.

Employment part from both the sectors

Table 3: shows figure of individual engaged in industrial sectors by employment position and sex, Bhutan, 2000 ( female ) .



All female





Private company






Government Company






Beginning: Statistical Yearbook of 2010

Table 4: shows the figure of individual engaged in industrial sectors by employment position and sex, Bhutan, 20009 ( male ) .



All male





Private Company






Government Company





Beginning: Statistical Yearbook of 2010

Fig.2. represents the employment part from both sectors ( male and female ) .

The above tabular array 3 and table 4 represents the female and male employment part

From both private and authorities sector of Bhutan ‘s financial twelvemonth 2000. Which show that

Government contributes more employment as comparison to private sector. The early 2000,

the private sector has non grown to the full like today that wise it has less part.

Troubles in the development of private and public sectors in Bhutan

The economic development of private and public sectors in Bhutan reemphasizes that sustainable economic growing uninterrupted to stay a major challenge but the economic growing is mostly financed by external assistance. The financial shortage is high, balance of payment state of affairs is weak, public debt is mounting and foreign exchange militias as hard to prolong as it is non but through exports. 1.

A little domestic market1

The little graduated table market restricts the development of both the sectors particularly private sectors. It is because Private sectors are net income motivated ; they need big graduated table of local market to sell their merchandises. Therefore private every bit good as public sector faces trouble in developing.

2. Inadequate infrastructure1

Bhutan is rich in natural resources, but lakes substructure which is really necessary to transport out all developmental activities. Therefore it may do outgo to transcend Revenue as everything has to be imported. Thus such factors discourages private and public sector to develop.

3. High transit cost1

Exporting and importation is one the challenge face by the sectors. As the cost of transit is high to export or import due to geographical location of our state. Therefore it makes hard for both the sector to develop.

4. Lack of direction skills1

Since Bhutan economic system is at nascent phase, it lakes enterpriser and experience individual in the direction of concern. Such thing Constraints the development of these two sector because many expertness are required to run the concern.

Foot notes:

1Ministry of Planning ( 1996 ) .


In this new and dynamic planetary environment, the function of the private sector and public sector is going of all time more of import. The private sector provides most income-generating activities and job-creation chances, and is progressively going the drive force for economic growing and poorness decrease.

Although we have made considerable advancement in developing our economic system, it is still in its babyhood. It is non yet to the full monetized, reflected in the estimation that merely two-thirds of the money that could be expected in an economic system of our size is really in circulation. The authorities has already done much to advance economic growing and the private sector. The construction of production is still comparatively shallow and the gait of private sector development in both urban and rural countries continues to dawdle behind outlooks. Given current rates of private sector growing, particularly in the crucially of import fabrication sector, it may take longer than expected before it can presume the function of engine of growing and is able to make the productive employment required to absorb a quickly turning work force

To unleash its growing potency, the cardinal restraints to private sector development must be identified and acted upon. This is the chief challenge of the Ninth Five-Year Plan. Of all the restraints that the private sector faces – skilled labour deficits – are considered the most binding. The challenge will be to make a better lucifer between the accomplishments that the Bhutanese workers possess and the demands of private sector concerns.