The Development Of Private And Public Sector Industries Economics Essay

Public sector is defined as the portion of an economic system that is owned by the whole populace and operates for its benefit whereas private sector is that portion of economic system that is owned by single and operated for their personal benefits. The development Bhutanese econonmy was started with the origin of planned economic development in 1961.

The development of private and public sector industries are confronting legion challenges for their development. It comprises many troubles like fiscal inadequate, substructures, deficiency of skilled work force, market and entrepreurship. Therefore, public and private sectors had play indispensable function in the formation of employment for immense group of population to accomplish the end of the autonomy, to understate the regional disparities and helps to gain foreign exchangethrough export and it besides facilitate in the decrease of poorness will ensue in the betterment of populating criterion of the society as a whole.however, GDP growing rate acclerated to 6.7 parts in 2009. Where the sector of the economic system has contributed to the GDP. However, the most critical economic index in Bhutan chiefly deals with the GDP per captia income, measuring of proverty, and literacy.

The private sector in Bhutan contributes about 63 per centum of entire employment and public sector with 34 % of the work force and non-governmental with 3 % of the work force. Therefore, it shows the mark of the growing of economic system as comparison to the passed decennaries in both the sectors. It must besides promote the private every bit good as public sectors to look beyond service oriented activities that promise immediate returns to longer term investings that take advantages of chances bing both inside and outside state. However, in order to better private sector in Bhutan the authorities must understate the strick ordinance to do usage of resources in sustainable manner. It will assist our embryologic private proprietors to do usage of their latent accomplishments and the authorities must promote labour and taxation policies like revenue enhancement inducements for the labor in the state.


Table of Contentss

Page No.





Role of the Public & A ; Private Sector

Foreign Exchange Earning

Community Development

Research and Development

Role of Private Sector

Fillings of Gaps:

Creation of employment chances



Brief History of Private and Public sector in Bhutan



Indexs of economic development of Bhutan

GDP Per Capita

Literacy rate

Life Expectancy

Balance of Payment ;

Human Development Index



Contribution of Public and Private Sector towards GDP ( GNI ) of Bhutan



Employment part from both the sectors



Troubles in development of Private and Public sector in Bhutan









Public sector is defined as the portion of an economic system that is owned by the whole populace and operates for its benefit. All public goods are those goods whose benefit is jointly consumed and non challenger in ingestion and whose benefits are non-exclusive. As a citizen, everyone is the portion to the proprietor of such public goods and services like roads and schools. Curriculum and Professional Support Division ( 2005 ) points out that public sector are those industries that are owned and managed by the authorities of the state. However, assorted goods tried to give ballad formation for the populace sector in economic system. In Bhutan, public sector chiefly helps to bridge the spread erected by income inequalities, to accomplish the ends of self trust, and minimising regional disparities in the state. On other side, Harmonizing to Wilson & A ; Clark ( 1997 ) private sector is that portion of economic system that is owned by single and operated for their personal benefits. Whereas in private sector the single owns goods for their private addition and their benefits for their improvement. For illustration, if single owns private nine 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, to make employment chances 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 assignment will try in way to discourse the function of the private and public sectors in the economic development of Bhutan. It will chiefly concentrate on the brief history of these two sectors and besides identifies some of the indexs of economic development in Bhutan followed by turn toing the parts made by these two sectors towards GDP ( GNI ) and employment in Bhutan. To decision by turn toing some of the troubles in development of private and public sector in Bhutan.

Role of the Public Sector in Bhutan

Public sector is the engine of economic development is the of import tool of accomplishing self-relaince. The followers are few most of import function of the populace sector in Bhutan.

Redistribution of Income

The populace sector is the portion of the economic system that provides societal public assistance and equal chances for all in the state. The proviso of employmentopportunities by public sector to the pooer subdivision of the society would assist to increase the fringy leaning to salvage for lower income groups. The mean disposable income would increase. Therefore, the populace sector would assist in redistrubing the income and minimising the income spread the rich person and have nots.

Community Development

Many public sectors have developed to supply all the societal comfortss to the people. Public endeavor has construct roads and other substructure installations to associate other parts of the degree Celsius ountryside where such installations are really indispensable in bettering community life.

Research and Development

Most of the public endeavors are engaged in high engineering and hold industries, they have undertaken research and development programmes in a immense manner. Public sector has laid strong base for self trust in the field of proficient know-how, care and fix of sophisticated industrial workss, mechinery and equipment in the state.

Role of Private Sector in the state

Fillings of Gaps:

At the clip of isolation, there existed serious spreads in the industrial construction of the state, peculiarly in the Fieldss of heavy industries such as fruit treating units, cement industires, hydropower, ferroalloys and Ca carbide, etc. Public sector has support to make full up these spreads. This really basic substructure required for rapid industrialization has been built up, through the production of strategic capital goods in the state. The populace sector has well widened the industrial base of the state at this present epoch

Creation of employment chances

Private sector in Bhutan is at this period of was embryologic phase but it has created maximal occupations compare to the populace sector in state to undertake unemployment job. Private sector in the state have contribute a batch towards the betterment of working and populating status of working by functioning as a employer compared to public sector. Peljor argued that 63 % of Bhutanese population is employed in the private sectors, followed by the authorities with 24 % , 10 % in public sectors and 3 % in non-governmental administration harmonizing to the Curriculum and Professional Support Division, 2005.

Infrastructure Development

The growing of private sector is an index of addition substructure in the economic system. The puting up of industries requires heavy investing in the substructure like conveyance and communicating. The societal services like instruction, proper H2O supply and sanitation would come up with addition figure of private sectors. Therefore, the private sector development would convey overall development in infrastructural installations.

Brief history of private and public sectors in Bhutan

Bhutan has an embryologic and comparatively under-developed private sector even today. Prior to opening up of the economic system in the 1960s the lone private sector activity was merely agriculture supplemented by some trading activities and its other work. After that the transmutation of the economic system was dramatic with a rapid growing with the constitution of a basic substructure installations, and the development of hydropower sector over the old ages and economic have grown steadily. 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 fruit processing unit, and a fast turning building sectors. The Royal Government recognizes that it is 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 of development. Merely with the origin of 6th Five Year Plan, ( 1987-1992 ) maximal attending focused in Bhutan was on the function of private sector development in economic system and declared that the private sector should take an progressively of import function in furthering economic growing through expansion of the state ‘s revenue enhancement base and through engagement chiefly in economic development activities. Even the denationalization of public sector endeavors was given increased precedence during 7FYP. ( 1992-1997 ) . For illustration, like the authorities go oning to reassign all commercial endeavors to the private sector as consequence in increasing efficiency and higher profitableness compare to public sector. Over the old ages, economic have grown increasingly and that fostered private sector development alternatively of public sector development. Today, Bhutan ‘s private sector is runing in an extended scope of activities in the state at present twenty-four hours. Bhutan had experience the modern system of economic system until at the terminal of ego imposed policy of isolation in state since 1961. The wise sovereign late male monarch Jigme Dorji Wangchuck 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 modern Bhutanese economic system started with origin of First Five Year Plan 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 and consequence in the formation of public sector. In short, public sector in Bhutan was started chiefly with the constitution the 1st Five Year Plan in 1961according to the Curriculum and Professional Support Division, 2005.

Indexs of the economic development in Bhutan

A broad assortment of indexs can be used to characterize the difference between the developed and developing part of the economic system, nevertheless, merely a little choice is taken into the consideration as follows.

GDP Per Capita

Normally GDP per capita income is measured at the changeless monetary value and GDP in 2010 is Nu. 63,073.44. GDP is calculated in changeless national currency per individual in the state. Bhutan ‘s existent GDP growing acclerated to 6.7 parts during 2009. Actually, the public presentation of the economic system was progressive during 2009, and on other side, GDP growing rate is below the precceding five old ages mean growing rate of 7 % since 2003. In 2009, state ‘s per capita GDP income was recorded at US $ . 1852. At the sametime, unemployment rise to 4 per centum from 3.7 per centum in 2008 in state harmonizing to the National Statistical Bureau, 2009.

Literacy rate

The grownup literacy is defined as the per centum of those aged 15 and above is able to read and compose a short, simple, and statement in their mundane life. ( Bhutan 2010, Data Sheet ) . Another most of import index of economic development is instruction. The more educated human resources will do more part to the economic development of the state. Today our literacy rate stands merely at 59.5 % ( Bhutan 2010. Data Sheet ) . Therefore, higher qualitity of instruction and literecy rate is the topographic point of socio economic advancement of the state.

Life Expectancy

The extreme index of economic develoment is life expextancy where it deals with the demographic characteristics. The life anticipation as of 2010 shows that overall is 68.9, for male life anticipation is 68.4, and followed by female with 69.4. ( Bhutan 2010, Data Sheet ) . Superior the life anticipation is vigorous index of the economic development in wellness, instruction, and other societal services. So, it clearly plays a critical function in bespeaking the economic development in the economic system.

Measure of poorness

The National Statistical Bureau reference that the poorness line as Nu. 1096.94 to a individual a month, of which Nu. 867 as for nutrient and the balance as non nutrient outgo. Food poorness concern rate in Bhutan has demand from 31.7percent to 23.2 per centum between 2004 to 2007. ( Poverty Anaylsis, 2007 ) .

The poorness decrease is the chief purpose of the 10th Five Year Plan and the authorities mark to cut down poorness to 15 per centum by the terminal of the program. ( Tenth Five Year Plan, 2008-2013 )

Human Development Index

The 3rd most economic index is human development index it chiefly deals with the development of the socio-economic steps, non-monetary factors and besides includes the life anticipation, demographic and length of service of the people in the state. It largely indicates the obliteration of poorness, to bridge the spread of inequalities, advancement in the underdevelopment parts in the state, self esteem, political freedom and sustainable development in state are the basic constituent concerned in economic development However. At the sametime, human development index greatly helps in three magnitudes of human well being in the state as following

Longevity- life anticipation

Knowledge- Access to modern instruction.

Stardand of living- GDP per capita income in the state.

Contribution of Private and Public sectors towards the GDP of Bhutan

Private sector part to economic growing in Bhutan is really important. This is due to rigorous authorities control over private sector concern activities, deficiency of entree to recognition, unequal legal model for private sector activities, limited entrepreneurial accomplishments, and an inefficient government-controlled fiscal system that does non run into private sector recognition desires. It was hence critical to beef up the fiscal establishments in many basic ways, to travel toward a market-based system as distinct from a centrally administered system, to privatise fiscal establishments, and to set up an effectual banking ordinance system. However, the cardinal jobs in the fiscal sectors for the sulky development of private sectors in Bhutan includes deficiency of competition and market-orientation, unequal institutional capacities, and narrow entree by little and average endeavors to recognition, particularly in rural countries in Bhutan.however, the tabular array below show the Gross Capital Formation of Constant monetary value ( Nu. In million )

Table: 01, Gross domestic capital formation in changeless monetary value ( Nu. in Million )

In current monetary values







Machinery & A ; equipments




























Gross fixed capital formation







Change in stock







Gross domestic capital formation







Beginning: National Accounts Statistics Report 2000-2007

From the above reference tabular array, it shows the Gross Domestic Capital where it demo the upward tendency boulder clay 2004 but the Gross Capital Formation in 2000 sums to Nu. 9,512 million, on other side, the rate of capital formation has been worsening after 2002. The comparative analysis reveals that the private sector has major portion in Gross Capital Formation. For case, private building dominates public building in their part towards Gross Domestic Capital Formation. The Gross Capital formation has ne’er been changeless, it fluctuates in assorted financial twelvemonth. From above tabular array, the capital formation has been increasing from 2000 to 2004, once more it decreases in 2006 and afterlife shows the upwards tendency from 2007.

Employment part from both the sectors

The employment figure is delicate in Bhutan ; it is likely that around 60000 people are employed in the formal sector. Of these, about 22000 are employed in public sector establishments of which 14,258 are employed in the civil service. These imply that about 60 per centum of entire formal sector occupations are in the private sector in the state. However, of the entire 60000 formal sector occupations, it is anticipated that 50 per centum are held by non-nationals and as the portion of non-nationals in public sector establishments is likely to be really small the bulk of these 30000 non-national workers are employed in the private sector ( Labor Market Information Bulletin, 2008 ) .

Table 02: entire no of people employed under different sector





























NGO ” Second














Beginning: Labor Market Information Bulletin ( 2008, p.24 )

Here the tabular array above it explained that the entire figure of population employed under the different sectors. In the twelvemonth 2000-2003, authorities sector has employed more with 1177, followed by the cooperation 316 and private 96 and NGOs merely 6. During this period other sectors like privat was less than turning phases, and it does non run into it demand. Government on the other had encouraged private sector to turn, in the twelvemonth of 2006/7.private sector has dominate over other with entire population employed was 1300.followed by cooperation 311 and authorities 141. Peljor argued that 63 % of Bhutanese population is employed in the private sectors, followed by the authorities with 24 % , 10 % in public sectors and 3 % in non-governmental administration ( Making Jobs & A ; Skills ) .

Troubles Face by Private and Public sectors in Bhutan

Harmonizing to World Bank ‘s 2nd investing clime appraisal study ( n.d ) 2009, stated that the entree to finance, authorities ordinances, labour productiveness and accomplishments are the chief challenges faced by the private sectors in Bhutan. However, entree to the finance is the chief obstruction face by the private sectors in Bhutan along with labour ordinances for little and average industries in the state. The other chellenges face by the private every bit good as public sectors in Bhutan is the clip direction or spent by houses to follow with authorities ordinances and associated costs is much higher compared to regional and international norms in countrry. And on other side the rigorous regulations and ordinances chiefly affect when engaging foreign laborers were besides an issue for the private sectors enhancement in economic system and to increase the productiveness of their industries, they should be able to engage laborers easy. However, Bhutan has back by a typical set of challenges with regard to the development of the private and public sectors in the state. The challenges face by both private and public sectors are chiefly by its landlockness with cragged and rugged topography in nature, by deficiency of enterpreneurial endowment due to the really fresh nature of private sectors in Bhutan and highly bantam domestic market in the state and due to the deficiency of skilled work force. However, Bhutan ‘s finacial system is embryologic and non-competitive and it provides really basic fiscal merchandises and at high cost to the enlargement of both private and public sectors in Bhutan. Finally, budget constrains for roads, schools, infirmaries and transit in more distant and northern parts of the economic system poses considerable cost. It is besides slow and on a regular basis disrupted by monsoons and linked landslides in summer and winter taking to the slow development of private and public sectors in state


In decision, public sector is that portion of economic system that is owned and operated for the benefits of demands and wants of the societies. The development of the populace sector was started with the origin of 1st Five Year Plan and all the private sector is at the embryologic phase, and our economic system is underdevelop and has future ability to go one of the exciting economic system. The exact determination from this assignment is that it indicate out that both the sectors in the economic system face the similar challenges like unequal entree to capital, fiscal, infrustructures and in instance of private sector with many authorities ordinance affects their production of goods and services in the state. Therefore, it is suggested that both the sectors to heighten the human resources by sharing of thoughts with advanced states for their benefits. In order to accomplish all this, authorities have to do bilateral understanding with the developing associates to suppress the troubles of fiscal meagerness is to put up the commerical Bankss to supply loans to the in private owned and public sectors with low-cost rate of involvement. It should besides promote in those countries which result in the sustainable creative activity of high quality employment and the transportation of the accomplishments and cognition required to fuel the state ‘s farther advancement. Despite the several hindrances such as comparatively little size of national market, deficiency of entrepreneurial expertness and experience, under-development substructure and deficit of domestic skilled and unskilled labor, the private sector in Bhutan have been notice a modest growing in both qualitive and quantitive. But in order to better both the sectors, it is recommand that it should hold adequate entree to the recognition installations, including the strengthening of the fledgling stock exchange by opening door excessively. For illustration, like foreign direct investing and by formation of joint ventures with foreign endeavor. It must besides promote the private every bit good as public sectors to look beyond service oriented activities that promise immediate returns to longer term investings that take advantages of chances bing both inside and outside state. However, in order to better private sector in Bhutan the authorities must understate the strick ordinance to do usage of resources in sustainable manner. It will assist our embryologic private proprietors to do usage of their latent accomplishments and the authorities must promote labour and taxation policies like revenue enhancement inducements for the labor in the state.