The Role Of Public And Private Sectors Economics Essay

The function of public and private sectors in any economic system has been tremendous in footings of its part towards GDP of an economic system and the overall development activities of the state. Since their developments has been traced back from the initial birth of its developmental programmes initiated by the Royal Government of Bhutan ( RGoB ) in the late sixtiess. The authorities strengthens or chiefly gave attending in the development of public sector such as building, wellness, instruction, and other agricultural allied activities, but the major attending and focal point were given to denationalization and private sector development during the 7th Five Year Plan ( FYP ) and subsequent program periods. This enhanced in rapid development in the economic system with addition in employment chances, inventions, incomes and in bend increasing the populating criterion of the people and their part towards Gross Domestic Product ( GDP ) in an economic system. This resulted in the credence of both the populace and private sectors as their life blood to the economic system ‘s socio economic development.

With combination of public and private sector, there resulted in positive growing in the economic system and therefore the paper depicts the function and parts of these two sectors in the economic system. The focussed is every bit good made in the field of their coevals of employment, parts made towards GDP in different consecutive old ages and the troubles occurred in the development of public and private sectors in the economic system. Inclusive of these two sectors plays an of import function in the developmental activites such as coevals of employment, income, civic comfortss, and other substructures for the public assistance of the society. Therefore, public and private sectors are universally considered as a back bone for their economic development.


The economic system, despite holding public sectors in their day-to-day operation of its economic systems, the increasing attendings has focused in Bhutan, every bit good worldwide, on the function of private sectors in their economic development. Denationalization of some of the incumbent public sectors and the attending towards the emerging possible private entrepreneurship has been the chief aims for the policy shapers in modern Bhutan. However, both, the authorities intercession public sectors and private sectors play polar function in speed uping the economic growing of the economic system, besides, private sectors are, frequently, considered as the engine for their economic growing. Therefore, the cohesive function of private and public sectors can make a absorbing growing for it economic development.

Public sector is those organisations or establishments that are owned by the authorities, regulated and monitored for the general public assistance of the society. The authorities here involves ; cardinal, province, and the local authoritiess, holding the full and equal authorization to transport out the undertaking of the public sector. On the other manus, private sector is those organisations or establishments that are to the full owned and operated by an person or an enterpriser, for their exclusive benefit. In short, public sectors are those establishments holding authorities intercession and private sectors are those establishments holding any intervention of authorities ( Wilson & A ; Clark, 1997, p.96-112 ) .

This study focuses on the function of the populace sector and private sector, runing in a market economic system, in presenting the acceleration of its economic development. The function of these two sectors can be evidenced through its history of development, indexs, part towards Gross Domestic Product ( GDP ) and employment generated by each sectors to the society and on the other manus, the troubles faced by each sectors for their development and operation of the establishments and organisations.

History in the development of public and private sector in Bhutan

The development of public sector can be traced back to the early 1960 ‘s with the development of its developmental activities, that is, its first Five Year Plans ( FYP ) , during the reign of His Majesty, the late Druk Gyalpo Jigme Dorji Wangchuk ( 1928-1972 ) . The land, nevertheless, saw its public sector with the birth its first national main road in 1959, with so Public Work Division ( PWD ) get downing the building of 179 kilometres of Phuntsholing-Thimphu national main road ( Ministry of Education, MOE, p.60 ) . This has greatly facilitated mobility of the people, reduced travel clip, helped in the selling of agricultural, industrial and other merchandises, and opened up economic chances thereby bettering the quality of the Bhutanese people. However, the greatest winner in the development of public sector has been merely after its developmental activities. From at that place, authorities started development of different sectors such as, primary sector inclusive of agribusiness, forestry and logging, carnal farming. The secondary sectors includes fabrication industries, excavation, hydro power and buildings, and eventually, third sector with the engagement of governmental activities and services.

However, despite holding its public sector, authorities even made focal point in the development of private sectors in the land. Therefore, denationalization was foremost initiated during the 6th FYP and denationalization of some of the incumbent public sector was given increased precedence during the 7th FYP. During the 7th FYP several public endeavors were divested and of the 14 major industries, 10 have bulk private ownership at present as opposed to merely 2 in 1990. In excavation and fabrication sectors, the Ca carbide works was to the full privatized with gypsum, slate and coal mines. The slate excavation in Wangdiphodrang and salt iodization works in Phuntsholing were privatized. Furthermore, the activities and installations related to touristry, hotels and conveyance services were successfully privatized but tourism authorization of Bhutan has remained within public sector to modulate and supervise private sectors when necessary. But in some instances authorities felt non necessary and some at that place lack involvement and purchaser by the private ( beginning: hypertext transfer protocol: //

Role of Public and Private Sector in Bhutan

Public Sector

Public sector has played extreme function in its state ‘s socio economic development and hence, some of the common parts that have been made by public sector are identified as follows:

Coevals of employment

The major function or part made by the populace sector is the coevals of employment to the people ; this resulted in raising the populating criterion of the people and hence, an increases individual ‘s possible to do payment in the signifier of revenue enhancement as the beginning of gross to the state.

Filling of Gaps

The chief function of the populace sector is to emphasis on those activities that are neglected by the private sectors, but, important to the state ‘s economic development. Such activities that public has to make full up the spreads are buying of bulky and heavy machineries, natural stuffs ( inputs ) and defence equipments.

Regional Development

Public sectors in any economic system are chiefly paid attending to the development and enlargement of rural and backward parts in the economic system. This has done with the localisation of its workss and programmes and thereby, supplying indispensable comfortss such as route web, H2O supply and communicating systems.

Community development

The populace sector has helped in the development of townships to advance and supply all the civic comfortss to their employees. It even made an attempt in the building of roads and other infrastructural installations to associate these townships to other parts of the state.

Foreign exchange net incomes

The greatest focal point that is made by the populace sector is to keep economic system ‘s balance of payment place. So in order to keep its balance of payment place, public sector has saved valuable foreign exchange or modesty ( difficult currency ) through import permutation beginning: hypertext transfer protocol: // artcode=140 & A ; stcode=8 & A ; substcode=10 ) .

Therefore, these are some of the common parts that are made by the populace sector to its socio economic development.

Private Sector

Throughout the universe, despite public sector, private sector has been the major subscriber to GDP and employment, hence universally considered it as the engine of the economic system. Hence, some of the parts made by the private sector are as follows:


Besides part to GDP, private sector besides creates employment to the people and it was found that 63 % of the Bhutanese population is employed in private sectors with compared to public sector with holding merely 34 % ( Peljor, n.d. ) . This therefore, maintains the equilibrium in the demand and provide labour force in the economic system.


The direction and use of any natural stuff and other resources has been expeditiously handled and used. Unlike, public sector there would n’t be any wastage of resources ; hence the frequence of corruptness will be minimum.

Decrease of Poverty

Besides, supplying income and employment to the people, there besides consequences in advancing inventions, life criterions and chances in front. Furthermore, with intensive competition within private persons, there consequences in take downing of monetary values for their goods and services making cheaper in monetary value, thereby profiting both hapless and rich people.

Faster growing

With lifting terrible market competition and trade names, there consequences in the development and enlargements of their workss to increase their production chances, therefore making greater handiness to indispensable points. On the other manus, private person ‘s slogan is to maximise their net income, so they accelerate their development of workss and industries.

Indexs of economic development of Bhutan

The most frequently used index of the development is the sustained rise in the existent per capita income and in recent old ages, nevertheless, this index has been found desiring in certain critical respects. For this, the non-income indices have been devised and the indexs of the economic development of Bhutan are identified as ;

Economic growing

Economic development

Human development index

Other steps

Todaro & A ; Smith ( 2005 ) defined economic growing as “ a step of the value of end product of goods and services within a period of clip. ” It means the entire result of those goods and services that has been produced in a given period of clip. Therefore, it includes growing in national income, Gross Domestic Product ( GDP ) , Real GDP versus Nominal GDP, Gross National Product ( GNP ) and per capita income. Similarly, economic development is “ a step of the public assistance of worlds in a society ” ( Todaro & A ; Smith, 2005 ) . Which means it takes into consideration of human benefits that is received, therefore, it by and large considers it as normative attack or construct and it constitutes the grade of poorness rate, inequality, nutriment, self esteem, political freedoms, sustainable development and proportion of activity in different sectors of the economic system such as, primary, secondary and third sectors. In short, economic development index considers the indices of the human public assistance in general.

Where as in human development index, its constitutes socio economic steps, three dimensions of human public assistance such as ; longevity- life anticipation, individuals literacy degree and their criterion of life. Finally, other steps involves, economic activity per sector, emphasis degrees, offense degree, wellness attention informations, figure of luxuries points per caputs and household. Therefore, all this provides indexs to the economic development in the economic system.

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

The concise part made from both the sector has been shown in the undermentioned tabular array.

Table 3.

Gross Domestic Capital Formation at Constant Price ( Nu. in 1000000s )


Capital formation of private sector

Capital formation of public sector

Growth rate of private sector

Growth rate of public sector

















































Beginning: National Accounts Statistics, 2009.

Figure 3.

Graphic representation of Public and Private Growth rate

From the above tabular array and graphical representation, it was found that the part made towards by both public and private sectors has been hovering. The highest part made by public sector was in the twelvemonth 2006 with the highest of 41.5 % but on contrary, its part has been into negative with -35.3 % during the twelvemonth 2003, this might be due to political instability as war against ULFA, Bodo and KLOs. Hence, its part towards GDP has been fluctuating.

However, similar to the part made by public sector, private sectors contribution towards GDP has besides been fluctuating, holding its highest part of 44.5 % in 2001 with remainder worsening in its part. On the other side, its part has been negative with about -11.5 % in 2005. Therefore, more or less the part made from both the sectors towards GDP has been tremendous.

Employment Contribution from Public and Private sector

Both the populace and private sectors in the state has generated considerable employment for both skilled and non-skilled labor. The employment informations in Bhutan is unequal but still Bhutan Private Sector Survey ( 2002 ) estimated that about 60,000 people are employed in the formal sector, out of this entirety, about 22,000 are employed in different public sector establishments and of which 14258 are employed in civil services. Hence, it implies that 60 % of entire formal sector occupations are in private sectors. But, out of the entire 60,000 formal occupations, 50 % are held by non-nationals and the bulk of non-nationals are employed in private sectors with compared to public sectors.

On the other manus, Peljor ( n.d. ) opposes that “ a labor survey found that 63 % of the Bhutanese population is employed in private sectors, followed by public sector with 34 % and merely 3 % in non-governmental organisations. ” This statement indicates that bulk of the employment were being generated by the private in comparing to public sectors. This means that the excess labor that are in public sectors are absorbed in the private sectors. Hence, keeping the equilibrium in the demand and supply for labor in the economic system.

However, the following tabular array and figures represents employment in industrial sector.

Table 1.

Number of females engaged in industrial sectors by employment position and sex in Bhutan, 2000.



Entire female





Private company






Government company






Beginning: Statistical Yearbook of Bhutan, 2010.

Figure 1.

Graphic representation of female employment in industrial sector

Table 2.

Number of male engaged in industrial sectors by employment position and sex in Bhutan, 2000.



Entire male






Private company







Government company






Beginning: Statistical Yearbook, 2010.

Figure 2.

Graphic representation of male employment in industrial sector.

Therefore, from the above given informations, it has been found that the employment of female in industrial sector is much lower with about 1435 with comapared to male, which is totaling upto 6038. Therefore, in entire the employment of both female and male was about 7473 in industrial sector merely ( beginning: Statistical Yearbook, 2010 ) .

Troubles in the development of public and private sectors in Bhutan

Public sector development

Despite the fact that, the populace sector is recognized in constructing up the critical infrastructural operating expenses and supplying the indispensable societal services to the society, its development has been limited by some of the undermentioned identified factors ;

Budgetary shortage

To beef up the development of public sector, economic system deficiencies adequate budget for funding due to limited figure of fiscal helper and moreover, lesser capableness of possible revenue enhancement remunerators in the land.

Lack of motive

Motivation in footings of acknowledgment such as awards, awards, gifts for the accomplishment and every bit good the up step of their classs.

Cost- consciousness

The people in public sector by and large do non recognize the disbursals involved in the buying and development of the authoritiess substructures and thereby they somehow ignore and works reluctantly.

Excess staff

Sing the fact that, everybody ‘s duty is cipher ‘s duty.

Problem of authorities disbursement

An unmistakable tendency in many states which depend in the private sector has been fall in public disbursement.

Private Sector Development

In malice of sing a figure of restraints, the private sectors have sustained to turn and play its function in the economic development of the state. However, the factors that have restrained the growing of possible private enterprisers have been identified as ;

( a ) Bhutan is landlocked with cragged and rugged topography

( B ) Highly little size of the local market,

( degree Celsius ) Lack of entrepreneurial expertness and experience,

( vitamin D ) Limited entree to recognition installations,

( vitamin E ) High involvement charges and

( degree Fahrenheit ) Shortages of domestic skilled and unskilled labor.

( g ) Financial system is developing and non-competitive.

( H ) Transportation system system has a considerable cost disadvantages due to heavy monsoon and landslides in summer and winter.

Beginning: hypertext transfer protocol: //

Therefore, all these above stated factors have a negative impact to the economic system taking to the slow development of private sector in the state.


Public sector and private sector are the two indispensable sectors in the economic development of any state. The development of public sector in Bhutan has been really long evolved since the beginning of its development low-level formatting, but the development of private sector is at the turning phase and thereby, authorities has paid greater attending towards the development of this sector. Private sector even its recentness in development, has marked enomorous in the field of economic development similar to public sector. The function played by both the sectors were likewise, particularly their parts in the favor and public assistance of the society.

With the promotion of both public and private sector, there resulted in the development of such indexs like growing in GDP, employment, care of balance of payment, populating criterion, thereby increase the life anticipation and addition in the part to gross as a revenue enhancement remunerators. Similarly, with the betterment in both the sectors as good resulted in important part towards GDP in the economic system. However, despite the function played by both the sector, part that they made and the employment they generated for the public assistance of the society, there is some restricting obstructions in the development and enlargement of both the sector due to its physical characteristics, under developed fiscal establishments and budgeting. Besides holding such restrictions, both the sectors started to turn and play their function in the development of economic system significantly.


The analytical model consists of five coupled factors for the enlargement of private sector in Bhutan:

Supplying inducements for entrepreneurship and investing

Increasing productiveness through completion internationally or internally and inventions

Harnessing international economic linkages

Bettering market entree and operation

Reducing hazard and exposure

Decentralization in determination devising procedure

Managerial competency

Whereas for the strengthening of public sector:

Seeking greater fiscal assistant- budget accretion

Having a tendency of recognition- motive

Stressing appropriate and more support in public endeavors.