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Bhutan-Role of the Government

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Bhutan Index

Planning and Reform

Government played a pervasive role in Bhutan's economy. Since 1961 the economy has been guided through development plans, which the Development Secretariat and later the Planning Commission directed, subject to the National Assembly's approval. In the World Bank's 1989 appraisal, "Coming late to the development scene, Bhutan was eager to avoid mistakes committed elsewhere. Although strongly dependent on foreign aid, it was determined to follow its own set of priorities, keep public finance on an even keel, build up a well trained but lean bureaucracy, and prevent environmental damage from overexploitation of the forests or uncontrolled growth of tourism." To help avoid further mistakes, the government used traditional social institutions and involved people at the local level in planning and implementation for their own district, subdistrict, or village. "As a result of these factors," said the World Bank, "development in Bhutan has been remarkably free from seeing economic, social, or cultural disruption."

India fully funded the First Development Plan (1961-66). The first plan, for which Nu107.2 million was allocated, and the Second Development Plan (1966-71), for which Nu202.2 million was allocated, focused primarily on developing modern budgeting techniques (see table 26, Appendix). According to some foreign observers, the first two plans failed to set priorities and achieve economic-sector integration as might be expected of genuine development planning. The major economic-planning emphasis was on public works, primarily roads; forestry; health care; and education (see table 27, Appendix).

To make planning more effective, the Planning Commission was established to formulate the Third Development Plan (1971-76), and the Druk Gyalpo served as its chairman until 1991. Under the third plan, public works, still primarily roads, continued to take a significant share of the Nu475.2 million development budget (17.8 percent) but had decreased from its 58.7 percent share in the first plan and its 34.9 percent share in the second plan. Education gradually increased (from 8.8 to 18.9 percent) in the first three plans. The second and third plans were paid for primarily by India, although about 3 percent of total funding became available through the UN, starting with the third plan. Despite amounts budgeted for planned development, there were additional capital expenditures outside the formal development plan, including public works (mostly road construction) and hydroelectric plants.

One of the major achievements of the Fourth Development Plan (1976-81) was the establishment of district (or dzongkhag) planning committees to stimulate greater local involvement, awareness of government development policies, and local development proposals. The committees, however, had no decision-making powers. Nevertheless, agricultural and animal husbandry came to the fore, taking 29 percent of the Nu1.106 billion allocated for the fourth plan. It was during the fourth plan that Bhutan made its first effort to establish the value of the GDP, which in 1977 amounted to Nu1.0 billion. In that year, GDP was distributed among agricultural and related activities, 63.2 percent; services, 13.1 percent; government administration, 10.4 percent; rental income, 8.1 percent; and manufacturing and mining, 5.2 percent. Per capita GDP was estimated at US$105.

The Fifth Development Plan (1981-87) sought the expansion of farmland to increase the production of staple crops, such as rice, corn, wheat, barley, buckwheat, and millet. The plan also emphasized improvements in livestock, soil fertility, plant protection, and farm mechanization. Its total planned allocation was Nu4.3 billion, but the actual outlay came to Nu4.7 billion. Financing the planning process grew increasingly complex, as indicated by the fifth plan's multilateral funding sources. However, domestic revenue sources for development planning had increased significantly, and the fifth plan included development projects that would further decrease dependence on external assistance. Such concepts as self-reliance in each district, decentralization of the development administration, greater public input in decision making, better control of maintenance expenditures, and more efficient and effective use of internal resources became increasingly important.

The Sixth Development Plan (1987-92) focused on industry, mining, trade, and commerce (13.3 percent) and power generation projects (13.1 percent), with education's allocation decreasing slightly to 8.1 percent from 11.2 percent during the fifth plan. At Nu9.5 billion, the sixth plan was considerably more expensive than its predecessor. It included programs that, if successfully implemented, would mean far-reaching reforms. The goals included strengthening government administration, promoting the national identity, mobilizing internal resources, enhancing rural incomes, improving rural housing and resettlement, consolidating and improving services, developing human resources, promoting public involvement in development plans and strategies, and promoting national self-reliance. Perhaps the key ingredient, self-reliance, promised to provide for more popular participation in the development process and to result in improved rural conditions and services as well as better government administration and humanresource development. With greater self-reliance, it was hoped that Bhutan would begin exploiting markets in neighboring countries with manufacturing, mining, and hydroelectric projects in the 1990s. Faced with rising costs, Bhutan postponed some projects requiring large inputs of capital until the Seventh Development Plan (1992- 96).

No major changes were expected in overall sectoral development in the seventh plan. Preliminary planning indicated emphasis on "consolidation and rehabilitation" of developments achieved under previous plans, more attention to environmental concerns, and enhancement of women's role in economic and social development.

From their inception, the development plans have been aimed at energizing the rest of the economy and promoting economic selfreliance . Windfall revenues from export receipts normally were used to reduce foreign debt and dependence on foreign aid. Planners also sought to involve the immediate beneficiaries of economic development. Representatives in the National Assembly and district officials were encouraged to become involved in projects, such as roads and bridges, schools, health care facilities, and irrigation works, in their district. Some costs for the projects were borne through self-help, such as households providing labor. Government planners also have endeavored to increase rural income through initiatives in the farming sector, such as stock-breeding programs, promotion of cash crops, and advanced agro-technology. Central government efforts also were aimed at increasing the quality of life by providing electrification, modern water and sanitation systems, better cooking equipment, and insulation for houses.

Data as of September 1991

Background		In 1865, Britain and Bhutan signed the Treaty of Sinchulu, under which Bhutan would receive an annual subsidy in exchange for ceding some border land to British India. Under British influence, a monarchy was set up in 1907; three years later, a treaty was signed whereby the British agreed not to interfere in Bhutanese internal affairs and Bhutan allowed Britain to direct its foreign affairs. This role was assumed by independent India after 1947. Two years later, a formal Indo-Bhutanese accord returned the areas of Bhutan annexed by the British, formalized the annual subsidies the country received, and defined India's responsibilities in defense and foreign relations. A refugee issue of over 100,000 Bhutanese in Nepal remains unresolved; 90% of the refugees are housed in seven United Nations Office of the High Commissioner for Refugees (UNHCR) camps. In March 2005, King Jigme Singye WANGCHUCK unveiled the government's draft constitution - which would introduce major democratic reforms - and pledged to hold a national referendum for its approval. In December 2006, the King abdicated the throne to his son, Jigme Khesar Namgyel WANGCHUCK, in order to give him experience as head of state before the democratic transition. In early 2007, India and Bhutan renegotiated their treaty to allow Bhutan greater autonomy in conducting its foreign policy, although Thimphu continues to coordinate policy decisions in this area with New Delhi. In July 2007, seven ministers of Bhutan's ten-member cabinet resigned to join the political process, and the cabinet acted as a caretaker regime until democratic elections for seats to the country's first parliament were completed in March 2008. The king ratified the country's first constitution in July 2008.
Location		Southern Asia, between China and India
Area(sq km)		total: 38,394 sq km land: 38,394 sq km water: 0 sq km
Geographic coordinates		27 30 N, 90 30 E
Land boundaries(km)		total: 1,075 km border countries: China 470 km, India 605 km
Coastline(km)		0 km (landlocked)
Climate		varies; tropical in southern plains; cool winters and hot summers in central valleys; severe winters and cool summers in Himalayas
Elevation extremes(m)		lowest point: Drangme Chhu 97 m highest point: Kula Kangri 7,553 m
Natural resources		timber, hydropower, gypsum, calcium carbonate
Land use(%)		arable land: 2.3% permanent crops: 0.43% other: 97.27% (2005)
Irrigated land(sq km)		400 sq km (2003)
Total renewable water resources(cu km)		95 cu km (1987)
Freshwater withdrawal (domestic/industrial/agricultural)		total: 0.43 cu km/yr (5%/1%/94%) per capita: 199 cu m/yr (2000)
Natural hazards		violent storms from the Himalayas are the source of the country's name, which translates as Land of the Thunder Dragon; frequent landslides during the rainy season
Environment - current issues		soil erosion; limited access to potable water
Environment - international agreements		party to: Biodiversity, Climate Change, Climate Change-Kyoto Protocol, Desertification, Endangered Species, Hazardous Wastes, Ozone Layer Protection signed, but not ratified: Law of the Sea
Geography - note		landlocked; strategic location between China and India; controls several key Himalayan mountain passes
Population		691,141 note: the Factbook population estimate is consistent with the first modern census of Bhutan, conducted in 2005; previous Factbook population estimates for this country, which were on the order of three times the total population reported here, were based on Bhutanese government publications that did not include the census (July 2009 est.)
Age structure(%)		0-14 years: 30.2% (male 106,410/female 102,164) 15-64 years: 64.3% (male 235,988/female 208,484) 65 years and over: 5.5% (male 20,169/female 17,926) (2009 est.)
Median age(years)		total: 23.9 years male: 24.5 years female: 23.3 years (2009 est.)
Population growth rate(%)		1.267% (2009 est.)
Birth rate(births/1,000 population)		20.07 births/1,000 population (2009 est.)
Death rate(deaths/1,000 population)		7.39 deaths/1,000 population (July 2009 est.)
Net migration rate(migrant(s)/1,000 population)		NA
Urbanization(%)		urban population: 35% of total population (2008) rate of urbanization: 4.9% annual rate of change (2005-10 est.)
Sex ratio(male(s)/female)		at birth: 1.05 male(s)/female under 15 years: 1.04 male(s)/female 15-64 years: 1.13 male(s)/female 65 years and over: 1.12 male(s)/female total population: 1.1 male(s)/female (2009 est.)
Infant mortality rate(deaths/1,000 live births)		total: 49.36 deaths/1,000 live births male: 50.38 deaths/1,000 live births female: 48.29 deaths/1,000 live births (2009 est.)
Life expectancy at birth(years)		total population: 66.13 years male: 65.33 years female: 66.97 years (2009 est.)
Total fertility rate(children born/woman)		2.38 children born/woman (2009 est.)
Nationality		noun: Bhutanese (singular and plural) adjective: Bhutanese
Ethnic groups(%)		Bhote 50%, ethnic Nepalese 35% (includes Lhotsampas - one of several Nepalese ethnic groups), indigenous or migrant tribes 15%
Religions(%)		Lamaistic Buddhist 75%, Indian- and Nepalese-influenced Hinduism 25%
Languages(%)		Dzongkha (official), Bhotes speak various Tibetan dialects, Nepalese speak various Nepalese dialects
Country name		conventional long form: Kingdom of Bhutan conventional short form: Bhutan local long form: Druk Gyalkhap local short form: Druk Yul
Government type		constitutional monarchy
Capital		name: Thimphu geographic coordinates: 27 29 N, 89 36 E time difference: UTC+6 (11 hours ahead of Washington, DC during Standard Time)
Administrative divisions		20 districts (dzongkhag, singular and plural); Bumthang, Chhukha, Chirang, Daga, Gasa, Geylegphug, Ha, Lhuntshi, Mongar, Paro, Pemagatsel, Punakha, Samchi, Samdrup Jongkhar, Shemgang, Tashigang, Tashi Yangtse, Thimphu, Tongsa, Wangdi Phodrang
Constitution		ratified 18 July 2008
Legal system		based on Indian law and English common law; has not accepted compulsory ICJ jurisdiction
Suffrage		18 years of age; universal
Executive branch		chief of state: King Jigme Khesar Namgyel WANGCHUCK (since 14 December 2006); note - King Jigme Singye WANGCHUCK abdicated the throne on 14 December 2006 and his son immediately succeeded him; the nearly two-year delay between the former King's abdication and his son's coronation on 6 November 2008 was to ensure an astrologically auspicious coronation date and to give the new King-who had limited experience-deeper administrative expertise under the guidance of this father head of government: Prime Minister Jigme THINLEY (since 9 April 2008) cabinet: Council of Ministers (Lhengye Shungtsog) nominated by the monarch, approved by the National Assembly; members serve fixed, five-year terms; note - there is also a Royal Advisory Council (Lodoi Tsokde), members nominated by the monarch elections: the monarch is hereditary, but democratic reforms in July 1998 grant the National Assembly authority to remove the monarch with two-thirds vote; election of a new National Assembly occurred in March 2008; the leader of the majority party is nominated as the prime minister
Legislative branch		bicameral Parliament consists of the non-partisan National Council (25 seats; 20 members elected by each of the 20 electoral districts (dzongkhags) for four-year terms and 5 members nominated by the King); and the National Assembly (47 seats; members elected by direct, popular vote for five-year terms) elections: National Council elections last held on 31 December 2007 and 29 January 2008 (next to be held by December 2012); National Assembly elections last held on 24 March 2008 (next to be held by March 2013) election results: National Council - NA; National Assembly - percent of vote by party - DPT 67%, PDP 33%; seats by party - DPT 45, PDP 2
Judicial branch		Supreme Court of Appeal (the monarch); High Court (judges appointed by the monarch); note - the draft constitution establishes a Supreme Court that will serve as chief court of appeal
Political pressure groups and leaders		United Front for Democracy (exiled); Druk National Congress (exiled) other: Buddhist clergy; ethnic Nepalese organizations leading militant antigovernment campaign; Indian merchant community
International organization participation		ADB, BIMSTEC, CP, FAO, G-77, IBRD, ICAO, IDA, IFAD, IFC, IMF, Interpol, IOC, IOM (observer), ISO (correspondent), ITSO, ITU, NAM, OPCW, SAARC, SACEP, UN, UNCTAD, UNESCO, UNIDO, UNWTO, UPU, WCO, WFTU, WHO, WIPO, WMO, WTO (observer)
Flag description		divided diagonally from the lower hoist-side corner; the upper triangle is yellow and the lower triangle is orange; centered along the dividing line is a large black and white dragon facing away from the hoist side
Economy - overview		The economy, one of the world's smallest and least developed, is based on agriculture and forestry, which provide the main livelihood for more than 60% of the population. Agriculture consists largely of subsistence farming and animal husbandry. Rugged mountains dominate the terrain and make the building of roads and other infrastructure difficult and expensive. The economy is closely aligned with India's through strong trade and monetary links and dependence on India's financial assistance. The industrial sector is technologically backward, with most production of the cottage industry type. Most development projects, such as road construction, rely on Indian migrant labor. Model education, social, and environment programs are underway with support from multilateral development organizations. Each economic program takes into account the government's desire to protect the country's environment and cultural traditions. For example, the government, in its cautious expansion of the tourist sector, encourages visits by upscale, environmentally conscientious tourists. Detailed controls and uncertain policies in areas such as industrial licensing, trade, labor, and finance continue to hamper foreign investment. Hydropower exports to India have boosted Bhutan's overall growth, even though GDP fell in 2008 as a result of a slowdown in India, its predominant export market. New hydropower projects will be the driving force behind Bhutan's ability to create employment and sustain growth in the coming years.
GDP (purchasing power parity)		$3.533 billion (2008 est.) $2.91 billion (2007 est.) $2.738 billion (2006 est.) note: data are in 2008 US dollars
GDP (official exchange rate)		$1.389 billion (2008 est.)
GDP - real growth rate(%)		21.4% (2008 est.) 6.3% (2007 est.) 6.5% (2006 est.)
GDP - per capita (PPP)		$5,200 (2008 est.) $4,300 (2007 est.) $4,100 (2006 est.) note: data are in 2008 US dollars
GDP - composition by sector(%)		agriculture: 22.3% industry: 37.9% services: 39.8% (2006)
Labor force		NA note: major shortage of skilled labor
Labor force - by occupation(%)		agriculture: 63% industry: 6% services: 31% (2004 est.)
Unemployment rate(%)		2.5% (2004)
Population below poverty line(%)		31.7% (2003)
Household income or consumption by percentage share(%)		lowest 10%: NA% highest 10%: NA%
Budget		revenues: $272 million expenditures: $350 million note: the government of India finances nearly three-fifths of Bhutan's budget expenditures (2005)
Inflation rate (consumer prices)(%)		4.9% (2007 est.)
Stock of money		$NA (31 December 2008) $381.1 million (31 December 2007)
Stock of quasi money		$NA (31 December 2008) $220.3 million (31 December 2007)
Stock of domestic credit		$NA (31 December 2008) $169.9 million (31 December 2007)
Market value of publicly traded shares		$NA
Economic aid - recipient		$941.2 million; note - substantial aid from India (2006)
Public debt(% of GDP)		81.4% of GDP (2004) 81.4% of GDP (2004)
Agriculture - products		rice, corn, root crops, citrus, foodgrains; dairy products, eggs
Industries		cement, wood products, processed fruits, alcoholic beverages, calcium carbide, tourism
Industrial production growth rate(%)		NA
Current account balance		$116 million (2007 est.)
Exports		$350 million (2006)
Exports - commodities(%)		electricity (to India), cardamom, gypsum, timber, handicrafts, cement, fruit, precious stones, spices
Exports - partners(%)		India 89%, Bangladesh 6.5%, Italy 1.2% (2008)
Imports		$320 million (2006)
Imports - commodities(%)		fuel and lubricants, grain, aircraft, machinery and parts, vehicles, fabrics, rice
Imports - partners(%)		India 59.5%, Japan 13.4%, China 5.6% (2008)
Debt - external		$713.3 million (2006)
Exchange rates		ngultrum (BTN) per US dollar - 41.487 (2007), 45.279 (2006), 44.101 (2005), 45.317 (2004), 46.583 (2003) note: the ngultrum is pegged to the Indian rupee
Currency (code)		ngultrum (BTN); Indian rupee (INR)
Telephones - main lines in use		27,500 (2008)
Telephones - mobile cellular		251,000 (2008)
Telephone system		general assessment: urban towns and district headquarters have telecommunications services domestic: low teledensity; domestic service is very poor especially in rural areas; wireless service available since 2003 international: country code - 975; international telephone and telegraph service via landline and microwave relay through India; satellite earth station - 1 Intelsat (2008)
Internet country code		.bt
Internet users		40,000 (2008)
Airports		2 (2009)
Roadways(km)		total: 8,050 km paved: 4,991 km unpaved: 3,059 km (2003)
Military branches		Royal Bhutan Army (includes Royal Bodyguard and Royal Bhutan Police) (2009)
Military service age and obligation(years of age)		18 years of age for voluntary military service; no conscription (2008)
Manpower available for military service		males age 16-49: 190,104 females age 16-49: 167,289 (2008 est.)
Manpower fit for military service		males age 16-49: 150,210 females age 16-49: 135,991 (2009 est.)
Manpower reaching militarily significant age annually		male: 7,668 female: 7,379 (2009 est.)
Military expenditures(% of GDP)		1% of GDP (2005 est.)
Disputes - international		Bhutan cooperates with India to expel Indian Nagaland separatists; lacking any treaty describing the boundary, Bhutan and China continue negotiations to establish a common boundary alignment to resolve territorial disputes arising from substantial cartographic discrepancies, the largest of which lie in Bhutan's northwest and along the Chumbi salient
Electricity - production(kWh)		4.475 billion kWh (2007 est.)
Electricity - production by source(%)		fossil fuel: 0.1% hydro: 99.9% nuclear: 0% other: 0% (2001)
Electricity - consumption(kWh)		528.8 million kWh (2007 est.)
Electricity - exports(kWh)		3.644 billion kWh (2007 est.)
Electricity - imports(kWh)		11 million kWh (2007 est.)
Oil - production(bbl/day)		0 bbl/day (2008 est.)
Oil - consumption(bbl/day)		1,000 bbl/day (2008 est.)
Oil - exports(bbl/day)		0 bbl/day (2007 est.)
Oil - imports(bbl/day)		1,168 bbl/day (2007 est.)
Oil - proved reserves(bbl)		0 bbl (1 January 2009 est.)
Natural gas - production(cu m)		0 cu m (2008 est.)
Natural gas - consumption(cu m)		0 cu m (2008 est.)
Natural gas - exports(cu m)		0 cu m (2008)
Natural gas - proved reserves(cu m)		0 cu m (1 January 2009 est.)
HIV/AIDS - adult prevalence rate(%)		less than 0.1% (2007 est.)
HIV/AIDS - people living with HIV/AIDS		fewer than 100 (2007 est.)
HIV/AIDS - deaths		NA
Major infectious diseases		degree of risk: intermediate food or waterborne diseases: bacterial and protozoal diarrhea, hepatitis A, and typhoid fever vectorborne diseases: dengue fever and malaria water contact disease: leptospirosis (2009)
Literacy(%)		definition: age 15 and over can read and write total population: 47% male: 60% female: 34% (2003 est.)
School life expectancy (primary to tertiary education)(years)		total: 10 years male: 11 years female: 10 years (2006)
Education expenditures(% of GDP)		7% of GDP (2005)