Bhutan Observer

Dec 9, 2007 -Thimphu: Bhutan’s current economic growth rate at 8.5% looks alright - meaning, as an economy the country is doing fine. Add to this, the rosy prediction that the figure might go double digit in another five years.

But there is a paradox here.

The country’s economic growth, spurred by the revenue from hydropower and service sector, has not been able to translate into jobs, primarily because of a weak manufacturing and production base.

The 8.5%-growth, therefore, is not able to generate enough employment opportunities for the people entering labor market leading to an unemployment rate of 3.2%.

Economists agree that the growth has failed to offset an increase in people seeking jobs, mainly because the growth is spurred by the sale of hydropower, construction industry and tourism that could not create enough employment opportunities.

Sale of electricity brings in revenue but does not create employment opportunities, and the construction industry is almost entirely manned by the expatriate workers. Moreover, the tourism industry is urban-centric and has not benefited the rural population much. Therefore, despite high GDP, the ‘trickle-down’ effect has been minimal, creating a gap between haves and have-nots.

The rise in GDP per capita from US $ 51 in 1961 to US $ 1320.9 in 2006 has taken Bhutan out from the circle of least developed countries. But the rippling effect has been minimal, leaving 31.7% of population (of which 31.6% are rural populace) under poverty earning less than US $ 222 a year.

Is Bhutan’s economic growth a jobless growth?

An official from the Royal Monetary Authority said: “Generally economic growth means generation of employment opportunities, but in case of Bhutan it is not, since the growth is hydropower driven which is capital intensive. But our manufacturing, production and service sectors are improving which is a good sign of prosperity.”

According to the Labor Force Survey 2007 carried out by the Ministry of Labor and Human Resources, the unemployment rate is higher in urban centers at 4.9% despite 79% of population living in rural areas, which indicates that educated youth who have migrated to urban centers cannot find gainful employment.

The Bhutan National Human Resource Development Report (BNHRDR) 2007 says that the two major constraints for the country’s economy are low level of monetization and macro policy interventions to which the economy does not have a capacity to respond. Add to this an absolute lack of entrepreneurial culture.

The report, on the other hand, estimates that the national economy will have to generate employment opportunities for 20, 600 educated youth who will be entering the labor market by 2013.

Bhutan’s industrial sector is engaged in 95% non-manufacturing activities which hardly boosts employment opportunities. This means Bhutan is emerging as an economy trading in goods produced by other countries implying that Bhutan’s domestic demand only causes income and employment generations in other countries.

Moreover, the manufacturing sector produces only semi-finished products without value addition just to benefit other countries which upon import of Bhutan’s primary and semi-finished products produce high value added goods. And most of the industries are located in the border towns preferring cheap day workers from across the border to Bhutanese job seekers which naturally leads to outflow of huge money and seizure of employment opportunities for the Bhutanese.

The BNHRDR 2007 states that Bhutan has a huge potential for small scale enterprises and cottage industries which will generate thousands of employment opportunities if some steps are taken through micro level interventions.

Some of the private employers pointed out that the Bhutanese job seekers do not possess enough skills. Does this mean Bhutan’s education system doesn’t prepare young people to pursue any specific career after they leave school?

A local consultant said that our school curricula school be made contextual to the economy’s demand for manpower and vocational institutes should be strengthened and diversified.

Entrepreneurs point out that Bhutan’s service sector is dominated by tiny micro establishments managed by family members. And the construction sector, one of the potential employment avenues, is dominated by imported workers.

“We could make jobs in the construction industry attractive by raising the wages and improving work environment,” said a local entrepreneur.

The major gray area of Bhutan’s economy is the widespread fronting, observers point out. And fronting causes income transfer to foreign countries on a large scale.

Analysts agree that economic development of Bhutan benefits her neighboring countries more than itself.

“We need to have a clear economic thought and model with the choice of enterprises and industrialization as, at the moment, our economy is heavily import-oriented,” said an economist. “It needs to be export-oriented earning foreign exchange and creating employment opportunities.”

For any economy the private sector is an engine of growth, but the Bhutanese private sector has been stagnant for the past many years. An observer said that in the past, jobs in the private sector was not a choice for many, but with the Labor and Employment Act 2007 in force, jobseekers would be encouraged to foray into the private sector.

Some economists point out that Druk Holding and Investment (DHI) could possibly formulate stronger guidelines for Bhutan’s growing economy to be more meaningful.

“We hope we will have a strong and sustainable economy with diversified manufacturing and production base generating enough employment opportunities for our jobseekers,” said an observer.

DHI, however, was not in a position to comment citing non availability of time.

Meanwhile, Bhutan’s unemployment rate has risen alarmingly from 1.9% in 2001 to 3.2% in 2006 with 7,200 productive people unemployed.

Source: BhutanTimes Newspaper