Country Profile

Bhutan is a small country in the eastern Himalayas and Thimphu is the capital city. It is a land-locked nation sandwiched between two giant neighbors and fastest growing economies in the world – China in the North, India in the East, West and South. It occupies an area of 38,394 sq. km and is inhabited by about 650,000 people. The country is sub- divided into twenty districts or administrative regions. The geography of the Himalayan mountain terrain has physically kept the country in isolation and the modernization process started only from the early sixties. Even today after the completion of four decades, mountainous and rugged terrain has impeded the development efforts where the cost of building modern development infrastructures such as roads, schools, rural electrifications, drinking water supplies, etc. have been prohibitively high in addition to being difficult and time consuming. The literacy rate of Bhutan is 59.5% and per capita GDP is about US$ 1,400 with unemployment rate of 2.5%. The Buddhism is the predominant religion of the country. Bhutan’s economy is one of the smallest and least developed (low income) in the world which is based on agriculture and forestry that provides the main livelihood to more than 69% of the population. As of 2008, only 66% of the total households have access to electricity and the government has mandated to provide electricity to all by 2020. Hydropower, cement, wood and food products constitute its main industries. Bhutan has a forest cover of 72.5% and the new constitution further mandates the forest cover to be maintained at 60% for all times to come. The rich cultural heritage, pristine environment and of late the adoption of a distinct and holistic growth philosophy of Gross National Happiness – a policy most constructively defined a favoring sustainable development, cultural preservation, social wellbeing and happiness over Gross Domestic Product has made Bhutan a top destination for tourists and topic of discussions in the academia worldwide. The country has been unanimous in maintaining that, economic growth as it is achieved in the west is not the solution for true development in the country, rather the development should encompass efforts to sustain economically, culturally and ecologically. According to a recent study on happiness by sociologist Adrian White, University of Leicester, United Kingdom, Bhutan is the eighth happiest country in the world. Yet, Bhutan remains a poor country, heavily reliant on foreign aid and with little industry other than tourism. India is the largest donor and trading partner as the country’s economy is intrinsically linked with that of India’s through strong trade and monetary arrangements. The hydropower export and tourism are the main revenue contributed by the hydroelectric sales was 38.52% since 2000 and is expected to provide 60% in 2009. In 2006, Bhutan commissioned the 1,020 MW hydropower project more than tripling the country’s total generation, the largest facility in the country which was financed by India. However, this represents only 5% of the country’s hydropower potential, estimated at 30,000MW.

On the political front, the remarkable political change initiated by 4th King had transformed the country from monarchy to constitutional democracy and is the youngest democracy in the world. As such, there was a sudden change in national policies and outlook on development activities under a new government while the long – term national goal will be to achieving self sufficiency and becoming a strong, happy and a dynamic nation.

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. Complicated 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. New hydropower projects will be the driving force behind Bhutan's ability to create employment and sustain growth in the coming years.