Opportunities and Challenges

The manufacturing and industry sector is constrained by various factors that impede its further development. Primarily, Bhutanese industries have been affected by low levels of productivity and this is clearly related to the lack of technological development and low levels of human capital. The industries will require substantial investments for capital and human resource development to improve industrial competitiveness for a viable growth in manufactured value added exports.

FDI and joint ventures are some of the mechanisms that must be actively promoted to help jump start the process. Foreign Direct Investment over the Ninth Plan showed a positive growth trend but has largely been directed exclusive into the hospitality sector and has stagnated of late. In order to achieve the annual target 5% growth of FDI and actualize the benefits of foreign investments for export and employment growth, it will be necessary to further streamline the FDI regulations and promote incentives to increase and diversify investments.

Effective coordination among all stakeholders and agencies will greatly help expedite industrial development activities and prevent unnecessary cost escalations and loss of valuable time. The development of industrial parks in the past provides an example of how land acquisition, compensation rates and resettlement issues tend to create long delays in implementing these activities. Additionally, the shortage of resources and the delays in securing funding have either resulted in scaling down the scope and coverage of activities or delayed implementation.

Industrial development activities were also hampered due to the shortage of manpower and expertise, particularly in the areas of management. The low levels of investments made by private sector companies into developing their own human capital have contributed to this in addition to the lack of development assistance funding for HRD activities for the private sector.

Policy and Strategies

  • The main objectives of the manufacturing and industrial sector are to:

  • Promote further sustainable industrial development with focus on MSMEs, cooperatives and women entrepreneurs;

  • Contribute to economic growth;

  • Generate employment opportunities;

  • Foster private sector development particularly through human capital development;

  • Stimulate growth of the rural economy in integration with urban and export markets without adverse impact on the environment;

  • Establish industrial estates and special economic zones.

A very important component to encourage private sector growth is the establishment of industrial parks and special economic zones. While an initial outlay of Nu. 4,000 million has been shown as requirement to develop these parks and special economic zones; it is proposed to develop through public private partnerships for which Nu. 500 million is required as RGOB equity.

Targets for the Industrial Sector

The targets for the manufacturing and industrial sector are listed in the box below.

  • Increase contribution to 12% of GDP

  • Achieve 10% average annual growth in FDI

  • Increase employment of manufacturing industries sector to 6% of the total workforce

Financial Outlay for the Industrial Sector
The indicative total capital outlay for the industry sector is Nu. 357.000 million.