The South Asian region is seeing nations tripping over poor economic decisions made over the past few years. In the Indian neighbourhood, Pakistan is living from bailout to bailout, Sri Lanka is in major turmoil, Bangladesh fears the worst, Nepal is showing cracks & Afghanistan has not had a chance to even look at the economy. Most of these countries have faltered by applying policies that have worked in other countries without (or with) realizing the extreme differences in fiscal realities. As a common factor, Pakistan & Sri Lanka have gone down the Chinese debt trap and Bangladesh & Nepal are on a similar path. The abode of peace, Bhutan was seen as the wise one, biting only as much as it could and pursuing happiness. But of late it has been taking decisions that might put its people on the path of discomfort.
The Bhutanese economy is largely dependent on Hydropower & Tourism. Hydropower plants financed by India export electricity back to the power-hungry neighbour and generate vital cash flow. Add to this large Indian assistance money & defence support create a major chunk of Bhutan’s money bucket. The country has also been prudent in spending this wealth in ways that protect ecological & economical needs, however, it is walking a tight rope in trying to balance sustainable development & aspiration of people who seek a better life.
Two years of COVID were met by a predictable government response, isolation. In absence of vital medical facilities & complete dependence on vaccine supplies led to people being made to confine in their communities. This had a major impact on small businesses & trade which was the mainstay of the growing middle class. Even when the world eased lockdowns, Bhutan kept the people confined & only opened institutional trade enabling the government to sustain the population. So, while the numbers showed healthy economic activity, the benefits were only doled out as Kidu. The simplest lay interpretation of kidu is that, in the Bhutanese system, the King personally takes care of the well-being of the people. It is a unique and humane social security system to ensure necessities and livelihood as well as any other aspect of a Bhutanese citizen's life when necessary. The greatness of the gesture is accepted, however, this support while sustaining is not a tool for development.
A total absence of tourists meant that no hotels, taxis & related businesses had any income. Most connections were lost, skilled manpower reverse-migrated & infrastructure suffered decay of disuse. Small traders who used to import goods from the land ports of Phuentsholing in the South West & Samdrup Jonkar in the South East had to scale down due to reduced demand & difficulty in sourcing. One of the biggest strengths of Indo-Bhutan trade was always the people-to-people relations that integrated commercial lines in both countries & facilitated people-driven growth & exchanges. Economic hubs of Siliguri & Guwahati were always social melting pots hosting mutually beneficial convergence.
The decline in COVID threat came as good news to people who had prayed for the restoration of normalcy. However, recent policies announced by the Bhutanese government hint at an inclination towards the proclamation of openness with retention of control. The free movement of people across the borders, up to a certain distance for Indians in Bhutan & unrestricted for Bhutanese in India is being changed. Indians can now only venture inside this limited area for 24 hours & will need to undergo certain processing. This limits the flow of casual tourists, labour, traders & others who may not have the luxury of paying for the processes. While India has not given the reciprocal web for the Bhutanese, locals on the Indian side feel that their generous hospitality is being replied to with paper policy tilting the deep relations of equality cherished by people from both sides.
In search of high-value-low-volume tourism, Bhutan has announced an increased visitor fee for all tourists. This again will end up affecting the budget traveller & the affordable hotel businesses in Bhutan. While Bhutan may assume a larger per-person spend from the tourists, the high-end tourist infrastructure is very limited & does not match the service standards offered in a similar process, globally.
These two decisions appear to be influenced by similar policies in other nations. Japan has a "sayonara tax". The 1,000 Yen ($9.25) fee, is paid by international visitors as they leave the country. This is reasonable as tourists on average get the value for money in return. Bhutan charging about $200 each from international tourists & Rs 1200 for Indian tourists may end up stunting its own travel industry. While the bigger players & government may see larger revenue, it is the smaller businesses that will end up suffering. Similarly, the travel restrictions are most likely to create a situation of reduced interactions. This is strange as for decades it was this free cultural exchange that created the unique social blend of Bhutan.
These decisions have an eerie similarity with actions in the neighbourhood. Sri Lanka had suddenly decided that they will go pure organic farming without giving time for the logistics chain & related ecosystem to develop. Unfortunately, it was the people in the lowest part of the pyramid who suffered and had to face the brunt of an economic collapse. Leaderships seeking control always prefer to control the flow of men & materials and then deciding distribution of welfare.
The people of Bhutan are free to choose the type of aspirations they want to be materialized through development. However, textbook policies, in their original form, have a limited place in the real world. Despite a large hydropower setup, & exports, Bhutan still needs to import power in the off-season. The delays in developing new projects & absence of other streams like Solar / Wind still keep Bhutan energy insecure. I am certain that it is understood that smaller businesses keep the household income up and directly impact the happiness index so cherished by the country. Income from institutional trade does add to the government revenue, but only has a median impact on household growth. Policies that isolate people and impede collaboration mostly go against basic social constructs. Bhutan may need to diversify its revenue streams, address grassroot realities and focus on the skill development of its population to offer people choices to decide their future. Choices that can be exercised & materialized & not just traded for happiness.
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