Private Sector Development in Bhutan: An Analysis of Constraints

The main focus of this paper is to find the actual constraints faced by the private sector in Bhutan. In order to achieve this, a nation-wide survey of 168 firms and personal interviews were carried out. All in all, this study deduces that the variance and severity level of constraints of the private sector in Bhutan differ significantly not only amongst different variables but also within districts, regions as well as sectors. Other constraints (miscellaneous) related to business policy and regulatory environment is the main constraint, closely followed by problems related to finance as the next, and poor infrastructure as the third significant constraint.

Further analysis identifies a significant difference between the urban and rural districts especially in terms of infrastructure and geophysical constraints, and finance and institutional support; and the severity of these constraints is felt higher in the rural districts vis-à-vis urban districts. A significant difference is also seen amongst different sectors, particularly for the constraints related to labour skills and productivity, business policy and regulatory environment, and infrastructure and geophysical constraints. However, no significant difference is seen amongst all the sectors for constraints related to finance and institutional support, and market and competition. As regards to the size and ownership of firms, they are not significantly different in terms of almost all the dependent variables (constraints).

In essence, this study explores to find a possible ‘missing gap’ between the factors hindering the growth of the private sector and the need of the Royal Government of Bhutan (RGoB) to bridge this gap. Finally, the paper concludes that the RGoB’s aspirations to achieving the objective of making the private sector the engine of economic growth would highly depend on its concerted efforts to creating a truly enabling business environment with transparent, coherent and time consistent policies.