The Private And Public Sectors Of Bhutans Economy Economics Essay

While Bhutan has made important growing in developing the economic system, it is still in its babyhood.

Furthermore, the establishment of private and public sector started recently with stoping its self-imposed isolation in 1960s wherein the history of private and public sector in Bhutan Begins. The private sector in Bhutan is non merely regarded as the major engine of growing but besides an indispensable spouse in the development of the state. It is seen as the dynamic force behind employment growing, which is likely to do increased degrees of productive employment to pull the fast turning labour force. Their parts towards GDP are rather important.Bhutan has made advancement in its recent economic construction and dunking poorness.

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The public sector, peculiarly hydro-power, has long been the most of import beginning of economic growing, but the authorities now identifies that developing the private sector is more cardinal. Expansion of public and private sector in Bhutan is held back by the little size of ( or no ) market, the deficiency of obligatory substructures and the reasonably high costs of operating concern. Furthermore, cragged Mountains dominate the landscape and do the edifice of transit webs and other substructure installations hard and expensive.Government sector and private endeavor are the two chief of import subdivisions of an economic system that functions hand-in-hand and without one of it would impossible the balanced growing of economic system. These two subdivisions of economic system play a lead function in the socio economic development of the state in all facets of development.

Therefore, private endeavors must be encouraged and rigorous competition is allowed among the private enterprisers, so to better private companies and heighten the rapid economic growing.


Bhutan has approximately 700,000 population prolonging with its limited resources within its entire country of 38,394 square kilometre. Besides its shoal and narrow economic construction Bhutan is seeking stand out its socio-economic development at really faster rate, although at its infant phase now. Sing private sector as one of the chief keys of development is mending towards its patterned advance in Bhutan.Private sector and public sector are of import sections of any economic system.

The public and private sector play a cardinal function in the developmental activities of the economic system and for the smooth operation of the authorities. The growing of private sector indicates the true sense of development in the economic system, and private sector is the engine of economic growing. Denationalization means the modernisation ; which enhances the broad scope of chances to its citizens.Private sector is that portion of economic system, sometimes referred to as the citizen sector, which is run by private single or groups, normally as agencies of endeavor for net income, and is non controlled by province. On contrary, the portion of the economic system concerned with supplying basic authorities services. The services offered by the populace sector vary from state to state. Public sector activity in Bhutan includes presenting societal security, administrating urban planning, forming national defence, public roads, primary instruction and health care centres, etc.This assignment contains analysis of function of private and public sector in the economic development of modern Bhutan.

Furthermore, it besides discusses the series of economic indexs, its part to GDP, chances, and some of the challenges in the development of both the sectors.

Definition: the populace and the private sector

The economic system is composed of private and public sector, which may be differed somewhat. However, each sector is characterized as below:Private sector: “ Private sector or private endeavor refers to all types of single or corporate endeavor, domestic and foreign, in any field of production activity. Private sector endeavors are characterized by ownership in direction in private custodies, personal enterprises and net income motivation ” , ( Datt & A ; Sundharam, 2006, p.

217 ) . Private sector ccomprises of concern activity, which is ego financed and run by private persons or in group and that are purposefully operated for net income motivation.Public sector: Harmonizing to Dhingra ( 1986 ) , “ private sector can be defined as an endeavor where there is no private ownership, where its maps are non simply confined to the maximization of net incomes or the publicity of the private involvement of the endeavor, but are governed by public ” . Economy concerned with supplying basic authorities services that vary from state to state. Public sector service in Bhutan consists of supplying societal security, pull offing urban planning, set uping national protection, public roads, primary instruction and health care centres, etc.

Brief history of private and public sector development in Bhutan

The history of private and public sector endeavor development in Bhutan Begins from the twenty-four hours where Bhutan opened its door to outside universe after pursue of long self-imposed policy of isolation.

In other words, the history of private and public sector in Bhutan can be traced back to the age of modern Bhutan, which is the execution of the development programs in 1961. Prior to 1960s Bhutanese economic system was closed economic system, there was n’t any external menace and Bhutan was prosecuting the utmost policy of isolation. There were no pecuniary system people exchanged goods for goods ; it was strictly a traditional economic system. Although, the development of different sectors in Bhutanese economic system started recently, since the origin of development programs in 1961, but the rate of development seems faster.

The Bhutanese private sector has expanded quickly over the last four decennaries of development but is still comparatively little and developing. Unlike many states with well-established mercantile traditions, Bhutan does non hold any drawn-out history of private endeavor ( Planing Commission Secretariat, 1999, p.60 ) . Before the beginning of planned development activities and the recent modernisation of the economic system, private endeavor was chiefly limited to small trade of little agricultural excesss and a few handcrafted merchandises.

Index of economic development of Bhutan

Table 1. shows the cardinal indexs of economic development of Bhutan








GDP ( Nu.

Million )

At current monetary values36,112.1340,673.5249,456.6054,712.8861,223.46At changeless monetary values28,879.3530,857.



GDP ( US $ Million )

At current monetary values818.87897.671,196.

051,257.771,264.69At changeless monetary values654.86681.03880.02875.



GNI ( Nu. Million )




GDP Growth Rate ( % )

At current monetary values13.4012.6321.

5910.6311.90At changeless monetary values7.126.8517.934.



Inflation ( % )

Implicit GDP Deflator5.865.413.

115.694.85Consumer price index5.064.995.158.314.



Govt. Outgo as % to GDP

Current Outgo18.2517.5116.

1720.3618.26Capital Outgo13.7416.4716.9919.



Govt. Revenue as % to GDP

Domestic Gross17.

9620.8822.6724.1224.25Other Grosss14.9515.




Govt. Dept as % to GDP





Exchange Rate ( Nu/ $ )




GDP per Capita

In Nu.


9581,539.4689,963.04In US $1,289.561,387.



Population ( million )



683Beginnings: National Accounts Statistics ; 2009, National Statistics BureauGDP ( in million Nu. ) at both the current monetary value and changeless monetary value additions reasonably over the period of clip ( i.e. from 2005-2009 ) , which indicates the socio-economic development of the state. The GNI ( million Nu. ) had increased from 31,425.22 in 2005 to 55,381.49 in 2009.

The rate of rising prices on the other manus has practically gone down to 3.11 in 2007 and there is spot of oscillation that has risen to 5.69 in 2008.Government outgo as per centum to GDP has decreased from 18.25 in 2005 to 16.

17 in 2007 which has increased to 20.36 in 2008 one time once more gone down to 18.26 in 2009. There is a fluctuation in the govt. outgo over the clip. But the domestic gross has increased annually which has recorded to 24.25 per centum in 2009 and that indicates that Bhutan is bring forthing much of gross from the sale of hydropower energy. Bhutanese GDP per capita was Nu.

56,869.50 in 2005, which has increased to Nu. 75,047.95 in 2007 and has farther augmented to 89,963.04 in 2009. Besides this big sum of GDP per capita there is a broad scope of disparities in the economic system.Population growing is another index of economic development of the state. Unless there are equal Numberss of population economic system is non considered as developed economic system.

There for Bhutanese population is increasing every twelvemonth that has recorded to 0.683 million in 2009. It would be wise to state the Bhutan is still necessitate of more population so to see as one of the developed states of the universe.

Contribution of public and private sector towards GDP

Agribusiness sector in Bhutan has been the anchor of our economic system since the clip immemorial, and the agribusiness productiveness has increased because of the agribusiness proper, which confirms a modest growing of 3 per centum per annum. Apart from this sector, building and fabrication contributes important portions to the GDP of state at an mean growing rate of 6.5 per centum and 13.5 per centum severally. This is because of the commissioning of Chukha Hydropower Project and other private companies like BCCL, BBPL, PCAL, BFAL etc.

Furthermore the under building of hydropower undertakings like PHPA, Kholongchu Hydropower Project, Mangdichu Hydropower Project, Dungsam Cement Corporation Ltd, would lend a important portion to our GDP and would decidedly hike our economic system.Table 2. Shows the gross domestic merchandise ( GDP ) or value of all concluding goods and services produced within a state in a given twelvemonthYearGDP ( buying power para ) ( Billion $ )20002.120012.320022.520032.720042.

720052.920062.920072.920083.35920092.731Courtesy: hypertext transfer protocol: //

aspx? c=bt & A ; v=65Chart 1. Represents the GDP ( buying power para ) of different twelvemonthThe above graph shows the representation of the state ‘s GDP ( buying power para ) of different old ages ( 2000-2009 ) . It is clear from the chart that the GDP of our state is increasing reasonably from 2000 until 2003.

But in 2003 and 2004 it remained changeless at 2.7b, where the developments lag far behind and authorities had to pass all its budgets on 2003 warfare. The maximal GDP was in the twelvemonth 2008 that recorded 3.36b of entire GDP, which might be because of the Tala Hydropower Project. However, it has decreased to 2.73b in the subsequent twelvemonth.

Employment chances in both the sectors

Private sector plays a lead function in the procedure of economic development of state and employment coevals.

In position of the limited employment growing chances in the populace sector, the Royal Government has strongly emphasized the demand to heighten the attractive force for young person to take up work in the private sector. Therefore, the authorities didnon anticipate public sector employment to turn quickly ; instead it was the private sector that is expected to play an of import function in making occupations for young persons ( Bhutan National Human Development, RGoB Report 2005, p.74 ) . Since the private sector remains little and developing, the creative activity of equal quality employment in the sector remains largely unfulfilled.Table 3.

Represents the figure of individual engaged in industrial sectors by employment position and sex, Bhutan, 2000SectorFemaleAll femaleOwnerEmployeeCasualSkilledUnskilledPrivate company341.0040.0149.083.069.0Government Company1,094.00201.0383.

088.0422.0Beginning: Statistical Yearbook of 2010Chart 2.

Shows employment of females in private and public sectorMost of the females have been employed in authorities sector in all. Until 2000 there was n’t any female owner in both the sectors. Harmonizing to the above representation the more figure of females are engaged in authorities companies than in private companies, whether skilled or unskilled, employee or casual.Table 4.

Number of individual engaged in industrial sectors by employment position and sex, Bhutan, 2000SectorMaleAll maleOwnerEmployeeCausalSkilledUnskilledPrivate Company2,406.07.0601.0648.0707.0443.0Government Company3,632.0


0566.0789.0670.0Beginning: Statistical Yearbook of 2010Chart 3. Shows the employment of males in private and public sectorCorrespondingly the male employment of private and public sector besides shows a similar representation.

More of males are employed in authorities sector which recorded 3,632 and 2,406 in private sector in 2000. There were 7 male owners in private sector. The more figure of employee in public sector clearly shows that private sector in Bhutan is still non good developed.

Troubles in development of private and public sector in Bhutan

The private sector in Bhutan is hindered by the little size of the market, the deficiency of helpful substructure and the comparatively high costs of making concern. Despite a figure of restrictions, the private sector has sustained to register modest growing and play its function in the economic development of the state. The factors that have restrained the possible growing of the sector have been recognized as ;“ TopographyThe comparatively little size of the local market,Lack of entrepreneurial expertness and experience,Limited entree to recognition installations,High involvement charges andDeficits of domestic skilled and unskilled labor ” , ( Ministry of Planning, 1996, p.

66 ) .Harmonizing to the ADB study of Country Strategy and Program ( 2005 ) , When asked about the individual largest job facing them, Bhutanese houses ranked ( I ) deficiency of skilled labour ( 20 % of all houses ) ; ( two ) non-competitiveness of merchandises comparative to foreign supplies ( 17 % ) ; ( three ) bureaucratic obstructions ( 16 % ) ; and ( four ) inadequate and dearly-won funding ( 16 % ) . So, that is why the construction of production is still comparatively shallow and the gait of private sector development in both urban and rural countries continues to dawdle behind outlooks. Private sector in Bhutan deficiency enterprise and invention that by and large comes from partnership with foreign houses and as of research and development. The enlargement of substructure is an absolute requirement for the broader economic and societal transmutation of the state.

Regardless of the speedy extension of route web, still more than 50 per centum of their population resides half a twenty-four hours ‘s walk from the nearest motor route point.


Private and public sectors are two of import sections of any economic system. Development private and public in Bhutan started recently, with the origin of development programs in 1961. Prior to 1961 Bhutan was prosecuting the policy of isolation that was closed economic system and strictly a traditional economic system.

With the establishment of development programs the private and public sector has generated broad scope of economic chances and played a really cardinal function in the socio-economic development of the state. These sectors have contributed to the GDP of state to a important extent. Since private sector is the engine of economic growing, it is hence necessary to promote the constitution of private endeavors and let the rigorous competition in order to reflect the economic system. Unfortunately, development of private and public sector in Bhutan is hampered by assorted causes that require high input cost and some of which are non evitable.RecommendationSince Bhutan is dawdling behind the good established private endeavor which is considered to be the engine of economic growing, so in order to raise a well-built private endeavors Bhutan authorities must promote private persons by supplying loans at lower involvement rates and inducements.Bhutanese enterprisers lack invention and modernism which is really of import in the procedure of denationalization. Therefore, immature Bhutanese enterprisers must be guided and given intensive preparation programmes.Concentration of authorities and privates venture in peculiar topographic point is one of the greatest defects in Bhutan, where people get concentrated and congested.

So, these strategies must be persuaded in rural countries so that every part of the economic system is every bit developed.


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