Struggling brand “Bhutan”

15 August 2023

The Himalayan Kingdom of Bhutan, best known for introducing its policy of Gross National Happiness (GNH) to the world, stands at a crossroads. Embedded into Bhutan’s national development philosophy, GNH seeks a holistic approach towards development centring around the values of sustainability, happiness, and good governance. Bhutan is also famous for being a “net carbon negative” country as a result of its strong environmental conservation efforts. Yet, the reputation as ‘one of the world’s greenest and happiest countries’ is contrasted with the fact that many of Bhutan’s young people are leaving the country in search of better economic opportunities. Bhutan is still a developing country with a per capita income of USD 3,266 and it remains heavily reliant on external debt and grants for its capital expenses. Also, while Bhutan’s conservation efforts come at a huge economic opportunity cost for the country, it is doubtful how much of a difference Bhutan’s individual efforts to mitigate carbon emissions will make to diminishing global climate change.

The latest GNH Index shows that the Bhutanese have become “happier”, with the GNH Index rising from 0.76 in 2015 to 0.78 in 2022. The same study, however, reveals some tension between the ‘happiness' and ‘income' relationship. Although the report claims that income is “not highly correlated” with GNH, results show that the group of poorest people (i.e., the bottom 20 per cent of the income quintile) also had the largest proportion of unhappy respondents, while the group of richest people (i.e., the top 20 per cent of the income quintile) had the highest share of happy respondents. Importantly, the study was conducted in 2022, when the world was just recovering from the COVID-19 pandemic. While Bhutan managed the COVID-19 pandemic relatively well, its reliance on hydropower and tourism as major sources of revenue and employment posed a problem in its recovery. For instance, the pandemic further delayed the start of the 1.2 GW Punatsangchhu I, a run-of-the-river hydroelectric power project, which has not only caused a potential loss of income but also cost the government triple the initial cost. The project is only expected to complete in 2025.

Bhutan’s challenges

The culmination of challenges and issues that Bhutan is facing has played out in multiple ways. In his State of the Nation report in December 2022, Prime Minister Lotay Tshering stated that 25,271 Bhutanese were living abroad, with the largest numbers in Australia (8,495), followed by India (5,779) and Kuwait (2,714). These numbers are alarming for a country with a small population of approximately 750,000. It is also highly probable that they are conservative estimates. Data released by the Australian Government, for instance, show that from July 2022 to March 2023, 10,755 Bhutanese got their visas to Australia. Even by Australian standards, the number of Bhutanese migrants is substantial. For the year 2021-2022, Bhutan ranked 16th in Permanent Migration Outcomes and 20th in Selected Temporary Visa Grants.

Perhaps it is time for the world to step up and convince Bhutan that its values are worth standing up for by investing in a sustainable economy premised around the well-being of its individuals.

The Bhutanese government is concerned about the migration of its people, and there is cause for this concern. For example, as per the census conducted in Australia in 2021, 12,004 people reported being born in Bhutan. Almost 66 per cent of these people were between the ages of 25 to 44 years. The same census reveals that more than 40 per cent of them had a qualification of a bachelor's degree level or higher. Such skilled and qualified migrants of a productive age cohort are very attractive to recipient countries such as Australia but come at a great loss for Bhutan.

In certain ways, the quality of Bhutanese migrants to Australia is a testament to Bhutan’s successful investment in education. Thimphu, however, is unable to reap the rewards of its investments. As Bhutan’s population pyramid inches closer towards an ageing population, the opportunities to enjoy its demographic dividends are narrowing. For the country to benefit from its demographic outlook, it has to be able to create sufficient and appropriate opportunities for its productive and skilled people. It is the lack of such opportunities that is forcing people to move to other countries. In an ongoing study to be published at the end of 2023, we found that the main push factor driving Bhutanese to Australia was the ‘lack of economic opportunities’ in their country of origin. While taking measures to mitigate some of the push factors that are causing Bhutan’s migration — which also include work-related issues, lack/poor delivery of services in Bhutan, and poor standards of living — there are lessons to be learned from other countries with similar experiences. While some measures have been taken towards encouraging international remittances, there is still scope to capitalise on opportunities for “brain gain” and attracting investments from Bhutan’s migrant population.

Transforming Bhutan?

The government has realised that there is a problem and initiated major reforms. Under the theme “Transformation Bhutan”, a series of governance and economic reforms have been implemented. One such reform, implemented in 2022, was to “transform the civil service” and improve governance in Bhutan. An outcome of the transformation exercise was that 47 senior executives were fired for failing to “meet the expectations of the positions that they had been holding”. Another reform was to Bhutan’s tried-and-tested tourism policy of high-value and low-volume, and the tourism levy was increased from USD 65 to USD 200 per day. Similar transformation-related reforms are taking place across other sectors, such as taxes, education, and urban planning. The long-term benefits of these reforms are yet to be seen. In the short term, however, the reforms are having the opposite effect, causing a great deal of uncertainty and consternation to the Bhutanese people.

To Thimphu’s credit, the government has revised the pay of its civil servants in an effort to retain its skilled professionals from July 2023 onwards. Ranging from 55 to 74 per cent increases across all levels, this is a substantial increase compared to previous revisions. The comparison, however, should no longer be year-to-year, and it has to be compared against the income earned overseas. For example, with the recent pay increase, the senior-most executive in Bhutan’s civil service now earns Nu 115,115 per month (approx. USD 1,400). In the same period, i.e., 1 July 2023 onwards, the national minimum wage in Australia increased to AUD 23.23 per hour (approx. USD 15.50). A person working at the minimum wage in Australia can earn more in a month than a government secretary in Bhutan — and the high expenses attributed to the social obligations of individual Bhutanese (such as financial contributions to family and community members) will likely offset the high cost of living in Australia.

Moving forward?

There is a sense of urgency in Bhutan as it seeks to graduate from the least developed countries (LDC) category in December 2023. To grow its economy, Thimphu will have to keep more of its skilled and qualified population from migrating and attract foreign investors. As a way to generate quick returns, Bhutan has started to invest in “new-age businesses”, such as bitcoin mining and drone technology. Profits from Bhutan’s investment in cryptocurrency are already being used to partially fund the recent pay revision in Bhutan. But the image of Bhutan as a cryptocurrency investor raised eyebrows when a couple of cryptocurrency companies that had listed Bhutan as one of their clients filed for bankruptcy earlier this year. To the international audience, these changes in Bhutan’s image and the sight of its young population leaving the country are confusing. Until just recently, Bhutan had enjoyed an image of perfectly balancing the pursuit of GNH and at the same time increasing its GDP and preserving its environment.

How Bhutan considers moving forward is important. There now appears to be a shift in the thinking of Bhutan’s development philosophy. The prime minister has admitted that recent trends have put the country’s GNH philosophy into question. In the end, Bhutan’s policymakers will have to decide what is best for the country and its people. These choices will have consequences both domestically and globally. For Bhutan, it might mean having to give up the “happiness” and “net-carbon negative country” brand that it has painstakingly built over the last few decades. For the rest of the world, this would mean losing an exemplar that shows that there is an alternate pathway to development. Perhaps it is time for the world to step up and convince Bhutan that its values are worth standing up for by investing in a sustainable economy premised around the well-being of its individuals.

DISCLAIMER: All views expressed are those of the writer and do not necessarily represent that of the 9DASHLINE.com platform.

Author biography

Dr Lhawang Ugyel is an academic with the School of Business at UNSW Canberra in Australia. Previously, he held various positions at the Crawford School of Public Policy, the Australian National University: as a Lecturer at the Development Policy Centre (a joint position as a Visiting Lecturer in Public Policy at the University of Papua New Guinea) and as a Research Fellow with the Policy and Governance Program. He also worked for the Royal Government of Bhutan for close to ten years as a Senior Human Resource Officer and Policy Analyst. Image credit: pixabay/Wellcometravel.