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Private sector’s blues
Sanjeev Mehta, July 18, 2013
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It has become ritualistic to talk with concern about the limited ability of the private sector in Bhutan. Plan documents have devoted chapters on private sector development but the need remains ever so important. The lack of capacity of the private sector can be established through a variety of data– the private sector contributes little more than 50% of GDP, large scale private investment is far too less, and so on. Deeper analysis suggests that the productivity of the private investment is declining. The entrepreneurial spark is missing. Why is this happening in spite of the rapidly rising economy?

The reasons range from the absence of enabling environment to lack of infrastructure. Doing Business 2012 report ranks Bhutan at 148th position, indicating that the regulatory framework is definitely strong.The degree of control over the private sector is definitely a factor in the investment decision as these regulatory hurdles may turn a profitable venture into a non-profitable one. Over regulation is bad and should be undone.

The basic problem faced by the Bhutanese entrepreneurs relates to lack of competitive edge. Bhutanese market is open to cheaper import from outside that renders domestic production uncompetitive. The old cliché, “nurse the baby, protect the child and free the adult” has never been put to use. Moreover, Bhutanese industries are not able to reap the natural advantage of cheaper hydro electricity as they have to pay the competitive rate. This undermines the ability of the private sector to benefit from the opportunities available in the energy intensive mineral based activities. No amount of deregulation would work unless government is ready to provide the industry with concession in the area to use domestic inputs at a cost price.

The private sector’s inability to grow is also caused by the absence of right attitude. Bhutanese entrepreneurs are more interested in making short-term gains. Their business tactics is akin to “killing the goose that lays the golden eggs”. Entrepreneurs should be driven by the sheer joy of creation.

The private sector would continue to be stifled by the low capability syndrome unless coordinated efforts are made by the players involved.

Sanjeev Mehta

Professor

Royal Thimphu College, Thimphu

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