Funny money?...

For over a decade now, every time I’ve fueled up in Phuentsholing, I’ve asked the petrol pump cashier to exchange various amounts of Ngultrums for Indian Rupees. I’ve had little problems changing small amounts, like Nu 500. But for larger amounts, say Nu 5000, it would sometimes get difficult to change my money.

I’ve rarely needed the Indian Rupees for my stay in Phuentsholing, yet I’ve made it a point to request for the informal currency exchange every time I visit our border town. I’ve developed this odd tradition to give me a very rough idea of the state of our economy.

My assumption is simple – petrol pumps in Phuentsholing should always have a ready supply of rupees. Why? Because many Indians fuel up in Phuentsholing. And they pay for it in rupees. Plus, since fuel is cheaper in Bhutan, some Indian’s take away petrol in barrels, presumably to sell at a profit … but that’s another matter.

So if I can change my money easily, it would mean that rupees are easily available; that the ngultrum is at least as strong as the rupee; and that, overall, we export more than we import from India. This is good sign.

But if I can’t change my money easily, it would mean that the rupees from the petrol pump are quickly diverted elsewhere; that the true value of the ngultrum is not at par with the rupee; and that, overall, we import much more than we export to India. This is not a good sign.

All things considered, I’ve had no cause to be concerned. Like I said earlier, changing small amounts of money has generally been easy.

But now I’m very worried. It appears that small shops in Phuentsholing are doing a brisk business charging a whopping 10% to change ngultrums to rupees (read The ‘swop’ shops of Phuentsholing). That means that you get only Rs 10,000 in exchange for Nu 11,000. That means demand for rupees outstrips supply. That means we import much more than we export to India, our principle trade partner. That means the market value of the ngultrum is not at par with the rupee.

Huge amounts of rupees have been pumped into our economy to construct hydropower projects. Even larger amounts of rupees come in as Indian aid. And most of our government’s revenue is realized through the sale of electrical power to India bringing in yet more rupees. And still we have difficulty changing ngultrums for rupees?

We should be very worried.

But there’s little point in treating the symptom. So trying to stop small business from selling rupees at a profit, for example, won’t provide real relief. It won’t be possible to forcefully stop them, anyway. Instead address the problem: reduce unnecessary imports; decrease dependence on foreign workers; increase farm productivity; support rupee generating businesses; and strengthen the private sector.

We have free and full access to one of the world’s largest and fastest growing markets. Use it. Tourism, education, health, ICT, manufacturing, finance, agriculture, and hydropower … any one of them should be able to generate more than enough rupees. Used together, we should be able to fulfill His Majesty the King’s vision of creating a robust and vibrant economy for our country.

Interpreting our Constitution...

“WE, the people of Bhutan … do hereby ordain and adopt this Constitution for the Kingdom of Bhutan …” proclaims the preamble of our constitution.

And Article 1 declares that “This Constitution is the supreme law of the State.” And that “The Supreme Court shall be the guardian of this Constitution and the final authority on its interpretation”.

If legal interpretation of the Constitution was needed it should have been provided by the Royal Courts of Justice which includes the Supreme Court, the High Court, Dzongkhag Courts and Dungkhag Courts. The Supreme Court has the final authority on the interpretation of the Constitution, but that does not mean that legal interpretation of the Constitution cannot be provided by other courts.

So I’m surprised that the National Assembly asked a foreign legal expert to interpret our Constitution (read Indian advocate interprets constitution). And even more surprised that the foreigner’s opinion, which is of no legal consequence, has been made public.

Transforming our villages...

I am delighted that the agriculture minister is traveling to our dzongkhags to discuss the 10th Plan and to identify viable products that our villagers can make (read Taking the 10th plan to the people). If villagers and local leaders are fully involved in the process and genuinely accept his idea, our agriculture minister could bring about a true and sustained transformation of our villages. Well done.

The following article, reproduced from the PDP manifesto, talks about how the One Village One Product movement could transform villages in Bhutan:

Ohita is a small village in Japan’s southernmost island of Kyushu, which is just about the size of Bhutan. Twenty years ago, Ohita was a sleepy backwater of Japan. Its young people were leaving for cities in droves, its economy was fast declining, and farmers increasingly depended on government subsidies that harmed Ohitaps’ spirit of self-reliance and self-respect.

Today, Ohita is a vibrant agro-based economy. It is a choice destination for Japanese looking for business and employment opportunities, and for foreign tourists looking for modern Japan steeped in tradition and pristine nature. “Made in Ohita” is recognized as the sign of unique farm produce of outstanding quality, and equally unique agro-industry products born of old heritage and new technology.

The One Village One Product Movement, started in 1979, is the power behind this transformation. The Movement was the brainchild of Ohita’s then-Governor Hiramatsu, who envisioned a dynamic and vibrant Ohita. But, he wanted to do it in ways that nurtured what he thought was the root of all sustained change: leaders who can inspire and move the community.

The Movement simply enables people and their community leaders to take up a product or an industry that is distinctive to their region, and transform it into a nationally or internationally accepted one. The government never used subsidies as a means to do so, for fear of hindering self-reliance and lasting success. Measures provided, instead, were leadership training, technical assistance, filling information gaps in marketing and distribution. (See the OVOP website for details.)

Around sixty communities of Ohita now produce more than 300 products of distinction bringing gainful employment and prosperity to the region. Among them are: “Shiitake” mushrooms regarded as the world’s best, commanding a lion’s share of Japan’s market; a flavorful “Kabosu” lime of ancient variety that is thought to have survived only in Ohita; a large number of processed products made from these unusual limes; “Bungo” meat that topped Japan’s Grand Championship; and various distilled barley spirits coveted for their smooth taste – like the best of our own ara.

The Movement’s success generated excitement elsewhere. It is spreading all over Japan and to many communities abroad – in Cambodia, China, Indonesia, Laos, Malaysia, Mongolia, Philippines, Thailand, and even USA and beyond.

Our people in villages are steeped in our cultural and natural heritage, in what they produce and how they live. One Product One Village Movement has a perfectly fertile soil, right here in Bhutan.

Possibilities are endless – limited only by our own imagination!

How (not) to lift the meat ban...

Well done, Bhutan Observer, for continuing the debate on the proposed amendment the Livestock Act 2001 (read their articles Meat ban debate and Killing ceases when eating stops).

I say “proposed amendment” because the proposal to lift the ban on selling meat products during the 1st and 4th months of our traditional calendar has not completed the constitutional process. So it is not yet law.

To become law, Article 13.1 of the Constitution requires that “A Bill passed by Parliament shall come into force upon Assent of the Druk Gyalpo”. And Royal Assent has not been granted so far. In fact, as far as I know, the amendment, as approved by the National Assembly, has not even been submitted to His Majesty the King.

So the government would be well advised not to lift the prevailing ban on selling meat during the 1st month the Year of the Female Earth Ox. Unless, of course, Royal Assent is granted within the next two weeks leading to Losar, our new year.

And the proponents against the amendment would be well advised to submit their grievances to His Majesty the King; not the agriculture minister or H.H the Je Khenpo – one will not listen and the other cannot listen.

But why approach His Majesty the King? Because according to Article 13.10 of our Constitution: “Where the Druk Gyalpo does not grant Assent to the Bill, He shall return the Bill with amendments or objections to deliberate and vote on the Bill in a joint sitting”.

My position? I’d voiced it in the Assembly and in “Consulting democracy”

Is the GDP in our GNH?...

Here’s some good news from the RMA: our GDP, which is about Nu 59 billion, grew by 21.4% in 2007 and increased per capita GDP to US$ 1900. Not bad. We now have the highest GDP per person in South Asia. But what does this mean?

Do you contribute your share to the GDP? If you do, you would have contributed US$ 1900 worth of goods or services to the economy. And if you do that, you would earn US$ 1900 in one year. Now US$ 1900 is roughly Nu 95,000 which is about Nu 7,900 a month. Do you earn that much? If you do, you earn your share of the GDP. If you don’t, you earn that much more, or less, of the GDP.

But let’s say you are married, that your spouse does not work, and that you have two young children. That’s a total of four people in your family living off only your salary – that wouldn’t be farfetched. Now how much would you have to earn to get your family of four to enjoy their share of the GDP? Nu 7,900 times 4, or Nu 31,600 a month. Do you earn that much? Probably not. Most families don’t.

What does this mean?

This means that we don’t work to earn much of the money that is pumped into our economy in the form of international loans, aid and hydropower exports. This means that imports dominate exports. That money does not circulate among us sufficiently. And this means that we don’t have enough people working outside our farms. This means that our GDP is not really that impressive.

I’ll be happier with a smaller GDP and a much more modest per capita GDP, but one which truly reflects our productivity. A per capita GDP that most Bhutanese can claim to earn.

And one more thing: I’ll be happy if my earnings, however humble they may be, grew at more or less the same ratio as the GDP.

Official business...

I’m humbled by the quality of the responses to my last entry – they are insightful, meaningful and educative. And every one of them shows deep concern over how difficult it is to do business in our country.

But your responses scared me. I suddenly realized that Doing Business ranking for Bhutan may be terribly inaccurate. Why? Because Doing Business measures regulations and procedures that affect business activity, regardless of how well or poorly the regulations are applied.

Your responses all say the same things in various ways: that regulations are not our biggest constraint to doing business; that that distinction goes to our officials, the enforcers of the regulations; that doing business is really difficult because officials do not do their job properly, or are simply absent from work; and that unless one has proper connections it is very difficult to get down to business.

Yes, our regulations and procedures are not business friendly…that’s why Bhutan is ranked 124th in the world. But what Doing Business does not measure is the attitudes of officials. If attitudes are factored in, expect our already poor ranking to plummet all the way to the bottom.

So yes, let’s review and improve business regulations. Let’s keep those that enhance business activity. And discard those that constrain it.

But, more importantly, let’s improve the way our officials conduct their business. Let’s change the mindset in officialdom: from enforcer to service provider; from the person in charge to the person serving; from commander to servant.

Last year, both parties convincingly articulated their promises to change the mindset of the government and the civil service. It’s time to walk that talk.

Getting down to business...

Everywhere I look I see people, thousands of them, buying and selling goods and services. It must be easy to do business in Thailand. In fact it is: Doing Business 2009 ranks Thailand 13th out of the 181 economies that the World Bank studied.

Doing Business investigates government regulations that affect the following 10 aspects of business activity: starting a business, dealing with construction permits, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business.

Bhutan, as we know very well, is ranked 124 (read Doing business isn’t easy anywhere). Here’s how we fared in each of the 10 dimensions covered in Doing Business 2009.

First, the good news…In Bhutan, it’s relatively easy to:
Employ workers (13th in the world)
Enforce contracts (37th); and
Register property (38th)

And now the bad news…but, it’s difficult to:
Start a business (63rd)
Pay taxes (82)
Deal with construction permits (116th)
Protect investors (126th)
Trade across borders (151st)
Get credit (172nd); and
Close a business (ranked last at 181st)

So what do these rankings mean? How did we get there? Why? What can be done? I’ll post a few entries on some of these areas to initiate public debate going. Let’s get down to business. Let’s make doing business easier. Let’s strengthen our private sector.

Increasing voluntary contributions...

The election commission’s decision to increase the voluntary contribution ceiling to political parties is hazardous to the health of our fledgling democracy (read ECB’s notification).

It’s hazardous because increasing the amount that members can contribute will strengthen the two existing parties, and place any future party at a big disadvantage.

It’s hazardous because increasing the voluntary contribution ceiling by 500% to Nu 500,000 per member per year disproportionately favors one party – the ruling party, DPT, which also enjoys an overwhelming majority. To be sure, even a ceiling of Nu 100,000 favours DPT more than PDP, but that ceiling was established before the elections, and both parties were fully aware of the rules. Changing the rules now, in the middle of the game so to speak, risks bolstering one party unfairly.

And it’s very hazardous because only a handful of Bhutanese can afford to make voluntary contributions of Nu 500,000 per year. Naturally, big money, from those few hands, will influence politics that much more, defeating the whole purpose of defining a ceiling in the first place.

If increasing the voluntary contribution ceiling is not good for a healthy and vibrant democracy, ECB should reconsider the decision.