Really hard business

We may have lost the elections. But I still read our manifesto every now and then. It reminds me of our promises. Reminds me to serve with humility. And to walk the talk.

The following article is a “box” from our manifesto. Enjoy.

Doing business isn’t easy anywhere
But, it’s really hard in Bhutan!

The World Bank has been looking into how easy it is to do business in 178 countries, from Afghanistan to Zimbabwe. Laws, regulations and their enforcements are evaluated in each of the following 10 stages of business companies’ life:

1. starting a business
2. dealing with licenses
3. employing workers
4. registering property
5. getting credit
6. protecting investors
7. paying taxes
8. trading across borders
9. enforcing contracts
10. closing a business

Doing Business 2008, the fifth annual report on this investigation, ranks 178 countries on the ease of doing business. Singapore is at the top, followed by New Zealand, USA, and other industrialized countries. No surprise. Democratic Republic of Congo is at the bottom, along with a number of other African countries. No surprise there, either.

Bhutan is ranked the 119th out of 178. You might say “no surprise!” But, we do worse than some African countries (Zambia, Uganda), parts of the world badly affected by war and internal conflicts (Pakistan, West Bank and Gaza, Sri Lanka), and distinctly worse than Bangladesh and Nepal. Surprised? We should be.

It is really hard doing business in our country, especially if you are small or self-employed. No wonder the private sector is not flourishing. No wonder the young people are having a hard time finding jobs.

Bhutan is particularly weak in areas such as trading across borders where we are ranked 149th compared to India (79th) and Bangladesh (112th); and in access to credit where we are 158th compared to India (36th), Bangladesh (48th) and Nepal (97th).

These statistics beg the questions: why is government standing in the way of Bhutanese doing honest business, generating income and creating jobs? And how can we expect the private sector be the “engine of growth” in such a hostile environment?

Doing Business 2008 including its country results is available to anyone at Reportedly, it is taken seriously by investors looking for business-friendly countries.

Question bank

I was shocked to read that RMA has given the Punjab National Bank approval to start preliminary work to set up a branch in Bhutan. I have many questions…

Do we know that Punjab National Bank is India’s second largest public sector lending bank? That it has more than 3850 branches? That its total business in 2007 was US$ 60 billion? That this is 56 times our GDP? Or almost 20 times the total planned outlay for our 10th Five Year Plan? That its market value of US$ 2.79 billion which almost trebles our total GDP?

Do we know why they are interested in Bhutan? Is there enough business here? Isn’t our economy too small? Or are they specifically targeting banking for the hydropower projects? If so, what will happen after these projects are over? Will we be able to regulate a giant? Will they operate in the dzongkhags where they will incur losses? Will Bhutan’s national interests be more important than corporate profits for PNB?

Will our existing banks be able to compete with PNB? Will competition be fair since PNB is more experienced, has more money, and better technologies? If not, can our banks survive after PNB enters? If not, where will competition come from?

Was our banking sector overregulated? Did that stunt the growth of our banks? Why suddenly liberalize? Why the sudden urgency? What support for national banks has the government announced? Why not give our banks five years to prepare for international-level competition?

Will the existing banks be allowed to close their loss-making dzongkhag branches so that they can become more competitive? Will they be allowed to relieve excess staff? Will these be good for Bhutan?

What’s happening with the proposals of Bhutanese investors? Why haven’t they been approved? Why shouldn’t Bhutanese be given preference to start banks? Will other Bhutanese be able to start banks once PNB enters? Will they even want to?

And what’s next? Airlines? What will happen to Druk Air? Hydropower? What will happen to DGPC? Cement? Will PCA stand a chance? Ferrosilicon? Steel? Agriculture?

Where’s GNH in all of this?

Saving industries

I applaud Lyonpo Khandu Wangchuk’s tour to Pasakha to assess the crisis gripping the steel factories. And factory owners welcomed his visit as signs of possible government support for an industry which is seriously affected by the global financial crisis.

The government should support the steel industry, but provided it is of strategic importance to our country. That is to say that the industry should be socially, politically or economically too important to our country to allow it to collapse. So if, due to a failure in the steel industry, many jobs for nationals would be lost, or national security or self sufficiency be compromised, or revenue would drop drastically, then, the government must intervene in full force. Otherwise, it should reconsider.

One strategically important industry that does need the government’s attention is tourism. Our tourism industry has endured the SARS epidemic, Asian financial crisis, avian flu outbreak, and other external shocks only to be seriously threatened now by the global financial crisis. And we cannot allow tourism to take a beating for three reasons: it generates jobs, it distributes money, and it generates foreign currency.

Tourism is a big employer. At last count there were 1,300 licensed guides. And this represents only a fraction of the jobs which are dependent on the tourism industry – thousands of cooks, waiters, housekeepers, drivers, craftsmen, retailers and entertainers depend, directly or indirectly, on tourism.

We all know that tourism is our country’s largest foreign currency earner. But we forget how effectively it circulates money through our economy. All the different types of workers I just mentioned, working in different parts of the country take home pay checks.

For example, consider this: Pem Tazi, about 43 years old, from Tshojo in Lunana, is a “yak contractor”; he organizes yaks for the famous Snowman Trek. This year, Yangphel used him on one trek – he worked 47 yaks for 14 trekkers for 14 days (Laya to Marothang) and charged Nu 500 per yak per day. So he recently collected almost Nu 330,000 for his services. He keeps 10% of this. The rest he divides among the other 18 yak owners. Yangphel also had to hire a similar number of horses and yaks for other segments of the same trek: Paro to Jangothang; Jangothang to Laya; and Marothang to Nikachu.

This is serious money circulating effectively through our economy. Strategically important stuff.

So our steel industries may or may not be strategically important, and the government may or may not help them. But tourism is strategically very important, and the government should address the possible impacts that the global financial crisis may soon have on this industry.

Running vegetable vendors

The other day I bumped into a vegetable vendor along Norzin Lam. She carried a basket of fresh saag and was obviously in a hurry. She wouldn’t sell me any.

But I convinced her to stop for a while, and discovered that she was actually running away from City Corporation officials. These officials, she told me, would seize her basket and fine her Nu 500 for selling vegetables illegally.

Today I met another group of vendors. They are from Wangduephodrang, and travel to Thimphu two to three times a week by taxi to sell fresh farm vegetables. The vegetables are mostly from their own farms.

They didn’t seem to be too worried and even displayed some of their vegetables (damdroo, saag, ola choto and spring onions). I asked them about the City Corporation officials and they said that between 1PM to 3PM they are generally safe – that’s about time the officials have their lunch break! Otherwise, they would be on the run. Some have had their entire stock, complete with baskets, confiscated by city officials, and slapped hefty fines as well.

All that our farmers want is a small opportunity to sell their produce. But existing city rules forbid them from setting up shop along the streets – it adds to the garbage, they say. And in the process, we, urban dwellers, are deprived of fresh farm vegetables during the weekdays.

This is not a new issue. The struggle between the vendors and city officials has been going on for years. This absurd contest, played out in Thimphu’s main street everyday, must end.

We can’t end it forcefully. Not as long as we have enterprising farmers on the one hand, and eager urban buyers on the other. So support the informal enterprises. And regulate them. Allow vegetable vendors on designated parts of Norzin Lam. And if we must, charge them the little money required to clean up each day.

More importantly, the government should address such small issues that go a very long way to discourage farm productivity and dampen entrepreneurship.

And oh, in Thimphu, very few people visit the Sabji Bazaar during the weekdays. What we and our farmers need is small “sunday market” closer to the city centre where we can buy vegetables during the weekdays, without bumping into escaping vendors.