Investing in Bhutan

During Question Hour today, I asked the Minister for Economic Affairs:

Newspapers recently reported that 100% foreign ownership of hotels is allowed for foreign direct investments above US$ 200,000. Please explain why the minimum is fixed at US$ 200,000.

I was basically concerned that the minimum investment required to qualify for 100% foreign ownership of hotels was too low. I reported that many Bhutanese have already demonstrated that they can build and operate hotels that cost many times more than US$ 200,000. And that, while foreign investors should be encouraged, policies should ensure that opportunities are not taken away from Bhutanese investors.

Lyonpo Khandu Wangchuk’s reply was long. He talked the House through the history of FDI in Bhutan, economic growth, economic policies, employment, tourism, foreign currency, domestic airports, helicopter services, seasonal tourists, conference centers, infrastructure, credit cards, TAB, tourist visas, and hotels. He even mentioned McKinsey and Brazil!

It turns out that I was wrong. The minimum investment proposed for 100% FDI ownership is Nu 20 million, not US$ 200,000.

And it turns out that Lyonpo Khandu may not have known that I was wrong either. He didn’t correct me. Nor did he mention the figure Nu 20 million!

 

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  1. And does that allow the foreign investor to operate the hotel for ever? Does the Investor qualify for permanent residency in Bhutan?

    • The draft FDI policy does not mention any time limit for foreign ownership. That permanent residency will not be offer is implied in the policy, as foreigners involved in the FDI business (owners, board directors, professionals) are required to renew their visas and work permits annually.

  2. First, I don’t care how much investment is required for 100% FDI ownership, be it twenty million dollars or just a few hundred thousands ngultrums. The quintessence of such a bill is to ensure that our country is not “ON SALE”. No matter how big or small the enterprise is, the Bhutanese people MUST hold the bigger share.

    Second, giving 100% foreign ownership is putting our country at great risk. There are thousands of billionaires in the world for whom paying the “twenty million dollars” is just nothing. Cambodia allowed just 80% ownerships of such hotel businesses to foreigners and now the country is filled with five star hotels with casinos, black money laundering, and worse, has become a mafia haven. Many other countries in the south and latin America, and Africa are suffering simillar fates. You can see high luxurious buidlings srrounded by slums.

    Conclusion: FDI will be good “if and only if” Bhutanese people are given the MAJORITY shares in any foreign investment ventures. Otherwise, believe me, it is not only conflicting the principles of GNH, it will prove to be catastrophic for our country ultimately.

    NB: It is unfortunate for the people of Bhutan that we are not able to watch the deliberations in our “own” Parliament live on TV.

  3. Aro Khampa says:

    LKW wrong and you worng. Two wrongs don’t make a right. Do your homework next time.

  4. I can surely see that happening with a lot of us Bums, Saa yaa and Dungjurs are hard to stick by when we have our reports in English… but not with hundred thousands and millions.
    No big deal, you are owning up your mistake..
    Keep it going.. Good luck!

  5. i thought lynpo said it has not been finalized by the CCM. So, is it necessary to delve over the figures when it is not final? This may misinform the public.

  6. Now this is indeed interesting and equally concerning. I agree with Tangba that we need not sell Bhutan and his example of Combodia is well taken. Our ministers need to take study tours in such places to learn form their mistakes. Mckinsey is not an answer to this solution. Forget Cambodia – take a study tour to Nepal and see what tourism has done there. Ofcourse there are many positive things to learn from there with what tourism has brought but there are also valuable lessons to be learned. Allowing 100% FDI for hotels with just 20million is no excuse. There are many hotels in the country today that are built already and many still under construction that has crossed investments of over 20 crores already. FDI with 20 million Nu’s will put our home grown hotels across Bhutan out of business instantly and how do you envision that they will service their loans and sustain. The government or consultants deployed to conduct such research should be mandated to meet with the stake holders before coming up with such recommendations to the government that pass policies like these. Nontheless, we are hopefull that hte government will re-look a this situation again and everyone could chip in to make it a win-win situation for conducting business in Bhutan.

  7. I am on the fence with this one. On one hand I understand the need to develop private sector in out country. I don’t think RCSC taking in around 200 undergraduetes a year is going to solve our unemployment problem. If managed properly FDI can go a long way. Look at China for example, now the world’s largest economy(USA) owes billions of dollars to China, thanks to its economy which is mostly dependent on FDI. So we should follow China’s example. See what they are doing right.

  8. Dear OL,

    As far as I know, Lyonpo Khandu has been Bhutan’s Trade Minister atleast 3 times so far. After all that, it is disappointing that he thinks Nu.20 Million is all it should take for Bhutan to grant 100% foreign ownership to a outside investor.

    What is Nu.20 million? Is Lyonpo aware that there are luxury cars that cost more than that? Does Lyonpo know how much Hotel Zhiwaling cost to build? Is Lyonpo for protecting domestic interests and capabilities?

    Does it ever prick Lyonpo Khandu’s conscience, whenever he is passing by Bumthang, to see that Bhutan has allowed hoteliers such as the Amankora to build such insultingly tasteless and grotesque structures along side our beautiful national icon such as the Wangduechoeling Palace in Bumthang? What is the DPT government thinking exactly?

    One of the reasons I voted for the DPT is because they comprised of senior Ministers with experience. I get this feeling that as they get older and more experienced; they are getting less and less wiser.

  9. Dear OL,

    At the outset, I salute and thank all the writers for sharing their concern over the topic.
    I don’t understand where is our country heading? No vision, no mission, no scope. As a Bhutanese, you just need to think and put it right but not in haste which might be very difficult correct later and might put oneself in awkward position. We had the benefit of starting late developmental activities for not having to risk from the failed projects. But why can’t our MPs in NA and NC wait and learn and sail as the breeze takes.
    I was furious and couldn’t belief that McKinsey is proposing for 250000 tourists a year. I don’t about their McKinsey’s profile but the report was just like building a castle in the air. When our tourism infrastructures fails to meet the demand of 20000 tourists a year how can they target to bring in such huge number of tourists. Mind you it is 1250% increase. There are lots of things to do.
    Now, in the haste of implementing the Mckinsey’s foolish economic or business plan, the government is thinking of 100% foreign investment. Like somebody cited above; are we selling our nation to foreigners? What a shame to whosoever supported this plan or proposal. Just because it will generate few tens of job opportunities for Bhutanese that too at the lowest rank like waiter, bar tender, some assistants – very narrow view. Are our MPs happy to have few Bhutanese people taking few thousands of ngultrums while foreigners taking millions and billions of ngultrums. What kind of plan or proposal is this?
    I remember reading in Bhutan history that slaves were abolished by His Majesty the third. Not very far, all Bhutanese are slowing getting there. If all greens for the investment are taken by foreigners what is there for fellow Bhutanese? Unproductive, rugged to scrape and live on to serve these foreigners. And I don’t know whether somebody will questions the present MPs for introducing this policy?
    If there is scope of investment opportunity, why are you not allowing our national financial institutions to operate. For instance, I heard pension has unproductive money lying ideal in bank. For pension, 20 billions in 2003 and 20 billions in 2009 is of same value rather they are losing money because of market inflation. In the NA session, rather than discussing on such plan and proposal, they are busy with the discussion on constituency development fund which matter most to them immediately.
    Ask yourself, where are we heading? What scope do we have? We depend on external imports for almost everything, even for rice which is main food crop. Soon the so called middle class people in the country will be going hungry as the food crops are becoming expensive. The middle class people are none other than salaried person of the civil society. On the pretext of encouraging farmers to grow food we don’t control price of cereals and vegetables. Where are the mechanisms for such control? What if majority of Bhutanese society can have a decent meal? Is that what GNH implies? What happen to our buzz word of ‘food self sufficiency’? More and more fields across the country are left fallow. why? Think fellow countrymen and we seriously need to think. The other problem in our system is that there is no incentive for thinkers, researchers, scientists, or provide opportunity to enlighten and to get better degree. Are we satisfied with master degree? When around the world even PhD can get a decent job. All these have led to frustration and felt strongly of the no scope for those thinkers and ultimately brain drains.
    I think I have provoked enough but got to think seriously.

  10. I dont think by opening up 100% FDI in hotels will mean ruining our private sectors. I guess they were never stopped from building star hotels any point of time. Except for a couple of them, bhutanese investors from what i could gather is that they were never forthcoming. They lacked both resource and idea. They are mostly risk-averse. May be its the bhutanese way not to take risk and jump into those busunesses where one has given a try and if little returns were noticeable then the masses follow. With this mentality, we can never take off from where we are, we can never give employment to the jobless, we might always face foreign currency shortages, we will never integrate with rest of the world. Open up but be cautious. Look at how small country of our size like Singapore perform. At any point in time, more thatn 1/3rd of their population is tourists and their economy is one of the greatest in the region. Protectionism and socialism is sometimes disincentives to innovation and economic growth. It has to die its natural death like it did in former soviet union. Bhutanese private sector left to act on its own will never compliment the country’s economic growth.
    The market forces also show that things will take its own course. The case in point, why has Oberoi hotel withdrawn from establishing resorts in Bhutan? May be that the market size is small, or is it due to too much regulations that they might have to undergo? I am not sure about the reason. What do we have to offer to foreigners to invest in bhutan? Of the two most prominent complaints we hear from the tourists visiting bhutan is dogs barking at night and poor hotel infrastructure. We need foreigners to invest in bhutan build that infrastructure.

  11. Hi. I am a Bangladeshi writer-journalist and am in love with Bhutan. I want to set up an English medium school. I do not mind having a lower share, say 20 per cent, my Bhutanese partner can have the rest. But do I have to invest 20 million.? It’s way huge an amount for a school,

  12. Diana Teo says:

    I love Bhutan a lot, and very wish to live in Bhutan and set up a small business there and Would like to know how can I get a citizenship without need to be marry to Bhutanese as I am married. I am serious.Thank you for reply

  13. Wayne dlima says:

    The only thing your country should allow as foreign investment is in education and that too in fields that adhere to wide principles of sustainable living
    All else is a sell out economically and more harming , culturally

    I have never visited your land but some day I will .

    You don’t need open economic borders for develop your Gross Happiness Product

    You need open hearts , that you culture is abundantly blessed with

    Best wishes

    Till we meet some day , our hearts are already together

    Wayne Dlima
    India

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