DHI and us

Kuensel quietly carried a corrigendum today clarifying that DHI had not given iPhones to the PM and the cabinet. And in it, the editor helpfully points out that: “Officials from the PM’s office, meanwhile, said the reference was to an occasion that happened in 2009.”

The corrigendum is helpful. But it is quiet. Too quiet.

Kuensel must now ask the PM – not “officials from the PM’s office”, but the PM himself – why he did not clarify that he was talking about something that took place almost three years ago, and why he misinformed the public about DHI giving iPhones.

The PM could have easily told the truth and put the iPhone rumour to rest. Instead, he chose to sensationalize it, and, in doing so, planted serious doubts about DHI’s credibility. For that, he owes the public an explanation. And he owes DHI an apology.

This is not the first time the government has raised questions about DHI. On several occasions already, MPs from the ruling party have expressed concern and objected to how DHI is run and how their employees are paid. The government complained about and succeeded in revising the Royal Charter. And during the very press conference which featured the iPhone controversy recently, the finance minister protested that “the government has little say in the functioning of DHI since it is governed by the Royal Charter which gives absolute power to its board directors.”

Added to that, unknown agents continue to fuel stories about DHI being run as a “parallel government”.

DHI was established in 2007, the year before our first elections, as the custodian of our nation’s wealth. The idea was to separate the investment and executive arms of the Royal Government. That idea is still relevant: politicians, now and in the future, cannot be trusted to manage and expand the commercial investments of the Royal Government in a manner that is prudent and sustainable. And that’s why DHI was established as an autonomous organization incorporated under the Companies Act.

But that does not mean that DHI can do anything it pleases or that the government has absolutely no control over the organization. DHI’s performance targets, including how much money they must earn for the exchequer, are fixed together with the government. And, more importantly, most of the members of DHI’s Blue Ribbon Panel and the board of directors are appointed, directly or indirectly, by the government. In addition, their operations are audited by the Royal Audit Authority to ensure prudent and effective use of the people’s resources.

These checks and balances are important. And we must use them to address concerns about salaries, perks, recruitment or any other issue that we may have. But otherwise, we should not undermine the functioning of DHI. And we must not make unmerited attacks on its image. The company is simply too important for the current and future wellbeing of our people.

How important is DHI? The company is already worth more than Nu 45 billion. That works out to about 60% of our national GDP. And last year, the company contributed Nu 4.3 billion in taxes and dividends to the government. That works out to more than a quarter of the government’s domestic revenue.

But DHI is barely four years old. So we can expect them to make some mistakes. When they do, we need to work together, constructively and within the legal framework, to correct them. Otherwise, we should support them – our wealth, and that of our future generations, is at stake.

i-Question

Did DHI try to bribe the prime minister and cabinet ministers? If, as the PM claimed in Kuensel, DHI had indeed offered them “the latest generation iPhones”, then that would amount to blatant corruption. And the Anticorruption Commission should investigate it thoroughly.

Why should this particular gift be seen as “blatant corruption”? Because three years ago, during the new year, DHI had given Nokia cell phones to all officials holding cabinet rank, including the PM and the opposition leader. But, as far I know, most of the recipients did not accept the gifts; most of them had returned the cell phones after the National Assembly MPs rejected DHI’s bags, which they had received at about the same time.

Now after all that, if DHI is still tempting our ministers, this time with iPhones, we should be concerned. We should be alarmed.

But what if DHI had not offered iPhones to the PM or to any other minister? Then what? I ask this because DHI has apparently denied giving iPhones to the ministers. In fact, the very same Kuensel report states that, “DHI officials denied having done anything of the sort.”

So we have two stories. And only one of them can be true.

If the PM is right – if DHI had indeed offered him an unsolicited gift – we should be alarmed. And ACC should investigate DHI for attempting to bribe our senior most government officials.

But if DHI is right – if they have not offered iPhones to the PM or any other minister – we should be equally alarmed. The PM should then have to explain why he has misled the public, and why he is undermining DHI’s reputation.

Kuensel’s website has been giving problems. So here’s the clip of their iPhone story.

 

 

Bhutanese power

water potential

I was happy to read about DHI’s plans to carry out major investments in power generation, power transmission, construction, information technology, aviation, mining, cement production and telecom in the next four years. These investments will add considerable value to the commercial interests of the Royal Government, while also leading and stimulating private sector growth.

Of these investments, which, in total, are estimated to cost DHI about Nu 53 billion, I am most excited about DGPC’s project to start a hydropower construction company.

Our country is blessed with perennial, fast flowing rivers perfectly suited to generate environmentally friendly run-of-the-river hydropower. Our rivers are capable of generating as much as 30,000 MW of hydropower, almost 80% of which has already been identified as technically feasible. And our people have been harnessing hydropower since 1967 when the 360 kW minihydel at Jungshina, Thimphu was constructed.

But virtually all the work, from that first minihydel to the 336 MW Chukha hydropower project (commissioned in 1986) and the 1020 MW Tala hydropower project (commissioned in 2006) were carried out by foreigners, mainly Indians. Similarly, almost all the work on the 1200 MW Punatsangchhu hydropower project is being done by foreigners.

So I welcome the news that the DGPC will soon start a hydropower construction company. That, coupled with the government’s power training institutes and DHI’s investment ambitions, could mean that we may eventually be able to become specialists in run-of-the-river hydropower schemes. And that could mean that we may some day become a recognized authority in planning, designing, constructing, operating, maintaining, financing and marketing clean, sustainable hydropower in Bhutan and beyond.

Standing up for sitting fees

“Guest”, a frequent commentator, left the following note in my last entry:

Please pardon me but I am going to deviate from the topic to register my unhappiness at your support for DHI during the discussions in the Parliament. I cannot believe that a man of your intelligence truly meant what you said.

I do not believe that your blind support for DHI stems from your need to show allegiance to our King. I think it is wrong to do so. In fact, you ought to know, more than anyone else, that it would be a great disservice to the King and his noble intentions that the DHI officers continue to pay themselves such disproportionate sitting fees even while they are drawing huge salaries which the whole country feels is unjustified.

As a responsible citizen and the Leader of the Opposition who has earned substantial goodwill from the people, I am disappointed that you choose to opt for political mileage rather than oppose something that we all know is unfair.

First, let’s set the record straight: I did not make any statement during the recent National Assembly discussions on the DHI. “Guest” may have been led to believe that I did so by Bhutan Observer’s article on the DHI’s sitting fees.

But I did mean what I said to the Bhutan Observer: that as long as the DHI has the legal mandate to establish their own remuneration – as, indeed, they do – I don’t see how we can, or should, interfere. Recall that I made a similar observation six months ago.

Obviously, all of us have opinions on the DHI’s sitting fees. And we should voice them. That is good. But, we should also make sure that no one, particularly politicians and the Government, encroaches on the DHI’s legal authority. This is no small matter, if the rule of law is important. And, it is, especially in an emerging democracy.

So are the sitting fees for DHI Board Members too high? Yes and No. Yes, if we look at their fees in relation to what members of other boards receive. But no, their fees are not high, if we look at them in relation to the scope of their work. The DHI’s net worth stands at about Nu 43 billion. And last year, the Government earned around Nu 4 billion in dividends alone from DHI. But that is not all. We expect them to grow. And to perform even better. This, in fact, is what the Royal Charter states:

The primary purpose of Druk Holding and Investments Limited (DHI) shall be to ensure that its companies are able to meet the challenges and requirements of the corporate sector in a highly competitive global economy, such that DHI creates and maximizes returns to its shareholders, the people of Bhutan.

Let’s face it: we are talking about big money, and even bigger expectations. So we simply must be willing to provide adequate incentives to attract and retain people who will be able to run the company successfully.

But there must be checks and balances. And there are. Three of the DHI’s seven Board Members are senior civil servants who represent the Government. DHI’s performance indicators and dividend targets are established jointly by the Ministry of Finance and DHI each year. Plus the DHI is required, by law, to submit periodic reports on its performance to the Ministry of Finance.

Finally, I don’t know how to respond to the charge that I “…choose to opt for political mileage rather than oppose something that we all know is unfair.” Let’s just say that if I were motivated by “political mileage” I wouldn’t disagree with something that the whole country feels is unjustified”, would I?

The fact is that I’m motivated by what is good for our country and our people. Which, in this case, is about DHI, but, more than that, is about the rule of law.

A matter of power

The Indian minister for power, Sushil Kumar Shinde, was in Bhutan from 4 to 7 December. His visit was busy: His Majesty the King granted an audience; he met the Prime Minister, and the MEA Minister, Secretary and DG; he visited the Tala dam site and Chukha power plant; he visited Dochula; and I called on him.

His visit was successful: a protocol agreement to develop 10,000 MW by 2020 is ready and will be formally signed later this month. An “empowered group” will then be formed to identify and accelerate the implementation of hydropower projects. Both governments are visibly optimistic, and Mr Shinde has even promised to complete the plan by 2019, that’s a year before schedule.

In all this exuberance, we’ve forgotten to involve one player – Druk Holdings and Investment. As far as I know, the government did not involve DHI at all during this very important delegation. They were not included in any of the discussions. And they did not even get to make a courtesy call on India’s Power Minister.

This is unfortunate. Practically all the knowledge and experience with regard to hydropower development in Bhutan resides with the Druk Green Power Corporation and Bhutan Power Corporation, both DHI subsidiaries. Ignoring this valuable store of national expertise does not make sense.

As a matter of fact, DHI should actually be fully involved. Their mandate, decreed by Royal Charter is “… to hold and manage the existing and future investments of the Royal Government of Bhutan for the long-term benefit of its shareholders, the people of Bhutan.” It goes without saying that the development of the 10,000 MW of hydropower would constitute “future investments of the Royal Government”.

The Royal Charter also declares that “DHI shall implement all future commercially oriented projects that are developed by the government”. All the power projects included in the 10,000 MW plan are obviously “commercially oriented” and DHI will, by law, be required to implement them.

If DHI is expected to eventually “hold and manage” these hydropower projects it is only good sense to involve them right from the beginning. If the negotiation, identification and construction of the projects are done by the government, and if the DHI is expected to take over the projects (including all loans) once they are operational, the incentives to work fast, cheap and well may not be strong.

True, DHI does not have the capacity to implement such large projects. But neither does the government. Hence, a few months ago, the talk of creating an entirely separate secretariat for energy under the Ministry of Economic Affairs. This would be wasteful, inefficient, and tantamount to hiding two ministries under one umbrella ministry.

Develop DHI instead – they have the mandate, experience and the right incentives.