State owned enterprises

The Interim Government

Last year, during the election period, the Interim Government seems to have conducted a study of state owned enterprises and released a report that is critical of companies established by the former government. That’s okay. It’s good that the Interim Government was concerned whether “established protocol” was followed while establishing the new companies and recommended strategies to streamline the system.

What’s not okay is the timing. The Interim Government seems to have taken up the issue of SOEs immediately after the primary elections … that is after PDP lost. So I’m still wondering if SOEs would have received the Interim Government’s attention if PDP had made it through the primary round of elections.

If the Interim Government was honest and if they genuinely wanted to question the usefulness and viability of SOEs, they should have done so immediately after assuming office, without hesitating to consider if the former government would return or not. In fact, if SOEs was a burning priority, one that merited the attention of the interim government, the members, some of them at least, should have questioned the government even before their appointment as members of the 3-month long interim government.

The RMA Governor, in particular, should have voiced his concerns to the former government either directly or included them in the RMA’s annual policy briefings. He didn’t. Similarly, the DHI should have questioned the establishment of the Construction Development Corporation or the State Mining Corporation as a part of their organization. They didn’t; instead they readily accepted both the corporations.

But like I said, it’s good that the interim government conducted the review. And in spite of the fact that due process was followed while establishing each and every one of the new SOEs, I agree that better guidelines may need to be in place.

On the other hand, I object to Kuensel’s reference to SOEs as a “political tool” that “cannot be created to accommodate some party supporters in the name of growth”. In this connection, I challenge Kuensel to substantiate their views that some SOEs were established for political reason, and prove their allegation that they were created to benefit party supporters. These are serious accusations and must be dealt with forthright.

Here are some of the SOEs that we established in the previous five years:

  • Bhutan Lottery to revive the lucrative lottery business that was terminated in 2011. The corporation is already turning in a profit of about Nu 50 million annually. And that’s without yet entering the huge market in India.
  • Duty Free Shop to improve operations. DFS barely earned Nu 16 million when it was run by the Ministry of Finance. Last year, less than 2 years after its establishment as an SOE, it earned Nu 50 million.
  • Royal Bhutan Helicopter Services earned Nu 163 million in 2017 and is already declaring healthy dividends to the government.
  • Rural Enterprise Development Corporation was established as a corporation after the opposition party’s (and Kuensel’s) loud objections to the erstwhile BOIC. By 2017, REDC had already disbursed Nu 524 million to establish 360 small businesses in rural Bhutan.
  • Construction Development Corporation was transferred to DGPC to take up hydropower construction. They are already building tunnels in addition to some of the best bridges in the country. (Incidentally, I was responsible for encouraging DGPC to expand Bhutan Hydropower Services and establish Bhutan Automation.)
  • State Mining Corporation to harvest strategic mineral resources sustainably.
  • Farm Shops as a part of FCB to provide fair price goods and to buy agricultural produce in rural villages.
  • Farm Machinery Corporation to mechanize farms and to revert fallow land for cultivation.
  • Green Bhutan to help in conservation efforts, especially through afforestation and reforestation.
  • Livestock Development Corporation to produce animal husbandry inputs for farmers.

Granted, some of these corporations are yet to turn a profit. These include SMC, FMCL, Green Bhutan and LDC. But give them time and they all will become financially viable. At any rate, profit was not the main motive for establishing these corporations. That these services were not available, especially at desired quality and scale, motivated the government to establish these corporations. More importantly, they were established to create much-needed jobs for our youth, jobs that would be seen as “government jobs”.

I wish to make one final point. The government seems to be thinking of privatizing some of the SOEs. I don’t know which ones they may have in mind, but I hope they will be careful. I hope they will tread cautiously. I hope they will not misuse privatization as a ruse to transfer ownership of national assets (like the juicy lottery business) to a few already well-off individuals. And I hope they will not misuse privatization as a quick way of generating revenue to pay for expensive campaign promises. That would be unsustainable. That would be short-sighted.