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Bhutan logs 40% decline in FDI projects over 2021

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Forty per cent of the foreign direct investment (FDI) projects in Bhutan are concentrated in the capital Thimphu. KUENSEL

Bhutan logs 40% decline in FDI projects over 2021

Bhutan recorded a 40 per cent decline in foreign direct investment (FDI) last year, according to the Department of Industry.

The Himalayan Buddhist kingdom’s government approved six FDI projects worth 0.71 billion ngultrums ($9.54 million) last year. Ten FDI projects worth 2.10 billion ngultrums were approved in 2020.

The department’s report states that both the number of FDI projects and capital investments dropped by a third in 2020 globally due to the Covid-19 pandemic.

There are currently a total of 96 FDI projects worth 43.31 billion ngultrums in the country. About 68 per cent of them have started commercial operations.

The country received three projects each in the manufacturing and service sectors, which was the lowest in the last five years.

Two existing FDI projects were converted to domestic projects in 2021. The government approved 16 FDI projects worth 6.78 billion ngultrums in 2018, which was the highest in the past five years. In 2017, seven projects worth 0.36 billion ngultrums were approved.

In principle, however, the department approved nine projects in 2021. Three projects in the manufacturing sector and six in the service sector are at various stages of the approval process.

According to the department, 64 per cent of the investors are from Asia. India, which contributes about 50 per cent of the total FDI, remains the biggest investor, followed by Singapore at 18 per cent, and Thailand at 11 per cent.

The service sector dominates the overall FDI composition with a 78 per cent share. The hotel sector has the highest number of FDI projects, accounting for 38 per cent in 2021.

The share of FDI in the information technology (IT) or IT-enabled service sector increased to 21 per cent in 2021 from 19 per cent in 2019.

Forty per cent of the FDI projects are concentrated in the capital Thimphu and the remaining are located in the dzongkhags, or districts, of Paro and Chukha.

In 2020, the country received capital inflows worth 0.42 billion ngultrums – $3.54 million and 175.38 million Indian rupees ($2.36 million at the current rate).

The inflow of convertible currency declined by 77 per cent and inflow received from Indian investors declined by 77 per cent compared to 2019.

“The capital inflows could have been higher, but most of the projects could not be started because of Covid-19,” the department’s report states.

A total of 4,747 Bhutanese were directly employed by 57 operating FDI projects as of December 2020.

The report states that except for the hospitality sector, all FDI companies retained their employees on the payroll in 2020 despite the pandemic.

It revealed that 73 per cent of the total employees were retained on regular salaries.

About 2.6 per cent of the employees in the sector received partial salaries from the company and Druk Gyalpo Relief Kidu (DGRK).

Some 22 per cent of the employees in the hotel industry were fully dependent on the DGRK.

The 57 operating FDI companies contributed to about 0.8 billion ngultrums in tax in 2020, which was a decline of almost 48 per cent from 2019.

The hotel industry, dairy, agriculture, water bottling, and beverage industries reported an income decline of 75 per cent to 100 per cent in 2020.

KUENSEL (BHUTAN)/ASIA NEWS NETWORK

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