Major features of Bhutanese Economy since 1961ECO 242 (Bhutanese Economy –I) Spring 2013Topic-1Tanveer Reza Rouf

What is in a name?

Shangri-La (Doig, desmond, Bhutan, the mountain Kingdom, National Geographic Magazine, Vol. 123, 1963, pp. 398-429)

Bhot ant or Bhu uttan (Sanskrit, meaning ‘end of Tibet’ or ‘highland)

Lho Mon (Land south of Tibet- ancient Buddhist writers of Tibet)

Drukyul (Durkpa Kagyupa sect of Mahayana Biddhism came to flourish 1200 years ago)

Land of Thunder Dragon (dragon stands for peace and does not spit fire)

Ref: Misra, H.N. 2007. Bhutan: Problems and Policies. Chapter-1: Socio-Economic background.

What is in a name?

Buffer zone (Lord Curzon)

Gated community (protected by mountains and other natural barriers and self imposed isolation for a long time and heavily guarded even to this day)

Migrant’s land? (one theory: originally inhabited by “Tephoo” tribes from Cooch bihar & another theory: Tibetan migrants are actually the Bhoteas as they are the same people)

Some general info

Size = 46,000 sq. km (roughly the size of Switzerland or 41,000 sq. km)

Duars=higher connectivity with India

Population = less than 1 million

Average density= 26 persons/sq. km

4 administrative regions= Eastern, western, central and southern

Regional economy based highly on regional

elevationNorthern region

Geography: valleys from 3500m to 5000m and ranges above 5000m, cold climatic conditions, winter temperatures often below freezing point, covered by snow nearly half the year, almost barren, alpine vegetation, grassy ground

Population: sparse nomadic groups

Economy: livestock farming is the only feasible occupation now {what about future?}

Regional economy based highly on regional

elevation Central region

Geography: valleys from 1500m but below 5000m, hill ranges radiate southward, watersheds formed among principal rivers, level land limited to narrow valleys such as Paro, Thimphu, Punakha and Bumthang, Black mountain divides region into western and eastern Bhutan, temperate type of climate, exceptions are Punakha and Wangduephodrang all valleys get very cold during winter, rainfall does not exceed 100 cm/ year, temperate type forests (flora: broad leaved and conifers), fertile rivers valleys grow rice, wheat, barley and maize, highest settlement

Economy: agricultural farming before, but changing fast now {what about future?}

Regional economy based highly on regional

elevation Southern region

Geography: Duar plains and foothills, narrow belt ranging from 30-50 km, hot and humid climate, 500cm/year rainfall, average temp = 20 C, tropical deciduous vegetation, timber rich region, alluvial soil, densely populated region, land is cultivated for paddy, maize, wheat, etc, region most connected to India

Economy: trade based and manufacturing hub due to cheap Indian labor, raw materials and access to Indian railroad networks and Indian market {what about future?}

Natural resource base: Water

Near unlimited water resources

Huge potential for hydro-electricity due to river flow and sparse population

Gov. India’s support led to construction of first hydro electric plant

1979 only 2.5 MW

Will global warming have significant negative impacts on this potential?

Natural resource base: Forest

Tropical (181.2m to 1510m), temperate (1510 to 3624m) and alpine pasture grounds (3624m to 4832m)

Rich in medicinal plants

Forest cover is maintained at above 60% always as mandated by constitution

All commercial felling was banned and timber trade was nationalized in 1979

Natural resource base: Minerals

Immense mineral deposits

Examples: calc-tufa, coal, copper, dolomite, graphite, gypsum, lead, zinc, limestone, marble, slate, talc and beryl pyrite

Most mineral deposits are concentrated in South only

More exploration needed in Central region

Mining industry contributes very little to economy due to : difficult terrain conditions, absence of transportation and communication facilities and the low unit value of these nonmetallic minerals

Timeline

1907 hereditary monarchy established and Bhutan more united than ever under Ugyen Wangchuk

1949 signed treaty with Govt. of India

1953 Tshogdu (a national assembly composed of representatives of people, civil admin. And monastic order)

1956 serfdom was abolished and land reform measures introduced

1959 China annexed Tibet and sent shockwaves through Bhutan’s political elites

1961 signed Colombo Plan

1965 Royal Advisory Council established

1968 Council of Ministers established

1971 became a member of UN

Background of Bhutanese socio-political history-1

No authentic info before 6th century AD

Rather chaotic and violent interlude from then until 17th century, when Zabdrung unified the country

Current Bhutan is the way it is due to the changes he brought about

Tibetan-Mongol invasions throughout the history also played a major role in unifying the country

1st FYP: 1961 to 1966

The first 5 FYP set Bhutan on the way to planned national development.

With an approved outlay of 1747 lakhs of rupees or Ngultrum the plan aimed at creating in the country

Basic infrastructural facilities like roads, power, communication system, transport

, agriculture and animal husbandry.

1st FYP: 1961 to 1966

Project Amount allocated

Roads 620 lakhs

Education 100 lakhs

Transport 75 lakhs

Health 32 lakhs

Forests 32 lakhs

Agriculture 20 lakhs

Power 16 lakhs

Animal Husbandry 15 Lakhs

Industries 11 lakhs

Miscellaneous 91 Lakhs

1st FYP: 1961 to 1966

The main achievements :

Infrastructure: 1770kms of roads were constructed including the 208 kms highway which

connected Phuntsholing on the Indian borders with Paro and Thimphu.

Other roads constructed were from Paro to Haa, from Tashigang to Darrang , and from Sarbang and Gelegphu to Charing and Trongsa.

Improvements were effected in the road transport systems, and communication facilities on the modern lines were begun in the country.

1st FYP: 1961 to 1966

The main achievements :

Education: By 1966 there were 108 schools in Bhutan, including 2 public

schools with a total enrolment of 15000 students.

Health: A Public Health Department under a chief

medical officer was set up at Thimphu. Steps were taken to eradicate malaria. 3 hospitals and 40 new dispensaries were

established in different parts of country.

1st FYP: 1961 to 1966

Agriculture: Department of Agriculture was established, which started a number of model agricultural

farms, seeds multiplication farms, agricultural research station, and development of extension work

Efforts were made to increase the area under fruit and vegetable cultivation

Animal husbandry: A department of Animal Husbandry was set up many live stock and sheep breeding farms were

established in different parts of the country.

1st FYP: 1961 to 1966

Forest resources:

The forest department of Bhutan initiated many measures for conserving the forest wealth and the exploitation of the forest

Mineral resources: Steps were taken in concert with Geological

Survey of India to discover deposits of coal, dolomite, graphite, gypsum and lime

stone

1st FYP: 1961 to 1966

Manufacturing: The Production capacities of the fruits preserving

plants and distillery at Samtse were increased and theirs sale and marketing was organized in

India

Trade relations with India were improved.

Energy needs: The Bhutan Government established a hydel

directorate and two 400 KW Hydel Projects were constructed to serve the needs of Thimphu and Paro.

By an agreement with India, Bhutan received 250 KW of power daily from the Jaldhaka river hydroelectric project for its south western region.

2nd FYP: 1967 to 1972 Background:

As no census has been taken nor has any detailed statistical information been collected so far it is difficult to assess the resources and potential of the

country and to formulate a coordinated development plan.

The population of Bhutan is about 8,00,000 of which the urban population would be about 20,000.

The average density of population is about 45 per sq. mile though in actual fact the density of population is greater

in Southern and Eastern Bhutan and considerably less in Western Bhutan and negligible in Northern Bhutan bordering Tibet.

2nd FYP: 1967 to 1972 Background:

As no census has been taken nor has any detailed statistical information been collected so far it is difficult to assess the resources and potential of the

country and to formulate a coordinated development plan.

The population of Bhutan is about 8,00,000 of which the urban population would be about 20,000.

The average density of population is about 45 per sq. mile though in actual fact the density of population is greater

in Southern and Eastern Bhutan and considerably less in Western Bhutan and negligible in Northern Bhutan bordering Tibet.

2nd FYP: 1967 to 1972 Diversion of a fair proportion of the available man-power to

defense requirements as well as development and Civil works, have seriously affected the agricultural output of the country.

The money that has come into the hands of the cultivators in the shape of wages for labor has been spent, in the purchase of consumer goods for which till now they had very little use or need and a very small proportion of it has really flowed into the economy of Bhutan.

The influx of relatively large numbers of workers connected with development activities has further affected the imbalance of the economy and

cost of common products such as eggs, grain, vegetables and other farm produce has risen as much as 300 to 400 % in the last five years.

Once again this money has been mainly frittered away in the purchase of consumer goods and has contributed very little to developing the economy of the country.

2nd FYP: 1967 to 1972

The implementation of the First Plan was considerably hampered by: The shortage of trained technical

personnel and the difficulty of obtaining staff on deputation or by recruitment from the open market in India.

Shortage of local labor and insufficiency of rations for employment of imported labor. This difficulty is partly overcome by a quota of 200 tonnes of grain a month provided by the Government of India which enables us to employ a labor force of 7,000 persons at any time.

The Plan was considerably set back by the Chinese incursion in 1962.

1st FYP: 1961 to 1966Project Amount

allocated in 1 FYP (in lakhs)

Amount allocated in 2 FYP (in lakhs)

Percentage increase

Roads, water supply, electrification

620 754 22

Education 100 276 176

Transport 75 169 125

Health 32 142 344

Forests 32 89 178

Agriculture 20 385 1825

Power 16 80 (Hydel) 400

Animal Husbandry 15 75 400

Industries 11 10 -10

Miscellaneous 91 14 -85

Postal 0 (not specified)

63 100

Publicity 0 (not specified)

19 100

Mechanical workshops 0 (not specified)

65 100

Development Wing Hqrs., Office of F. A. & C. A. O.

0 (not specified)

73 100

Economic base: 1971

Fischer, F. (1971):

The great majority of Bhutan’s population lives and subsists on the basis of an archaic form of integrated utilization of soils and vegetation for agriculture and cattle farming

Market economy is, apart from a relatively insignificant internal barter trade, nonexistent

Major features of Bhutanese Economy

since 1961Classwork

Timelines

Features

1961 to 1970

1971 to 1980

1981 to 1990

1991 to 2000

2001 to now

Role of state in economic organization

Main sector contributing to economy

Role of hydroelectricity