An introduction to the major features of the early phases of Bhutanese economy.

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

2. 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.

3. 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)

4. 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

5. Regional economy based
highly on regional elevation
 Northern 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?}

6. 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?}

7. 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?}

8. 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?

9. 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

10. 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

11. 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

12. 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

13. 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.

14. 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

15. 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.

16. 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.

17. 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.

18. 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

19. 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.

20. 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.

21. 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.

22. 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.

23. 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.

24. 1st FYP: 1961 to 1966
Project 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

25. 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

26. Major features of Bhutanese
Economy since 1961
Classwork
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
hydroelectricit
y