Toward a Development Strategy for Bhutan: Translating Philosophy into Action S. R. Osmani University of Ulster, UK

1. Toward a Development Strategy for Bhutan: Translating Philosophy into Action S. R. Osmani University of Ulster, UK

2. Guiding Philosophy: Gross National Happiness (GNH) • Equitable development • Promotion of cultural/spiritual life • Sustainable environment • Good governance

3. Two Major Constraints • 1. Small population  • small market • limited manpower • 2. Geographical constraint  • difficult terrain • landlocked

4. A Long Term Strategy consistent with objective and constraints: • Exportinglow volume and high value goods and services based on skilled manpower and modern technology, in return for imports of most consumer goods, except for some basic foodstuff.

5. This strategy is consistent with the objective because it can be • environmentally friendly • culturally sensitive, and • highly equitable.

6. The strategy is consistent with the constraints, because it • overcomes the constraint of limited home market by relying on export and obviates the problem of small manpower by relying on the quality rather than the quantity of people, • overcomes the geographical constraint of transportation barriers.

7. Transitional Strategy: Goals • 1. Building the skill and technological base necessary for transition to the long term strategy 2. Devising alternative means of raising the living standards of the people during the transition period in a way that is consistent with • the long term goal of building skills and technological bases • the GNH philosophy • the geographical and manpower constraints

8. Criteria for choosing the transitional strategy: • Which strategy is best able to overcome • Demand constraint • Wage goods constraints • Foreign exchange constraint

9. Three possible alternatives • Agriculture-led growth • Export of labour intensive products • Natural resource based growth

10. 1. Agriculture-led growth • can solve the wage goods constraint but not demand constraint and foreign exchange constraint • 2. Export of labour intensive products • in principle can solve all three constraints, but in practice none • 3. Natural resource based growth • can solve all three constraints

11. Two broad categories of natural resource based exports: • 1. Hydropower, and • 2. Others • Niche agricultural exports • forest-based products • tourism

12. 1. Hydropower • good for wage goods constraint but not for foreign exchange constraint • 2. Others • essential for overcoming foreign exchange constraint

13. Potential pitfalls of natural resource based growth strategy • Dutch disease • Rent-seeking • Trade-off with GNH goals • The last two pitfalls assume greater significance in the emerging political scenario.

14. While recognising the pitfalls, greater emphasis is still needed on natural resource based growth strategy, because • It is essential for improving the livelihoods of the people during the transition period • It is essential for building the skill and technological base necessary for the long term strategy to work

15. Two types of trade-off: • Contemporaneous trade-off during the transition period between equitable development on the one hand and environment/culture on the other • Inter-temporal trade-off between greater consistency with GNH now and greater consistency with GNH in future