𝐄𝐃𝐈𝐓𝐎𝐑𝐈𝐀𝐋 – 𝐑𝐞𝐭𝐡𝐢𝐧𝐤𝐢𝐧𝐠 𝐈𝐧𝐝𝐮𝐬𝐭𝐫𝐢𝐚𝐥 𝐒𝐭𝐫𝐚𝐭𝐞𝐠𝐲 𝐟𝐨𝐫 𝐁𝐡𝐮𝐭𝐚𝐧’𝐬 𝐄𝐜𝐨𝐧𝐨𝐦𝐢𝐜 𝐅𝐮𝐭𝐮𝐫𝐞

Bhutan stands at a crucial economic juncture. The signs of industrial expansion may look promising at a glance, especially with rising electricity output and infrastructure development. But the surface narrative conceals deeper systemic issues that call for critical introspection and timely intervention. Beneath the optimistic numbers lies a reality of structural inefficiencies, weak manufacturing performance, business closures, and an industrial base that lacks resilience. This should prompt a serious rethink of the country’s industrial development model.

At the heart of the issue is an over-reliance on capital-intensive sectors that, while contributing significantly to gross output, have limited capacity to generate widespread employment or stimulate value chains. This pattern of growth is not unique to Bhutan. Several low and middle-income countries in Asia and Latin America have pursued infrastructure-led development with limited success in achieving broad-based industrialization. The lesson from these experiences is clear: growth that is not rooted in productivity, diversification, and enterprise development is unlikely to be sustainable.

One of the most pressing challenges is the stagnation of the manufacturing sector. Manufacturing plays a pivotal role in economic transformation. It creates jobs, fosters innovation, builds export capacity, and drives integration into global value chains. Countries such as Vietnam and Bangladesh have demonstrated how strategic investments, policy consistency, and targeted support for small and medium enterprises can elevate manufacturing as a core economic pillar. Vietnam, for instance, adopted a multi-decade industrial policy that encouraged foreign direct investment while nurturing domestic industries. Its focused efforts on education, logistics, and trade facilitation contributed to a manufacturing boom that has lifted millions out of poverty.

Bhutan’s manufacturing sector, by contrast, remains small, underfunded, and overly dependent on a few sub-sectors. A lack of scale, weak supply chains, high input costs, and limited market access hinder its growth. These structural constraints are exacerbated by a capital-output imbalance, where large investments produce limited economic returns. This inefficiency signals a deeper problem: the absence of a productive ecosystem in which investment translates into innovation and competitiveness.

Another area requiring urgent attention is the high business exit rate, particularly among small and medium-sized firms. These enterprises form the backbone of any industrial economy, not only through job creation but also by contributing to regional development and social inclusion. Their inability to survive reflects policy gaps, fragmented support systems, and limited access to credit, technology, and skilled labor. The dominance of a few large enterprises in a protected market space further marginalizes smaller players, discouraging innovation and competition.

To move forward, Bhutan must design a robust industrial strategy anchored in three core principles: inclusivity, productivity, and resilience. Inclusivity demands a level playing field for small enterprises and startups. This includes access to affordable finance, business incubation services, and supportive regulations that reduce entry barriers. Productivity requires investments in technology adoption, skills development, and research and development. The country’s technical and vocational training systems must be aligned with industry needs, and partnerships with regional centres of excellence should be explored.

Resilience, meanwhile, is about diversifying the industrial base to reduce dependence on a few sectors. Agro-processing, green manufacturing, digital services, and eco-tourism-based industries could offer new avenues for expansion. Policies should promote clusters and industrial parks that facilitate backward and forward linkages. The private sector must also be seen not just as beneficiaries of policy but as partners in shaping the future industrial landscape.

Finally, institutional reform is critical. Transparent governance, efficient public service delivery, and strong accountability mechanisms are essential to build investor confidence and ensure sustained industrial growth. We must also take inspiration from countries that have successfully transitioned from factor-driven to innovation-driven economies through long-term planning and a commitment to structural transformation.
The real test of Bhutan’s industrial vision will not be measured by isolated output gains but by its ability to build a diversified, competitive, and inclusive economy that can stand the test of time. Now is the moment to recalibrate, innovate, and act.