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Bhutan Role of the Government
Planning and Reform
Government played a pervasive role in Bhutan's economy.
Since
1961 the economy has been guided through development
plans, which
the Development Secretariat and later the Planning
Commission
directed, subject to the National Assembly's approval. In
the World
Bank's 1989 appraisal, "Coming late to the development
scene,
Bhutan was eager to avoid mistakes committed elsewhere.
Although
strongly dependent on foreign aid, it was determined to
follow its
own set of priorities, keep public finance on an even
keel, build
up a well trained but lean bureaucracy, and prevent
environmental
damage from overexploitation of the forests or
uncontrolled growth
of tourism." To help avoid further mistakes, the
government used
traditional social institutions and involved people at the
local
level in planning and implementation for their own
district,
subdistrict, or village. "As a result of these factors,"
said the
World Bank, "development in Bhutan has been remarkably
free from
seeing economic, social, or cultural disruption."
India fully funded the First Development Plan
(1961-66). The
first plan, for which Nu107.2 million was allocated, and
the Second
Development Plan (1966-71), for which Nu202.2 million was
allocated, focused primarily on developing modern
budgeting
techniques (see
table 26, Appendix). According to some
foreign
observers, the first two plans failed to set priorities
and achieve
economic-sector integration as might be expected of
genuine
development planning. The major economic-planning emphasis
was on
public works, primarily roads; forestry; health care; and
education
(see
table 27, Appendix).
To make planning more effective, the Planning
Commission was
established to formulate the Third Development Plan
(1971-76), and
the Druk Gyalpo served as its chairman until 1991. Under
the third
plan, public works, still primarily roads, continued to
take a
significant share of the Nu475.2 million development
budget (17.8
percent) but had decreased from its 58.7 percent share in
the first
plan and its 34.9 percent share in the second plan.
Education
gradually increased (from 8.8 to 18.9 percent) in the
first three
plans. The second and third plans were paid for primarily
by India,
although about 3 percent of total funding became available
through
the UN, starting with the third plan. Despite amounts
budgeted for
planned development, there were additional capital
expenditures
outside the formal development plan, including public
works (mostly
road construction) and hydroelectric plants.
One of the major achievements of the Fourth Development
Plan
(1976-81) was the establishment of district (or
dzongkhag)
planning committees to stimulate greater local
involvement,
awareness of government development policies, and local
development
proposals. The committees, however, had no decision-making
powers.
Nevertheless, agricultural and animal husbandry came to
the fore,
taking 29 percent of the Nu1.106 billion allocated for the
fourth
plan. It was during the fourth plan that Bhutan made its
first
effort to establish the value of the GDP, which in 1977
amounted to
Nu1.0 billion. In that year, GDP was distributed among
agricultural
and related activities, 63.2 percent; services, 13.1
percent;
government administration, 10.4 percent; rental income,
8.1
percent; and manufacturing and mining, 5.2 percent. Per
capita GDP
was estimated at US$105.
The Fifth Development Plan (1981-87) sought the
expansion of
farmland to increase the production of staple crops, such
as rice,
corn, wheat, barley, buckwheat, and millet. The plan also
emphasized improvements in livestock, soil fertility,
plant
protection, and farm mechanization. Its total planned
allocation
was Nu4.3 billion, but the actual outlay came to Nu4.7
billion.
Financing the planning process grew increasingly complex,
as
indicated by the fifth plan's multilateral funding
sources.
However, domestic revenue sources for development planning
had
increased significantly, and the fifth plan included
development
projects that would further decrease dependence on
external
assistance. Such concepts as self-reliance in each
district,
decentralization of the development administration,
greater public
input in decision making, better control of maintenance
expenditures, and more efficient and effective use of
internal
resources became increasingly important.
The Sixth Development Plan (1987-92) focused on
industry,
mining, trade, and commerce (13.3 percent) and power
generation
projects (13.1 percent), with education's allocation
decreasing
slightly to 8.1 percent from 11.2 percent during the fifth
plan. At
Nu9.5 billion, the sixth plan was considerably more
expensive than
its predecessor. It included programs that, if
successfully
implemented, would mean far-reaching reforms. The goals
included
strengthening government administration, promoting the
national
identity, mobilizing internal resources, enhancing rural
incomes,
improving rural housing and resettlement, consolidating
and
improving services, developing human resources, promoting
public
involvement in development plans and strategies, and
promoting
national self-reliance. Perhaps the key ingredient,
self-reliance,
promised to provide for more popular participation in the
development process and to result in improved rural
conditions and
services as well as better government administration and
humanresource development. With greater self-reliance, it was
hoped that
Bhutan would begin exploiting markets in neighboring
countries with
manufacturing, mining, and hydroelectric projects in the
1990s.
Faced with rising costs, Bhutan postponed some projects
requiring
large inputs of capital until the Seventh Development Plan
(1992-
96).
No major changes were expected in overall sectoral
development
in the seventh plan. Preliminary planning indicated
emphasis on
"consolidation and rehabilitation" of developments
achieved under
previous plans, more attention to environmental concerns,
and
enhancement of women's role in economic and social
development.
From their inception, the development plans have been
aimed at
energizing the rest of the economy and promoting economic
selfreliance . Windfall revenues from export receipts normally
were used
to reduce foreign debt and dependence on foreign aid.
Planners also
sought to involve the immediate beneficiaries of economic
development. Representatives in the National Assembly and
district
officials were encouraged to become involved in projects,
such as
roads and bridges, schools, health care facilities, and
irrigation
works, in their district. Some costs for the projects were
borne
through self-help, such as households providing labor.
Government
planners also have endeavored to increase rural income
through
initiatives in the farming sector, such as stock-breeding
programs,
promotion of cash crops, and advanced agro-technology.
Central
government efforts also were aimed at increasing the
quality of
life by providing electrification, modern water and
sanitation
systems, better cooking equipment, and insulation for
houses.
Data as of September 1991
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