联合国贸易发展委员会-为不丹实现平稳过渡战略（英）-2022.2-39页_1mb

Summary of "Towards a Smooth Transition Strategy for Bhutan"

Core Content

This document outlines the smooth transition strategy for Bhutan as it prepares to graduate from Least Developed Country (LDC) status in 2023. It emphasizes the importance of ensuring that Bhutan continues to make progress in its development trajectory despite the loss of LDC-specific benefits and the challenges posed by the global economic environment.

The report discusses the graduation criteria set by the United Nations, including Gross National Income (GNI) per capita, Human Assets Index (HAI), and Economic and Environmental Vulnerability Index (EVI). Bhutan has made rapid progress in meeting these thresholds, particularly in GNI and HAI, but still faces challenges in reducing economic and environmental vulnerabilities.

The document also highlights the impacts of the COVID-19 crisis on Bhutan's economy, especially the tourism sector, which is a major contributor to the country's GDP and foreign exchange earnings. The crisis has led to a significant decline in GDP growth, increased unemployment, and reduced tax revenues, creating a need for a comprehensive transition strategy.

Main Points

• Graduation Date and Context:

  • Bhutan is expected to graduate from LDC status on 13 December 2023.
  • The country has been preparing its 12th Five-Year Plan (12 FYP) to align with this transition.
  • The strategy aims to cement development gains, complement national development objectives, and configure the implementation of the 13 FYP.

• LDC Graduation Criteria:

  • GNI per capita: Bhutan surpassed the threshold of $1,222 in 2020.
  • HAI: Bhutan's score improved to 77.5 in 2020, exceeding the threshold of 66.
  • EVI: Bhutan's score remains above the threshold of 32, indicating ongoing vulnerability.

• Implications of Graduation:

  • Loss of LDC-specific support measures (ISMs) such as trade preferences, ODA, and travel assistance.
  • The need to build resilience and reduce economic vulnerability.
  • The importance of maintaining development momentum to avoid regression in development progress.

Key Elements of the Smooth Transition Strategy

• Stabilizing the macroeconomic environment:

  • Ensuring fiscal sustainability and reducing public debt.
  • Managing the impact of reduced external support and trade preferences.

• Expanding trade:

  • Diversifying export markets beyond India.
  • Improving trade infrastructure and reducing transport costs.
  • Leveraging preferential trade agreements (e.g., with Bangladesh) to enhance competitiveness.

• Enhancing productive capacities and economic diversification:

  • Encouraging the growth of cottage and small industries (CSI).
  • Diversifying the economy beyond hydropower and tourism.
  • Focusing on manufacturing and high-value, low-volume exports.

• Product space and potential for diversification:

  • Identifying new opportunities in product complexity and relatedness.
  • The report provides a summary table of priority elements for the transition strategy.

• Maintaining sustainable levels of debt:

  • Ensuring that the country's debt-to-GDP ratio remains manageable.
  • Avoiding over-reliance on external financing and promoting domestic investment.

• Fostering technological advancement and human capital development:

  • Promoting information and communication technologies (ICTs).
  • Enhancing skills development and entrepreneurship.

• Mitigating vulnerability and building resilience:

  • Addressing climate change impacts on hydropower and tourism.
  • Strengthening disaster preparedness and economic resilience.

Challenges and Opportunities

• Economic Vulnerabilities:

  • Bhutan is a landlocked country with a small domestic market.
  • Reliance on limited export products and India as the main export market.
  • High economic and environmental vulnerability due to geographical constraints and climate change.

• Impact of the Pandemic:

  • The tourism sector was severely affected, leading to job losses and reduced income.
  • The construction and manufacturing sectors also suffered from supply chain disruptions and labour shortages.

• Current Development Priorities:

  • The 12 FYP focuses on economic diversification, productive capacities, and sustainable development.
  • The tourism sector is expected to grow at an average of 8.3% during the implementation period.
  • The Tourism Policy aims to promote eco-tourism, year-round tourism, and cultural and environmental sustainability.

Conclusion and Recommendations

• The smooth transition strategy is essential to maintain Bhutan's development momentum.
• The strategy should leverage international cooperation, domestic investment, and technological innovation.
• It should address structural vulnerabilities, including climate change, economic dependence, and lack of diversified industries.
• The report recommends a comprehensive, inclusive, and sustainable approach to transition, ensuring that Bhutan can continue to grow and develop post-graduation.

References

• The report references the United Nations Committee for Development Policy (CDP), UNCTAD, World Bank, and Bhutan's National Budget and Trade Statistics.
• It also includes boxes and tables that provide detailed insights into the 12 FYP goals, development finance sources, and export composition.

Annex

• Summary Table: Highlights the priority elements of the smooth transition strategy, including macroeconomic stability, trade expansion, productive capacity enhancement, and resilience building.

Figures

• Figure 1: Shows total trade in goods and services over the years.
• Figure 2: Illustrates total trade and its contribution to GDP.
• Figure 3 and 4: Provide insights into Bhutan's productive capacity index and its components.
• Figure 5 and 6: Highlight product diversification, complexity, and relatedness in Bhutan's exports.

Tables

• Table 1: Lists the main sources of development finance in 2018, with India as the largest contributor.
• Table 2: Outlines Bhutan's top 5 exports, with ferroalloys being the largest.
• Table 3: Shows Bhutan's top 10 export markets, with India accounting for 70% of exports.
• Table 4: Provides the overall balance of trade and total trade in goods and services for the years 2005–2018.
• Table 5: Discusses Bhutan's situational changes and vulnerability status.
• Table 6: Outlines central government fiscal revenues.
• Table 7: Shows trends in external fiscal support.

This document serves as a guidance tool for the Royal Government of Bhutan and its development partners in planning for a smooth and sustainable transition to developing country status.