Bhutan: Heaven is Still Far Away for the Himalayan Kingdom at 7,000 Feet Above Sea Level

Bhutanese are the happiest people on earth, according to the Gross National Happiness index first introduced by their king in 1972. But most Bhutanese, especially the youngsters, now regard the index as a royal palliative which, after 46 years, still hasn’t made their lives markedly better.

The general election last Thursday in the Himalayan Kingdom, a constitutional monarchy since 2008, was fought mostly on domestic issues from corruption and income inequality to youth unemployment and criminal gangs. The centre-left party DNT headed by a 50-year old medical surgeon Lotay Tshering, who campaigned on diversifying the economy away from hydropower and creating more employment, won 30 of the 47 seats in the national assembly.

As the nation’s new Prime Minister, Tshering has his work cut out for him. A de facto protectorate of India since the two countries signed the Treaty of Friendship in 1949, India supposedly “guides” Bhutan’s foreign policy. The reality is that Thimphu is a hostage of New Delhi practically on all fronts, not just foreign policy. It wasn’t until 1972 that Bhutan was given India’s blessing to join the United Nations. Thanks to India’s “guidance” , Thimphu till today has no diplomatic relations with any of the UN permanent members, including its giant neighbor China.

The 2-month long Doklam standoff last year between China and India, over an incident at the Bhutan-China border, put Thimphu in an awkward position. The border face-off stripped away all pretenses that New Delhi only “guides” the kingdom’s foreign policy. It dawned on Thimphu that India would take care of its own interest ahead of Bhutan’s. Many Bhutanese were at the time unhappy with India taking into its own hands a sovereignty issue affecting Thimphu.

In return for India’s largesse–Bhutan is the biggest recipient of aid from New Delhi – Thimphu forfeits its sovereignty. That bargain worked well for decades until the end of monarchy and the first democratic elections in 2008. Voices calling for more self-determination and diversification of international relations and the economy began to emerge. The momentum for change has gathered force and urgency since last year after the Doklam episode.

Despite GDP growth averaging 6% over the last decade, signs that not all is well with the economy have become increasingly visible. Youth unemployment in excess of 10%, well above the national average of 3%, can no longer be ignored or wished away. The trajectory of good GDP growth is under threat by the introduction of Goods and Services Tax in India last year (most of the landlocked Bhutan’s trade goes through India), aggravated by delays of several hydropower projects which are crucial to expansion in export earnings and government revenue from sale of electricity to India.

External debts at 121% of GDP are excessive by international standards. Indian loans to Bhutan to build hydro dams account for 90% of GDP. Of course, few outside Bhutan have a clue because India gets a free pass from western corporate media which chose not to report it. New Delhi charges 9 to 10% interest on the hydropower loans made to Thimphu. It’s sheer hypocrisy for India to go round denouncing China’s funding of Belt and Road projects in Pakistan, Maldives, Sri Lanka and Myanmar as debt traps when Bhutan’s debt situation is far more perilous and unsustainable than that of Maldives and others.

Some figures will show Bhutan’s high economic dependence on India.

1) 80% of exports go to India, with 40% in the form of sale of hydropower.

2) 90% of imports come from India.

3) Three-quarters of loans from India.

4) Almost all the migrant labor are in India working on road construction projects.

5) One-quarter of government revenue comes from hydropower sold to India.

In short, Bhutan’s economy is at the whims and mercy of New Delhi.

The new Tshering government wants to diversify the economy away from hydropower and from over-reliance on India. In particular, the Bhutanese want light industry and more ecotourism to create jobs for the young and avoid the vicissitudes of New Delhi politics. An obvious step for the new Thimphu administration is to rectify a glaring anomaly of not having diplomatic relations with its next door neighbor, China. Beijing stands ready to help Thimphu by investing in light, non-pollutive industry, bring ecotourists to Bhutan, and build infrastructures on the country’s difficult and treacherous terrain to open up the landlocked kingdom. All that Beijing is prepared to do without interfering with Thimphu’s domestic affairs and sovereignty.

Too good to be true? Tshering need not look far : Nepal is a recent precedent after the Communist Party in Kathmandu won power and started to avail itself of Chinese assistance and largesse.