Bhutan launches Diagnostic Trade Integration Study 2020

Chimmi Wangmo

The Department of Trade, Ministry of Economic Affairs (MoEA), in collaboration with the United Nations Development Programme (UNDP) and Enhanced Integrated Framework (EIF), launched the Diagnostic Trade Integration Study 2020 this week in the capital.

UNDP-Bhutan said the comprehensive trade study identifies strategies and interventions to promote and diversify the country’s trade sector, support smooth graduation from the Least Developed Country (LDC) category, and achieve the Sustainable Develeopment Goals (SDGs) amid the COVID-19 pandemic.

“The EIF National Implementation Unit under the Department of Trade, MoEA in partnership with UNDP Bhutan who supported as the main Implementing Entity, undertook the Diagnostic Trade Integration Study Update (DTISU) in 2020 with financial and technical support from EIF,” a report from UNDP stated.

It states that the report reviews Bhutan’s economic progress since the first DTIS and also assesses the implementation of earlier recommendations, identifies challenges encountered since the last study, and considers the new economic landscape.

Further, the DTISU also builds on plans and strategies adopted by the government in recent years and takes into account Bhutan’s transition from the LDC category by 2023.

“It provides a clear analysis of the new priorities and challenges ahead for the revival and growth of the Bhutanese economy in the face of COVID-19 crisis,” the report states.

The report further highlights the instrumental role of trade facilitation and trade agreements in creating favorable trading environment, with clear insights into Bhutan’s trade competitiveness factors.  It also examines implications of the country’s impending transition to a middle-income country and the impacts of the pandemic on the economy.

Meanwhile, during the launch, the Minister for Economic Affairs, Loknath Sharma, said Bhutan’s economy has grown steadily since the launch of the first DTIS.

“However, the economy has been severely disrupted by the COVID-19 pandemic and is likely to take time before it recovers fully. Without timely and appropriate interventions, the disruption will not only derail the economic trajectory, but also impact Bhutan’s smooth transition from the least developed to developing country category,” he said.

Lyonpo added that it is also is also a timely intervention as this will not only help and supplement the government’s efforts for economic recovery and smooth graduation from the Least Developed Country (LDC) category but also help in guiding Bhutan’s long-term economic plans geared towards realization of economic self-reliance.

The UNDP Resident Representative Azusa Kubota said the UNDP sincerely hopes that this study, its recommendations, and its monitoring framework will support Bhutan as it recovers from the COVID-19 pandemic and defines new approaches to the economy and trade.

She said the DTISU lays out a comprehensive agenda for action that is relevant to Bhutan’s challenges and opportunities in the wake of the current COVID-19 pandemic, its recovery efforts and long-term economic growth.

Azusa Kubota said this includes specific suggestions for developing the green economy, strengthening youth skills development for the 21st century and enhancing trade-related infrastructure and logistics among others.

Further, she said that developing cottage and small industry (CSI) and increasing their competitiveness, promoting Bhutanese exports and foreign investment into Bhutan, and leveraging digitalization and e-commerce to support inclusive business and trade are some of the fundamental steps for attaining the 2030 Agenda for Sustainable Development.

EIF Executive Director, Dr. Ratnakar Adhikari said DTISs enable the LDCs to identify trade-related constraints, opportunities and to develop institutional and productive sector capacity-building projects to address them.

“Bhutan’s export concentration remains high, and hence diversification beyond hydropower in areas such as the services sector and tourism has been highlighted as essential in this DTISU,” he said,

In addition, the ED said constraints on productive capacity and productivity in the domestic market as well as critical skill shortages are particularly highlighted.

He said as a landlocked LDC, improving trade facilitation and infrastructure support in Bhutan will help reduce trade costs.

“Additional key areas spotlighted by this DTISU include improvements to the business climate and access to finance, the importance of standards and quality infrastructure, and the significance of investment promotion and tourism support services,” he said.

The study covers a wide range of sectors and reviews the trade performance, LDC graduation and accession to World Trade Centre.

The study provides recommendations that can be implemented in the short, medium and long term, and are aligned with Bhutan’s 12th Five-Year Plan for each sector.

In addition, it highlights policy considerations in the areas of integration into both regional and multi-lateral trading system.

The event saw the launch of UN Policy Brief titled “Trade Diversification in Bhutan: LDC Gradutaion, Economic Transformation and COVID Recovery”.

It was prepared jointly by the UN Resident Coordinator Office and UNDP.

UNDP said the policy brief is aimed at contributing to the dialogue on Bhutan’s potential economic and trade diversification in the wake of COVID-19 pandemic and impending graduation from the LDC category.

The Minster for Economic Affairs, Loknath Sharma and UNDP Bhutan Resident Representative Azusa Kubota launched the study report with the Executive Director of the Enhanced Integrated Framework (EIF), Dr. Ratnakar Adhikari, who joined the event virtually from Geneva, Switzerland. 

Bhutan published its first Diagnostic Trade Integration Study (DTIS) in 2012. It has since proved to be an important guiding document for trade policy and other trade-related interventions.