On 15 June 2024, Bhutan unveiled its ambitious and innovative 13th Five-Year Plan (2024–2029). While it fits into Bhutan’s ten-year strategic framework, the 13th Five-Year Plan is unique in the long history of Bhutan’s five-year plans, as rapid economic growth is the central objective for the first time.

The goal of the plan is to transform Bhutan into a high-income economy by the end of 2034. This means raising GDP per capita from US$3833 to above US$6174 by 2029 — a 62 per cent increase — and doubling that figure by 2034. But there are questions about whether such rapid growth can be achieved in the time allowed.

Putting economic growth front and centre of the 13th Five-Year Plan and the ten-year strategic framework might seem like a major digression from Bhutan’s celebrated alternative development philosophy of Gross National Happiness (GNH), which was front and central in all the plans from 2007 until now.

Bhutan explicitly aims for a ‘high-income GNH economy’. GNH remains the guiding philosophy to ensure economic growth does not compromise the social, ecological and spiritual wellbeing of the country. But it is now felt that economic growth is essential to continue the trend. 

Bhutan boasts an impressive growth record with an annual average of 10.9 per cent since the 1980s. Yet it is still marred with long-term issues including low productivity, a small domestic market, poor linkages to international markets, lack of economies of scale, infrastructure limitations and restricted access to finances. While promoting innovation and introducing new industries are key to the plan’s success, past efforts have been disappointing. 

The government aims to improve the regulatory environment for business, streamline interactions with government agencies, improve communications infrastructure and set up or expand business incubation centres and industrial parks. Designated sites are mostly in the south of the country, near the border with India, suggesting greater integration with the Indian economy. 

But it will take time for an entrepreneurial mindset and innovation networks to develop under Bhutan’s collectivist and risk-averse culture. It is also unclear what the new advanced industries might be and whether Bhutan will be able to attract the required foreign direct investment.

Economic growth is anticipated across all sectors, both traditional and new. Hydropower, a mainstay of the formal economy, accounts for about 30 per cent of export revenue. Two major hydropower projects are scheduled to be commissioned during the plan while ten other major projects are listed to start during the terms of the 13th and 14th Five-Year Plans. But construction delays and cost overruns have been common in hydropower projects.

Bhutan’s new high-income economy requires the government to invest significantly in re-skilling and upgrading qualifications to create the labour force needed for contemporary industries. This will take time. The state’s educational institutions will need to demonstrate greater flexibility, agility and orientation to change than they have in the past if they are to succeed. 

A major persisting problem that has led to the plan’s focus on economic growth is the failure to create enough jobs, especially for the young. The plan’s vision is to develop the industries that will drive labour demand in the private sector which is to be the engine of growth. It is hoped that this will help stem the recent exodus of educated people in the most productive age groups seeking better economic opportunities overseas — a Bhutanese ‘brain drain’ described by Prime Minister Tshering Tobgay as the country’s ‘biggest existential threat’.

In addition to growth with jobs in established sectors like agriculture, tourism and manufacturing,  new industries are envisaged. These include activities in the digital and creative economy, the establishment of a Bhutan Carbon Market and industries that draw on Bhutanese culture, such as holistic education and health services.

These culture-related industries will be focused on the world’s first ‘mindfulness city‘ at Gelephu in the south. The mindfulness city will occupy a massive 1000 square kilometres territory and will be a special administrative region. It is to be a ‘vibrant economic hub’ and a ‘cradle for growth and innovation’ anchored in the values of GNH and Buddhist heritage. The big question is whether the bold new city will attract the industries and capital to make the dream come true. 

It is unclear how the mindfulness mega-project is being financed, but it may well be through the government’s investment arm, Druk Holding and Investments, which has recently ventured into bitcoin mining. According to the World Bank, bitcoin mining can help to accelerate Bhutan’s digital transformation and form a new source of economic growth. 

Between July 2021 and June 2023, bitcoin mining had a reported investment of US$539 million, much of it for IT equipment. This resulted in a sharp decline in Bhutan’s foreign currency reserves. The industry has also been correlated with a drop in Bhutan’s electricity exports to India as bitcoin mining requires huge inputs of electricity.

With Bhutan relying on economic growth to create a happy, prosperous and secure nation, the country’s economic managers will be very busy over the next five years attempting to turn this vision into reality.