Embassy of India

Thimphu

No.Thi/Eco/202/2/2006 January 13, 2009

Economic & Commercial report for the months of November 2009

Economic Development Policy

The draft Economic Development Policy (EDP) was presented to the 56th session of the Cabinet on November 10, 2009 by the Ministry of Economic Affairs. The Cabinet, according to a press statement, has approved the EDP. The Government has described the EDP as the first policy document that encompasses all economic sectors of the Royal Government and provides for policy reforms, review of laws, rules & regulations and incentives for various industries.

Economic growth

Bhutan’s GDP growth slumped to one of its lowest at 5% in 2008. The lowest since 2000. The slide in the growth rate is largely attributed to the negative growth rate in the construction industry at -6.4%, forestry and logging at -2.6%, average performances in trade, mining, transport, communication, education and health services. Bhutan recorded one of the highest growth rate in 2007 at 19.7%.

Extension to Druk PNB

It is reported in the media that the Royal Monetary Authority (RMA) has given six months extension to Druk PNB to fulfill all requirements needed to obtain the licence to start commercial banking operations. Druk PNB, a joint venture promoted by PNB (51%) was supposed to start its operations on December 18, 2009.

Interest paid by Bhutan to India on rupee requirements

According to the presentation made by the officials of the Royal Monetary Authority (RMA) at its annual meeting with the financial institutions held on November 20, 2009, Bhutan has paid an estimated Nu. 110 million as interest till November 2009 on Rs. 5 billion borrowed from India to meet rupee requirements. It could touch Nu. 140 million by the end of 2009.

Renewal of bilateral Trade Agreement between Bhutan and Bangladesh

The bilateral Trade Agreement between Bhutan and Bangladesh was renewed on November 07, 2009 during the visit of the Bangladeshi Prime Minister to Bhutan. Bangladesh agreed to eliminate tariffs on 18 major agricultural export products. The first Trade Agreement was signed in 1988. Bangladesh Government slashed import duties on these 18 products to 15% in 2003. According to the Minister of Economic Affairs, RGoB, the number of commodities that would be traded was also increased from 74 to 90. According to the officials of the Department of Trade, duty free access is expected to make exports to Bangladesh more competitive and profitable for both the exporters and the importers.

Meeting of SAARC Payment Council

On November 03, 2009, Deputy Governors of the SAARC Central Banks had a meeting in Thimphu as part of a regional forum created in 2008 to build a common understanding and help member countries in reforming national payment and settlement systems (PSS). During the meeting, member countries made presentations on payment systems and took stock of recent PSS developments in the region.

Investment in Bhutan by US company

According to press reports, an American real estate and construction company - Carpenter and Company Inc. wants to invest in Bhutan’s mineral water resources, albeit with a clause that it be given exclusive rights to sell the water outside India and Bhutan region. The American company has been holding talks with Druk Holdings Investment as a potential FDI partner. However, when approached by the American company, the Department of Industry, RGoB has informed that the case could not be processed since under current FDI rules, no investment was yet open in the water sector.

Thailand’s interest in Bhutanese mini hydels

It is reported in the media that the Electricity Generating Authority (EGA) of Thailand and Provincial Electricity Authority (PEA) are exploring possibility of constructing two 20 MW mini hydropower stations in Bhutan in collaboration with Bhutan Power Corporation (BPC). According to PEA Deputy Governor, the company will conduct feasibility study shortly. EGA, PEA and BPC have signed an MoU on cooperation on November 05, 2009 to this effect. Cooperation between BPC and the two Thai companies was established in 2007. The two Thai companies are already involved with BPC in maintaining mini hydropower projects in Bhutan.

Assistance by Republic of Korea

According to media reports, the Ambassador of the Republic of Korea to Bhutan handed over US$ 100,000 for reconstruction of infrastructures damaged by Cyclone Ailia in May 2009.

Earthquake relief assistance by Canada

According to media reports, the Ambassador of Canada to Bhutan presented a letter of credit for 50,000 Canadian dollars as earthquake relief to Bhutan.

Relief assistance by Kuwait

According to media reports, the Government of Kuwait and Kuwait Red Crescent Society contributed US$ 5.5 million to Bhutan as assistance to reconstruct and rehabilitate damages caused by Cyclone Ailia in May and earthquake in September 2009.

Trade enquiries received from India during the months - Six

Trade enquiries received locally – NIL

This issues with the approval of the Deputy Chief of Mission.

Sd/-

(Ms.G.V.Nidhi)

Second Secretary (Comm.)

Distribution: As per standard list