Pub­lic sec­tor un­der­mines pri­vate in Bhutan: World Bank

Two-thirds of Bhutanese with ter­tiary ed­u­ca­tion work in the pub­lic sec­tor, which lim­its the pool of tal­ent avail­able to the pri­vate sec­tor

Business Bhutan - - Front Page - Pema Sel­don

An over­sized pub­lic sec­tor is es­pe­cially prob­lem­atic for a small, land­locked coun­try like Bhutan, which has an un­der­de­vel­oped pri­vate sec­tor, ac­cord­ing to a re­cent re­port launched by the World Bank.

The re­port ‘Bhutan’s La­bor Mar­ket: To­ward gain­ful qual­ity em­ploy­ment for all’, pub­lished by the World Bank in col­lab­o­ra­tion with the Min­istry of La­bor and Hu­man Re­sources (MoLHR) in­di­cates that the over­all

com­pen­sa­tion pack­age for work­ers are more gen­er­ous in the pub­lic sec­tor and that un­em­ploy­ment among a num­ber of pop­u­la­tion groups is el­e­vated as they wait to se­cure pub­lic sec­tor jobs.

Two-thirds of Bhutanese with ter­tiary ed­u­ca­tion work in the pub­lic sec­tor, which lim­its the pool of tal­ent avail­able to the pri­vate sec­tor.

Ac­cord­ing to the re­port, Bhutan’s pub­lic sec­tor is rel­a­tively large and ac­counts for about a fifth of all jobs and al­most half of the jobs out­side the agri­cul­ture sec­tor.

Over­all, 19.1% of jobs in Bhutan are in the pub­lic sec­tor de­fined as the civil ser­vice, other gov­ern­ment agen­cies, the armed forces and gov­ern­ment com­pa­nies. Given that only 43.3% of Bhutan’s work­ers are em­ployed out­side agri­cul­ture, and pub­lic sec­tor em­ploy­ment is en­tirely non-agri­cul­tural, 44.1% of all jobs out­side agri­cul­ture are in the pub­lic sec­tor.

Ac­cord­ing to the Sec­re­tary of La­bor and Hu­man Re­sources, Sonam Wangchuk, there is lit­tle sign of the pri­vate sec­tor be­ing the main en­gine of growth and job cre­ation in Bhutan since more than 50% of jobs out­side agri­cul­ture are in the pub­lic sec­tor.

“Both the 10th and 11th Five Year Plans (200813, 2013-18) rec­og­nize the un­der­de­vel­op­ment of the pri­vate sec­tor and high­light the need to fo­cus on im­prov­ing the qual­ity and quan­tity of pri­vate sec­tor em­ploy­ment,” he said.

The re­port also states that only 6.5% of the work­ers with­out for­mal ed­u­ca­tion are em­ployed in the pub­lic sec­tor. As for ed­u­cated work­ers, 21.6% of those with pri­mary ed­u­ca­tion and 30.2%, 37.9% and 56.3% of those with lower, mid­dle and higher sec­ondary ed­u­ca­tion re­spec­tively work in the pub­lic sec­tor.

“Lu­cra­tive com­pen­sa­tion pack­ages in the pub­lic sec­tor re­in­force work­ers’ pref­er­ences for pub­lic sec­tor jobs and in­hibit pri­vate sec­tor growth,” states the re­port.

The re­port also states that with ma­jor hy­dropower projects com­ing on stream within the next few years, the gov­ern­ment will have more in­cen­tive to fur­ther ex­pand the pub­lic sec­tor and to in­crease the gen­eros­ity of the com­pen­sa­tion pack­ages of­fered to pub­lic sec­tor work­ers.

“If not coun­tered, these in­cen­tives will likely lead to in­creased pres­sure on the pri­vate sec­tor with­out sub­stan­tially de­creas­ing un­em­ploy­ment.”

How­ever, the gov­ern­ment has rec­og­nized that the coun­try’s fu­ture de­vel­op­ment cru­cially de­pends on a vi­brant pri­vate sec­tor there­fore a num­ber of help­ful ini­tia­tives have been launched to strengthen the pri­vate sec­tor.

The gov­ern­ment em­barked on an am­bi­tious plan to im­prove Bhutan’s po­si­tion in the World Banks’s An­nual Do­ing Busi­ness re­port rank­ing. As of 2016, Bhutan ranks 71st out of 189 coun­tries in the ease of do­ing busi­ness.

“If Bhutan wants to avoid the sit­u­a­tion of other re­sources-rich coun­tries that rely mostly on pub­lic sec­tor jobs and jobs sub­si­dized through trans­fers, a com­pre­hen­sive ap­proach to sec­to­rial re­bal­anc­ing is needed – not to weaken the pub­lic sec­tor but to al­low pri­vate sec­tor jobs to emerge and pros­per,” said Mr. Yoichiro Ishi­hara, World Bank Res­i­dent Rep­re­sen­ta­tive in Bhutan.

He fur­ther stated that if Bhutan de­cides that it wants to fol­low a more bal­anced de­vel­op­ment path, now is the time to for the coun­try to be­gin to ad­dress im­bal­ances be­tween the pub­lic and pri­vate sec­tor.

Al­though the re­port rec­om­mends that pub­lic and pri­vate sec­tor com­pen­sa­tion pack­ages could be re­bal­anced with an in­crease in pri­vate sec­tor wages and fringe ben­e­fits, it has also men­tioned that a sud­den in­crease in pri­vate sec­tor wages ap­pears un­re­al­is­tic as pri­vate sec­tor firms al­ready strug­gle with un­af­ford­able wage costs.

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