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
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.