FDIs rake in Nu 1 bn last year
Foreign Direct Investment (FDI) in the country contributed Nu 1bn to the domestic revenue in the income year 2016, as per the latest annual budget report presented in parliament.
The revenue constituted Nu 903mn in corporate income tax and Nu 99mn in sales tax and customs tax from FDI companies.
FDI companies’ contribution to the foreign exchange reserve was recorded at US$ 48.9mn during the last four years (2013-16).
However, an outflow of foreign reserve also took place as FDI companies need to import goods and services such as
technology, equipment, construction and other raw materials, patents in some cases, and profit repatriation and fees.
Therefore, these FDI-driven imports offset the surplus of the capital and financial account in the form of trade deficits which results in minimum change on the level of foreign reserves.
“While the contribution of FDI to international reserves may be marginal, it brings other benefits such as employment and technology transfer,” states the report.
In 2016, 4,879 people were employed in 37 FDI projects that have commenced operation. FDI projects under construction have also employed a total of 51 employees during the year. This is an increase of more than 100% in employment generation since 2011 where FDIs employed only 2,341 people.
As of today, there are 52 active FDI projects in Bhutan, 37 are fully operational while 15 are in the construction stage.
These FDIs are in various sectors of the economy such as hotels, financial services, dairy, agro, water bottling and beverage projects and other manufacturing sectors. The highest number of FDI is in the hotel industry with a total of 21 hotels across the country.
According to the budget report, 63% of FDIs are from Asia followed by Europe with 23%, 10% from North America and 4% from Oceania.
“Bhutan has always received more investments from Asia and in particular from India,” states the report.
FDIs in Bhutan are encouraged in areas that contribute to the development of green and sustainable economy, promotion of socially responsible and ecologically sound industries, promotion of culturally and spiritually sensitive industries, investments in service that promote Brand Bhutan, and the creation of a knowledge society.