Bhutan Foreign Direct Investment

The dust that foreign direct investment (FDI) in the construction sector stirred up between the government and the Bhutanese contractors has finally settled.

The two parties realised that, more than the disagreement on the issue, it was the misunderstanding arising from miscommunication between the two that had the government and local contractors at loggerheads for the last few months.

All this while Bhutanese contractors thought the Nu 50M, which the government recently increased to Nu 100M following contractors’ repeated pleas, was the total worth of a project foreign investors could participate in. The government on the other hand failed to clarify that it was indeed the initial capital that foreign investors ought to possess should they wish to invest in projects within the country.

The works and human settlement minister, Lyonpo Yeshey Zimba, explained that the Nu 100M was not for the project size.

“The amount is for establishment of offices, buying construction equipment and other machineries required for a project,” Lyonpo Yeshey Zimba said. “The amount is for the initial investment FDIs will have to make.”

It was like the case of Bhutanese contractors, who, to be in class ‘A’ category and undertake projects of that capacity, had to have Nu 20M capital as establishment cost.

For serious foreign investors in the industry, the amount was initially fixed at Nu 50M, which was doubled this week to allay Bhutanese contractors’ fears of the possibilities of opening doors to small-time contractors from bordering Indian states of Assam.

While a few local contractors cursed themselves for asking the government to raise the amount to Nu 100M, fearing they might not be able to mobilise it, many were satisfied.

“It’s all so confusing and even the FDI policy failed to clearly define and spell it out,” said a class ‘A’ contractor. “It’s good nevertheless.”

He said Bhutanese contractors, tying up with some foreign companies, would have to explain the same to their potential partners and find out if they were still in. “That’s the only difficulty now,” he said.

Some contractors thought the government had deliberately left this aspect of FDI unexplained, just so they could raise the amount on the terms of the contractors.

“We had many consultations with the government and they never explained to us,” a contractor said, adding that he was happy at the prospect of being able to tie up with some real foreign partners.

The economic affairs secretary, Dasho Sonam Tshering, said Bhutanese contractors were aware of the fact that the amount had nothing to do with the project size but the capital investment.

Of fronting and allowing inept foreign partners into the industry, Lyonpo Yeshey Zimba said foreign investors would have to bring their capitals in USD, a foreign exchange the country was short of.

“Otherwise, what’s the point of bringing in a foreign investor,” he said, adding that it allowed only big contractors to form a strong company that will bring the business long-term benefits. “Only serious companies, who have more capital than we have today, will be encouraged,” Lyonpo said.

Anticipating foreign partners to be big Indian companies, some contractors suggested the Indian rupee should also be allowed, as it was sorely lacking in the country.

The real picture in sight, Dasho Sonam Tshering said serious Bhutanese contractors would gain in terms of technical know-how, tying up with foreign investors, which would capacitate them to undertake bigger complicated projects, not just within the country but the region in future.

“Profits might go out at the end of a project, but the real investment and skills will be retained,” he said. “The commission market will also be limited.” Source: Kuenselonline