Forward march

A view of the Paro valley. Bhutan is rich in minerals and the potential to produce hydropower.-SUSHANTA PATRONOBISH

THE tiny Himalayan country of Bhutan, which made a peaceful transition from monarchy to constitutional democracy in 2008, has begun to move slowly but surely towards economic growth and industrial modernisation. One of the main forces guiding the country in this is Druk Holding and Investments Limited (DHI), the single-largest government-owned holding company.

The main purpose of the DHI, which was established in November 2007, is to manage the existing and future commercial investments in Bhutan for the long-term benefits of its people. It functions as an autonomous commercial arm of the government and shoulders the responsibility of wealth creation, not by competing with it but by promoting the private sector. The DHIs portfolios include five wholly-owned companies and seven joint venture undertakings in important sectors such as hydropower, banking, insurance, airline, telecom and natural resources. The total assets of the DHI companies are estimated at over $2.022 billion.

The wholly owned companies of the DHI include the Druk Green Power Corporation (DGPC), the Bhutan Power Corporation (BPC), Bhutan Telecom (B.T.), the Druk Air Corporation and the Natural Resource Development Corporation (NRDC). The DGPC, which was incorporated in January 2008, runs four hydropower plants and has a total installed capacity of 1,500 MW. It operates and maintains all the hydroelectric plants in Bhutan. The BPC takes care of the transmission and distribution of electricity.

Bhutan Telecom, which was incorporated in July 2000, offers mobile, fixed-line communication and ISP (Internet service provider) services. Drukair, Bhutans only airline, started operations in 1983. The NRDC was incorporated in 1984 and has the mandate to manage and supply natural resources such as sand, stone and timber.

The DHI is a shareholder in the Bank of Bhutan (BoB), the State Trading Corporation of Bhutan (STCB), the Bhutan Board Products (BBP), the Bhutan Ferro Alloys (BFA), the Penden Cement Authority (PCA), the Royal Insurance Corporation of Bhutan (RICB) and the Bhutan National Bank (BNB). The BoB, incorporated in 1978, is the largest commercial bank in the country with a network of 26 branches. In 1995, the BNB came into being as the second commercial bank in the country.

The STCB, which was established in 1969, is one of the largest trading companies. It is the authorised dealer of Toyota Motors, Tata Motors and Eicher vehicles. The RICB, incorporated in January 1975, is the countrys only insurance company. The BBP, incorporated in 1983, manufactures graded plain and pre-laminated particle boards and ready-to-assemble furniture for domestic sale and exports.

The BFA, which was established in 1990, has an installed capacity to produce 18,000 tonnes of ferro silicon for export to India, Japan, the United States, Singapore and China. The PCA, a major manufacturer of cement in Bhutan, not only caters to the domestic market but also exports to India. The company started its production in 1981.

The DHIs main aim is to promote the competitiveness of Bhutans economy by making its companies highly efficient and productive. One of its most important functions is to provide critical support for the growth of the private sector. For this purpose, it has to liaise with government agencies to facilitate the formulation of credible long-term policies for the development of a dynamic private sector; facilitate research and development to identify potentials and challenges for broader investment avenues inside and outside the country; and promote Bhutans brand image.

Although the DHI comes under the Ministry of Finance, it remains autonomous in its functions and plans. The board of directors is its highest decision-making body. It makes decisions on investments, divestments and issuance of securities in consultation with the Finance Ministry.

However, consulting the Ministry is more of a formality, the final decision rests with the board of directors. The Ministry and the company also set mutually agreed upon performance benchmarks for the DHI, and the latter sends periodic reports on its performance to the Ministry. All future commercially viable projects and commercially developed projects are to be transferred to the DHI.

Important projects being implemented by the DHI include the Dagachhu Hydropower Corporation, Dungsam Cement and an information technology park, which is the first special economic zone (SEZ) project in Bhutan.

The Dagachhu Hydropower Corporation is Bhutans first foreign direct investment (FDI) project in hydropower. The 114-MW project, which was initiated through the DGPC, is coming up at a cost of $201 million. The Dungsam Cement plant, which will have a capacity of 1.36 million tonnes a year is being set up at a cost of $161 m.

The DHI has identified areas of opportunity in certain key sectors, including renewable energy, data centres, IT and IT-enabled services, education, tourism, natural resources and mineral-based industries, SEZs, infrastructure projects, service industry, water and domestic air services.

Recognising Bhutans close ties with India, the DHI hopes to promote economic partnerships with Indian companies.