Development of the Sustainable Tourism

in Bhutan
A Sectoral Study Based on Pros-and-cons Analysis

1630007011
Natalie Jiang Yingshuo
Instructed by Dr. Edoardo Monaco
POLS 4073
Final Year Project (GIR)

BNU-HKBU
United International College

December 2, 2019
Development of the Sustainable Tourism in
Bhutan
A Sectoral Study Based on Pros-and-cons Analysis

Introduction
The world population has exceeded 7 billion in 2011 and at a time when social injustice,
wars, famine and global poverty prevail, the most vital challenge is to improve living standards
without ruining the environment. In tourism, the largest sector of the world, the Kingdom of
Bhutan has become a pioneer in developing high yield, low impact sustainable tourism with its
distinctive guidance of the ‘Gross National Happiness’ and the “Middle Path1” policy. As a result,
predominant achievements have been made in economic capacity building, cultural conservation
and environmental preservation in Bhutan. Nevertheless, infrastructure deficit, severe limitations,
doubts about bringing in foreign direct investment and other obstacles challenge the further
development of the sustainable tourism in Bhutan. This article aims to illustrate the pros and cons
of sustainable tourism in Bhutan with a comprehensive expression and give a deeper perspective
of this hermit state.

Literature Review
With a population of 750,000 and a territory of 38,364 square kilometers, the Kingdom of
Bhutan is a tiny, remote and landlocked kingdom nestling in Himalaya between two powerful
neighbors, India and China (BBC, 2018). Bhutan is also a bystander or even a protestor of the
globalization process for guarding its unique ancient heritages. It was not until 1999 that
televisions and the Internet came to Bhutan. Remained an intact place of antique monasteries,
Bhutan notably grabbed global attention beside the material growth emphasized in the modern era.
Since 1971, the nation has refused GDP as the sole way to measure progress and placed GNH

1
Also known as the “Middle Way”, the “Middle Path” is a Buddhist term that portrays the eightfold path of
Buddhism between indulgence and asceticism. It has realistic guidance of avoiding unitary and extreme course of
actions.
instead. The notion of Gross National Happiness (GNH)2 was raised in 1972 by the Fourth King
Jigme Singye Wangchuk and basically contained four pillars: good governance, sustainable
development, cultural preservation, and environmental conservation (GHN Center Bhutan, 2019).

Figure 1. The location of the Kingdom of Bhutan and the distribution of Bhutan’s abundant tourism resources
including monasteries, national parks and other landscapes.

Source: Tibet Discovery (2019)

To realize the goal of improving Gross National Index, developing sustainable tourism was
put on the agenda. United Nations World Tourism Organization and United Nations Environment

2
The GNH is initiated by the Kingdom of Bhutan and shares different criteria with other global measurement
reports: in 2019, Bhutan ranked the 95th among the 156 nations in the World Happiness Report. The nine domains of
the GNH are respectively: (1) psychological wellbeing, (2) health, (3) education, (4) time use, (5) cultural
diversity and resilience, (6) good governance, (7) community vitality, (8) ecological diversity and resilience,
and lastly (9) living standards (Centre for Bhutan Studies, 2015).
Program (2005) define that “sustainable tourism development guidelines and management
practices are applicable to all types of destinations, including mass tourism and the various niche
tourism segments. Sustainability principles refer to the environmental, economic, and socio-
cultural aspects of tourism development, and a suitable balance must be established between these
three dimensions to guarantee its long-term sustainability.” In Bhutan domestically, the tourism
industry started in 1974 with the primary ambitions of generating revenue, especially foreign
exchange, publicizing the country’s distinctive culture and traditions to the outside world, and to
contribute to the country’s social-economic development (Royal Government of Bhutan, 2016).
In a recent appraising, obvious progress and recognized features make Bhutan the number one
country to visit with the reputable description of real-life Shangri-La on the Best in Travel 2020
(Lonely Planet, 2019).

However, there are inevitable defects existing in both Bhutan’s tourism sector and the
related academic research. The shortage of accurate and regular data on pertinent realms is a
consideration so few quantitative studies are prudently authoritative. In addition, the application
of Gross Happiness Index is so unique and lacks universality, which leads to predominately
positive attitudes of scholars disregarding the reality that Bhutan has just graduated from the UN
category of the world's Least Developed Countries (LDC) with a GDP per capita of only 3110.23
USD in 2017 (UN, 2018). All biases mentioned above induce a consequence that the neutral and
synthesized sectoral study of sustainable tourism in Bhutan remains at relative rarity, and this
article may open a breach.
Research Body

Pros
Economic

Figure 2. The number of tourists that have arrived in Bhutan in recent years. Although the growth rate is fluctuating,
the substantial growth in the total amount is promisingly obvious.

Source: Tourism Council of Bhutan (2018)

Being highly centralized and strictly restricted, the Bhutanese tourism is internationally
eminent for its “high value, low impact” approach which has strengthened economic capacity
building. There are merely 10,000 tourists annually spending on average eight nights in Bhutan,
and the tourists are compulsorily required to spend at least 200 USD per person/ day (and 250
USD per person/day during the peak season) with a wide range of coverages (Andersen and
Henriksen, 2006), which includes: a) a minimum of 3 star accommodation (4 & 5 star may require
an premium payment), b) all meals, c) a licensed Bhutanese tour guide for the extent of guests’
stay, d) all internal ground transport , e) camping equipment and haulage for trekking tours and f)
USD 65 Sustainable Development Fee (Tourism Council of Bhutan, 2019). Gyeltshen and Wangdi
(2019) refer these Bhutanese tourism policies as “elite tourism” in their descriptive narrative on
Nikkei Asian Review. In 2018, Bhutan accepted 274,097 visitor arrivals in total and surpassed that
of 2017 with a growth rate of 7.61%. Among all arrivals, there were 71,807 foreigners of which
63,367 were international leisure arrivals and 202,290 regional travelers. Plurality of international
visitors to Bhutan selected air as their way of transport to ingress and egress Bhutan while the
majority of regional arrivals chose land. 87.81% of the total visitors visited Bhutan for recreation
or holiday purpose (Tourism Council of Bhutan, 2018). Beyond essential budgetary requirements
and quantitative accomplishments, numerous advantages have been spread to diversifying
domestic economy, increasing revenues and generating taxation, and enhancing the quantity and
quality of employment.

Figure 3. The single-sector driven economy in Bhutan has suffered from the fluctuations of GDP growth rate and
vulnerability in the past decades.

Source: Royal Government of Bhutan (2015)

From a macro perspective, tourism in Bhutan raises the level of diversification in its single-
sector driven economy through expanding business types and the source of clients. For a long
period, a narrow range of ten export products3 comprise more than 80% of total exports (Royal
Government of Bhutan, 2015). Simultaneously, heavy reliance on exporting hydro power to the

3
The top ten export commodities in Bhutan (2015) are respectively: ferro silicon (30%), iron (8%), cement (7.1%),
cardamom (4.1%), calcium carbide (4%)，iron rod (3.8%), silicon (3.5%), dolomite (3%), silicon carbide (3%) and
gypsum (2.8%), and all products are in the category of relatively low-value added primary or secondary industry.
single market, India, intensifies the absence of real economic transformation. Compared to the
conventional economic activities, Bhutan’s tourism dramatically expands the variety of products,
especially in the existed service sector such as the items of cultural exploration, adventure and
sports (Royal Government of Bhutan, 2018), in which selling representative goods like textiles,
carvings and camping equipment is capable to drive economic diversification with an integrally
high-end and miscellaneous impact. Furthermore, a growth rate of 7.61% in 2018 (Tshomo, 2019)
is able to attract more affluent foreign guests, thus there will be larger demands for potential
products, for example: zip lines, theme parks and punting. As a consequence, systematic
diversification will be achieved along with the transformation and upgradation of the national
economic structure.
Annex1.Both existed and potential tourism products are indispensable for the diversification program, not only within
the tourism sector, but also the single-sector driven economy.

Source: Royal Government of Bhutan (2018)

International recreation arrivals in Bhutan account for a proportion of 88% among the whole
guests, and as a chief support, they create earnings and thus contribute to taxation. In 2018, the
complete tourism profits from the foreign leisure section was USD 85.41 million out of which
USD 26.29 million was direct revenue for the government through Sustainable Development Fee
(SDF), Visa Fees and 2% TDS 4 (Tourism Council of Bhutan, 2018). The $65 Sustainable
Development Fee is a typical characteristic receipt belongs to the Minimum Daily Package Price
and will be ultimately subsidized for promoting social welfare in education, health care and other
GNH programs. The governmentally consolidate and clearly stated tourist taxation mechanism
makes the nine domains of GNH initiative acceptably welcomed by civilians, and simultaneously
strengthens the tie between the travelling commerce and residents’ well-being, which is a
bilaterally beneficial means.

Table 1. Tourism Earning from the International Leisure Arrivals

Particulars of earning Amount (in USD)

1 Gross Earning 85,410,505
2 Sustainable Development Fee (SDF) 22,633,016.25
3 Visa Fees from Tourists 2,460,320
4 2% TDS (Tax Deducted at Source) 1,195,295.46
5 Tour Operator’s Net 58,569,461.29

Table 1. Five major domains that compose the tourism earnings from the International Leisure arrivals, of which the
Tour Operator’s Net (34.4%) and the Sustainable Development Fee (13%) are two major contributors.

Source: Royal Government of Bhutan (2018)

Beside the direct incentives from tourists’ tax, another way that tourism contacts with local
communities is through well-rounded employment in Small and Medium-sized Enterprises

4
Tax Deducted at Source (TDS) is a system that persons are responsible for generating particular payments such as
salary, commission, interest and rent ahead of the full payment to the receiver.
(SMEs). SMEs comprise more than 95% of total enterprises in Bhutan hiring roughly 14% of the
total population, of which service (tourism, hotels and restaurant) becomes the mainstay (Adhikari,
2015). It is estimated that the industry directly and indirectly hired around 17800-19600 people
in 2010, and 128 hotels and resorts in Bhutan are eligible to cater to tourists (Sharma, et al., 2012).
To satisfy various lodging demands of honored guests, the ‘Hotel Star System’ appraises the
accommodations on a grade of 1-5 stars based on a comprehensive set of criteria, and
establishments are categorized into: a) farm-stays, b) home-stays, c) resorts, d) hotels and e)
guesthouses (Tourism Council of Bhutan, 2019), so both urban areas and countries can impartially
share the dividends of tourism, which prevents the unemployment triggered by the rural-to-city
migration and vocational saturation in the metropolises as the negative externalities of urbanization.
In addition, additional spending on shopping, gifts and souvenirs, car rental and etc. would
certainly hires an amount of artisans, sales clerks and drivers, so the result of employment in
Bhutan’s tourism sector is appreciable with considerable boost in volume and varied practitioners.

Figure 4. All-round impacts of Bhutan’s employment as a result of expenditures from developing tourism.

Source: Tourism Council of Bhutan (2018)

Aside from full-scale engagement in recruitment, the quality of employees is guaranteed.

From arriving to leaving, all tourists are accompanied by at least a registered guide and a rental
car, and more personal requests need additional payments (Hirotsune, 2011). Bhutan’s tour guides
are all required to register and receive rigorous and thorough training before obtaining the
occupation. There are 30 certified guides on the official website of the Tourism Council of Bhutan,
of which eight have the vocational qualification of trekking and four master a third language
(French and Japanese). In general, all guides are engaged in the cultural journey and are
intelligently bilingual, so explaining local distinctive culture to foreign guests becomes
conceivable.

Cultural
In Bhutan, richness of culture origins in practicing the Vajrayana Buddhist 5 doctrine as it is the
state religion of Bhutan. The Vajrayana belief of “worship, psyche and behavior” not only forms
a series of intrinsic worth as guiding ideologies for developing tourism (for instance, Zogib [2014]
discovered that most tourist attractions in Bhutan have their religious meaning. Forests, rivers,
lakes and landscapes are referred as Neys, while the holistic land in the nation is called Beyul), but
also leaves a legacy of abundant heritages. The countryside is dotted with 2,000 monasteries,
1,0000 stupas and numerous Mani walls and prayer flags (Ritchie, 2008), which is an incredibly
distinctive landscape with original culture well preserved. Buddhism is at the center of all cultural
identities in Bhutan that preservation is highly emphasized to maintain the sacred Mandala, so
strict regulations are common in Bhutan. Because of the sacred nature of all mountain peaks in
Bhutan, mountaineering was wholly banned in 2004 while climbing mountains above 6000m has
been prohibited in 1994 (Zogib, et al., 2016). Despite restrictions in terms of maintaining cultural
purity and religious holiness, Bhutan has developed its own model in cultural preservation and
communication through observing religious festivals.

5
Vajrayana is a sort of Tantric Buddhism that signifies the conversion from Mahayana theoretical thought to the
enactment of Buddhist ideas in individual life The concept vajra (Sanskrit: “thunderbolt,” or “diamond”) is used to
convey the completely real and immortal in a human being, as against the fictions an individual entertains about
himself and his nature; yana is the spiritual pursuit of the ultimately valuable and indestructible.
Figure 5. Popular festivals drive tourists’ attention, of which the most characteristic are Tsechu festivals.

Source: Tourism Council of Bhutan (2018)

Certain religious festivals are practical measures to consolidate cultural confidence and
reinforce propaganda. Among all festivals, the Tsechu festival (Paro:32.21%, Dochula: 4.57% ,
Trongsa: 1.63% and Tashingang: 1.25%) is overwhelmingly visited by tourists. A tsechu
celebrates the epic deeds that were executed by the honored religious saint and teachers,
Padmasambhava, also known as Guru Rinpoche II or Ugyen Rinpoche (Huntington, 1986). As an
imposing social event, a series of ritual religious dances (cham) are presented by magnificently
masked and meticulously robed dancers. The specific dates and duration of the tsechus are
different from one district to another, but generally start around the 10th day of the Bhutanese
calendar (Lonely Planet, 2017). The tsechu festivals reinforce the social life of the community and
offer chances for making or renewing friendships by drawing people far and wide from the
neighbouring districts. In addition, the festivals are performed in dzong or monastery patios, which
can become notable as onlookers vie for a position. The unique Bhutanese happiness can be
elaborated to foreign guests via the symbolic folk dance and other works of art 6 displayed on the
tsechu festivals, and simultaneously impressive relics with the Buddhist belief ‘liberation on sight’

6
The focal points of many tsechus is the unfolding of a gargantuan thangka (painted or embroidered religious
picture) from a building overlooking the dance arena before sunrise. Such large thangkas are called thondrols and
are usually embroidered rather than painted.
are sophisticatedly explained to tourists. As a consequence, Bhutan’s inherit culture is preserved,
and cultural value influences visitors directly or indirectly.

Figure 6: The Paro Tsechu festival at night, which collectively integrates natural environment, cultural beliefs and
aesthetic values.

Source: Tourism Council of Bhutan (2019)

Environmental
Apart from deep-seated cultural value, the environmental concern is also highlighted in
Bhutanese Vajrayana Buddhism because rivers, mountains and animals are given a sacred meaning,
and eco-tourism is an adequate reflection. Eco-tourism is defined as “responsible travel to natural
areas that protects the environment, sustains the well-being of the indigenous people, and engages
interpretation and education (TIES, 2015).” Bhutan harmoniously combines natural endowments
and Buddhism dogmas, and developing ecotourism is extended from theories to realities: Bhutan
has 51.44 % of its total land area under a framework of conserved areas, which includes five
national parks, four wildlife sanctuaries, and one strict nature reserve (Zogib, et al., 2016). These
conserved areas also occupy total forest coverage of 71%, among which national parks are the
most extensive habitats for local flora and fauna.
Figure 7. Layers of sacredness in Bhutan, which contains the precious black-necked crane.

Source: Divya Venkatesh, DiversEarth

In Bhutan, Jigme Singye Wangchuck National Park is the third largest protected area and
is well-known not only for biodiversity, but also the community-based ecotourism program “Nabji
Trail”. The biologically diverse national park has recorded the presence of 39 mammals, 270 birds,
139 species of butterflies, 16 fishes, and harbors 50% of the population of ‘critically endangered’
white-bellied heron (Department of Forests and Park Services, 2019). Simultaneously, there are
more than 5000 people dwelling in the national parks: 588 households spread over 6 geogs
moderately in five regions adapting to assorted climatic conditions and vegetation covers. In such
a situation that requires human beings and nature to connect perfectly, the Nabji Trail came into
being following the existed park strategies. Opened in 2006, the trail is composed of a five-day
trek through six villages, crossing fascinating and disparate forests, incredibly rich plants and
animals, farms, and cultural sites. To support the operation of the trail, campsites were established
in the villages of Jangbi, Kuda, Nabji, Korphu and Nimshong at the same year (Namgyel, 2011).
Therefore, the practice of Nabji Trail ecotourism project meets the objectives of maintaining
cultural and ecological processes while gaining tourism income, which echo the gist of sustainable
tourism adequately.

Furthermore, beyond the existed pilot projects in the national parks, keeping diversity has
been emphasized to the level of national festival. Bhutan’s black-necked crane (Grus nigricollis)
festival has become a spotlight that attracts foreign tourists to bring awareness of preserving the
beloved cranes. This festival belongs to a program initiated by His Majesty the Fourth King and is
observed annually on 11th November, coinciding with the birth anniversary of His Majesty (Daily
Bhutan, 2019), which indicates that species diversity is highlighted as a basic national policy. The
crane festival is so popular that 500 foreign tourists come to Bhutan to enjoy the distinctive
celebration in 2019, and their experience and sense are able to articulate Bhutanese sustainable
idea to the world in a vivid and authentic way: maintaining biodiversity and finding an equilibrium
between human and nature is critically indispensable.

Cons
Infrastructure and Transportation
Inadequate infrastructure and inefficient transportation are the vital threats for the tourism
sector in Bhutan. Due to geographical difficulties, the number and quality of roads remain at an
insufficient level to support the flourishing touristry. Except for Thimphu-Phuentsholing, Paro-
Thimphu and Thimphu-Wangduephodrang primary national highways, remained roads in Bhutan
are only single lane (Royal Government of Bhutan Department of Roads, 2017). In addition to low
volume for traffic, travel time from core cities to major towns becomes a difficult issue because it
is generally time-consuming. Atlassian (2017) demonstrates that the time spent on transportation
among different regions mostly concentrate on 6hr to 2 days, and a maximum time of three days
can be reached in several routes connected to Samdrup Jongkhar. For individuals, the
inconvenience of transportation will negatively affect the satisfaction of passengers, and even
some tourists with altitude sickness may encounter obstacles in seeking medical attention promptly.
For the whole sector, the uneven distribution of roadways brings a result that most tourists remain
in urban areas while rural communities benefit relatively fewer from tourism (Gurung & Seeland,
2008), which is unfairly imbalanced. Moreover, because of fragile topography, roads in Bhutan
often get blocked by landslides especially during the monsoon season that spans from May to
August (Atlassian, 2017). For this reason, how to rationally expand Bhutan's road facilities under
severe conditions is the top priority of Bhutan's sustainable tourism sector.

Figure 8. Travel time between towns in Bhutan varies from 1 hour to 3 days.

Source: Atlassian (2017)

Compared with the shortage of roads in terms of quantity and quality, the throughput of
Bhutan airport is a more crucial issue. Paro International Airport (PIA), Bhutan’s sole operating
airport until currently and still the only one offering international air access, is located adjacently
to the capital Thimphu in the western area (Asian Development Bank, 2012). Because of the lack
of internal air connectivity, other districts of the country: the center, south, and, east, have restricted
access to regional and international markets. It is detrimentally for the tourism industry, which is
a substantial economic contributor, for achieving equal accessibility to opportunity, enterprise,
markets, and services. Insufficient infrastructure in aviation has been an obstacle to achieving
broad-based economic growth particularly in intriguing foreign direct investment.

Regulations and Constraints

The management system of Bhutan’s tourism remains at authoritarian and immature mode: the
Tourism Council of Bhutan (TCB) is a semi-autonomous government organization and the “Apex
Tourism Body” and charges implementing all tourism-associated exercises. Simultaneously, the
private sector is represented by three considerable but relatively young groups of tour operators,
hotels and restaurants, and guides (Santini, et al., 2017). Nevertheless, these groups function
principally as lobbying entities and do not engage in educating members, certificating, collecting
data, marketing, planning strategic and disputing resolutions (UNCTAD, 2013). The dichotomous
pattern reveals apparent cleavages between the private sector and the public sector, and the
shortage of intragovernmental cohesion has triggered adverse effects of the loss of flexibility, thus
results in market failure.

Centralization and serious government interference are chief reasons that reduce the flexibility
of Bhutan’s tourism industry. Although the government-dominated tourism sector of Bhutan
promotes the cooperation between hotels, transportation services, tour guides and marketing, the
reliance on government intervention necessarily constrains private sector flexibility and
adaptability (Ukai, 2016). For instance, the rigid “high value, low impact” scenario has run counter
to its initial desire to some degree: the total number of foreign tourists remains relatively small and
tour guides have to suffer by the scarcity of customers (Hirotsune, 2011). In a long term
theoretically, a lack of market competition mechanism for survival of the fittest is disadvantageous
to improve overall quality of the tourism industry and might reduce customers’ contentment. An
even more disturbing outcome of the predominant market failure can be caused, which limits the
utilization and profits of Bhutanese tourism. To solve these problems, a decentralization approach
should be executed to reflect the changing nature of flows and the altering preferences of tourists.
Accordingly, only through a more disperse management model and a more normative government-
market relation can Bhutan increase the benefits of developing sustainable tourism.

In addition to the irreconcilable contradictory between public and private sectors, there are
still problems within the private sector of Bhutan's tourism industry, of which low efficiency and
abnormal operation are representative symbols. From a macro perspective, Bhutan’s
comprehensive rank in the World Bank’s annual ease of accomplishing business assessment
degraded from 126th of 183 countries in 2009 to 148th of 185 in 2012 ( International Finance
Corporation, 2010), and some process are still perceived as overly complex, time consuming, or
unclear (UNCTAD, 2013). To avoid the systematic disadvantages, private tourism sector has
developed an operational scheme bypassing government regulations. For example, unethical
business such as excessive underselling tours, which results in fewer income contribution and also
brings wrong net value of tourism profits. As reported by Bhutan Tourism Monitor 2017, tour
operator’s total net was Nu 53.4mn, while the overall tour operators might earn less if taking
undercutting into consideration (Business Bhutan, 2019). As a result, the entire tourism industry
remains less productive than other non-tradable service activities. Fortunately, things has been
improved as both the government and Tourism Council of Bhutan patiently sympathize the
hardships of tour operators. For instance, the ICA found that the tourism sectors were dominated
by new firms (ADB, 2018). Simultaneously, there have been more stakeholder participation in
decision making related to heritage conservation and tourism development (World Bank, 2014).
In this way, unfavorable shortfalls like the shortage of accessibility and ineffective marketing
could be suppressed, and the private market of Bhutan’s tourism is able to improve its
sustainability.

Figure 9. Share of companies signifying access to finance is the greatest hurdle, in which tourism accounts for a
noticeable proportion of 32%.

Source: World Bank (2017)

Open to Foreign Direct Investment

Bhutan shows a stance towards opening up in a late-maturing or even resisting inclination,
and it is no exception to the tourism industry. Bhutan hardly propose a chance to observe the access
of tourism related to FDI, and it was not until 2005 that the first foreign hotel entered the nation
(United Nations, 2007). This is because from a certain level, integrated into the international
economic and trade system means economic leakage7 and cultural contamination, which contains

7
Foreign direct investment is a kind of international capital flow from a firm in one nation, which generates a
subsidiary of the parent company in other nation or which allows the firm to obtain a controlling interest in a foreign
firm. Beyond a transfer of resources, the FDI also involves the acquisition of control of assets in other country,
which might be considered as a major hazard for the Kingdom of Bhutan due to the potential risk of capital invasion
that benefits little or even harm the local society.
westernized modern concepts that seriously conflict with the distinctive notion of “Gross National
Happiness” of Bhutan. Ironically, it is these foreign companies that have brought huge benefits to
Bhutan's tourism industry, including income generation and employment. In Bhutan, though
bountiful indigenous hotels are located in settings with brilliant historical and cultural resources,
TNCs (Transnational Corporations) provide the only accommodation at the level of five-star,
which also account for 7-10 per cent of total hotel rooms specially for worldwide guests. Several
TNC hotels occupy approximately one third of all hotel recruitments, and every TNC hotel group’s
employment levels vary from 180 to 260 (United Nations, 2007). This is a rare opportunity for
local residents of Bhutan to improve their careers and earn more income, so opening up to attract
Foreign Direct Investment is supposed to be a hard-won chance but not a potential threat.

Bhutan’s Foreign Direct Investment Inflows, (1990-2011) (US$ million)

1990- 1995- 2000- 2005 2006 2007 2008 2009 2010 2011
1994 1999 2004
0 0 2 9 72 3 7 18 16 14

Figure 10. Bhutan’s Foreign Direct Investment Inflows from 1990 to 2011

Source: Asian Development Bank and the United Nations (2015)

However, the impact study of FDI on Bhutan’s economic growth by the economic affairs
ministry shows that the existing FDI Policy has failed to attract foreign investors particularly in
tourism (Sharma, et al., 2012). This is mainly because of the asymmetry in demand differs from
the international and the regional travelers, and the overpoweringly dominated visitors are regional
instead of those upscale international guests. As National Council of Bhutan (2016) stated, “one
of the major anomalies that have become more pronounced the recent years due FDI to the lack of
a comprehensive tourism policy is the issue of unregulated regional tourism.” Currently, there are
only four FDI funded resorts under operation respectively established with the cooperation of
Aman, Singapore, Thailand and the USA (See Figure 11). In contrast to the infrequent international
investments, the whole toursim sector in Bhutan has inclined to give favourable policies to the
majority, the regional tourists. A typical example is that with the exception of visitors from India,
Bangladesh and Maldives, all other visitors travelling to Bhutan need a visa at a price of USD 40
(Tourism Council of Bhutan, 2019). Moreover, for those 113 countries that have no diplomatic
relations with Bhutan, private visits to Bhutan or travelers must apply for visas on behalf of
Bhutan ’s domestic travel agencies authorized by the Bhutanese government and third-country
travel agencies that cooperate overseas, which causes additional prices and inconvenience to
cultivate willingness to invest. In short, finding a balance between local interest and foreign
investment is still a tough task for the tourism sector in Bhutan.

SI. Project Name Foreign Investor Location

1 Bhutan Resorts Pvt. Ltd Bhutan Hotels Limited, Aman Thimphu, Wangdi, Paro, Trongsa,
Resorts Groups (Virgin Islands) Bumthang
2 Bhutan Eco Ventures Pvt. HPL Leisure Ventures Pvt. Ltd Paro and Punakha
Ltd. (Singapore)
3 Heavens Resorts Pvt. Ltd Voraphot Srimahachota Paro
(Thailand)
4 Nak-Sel Boutique Hotel PHM Foundation, USA Paro
& Spa Pvt. Ltd
Figure 11. Four FDI funded resorts that are currently under operation

Source: Sharma et al. (2016)

Conclusion
Famous for its natural beauty, unique culture and rich wildlife, the tourism sector of Bhutan
has made conspicuous progress with the guidance of the distinctive idea of Gross National
Happiness in economic development, cultural preservation and ecological conservation, with
detailed achievements in diversification, taxation and employment both in terms of quantity and
quality. Celebrating certain indigenous festivals like the Tsechu festivals and the black-necked
crane festival (Grus nigricollis) are effective measures to strengthen the identity and protect
species diversity while can simultaneously explain the unique Bhutanese value to tourists around
the world. However, there are indeed inevitable shortcomings, such as the infrastructure deficit,
stern interventions from the government, and a lack of ability to attract FDI, which make the
sustainable tourism itself hard to combine with rewarding local business. Under this circumstance,
revaluating the industry and adjusting the scale have become the most vital task for the
sustainability of tourism, especially to incent market vitality.

Since the scale of market has hindered market growth, promoting tourism at the
international level to increase more international arrivals is critically important. Santini et al.
(2017) demonstrate that though tourism has developed into a key source of foreign exchange, but
changing composition and spending patterns of tourists is still an ongoing process. This is
primarily because of the high cost of collection and transportation over difficult terrain discourages
exploitation on a commercial scale (Ministry of Economic Affairs, 2017). Meanwhile, the market
vitality should be promoted by providing incentives to operators so that the temporal and
geographic source of tourist flows can be diversified. For Bhutan, using social media and other
innovative strategies to develop new markets (Santini, et al., 2017) can be a reliable way to enlarge
the market scale, and it is high time that the future programming needs to take mass tourism into
consideration. Beyond the current conservative strategy, the sustainable tourism- mass tourism
synergy will can become a dominate direction as it basically follows the “Middle Path” and satisfy
the economic, socio-cultural and environmental concerns of sustainability with great
autoregulation. To sum up, the sustainable tourism in Bhutan will become one of the most reliable
and contributing sector for the world’s happiest country.
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