Weaving on a backstrap loom, an important home industry
Courtesy Bhutan Travel, Inc., New York (Marie Brown)

The Economic Context

Bhutan, recognized by international aid agencies as one of the poorest of the least developed countries of the world, had a primarily subsistence agricultural economy in the early 1990s. In the late 1980s, around 95 percent of the work force was involved in the agricultural sector (agriculture, livestock, forestry and logging, and fishing). The government projected that the agriculture sector would produce 46.2 percent of the nation's gross domestic product (GDP--see Glossary) for 1991, representing a decade-long slight decline as government services and electric power generation increased. Manufacturing and construction, although important, were expected to contribute only 14.2 percent of the projected total GDP (nearly Nu4.1 billion) for 1991 (see table 24, Appendix). The gross national product (GNP--see Glossary) was nearly Nu3.9 billion in 1988, and in the same year, the GDP had risen to Nu3.4 billion (see table 25, Appendix). The World Bank (see Glossary) calculated Bhutan's 1989 per capita GNP, based on revised population estimates (600,000 persons), at US$440.

Despite these seemingly bleak economic indicators, the actual quality of life was comparatively better than that of countries to the north and south. World Bank analysts believed the numbers were low because of inaccurate population estimates and differences in measuring subsistence output and barter transactions, as well as the difficulties in reconciling the differences between fiscal-year and calendar-year accounts. Nutritional intakes, and the availability of housing, land, livestock, and fuel, all pointed to higher per capita income. And, when measured in 1980 constant prices, according to Bhutanese government statistics, the economy experienced a highly respectable .8 percent annual growth rate during the 1980s.

Although Bhutan has a minuscule private sector, it was growing in the late twentieth century in conjunction with government development plans. It was controlled, however, by a small sector of society, members of the royal family, and individuals or families with government ties. The Companies Act of 1989 provided for the separation of all public and joint sector corporations from the civil service by mid-1990, and, as a result, certain key enterprises became independent of the government.

Data as of September 1991