Foreign Direct Investment (FDI): An
Observation about Tourism Sector of Bhutan
By
Dr. Pawan Kumar Sharma,
Umesh N. Jadhav,
Elangbam Haridev Singh,
Dr. Achintya Mahapatra
Salient Features of FDI for Tourism
• In case of Five Star and above category hotels with
minimum project cost of Nu. 200 million, 100%
equity.
• Four Star Hotels with minimum project cost of Nu. 25
million, only 75% equity.
• Incentives to FDI funded projects
• Income Tax Holiday
• Reinvestment Allowance,
• Service Tax,
• Daily tourist tariff/royalty has been waived.
Introduction
• On 2 June 1974, the first group of paying tourists
arrived with 287 visitors, have increased to 64,028 in
2011.
• Bhutan introduced FDI as developmental strategy in
2002 including in tourism.
• major source of employment.
• the second largest net earners of foreign exchange.
• to facilitate private investments through public
private partnership and focus on development of this
sector including FDI.
Objectives
• To determine the factors affecting FDI in Tourism
sector
• To evaluate the policies adopted to attract FDI
• To examine the benefits of FDI in the growth of
Tourism sector
Eight FDI Funded Resorts
Foreign Investor
SI.
Project Name
1
Bhutan Resorts Pvt. Ltd (in Bhutan Hotels Limited, Aman Resorts Thimphu, Wangdi, Paro, Operating
six locations)
2
3
Location
Table 1. Reasons of FDI in Bhutan
Groups (Virgin Islands)
Bhutan Eco Ventures Pvt. HPL
Leisure
Ventures
Status
Yes
No
Trongsa, Bumthang
Pvt.
Ltd Paro and Punakha
Ltd. ( in two locations)
(Singapore)
East West Co. Pvt Ltd.
Mr. Rawleigh Hazen Ralls and Mr. Punakha
Operating
Unique culture 3
1
Good relation 0
4
Profit motive
4
Under construction
Stephen C. Sherrill, Mr. Gerard S. J.
Moffatt (USA & UK)
4
Havens Resorts Pvt. Ltd
Voraphot Srimahachota (Thailand)
5
Nak-Sel Boutique Hotel & PHM Foundation, USA
Paro
Operating
Paro
Operating
Wangdi
Under construction
Thimphu
Under construction
Paro
Under construction
Spa Pvt. Ltd
6.
Himalayan Safaris Lodges Eastern Safaris Pvt. Ltd, Singapore
0
Private Limited
7
Bhutan
Hotels
Private Eastport International Ltd., Samoa
Limited
8
Manidheepa-Mohsin
Dolphin Overseas Pvt. Ltd, Singapore
Graph
Hotels & Resorts Pvt. Ltd
Table 2. The perception on FDI Policy
in Bhutan
Yes
Table 3. Benefits of FDI to Country, Society,
Business and Investor
Yes
No
3
1
4
0
Profitability
3
1
Information technology
1
3
employee 3
1
No
Infrastructure
Effective laws of existing policy
3
1
development
Employment
Need to change existing policy
1
3
Benefits of existing policy
3
1
Govt. support
4
0
opportunities
Improving
training and Skills
Explore
tourism
of
Potential 1
3
Table 4. The Market Factors Attract FDI
in Bhutan
Most Imp.
Least Imp.
Size of market
4
0
Market growth
3
1
0
4
Dissatisfaction
with exiting market
3
1
0
4
Desire to follow
competition
Most Imp. Least Imp.
Availability of labor
4
0
Availability of R.M
4
0
Low cost of transportation
0
4
4
0
0
4
Availability
Desire to follow
customer
Table 5. Showing the Ratings of Cost
Factors
of
capital
technology
Financial encouragement by
Table 6. Political and Legal Factors
govt.
Table 7. Showing Social and Cultural
factors
Most Imp. Least Imp.
Political stability
&
4
0
Country image
4
0
Terrorism
3
1
Racial & ethnic
tension
0
4
Tax policies
1
3
Most Imp.
Least Imp.
2
2
Unique culture and tradition 3
1
Language
and 2
2
Religion
2
2
Attitudes of the customer
1
3
Familiarity with country
Communication
Table 8. Showing
Geographical/Location factors
Most Imp.
Least Imp.
Climate condition
3
1
Terrain/ Topography
2
2
Access
to
infrastructure
physical
1
Table 9. Showing the overall Rating of Factors
Determining FDI in Bhutan
Overall Ratings
Market Factors
2
Cost Factors
3
Political and legal Factors
4
Social and cultural Factors
5
Geographical/Location Factors
1
3
Conclusion
• Market, cost, political and legal environment, sociocultural, geographical location play vital role
• Peace and political stability is the strength, but lack
of infrastructure is a major reason for poor
performance.
• Availability of labor and raw materials become
another important factor.
• Large investors avoid investment in LDCs where
markets are small and operation cost is very heavy.
Cont…
• FDI in tourism sector has been successful due to
favorable climatic conditions, unique culture and
preserved social conditions can be capitalized.
• The Companies Act 2001 of the Kingdom of Bhutan
is not clear
• Liberalizing the restrictive FDI.
• Bhutan has not proved to be a viable destination for
high foreign investment
• The government can capitalize on FDI to achieve the
sustainable growth of the economy.
References
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