With a population of about 750,000, Bhutan rarely evokes the interest of international investors. However, opportunities exist for those willing to look at specific sectors and focus on potential profitability rather than just immediate growth. Bhutan is undergoing an important political and economic transition. And the aspirations of its population are also changing. Its monarchy gave way to a parliamentary democracy in 2008.

The economy has been growing rapidly; gross domestic product expanded by 7 per cent, 12 per cent, 9 per cent and 5 per cent in the past four fiscal years. Incomes are also growing. Extensive construction activity can be seen along the Babesa Highway south of the capital Thimpu. According to the Statistics Bureau, investment by financial institutions in the building and construction sector soared from 5.8 billion ngultrum (S$118 million) in 2008 to 14.5 billion ngultrum in 2012.

I found during two taxi rides that the young part-time drivers were graduates who also had office jobs. There seemed to be a sense of despair at the lack of full-time jobs. Most of the low-income workers appear to be from India, judging from the Hindi music they listen to on their radios. An expatriate working with an international group notes that young Bhutanese are big fans of the Korean programmes that reflect middle-class lifestyles. Those with good incomes are willing to spend. News reports suggest that cars are now larger and in greater numbers. New coffee shops and restaurants are sprouting up, and average prices seem higher than in Thailand or India. But since Bhutan still has very few such outlets, proprietors may be taking advantage of the lack of competition.

These changes are throwing up sector-specific micro opportunities, such as: Electric cars: Environmental reasons apart, Thimphu is small and should suit intracity driving. People owning electric cars would rarely be far from a battery charging point. Bhutanese professionals re- mark that youngsters increasingly preferred to drive rather than walk. Cabbies say cars imported from India cost about 20 per cent to 25 per cent more than in India. But electric cars would have to be priced competitively, or they will be out of reach for most people.

Processed and packaged foods: Such foods are becoming increasingly popular, going by the stocks in department stores. Hygiene is one reason. Another is longevity. Daily cooking is not practical with a working population increasingly comprising both men and women.

Mobile value-added services (VAS): Bhutan has moved from having no mobile phones to claiming more than 70 per cent mobile penetration in less than seven years. Annual subscriber growth is in excess of 100 per cent. This suggests potential for mobile VAS providers to tie up with local net- works for mobile gaming, tones, infotainment, live streaming, m-commerce, and so on.

Solar renewable energy: The sunlight in Bhutan is intense due to its high altitude and low pollution levels. Being mountainous, the country also has land tracts not suitable for real estate or agriculture. These are located in the east of the city across the river, in the west near a television tower, and in the south around the Buddha view-point. These places would be suitable for the construction of solar photovoltaic panels on mountain inclines.

Finance: The propensity to save has never really caught on. Ratio of savings (excluding time deposits) to gross domestic product has hovered between 9 per cent and 13 per cent over the past five years. This could constrain the ability of banks to lend. Local professionals, however, say the appetite for initial public offerings on the stock market is huge. The recent listing involving Dungsam Polymers, a manufacturer of polythene bags, was over-subscribed by about three times. With people’s wallets estimated to grow, potential future listings might warrant the attention of boutique banks. Online trading has picked up and offers scope for technology providers to partner with local brokers.

E-commerce: Bhutan has good Internet connectivity and most young people are literate and computer-savvy. There is a hunger for the latest products, including casual fashion, electronic goods and entertainment that could be sold online. The market for formal clothes, however, is limited since most people wear traditional at- tire at work.

Pre-fabricated furniture: The building boom is fuelling demand for furniture, meaning timber. But this is something Bhutan might want to avoid to maintain its ecological balance.

Hang-out zones: Changing lifestyles mean socialising in fashionable coffee shops and restaurants in the city centre. The 1990s music played in most of these places seems to attract many young people. But there are not many such outlets. If the number of high-income earners grows, there could be opportunities for more such businesses across the city.

Vocational and professional courses: The construction of the Knowledge Park and IT Park shows the government is taking higher education seriously. This emphasis on higher education suggests a chance for entrepreneurs to provide professional and vocational courses in information technology, hotel management, graphics and industrial skills, thus building expertise and making students job-ready and employable.

Online newspapers: Local newspapers are small and have limited global content. This provides opportunities for online newspapers, with both news and infotainment content, gaining revenue from either advertising or subscriptions.

Travel: Those not travelling as part of a group package would appreciate a good online booking service. My own experience suggests the online booking process is not streamlined for individual budget travelling. But luxury hotels offering a variety of indoor services may find only limited demand. Since most foreign visitors pay a per-day fee, which limits the number of days they can remain in the country, most prefer to stay in budget hotels and spend their time outdoors.

Is it justified to look at these opportunities, given that Bhutan is such a small market? Absolute profits may be low, but the picture is different if the focus is in terms of return on equity. Larger markets offer higher growth potential. But companies entering such environments also face greater competition and will not be able to break even for some time.

Meanwhile, Bhutan’s government will have to think about opening up the economy to foreign investors further in order to provide increased economic opportunities for its jobless youth. Bhutan may be a small “frontier” market, but it is not without opportunities.

By Sourajit Aiyer

Image Courtesy: Agence France-Presse/Getty Images & WSJ.com

Originally published here – http://www.straitstimes.com/sites/straitstimes.com/files/20140418

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