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Higher investments required to maintain consistent growth rate:World Bank report

Published Mar 04, 2019
Updated Apr 30, 2020

For Bhutan to maintain a consistent growth rate of four to five per cent over the long-term until the 2050s, higher investments in the human and physical capital are paramount as per the World Bank’s Bhutan Development Report, published recently.

The report states if investments are not made, and the current economic trend continues, the annual growth rate might plummet to one and a half per cent by 2050.

The report created an alternate scenario where Bhutan makes higher investments in the physical and human capital in the coming years to study the growth pattern.

Physical capital investments would require Bhutan to spend significantly on improving the existing road networks, investing hugely in ICT and digital technologies, and other public infrastructures which would create an enabling environment for private sector development.

On the other hand, human capital investment looks at improving and catering to the skilled labour shortage in the Bhutanese market.

“Bhutan is one of the best countries in terms of governance and security and has a strong foundation for diversification. Other countries face constraints in financial resources but Bhutan will have more financing resources from the hydropower projects,” Yoichiro Ishihara, the Resident Representative of World Bank Bhutan Country Office, said.

“By using the resources and revenues from hydropower, Bhutan is in the right position to invest in human and physical capital. I don’t think many other countries in the world have this luxury.”

In another scenario, the report keeps the baseline investments as it is to see the growth pattern. If the current scenario continues, it is predicted that the annual average growth rate will decelerate to 2.6 per cent per year during 2017-2050.

Therefore the report implies that significant investment in both human and physical capital is required to accelerate productivity.