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Bhutan: Reconciling Economic Growth and the Environment

Taking a democratically-based, long-term approach to development.

November 30, 2014


For nature lovers and those interested in politics, Bhutan is a special place. I can think of few countries that are better suited to observe — at close range — the contest of tradition and modernity as well as the coexistence of the old and new.

Few countries have changed as rapidly as Bhutan. A few years back, the mountain kingdom remained more or less sealed off from the outside. An authoritarian ruler held absolute control.

Tourists have been welcome since the mid-1970s. Local TV arrived in 1999 – and it’s only been ten years since mobile phones were available. “Bhutan is no longer living in isolation. We are a part of a globalized economy,” says Dasho Sonam Tshering, the secretary of the Ministry of Economic Affairs.

About the size of Switzerland, this Himalayan country with its three quarter of a million people lies sandwiched between China in the north and India to the south.

Globalized buzz, with the air of a spa

The capital Thimphu is one of the most rapidly growing cities in Asia. Numerous construction sites are proof of economic drive. The international airport at Paro is built in the style of a Buddhist temple. Expansion works are in full swing. Grey concrete indicates the clock does not stand still here either.

Not a single traffic light exists in the entire nation, my Bhutanese host tells me with a smile. It is late afternoon and rush hour in Thimphu. In order not to lose time, he takes me along a back alley to get to the hotel.

In spite of the buzz, the new hotels, shops and malls, Thimphu has preserved the air of a climatic spa. Building inspection seems to work — no sign of the uncontrolled, anarchic expansion that we bemoan in other Asian metropolises. Here, high up in the mountains with their green slopes, untouched nature is just a few steps away.

Bhutan has become a favorite of international tourist business – and somewhat of an insider’s tip for globetrotters able to afford the treat. Last year, 100,000 foreign visitors toured the country. It could have been far more. An official per diem prevents an uncontrolled tourist assault. That financial hurdle is a deliberate policy. Regarding tourism, quality goes before quantity in Bhutan.

A monarch divesting absolute power!

The driving force behind the historic changes has been Jigme Singye Wangchuk. In 2006, the fourth king, as he is also called, relinquished absolute power and introduced constitutional monarchy.

Two years later elections took place and in 2013, a second round of voting followed. That ended with a victory of the main opposition party, giving proof that the country is on the right democratic path.

It was a big shock when the venerated king stepped down and turned the throne — with drastically slimmed down prerogatives — over to his youthful son. The fifth monarch has followed the reformist agenda of his father, who continues to wield huge influence.

Bringing the country forward and ridding the people of poverty is the declared aim. The key to a more prosperous future lies in hydropower — of which the mountain kingdom possesses seemingly boundless reserves. The challenge is to tap these reserves and bring them to the consumer far away.

The initial steps of a grand scheme have been taken. Engineering and construction companies assisted by tens of thousands of laborers, many of whom hail from neighboring countries, are planting huge hydroelectric dams in the untouched nature.

Little surprise that these forceful interventions into the pristine landscape have created concerns – by those immediately affected and living in the vicinity of the construction, and by others further downstream concerned with the indirect effects of the changes.

Growth that serves the people and the environment

A lively debate has kicked off in this young democracy about the direction Bhutan should take. It is a debate that goes far beyond the economics of energy planning. It is a fundamental debate not uncommon in other parts of the world, pitting ecologists and conservationists against less considerate economic expansionists.

In the end, it is also a debate about the future of the country, a debate about how the Bhutanese want their country to look in ten, twenty, maybe fifty years.

“Bhutan is the Saudi Arabia of electricity production,” says Tashi Wangchuk, who runs Thunder Motors, a local start up that develops electric cars in cooperation with the Japanese automobile giant Nissan Motors. Wangchuk has ambitious plans. “Everything you want to do, it’s possible right now in Bhutan,” he says. His prime objective is to produce ecologically sound cars for his own country.

Not leaving out ecological considerations

In five years’ time, 20% of automobiles on Bhutan’s roads will be e-cars, the entrepreneur says. But that is not the end, “Our market is global. We’re thinking of India and also China. I am hoping to become a multibillionaire,” Wangchuk says.

Today, the country has an installed capacity of 1,500 MW, reflecting a mere 5% of the estimated potential capacity of 30,000 MW. It has plans to reach 11,000 MW by 2020.

The Bhutanese economy has begun to see “an unprecedented inflow of capital and labor,” says the free-market Bhutanese think tank QED at the outset of the recent international conference entitled, “The E3 conference. Ideas at the confluence of Energy, Economy and Environment.”

One of the important conclusions at that meeting was that, at this stage, important local players – government, business community and civil society – seem to agree that in spite of all the hype about hydro power, ecological considerations should not be left aside.

Conservatism as a nonpolitical virtue

No question, Bhutan is a conservative environment – in the best sense of the word. The conservatism is in line with the concept of “Gross National Happiness,” (GNH) a kind of state ideology that comprises four pillars: economic development, good governance, cultural preservation and – importantly – protection of the environment.

GNH may be called a unique political planning instrument. In this developing nation, it has prevented irreparable damage to the environment at the cost of economic growth and profit.

“It is our priority that the people of Bhutan benefit from the sale of the electricity,” says Dasho Sonam Tshering, a senior government official. If all goes according to plan, they will not be the sole beneficiaries.

The Indian neighbors with their growing hunger for affordable and reliable energy will also stand to benefit. There is another big beneficiary of this Himalayan win-win-scenario. As Bhutan’s hydroelectric projects are carbon-neutral, world climate will be a winner, too.


Bhutan offers globalized buzz, with the air of a spa.

About the size of Switzerland, Bhutan lies sandwiched between China in the north and India to the south.

As Bhutan’s hydroelectric projects are carbon-neutral, world climate will be a winner too.

In 2006, Bhutan’s fourth king relinquished absolute power and introduced constitutional monarchy.

Elections took place in 2008 and 2013. The second ended with a victory of the main opposition party.