COUNTRY BACKGROUND - Gross National Happiness Commission

Manufacturing and Trade
18.41 Replacement of quantitative restrictions by tariffs will be considered by the government. This policy change
would bring additional revenues to the government that might otherwise go to the import licence holders or traders.
Third country imported goods would then become available to anyone prepared to pay the tariffs and would reflect
private sector priorities. Tariff exemptions, e.g. for government approved projects, will be gradually abolished. The
preferential treatment in terms of tariff rates e.g. for importing cars for civil servants, will also be gradually phased
out. While replacing the quantitative import restriction system by tariffs, tariffs will be fixed a rate high enough to
prevent re-export to India.
18.42 The sales tax structure on goods from India will be simplified. At present, the sales tax rates vary between
zero and 40 per cent. This differential sales tax structure could lead to smuggling of goods in the higher tax bracket
and thus loss of revenue to the government. In order to reduce the incentive for smuggling and evasion of sales tax
of the goods in higher sales tax bracket, the number of sales tax will be reduced to two or three different rates.
Incentives for regionally balanced growthIncentives for regionally balanced growth
18.43 To promote more regionally balanced growth in manufacturing and trading sector, incentive packages will
be provided for industries to be established in less developed areas. For the purpose of providing these incentives,
dzongkhags have been categorised into first, second and third priority dzongkhags according to their stage of
industrial development. Industries established in first priority dzongkhags will be provided with 20% of project
costs. Second and third priority dzongkhags will be given 10% and 5% of the project costs respectively. In
addition, industries which are in the first priority dzongkhags but are not located the industrial estates will be
provided with 20% of the project cost as a capital grant.
18.44 Other kinds of assistance will be provided to entrepreneurs at crucial stages of business development.
Entrepreneurs will receive assistance to identify projects, prepare project reports and select technology in the preinvestment
stage of projects. After the viability of the project is established, the entrepreneurs will be assisted in the
implementation phase to develop infrastructure if the project is outside the proposed and existing industrial estates.
18.45 In the operational phase, national employees will be given skills development training and advisory services
to industries in operation and management. The support will be further extended to marketing of products by way
of assistance in market and product identification, trade fairs and exhibition. However, the present system of price
support will be gradually phased out.
IV. Manufacturing and Trade Development Programmes for the 7FYPIV. Manufacturing
and Trade Development Programmes for the 7FYP
Dungsum Cement ProjectDungsum Cement Project
18.46 The Dungsum Cement Project will involve the establishment of a 1,500 TPD Dry Cement Plant with
precalcinator. The Plant will have the electrostatic precipitator and dust collectors to control pollution at a stipulated
level. The project is estimated to cost Nu 1500 m. Out of the total cost, the foreign exchange requirement is about
US $ 13 m. This plant will require about 100,000 Mts of coal which can be met fully by the coal deposits in
Bhutan. The gypsum requirement is about 25,000 MTs per year which will be met from Khotakpa Gypsum Mines.
Power will be provided eventually from the proposed 45 MW Kurichu Hydro Project. Otherwise, it will be drawn
from through high tension line from Bongaigoan, India. A total manpower requirement in both the mine and the
plant is estimated at 542. The internal rate of return is estimated between 13.2% and 16.1% depending on the
assumptions on the level of non levy sales.
TourismTourism
18.47 Since the privatisation of Bhutan Tourism Corporation in late 1991, several travel agencies have become
involved in tour operations. Policy guidelines and regulations on tourism have been developed by the Board of
Tourism. The Board has decided to allow up to 4,000 tourists a year during the 7FYP. This increased inflow of
tourist will be possible with the expansion of tourist infrastructure and better marketing.
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