COUNTRY BACKGROUND - Gross National Happiness Commission

Privatisation
4
privatised.)
(c) Policy issues surrounding certain enterprises: for example, privatisation of logging activities will
depend on first establishing adequate regulation and monitoring capacity to ensure that logging
complies with environmental safeguards.
6.11 Sale of existing public enterprises is not the only possible form of privatisation. For example, many of the
functions formerly reserved to the Food Corporation of Bhutan have been opened up to the private sector, and FCB
retains only a more limited role concerned with food security and the marketing of controlled foodstuffs. The role
of the State Trading Corporation has been similarly curtailed, and the functions of the Bhutan Government
Transport Service have been almost entirely superseded by private sector services. (Both the State Trading
Corporation of Bhutan and Food Corporation are now directly involved only at the wholesale level; retail outlets
are managed by agents.) In road maintenance and construction, RGOB is fostering the development of private
firms to which work previously undertaken by the Department of Roads may be contracted out. Government
transport facilities have also been contracted out, so that Government officers have to now hire vehicles when
required.
6.12 In addition to the industrial activities identified above, there are other areas where the Royal Government
will consider as potential operations for privatisation. These include the Post Office, some of the operations of the
Telecommunications and Power Departments, and some of the activities of the Ministry of Agriculture. There are
however, a number of public enterprises which are unlikely to be privatised during the period of FYP7, because of
factors already mentioned or because of special institutional circumstances. The most significant examples are:
(a) The Chhukha Corporation which is simply too large in scale to be absorbed by the domestic capital
market for the foreseeable future although the distribution of power in urban areas may be privatised.
(b) The Bank of Bhutan, which is a joint operation between RGOB and the State Bank of India.
(c) Druk Air, which is unlikely to be attractive to private shareholders until its financial returns
considerably improve.
6.13 Privatisation is part of a broader strategy to generate an efficient, dynamic, commercial and industrial sector
in Bhutan. To achieve its full potential, privatisation needs to be complemented by measures to create an enabling,
competitive environment in the private sector. Such measures are described in Chapter 18 on Manufacturing and
Trade.
6.14 During FYP7, RGOB will also take measures to put onto a sounder footing those enterprises which for the
time being remain in the public sector. For each such enterprise:
(a) An appropriate corporate structure and legal identity will be established, if not already in place. Such
enterprises will be expected to run along commercial lines in accordance with the Companies Act of
Kingdom of Bhutan, 1989.
(b) Relevant interests and skills will be represented on the Board of Directors.
(c) General objectives and strategy for the corporation will be agreed between RGOB and the Board, but
RGOB will not attempt to interfere in the day-to-day running of public enterprises.
(d) The Board will be responsible for appointing senior management as laid down in the Companies Act of
Kingdom of Bhutan, 1989.
(e) Government's return from the enterprise will take two forms: dividends on Government equity, and
general taxation, in which publicly owned and private companies will be treated on the same footing.
(f) Enterprises will be expected to make a competitive return on their capital; any subsidies will be
explicitly justified.