Johan Stevens Ramrez A

Case study 2

Kingdom of Bhutan
The land of the Thunder Dragon

1. Background
1.1 Location
The kingdom of Bhutan is located in
Southeast Asia at the eastern end of the
Himalayas and bordered by The
Peoples Republic of China to the north
and by The Republic of India to the
south.
Its also near to Nepal and Bangladesh
but separated by some regions of India
and it's also important to notice that the
country is landlocked which difficult the
income to the country and the
development of economy.
For the fact of being in the Himalayas, the geography is highland and unstabilised, what increase
the risk of natural disasters and earthquakes
Official language: Dzongkha
Capital: Thimphu
Population: 742,737 (2012, Estimate)
Currency: Bhutanese ngultrum but Rupees are also accepted
Official religion: Vajrayana Buddhism

1.2 Political system

The power in Bhutan was wielded by a hereditary monarchy since 1907. In 2008 as a part of its
political transformation, the country became into a constitutional monarchy with a two-party
parliamentary democracy.

Political participation: in Bhutan before it was allowed only one vote per household, which in
practice always left in the hands of man's decision to go to the polls. However the political
transformation seeks to ensure the participation of citizens in accordance with international
standards for democratic elections.

Political Ideologies: In this country both pro monarchist parties as opposition represented by
the Peoples Democratic Party support the monarchy of Dragon King but its political ideology is
nationalist due to the widely accepted idea of nation-state and the importance of nation over
everything

1.3 How to do business in Bhutan

Bhutan was a closed country to the world until 1970s decade but it always has kept a very
important economic relation with India. Its economy is agriculture based and is very traditional.
Doing business in Bhutan is difficult and entrepreneurs have to face some problems like the
distance from markets, the countrys landlocked location, difficulty in obtaining credit, a
shortage of rupees (used as an alternate currency) inadequate for investment protection
regulations and the high costs of trading across borders.
The country has only one international airport which started its commercial service in 2012 and
its road infrastructure is poor and has several problems in winter time and with earthquakes.
To do business in Bhutan you have to keep in mind next steps:

In formal occasions Bhutanese have to wear the national dress (The Gho for men and
Kira for women)
Shaking hands is not a Bhutanese tradition nevertheless a formal greeting is to bow with
hands open and outstretched and the palms up.
When you receive a present from someone, other than a superior, you are expected to
reciprocate by giving a present in return.
When receiving a gift, the Bhutanese will always refuse to take the gift for at least three
times and they expect you do the same. The tone of the pretended refusal is
important it must not be a loud definite No.

When eating in groups, on all occasions, wait for everyone to be served before starting
to eat, even in restaurants. When invited as a guest, the host will politely ask to you to
start eating once everyone is served.
When you invite one Bhutanese to eat, make sure to ask him to start eating.

2. The Five Political Risks.

The political risks in short terms in Bhutan are

stabilized because guaranties to the political
participation and association. Also the
opposition in Bhutan is not strong. However in
medium/long term there are many risks
because the democracy in the country is just
starting and could increase some problems with
the time.
The commercial risk in Bhutan is medium
because of its strong dependence to the
commerce with India (almost 75% of the
production in Bhutan is sell to India) but the
country is trying to open to other countries
with commercial treatments and legacy
regulations as part of a strategy to improve the
economy and commercial risk.
In Bhutan the risk of war is unlikely because there are no internal conflicts neither terrorist
group, and the social protest is not very well seeing. Its not very common a situation like an
expropriation, nationalization or confiscation in this country because the government is trying
to protect the investors to improve the economy. On the other hand the transfer risk is high
because exports transactions depends a lot of the commerce with India.

3. Expropriation
Its not very common a situation like an expropriation, nationalization or confiscation in this
country because the government is trying to protect the investors to improve the economy.

4. Legal system
The constitution clearly sets out a separation of powers. The executive, legislature and judiciary
are formally independent of each other. The monarchy still exercises formal authority as part of
the parliament but also wields considerable informal power. Prior to democratization, the
judiciary was frequently viewed as an extension of the government machinery and/or a tool to
support the interests of the powerful.
Also there has been investment in upgrading the skills and knowledge of judicial officials
through foreign technical assistance and with the establishment of the National Legal Institute.
This organization arranges continuing judicial and legal education, including outreach programs
to schools and supporting television programs. The Supreme Court has so far managed to act as
guardian and interpreter of the constitution, and has developed credibility both domestically
and internationally. The penetration of modern legal institutions into the affairs of rural
communities remains in some cases minimal.

5. Concepts

Standardization: in Bhutan in fostered by the Ministry of Economic Planning and

Development through the Construction Planning and Research Unit (CPRU). Also Bhutan
is attached to the United Nations (UN) since 21th September 1971.
Intellectual Property: The Ministry of Economic affairs has a division in charge of the
intellectual property which tries to protect the innovation and creation of citizens and
companies according to international standards.
Product safety and liability: In Bhutan the product safety and liability is guaranteed by
means of the environmental policy which tries to protect the natural and social
environment according to the constitution that declares that a fundamental duty of
every citizen to contribute to protection of the natural environment, conservation of the
rich biodiversity of Bhutan and prevention of all forms of economic degradation. The
importance of the environment in Bhutan is also emphasized in features strongly in the
five-year development plans.
Taxation: Every company must register for corporate income tax. A Business
Identification Code (BIC) is then assigned to the company. This BIC number must be
presented to participate in public tenders and works.
Antitrust regulation: There are no laws on anti competitive practices, monopolies and
cartels, but a Consumer Protection Act was passed in 2012. This has given a slight boost
to competition in the economy as government price regulation to some degree helps to
prevent the development of monopolies.

6. Corruption Perception Index

Bhutan stood at 33rd position as the least corrupted countries among some 176 countries
taking Bhutan on the top position among the SAARC countries. The incidence of corruption is
lower than in neighboring South Asian countries. Several factors explain this. First, smaller
governments such as that of Bhutan are easier to monitor and audit. Second, there has been a
concerted effort by the government over several years to raise the standards of accounting and
auditing to international levels. Third, the Accounting and Auditing Standards Board of Bhutan
was introduced in 2010, with the aim of assisting in raising Bhutanese standards in these
activities. Fourth, the idea of service to the state and king is ingrained in the civil service and
acts to prevent corruption. Finally, the Anti-Corruption Commission (ACC) established in 2006
has been a notable force in promoting the anti-corruption message and in investigating and
prosecuting corrupt officials.

E-sources
http://www.20minutos.es/noticia/391615/0/voto/femenino/sufragio/
http://www.bbc.com/news/world-south-asia-12480707
http://en.wikipedia.org/wiki/Bhutan
http://www.doingbusiness.org/data/exploreeconomies/bhutan/starting-a-business
http://pdxmim.com/2012/10/12/tips-for-doing-business-in-bhutan/
http://seangallaghersite.com/yahoo_site_admin/assets/docs/Bhutan_Presentation1.38205406.
pdf
http://www.bti-project.org/fileadmin/Inhalte/reports/2014/pdf/BTI%202014%20Bhutan.pdf
http://www.delcredereducroire.be/en/countryrisks/#focusCountry=BT&focusContinent=&filter=StRating&min=0&max=7&tab=0?OpenDocum
ent