Bhutan's foreign direct investment (FDI) landscape showed significant growth in 2024, with the Department of Industry approving 17 new projects worth Nu. 15,962.87 million, according to the annual FDI report released by the Invest Bhutan Division. This brings the total number of approved FDI projects in the country to 121, marking a 12% increase from 108 projects in 2023.
Service Sector Dominates New Investments
The service sector continued to dominate Bhutan's FDI landscape, accounting for 65.2% of all projects, though this represents a slight 2% decline compared to 2023. Of the 17 newly approved projects, 11 were in the service sector while 6 were in manufacturing.
"The hotel sector continues to attract the highest FDI, receiving 34.7% of the total, which corresponds to 42 projects," states the report. This is followed by the IT/ITES sector at 23.14% (28 projects). While the hotel sector's share saw a marginal decline from 34.9% in 2023, the IT/ITES sector experienced a slight increase from 21.7% in 2023.
Capital Inflows Show Strong Growth
Bhutan received capital inflows worth Nu. 6,445.57 million in 2023, up from Nu. 5,868.57 million in 2022. Inflows in convertible currency reached US$ 4.6 million, more than triple the US$ 1.39 million recorded in 2022. Similarly, inflows in Indian Rupee rose dramatically to INR 1,470.79 million from INR 262.778 million in 2022.
The total value of all FDI projects in Bhutan stands at Nu. 60.841 billion as of 2024, with approximately 80.33% falling within priority sectors.
Asian Investors Lead the Way
Asian investors account for 58.3% of all FDI projects in Bhutan, followed by America (23.5%) and Europe (12.9%). Within Asia, India remains the dominant source of investment with a 55% share, followed by Singapore (15%) and Thailand (11%).
Employment Generation and Local Impact
FDI projects have created significant employment opportunities for Bhutanese citizens. The report indicates that 4,366 Bhutanese were directly employed by FDI projects as of December 2024, with 56% (2,460) being male and 44% (1,906) female.
The service sector employed 70% of the total workforce, while manufacturing accounted for 30%. Hotel services generated the most jobs for Bhutanese citizens, with a 34.6% share of total employment, followed by financial services (19.8%), other manufacturing (16.1%), IT/ITES (14.4%), and agro-based production (13.8%).
An interesting finding reveals that for every expatriate employed in FDI companies, there are 16 Bhutanese employees. The financial sector boasts the highest ratio with 421 Bhutanese employees for every expatriate, followed by IT/ITES (35:1) and the hotel sector (30:1). The manufacturing sector has a lower ratio of 6 Bhutanese employees per expatriate.
Tax Contributions Rise
FDI companies contributed Nu. 2,078.47 million in taxes for the income year 2023, representing a substantial 37.38% increase from Nu. 1,512.97 million in 2022. These contributions include salary tax, customs duties, corporate tax, and other taxes.
Global Context and Future Outlook
The report references the UNCTAD World Investment Report 2024, noting that global FDI flows fell 2% to $1.3 trillion in 2023 due to trade tensions and a slowing global economy. While FDI flows to developing countries dropped 7% to $867 billion, Bhutan has managed to buck this trend with its increased project approvals and capital inflows.
The report suggests that modest growth remains possible for 2024, citing easing financial conditions and investment facilitation efforts in both national policies and international agreements.
Most FDI projects in Bhutan are concentrated in Thimphu, Paro, and Chukha Dzongkhags, indicating continued focus on these economically significant regions.
