The Cabinet is yet to approve the revised FDI policy
Dorji Choden
The government’s ambitious target to attract Nu 500 billion Foreign Direct Investment (FDI) over the next five years seems a long way off if FDI inflow in 2024 is any indication.
Only 17 projects worth Nu 15.96 billion were approved in 2024, according to the latest FDI Annual Report. This is, however, a 110 percent increase compared to the previous year, when 12 projects worth Nu 7.6 billion were approved.
This brings the total number of FDI projects in Bhutan to 121, with a combined value of Nu 60.84 billion.
The majority of foreign investments are in the service sector, which accounts for 65.2 percent of the total FDI, followed by the manufacturing sector.
Of the 17 approved projects last year, 11 fall under service sector category. The hotel industry remains the top FDI recipient, contributing 34.7 percent of the total with 42 projects. However, this marks a slight dip from 34.9 percent in 2023.
The IT/Information Technology Enabled Services sector also showed growth with 28 projects, increasing its share from 21.7 percent in 2023 to 23.14 percent in 2024.
Other sectors such as agro, power-intensive projects, financial services, building materials pharmaceutical, technical and vocational education and training (TVET), gases and hydropower related project, accounts for a combined 51 projects in total.
Asian countries dominate FDI inflows, contributing 58 percent of the total investments. India remains the largest investor, holding a 55 percent share, followed by Singapore at 15 percent and Thailand at 11 percent. Investors from the Americas and Europe account for 23.5 percent and 12.9 percent, respectively.
Asian countries lead the way in investment, contributing 58 percent of the total FDI. India remains the largest investor, holding a 55 percent share, followed by Singapore with 15 percent and Thailand with 11 percent. Investors from America and Europe account for 23.5 percent and 12.9 percent of the total FDI, respectively.
The capital inflows rose to Nu 6.44 billion in 2023, up from Nu 5.86 billion in 2022. These investments contributed US$ 4.6 million in convertible currency and INR 1.47 billion, showing an increase from the previous year.
Tax contributions by FDI companies also increased significantly, with a total of Nu 2.1 billion collected in 2023—a 37.38 percent jump from Nu 1.51 billion in 2022. Taxes included corporate tax, salary tax, customs duties, and other levies.
FDI projects created 4,366 jobs for Bhutanese in 2024, comprising 56 percent male and 44 percent female workers.
The hotel sector generated the most jobs, accounting for 34.6 percent of total employment, while the financial and IT/ITES sectors experienced slight declines in job creation.
Most FDI projects are concentrated in Thimphu, Paro, and Chukha Dzongkhags. Four FDI projects were withdrawn in 2024.
A total of 16 projects received FDI Registration Certificates. Seven of these projects—three in manufacturing and four in services—have been approved, while nine others (three in manufacturing and six in services) are at various stages of the approval process.
Draft FDI policy await Cabinet approval
The revised FDI rules, aimed at creating a more investor-friendly environment, introduces major changes in land, labour, equity, foreign currency access, and dividend repatriation.
Local shareholders can capitalise freehold land as equity, while state land is available on a 30-year lease, extendable up to 99 years.
The new FDI rules also offer ‘investor cards’ to foreign investors or their authorised representatives making investments over Nu 20 million.
This card grants a one-year residency approval, which can be extended annually without the sustainable development fee, including provisions for spouses and dependents.
The investor’s spouse can also obtain a work permit and the family can live in Bhutan without separate visas. Investors can hold business guest visas while their ventures are being established.
Venture capital funds, with 100 percent foreign equity, are allowed for impact startups.
The new foreign exchange provisions permit easier access to convertible currency and Indian Rupees. Foreign investors can repatriate profits in their investment currency without restrictions.
The draft FDI rules allow 100 percent foreign equity in agriculture, animal husbandry, and IT sectors. Foreign equity is capped at 74 percent in manufacturing, healthcare, education, and hospitality sectors, with minimum investment requirements ranging from Nu 3 million to Nu 500 million.
Critical sectors such as news media, retail, and lower-rated hotels are restricted from foreign ownership.