It was Adam Smith in Wealth of Nations that said, "The price of monopoly is upon every occasion the highest which can be got. The natural price, or the price of free competition, on the contrary, is the lowest which can be taken, not upon every occasion indeed, but for any considerable time altogether.”
The price of monopoly in Bhutan was the highest during the time when it can be got. For a long time, a product monopolized by the masses, sought and was awarded the highest. Bhutan has witnessed over the last 40 years modest beginning of small family run general shop and domestic kitchens functioning as eateries. Due to its difficult terrain and the sporadic import of necessary or luxury goods to the country, shopkeepers took to their own discretion to set the value on items, thus monopolizing specific locality. There was no regulation of price, till the mid-1990s. The uncertainty of product availability, coupled with the sole ownership/provider in the market fueled consumers to begrudgingly indulge the providers.
When the market is monopolized, complacency and inertia are rampant; why possibly spend money to better products or services when there is already such a high demand? So a free market must exist to bring about competition, which because of market law will demand a showcase of ingenuity and creativity for survival.
It cannot be truer for Bhutan; though the whole process of divestment and commitment to foster private sector growth began during the 6th Five Year Plan it has taken the Bhutanese private sector a long time to establish itself as an equal partner in the economic development.
Earlier, the Royal Government of Bhutan played a leading role in developing the modern sector, due to the lack of capital and private sector capacity. Most of the initiatives towards development in tourism, manufacturing, mining, etc. were under public expenditure. Further, social services like education, health, etc. were provided by the government.
From 6th FYP onwards, a planned program of divestment and involvement of private sector partners began. To encourage divestment, a legal and suitable institutional framework was developed for privatization with the Companies Act of Kingdom of Bhutan, 1989, which led to the privatization of Gedu Wood Manufacturing Corporation, and corporatization of Druk Air, etc.
The commitment of the Bhutanese government towards fostering private sector growth with planned strategies of tax holidays, subsidization of goods & services, etc. has led to private partnership or ownership in most sectors. Slowly, but surely sectors like tourism, transport, wood industries were opened and eventually privatized. The business environment in these sectors are cut-throat and incredibly competent. There is a conscious effort to better products and services to capture the largest slice of the market.
With a more suitable legal framework for competition in the country, the economic environment has seen a marked as well as positive change of attitude towards consumers. With more players competing for a small market, the level playing field is riddled with obstacles and challenges.
Public sector involvement in various enterprises still exists, for strategic significance, but priorities were set by the government for stage wise privatization. The Bhutanese government has limited its role to few enterprises where there is no adequate private sector capacity. Now, free competition is more readily encouraged, considering there are some big private sector players. As the market opens up, competition is bound to happen; which is good, since it facilitates economic growth.
When the banking sector in Bhutan opened up to include Foreign Direct Investment (FDI), the existing local banks scrambled to better their services and grabbed new age global innovations to entice the public. The Druk Punjab National Bank with its expansive network of banks all across India provided its customers a better ATM service, which allowed customers better access to cash– this was an instant hit among Bhutanese travelers and parents of students studying in India. Soon enough, Bank of Bhutan introduced MasterCard and BOB-Axis Bank Prepaid card for the Bhutanese public. With this, there is a huge array of services like internet banking, SMS banking, credit card and ATM facilities, competent interest rates, etc. for the public to choose from.
In 2007, the launching of Bhutan Times caused a wave of revivalism within Kuensel Corporation. There was frantic implementation of new marketing strategies within a short period of time; Kuensel’s decisions to print bi-weekly, daily, and providing e-newspaper are but trends swayed by fierce competition with the 6 odd newspaper firms now in the country. Gone are the days when an announcement would suffice for advertisement; TV and radio ads are becoming prolific.
Bhutan Broadcasting Service Corporation as the only national TV channel in the country also faces competition from Multi Service Operators (MSOs) like Norling Cable Operators and Etho Metho Cable Operators. Keeping aside the fact that these MSOs function more as a music TV channel with a perennial line up of amateur video for popular songs (in several languages), and though not licensed under the BICMA Act 2006 to broadcast information, they are still used by private enterprises for advertisements of their businesses.
Bhutan Telecom as the only mobile service in the country has over 145,000 subscribers irrespective of the service charges. As the only mobile service provider BMobile monopolized the Bhutanese market for over 5 years; there were changes in tariff rates, as and when it felt was time, but never much a dash from survival. The dash came with the advent of a new mobile service provider, TashiCell in early 2008. Tariff rates dropped drastically as well as new promotional schemes were introduced by BMobile. It is interesting to note here that earlier subscribers to the BMobile’s prepaid service had to recharge their vouchers at zero balance. However, it was a pleasant surprise after the launch of TashiCell, BMobile subscribers could opt to utilize credit talk time till Nu. -15, which was deducted from the next renewal, but gave callers flexibility. BMobile’s concern for obvious reasons laid in retention of old as well as attracting new users.
Bhutan Telecom also provided the first ever internet connectivity, which to begin with was 50 kbps. As more players like Druk InfoComm Pvt. Ltd. and Samden Tech. Pvt. Ltd. joined the rat race, rates dropped and services became better overnight. Subscribers could begin to demand best service for best price. Now the platter offers broadband, wireless sim, 3G, etc. for the lowest cost possible.
As more rival companies join the market, the existing firms begins to realize that there is no pot of gold, but a tremendous amount of hard work to retain the market, and a tastier slice of pie. As one by one the price of monopoly on every commodity and service are knocked off by competition, we see the Bhutanese private sector expand with more choices for the consumers. The size of the market might not grow exponentially, but the opportunity to be get from a vibrant private sector is recognized.
However, there will always be bone of/for contention between the government and private sector, mostly in their priorities of national interest and minting money. There are major steps taken to ensure public-private partnership, so that it enables both parties to do what they can do best in achieving a common goal of more opportunities in employment generation, revenue creation and increasing tax base in the country.
But as private sector develops, the government will have to ensure that the Bhutanese economy will be backed by tangible things and needs to be more economists. The liberalization of capitalism meant the economies were not backed by tangible things but run on speculation and credit. The recent trend hitting Europe is just that.
The Bhutanese private sector accounts for only a small percent of the GDP. Even as the highest sector for employment in the country, the environment is marred by irregularities of enforcement of regulations and lack of transparency. If the private sector needs to grow, the country needs to see a more efficient and competitive financial sector for mobilizing funds and facilitating long term micro, small & medium enterprise growth, as well as a legal framework for public-private partnership for strategic sectors.
Steps are always undertaken by the government to ensure that the private sector does not unhinge. In light that the public has more accessibility to goods and services, for example, the recent ban by the Drugs Regulatory Authority on Pharmacies from bringing un-registered drugs proved highly efficient, and has positive social ramifications. The same goes for psychotropic drugs and cigarettes.
We as Bhutanese have come a long way with our private sector. Gone are the days when a shopkeeper would almost refuse to display items for a possible customer if prior indication of commitment to purchase was not given. Every time we went out shopping, comparisons were invariably drawn between shopkeepers in India and Bhutan. We would draw the nearest comparison across the border from Phuentsholing; Jaigaon as a shopping destination was popular, as the shopkeepers treated the customers like royalty, with ready refreshments and sweet talk.
Circa 2011- Now take a walk around town and observe; our shopkeepers, restaurateurs, and boutiques owners’ erstwhile stony expressions are replaced by smiles and polite inquiry. Though the smile is towards the purse, the power lies with you.
* Article for DRUKPA magazine