Role Of Public And Private Sector In Bhutan Economics Essay

Every monograph has a brief general introduction of a country. It covers the introduction, roles, history, indicators, contribution towards GDP (GNI), employment contribution, and difficulties with few data and graph. This information gives a fair knowledge of country and helps draw certain conclusion regarding role of private and public sector plays in economic development of modern Bhutan. Such information is very much necessary as country being in a stage of developing. That ultimately needs to have clear idea of role played by private and public sector. Individual need to have clear knowledge about the contribution made by this two sector in economic development.

On introduction part it gives the simple definition of both the sectors. Roles of this two sector talk on redistribution of income which provide equity and justice to the people and the employment opportunities which reduces the unemployment problem. Coming to history it mention Bhutan’s harsh land that make difficult for the development, agriculture being predominate sector and followed by hydro power project. And the assistance from developed nations. The concern and good idea raise by Fourth Druk Gyalpo can also be seen in history part.

GDP per capita, Life expectancy, Literacy rate, Measures of poverty, Disease Indicators are been explain under indicators of economic development in Bhutan. Contribution towards GDP and employment contribution by both the sector are given through data analysis with graph. On the basis of geographical feature that make difficult for development, lack of skilled labor, country’s financial system being undeveloped were some of the points under difficulties in development of private and public sector. Finally conclude with brief recommendation and few support along with example about public and private sector.

The above mention is some of the contents mention in the assignment.

Table of Contents

Sl.

Contents

Page No.

I

ExecutiveSummary……………………………………………….

–

II

Introduction……………………………………………………….

1

III

Role of Public Sector in Bhutan…………………………………..

Redistributing Income

Employment Opportunities

2

IV

Role of Private Sector in Bhutan………………………………

2

V

Brief History of Private and Public Sector Development…

3

VI

Indicators of Economic Development of Bhutan…………..

GDP Per Capita

Life Expectancy

Literacy Rates

Measures of Poverty

Disease Indicators

4-5

VII

Contribution towards GDP (GNI)………………………………

5-8

VIII

Employment contribution from both the sectors………….

9-12

IX

Difficulties in Development of Private and Public Sector in Bhutan…………………………………………………………..

12

X

Conclusion………………………………………………………..

13

XI References……………………………………………………….. 14

Introduction

Private sector is that part of economy that is owned by individual and operated for their personal benefits. (Wilson & Clark, 1997).The private sector consists of business activity that is owned, financed and run by private individuals. This business can be small firms owned by just anyone, or large global business that work around the world. In the case of large business, there might be many thousands of owners involved. Usually private sectors are not controlled by the government and their main objective is to make profit.

Whereas, Public sector is the part of an economy that is owned by the whole society and operates for its benefit. (Wilson & Clark, 1997).The public sector is the part of the economy where goods and services are provided by the government or local authorities. These goods and services are provided free and in other cases consumers have to pay a price. Companies and corporations that are government run are part of what is known as the public sector. Example: government real estate activities in the public sector include public buildings (schools, libraries, courthouse, etc.), public housing, and subsidize rent.

However, this assignment will briefly focus on the vital role played by private and public sector in economic development of modern Bhutan.

Role of the Public Sector in Bhutan

Redistributing Income

Role of the public sector could be redistributing of income, however, in Bhutan there are many individuals who are not able to earn enough income to live up to their satisfaction. By redistributing income, government is trying to provide equity and justice among people and it try to make many other opportunities to earn equally. Actually, redistributing of income it never obtain everybody an equal income in the country because it keep all the income within country from going only to few people. Redistributing of income provide public assistance to low income groups and opening many opportunities available for their survival and this help in alleviating poverty in the country.

Employment opportunities

Public sector has created more than enough jobs to tackle the unemployment problem in the country. Public sector has also contributed a lot towards the improvement of working and living conditions of workers by serving as a model employer.

Role of Private Sector in the country

Private sector becomes a more active partner in the nation’s future development. Measures are introduced that increase the attractiveness of the private sector especially to the youth as a place of work. Opportunities must be created for small businesses to flourish and promote arrangement with the aim of developing inter- industry linkage.

Brief history of private and public sector development

The economy, one of the world’s smallest and least developed, is based on hydroelectricity, tourism, agriculture, and forestry. (“History of private and public sector”, n.d.). Harsh land makes it difficult to develop roads and other infrastructure. Despite this limit, hydroelectricity and construction continue to be the two major industries of growth for the country. Whereas Bhutan was once totally dependent on India not only for its development assistance but also for its entire government revenue. Since the 1960s, Bhutan, through the Colombo plan, has received aid from several countries in the form of farm machinery, motor vehicles, school books and laboratory equipment, livestock, seeds, dairy equipment, medicine, and irrigation systems. (“Back to Bhutan economy”, n.d.). Ever since, India is Bhutan’s largest trade and development partner, providing significant amounts of foreign aid and investment.

The Fourth Druk Gyalpo’s long-term concern since ascension to the throne was for private sector development. His Majesty believed socio-economic development should not be left to the initiatives and activities of the Royal Government alone. His Majesty issued royal directives to create partnership between the government and the private sector in sharing the responsibilities for provision of employment.

The Bhutan Chamber of commerce and industry (BCCI) was established in May 1988 as a top institution for private sector policy formulation and management. (Kezang & Phuntsho, 2009). This organization was created with support from government to promote trade and commerce, expand revenue generation bases, develop private sector and establish industries.

Indicators of economic development of Bhutan

Some of the indicators are as follows:

GDP per capita

As a measure of development this seems to be the most important indicator. However, if people want to be in a position to buy commodities and enjoy high standards of health and education then they will need the income to match. Increasing GDP per capita may bring with its costs as well as benefits, particularly if it is brought about in a non-sustainable way. The level of negative externalities needs to be considered.

Life Expectancy

Life expectancy at birth is defined as the number of years a newly born child would expect to live should prevailing mortality patterns stay the same throughout its life. (“Life Expectancy of Bhutan”, n.d.). A primary goal for human development is for the people to live longer, more productive and more fulfilling lives.

Life expectancy helps measure the general health status and quality of life of a population, since it indirectly reflects certain aspects of people’s well being. Significant improvements of life expectancy around the world, including in Bhutan, have always been linked to sharp reductions in child mortality.

However, as recently as 1960, life expectancy in Bhutan was estimated at 37 years. (“Life Expectancy of Bhutan”, n.d.) This was not surprising in view of the complete absence of modern health service in the country and very high child mortality patterns.

Literacy Rates

Literacy is a basic condition for education and constitutes the first step toward learning and building an individual’s education. Education is essential to expanding life opportunities and for enlarging people’s choices to live dignified lives. In this sense, education is truly regarded as the royal road toward the empowerment of people. Moreover, education contributes to generating sustainable livelihoods and employment opportunities. More importantly, because low educational attainment is one of the root causes of human and income poverty, promoting education/ opportunities for all constitutes an obvious long-term solution.

Measures of Poverty

From the human development view, poverty is understood to be a condition in which opportunities and choices most bases to human development are deny. (UNDP, 1997). Freedom from poverty is necessary for human development, since poverty denies people the opportunity to enjoy long, healthy and dignified lives and basically restricts their life choices. Poverty is viewed from a multi-dimensional view and includes both income and human poverty aspects.

Disease Indicators

diseases is common in many developing countries due to low levels of health care, expensive drugs, contaminated water supplies, and poor health education. Poor health with diseases severely affected productivity of the family and to the economy of the country. Therefore, to increase the efficiency and productivity of labor, the health of the people must be progressively improved.

Contribution towards GDP (GNI)

The following are the share of three sectors in Bhutanese economic development from 2000 t0 2009:

Table 1: Shows the Top Ten Private Sectors Contributing to GDP.

Rank

Private Business

2008-2009

% of total revenue to GDP

1

Jigme Namgyel Company Ltd

45.535

0.3

2

SD Eastern Bhutan Coal Company

30.258

0.2

3

Druk Satair Corporation Ltd

26.484

0.2

4

Sherja Equipment Hiring Unit

18.920

0.1

5

Lhaki Cement

14.200

0.1

6

Bhutan Carbide and Chemical Ltd

11.321

0.1

7

Tashi Commerical Corporation Ltd

9.928

0.1

8

Jigme Industries Pvt. Ltd

8.750

0.1

9

Hotel Druk

6.188

0.0

10

Bhutan Hyundai

5.208

0.3

Total

176.592

0.3

Source: National Account Statistics

Among the top ten lists Jigme Namgyel Company Ltd rank first with 0.3% of revenue contributing to GDP followed by Eastern Bhutan Coal Company with 0.2% and Druk Satair Corporation Ltd with 0.2. Though there are lots of private owners but among them the above mention are the highest revenue contributor to GDP.

Table 2: Capital Formation of Private and Government Sector, 2010.

year

Capital formation of private

Capital formation of government

Growth rate of Government Sector

Growth Rate of Private Sector

 

2000

6785.5

3080.14

0.0

0.0

 

2001

9802

3564.4

15.7

44.5

 

2002

11709.2

4095.7

14.9

19.5

 

2003

14258.2

2647.9

-35.3

21.8

 

2004

16842.3

3236

22.2

18.1

 

2005

14904.6

3669.7

13.4

-11.5

 

2006

13524.1

5193

41.5

-9.3

 

2007

13235.4

6302.4

21.4

-2.1

 

2008

14435.3

6729.2

6.8

9.1

 

2009

18263

7038.2

4.6

26.5

 

Figure 1.

Source: National Statistical Bureau

The above table gives an idea of the range of Government and Private sector involvement in various enterprises and their capital formation. They vary widely in size, in strategic significance, and in their formal status. Table also indicates a number of other Ministers and Departments also have responsibilities for public enterprises within their sector.

As compare to government there is greater capital formation in private sector till 2009 from 2000. This shows that more of the private sectors are encouraged by government. By 2009 capital formation reached up to 18263 from 6785.5 in 2000 which is triple in number. This too indicates that more and more private entrepreneurs are coming up and as a result, economic development and ultimately employment opportunity taking place. However, at the same time capital formation of government sector too fluctuate. Government borrows huge debt and use for the purpose of capital formation likewise in Hydro Power Project. However, in the graph rate of growth in government falls below x-axis which is of -35.3 in 2003. This could have occurred because of huge public expenditure in development activities and war expenditure in 2003.

Employment contribution from both the sector

Table 3: Existing number of employees by Major Occupation and their Status in Private and Corporate Sector, 2008

Sl.

Major Occupation

Regular

Casual

Contract

Total

1

Legislator, Sr. Officials & Managers

7,992

86

38

8,116

2

Professionals

1,984

25

49

2,058

3

Technicians & Associate Professionals

2,690

116

57

2,863

4

Clerks

1,899

30

5

1,934

5

Service Workers & Shop and Market Sales Workers

3,875

147

74

4,096

6

Skilled Agriculture & Fishery Workers

5

5

7

Craft & Related Trade Workers

2,127

109

136

2,372

8

Plant & Machine Operators & Assemblers

2,429

153

42

2,624

9

Elementary Occupation

3,562

1,835

294

5,691

10

Total

26,563

2,501

695

29,759

Source: Establishment Census, 2008

The above table outlines the existing number of employees in the private and corporate sector establishments. Most employees are in the Elementary Occupations and then followed by legislators and senior Officials and Managers. A very least number of employees can be seen in the Skilled Agricultural and Fishery Workers since there are less number of formally established Agricultural industries.

Table 4: total no of people employed under different sector

Sector

2002-3

2003-4

2004-5

2005-6

2006-7

Total

Government

1177

1408

1036

278

141

4040

corporation

316

236

113

560

311

1536

Private

96

201

320

1765

1300

3682

NGO”S

6

20

16

13

55

Total

1595

1865

1485

2616

1752

9313

Source: labor Market Information Bulletin, 2008

Figure 2.

The figure above tells about the total number of people employed under different sector. The figure and graph clearly indicates that from the year 2002 till 2005 government sector dominates the employed number. Since during that period private and corporation sector was small and relatively under-developed. More over people at that time had a feeling of secure in government sector rather than joining in private and corporation sector.

But from the year 2005 till 2007 private sector leads the employment rate followed by corporation and government sector. This is because, lots of encouragement from government for the improvement. The reason could be providing good amount of salary. One of the main reasons behind may be due to tremendous increase in size of the population.

Difficulties in development of Private and Public Sector in Bhutan

The challenges face by the private as well as public sectors in Bhutan is the time spent by firms to fulfill with government regulations and associated costs is much higher compared to regional and international averages in country.

Bhutan has a small, new, and relatively under-developed private sector. However, Bhutan has a unique set of challenges with respect to the development of the private and public sector.

Bhutan being landlocked, it’s difficult for the development to take place and even though it happens to take place lots of budget needs to be allotted. There is extremely small domestic market to be challenge among firms. A lack of skilled Bhutanese workers to undertake skilled work is another problem for the sectors.

Bhutan’s financial system is undeveloped and non-competitive. It only offers very basic financial products and at a fairy high cost, and Transportation, particularly in the more remote poses a considerable cost disadvantage. It is slow and regularly disrupted by monsoons and associated landslides.

To make better, the impact of many of these problems will prove difficult. For example, will always remain land locked.

Conclusion

As a citizen, everyone is the part to the owner of public goods and services. However, various goods tried to give place structure for the public sector in economy. Therefore, it mainly helps in generating employment opportunities and even it gain foreign exchange through export. The main objective of the private sector in Bhutan is mainly to increase productivity within Bhutanese society, employment in country. The government acknowledges the private sector as the main engine of future income growth and employment generation.

To conclude there are lots of pros and cons of public and private sector to be encouraged. On one side, there are advantages on development of private sector because it reduces the unemployment rate. Moreover, competition within private sector will rise in the real per capita income of individuals. Higher the private sector comes up more the investment occurs which government can fully utilize in fruitful manner. Even the price can be compromise in private sector. So in this way burden of government is been reduced. On the other hand, there are negative impacts of private sector too. Since private sector aims for profit maximization so directly or indirectly they do malpractices. For example; the construction of hostel in Sherubtse College built by Private Company were damage during earthquake but hostel constructed by government were not affected.

Public sectors are stable and employees do feel secure compare to private sector. There are no ways for malpractices and if incase it happens then no ways to run from Anti corruption Commission. There are many positive contributions from government to every individual. But on the other hand, people of public sector are in active in the field compare to private sector.