Brief April 2004

8/10/2019 Brief April 2004

http://slidepdf.com/reader/full/brief-april-2004 1/7

Bhutan

By Ken Zita

he Kingdom of Bhutan, regarded by some as aShangri La tucked away in the Himalayas, is taking

a measured approach to technological modernity. Since joining the United Nations in 1971, it has sought toengage increasingly with the outside world, but the paceand scope of development change is guided equally by

its tr aditional culture. Telephones were intr oduced onlyin 1963, and television, in 1999. It is the only country in the world to measure its wellbeing byGross National Happiness instead of Gross National Product, an official policy as declared by thereigning king. This unorthodox approach, stemming from the strong current of Buddhist theologyin all aspects of life, is a serious attempt to question the values of unbridled economic progress bymaintaining a balance between tradition and modernization.

Contents

Political and Economic Brief 2 Demography and Economy 3

Telecom Policy Environment 4

Telecom Market Environment 5

T

All telecommunications and Internet services in theKingdom are provided by the state monopoly, BhutanTelecom. It currently operates approximately 26,000 phones, of which half are in the capital of Thinphu. Thefirst mobile phone network was put into service in

November 2003 and is expected to reach 5000 subscribers by year-end 2004. Expenditures on the sector from the state budget have been minimal. Bhutan Telecom’s modestexpansion plans are governed by its own sources of capitaland donor loans.

Acknowledging the difficulty of accommodatinginformation technology into its society – and, in a sense,into developed societies as well – Bhutan’s Foreign MinisterLyonpo Jigmi Thinley has said: “We need to ask how thedramatic changes propelling us into the 21st century willaffect prospects for happiness [and] how information

technology will affect people's happiness." Whatevercourse it chooses, the Information Age has now begun to take hold in Bhutan.

Key Indicators

Kingdom of Bhutan

Population 900,000 -2.25 million

GDP $482 millionGDP real growth* 6.0%GDP per capita $219 - $536PPP $2.7 billion

(2002)PPP per capita $1,300 (2002)Pop.below poverty NALiteracy 54%Phone lines 26,000 (2003)Phone density 1.9 (2003)Mobile phones 2255Mobile density -Sources: CIA World Factbook 2003, U.S.

Department of State and World Bank 2003

____________________Ken Zita is president of Network Dynamics Associates LLC (www.ndaventures.com), a telecom sector managementconsultancy active in 35 countries worldwide. Network Dynamics served as the principle U.S.-appointed policyadvisor to the government of Afghanistan. This paper was adapted from a Briefing Book prepared for the U.S. Tradeand Development Agency conference on South Asia Communications Infrastructure in New Delhi, India in April2004.

Network Dynamics Associates LLC USTDA South Asia Communications Infrastructure Conference www.ndaventures.com New Delhi, India – April 21-23, 2004

http://www.cia.gov/cia/publications/factbook/flags/bt-flag.html











http://www.ndaventures.com/

http://www.ndaventures.com/


8/10/2019 Brief April 2004


Bhutan 2

Political and Economic Brief

The Kingdom of Bhutan began to open to the world only in the 1970s. Beginning with its entryinto the United Nations in 1971, Bhutan is continuing with a policy of cautious modernization

and developing its remote, rural and largely poor country at a measured pace. Its ancientBuddhist culture, breathtaking scenery and diverse wildlife have made it a desirable destinationfor tourism which, along with hydroelectricity, is a major source of income.

The country's political history is inseparable from its Buddhist religious history. TibetanBuddhism was introduced in the 9th century and has been the defining force of politics andculture. Traditionally a decentralized Buddhist theocracy and, since 1907, a monarchy, Bhutan isevolving into a constitutional monarchy with a representative government. Bhutan has noconstitution, but a drafting commission proposed a draft for a parliamentary democracy andconstitutional monarchy in 2003. The monarchy has been absolute and hereditary but beganceding powers in 1998. The National Assembly now has the authority to remove the king with atwo-thirds vote.

King Jigme Singye Wangchuck has been monarch since July 1972. He ascended the throne in1972 at age 16 and has delivered on his promise to continue his father’s policy of limited andcautious modernization while preserving and protecting Bhutan’s unique culture. His policieshave emphasized modern education, decentralization of governance, the development ofhydroelectricity and tourism and improvements in rural developments. Notably, the king hasestablished an overarching development philosophy of "Gross National Happiness." It recognizesthat there are many dimensions to cultural and social development and that economic goals aloneare not a complete measure of success.

The king nominates the Council of Ministers ( Lhengye Shungtsog) which must be approved bythe National Assembly. Cabinet members serve fixed, five-year terms and rotate the effective

role of prime minister between members every year. The king also appoints members of a RoyalAdvisory Council ( Lodoi Tsokde). Lyonpo Jigme Y. Thinley has headed the government sinceAugust 2003 as Chairman of the Council of Ministers.

In 2002, election laws changed to effect national suffrage of one vote per citizen and secret ballotfor a representative to the National Assembly (Tshongdu) when previously, only one vote perfamily was allowed. The National Assembly is composed of about 150 members, includingappointed monks and senior government representatives. They in turn elect the Council ofMinisters. Prior to 2003, the cabinet had six members rotating the position of prime minister eachyear. In 2003, the National Assembly elected four additional ministers and also selected a primeminister to serve for the next 3 years.

Bhutan has limited elections but is in the process of expanding elected representation to the National Assembly. There is .no written constitution. The legal system is based on Indian lawand English common law and is evolving further. Bhutan also has no legal parties but strong political pressure groups include the Buddhist clergy. A limited amount of external political pressure is exerted by some ethnic Nepalese organizations that have led an antigovernmentcampaign, the Indian merchant community, and the exiled members of the United Front forDemocracy.


8/10/2019 Brief April 2004


Bhutan 3

Approximately 100,000 Bhutanese refugees live in Nepal and reside mostly in seven UNHCRcamps. Nepal and Bhutan, which established diplomatic relations in 1983, had by 2003 held 15sets of talks on the refugee situation but so far no solution has been implemented. In 2003, a joint

Bhutan-Nepal verification team categorized refugees and a repatriation process is expected to begin in 2004.

In regional and foreign relations, India is Bhutan's largest donor and supplies approximately 80%of Bhutan's foreign assistance. Bhutan and China do not have diplomatic relations, although border talks between the two nations have occurred. In 1971 Bhutan became a member of theUnited Nations but does not have diplomatic relations with any of the permanent members of theU.N. Security Council. The United States and Bhutan do not have diplomatic relations, and theUnited States does not give foreign assistance to Bhutan. Informal contact is maintained throughthe U.S. Embassy and the Bhutanese Embassy in New Delhi. Seven European nations(Switzerland, Denmark, Sweden, Norway, the Netherlands, Finland, and Austria) and Japan havediplomatic relations and form the "Friends of Bhutan" group, contributing generously to

Bhutanese development and social programs. Bhutan also has diplomatic relations with SouthKorea, Canada, Australia, Kuwait, Thailand, Bahrain, Bangladesh, the Maldives, Sri Lanka, andPakistan.

Demography and Economy

Bhutan’s population is estimated variously between 900,000 and 2.1 million, the higher figuresupported by the CIA Fact Book. It is about half the size of Indiana, in southern Asia lodgedlargely between China and India but sharing a western Gordian knot of borders lands in close proximity with Nepal, India and Bangladesh. Rugged, mountainous, snowcapped terrain in thenorth is part of the Himalayas, the source of the violent storms that gave the country its name, Drag Yul, which formally translates as Land of the Thunder Dragon. Bhutan controls several keyHimalayan mountain passes. The climate varies from tropical in the southern plains to acombination of cool winters and hot summers in the central valleys. The main cities are thecapital, Thimphu (population 55,000), and Paro, Phoentsholing, Punakha, and Bumthong.Bhutan is divided into 20 districts or dzongkhags, each headed by a district officer (dzongda) whomust be elected, and districts are broken into villages. Each local area is responsible for creatingand implementing its own development plan in coordination with the district.

The economy, one of the world's smallest and least developed, is based on agriculture andforestry, providing the main livelihood for more than 90% of the population. The labor force isdivided between agriculture at 93%, services 5%, and industry and commerce 2%. Bhutangrapples with a massive lack of skilled labor. Agriculture consists largely of subsistence farming.

Greatest promises for increased revenues are likely to come from hydropower and tourism.Bhutan’s physical beauty is quickly registering with the exotic traveler circuit although thegovernment tightly limits the number of visitors and the terms under which they visit. Thegovernment is setting aside nearly a third of the country’s extraordinary terrain and wildlife for anational nature preserve with the assistance of a World Bank grant and help from the WorldWildlife Fund.

Bhutan has only recently begun to accept and utilize foreign assistance. With exceptionally lowdebt $331.7 million and debt to GDP ratio (58%), the government has agreed to use international


8/10/2019 Brief April 2004


Bhutan 4

aid to improve social welfare and limited infrastructure. Inflation is low at 2.7% and Bhutanenjoys a stable macroeconomic environment.

The government is currently implementing its Ninth Plan, a 5-year plan for economicdevelopment (2002-2007). It targets increased annual growth from 6-7% to 8.1%; expansion oftourism by 15%; continued growth in the construction sector and completion of the 1020 MWTala hydroelectric project, among a variety of other initiatives. The economic program in thecurrent 5-year-plan (2002-07) places a strong emphasis on improving education and infrastructurewith a special emphasis on increasing activities in the sectors of information and communicationtechnology, energy, and tourism. Bhutan has applied for membership in the World TradeOrganization and is in the process of developing clear legal and regulatory systems designed to promote business development.

Telecom Policy Environment

Development of the telecom sector is the responsibility of the Bhutan Ministry of Information andCommunications. The Ministry formerly had a broader portfolio but was reorganized in July2003 to allow better focus on sector initiatives. It is responsible for policy formation;coordination and execution of donor assistance; governmental communications planning,including IT adoption; and sector and project studies.

The baseline legislative framework is the Bhutan Telecommunications Act 1999 passed by the National Assembly, Bhutan's legislative body. The Act and accompanying FrequencyRegulations established the Bhutan Telecom Authority. BTA is responsible for economicregulation (tariffs), technical and broadcasting regulation, licensing, technical standards,telecommunications infrastructure (though not operations), radio frequency spectrum, commercialcable television, and advisory services to the government, and represents Bhutan in international

telecom organizations and agencies.

The Act also transferred the assets the Ministry’s Department of Telecommunications to a publiccorporation, Bhutan Telecom, which became effective July 2000. Bhutan Telecom continues toserve as the exclusive provider of telecom and Internet services in the kingdom.

A Telecommunications Master Plan was developed in 1989 that laid the foundation for thecurrent network operating environment. A more recent ICT Master Plan (June 2001) and National e-Readiness Assessment1 (June 2003), both prepared with technical assistance grantsfrom UNDP, detail the overall communications and IT environment. The Ministry’s Division ofInformation Technology, responsible for regulating and promoting ICT, produced an introductorywhite paper called the Information and Communications Technology (ICT) Policy for Bhutan inOctober 2003 which lays a statement of direction for harnessing information technologies in thenational effort to promote “gross national happiness.”

The government’s overall vision for telecom is captured in a strategy paper, “Bhutan 2020: AVision for Peace, Prosperity & Happiness”:

1 http://www.dit.gov.bt/bips/documents/E-Readiness-report.pdf


8/10/2019 Brief April 2004


Bhutan 5

“In the field of telecommunications, our future strategies must…meet multiple

objectives. They must bring telecommunications as well as postal services closer to

the rural population. They must facilitate communication and exchange within the

nation through the development of such services as email, internet and intranet. They

must also further improve our contacts with the outside world, making it possible for

us, at an appropriate time and following the introduction of appropriate standards,

to access the ‘information superhighway’ that will provide us with access to the same

information and data as those residing in the technologically most advanced

nations.”

The Ministry is mandated to provide at least 10 telephones for every geog (village), or one phoneat a distance of two and a half hours' walk from any house. The government hopes that, by 2007,Bhutan Telecom will bring national telephone service to 80 percent of the sparsely populatedrural areas across the country’s formidable terrain.

Telecom Market Environment

Telephones were introduced to Bhutan relatively recently in 1963 (television arrived in 1999).Until an Intelsat earthstation was installed in1990, international connectivity was essentiallynonexistent, except for limited radio connectionsat the India border. Today there areapproximately 26,000 lines in service,representing a teledensity of 2.9, depending on

how population is measured.2 This number may be small but represents a 10-fold increase incapacity since concerted effort to expand thenetwork began in the early 1990s when publicnetwork services were limited only to thecapital, Thimphu.

About 65 percent of total phone users are located in the three major towns, Thimphu,Phuentsholing and Paro, contribute; 50 percent are in Thimphu alone. As of mid 2003, BhutanTelecom operated a total of eight local switches, 12 remote exchanges and one internationalgateway.

Capital investment remains low. Throughout the current Ninth Plan (2002-2007), total capitalexpenditures for telecom from the government budget total $1.8 million (Nu. 81.050), or about$360,000 per annum. Given that Bhutan telecom is a state corporation with limited investmentresources of its own, funding for all expansion efforts necessarily comes from low-interest loansand development grants.

2 The government place teledensity at 2.9, for an implied population of about 900,000.


8/10/2019 Brief April 2004


Bhutan 6

The mobile era has just arrived in Bhutan, withgreat fanfare. Bhutan Telecom launched thenation’s first GSM network on November 11,

2003, an auspicious date coinciding with theKing’s birthday. The network has an initialcapacity of 10,000 lines; some 2255 subscribersregistered prior to launch and the company ea total of 5000 or more subscribers by year end 2004. The cost of the project is estimated million, of which the government of India provided $2.45 million as a grant. Bhutan Telecom is borrowing the balance from a consortiumof national financial institutions at seven per cent interest. The first phase of the “B-Mobile” project will cover the Thimphu valley, Paro valley, Chukha, Gedu, Phuentsholing and about 5 per cent of Thimphu-Paro and Thimphu-Phuentsholing highways with a total of 13 base station

xpects

at $7.89has

0s.

national microwave network was built in the 1990s. This $58 million investment enabled

79he

s

upplying

ork using the DAMA standard with an estimated6 sites, connecting regional towns to the international

runk

ost of rural areas do not have telephone access at all: there were only an estimated 1574 lines

SAT began inJanuary 2004, restricted to OECD member countries.

Anationwide connectivity at 34Mbps, linking Thimphu to all 20 district centers and brought localswitching to the major towns. In early 2004, Bhutan Telecom began building an ambitious EastWest optical fiber route parallel to the national highway. This1000 Km route is an STM 16 system that will also connectlocal exchanges. TCIL is again the contractor. Over time tnetwork is expected to be connected to the Indian fiber opticnetwork at Hashimara, to provide the first internationalterrestrial link. Bhutan Telecom has also begun to lay fiberalongside high voltage alongside electricity transmission linein cooperation with the Bhutan Power Corporation. In this$2.4 million project near Thimphu, LG Cables Limited

(Korea) is supplying the fiber and the Wuhan ResearchInstitute of Post and Telecommunications (China), is stransmission equipment.

A VSAT netw1gateway in Thimphu, complements the transmissioninfrastructure. Bhutan Telecom’s backbone is the only ttelecommunications network in the country.

Min all four eastern districts as of May 2003. Only 37 percent of rural districts have connectivity.

An objective of the current 9th Five-year Plan (2002-2007) for the telecom sector is to provide atleast 10 phones per geog. The government hopes to achieve 6250 rural telephone lines by the end of the plan period. Providing connections is a challenge given vastness of Bhutan territory andhigh mountain ranges; many of Bhutan's communities live in villages that often have fewer than10 households. To achieve this target, the government of Bhutan has taken a US$19 millionmixed credit loan from the Danish Ministry of Foreign Affairs to finance a ruraltelecommunication project. A tender for Microwave, WLL local exchanges and V


8/10/2019 Brief April 2004


Bhutan 7

There is one Internet provider, Druknet, which is owned and operated by Bhutan Telecom. Itegan service in 1999 with the assistance of the International Development Research Center

os a

b

(IDRC) of Canada.and has 1900 dial-up customers and 26 lease line customers by 2003. It als provides connectivity to an estimated 12 internet cafes, seven of them in Thimphu. Druknet iVSAT separate from the main voice gateway to increase international data capacity to 2.640Mbps, with circuits to Japan, London and Germany provided by Loral Skynet.


Brief April 2004

Documents

Transcript of Brief April 2004