FDI, disinvestment and growth: an appraisal of Bhutanese economy
| DOI | https://doi.org/10.1108/JCEFTS-05-2022-0031 |
| Published date | 06 March 2023 |
| Date | 06 March 2023 |
| Pages | 64-82 |
| Subject Matter | Economics,International economics |
| Author | Mohammad Sultan Ahmad Ansari,Shad Ahmad Khan |
FDI, disinvestment and growth: an
appraisal of Bhutanese economy
Mohammad Sultan Ahmad Ansari
Department of Business and Economics, Modern College of Business and Science,
Al Khuwair, Oman, and
Shad Ahmad Khan
College of Business, University of Buraimi, Buraimi, Oman
Abstract
Purpose –The purpose of this paper is to appraise the influenceand challenges of direct disinvestment or
through foreign direct investment (FDI) in the Kingdom of Bhutan, particularly to identify the inflow of
disintermentpost pandemic and how it can be improved.
Design/methodology/approach –The authors investigatedthe influence of FDI on Bhutan’s economy
by analyzing secondarypublished data by Asian Development Bank and governmentagencies of Bhutan. To
find out the role FDI has played in the growthof the BhutaneseEconomy.
Findings –The FDI is not playing a major role in the nation’seconomy so far. However, its potential cannot
be ignored as there is a need for foreign currency and expertise in the country. Furthermore, government
policies are directlyinfluencing the inflow of foreign exchange that affectsthe Bhutan’s economy. FDI has not
increasedconsiderably because of self-imposed restrictionsblocking government policies.
Research limitations/implications –This research is based on the data collected from secondary
sources, which couldbe considered as the main limitation of this study. The Himalayan kingdomis not much
open to the outside world in terms of the publication and availabilityof the data. Researchers put their best
effort in retrievingsecondary data from authentic sources.
Practical implications –This research has direct implicationsfrom an institutional perspective on the
government policies and procedures.This study throws light on the elements that might help in improving
Bhutan’seconomy, employment and productivity for an overalldevelopment of economy.
Social implications –Bhutan and similar countriesneed to understand the pros and cons of having FDIs.
This study might helpthe government and the civil society to understand the trends FDI has triggeredin the
nation over last 30 years,and will help them to make appropriate policies and regulations dealing with foreign
investments.
Originality/value –This paper underwrites the influence of disinvestment on Bhutan’s economy, which
can revolutionize business, entrepreneurship and institutions. This research was conducted by analyzing
secondary data released by authorized agencies, which indicated thelower inflow of foreign exchange and
how to improve further.
Keywords Disinvestment, Foreign direct investment, Governance policy, Bhutan, Economic growth
Paper type Research paper
1. Introduction
The aim of the research was to find out the influence of disinvestment or through foreign
investment to the Kingdom of Bhutan. The country having absolute constitutional
monarchy, with 760,000 population,38,394 square kilometers territorial area. Bhutan ranks
Conflicts of interest: There is no conflict of interest and no financial support taken from any parties
for this research.
JCEFTS
16,1
64
Journalof Chinese Economic and
ForeignTrade Studies
Vol.16 No. 1, 2023
pp. 64-82
© Emerald Publishing Limited
1754-4408
DOI 10.1108/JCEFTS-05-2022-0031
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1754-4408.htm
133rd in terms of area and 160th in terms of population in world ranking. Bhutan comes
under least developed country and recorded US$7m as foreign direct investment (FDI) for
FY2019 (Khan and Gurung, 2019;Khan et al.,2021). According to the United Nations World
Investment Report FY2020, the FDI inflow in Bhutan has marginally enhanced from US$6
to US$7m in FY2018 and FY2019, respectively.
Bhutan still attracts exceedingly small foreign investment because of country size,
location, population and growth potential from investor perspective that affected economic
growth. According to Tahir et al. (2020), principally,foreign incoming remittances influence
economic growth positively.Nevertheless, Bhutan has initiated many attractiveschemes for
attracting foreign exchange by building public awareness, streamlining processes and
procedures for foreign investors. According to Iqbal et al. (2019), the inflow of FDI in China
has surpassed Japan and exceededthe level of inward FDI (IFDI).
The net foreign exchange receivable in FY2020 was limited to US$2.79m, which
significantly declined because of the global economic crisis of pandemic that affected the
world economy. However, Asian Development Bank (ADB) has predicted an increase of
3.7% in economic growth in FY2022, whereasit was 0.9% in FY2020 and estimated 3.4%
for 2021. However, in exceptional cases, such as China, the foreign reserve has increased
even during pandemic (FY2020), depending upon country demand or investment elasticity
(Figure 1, illustratesChina foreign reserve for FY2020–21). Accordingto Liu et al. (2020), the
investment elasticities will depend on the country’s investment elasticity. Therefore, the
foreign investment would depend upon other factors such as investment elasticity,
investment demandand growth opportunities, which is irrespectiveof global situation.
The foreign investment is becominga major concern for developing, underdevelopedand
least developed countries that led to uneven disturbance of economic wealth. According to
Sasana et al. (2018), foreign investmentinfluences macroeconomic variables that impacts in
setting the aggregate economy. Bhutan’s economy was immensely affected in FY2020
because of the pandemic and is likely to face slowdown in the years to come. According to
the United Nations Conference on Trade and Development (UNCTAD), dated January 24,
2021, the foreign inflow prediction in FY2021 is a major concern for developing countries,
because global foreign inflow has buckled, by dropping to 42%, that is, from $1.5tn in
FY2019 to a projected $859bn in FY2020. Similar situations arose in the early 1990s and
2008–2009 because of the global financial crisis. According to Anuradha and Samy (2014),
Figure 1.
China foreign
exchange reserves
FDI,
disinvestment
and growth
65
To continue reading
Request your trial