The Knowledge Economy

I write this in my Tshendhen Hotel room in Gelephu while my wife with thousands of others is out for Lam Namkhai Ningpo’s “wang” (blessing) expected to go on for next 45 days. We are here for only initial ten days. I met quite a few of my old friends who have come for spiritual intake before the inevitable "one-way-voyage". Why people become more religious as they grow older? I do not think it is anything to do with spiritual depth and/or dimension. 

The other day Lam, concluding his regular rituals, told all devotees that they should avoid going to Bhutan-India border mainly because on 16 November 2012 a village astrologer from Hilley in Sarpang was kidnapped and ambushed to India at gunpoint, second kidnapping of Bhutanese subsequent to a taxi driver who was kidnapped and released earlier after pretty handsome ransom.

I think it is important for intelligence and security personnel to analyse the root cause of  incidents keeping in mind that politics often uses mean means through scapegoats to scrape  corners. I normally like people who are tough to convince but once convinced they do a good job. They think and analyse. Unfortunately we do not seem to fall in that category.

Mostly qualified but poorly educated persons parroting basic principles and espousing the mantras that support individual status/wealth greed (not aspirations – greed chase cheap profit/profile while aspiration create value) and/or near-feudal style concern for the masses will lead us to the crippling squeeze before even realizing what is in the front, no doubt about it. Most of us simply lack analytical ability and any deep understanding of the overall evolution footsteps and foresight. As an  observer I see the footprints of these in all actions/outcomes.  Frankly, I fear moral failure of the society obsessed with wealth and status. So is Bhutan showing signs of political and/or social dysfunction? It is about time we ask such very serious questions while I sincerely think “tight squeeze” is ahead of us (bookmark if you want to).

What do we stand for: liberal economic reforms; defensive nationalism; welfare expansion; a trust fund baby? Reorganising and strengthening the structures, systems, strategies, policies, ideas and vision on how best Bhutan should handle itself in pragmatic way is the priority concern. It is time for coalition of positive to come forward and face the challenges posed by the concern. There is nothing we cannot face and not overcome. We need impetus of positive forces.

The “positives” do not try to find fault from past mistakes, but correct mistakes and draw lessons. They would be willing to cultivate motivation, and surrender “what you are”, for “what you could become”. So we should not be afraid of the rational reforms. Change is the essence of life. That reminds me of Winston Churchill’s words: the pessimist sees difficulty in every opportunity, the optimist sees the opportunity in every difficulty. For us today, seeing alone is not good enough. The opportunities have to be translated into reality with concrete outcomes. So, creating healthy systems and conducive environment are important aspects of the change to take deep root and gain strength like the Chinese bamboo does.

I like Chinese bamboo. It takes more than four years to grow its complex and strong root system underground.  At the end of 5th year it suddenly shoots to the height of more than 20 m.  Then, it is strong as ever. Bends under pressure and goes back to original shape once pressure is off. But, does not break easily!

You cannot take the pressure without complex and strong root system, can you? You may now say, so?  So....

First, the culture and tradition, driglam-namza and modern development have to have their own digital space of harmonious co-existence and complementary interface.  Interference of one on other is bound to divert the positive prospects of latter. The cultural diversity is a strength, not weakness, and modern development is inevitable. I am not sure if we understand this well to maintain an intricate balance that is required to prosper to the path of Gross National Happiness (if you like). Let not the short-sightedness now impair the longer-term perspective. For start it is important to comprehend how people behave and streamline ingrained principles, procedures and/or practices mainstreaming all sections of the society based on new vision to influence positive changes.

Second, strengthen institutions balancing power, authority, responsibility and accountability. Take a look at existing legal and policy documents, structures and systems, and see if  power, authority, responsibility and accountability at all levels of Executive, Legislative and Judiciary   functionaries (most importantly Executive) are well structured, balanced and harmonized with adequate checks-and-balances. The government strength and capacity flow out of such institutional establishment. If not, erosion of governance is inescapable. The strengthening government institutions with an aim to reinvigorate them, in addition to undertaking their routine responsibilities, without major reforms seems not possible. The reforms may aim, among others, at :

• improving the core structural strength including institutional and individual capability aimed to improve performance,  with creativity (thinking new things) and innovation (doing new things);
• attracting high quality knowledge workers;
• undertaking austerity measures for regulating economic activities and  financial discipline, and mobilizing resources  to ease financial squeeze, debt and rupee crunch;
• administrating mega power projects and analyzing country’s hydropower strength to serve national interest,  including on the move by governments of countries in the region towards collaborating more and pooling their resources for electricity grids; and
• coming out from dormant attitude towards relationship of gratitude and gratefulness to understanding the merger of nationalism with new geopolitical reality to carve out balanced and comfortable geopolitical space.

Third, private sector development on right foothold brings dynamism to the economy. Here in Gelephu  I went to fix wiring of my car. There was an auto-electrician from West Bengal who lived in Dadgiri (Indian side of Bhutan-India border). He commuted every morning inside Bhutan  and worked through a dirty small workplace attached to shabby structure on a dusty compound they called workshop set up in a leased land. I asked how much was his salary? He said he did not work for salary. He just paid Nu 5,000 per month to “malik” (master, meaning owner) for using the premises and the earning was entirely his. The work in my car required soldering a wire. He had no soldering machine. When I asked why he did not have soldering machine, he said “malik” did not give him. I asked why he did not have a Bhutanese boy (instead of a boy from Dadgiri) as his helper. He said Bhutanese did not want to do helper jobs. Some business model! What can I (a client) expect – quality work and value for money? What can the country look forward to – transfer of knowledge, training, capacity development, proper service to car owners, contribution to local economy?

The private sector development on right footings and positive public-private partnership with proper allocation of responsibilities are key to fostering socio-economic development. The reform and restructuring will need to properly identify effective roles of private and public sectors. The activities that can be best performed through proper platform by private sector can never be performed effectively by government. The  government's role should be proper focus on regulation, control and supervision with strong system, policies and procedures.

Fourth, with strengthened government institutions and private sector, modernizing the growth models and making slow longer-term shift from existing to new economy will be sensible:

Existing Economy	New Economy
Economic development is resource-based, government-led and credit-fueled.	Knowledge economy in partnerships with business, government and non-profit sector lead change.
Growth model: import-driven internal consumption-based pattern characterized by high credit growth and internal and external imbalances.	Growth model: slow and step-by-step shift towards export-led growth model.
Socio-economic development model: Service-oriented-inward-looking gewog focused	Socio-economic development model: Talent-based out-ward looking and identifying the high-growth firms that disproportionately drive economic activity and jobs.
Success = fixed competitive advantage in national resource including hydro-power.	Success = organizations and individuals with ability to learn and adapt, and create value.
Attracting cheap low-grade people from neighbouring country for low quality works is the key.	Attracting qualified and educated people is the key.
Attracting low quality workers that are mostly unemployed in their native land. No recognition of attributes for attracting knowledge workers.	Natural environment, political stability, physical facilities, cultural amenities and attractive benefits are key in attracting knowledge workers.
Pay low for all and service utilization not effective.	Pay high for talents and use them effectively.
Input-oriented work process	Result-oriented work process
......and......

Politicking aside, it's time to build the real legacy -- strong and able --  that can take pressure, like the Chinese bamboo. The beginning has to be modest. Let the best ideas rather than hierarchical organizational structure control the meetings. Yes, I am talking about step-by-step shift towards the knowledge economy. If you think longer-term there are choices, I will not be the first to be convinced for I do not get convinced so easily. And so will many others.  Therefore, earlier we start, better off we will be!

continuation.....................The Knowledge Economy..........(2)

Geopolitics of Environment

The geopolitics as plain link between political power and geographic space is more traditional. The ensemble of relations between the interests of international political actors; interests focused to an area, space, geographical element or ways; and relations which create a geopolitical system is contemporary. No two countries have similar geopolitical environment. Therefore dimensions are intricate or even “sensitive” if one is unequal “among equals”. If sandwiched as unequal “among equals” the intricacies multiply.

The geography cannot be altered. Politics bears the brunt of shouldering the national geostrategic interest through its potent depth. If the institutions of democracy are still young and are yet to take firm root to provide a solid foundation for ensuring the rule of law and transparent governance with adequate checks and balances, the key concern is the ability to safeguard national interest in international arena. There is need for matching intellectual depth and maturity to understand the multi-dimensional changing geopolitical atmosphere and to have strategic foresight.

Let us take a look at our geopolitical situation down south as well as up north!

 Bhutan is bounded on three sides by the Indian states of Sikkim, West Bengal, Assam, and Arunachal Pradesh. The first friendship treaty between India and Bhutan was signed in November 11, 1865 when India was under British rule. In the 1870s and 1880s, there was renewed competition between pro-British Penlop of Tongsa and the anti-British, pro-Tibetan Penlop of Paro. The Tongsa Penlop defeated his political enemies and united the country. Thereafter British India was the first country to recognize Bhutan when it became a monarchy and the friendship treaty was renewed in 1910. Bhutan reciprocated and was the first country to recognize Indian independence. The India-Bhutan treaty was revised in 1949. On August 8, 1949 India and Bhutan signed the Treaty of Friendship (TOF) in Darjeeling by Sri Harishwar Dayal, representing India and Gongzin Sonam Topgye Dorji, Yangbi Lopon Sonam and Ha Drung Jigme Palden Dorji representing Bhutan.

The ten-article treaty, in force in perpetuity, called for peace between the two nations and non-interference in each other's internal affairs. While the TOF also established free trade and extradition protocols, Article 2 of TOF read: "The Government of India undertakes to exercise no interference in the internal administration of Bhutan. On its part the Government of Bhutan agrees to be guided by the advice of the Government of India in regard to its external relations." The Indian non-interference in Bhutan's internal affairs in return for Bhutan's agreeing to Indian guidance in regard to its external relations was quite clear. During those days India’s relations with Bhutan were looked after by a Political Officer from the Ministry of External Affairs in Sikkim. In his first visit to Bhutan in 1958, Indian prime minister Pandit Jawaharlal Nehru reiterated India's wish that Bhutan remain an independent country, "taking the path of progress according to your will." The full diplomatic relation between India and Bhutan was established in 1968 affirming Pandit Nehru's statement.

Bhutan joined the United Nation in 1971, and its perspective of the world broadened. Two years later, Bhutan and Bangladesh exchanged diplomatic recognition. A new interpretation of the India-Bhutan relationship began to emerge in 1974 when Lyonpo Dawa Tsering, Bhutan's minister of foreign affairs, said that whether or not Bhutan followed India's advice and guidance on foreign policy matters was optional. The statement in 1979 by Druk Gyalpo that the 1949 treaty needed to be "updated" was still another signal of a need to incorporate in the treaty the changed reality. The country needed to put forth its own stance on a number of smaller issues and identity in international forums. For instance at the Non-Aligned Movement summit conference in Havana in 1979, Bhutan voted with other Asian countries rather than with India allowing Cambodia's Khmer Rouge to be seated at the conference. Also Bhutan's votes in the UN on such issues as the status of landlocked nations also did not follow fully the Indian leads.

On February 8, 2007, the India-Bhutan Friendship Treaty (IBFT) updating the TOF was signed and came into force following the exchange of Instruments of Ratification between the two governments in Thimphu on March 2, 2007. Under the IBFT Article 2 reads as, "In keeping with the abiding ties of close friendship and cooperation between Bhutan and India, the Government of the Kingdom of Bhutan and the Government of the Republic of India shall cooperate closely with each other on issues relating to their national interests. Neither government shall allow the use of its territory for activities harmful to the national security and interest of the other."

The notion of the IBFT strengthening Bhutan’s sovereign nation status was apparent as its preamble included "Reaffirming their respect for each other's independence, sovereignty and territorial integrity", a feature that was absent in the earlier version. The updated IBTF laid the foundation for future development and provided, among others, for perpetual peace and friendship, free trade and commerce, and equal justice to each other's citizens. With improvements in communications and transportation, geopolitical factors need to take time-adjusted shape to influence foreign policies. Also, haven't we all grown to greater balance and neutrality, and respect for such a growth?

To the north Bhutan shares a contiguous 470 km border with China. Bhutan and part of China that borders Bhutan --Tibet, or the Xinjiang Autonomous Region -- shares historical, cultural, and religious ties. Bhutan has had neither a tributary relationship with Beijing then (even though Bhutanese delegations to the Dalai Lama came into contact with the Chinese representatives in Lhasa) nor diplomatic relations now. Those days even relations with Tibet was never particularly good when Bhutan sided with British India. And, China trying to secure its southwestern edge claiming a vague suzerainty over Bhutan just before the Chinese Revolution of 1911 did not help foster links. The new People's Republic of China let the claim elapse, and it has never again been raised publicly.

The fall of Tibet under the Chinese in 1951 increased tension in Bhutan-China relation. The 1959 Tibetan uprisings and the flight of the H.H. Dalai Lama to India followed by massive presence of Chinese People's Liberation Army along northern border running through eight enclaves administered by Bhutan since 17th century alerted Bhutan to the potential threat it faced. Bhutan’s representative in Tibet was also withdrawn. India intervened with Beijing on behalf of Bhutan, but the Chinese refused to discuss what they considered a matter between China and Bhutan. Also there was problem with regard to the flight of some 6,000 Tibetan refugees to Bhutan. Then China published a map in 1961 that showed alterations of traditional Sino-Bhutanese and other Himalayan borders raising renewed claim to its southwest including Bhutan, Sikkim, and Nepal. Bhutan responded with cross-border trade embargo and closer ties with India.

Then Sino-Indian border war broke out in 1962. Bhutan became more apprehensive of China. Since then there were cross-border intrusions by Chinese soldiers and Tibetan herders starting in 1966, and a larger than usual annual incursion by Tibetan herders into Bhutan in 1979. Both Thimphu and New Delhi protested to Beijing. China responded to open direct talks with Bhutan.

A series of 20 border talks has been held between the ministers of foreign of affairs of Bhutan and China since April 1984. The 20th talk led by Chinese Vice Foreign Minister and Bhutanese Foreign Minister-in-Charge was held in Thimphu on August 20, 2012, soon after Bhutanese Prime Minister Jigmi Y. Thinley had a meeting for the first time with Chinese Premier Wen Jiabao on June 21, 2012 on the sidelines of the UN Conference on Sustainable Development at Rio de Janeiro.  The Chinese state-run news agency Xinhua  reported that two leaders “expressed willingness to establish formal diplomatic ties between their countries” and were willing to settle border issues in a cooperative manner.

The Xinhua report was picked by Indian media with a perspective of border dispute: “Any settlement of the Bhutan-China border is significant for India as Chumbi Valley – a vital tri-junction between Bhutan, India and China border - is 500 km from Siliguri corridor and the “Chicken’s Neck” which connects India to its Northeast states and Nepal to Bhutan. Indian strategic analysts say that the Chumbi Valley is of geo-strategic importance to China because of its shared borders with Tibet and Sikkim.”

A joint study conducted by the Indian Ministry of External Affairs (MEA) and Institute of Defence Studies and Analysis (IDSA), released in New Delhi on July 13, 2012 by foreign secretary Ranjan Mathai, discussed potential shift in Bhutan’s foreign policy, having far reaching impact on India’s strategic and political interests.

“There are already concerns on the Indian side over increasing Chinese foray into Bhutanese territory and efforts to engage Bhutan at various for a in the past years. China has so far built 6 roads closer to Bhutan’s border towns in the north and northwest,” says the joint MEA-IDSA study.

Also the study pointed out public resentment regarding the location of Indian Army Military Training Team in Haa.

Indian media reported that “With the increasing democratisation, communists consolidating their position, coupled with “sub-standard” works of Indian contractors, is costing India its long-term and the closest ally in South Asia. The tiny Himalayan nation Bhutan is increasing moving away from it.” 

During 20^th border talk the Chinese Vice Foreign Minister  Fu Ying said  “We are willing to work with Bhutan towards early establishment of diplomatic relations between the two countries. The border dispute between the two countries does not cover a wide area. The two sides should speed up border talks in the spirit of mutual understanding and accommodation, with a view to arriving at a fair and reasonable and mutually acceptable solution. This will contribute to peace and stability in our border areas.” All these were picked in an  IDSA Comment. 

Following the border talks a quiet visit by security personnel and goodwill visit by Indian army chief from August 25-29, 2012 are quite understandable. What is not, is the geopolitics not having wider and broader digital age significance.

The challenge lies in coming out from dormant attitude on relationship of gratitude and gratefulness to understanding the merger of nationalism with new geopolitical thinking to carve out a comfortable geopolitical space. How many will properly understand the nationalism trends, including reading signs of an advancement towards so called "geopolitik nationalism"? Can we think in terms of the possibility of being an instrument of confidence building?

“We know states come and go like human beings, countries evolve so there is no reason for countries like Bhutan or India or China to remain the same in 40 years time. So in some sense we need to be aware of our history so that we can prepare our future. Those who ignore history will also be ignored,” says Prof. Dibyesh Anand of London’s Westminster University.

Health Care

Do not have even faintest idea that I belong to the medical profession. My interest in medicine evaporated on the day  when I choose engineering in IIT Kharagpur over medicine after my high school graduation. Despite such low-key file storage in my head’s hard disk on medical matters, I can neither avoid visiting doctors nor having medicines.  So it is all about my medical treatment experiences in all those world-standard hospitals including Makati Medical Center  (Manila, Philippines), Shifa International (Islamabad, Pakistan), United Family Hospital (Beijing, China), Pyathai 2 Hospital (Bangkok, Thailand) and Bumrungrad International (Bangkok, Thailand). I am not that sickly a person visiting all these hospitals regularly enabling me to write this. Most of my visits were for annual medical check-ups, and few for treatments. I have my own impression either way of each hospital which I consider beyond my moral principle to disclose here.

For all patients medical treatment means full recovery from illness. It can only happen if the disease is diagnosed properly, treatment and post-treatment advice/care are given appropriately.  Generally patients have no idea of proper diagnosis, appropriate treatment and post-treatment advice/care. Also patients normally cannot differentiate if the treatment is for symptoms or problems. For doctors, it varies I guess. While I think most of the government hospital doctors (typically with doing-you-favor attitude) diagnosed, treat and advise patients on their illness considering also patients’ identity, personality, behavior, attitude, outfit etc., my experience in private hospitals is the following.

During one of my annual medical check-ups, doctor discovered that I was suffering from hernia and needed to be operated.  All justifications that operation being minor involving only local anesthesia, doctor having experience in operation etc.... were explained to me. I was also reminded that since I was with the Asian Development Bank and had insurance coverage, it would be good if I decided to do the operation.  There it was, the financial aspect of the diagnosis. First, slicing and stitching my body scared me to death. Second, the doctor did not even mention non-surgical treatment. And, why was he advising operation which should, in fact, be the last option? Was the recommendation for operation more associated with cost rather than diagnosis and appropriate treatment? I had to consult few more doctors and decide on appropriate treatment. Thereafter I have had several cases where doctors asked if I had insurance coverage for treatment. Even if it was not intended to associate with the type and level of treatment, I had already learnt to do basic research on my illness and discount appropriately  the impact of market forces in medical treatment through critical dialogue with doctors on diagnosis, treatment and post-treatment services. This I find is very important. It’s my life! It is not intended to be derogatory to medical profession but give a perspective on impact of privatization.

Bangkok  occupies more and more prominent place as being medical destination for the people all over the world in addition to being tourist and shopping paradise. The reasons quite simply are Thai hospitality and care, world-class equipment and facilities, and well trained professionals in addition to its tropical climate, location and cost effectiveness compared with medical care in developed countries (MRI: $350 in Bangkok, against $1,080 in the US). The right strategy calls for focusing on what you are good at and excelling in it, and  Thais are good at it. The reasons,  in addition to being a prestige issue for some, why more and more Bhutanese are heading to Bangkok for treatment . While it is so, illusion that Bangkok treatment being always perfect ensuring full recovery from illness is bit far fetched. For that matter anywhere in the world, I guess.

More recently I went to Bangkok for treatment of my back pain. The diagnosis included X-ray, MRI (magnetic resonance imaging) and evaluation by spine surgeon.  The problem was identified and I was given the choice: non-surgical treatment (medicine plus physiotherapy) or surgery, Lumbar Laminectomy (LL).

The human back comprises of many interlocking bones, discs, ligaments, tendons, nerves and more I suppose. The LL surgery involving two inches cut including lamina (bone) from one or more vertebrae is bound to have higher risk of destabilizing the spinal cord. I opted for non-surgical despite surgeon's recommendation for appropriateness of LL for full cure. The non-surgical treatment for about a month had no impact on my back pain what-so-ever. What do I do? I was back researching how best to treat my back. I came across new spine surgery procedure using endoscope, least invasive to date I read, called Endoscopic Lumbar Disectomy (ELD). Since ELD was done with very small incision (less than 2 cm) and on an out-patient basis (in west), I opted for ELD in another Bangkok hospital.  I asked the surgeon there regarding appropriateness of ELD vis-à-vis LL.  He told me they did not do LL anymore because ELD was least invasive, patients got back to  normal situation after about three months and more or less had no possibility of back destabilization. Why was LL appropriate on me earlier? Good question!

After my ELD I was back in Thimphu. Unfortunately, Thimphu weather deteriorated - snows at hilltops and severe cold wind sweeping through all afternoons. This adversely affected my fresh surgery. I had nerve inflammation. I wrote back to the surgeon for anti-inflammatory drugs. The Thai surgeon could not have given me cold weather post-surgery advice when he had only experienced tropical climate. The environment in Bhutan is different from the one  in Thailand. Then there were other issues: different drug brand names, lack of post-surgery physical examination and others with regard to difficulty in giving post-treatment care/advice.  I am fortunately now on my regular golfing days.

While I point out my real life experience for the readers to understand briefly pros and cons of overseas medical treatment along with impact of privatization on medical services, I see the other extreme that the loose free-medical-care-for-all policy on standstill from its sectoral inception flawed with never-ending issues relating to purchase and shortage drugs; counterfeit drugs; dilapidated hospitals/basic health units; shortage of doctors; non-operational medical equipment and you name it.  For balanced and sustainable development;  social, political and economic progress have to move ahead hand-in-hand. The economic reform makes no sense if a sector is on standstill. Isn’t it time to reform health care accounting the cost of mismanagement and overseas treatment (Nu 50-60 lakhs for couple of weeks in Bangkok hospital seems normal),  and allowing careful private sector participation including for health insurance for effective health coverage? I think it is, keeping in mind also that a pure free market model simply cannot work in providing health care!

What Retirement?

The retirement age of ADB (Asian Development Bank) is 60. I did not give much attention to it during induction briefing. As I approached 60, I asked myself, what retirement? Unproductive after 60? Whatever, I do not like the word! Isn’t the impression of a retiree generally physically fragile, mentally corroded and at times fairly inactive soul? If light-skinned with supposedly plenty of cash to spare, a person hanging around and taking pleasure of slack-life in southeast Asia. So I refuse to use the word, retirement – too laidback a word when my desire for getting better and base of curiosity are crisp.

 A year before approaching the magic number 60, I some what excitedly looked forward to life after ADB as a relocated and settled person: with full time at my disposal, playing golf, reading books, meeting relatives and friends and traveling around and taking life easy. As I approached more closer to 60, I read articles about people going under depression because of not being able to adjust their life styles. Nearer, I started to look back. The reflections were mainly of having to leave nicely adjusted work style, ethics and environment, and cross over to new mode. On the very next day of my 60th birthday, I wondered why I did not go to work while I was still on top-form in every sense of the word. I wrote my parting email to my ADB colleagues in Beijing:

“In pursuit of ….Happiness in the land of Gross National Happiness, the overarching philosophy guiding the Bhutan's development policy, based on four pillars: (i )sustainable economic development; (ii) preservation and promotion of culture and tradition; (ii) conservation of environment; and (iv) good governance. Development planners may argue if the high priority for culture and tradition, and conservation (preservation + protection) of environment will counter-balance in reality the high material aspiration of human being.

But still, for me a place worth spending my life after more than 19 years of ADB service.

The field of development excites me. I could not have asked for more than spending my last five years in China, where the real actions and huge events including Olympics, 60th Anniversary, and Shanghai Expo took place.

To you, I would like to express my deep appreciation for the many shared moments of friendship, learning and good work, and say what a pleasure it has been knowing and working with you!

And, thank you for your good words and birthday cakes and wishes.

Sangpa

PS: Try not to become a man of success, but rather try to become a man of value - Albert Einstein”

           For about a year, relocation and settlement, golf, relatives and friends, books, internet, travel around Bhutan and "take-it-easy" filled my days. By some definition, a man of success? Well, to an extent, many here would say yes! Did I try too hard for it sacrificing my man-of-value virtues? I say no but do not know what the others' say. To me a person of value means you are of value to your own existence first, and then to the existence of others. How do you get to that? One way is through inspiration.

“ We have a strong, committed parliament today, but my worry is in the future, whether our best and brightest people will come forward in order to serve the nation through politics.” His Majesty Jigme Khesar Namgyel Wangchuk, 17 Dec 2011.

This is a strong message from the King to the Bhutanese youth. But the youth of today need to be influenced, that takes effort and years for setting some kind of trend. For them trend is their friend. So, is politics the proper arena for initiating such a influence-thread (which I am not at all sure) and pursuing my values? I mean, my individual values, the way I look at it. I studied civil engineering instead of political science, have no experience in, and am not trying to make a career out of politics. And, I am no good at talking something without meaning it. But I am looking for platform, a political platform, to make some contribution for the good of the people and country - serve the nation in the words of His Majesty. Will it make me a politician? It does not bother me either way. Because it will not affect my values, certainly not in five years, as long as I am within the periphery of my own man-of-value virtues.

The value contribution is not about solving all the problems, not even finding answers to critical ones. If found, well and good. The contribution can come in a smallest form to make a difference down the road. It may be in terms of avoiding small mistakes or influencing correct decision making: good ideas do not die, and have no date for expiration. But good ideas need deep space and mature environment to blossom. My main concern!

Debt-to-GDP

Debt-to-GDP measures the financial leverage of an economy. “The debt can make a country effectively bankrupt. The total debt outstanding at the end of fiscal year ending in June 2011 was estimated at Nu 58.7 billion equivalent representing 80.9% (increase from 66.6% in 2009-10) of GDP of which 47% was rupee debt and 37.9% was foreign debt for convertible currency”…. my concern on country’s debt situation in my blog of 8 April 2012 . The external debt in FY2010-11 was Nu 58.7 billion while its nominal GDP  (total value of goods and services produced at market prices minus imports) recorded  Nu 72.0 billion.

Now it is reported that country’s external debt as of June 2012 has reached  Nu 76.0 billion, an increase of  Nu 17.4 billion (about 30%) from FY2010-11 while GDP for FY 2011-12 is yet to be released.  With such external debt increase, it would not be a surprise to see the debt to nominal GDP ratio going beyond 100% in future.

The nominal GDP for FY 2011-12 would have also increased, taking into account both prices and production increases over the year. If the production of goods and services did not increase during the year, then the entire growth is attributed to an increase in prices alone. So the growth does not reflect any real increase in the production of goods and services.

Of the total rupee debt of Nu 45.0 billion (59% of the total debt), hydropower debt amounts to Nu 32 billion (71% of total rupee debt), and  the short-term liability stands at Nu 13.0 billion (29% of rupee debt)

The short-term liability comprises GOI line of credit: Rs 6 billion; State Bank of India and Punjab National Bank Borrowings: Rs 5.1 billion; and Dungsam Cement debt: Rs 1.8 billion (increased from Rs 1.5 billion in June 2010). 

The convertible currency debt also increased to Nu 30.9 billion (41% of the total debt) from Nu 24.5 billion.

We may take comfort from the fact that the hydropower debt of Nu 32.0 billion (42% of of Nu 76.0 billion) is “self liquidating" with supposedly firm long-term sales contract, and most of the convertible currency debt of Nu 30.9 billion is concessional with easy amortization schedule spread over longer period.

A large portion of the increase in debt is attributed to hydropower loans. The debt increase is likely to continue exponentially for years ahead to complete both ongoing and new hydropower projects (see table below) and to meet other obligations.

Hydropower Projects
Sl.No.	Projects	Capacity MW	Start	Completion	Mode	Work Status
A.  Completed Projects
1.	Chukha Hydropower Plant	336	1979	1988	Bilateral	Completed            (GOI loan liquidated)
2.	Kurichu Hydropower Plant	60	1994	2002	Bilateral	Completed
3.	Tala Hydropower Plant	1,020	1997	2007	Bilateral	Completed
4.	Basochu Hydropower Plant	64	2002	2008	Bilateral (Austria)	Completed
Total		1,480
B.  New Projects
1.	Punatsangchhu-I	1,200	2009	2015	Bilateral	Advance Stage
2.	Mangdechhu	720	2010	2017	Bilateral	Initial Stage
3.	Punatsangchhu-II	990	2010	2019	Bilateral	Initial Stage
4.	Sankosh Reservoir	4,060	2011	2020	Bilateral	Yet to Start
5.	Kuri-Gongri	1,800	2012	2020	Bilateral	Yet to Start
6.	Amochhu Reservoir	620	2012	2018	Bilateral	Yet to Start
7.	Kholongchhu	650	2012	2018	Joint Venture	Yet to Start
8.	Chamkharchhu-I	670	2012	2018	Joint Venture	Yet to Start
9.	Wangchhu	600	2012	2018	Joint Venture	Yet to Start
10.	Bunakha Reservoir	180	2012	2018	Joint Venture	Yet to Start
11.	Nikachhu	208	2012	2017	Druk Green	Yet to Start
12.	Khomachhu	327	2014	2017	Druk Green	Yet to Start
13.	Rotpashong	918	2012	2019	Druk Green	Yet to Start
14.	Gamri	102	2013	2017	Druk Green	Yet to Start
15.	Dagachhu	114	2009	2013	Druk Green	Advance Stage
Total		13,159			Druk Green
Source: Druk Green Power Corporation Limited

Of the 14 new projects (leaving Dagachu aside), 10 projects were identified for the development of 10,000 MW by 2020 under Government of India - Royal Government of Bhutan Framework Agreement. Of which six projects were selected for  bi-lateral funding and remaining four (Kholongchhu, Chamkharchhu-I, Wangchhu Reservoir and Bunakha Reservoir), under joint venture funding by government corporations of Bhutan and India. The remaining four (Nikachhu, Khomachu, Rotpashong and Gamri) are to be developed by Druk Green Corporation out of its own resources.

The Druk Green has estimated that the total investment required for developing 14 projects (excluding Dagachu) as around Nu 190.0 billion.

The World Bank and IMF are of the view that  “a country can be said to achieve external debt sustainability if it can meet its current and future external debt service obligations in full, without recourse to debt rescheduling or the accumulation of arrears and without compromising growth.”  High external debt obviously is believed to have harmful effects on an economy.

Some economists believe that economic growth begins to suffer when a country's debt-to-GDP ratio exceeds 90%.

Also, there is a difference between external debt nominated in domestic currency, and external debt nominated in foreign currency. A nation can service external debt nominated in domestic currency by tax revenues, but all of the money used to service foreign currency debt has to come from a country's balance of payment transfers.

At this point can we afford financial recklessness? Absolutely not !  “The credit works on an economy like steroids on the body of an athlete: you need ever larger injections to maintain the effect”  says Edward Chancellor, global strategist, GMO (investment management firm).