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Bhutan Country Brief - June 2008

Political overview

System of government

The Kingdom of Bhutan’s first democratic elections were held on 24 March 2008. These followed elections in December 2007 for the National Council, Bhutan’s upper house. The move toward democracy began in 2000, when the King decreed that day-to-day affairs would be handled by a council of ministers. In December 2006, the King abdicated power to his eldest son, Jigme Khesar Namgyel Wangchuck, ahead of the implementation of major political reforms. A 39- member Constitution Drafting Committee was appointed by the King to draft the country’s first written Constitution. The Constitution was intended to transform the absolute monarchy into a two-party democratic system.

The 24 March 2008 Elections

Mock elections were held in April-May 2007 to educate the public on democratic processes. Elections for the National Council were held on 31 December 2007. Elections for the National Assembly, the lower house which determines the government, were held on 24 March 2008 and were contested by two major political parties, People's Democratic Party and Druk Phuensum Tshogpa. (Bhutan Harmony Party-DPT). Voters delivered a landslide victory to the DPT, which took 45 out of the 47 seats in the National Assembly.

Economic overview

Bhutan has a history of fiscal prudence and good governance, very little debt and is assisted by the nominal anchor provided by the currency peg to the Indian rupee. Bhutanese products enjoy free access to the large Indian market and India is Bhutan’s main trade and development assistance partner.

Bhutan’s Ninth Five Year Plan (2002-2007), launched in July 2002, is guided by five overall goals:

  1. Improving quality of life and income, especially of the poor;
  2. Ensuring good governance;
  3. Promoting private sector growth and employment generation;
  4. Preserving and promoting cultural heritage and environment conservation; and
  5. Achieving rapid economic growth and transformation.

The King’s desire to divest the monarchy of many of its traditional roles through enactment of a new Constitution and election of local government representatives underpins the most recent Five Year Plan. The Plan aims to expand services, especially in secondary education and health, strengthen the economy by improving infrastructure, especially roads, and increase domestic revenues through improved tax collection. It will seek to expand the private sector with particular emphasis on employment generation. Tourism is seen as a key area for growth: To date, the Government of Bhutan has adopted a cautious approach to tourism and development policy so as to control the negative impacts of tourism on culture and the environment. Bhutan is working to improve the business environment by reforming the financial sector, reducing trade and investment barriers and keeping the government compact and efficient. Bhutan’s tenth Five Year Plan has royal ascent, but will remain in draft form until approved by the new Government.

The United Nations Development Programme (UNDP) Human Development Report (2007) ranks Bhutan 133 out of 177 countries in terms of the human development index (HDI) (which measures countries’ relative standing in terms of life expectancy, educational attainment and adjusted real income).

Bhutan faces the challenge of matching gains from strong economic growth (6-8 per cent per annum since the mid 1980s) to rising expectations of expanding employment opportunities and welfare improvements, while preserving its environment and culture. Changed community expectations as a result of the introduction of television and the internet add to the challenge. Providing employment opportunities for an expanding and increasingly urban and educated labour force will not be easy.

Bilateral relationship

Australia and Bhutan traditionally have enjoyed warm and friendly relations, going back many years before the two countries established formal diplomatic relations on 14 September 2002. Mr John McCarthy is currently Ambassador to Bhutan (accredited from New Delhi). The then Foreign Minister of Bhutan, Lyonpo Jigme Y. Thinley, visited Australia from 1 to 6 June 2003. Ms Catherine Harris AO PSM, who is based in Sydney, is the Honorary Consul for Bhutan in Australia.

An Australia-Bhutan Friendship Association (ABFA) was launched on 3 March 2003 in Thimphu to promote information exchanges and 'networking' between the people of the two countries.

Bilateral Aid Program

Australia has a long standing bilateral aid program in Bhutan, which was first established under the Colombo Plan. A large number of Bhutanese officials have received education or training in Australia. Representatives from the NSW Rural Fire Service went to Bhutan in April 2004 to train forest officials in fire-fighting techniques.

Australia will provide an estimated $3.23 million in total aid flows to Bhutan in 2008-09, almost all in the form of Australian Development Scholarships. For further information refer to the website of AusAID.