INTO THE

NEXT DECADE
A Roadmap for DHI and Group
Druk Holding & Investments Limited
Motithang, Thimphu, Bhutan
Post Box 1127
Phone: 00975-2-336257/58
Fax: 00975-2-336259
www.dhi.bt
©DHI, 2018

Content development: Druk Holding and Investments Limited

Design & print: Yoebar Prints - [email protected]
 INTO THE
NEXT DECADE
A Roadmap for DHI and Group

1
16 2 ROADMAP 2030
MANAGING AND SAFEGUARDING NATION’S WEALTH
 DEDICATION
To the people of Bhutan, the trustees of
the nation’s resources

3
 TABLE OF
CONTENTS

4 ROADMAP 2030
 FOREWORD 6

INTRODUCTION 9

A DECADE OF DHI 11
Performance Improvement 12
Resource Optimization 14
New Investments 16
Private Sector Development 18
Revenue To Government 20

MACRO-ECONOMIC VIEW 22
Bhutan’s Socio-Economic Development Progress 23
Bhutan’s Economic Development Goal 24
Dhi And Economy 25
Key Challenges 26

THE NEXT DECADE 29

Mission 30
Vision 31
Destination 32
Guiding Themes 33

GOALS, OBJECTIVES AND MILESTONES 39

Performance Improvement 40
Resource Optimization 44
New Investments 48
Leading And Complementing Private Sector 78
Revenue To The Government 80

DHI IN 2030 82
Performance Excellence 84
Human Capital Excellence 86
Economic Transformation 88

CONCLUSION 91

ANNEXURES 92
Acronyms 98

5
 FOREWORD
DHI completed its first 10 years on 11th performance of companies, thereby,
November 2017. In keeping with the contributing to growing dividends and
vision enshrined in the Royal Charter, DHI taxes to the Government. For fiscal year
has lived up to the mandates set out for 2016/17, its share comprised 41% of the
the decade. government’s total internal revenue, which
helped finance 50% of the total recurrent
It braved many challenges that riddled the expenditure. Besides, it also made modest
company’s journey thus far. The outcome investments and was able to support
has been in its acceptance as the company private sector development through
it was conceived and later evolved entrepreneur promotion initiatives.
into, besides being able to establish its
autonomy and consolidate the Group. Stepping into the next decade, DHI plans
to accelerate the growth and contribute
DHI, today, is an integral part of the twice as much as in the first decade.
Bhutanese corporate landscape and shares
a harmonious and professional working The government has proposed a new
relationship with all of its companies. economic development goal to attain
In operations, it was able to enhance upper middle-income country status with
corporate governance, improve GNI per capita of at least USD 11,000

6 ROADMAP 2030
by 2030. This will be made possible for the Group’s success, Human Capital
primarily due to the commissioning of the Excellence is the final theme.
hydropower projects under construction,
or in advanced stages of construction. While significant improvements in
Bhutan will have an additional 3,658MW product quality, service efficiency and
of power in the next five years; an addition people productivity will be made, there
of 228% on the current capacity and an will still be challenges to cope with,
additional 768MW of firm power. especially in meeting people’s growing
expectations.
For the same reason, DHI intends to
increase its contribution to government’s Major investments slated for the decade
internal revenue and finance entire will have to battle policy and regulatory
recurrent expenditure for the 2029/30 challenges, including those related
fiscal year. Conscious of the need to to finding appropriate partners and
maintain adequate liquidity in times investors, given Bhutan’s small economy.
of national exigencies, DHI also aims The Group will also have to grapple
to increase the Bhutan Future Fund, with development of world-class human
established on 11th November 2017 with capital, capable of taking up projects with
a seed fund of Nu. 300 million, to Nu. 30 in-house capacity and expertise.
billion in 2030.
Nonetheless, with steadfast and dedicated
DHI has adopted three key themes to support of shareholders, unfaltering
guide the Group through the new decade. commitment and hard work of boards,
Resolved to increasing shareholders’ managements and employees, all under
return, primarily through efficiency and the enlightened guidance of His Majesty
productivity, Performance Excellence is the King, we will achieve unprecedented
the first theme. Determined to accelerate growth in the coming decade.
growth of non-hydro segments,
help economic diversification and
finance government’s entire recurrent
expenditures, Economic Transformation Dasho Ugen Chewang
is the second theme. Finally, mindful of Chairman
HR being the single most critical element Druk Holding and Investments Limited

7
 ROYAL CHARTER FOR DRUK HOLDING AND INVESTMENTS

8 ROADMAP 2030
 INTRODUCTION
On 11th November 2007, His Majesty issued was in establishing the autonomy of DHI.
a Royal Charter establishing Druk Holding Fortunately, whenever there were doubts
and Investments Limited (DHI) to hold and about how issues were to be resolved,
manage the existing and future investments the Royal Charter provided the clarity and
of the Royal Government for the long-term inspiration in meeting these challenges.
benefit of the people of Bhutan. DHI developed the ownership policy, which
provided a framework for administering its
In keeping with the Charter, DHI was portfolio companies and defining its key
formed with an initial grouping of selected relationships with other stakeholders. With its
companies1 in hydropower, banking, natural implementation, DHI firmly established itself
resources and manufacturing sectors, where as the largest and only government holding
the government had full or partial stake. The and investment company in the country.
company started with a total net worth of Nu.
19,558.12 million. In order to ensure that DHI creates and
maximises returns to its shareholders, the
Being a revolutionary concept in the country, 19 primary functions highlighted in the Royal
the establishment of DHI, however, posed Charter, were summarised and grouped into
some challenges. The greatest challenge a Thrust Area Framework, as illustrated in
was in its existence itself, as it had to justify Figure 1, and used as the basis for making
the need for the country to have a holding strategic plans, setting targets and evaluating
company. Operationally, the biggest challenge performance.

T1 Performance Improvement

T22 Resource Optimization

T3 New Investments

T4 Private Sector Development

T5 Revenue to the Government

Thrust area framework

1
DGPC, BPC, Drukair, BTL, BOB, NRDCL, RICBL, BNB, STCBL, BBPL, PCAL, BFAL

9
10 ROADMAP 2030
 A DECADE OF DHI
The first 10 years were largely a period of consolidation. As a new entity, DHI needed to establish
and clarify its role, while strengthening the subsidiary companies to improve corporate governance
and performance.

This involved developing processes and systems to institute and enhance a culture of performance,
accountability and responsibility in the companies. It also involved ploughing back profits to
existing companies to modernize systems and upgrade infrastructure for more efficient service
delivery. Further, DHI also made achievements in new investments through setting up of Thimphu
Tech-Park Limited, Dagachhu Hydro Power Corporation, Nikachhu power project and others that
were carried out through the subsidiaries.

The achievement of the first decade are presented through the five thrust areas.
11
PERFORMANCE IMPROVEMENT

12 ROADMAP 2030
DHI instituted a very strong performance turn ensured selection and appointment of
driven culture in its companies. Although the right leader for each company.
it is only ten years old, DHI has already
earned acknowledgement and recognition Several other policies and applications have
for excelling in corporate governance. DHI’s been put in place to enhance the performance
achievement is a culmination of the numerous of the group. To improve service delivery of
game-changing initiatives it took to transform customer-oriented companies, DHI instituted
the companies. The main ones being the re- the annual independent customer satisfaction
composition of Board Directors, PMS and HR survey in 2012. In order to ensure growth and
Guidelines with flexibility for top management competitiveness, companies were mandated
recruitment and remuneration. to prepare Five-Year Financing and Investment
Plans (FYFIPs) from 2009, required to be
It started with the introduction of the Annual updated annually.
Compact in 2008. The compact, signed every
year between DHI and the companies, is Avenues such as the CEO Round Table Meeting
the guiding document for the companies. (RTM), Chairmen’s Forum and CXO Forums
The performance-based variable pays and were initiated to foster group wide synergy.
allowances of the companies are tied to the These forums have made it easier to align
achievement of the targets in the compact. the companies toward the overall vision of
A mother document for target setting, the the Royal Charter. The day to day operations
Compact Guideline was developed in 2009. of DHI companies are made easier with the
This has enabled our companies to become introduction of Enterprise Resource Planning
more efficient while posting higher revenues (ERP) application in most of the companies.
and profits at the same time.
Through these initiatives, DHI and its
The Ownership Policy outlines DHI’s companies have championed the twin pillars
relationship with the companies and therefore of corporate governance and performance
the application of its Corporate Governance management. DHI has already started making
Code (CG Code). The CG Code includes the its presence felt in the region. It will continue
Guidelines for the Board of Directors and the its efforts towards achieving excellence in
appointment of the Chief Executive Officers Corporate Governance and seek a place
of companies. Through this, DHI could ensure among the global CG champions in the
selection of the right composition of Board coming ten years.
Directors specific to each company, which in

13
RESOURCE OPTIMIZATION

14 ROADMAP 2030
Before being consolidated under one holding into new areas of construction such as into
company, the existing government companies hydropower and transmission infrastructure.
were operating in independent silos.
Recognising that the cumulative cost for DHI DHI launched the Inter-Corporate Loan
would have been extremely high if companies Policy and Corporate Guarantee Policy in
continued to conduct business as before, the 2015. The inter-corporate loan enabled easy
first task of DHI was to consolidate resources access to short-term loans among companies
and avoid duplication of the existing and at mutually beneficial interest rates. DCCL,
new services. While consolidating, DHI also one of DHI’s companies that frequently runs
prudently allowed flexibilities in enabling short of funds due to the industry dynamics,
companies, such as DGPC, to set up their own benefitted most from inter-corporate
subsidiaries for optimal use of HR and financial reserves. The company also secured an
resources and leverage their strengths within external commercial borrowing of INR 2
the sectors. billion through DHI Corporate Guarantee.

The consolidation of the lands owned by The Inter-Corporate Loan has been extended
the companies under the ownership of DHI to other controlled companies with lower DHI
was one of the biggest achievements of shareholdings like DPL. This has brought about
DHI in terms of resource optimization. The huge savings in cost of funds for companies.
transfer of company-owned lands to DHI
ensures perpetual state ownership of this DHI has also been encouraging cross-company
precious asset which could otherwise have businesses to reduce outflow of capital and
been converted to private ownership in strengthen group-wide synergy. Launched
case of divestments in the future. This also in 2014, Bhutan Telecom’s data centre now
guarantees land availability for expansion of houses the servers of DHI companies like
existing companies and for new initiatives. DGPC and BoB, among others.

DHI took a bold leap in 2016 by merging CDCL Several resource optimization studies
and DHI INFRA. The latter was formed by DHI were done ranging from consolidating
in its early years of operation as a company transportation to centralising procurement.
that would specialize in infrastructure The aforementioned are some of the prioritised
development. The former, transferred initiatives in the first decade. Additionally, our
to DHI in 2015, was also a government companies benefitted through inter-company
undertaking specialized in construction. The human resource pooling and through DHI’s
companies were merged to avoid existence consulting services. As the next decade unfolds,
of two companies with similar mandates. The more such initiatives will be considered to
initiative enabled the merged CDCL to venture optimize resources in the group.

15
NEW INVESTMENTS
Investment is a key mandate of DHI. Ever foreign ICT companies employing more than
since its inception, DHI has made a number 700 Bhutanese youth.
of new investments in various sectors, while
also investing in existing companies to DHI embarked onto another joint venture
expand their businesses, diversify products in 2011 with Shin Nippon Biomedical
and services, and to maximise returns. Laboratories Limited (SNBL) to start Koufuku
International Private Limited (KIPL), a dairy
One of the first investments of DHI was the plant in Chenary - Trashigang with Gouda
Thimphu TechPark Limited (TTPL), a joint cheese as its premium product, for export
venture between DHI and Assetz Property to the Japanese market. To take lead in the
Group (APG). DHI took full ownership of the long-term interest of the company, DHI took
company in 2014. TTPL started making profit over 71% of SNBL’s shares and increased the
by 2015. Today the tech-park houses about 10 ownership to 80% in 2017. Today, the plant

16 ROADMAP 2030
buys a minimum of 1,000 litres of milk from hopes to curb import and also promote brand
farmers in Trashigang, paying them about Nu. Bhutan in a global market through export of
30,000 everyday. pharmaceutical products. DHI is also setting up
the largest steel manufacturing unit in Bhutan
Along with the takeover of Dungsam Cement and Northeast India with an installed capacity
Corporation Limited (DCCL) project in 2009, of 200,000 MTPA in Motanga Industrial Park,
DHI also started Dungsam Polymer limited Samdrup Jongkhar. A power intensive plant, the
(DPL) in Nganglam, and offered 49% of its unit is expected to add value to the country’s
shareholding to the people of Bhutan. One of cheap renewable energy, generate employment
the most strategic and profitable investments and earn convertible currency from exports.
of DHI was the establishment of State Mining
Corporation Limited (SMCL) in 2014. SMCL To revitalise, restructure and expand the
currently operates a coal mine in Samdrup businesses of existing companies, DHI
Jongkhar and will be taking up more mines has also been making investments in its
in future. SMCL demonstrated its revenue existing companies. In the past decade,
earning potential for the government when it Drukair increased its fleet to four aircrafts.
made profits and even declared dividends just Further, investments in two new aircrafts, an
in the second year of its operation. additional Airbus and replacement of an ATR,
have already been approved for future growth
With support from the Ministry of Finance and expansion.
(MoF), and financing secured from the Asian
Development Bank through substantial grants The Group also ventured into major endeavors
and low-cost debt, DHI is undertaking the in the energy sector through DGPC, BPC
Phuntsholing Township Development Project. and CDCL. Among others, DGPC completed
The project, which was initially conceived the construction of the 126 MW Dagachhu
to mitigate the risk of floods to the existing project and started the 118 MW Nikachhu
township and improve the quality of life of project. DGPC also completed a number of
its residents, will reclaim more than 162 diversion schemes such as the Tsibjalumchhu
acres of land by training the Amochu river. to augment generation from its existing
The river bank protection works will start in Chhukha and Tala power plants. DGPC further
2018. The project will be implemented by established Bhutan Hydropower services with
the Construction Development Corporation Alstom and recently entered into a partnership
Limited (CDCL), a subsidiary of DHI. with Andritz to start Bhutan Automation to
provide automation services to hydropower
DHI recently partnered with Azista Industries stations, substations and related industries.
Pvt. Ltd., India and formed Azista Bhutan DHI will continue to invest in new ventures
Healthcare Limited, a pharmaceutical and existing companies on a year on year
company. The plant is under construction in basis.
Samdrup Jongkhar. Through this project DHI

17
PRIVATE SECTOR DEVELOPMENT

18 ROADMAP 2030
Recognising the importance of the private in partnership with Department of Roads,
sector for creation of better opportunities Ministry of Works and Human Settlement,
and overall socio-economic growth in the College of Science and Technology, CDCL and
country, DHI also played a role in leading, DCCL has initiated a study to assess techno-
complementing and spearheading growth economic viability of cement concrete roads
of a dynamic private sector. In keeping with in Bhutan as a substitute for bituminous roads.
the Royal Charter, the DHI-Private Sector The preliminary results are very encouraging.
Partnership Framework (DPP Framework) was
developed to enable DHI and its subsidiary DHI also maintains a Corpus Fund at BoB to
companies to undertake projects with the help entrepreneurs access capital in the form of
private sector in an objective and transparent bank guarantee for bidding of contract works,
manner. supplies or services. The fund is available
to entrepreneurs bidding for small contract
In 2012, a comprehensive entrepreneurship works/supplies/services up to Nu.1.5 million.
development program, “BEGIN” (Business
Entrepreneurship Growth and Innovation) In 2018, DHI launched the DHI Business
was framed for private sector development. Acceleration Program, (DHI BiZAP) in
DHI helped smaller entrepreneurs to develop partnership with IC2 institute, University
new ideas and expand their businesses. of Texas. It is aimed at complementing the
The program was later merged with Loden growth of the cottage and small industry
Foundation’s entrepreneurship program and in the country. This high level structured
a special fund of Nu. 20 million was created training is expected to sharpen entrepreneurs’
to provide collateral and interest free loans value proposition, define target markets, get
to prospective entrepreneurs. A total of 30 market feedback on product/technology and
entrepreneurs in diverse sectors benefitted determine effective business model for an
from the fund. enterprise. Graduates from this prestigious
program will immensely benefit from IC2’s
Since its operation in 2012, TTPL’s Bhutan rich and wide mentorship network with
Innovation and Technology Center (BITC) has local support consisting of subject matter
helped numerous start-ups. Similarly, with an experts at DHI and experienced Bhutanese
objective of bolstering private sector growth, entrepreneurs.
DHI played a leading role in organising the
first ever Better Business Summit in 2014. Beyond that, the DHI companies have been
paving the way for the private sector to improve
Considering the high demand for herbal products and services, while enhancing
products and mismatch in demand and supply efficiencies and quality. For instance, CDCL
of Bhutanese herbal products, DHI assisted has set very high standards for construction
Menjong Sorig Pharmaceutical (MSP) in in terms of work quality and the engagement
carrying out an R&D for herbal product. DHI of hundred percent Bhutanese workforce. In
and MSP identified herbal tea as a potential the power sector, inroads have been made
project and, following that, pilot manufacture for greater participation by the Bhutanese in
of cinnamon tea was carried out. Upon transport, supplies of construction material
realising its success, the product has now and in the construction of tunnels, dams and
been transferred to MSP. Additionally, DHI power houses.

19
REVENUE TO GOVERNMENT

20 ROADMAP 2030
One of DHI’s primary functions is to maximise In the five-year period (2002-2006) preceding
returns on investments and, thereby, ensure DHI’s inception, MoF collected a total
steady stream of revenue to the government. dividend of Nu. 8,257.22 million. It accounted
In order to fulfill the mandate, the foremost for 25.10% of the government revenue then.
task DHI had to undertake was improve
performances of the companies and, thereby, However, following the transfer of government
ensure a sustained revenue from them. linked companies to DHI in 2007, the total
dividend income for the following five years
In the past decade, DHI’s standalone revenue (or DHI’s first five years: 2008-2013) increased
increased from Nu. 4,508.43 million in 2008 to Nu. 11,708.432 million (registering 15%
to Nu. 7,922.98 million in 2017. The return on CAGR), and to Nu. 30,116.00 million for the
equity averaged at 8.55%. All the returns came 10-year period (registering CAGR of 22.50%).
from the companies that were transferred to Today, DHI’s dividend contribution accounts
DHI during its formation, mainly the hydro for 42% of total government revenue.
sector companies (DGPC and BPC). Averaging
at 86.56%, the combined dividend income In addition to dividend payments, for the
from DGPC and BPC did not drop below 84% first ten years, DHI also contributed Nu.
in the last five years. 16,125.40 million as its income tax and the
Group companies contributed Nu. 40,089.19
DHI in its first 10 years (from 2008 – 2018), million as their income taxes. Further, DGPC
contributed a total dividend of Nu. 30,116.00 also makes a royalty payment averaging Nu.
million to MoF. Dividend contribution increased 2,300 million a year; accounted for at 15% of
from Nu. 1,463.85 million paid for FY2008 to annual energy generation.
Nu. 4,038.23 million paid for FY2017.

2
DHI’s dividend for the first five years does not include Tala’s contribution.

21
 MACRO-ECONOMIC VIEW

22 ROADMAP 2030
BHUTAN’S SOCIO-ECONOMIC
DEVELOPMENT PROGRESS
Under the visionary leadership of its level was found to be 110. The median age
monarchs, Bhutan has become emblematic of was found to be 26.9 years, indicating that
a politically stable, economically prosperous half of Bhutan’s population is younger than
and spiritually happy country in South Asia 26.9 years. The total dependency ratio was
and beyond. Bhutan achieved significant found to be 47.0, implying that for every 100
socio-economic development since the start economically active persons, there are 47.0
of planned activities in early 1960s. dependents.

Poverty has been reduced from a high of 36.3% In terms of the economy4, Bhutan has been
in 20003 to 12% in 2012. Today, Bhutan’s achieving impressive growth rates over the last
general literacy rate reached 71.4% and youth decade. However, given its shallow economic
literacy at 93.1%. Since the introduction of base, its GDP is small by most international
modern health care system in early 1960s, standards. Bhutan’s total GDP was about Nu.
health facilities cover 95% of the total 148,678.93 million in 2016, having grown
population, ensuring that a health facility is from about Nu. 54,712.89 million in 2008,
within three hours walking distance of any registering an average growth rate of 6.57% for
human settlement. the period. On the other hand, given its small
population size, Bhutan enjoys a relatively
About 97% of all births in the 12 months high per capita GDP. The per capita GDP has
preceding the 2017 Census were attended increased to Nu. 193,447.02 in 2016 from Nu.
by health professionals. According to the 81,586.13 in 2008. Similarly, the per capita
National Health Survey of 2012, there has GNI has also increased to Nu. 177,294.94 (or
been significant decline in mortality rates USD 2,640.17) in 2016 from Nu. 79,380.65 (or
compared to 1984 – infant mortality rate has USD 1,824.42) in 2008.
declined from 102.8 to 30 per 1,000 live births;
and maternal mortality has declined from 777 Correspondingly, government’s revenue
to 86 per 100,000 live births. Similarly, the also increased during the period. The total
overall life expectancy has also increased to revenue increased to Nu. 29,713.60 million
70.2 years in 2017 from 66.3 in 2005. in 2017 compared to Nu. 12,345.99 million
in 2008. Revenue in 2017 was 19.62% of the
As per the Population and Housing Census GDP as compared to 24.11% of GDP for 2008.
of Bhutan 2017, Bhutan’s total resident Similarly, the total expenditure also increased
population as of 30th May 2017 was 735,553 to Nu. 49,966.60 million in 2017 from Nu.
persons. Out of the total population, 681,720 19,693.03 million in 2008. In keeping with
persons were Bhutanese and 53,833 persons the Constitution, all recurrent expenditures
non-Bhutanese, including 8,408 tourists. for the period were met through domestic
The sex ratio of the population (number of revenues.
males for every 100 females) at the national

3
Poverty assessment started in 2000
4
Source: National Accounts Statistics 2017

23
BHUTAN’S ECONOMIC
DEVELOPMENT GOAL
At per capita GNI of USD 2,640.175 in 2016, Considering payments made by DGPC on
Bhutan is considered a lower middle- account of royalty energy (Nu. 2,275.58 million
income country, but considering structural for FY2017) and 85% of DHI’s dividend coming
impediments to sustainable development, from DGPC and BPC, electricity’s contribution
Bhutan remains in the Least Developed increases to 29.34%. Its contribution to 2016
Country (LDC) bracket. GDP was 13.36%. Further, Bhutan registered
the highest GDP growths either during
However, considering that Bhutan has met completion of a mega hydropower project or
all three criteria6, the UN’s Committee for when a substantial export tariff increase came
Development Policy (CDP) has recommended into effect.
for Bhutan’s graduation from LDC status in the
forthcoming UN General Assembly. Bhutan’s Hence, based on the assessment of the
policy on graduating from its current Least optimal pace of hydropower development
Developed Country (LDC) status has been for economic progress and in consideration
implicit in its vision 2020 document which of the result7 of the ‘baseline scenario’8
envisages Bhutan as a middle-income country therein, Bhutan’s proposed new economic
by 2020. Besides, the EDP also envisions self- development target is “to achieve upper
reliance by 2020. Similarly, in its 11th Five middle-income status by 2030”.
Year Plan, the government explicitly included
graduation from the LDC category by 2020 According to the World Bank, an upper-middle
as one of the key targets to be achieved. income country is defined as any nation which
However, absence of quantitative measures has a GNI per capita range between $3,896 -
resulted in difficulties to set specific economic $12,055. This means Bhutan must achieve an
goals for the country. average economic growth rate of 7.7%9, which
would be one of the highest in the world.
As the key driver of our economy, hydropower
is considered the cornerstone of Bhutan’s DHI and Group companies will have to play
socio-economic development policy and of an increasingly critical role of doubling its
strategic importance to the future of Bhutan’s revenues to the government, to help Bhutan
economy and economic diversification. For attain the “upper middle-income’ country
instance, in 2016/2017, electricity sector status by 2030.
contributed 10.3% of total internal revenue.

5
National Accounts Statistics, 2017;
6
(as per UN’s CDP Report 2018): (i) GNI per capita $ 2,401, against the threshold of $1,230, (ii) Human Asset Index (HAI) 72.9, against the threshold of ‘66 or
above’, and (iii) Economic Vulnerability Index (EVI) of 36.3, still above the threshold of ‘32 or below’, the index is much lower than LDC’s 41.3.
7
With the completion of the ‘Baseline projects’ within 2023*, average economic growth rate is expected at 6.8% from 12th FYP – 14th FYP, Hydropower
Development Strategy 2017;
8
With two mega projects (Punatsangchhu I & II), two large projects (Mangdechhu and Kholongchhu) and one medium size project (Nikachhu), there will be 3,658
MW capacity addition, taking the total capacity to 5,264 MW, Hydropower Development Strategy 2017;
9
While the baseline scenario itself puts Bhutan to an upper middle-income status and projects an economic growth rate at 6.8%, the scenario also projects
a breach in the constitutional requirement for Forex reserve. Hence, there is a need to take up an additional power plant project, which then projects an
economic growth rate of 7.7%, Hydropower Development Strategy 2017;

24 ROADMAP 2030
DHI AND ECONOMY
Ever since its inception, the Group has From Nu. 4,364.28 million in 2008, the Group’s
contributed significantly to the national total contribution to the government revenue
revenue. The contributions are mainly through increased to Nu. 12,253.28 million in 2017,
dividend paid to the Ministry of Finance registering a compounded annual growth
(MoF) by DHI, DHI’s standalone income tax rate (CAGR) of 10.88%. The total contribution
and Group companies’ income taxes10 paid for the first 10 years is exhibited in the chart
directly to the government. below:

Group's total contribution to MoF (in million Nu.)

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
DHI dividend 1,463.85 1,451.59 2,864.35 2,989.37 2,939.27 3,127.53 3,769.98 3,689.74 3,782.10 4,038.23
DHI standalone tax 1,332.16 1,516.24 1,327.03 1,292.39 1,267.01 1,361.65 1,666.15 1,855.77 2,180.93 2,326.06
Group companies' tax 1,568.28 2,842.30 3,076.09 2,858.99 3,022.16 4,629.91 5,034.09 5,261.77 5,906.61 5,888.99

Group's vs others' contributions to National Revenue (41.69%) 17,460

16,164
14,334
12,774
13,126 11,983
10,318
8,371
8,239
7,982 11,870 12,253
10,470 10,807 (41%)
9,119 (41%)
(45%) (43%)
7,267 7,141 7,228 (43%)
4,364 5,810 (46%) (41%) (36%)
(35%) (41%)
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Group Contribution Others

10
Income taxes of companies considered fully owned as per the Bhutanese Accounting Standards (BAS) are considered in Group’s contribution.

25
Its contribution to the government’s internal last decade, the Group’s average contribution
revenue increased from Nu. 4,364 million to the total internal revenue (for 10 years) was
in 2008, which was 35% of the total, to Nu. 41.69%. The Group helped finance 50.78% of
12,253 million in 2017, which is 41.24% of government’s recurrent expenditure in 2017.
the total. Including payments made by DGPC It grew from 44.87% in 2008. Overall, for the
on account of Royalty energy (Nu. 2,275.58 last 10 years, the Group covered 50.30% of
million for 2017), the total contribution for government’s total recurrent expenditure.
2017 increases to Nu. 14,528.86 million, which The contributions are illustrated in the charts
is 48.89% of the total internal revenue. For the below:
Financing government's recurrent expenditure (50.30%)
Financing government’s recurrent expenditure (50.30%)
24,130
22,880
22,044

18,626 17,897

16,706
13,837 14,735

11,061
9,726
11,870 12,253
10,470 10,807 (51%)
9,119 (52%)
(59%) (49%)
7,267 7,141 7,228 (49%)
4,364 5,810 (53%) (43%)
(48%)
(45%) (53%)
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Group Contribution Total recurrent expenditure

KEY CHALLENGES
According to the Economic Development Policy 23,495.12 million in 2008, while exports
2016, sustainable economic growth continues increased only marginally to Nu. 37,297 million
to remain a major challenge in Bhutan and from Nu. 22,590.64 million in 2008. Electricity
economic growth is largely financed by external export comprised 32.13% of total export for
aid. The major constraints facing economic 2017. Excluding export of electricity, total
growth in Bhutan, as outlined in the EDP, are: exports increased by 119% from 2008 (or Nu.
13,756 million) whereas imports increased by
i. A small domestic market;
ii. Narrow export product base and markets;
185% from 2008 (or Nu. 43,499 million). The
iii. Inadequate infrastructure; overall trade imbalance stood at Nu. 29,299
iv. High transportation cost; million, with more than 75% of it with India.
v. Difficult access to finance;
vi. Inconsistent policies/lack of coordination; The quantum of imports from India (Nu.
vii. Lack of management skills; 53,973 million) and export to India (Nu.
viii. Shortage of professionals; 31,618 million) formed more than 81% to
ix. Low productivity of labor; 85% of the overall imports and exports,
x. Absence of R&D capability; and respectively in 2017. Due to this structure,
xi. Access to land. prices of commodities in Bhutan broadly
Bhutan’s imports increased almost three follow developments in India and, hence,
folds to Nu. 66,996 million in 2017 from Nu. inflation is largely tied to the Indian economy.

26 ROADMAP 2030
Considering how the Indian economy remaining in USD 4.45 million, an increase by
influences Bhutan’s growth, it is important to 178 percent compared to the previous year.
assess and understand multiple dimensions The increase in inflow was driven by the inflow
between the two markets. Understanding the of additional capital in projects approved
market dynamics of the two countries will help prior to 2016, as the number of projects
determine the areas of concern, opportunities approved during the year remained same as
and policy interventions, if Bhutan is to balance previous year. Overall, the tax contribution of
the existing trade imbalance. Even the slightest FDI projects were to the tune of Nu. 1580.67
change in Indian economic policy impacts our million, which is equal to 7.23 percent of the
economy. For example, the introduction in tax revenue for the year 2016.
India of the Goods and Service Tax (GST) in
2017 significantly reduced the competitive Hydropower is the main economic driver of
edge of Bhutan’s export-oriented industries. Bhutan, with 85% of the Group’s contribution
coming from this sector. Including royalty
Bhutan claims the 82nd place in the Global payments made to the government, the
Competitiveness Report 2017-18 released sector’s contribution could be well within 40%
by the World Economic Forum (WEF), which of the government revenue.
is a 15-place jump from the 97th position
in the previous year. In South Asia, Bhutan Currently operational projects represent 7%
is placed second after India (40). The WEF (1,606 MW) of the techno-economically viable
classifies Bhutan among 17 economies, potential of 23,760 MW. The hydropower
including Vietnam, the Philippines, Nigeria sector is expected to harness another 3,658
and Kuwait, that are transitioning from stage MW of power from projects, which are under
one factor-driven economies dependent on construction and a few that are about to start.
the basic requirement measure to stage two In the coming decade, hydropower could
or efficiency-driven economies. represent as high as 50% of Bhutan’s GDP.

The report’s executive opinion survey found The fact underscores the critical role
that the five most problematic factors to hydropower plays in the economic development
doing business in Bhutan, in order, are: of Bhutan. Any major policy changes in the pace
i. access to financing; of hydropower development would need deep
ii. restrictive labour regulations; considerations to ensure benefits are maximised
iii. inadequate supply of infrastructure; while adverse impacts to the Bhutanese
iv. poor work ethics in the National Labour force; economy are reduced to the extent possible.
and
v. forex regulations. As the O&M of the hydro-plants are entrusted
Adding to the list are other factors like to the Group, it will be very important that
unskilled work force, insufficient capacity to DHI and Group companies render all possible
innovate, inefficient government bureaucracy, support to the hydro sector companies, thus
tax regulation s and tax rates. ensuring plants are operated at their optimal
capacities and maintained well to avoid
The share of FDI to GDP of Bhutan remains unpleasant events in future. As the Group will
relatively low compared with other developing also play an increasingly important role in
countries. In terms of stock, FDI represents developing the hydropower potential in the
less than 10% of GDP. In 2016, FDI capital future, DHI and Group will need to invest not
inflow totaled Nu. 600.53 million, of which just in O&M but also in building capacity in the
306.70 million was in Indian Rupee and the complete chain of “water-to-wire” business.

27
28 ROADMAP 2030
 THE NEXT DECADE
Considered mainly a period of consolidation, aspect of its performance will be monitored
DHI was still able to enhance corporate closely.
governance and improve performances of its
companies in the first 10 years. The group Hence, in the next decade, the Group should
was also able to contribute significantly to focus primarily on economic development
the government’s internal revenues. While and play a significant role in taking Bhutan
the group takes pride in the first decade’s to an ‘upper middle-income country’ status
achievements, the coming decade, with its by 2030. The Royal Charter also envisions the
many challenges and opportunities, calls for need to build a strong dynamic economy as
DHI to work harder and smarter. one of the five aspirations.

In the backdrop of Bhutan’s new economic Consequently, to guide the group companies
development goal, which was proposed based into the next phase, DHI must reflect upon
on the results of assessment for optimal pace its purpose and re-establish the high-level
of hydropower development, the Group will strategic elements, a solid foundation on
have to play a significant role while being which to build successes for the next decade
mindful that it will have to take in operations - the Mission, the Vision and the Guiding
and management of additional hydropower Themes to fulfill the 2030 Destination. These
plants, and play a bigger role in the elements reflect the organization’s purpose,
development of new hydropower potential. what it intends to be in the future, and the
Expectations from all other economic sectors main drivers of success for the next 10 years.
will be higher than the first decade, and every

29
MISSION
Organizations are formed for a purpose or a e. Provide guarantees: to the government
mission. His Majesty issued a Royal Charter companies, where required;
on 11th November 2007 and established DHI f. Divest shares in government companies
to hold and manage the existing and future with no strategic interest: to the
investments of the Royal Government for the government or where government
long-term benefit of the people of Bhutan. participation may not be necessary;
g. Raise funds: through borrowing from
The primary purpose of DHI is to ensure domestic and international financial
that its companies meet the challenges and institutions and through the issuance
requirements of the corporate sector in a of debt, equity or other securities in
highly competitive global economy, such the domestic and international capital
that DHI creates and maximises returns to its markets;
shareholders, the people of Bhutan. Among h. Subscribe or purchase equity, debt or
others, DHI is required to: other securities;
a. Strengthen corporate governance: by i. Undertake investments: in the existing
clearly separating the ownership and government companies to revitalize,
management of DHI, and also improve restructure and expand their businesses,
governance of the government companies and also invest in new companies and
by appointing board directors and CEOs businesses. DHI is also allowed to make
who are professionally qualified, well investments abroad and undertake
experienced, highly motivated and of investments in reserved sectors and
high integrity; activities. Further, DHI is required to
b. Enhance performance of the government implement all future commercially
linked companies: by making them oriented projects developed by the
responsible and accountable in their government by transferring their shares
performances. To bring improvement, upon formal incorporation;
DHI is required to track performances j. Promote and encourage entrepreneurship
of the companies by setting targets and business development: through
and benchmarks, and holding them venture capital and other required
responsible for meeting those targets institutional support;
and benchmarks; k. Act as an incubator and initiate business
c. Provide managerial support: and other in new areas;
support services on a fee basis to both l. Promote private sector through the
public and private sectors; following:
d. Achieve optimal capital efficiency a. Liaising with government
and optimal utilization of resources: agencies: to facilitate an enabling
by consolidating resources of the environment through credible long-
government companies. Further, it term government policies for the
is required to maximize returns on development of a dynamic private
investments by optimal utilization of sector;
resources; b. Facilitating research and

30 ROADMAP 2030
 development (R&D): to identify In determining the direction for the new
changing potentials and challenges decade, DHI is mindful of its primary purpose
for broader investment avenues prescribed in the Royal Charter. Some of
within and outside the country; and the key phrases from the Royal Charter are
c. Promoting Bhutan’s brand image. and “national wealth”, “prudent investment” and
m. Provide predictable and increasing the “people of Bhutan as the shareholder”.
revenue inflows to the government: by Motivated by the Charter, thus, DHI’s mission
mutually agreeing on the amount of is to:
revenues to be provided to MoF annually.

Safeguard and enhance national wealth for all generations of

Bhutanese through prudent investments.

While it is DHI’s mission statement, the Group companies are to draw their purposes aligning
with the safeguarding and enhancing of national wealth for all generations of Bhutanese through
prudent investments.

VISION
In stating the purpose, the Royal Charter also it is clear that DHI’s vision should reflect the
describes the future intent of DHI. It depicts intent and spirit of the Royal Charter, that
the idealised state for DHI to pursue and, DHI’s vision should provide direction to the
hence, provides a direction to DHI and its Group companies, their employees and other
employees. stakeholders. And finally, that the visions of
the group companies should be aligned to the
As the Roadmap is being prepared for overall vision of DHI.
the entire group, it is imperative that the
companies and employees derive motivation Aligning to the mandates and the future intent
and be guided by the essence and long term of the Royal Charter, the DHI’s Vision is:
vision enshrined in the Royal Charter. Hence,

To be the leading wealth management and creation organization

that helps transform Bhutan into a globally competitive economy
guided by the principles of Gross National Happiness.

31
DESTINATION
With a new economic development goal for the exponentially and be able to finance the
country, set in quantitative terms, it becomes government’s total recurrent expenditure for the
incumbent upon the Group to also quantify its goal fiscal year 2029/30.
for the next decade. The requirement is more from
the perspective of bringing focus to the Roadmap. Further, conscious that adequate liquidity needs
Hence, to be able to bring focus and operationalise to be maintained for exploring opportunities and
the high-level strategic elements, a single statement catering to national exigencies, the Bhutan Future
with a desired result and milestone target is being Fund was established on 11th November 2017
proposed in the form of a destination statement. with a seed fund of Nu. 300 million. In comparison,
the seed fund is only 1.24% of the total recurrent
In the last 10 years, the Group contributed an expenditure for fiscal year 2017/18. DHI also aims
average of 42% of the total internal revenue to increase the Fund to Nu. 30.00 billion in 2030.
and, thereby, financed an average of 50% of total
recurrent expenditure. For the next 10 years, Hence, the following Roadmap destination is
the Group targets to increase the contribution proposed:

DHI Group finances the Government’s entire recurrent expenditure for

fiscal year 2029/30 and
the Bhutan Future Fund is worth Nu. 30 billion in year 2030.

In proposing the new national economic to study the impact of various hydropower
development goal, the Macroeconomic Framework development scenarios. Based on their simulation,
Coordination Technical Committee (MFCTC) had following fiscal projections were made until 2030.
carried out several macroeconomic simulations

2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27 2027/28 2028/29 2029/30
Resources 39,007.43 60,700.78 62,422.82 61,654.39 58,837.51 73,620.33 67,609.99 73,764.10 76,316.84 85,106.19 85,539.10 88,393.02
Domestic
34,119.27 46,025.27 44,033.67 46,305.46 48,799.47 58,559.37 62,699.99 68,854.10 71,406.84 80,196.19 82,581.28 85,435.21
Revenue
Grants 4,888.16 14,675.50 18,389.16 15,348.93 10,038.04 5,060.00 4,910.00 4,910.00 4,910.00 4,910.00 2,957.82 2,957.82
Total
39,718.24 66,140.96 68,803.11 67,834.77 67,180.88 66,367.08 87,047.81 93,519.72 102,942.46 105,961.37 93,534.31 106,744.87
Expenditure
Current
28,945.94 39,430.03 40,926.88 41,106.34 43,148.05 43,112.14 56,458.56 58,535.30 60,030.70 62,354.56 64,663.03 68,767.97
Expenditure
Capital
10,772.30 26,710.93 27,876.23 26,728.44 24,032.83 15,327.94 21,714.58 25,546.56 30,655.87 34,487.86 17,627.13 26,057.49
Expenditure

As per the table above, the total internal revenues The Group’s destination, hence, is to finance Nu.
projected in fiscal year 2029/30 is Nu. 85,435.21 68,767.97 million in year 2030; more than a five-
million and the total current expenditure projected fold increase in revenue contributions over the
is Nu. 68,767.97 million. next decade.

32 ROADMAP 2030
GUIDING THEMES
To help reach the destination, it will be important With a share of close to 30% of government’s total
for the Group to adopt key themes to serve as an internal revenues, and the gross contribution slated
overarching guide. The themes must be relevant to treble with the commissioning of a number of
to every company: ones existing now, those that hydropower projects, economic concentration on hydro
might be transferred to DHI from MoF and the ones sector is a key concern voiced by many. For DHI too, its
that may be established as a part of expansion and hydro sector revenue constitutes more than 85%.
new investment initiatives.
While increased contribution to the government
As the Royal Charter always provided the clarity and revenue, primarily driven by hydro segment, would
inspiration in times of uncertainties, the themes for obviously help transform Bhutanese economy,
the future are also expounded within its spectrum. DHI will seek economic transformation in terms
Not only would these themes serve to resolve of diversification. Drastic measures will be taken
issues and challenges of the new decade, but they to upscale non-hydro sectors. The Group will also
would effectuate perfect alignment of operational embark upon new segments and even go beyond
initiatives to the Roadmap’s mission and vision. the borders of Bhutan to help build the economy.
DHI targets to enhance the pace of growth for non-
The themes that will guide the group into the new hydro segment companies and, thereby, increase
decade are: Performance Excellence; Economic their share of revenue to more than 40% in 2030,
Transformation; and Human Capital Excellence. up from 15% today.

Performance excellence Human capital excellence

DHI laid a very strong foundation in Corporate Development of human capital will be the Group’s
Governance (CG), a pivotal pillar for performance primary focus in the coming decade. Currently,
excellence, in its first decade. Several other DHI is faced with high attrition rates. It is also in
initiatives from consolidation to restructuring and want of skills in most segments. The fulfilment of
merging of companies were carried out. Instituting goals and objectives under other guiding themes
a culture of performance in the group was one depends on DHI’s success in development and
of the highlights. Such measures have increased retention of human capital.
efficiency and productivity of our companies.
While the nation’s economic development
In the coming decade, DHI will continue to scale up goals have been set with an ambition to achieve
its initiatives in corporate governance, performance economic self-reliance at the earliest, there is
improvement and resource optimization. Efficiency also a greater need for conception of self-reliance
and productivity with customers and stakeholders in human capital. The Group will work towards
at heart would be the focus. For every initiative, achieving human capital self-reliance at the end
having pre-identified components for excellence of the Roadmap. Further, the desire is also to go
and processes that help create excellence, so that beyond the national borders and be able to provide
high performance becomes a natural phenomenon, expertise in the region, particularly in specific areas
would be the desired outcome. of hydropower, transmission, rural electrification
and ICT. The Group will also enhance capacity
Economic transformation to make investments abroad, not just through
This theme is derived directly from the Charter- partnerships but independently by developing our
to help build a strong dynamic economy. With own internal capabilities.
hydropower as the single largest entity in the
economy contributing to national revenue and the With an exception to areas that are highly
GDP, the Group is the backbone of our economy. specialized and of latest modern technologies, the
The Group employs more than 7,000 Bhutanese. ambition is to be in a state where the group no
Subsidiaries such as BT and BoB among others longer needs services of external consultants in all
catalyse development and other economic activities. areas of operation.

33
 OUR MISSION
Safeguard and enhance
national wealth for all
generations of Bhutanese
through prudent
investments.
MISSION

DESTINATION
OUR DESTINATION
DHI Group finances the entire of
Government’s current expenditure
for fiscal year 2029/30 and the
Bhutan Future Fund is Nu. 30
billion in year 2030.
PERFORMANCE EXCELLENCE

TRANSFORMATION
ECONOMIC

34 ROADMAP 2030
GUIDING
 OUR VISION
To be the leading wealth management
and creation organization that helps
transform Bhutan into a globally
competitive economy guided by the
principles of Gross National Happiness.

VISION
HUMAN CAPITAL

THEMES 35
 36 ROADMAP 2030
140 DHI'S journey: THe FIrST 10 yeArS
“It will be his (Gyalsey Jigme
namgyel Wangchuck)
sacred responsibility to
build a harmonious and just
society, and thereby, fulfill
all the aspirations of his
people."
his maJesty the kinG,
on the occasion oF the naminG ceremony
oF his royal hiGhness the Gyalsey, april, 2016

37
141
38 ROADMAP 2030
GOALS,
OBJECTIVES AND
MILESTONES
While shared common mission and themes
adopted to guide the group through the
new decade lends itself to many priorities,
the specific functions for DHI that the Royal
Charter highlights are mutually exclusive and
collectively exhaustive of all those priorities
and are designed to meet the needs of
evolving circumstances.

From its initial days, DHI has summarised

these functions under five thrust areas to
provide the Group with powerful objectives
and initiatives to steer the process of change.
They are the tangible expression of the spirit
of the Royal Charter and also embody guiding
themes and shared common mission. As such,
they acquire special significance in elaborating
preferred directions of the roadmap. The
thrust areas are and will continue to be: (i)
Performance Improvement, (ii) Resource
Optimization, (iii) New Investments, (iv)
Private Sector Development, and (v) Revenue
to the Government.

39
 PERFORMANCE IMPROVEMENT

40 ROADMAP 2030
Strengthen Corporate Governance CG Codes, DHI could act as the facilitator
DHI is required to strengthen Corporate and catalyst in discussions regarding the
Governance (CG) of the government furtherance of CG in Bhutan. It is recommended
companies by appointing board directors that all concerned authorities (RoC, RMA, DHI,
and CEOs who are professional, qualified, RSEBL and MoF) establish a united front to
experienced, highly motivated and of high ensure that rules and regulations issued by
integrity. various authorities are in harmony with the
Companies Act and the proposed national CG
In the last decade, DHI made significant Code. Ever since its establishment, DHI has
improvements in CG and achieved high acted as the vanguard of CG in Bhutan and
standards. The achievement was mainly with about 10 years of experience, DHI has
through initiatives such as the annual board a good repository of literature, knowledge
orientation program, training programs for and experience that can be used to support
boards and managements on CG, leadership, national level initiatives.
finance and other management areas.
However, the achievement is more or less At the Group level, there is a growing need
limited to the Group companies only. There for a research and training institute to
is a need to share the instruments and impart consolidate CG resources, carry out research
knowledge gained to companies and agencies and studies on CG and related areas and, on
beyond the Group. that basis, train the boards and managements
of all the agencies. The institute can also
At present, there are more than 81 companies serve as a research and training center on CG
with DHI, MoF, listed with RSEBL and registered for organizations in the region in future.
as large and medium private companies.
Including civil society organizations (CSOs) Enhance performance of government
and independent bodies governed by boards linked companies
or trustees, the number can easily go beyond To enhance performance, DHI is required to
100. In a bid to enhance CG in their respective make companies responsible and accountable
sectors/areas, many independent groups for their performances. It is also required
are seen to be carrying out CG initiatives in to track performances of the companies by
silos, resulting in duplication and wastage setting targets and benchmarks and holding
of resources and time. Given the size of them responsible for meeting those targets
the number of companies and independent and benchmarks.
agencies, a common CG Code could serve the
purpose. The initiatives carried out under this function
has been one of DHI’s biggest achievements.
At the national level, even with the Registrar With the introduction and implementation
of Company taking the lead to draft national of Performance Compacts11 and Performance

Performance agreement drawn between DHI & Companies and Board & Management, based on which incentives are paid out or withheld at the end of the
11

year.

41
Management Systems, it was able to institute providing managerial and other support
a culture of performance in the Group. services on a fee basis. During the first 10
Considered successful, DHI also assisted the years, DHI initiated an internal consultancy
government in introducing the Government unit within its corporate structure. It was
Performance Management System (GPMS). mainly to streamline management systems
Through the proposed new research and and procedures in the Group and to help
training institute, DHI will continue to make institute performance systems, strategic plans
improvements in its performance systems. and carry out other business and management
interventions in the companies.
For the Group to succeed in achieving the plans
of the Roadmap, the most critical element will Similarly, some of the Group companies
be to address the Group’s HR needs. Hence, had also initiated profit centers to extend
the first and foremost initiative to be planned specialized services. For instance, DGPC has
and implemented will have to be the review a Druk Green Consultancy and Center of
of Group’s HR policies, succession plans, Excellence (CoEs) concept in five specialized
remuneration policies and regulations to help areas. Plans are to expand these CoEs to
attract and retain talent. Therefore, a detailed about nine specialized areas and extend
Group HR Masterplan that aligns with the services to both the local industries and in the
Roadmap, will be studied and developed. international market.

Following streamlining of HR plans and Further, the Group will initiate CoE for
policies, DHI will carry out other initiatives to Transmission and Rural Electrification at BPC
bring about efficiency and productivity and, to venture into international markets and CoE
thereby, improve performance. DHI will carry for Information Technology (IT) at Thimphu
out process reengineering of all internal and Tech-Park Limited (TTPL) to function as the
external business processes. As the number Group’s IT manager.
of companies under DHI’s hold has increased
since its inception, the number of products and The CoE for IT will focus on consolidating the
services the Group as a whole provides have Group’s IT services and resources (including
also multiplied. As the products and services the data centers), replace all legacy systems
touch the lives of every citizen in some way and applications with up-to-date applications.
or the other, the Roadmap aims to extend Later, it will be required to provide IT and
world-class services to every citizen, for which IT enabled services (system development)
business process reengineering is imperative. to all local agencies and then function as IT
Manager to the Group, government agencies,
Another function classified under and other independent agencies.
performance improvement thrust area is

42 ROADMAP 2030
 MILESTONES
• Institute Research and Training Institute for Corporate Governance : 2020
• HR Masterplan (standalone for DHI and respective companies) : 2019
• Business Process Management and Re-engineering : 2019 - 2020
• Druk Green Consultancy scope expanded and projects undertaken : 2020 - 2025
• Integrate DGPC’s CoEs under Hydropower Research & Development : 2019 - 2025
Center and strengthen the service
• Center of Excellence for Transmission and Rural Electrification : 2020 - 2021
• Center of Excellence in Information Technology : 2020 - 2022

43
 RESOURCE OPTIMIZATION

44 ROADMAP 2030
Ensure optimal capital efficiency and have high synergy quotient with the
Under resource optimization thrust area, Group companies. Based on the findings,
DHI is first required to ensure optimal capital initiatives will be taken to transfer the SOEs
efficiency by consolidating resources of the from MoF to DHI. However, as part of the
government companies. Further, it is required review and consultation process for this
to maximize returns on investments through Roadmap, mandates of some of the SOEs were
optimal utilization of resources. studied. Based on the review, following list of
companies are recommended to be brought
Realizing duplication of resource utilization under DHI’s hold in the coming few years:
for similar activities caused by silo operational - Bhutan Postal Corporation Limited;
models, initiatives were carried out to merge - Bhutan Development Bank Limited;
companies with similar mandates, including - Bhutan Lotteries Limited;
transfer of some of the strategic SOEs under - Bhutan Duty Free Limited;
MoF to DHI. After the transfer of CDCL to - Bhutan Helicopter Services Limited; and
DHI in 2015, DHI-Infra, an infrastructure - National Housing Development Corporation
development company set up by DHI, was Limited.
immediately merged with CDCL as their
mandates had complementary strengths Under transport and communication
and these could be leveraged to pursue segment, the Group spends close to a billion
large and meaningful projects. Similarly, DHI Ngultrums as freight charges. There is a
conducted a resource optimization and value business case for the Group to consider an
creation study among six DOCs in 2014- independent transport and logistics company.
15 to explore synergy quotients in various This is mainly on account of the inefficiencies
fields of operation. It revealed more than 23 of the private transporters and poor fleet
areas with significant synergy quotient. The management which led to increased freight
Group has initiated implementation of the charges. Further, unlike passenger buses
recommendations from the study. and taxis, trucks and transporters are not
regulated by the Road Safety and Transport
For the next decade, DHI will review/re- Authority (RSTA) and freight rates are based
conduct the resource optimization and value on market conditions.
creation study, but with all the companies
under its hold. It is expected that the study DHI believes that greater efficiencies can be
will reveal more areas with high synergy achieved through good fleet management
quotient and high potentials to improve the practices and use of technology. In 2017
earnings before interest and tax (EBIT) at the and 2016, DCCL and SMCL together spent
Group level. Nu. 694.22 million and Nu. 721.18 million
respectively as freight charges. DCCL and
Similarly, DHI will work with MoF to explore SMCL are still in its nascent stages. As DCCL
SOEs that complement the Group’s mandates and SMCL expand their operations, the freight

45
charges are only going to grow. Moreover, Further, the Group should also plan on the
as DHI slowly embarks on its journey to management part of the hydropower projects
diversify its portfolio, DHI is expecting more after their commissioning. DGPC already has
manufacturing companies in its portfolio. its fair share of challenges, given the number
Logistics is inevitably going to become an of generating units, subsidiary companies
increasingly crucial function for the group to and new investment initiatives it currently
bring about efficiencies and optimal use of manages. With the commissioning of the
resources. plants that are already under construction and
others in future, those challenges will only
Considering that Bhutan Post is also mandated magnify. Hence, a study will be conducted to
to carry out transport and logistics business, it explore alternatives to break up DGPC into
may be prudent for DHI to take over Bhutan Post multiple units for better management and
from MoF and mandate it to take up the Group’s to segregate the strategic and non-strategic
transportation business, at least partially components in this sector.
to act as a stabilizer of prices in the private
transportation business and as a safeguard In terms of ensuring optimal capital efficiency,
against cartels and cartel-induced behaviour. The the Group’s efforts are constrained by the
initiative stands to benefit the group companies ceiling on exposures on related parties for
in terms of removing hassles of having to deal borrowing from financial institutions. For
with transportation related works and bring instance, Drukair currently is purchasing
focus back to their core mandates. two aircrafts. While BoB has the capacity
and Drukair is willing to be financed by BoB,
The other functions under this thrust owing to BoB reaching the maximum ceiling
area are carrying out divestments, raising on lending to related parties, it is not able to
funds and subscribing or purchasing other lend to any of the companies in the Group.
financial instruments. In the last decade, DHI This has led to more expensive borrowings
deliberately went slow with divestment, as and resources going out of the Group. While
its focus was on consolidation, performance DHI has been discussing with RMA on this, the
improvement and maximising returns to the issue is yet to be resolved and needs further
shareholders. review and favourable interventions. With the
commissioning of at least three hydropower
In the coming decade, DHI will study and plants in the next few years, there will be
segregate companies into strategic12 and opportunities for DHI to set up many new
non-strategic companies and then initiate industries and will require financing from
divestment of shares in non-strategic local financial institutions.
companies or companies where state’s
involvement is no more required.

12
Companies in which the government and DHI has no strategic interest

46 ROADMAP 2030
 MILESTONES
• Resource optimization and value creation : 2019 - 2025
(study and implementation of recommendations)
• Study and initiate transfer of MoF SOEs to DHI : 2020
• Initiate Group transport and logistic business under Bhutan Post : 2019 - 2020
• Segregate strategic and non-strategic companies and initiate : 2019 - 2021
divestment
• Optimal capital efficiency in the Group : 2020

POLICY INSTRUMENTS IMPACTING THE GROUP

1. RSTA Motor vehicle regulation
2. RMA’s Prudential Guidelines/Regulation
3. Financial Services Act

47
With an additional 3,658 MW of power and
additional 768 MW firm power, there will be
an opportunity to create more than 54 new
industries in next five years.

NEW INVESTMENTS

48 ROADMAP 2030
Undertake investments need to address some constraints. One of
Most new investments in Industries happen the constraints that the Group might be able
when a new hydropower plant is commissioned to help address is through long term Power
with the availability of new firm power. Purchase Agreement (PPA) for industries.
Historically, each time a medium, large or Although Bhutan’s power tariff has been
mega hydropower plant was commissioned, relatively low, power intensive industries
it immediately led to jumpstarting of energy generally prefer and demand for a long term
intensive industries. For instance, when Tala PPA with predictable power tariff.
Hydropower Project became operational in
2011 and added 200 MW of firm power, 11 Efficiency in power tariff and long term PPAs
HV industries and 28 MV industries were The existing tariff determination policy
developed. With the hydropower projects incentivises14 additional transmission and
under construction anticipated to become distribution lines, and thus additional redundant
operational between 2019-2023, Bhutan lines sometimes get strung based on simple
would have an additional 3,658 MW of power analyses in the investment plan document.
in the next five years; an addition of 228% on However, industries are yet to come to the
the current capacity and an additional 768 MW Jigmeling and Damdum industrial estates and
of firm power. Considering the same average start drawing electricity, and the costs from
and assuming13 the same pattern of power additional assets (depreciation and O&M costs)
distribution between HV and MV as currently are added to the tariff for existing consumers.
prevailing, the additional firm power of 768
MW provides opportunities to create 29 new Further, majority of BPC’s assets were those
HV and 29 new MV industries. DHI intends to that were taken over from the government,
harness this opportunity for diversification when the company was corporatised, and
by exploring new energy-intensive industries are nearing replacement. Hence, cost of
either on its own or through partnerships replacement will also have bearing on the
with regional/international companies. electricity tariff when it is reviewed next.
BPC, in its Five-Year Investment and Financing
Further, to revitalize, restructure and expand Plan (FYIFP) document, has already laid out
their businesses, DHI also makes investments Nu. 2,623 million worth of investment plans
in the subsidiary companies. Since the for ‘Replacement of Assets’ and ‘Business
subsidiary companies are grouped in different Expansion’ for the FY2019-2020.
segments and different stages of its life cycle,
the milestones for the new decade are also Hence, going forward, a detailed assessment
planned through the segments. of the existing infrastructure will be carried
out and opportunities to improve redundancy
Energy segment within the existing infrastructure will be
If the entire additional firm power is to be explored. The additional and new transmission
utilised in the country, by attracting and/ and distribution lines will be decided based
or creating new industries, first, there is a on the new master plan document.

13
By 2022, Bhutan could have additional firm power of 768 MW (21% of new capacity). Assuming that 25% will be used by LV customers as forecasted by BPC
in the 2016 tariff proposal, and as per current trend if 70% is used by HV and 5% by MV, there will be 538 MW for HV and 38 MW for MW totaling to 576 MW.
14
The determination of asset additions is based on the consideration of investment plans of BPC, which is submitted to BEA for scrutiny during the tariff review.

49
With the master plan document, BPC should and Rural Electrification, transmission related
be able to predict power tariffs for a longer studies and DPRs will also be explored to be
duration and then be able to propose for long taken up by BPC. Through this, there would
term PPAs to the HV industries. The PPA tariffs not only be a building of competencies of
will then be outside of any asset additions Bhutanese but accountability with Bhutanese
during the PPA tenure, which might increase entities as well. The scope of the CoE will
the power tariff. BPC should, however, initiate be further expanded in future to take up
investments (transmission lines to the HV businesses in the region.
industries’ locations) only after signing PPAs
and also start billing the industries as per the b. Construction of hydropower projects
drawing date stated in the PPAs. and transmission lines
DGPC has already started building capacity
Hydropower related industries in hydropower construction, by deploying
As noted above, the additional firm power employees in on-going projects on deputation.
will open up opportunities to set up many Together with DGPC, DHI has also been able to
industries, mainly power related/intensive engage CDCL16 in hydropower construction to
industries. But even before exploring build and enhance its capacity to build future
investment opportunities in power intensive hydropower projects. The initiative is on the
industries, opportunities opens up for the right track as the recent development on the
energy sector itself. Some of the potential 600 MW Kholongchhu hydropower project
business clusters that are of interest to the agreement has a mandatory clause stating
Group are: interested foreign investors must have a local
partner. Therefore, it is imperative that DGPC,
a. Hydropower consultancy BPC and CDCL enhance their capacities in
While the overall hydropower development hydropower construction at the earliest and
will be guided by the new Hydropower take up construction of hydropower projects
Development Strategy, the group will still on a much larger scale.
need to play a key role right from the
development phase. DGPC has established a With its engagement in the Associated
profit center unit, Druk Green Consultancy Transmission System (ATS) works (for power
(DG Consultancy), that engages in conducting evacuation to India), BPC earns revenue both
feasibility studies and preparing Detailed during construction phase (for the deposit
Project Reports (DPR) for hydropower work), and operation phase (wheeling
development. DHI and DGPC will work with the revenue). However, since the assets are
government to take up more studies and DPR transferred to the company after completion
and expanding its scope to implementation of construction, BPC is required to service
in the capacity of Owners’ engineers and/or the debt. Hence, it is only prudent that ATS
project management consultants. Towards the projects are capitalised at lower costs to be
first part of the next decade, DHI and DGPC able to service the debts easily and to ensure
will work towards engagement in regional affordable and competitive tariffs.
hydropower consultancies.
One of the primary causes of cost escalation,
Similarly, through the CoE for Transmission recently, has been policy changes. BPC
15
Tunneling work for Adit four and the head race tunnel (HRT) of Nikachu hydropower project (NHP) at Tangsibji in June 2017

50 ROADMAP 2030
CDCL team at Nikachhu Hydroelectric Power Project site

initially received tax exemption on import setting up of such units under one of the
of transmission tower and tower parts. This existing companies, either at BHSL or CDCL.
reduced the capital cost significantly. The
exemption has, however, been lifted for some Further, based on its experience in design
projects in the last few years, resulting in a and managing contractors, BPC has built
much higher cost for transmission lines, adequate in-house capacity in transmission
which ultimately had negative impact on the line design and construction. In addition to
tariff. This is also the case with some DGPC being able to take up construction of all future
projects where the taxes are not always transmission lines (ATS and system expansion),
uniformly applied. DHI, DGPC and BPC will DHI will venture into regional transmission
work with the government in reinstating such construction works. In line with that a CoE for
fiscal incentives. Transmission and Rural Electrification is being
proposed. DHI, BPC and CDCL will work on
Related to this and in consideration that about creating this Center of Excellence and seriously
80% of the transmission construction cost are engage in design and construction of all
for tower and tower parts, there is a need to transmission lines in house. DHI will also work
study and consider a unit for fabrication of with the government to engage its companies
transmission tower parts and electric poles. in all hydropower projects constructed through
Based on the study results, DHI will initiate different modalities (mainly IG model).

51
Construction of 66kV D/C transmission line from
Jemina to Changedaphu

c. Manufacturing of electro-mechanical
and hydro-mechanical components
It is proposed that Bhutan Hydropower
Services Limited (BHSL) will add capacity
to manufacture many of the mechanical
components of electro-mechanical and
hydro-mechanical equipment. This could
further be expanded to produce specialized
hydro equipment such as runners and other
underwater components in collaboration
with manufacturers and end-users of such
technologies for which a lot of interest has
already been generated. BHSL could also
manufacture bridge components for the
bridges in Bhutan and in future consider
expanding to the region.

However, for the manufacturing business to

succeed, specific clauses would need to be
inserted in the bidding documents enabling
supplies of such electro-mechanical and
hydro-mechanical equipment either directly
from such facilities in Bhutan or through joint
ventures with others to all the hydropower
plants and projects in Bhutan. DHI and DGPC
will play an active role at the policy level for
the success of this initiative.

Related to this, BPC spent Nu. 57.66 million

between 2015-2017 on purchase of new
transformers from Nepal and India. Further,
out of 256 received for repair, it repaired 160
transformers at Begana and 60 in Gairkata,
India and 29 in NEEK, Nepal from 2016
until today, and spent Nu. 10.63 million
on purchase of parts alone during repair.

52 ROADMAP 2030
Considering the volume, there is potential for e. Secondary equipment integration for
DHI to consider expansion or relocation of automation, control and protection
the Begana transformer repair unit or require An offshoot under the R&D Centre will
BHSL to add transformer repair component to be the development of competencies in
their list of services. the automation, control and protection
systems of a power station to reduce overt
d. Hydropower research and development dependency on OEMs. DGPC plans to enter
center into a joint venture, with an internationally
Similar to its consultancy unit, DGPC also renowned hydropower company, through
manages R&D Center through CoE in a strategic partnership to develop this
five specialized areas – (i) vibration and expertise and provide its services not only
thermographic analysis, (ii) projects contracts to the country’s hydropower plants but also
management, (iii) control and protection, (iv) to customers outside of Bhutan. The scope
dielectric materials analysis, and (v) gates and could be expanded in future to include all
instrumentation. These centers were created plant automation including SCADA and other
to minimize dependency on foreign expertise software/hardware integrated systems in its
and also to build in-house expertise in the field. portfolio to service other industries beyond
hydropower, load dispatch centers and
DGPC intends to consolidate these COEs substations.
and expand the scope of services under an
R&D Center to provide specialized services f. Power training institute
and applied research in nine specific areas The success at diversification would largely
to start with. The R&D Centre with the depend on the hydropower sector’s ability to
Hydropower Services Centre and the Druk attract, train and recruit the best employees
Green Consultancy group could evolve to be from the market. Presently, most of the
technically competent as well as competitive reskilling is being done through training
in providing international level consultancies programs and higher studies at institutions
and acting in the capacity of Owner’s outside of Bhutan. There is, therefore, a huge
Engineers. opportunity for a training institute dedicated
to meet the requirements of the power sector.
Similarly, in the next decade, DHI would Since entities such as DGPC and BPC are quite
explore investments in electric transport conversant with the needs of the industry,
with particular emphasis on mass transit as such a training institute could be placed
a commercial venture. The R&D Center could under them.
then also cater to some the research require
for the Bhutanese market in the field.

53
g. Energy market storage scheme and pilot at least one such
With respect to investment in other renewal project in the next 10 years.
energy, power tariff plays a crucial role. For
2017, India’s marginal tariff for solar power Besides looking at serving as a battery bank,
was only INR 4.73/kWh and projected to for Bhutanese power to remain relevant, it
increase to INR 5.18/kWh unit by 2030, and must be of low cost. Therefore, it has become
for wind it was INR 5.25/kWh and projected to critical to discuss and finalise with RGoB to
increase to INR 7.43/kWh by 2030. Whereas, increase role of DGPC from the project stage
hydropower’s marginal tariff was INR 5.03/ itself in all projects developed under IG model.
kWh increasing to INR 8.87/kWh. However,
with the declining cost of generation of solar h. Marketing hydropower human capital outside
and wind power, India recently announced to of Bhutan
build solar energy capacity to 100 GW and As DGPC and BPC become more proficient
wind to 60 GW by 2022. The success of India’s in the operation and maintenance of their
renewable energy will only further enhance generating and transmission assets, there are
the relevance of Bhutan’s hydropower to act interest groups outside of Bhutan who would
as a battery bank to the Indian grid system. like to engage Bhutanese managers, engineers
and technicians in the O&M of their plants
However, for the ‘battery bank’ to serve its and other assets. DGPC has recently deputed
purpose throughout the year, the firm power a team for the O&M of a power plant in India
content must remain consistent at all times. and there are opportunities to expand the
In this regard, the Hydropower Development engagement from an individual engagement
Strategy document already speaks about to the organization itself outsourcing the
projects to be developed through reservoir O&M of the plant. This could provide not
schemes and mentions pumped storage only employment but also generate revenues
schemes. It will also be prudent for the Group for the company in future. It could also sell
to invest in capacity development in pumped Bhutan as a hydropower expertise resource.

54 ROADMAP 2030
 MILESTONES

• Master plan document for planning and construction of : 2019-2020

transmission and distribution lines

• Extend and sign long-term PPA with the industries : 2023-2025

• CoE for Transmission lines (design, construction and management) : 2020

• Hydropower Research and Development Center : 2025

(Consultancy in hydropower and transmission lines constructions in the region)

• Study for set-up of fabrication unit for transmission tower parts : 2024

• Center for secondary equipment integration for automation, : 2025

control and protection

• Power training institute : 2023

• Pilot a pumped storage scheme : 2026

POLICY INSTRUMENTS IMPACTING THE GROUP

1. DHI and DGPC to play an active role at the policy level for enabling supplies of
electro-mechanical and hydro-mechanical equipment either directly from electro
mechanical and hydro-mechanical facilities in Bhutan or through joint ventures
with others;

2. To engage Group companies in hydropower development pursued though Inter-

Governmental model; and

3. Fiscal incentives policy – for transmission tower parts.

55
Finance segment
As noted in sections above, the additional firm While DHI is in talks with RMA on setting up
power will be able to create 29 new HV and 29 of NBFI, lack of regulation on this front has
new MV industries. Based on the investment slowed down the process. DHI shall work with
size realized for industries during Tala RMA to provide all necessary support to make
plant’s commissioning, this translates into an way for such financial institutions.
investment of about Nu. 20 billion, without
considering inflation, over the investment of The other big opportunity for the financial
the existing industries. segment is in digital payment. The benefits
of digital payments to the Bhutanese
Considering the requirement of foreign financial sector and customers are in terms
exchange to buy the plant and equipment, Nu. of safety, accounting theft and associated
20 billion for establishment of new industries cost reduction, and transparency and audit
will be too large for existing Bhutanese banks. traceability. Having digital transactions
The large demand for capital will put huge means having a well-organized and accessible
pressure on the foreign exchange reserves of database of all transactions that may have
the country. The situation, therefore, opens occurred for a business. This would be an
up opportunity for a non-banking financial enormous tool to enhance transparency and
institution (NBFI) to provide the financing prevent fraud or mismanagement of accounts
required for industries that export and earn for the Bhutanese and their businesses.
foreign currency. These NBFIs will have to To the economy, it will serve as a cracking
rely on external commercial borrowings. In mechanism for individual’s and businesses’
addition to debt financing options, alternative incomes, which ultimately will help improve
sources of equity financing should also be government’s tax revenue.
explored. Setting up investment funds with
FDI partners is another viable option. The system also helps the economy in

56 ROADMAP 2030
reducing the overall cost associated with to go digital (or cashless). At the operational
physical currency. As per a study conducted level, BoB’s MBoB application has acted as the
by MasterCard, a country’s cash handling cost trailblazer for the digital payment movement,
is as high as 5% of its GDP. By that standard, already making thousands of transactions
Bhutan’s cash handling cost works out to more convenient, and instantaneous. In
Nu. 7.45 billion for fiscal year 2016-2017, the coming years, MBoB’s model should be
which is equivalent to ‘Finance and Insurance’ followed and expanded upon, facilitating
sector’s GDP contribution16 in 2016. For small interaction between different bank’s
economies, like ours, digital system will bring platforms and enabling service integration
about enormous benefits. and transactions with all sectors of the
economy and non-domestic parties, as well.
RMA has already initiated digital system and is To enhance the system, the group will have to
seeking to digitalise all government payments come up with a digital strategy that will serve
by the end of 2018. Further, it has plans to the overall economy and also help the policy
incentivise financial institutions with a free makers frame right policies and regulations.
POS device for every POS device they invest in,

MILESTONES
• Set-up a non-banking financial institute/investment bank : 2021

• Digital strategy for payments and transactions : 2020

• Group transactions and payments fully digitalised : 2019-2023

POLICY INSTRUMENTS IMPACTING THE GROUP

1. Regulation on Non-Banking Financial Institution (NBFI)

2. Fiscal and financial incentives policy – for digital transactions and payments

16
Finance and Insurance sector contributed Nu. 7.57 billion to the 2016 GDP

57
Transport segment Corporation (IFC) recommends creation of
A spin-off of the transfer of an SOE like urban villages, neighborhood nodes, urban
Bhutan Post would be DHI’s involvement in hubs in Thimphu and Phuentsholing, all of
the public transport system. Through the City which are neighborhood communities with
Bus Service, a unit under Bhutan Post, DHI all the primary amenities and facilities. It is
could improve the public transport system likely that the government will go ahead with
and provide reliable and affordable services these plans in the near future. However, the
to the public. It would be an opportunity for government is constrained by the lack of
DHI to impact something that directly touch fund. Hence, DHI should gear up towards
people’s lives and promote DHI’s image and making investments in the development of
branding. At present, the city bus service is the transport infrastructure in partnership
highly subsidised by the government and is with the government or through public
constrained by it to increase their fleet and private partnership (PPP) model. Under
frequencies - two ways in which they could CDCL, DHI will initiate a profit center for
greatly garner public’s trust in our public construction of tunnels, either together with
transport system and would encourage them DGPC Consultancy or on its own.
to use it more. A reliable and affordable public
transport would also curb usage of private Moreover, in recognition of the rising fuel
vehicles and address the traffic congestion imports and availability of clean energy in
issues in Thimphu, Phuentsholing and other Bhutan, the government also aspires to slowly
major towns. This in turn would reduce replace fuel powered vehicles with electric
import of private vehicles and thereby, reduce vehicles, which is in line with Bhutan’s mission
import of fuels. Bhutan imported fuels worth to remain carbon neutral. However, there is
Nu. 720.98 million in 2002, which increased much to be done at the policy level, in term of
to Nu. 7.53 billion in 2016. Moreover, if not extending incentives for electric vehicles and
checked, it is estimated that vehicle numbers green infrastructure.
in 2040 will be 10 times the total number of
vehicles in 2016. While the public transport DHI will initiate ‘DHI Green Initiative’ to lead
unit might not be a profit generating unit, the the way in marketing electric vehicles (including
socio-economic benefits and the benefits to electric trains and trams) for mass transport and
the overall economy would be enormous. personal vehicles. With the policies streamlined,
DHI would then look into setting up charging
Besides, RSTA and other relevant stakeholders stations for electric vehicles.
such as MoWHS and Thromde offices
already have plans to improve the public Under air transport, currently, Drukair
transport infrastructure and the transport Corporation Ltd. is DHI’s only company
infrastructure in general. They have carried operating in this sector. Drukair’s fleet
out numerous studies to identify ways in consists of four aircrafts – three Airbus A319
which travel distances and, hence, travel time and one ATR 42-500 aircraft. It operates to
could be shortened through construction of 10 international and 4 domestic destinations,
tunnels, viaducts, bridges and suitable mass both including Paro International Airport. In
transit options. The Bhutan Urban Transport 2017 alone, Drukair operated 4,903 flights
System prepared by International Finance and carried 271,007 passengers. Recently,

58 ROADMAP 2030
 Dumper moving limestone to crusher at DCCL

the Department of Air Transport (DoAT) has tourists arrival, the focus in selecting the
opened up a new taxiway, expanded boarding internal destinations and routes needs to be
lounge and will soon have bigger parking on connecting markets that generate high
space. These initiatives are done to enhance tourist arrivals to the country.
the airport’s capacity. Additionally, Drukair
will get two new aircrafts (Airbus and an ATR) Hence, DHI will ensure all required frequencies
by 2019-20, which were initiated to enhance within the capacity of the aircrafts to provide
regional and domestic connectivity. best connectivity to all Bhutanese, along with
the normal commercial considerations of load
First, as the national flag carrier, Drukair sets factor and profitability, and at the same time
the first impression of brand Bhutan. Therefore, selecting routes that generate high tourist
DHI and Drukair will continue to place top arrivals to the country. The overall aircraft
priorities on Safety, Standard and Services. utilization is targeted to increase by at least
15% every year.
While Drukair shall always have Bhutanese
passengers on the top priority list, in With respect to air transport infrastructure,
consideration of the increased year-on-year Bhutan has only one international airport and

59
three domestic airports. Nepal, with similar opportunity to acquire customer airlines from
topography as ours, has about forty nine fully these airports.
functioning airports. Thirty-two of them are
airports with commercial flights while others DHI and Drukair will allow relieving the
are made for occasional use and helicopter civil aviation and air transport authorities
landings. Paro Airport, given its features, is of the operational jobs, and let them focus
not able to accommodate bigger aircrafts. on regulatory issues, by setting-up airport
Further, if natural disasters strike and render management company, ground handling
Paro Airport non-operational, the country firms, catering firms and security and other
could immediately be cut off from the rest of ancillary services.
the world.
As the 12th Five Year Plan also envisages
On the opportunity side, considering to take up Gelephu International Airport
inefficiencies of international airports (in initiative, DHI will work with the government
Nepal) and regional airports in Assam and to engage in the construction and readying
Bengal, Bhutan could serve as an international investments for any related services, including
hub for this region. There is a very good investments in electric mass transport system.

MILESTONES
• Set-up profit center for tunnel construction (CDCL) : 2020 – 2030
• Manage public transport/city bus service : 2021 - 2022
• Increase aircraft utilization : 2020 – 2030
• Engage in planning and management of international airports : 2021 - 2022
• Incorporate an airport management company and promote Bhutan : 2023
as the transit hub in the region

POLICY INSTRUMENTS IMPACTING THE GROUP

1. Rules and Regulation of RSTA, 2018
2. DHI to initiate discussion with the government on initiating construction of
public transport tunnels.
3. DHI to initiate discussion with the government on planning for and construction
of second international airport.

60 ROADMAP 2030
Telecom towers at BT Headquarters

Communication segment 699,819, with more than 393,643 (active)

Telecom in BT network. However, over the years, BT
Under communication segment, Bhutan has been witnessing a steady increase in the
Telecom, at present, is the only company mobile Average Revenue Per User (ARPU).
in the Group. As of date, the company has Mobile ARPU increased from Nu. 525 per
established a new Core and IN (Intelligent month or Nu. 17.5 per day in 2017 from Nu.
Network) in Thimphu and a Disaster Recovery 581 per month or Nu. 19.38 a day in 2018.
(DR) center in Kanglung, designed to ensure
undisrupted telecom service in the event of The increase in the ARPU has mainly been
major failures with either Core. The coverage due to the surge in data usage in last few
has been improved with the installation years. To meet ever-growing demand for data
of 4G nodes in all the dzongkhags and bandwidth, the international bandwidth was
satellite towns. Mobile connectivity has also upgraded from 6.2 Gigabit to 21 Gigabit.
also reached all the gewogs through 2G and The demand is projected to increase, as the 4G
3G technologies. As per the Department of technology has only been introduced in all the
Information Technology & Telecom (DITT) dzongkhags in 2017 and the gewogs are still
Bhutan’s mobile penetration rate in 2017 to be extended with the technology. However,
was 92% with internet penetration of 75.44%. technology itself will not serve the purpose
This shows that Bhutan’s mobile has reached if the network is not reliable. Currently, there
near saturation limits. By June 2018, the is no redundant fibre link between the Cores.
total registered mobile users increased to Also, there is only a single physical connection

61
between Thimphu and Phuentsholing, and In order to gear Bhutan towards a Singaporean
Thimphu-Gelephu-Kanglung. There is a huge telecom state, the vision is to maintain dropped
risk of blackout if anything happens to the call percentage of less than 1% in every core
existing fibre line. Similarly, availability of area. Further, BT will ensure that there is no
the base stations is also very important and, shadow zone between the core areas. Reliability,
therefore, power redundancy is a must. At however, will first have to be explored and met
present, stations are equipped with DG or from the existing infrastructure. All additional
solar batteries, which at times takes a lot of will be based on the network masterplan, which
time to power the generators. BT will develop immediately.

There are varying reports on Bhutan’s internet Digitalized Bhutan

speed and thus the exact speed is not known. The future of the world is digital and so is the
As per DITT’s quarterly report Bhutan’s average future of Bhutan. Currently, most Bhutanese are
mobile internet speed in 2017 was 4.23 Mbps digitally connected through mobile technology.
which is much below the global average However, businesses in Bhutan are yet to go
internet speed of 7.2 Mbps in 2017. Bhutan's digital. It could be attributed to the lack of
internet speed (both broadband and mobile) digital innovation (platform/products/services)
is one of the lowest in Asia and in the world. and required infrastructure (accessibility to
Higher internet speed will be achieved through Internet and slow Internet speed). But in some
expansion of 4G and 3G technologies. This will manner, Bhutanese innovations like MBoB and
result in an increased data consumption and B-Wallet, which are widely used applications,
thereby a higher revenue. have helped Bhutan head towards digitization.
Similarly, the government's service channel
Considering that all core areas are now covered Government to Citizen (G2C) has eased availing
with 4G technology, BT will start capitalising on of public services. So, the fact is that firms just
the data usage. To enhance the data usage, BT need to come up with innovative products and
will invest in providing the best internet speed services to enable digitization.
in the region with 99% reliability. With that the
ARPU will also be the best in the region within Given the small size and population of Bhutan
the coming 2-3 years. we can become digital like Estonia, the world’s
most digitalized country, if similar technology
On the network’s performance, the KPIs aided by similar rules and regulations are put in
achieved are an overall average and there are place. BT will have to catalyse the digitization
many locations where network performance by providing infrastructure support, be it
is much below the standard or the network in terms of increasing the Internet speed
is not at all there. So, there is a need to track or providing fast and reliable Internet and
network performance location-wise and telecom network. DHI, the shareholder, in
maintain the up-time within or better than collaboration with relevant stakeholders such
the industry standard for every location and as the BICMA & DITT will have to lobby policy
not an overall average. In Singapore, a global interventions to push for the implementation
leader in telecom services, the dropped of digital initiatives. However, together with
call percentage target is as low as 1%. The BT, BoB and TTPL, a digital strategy will be
performance of telecom companies like studied and developed in the first year of the
Singtel is under 0.5%. Roadmap itself.

62 ROADMAP 2030
Consolidation of IT infrastructure some of the applications. It brought about
The other area that the sector might be able to huge savings to the Group. Considering
value-add is on consolidating the IT hardware investments have already been made in
and software. In its first 10 years, DHI and some of the required infrastructure (Data
companies achieved efficiencies through Center for instance), DHI will set up a Center
introduction of Enterprise Resource Planning of Excellence for IT at Thimphu TechPark
(ERP) applications and, thereby, streamlining Limited. With it, TTPL will be removed from
internal and business processes. However, Real Estate segment, and be the main driver
it required procurement and housing of IT for group’s IT innovation. The CoE IT will
hardware in silos and also availing after-sale consolidate IT services and resources and also
services and annual maintenance contracts replace all legacy systems in the companies.
(AMCs) individually. Similarly, there are also Its scope will later be expanded to providing
companies where legacy systems/applications specialized IT services like cyber security and
are in need for updates and/or replacements. then managing them for the clients.
Hence, consolidation of hardware, software
and data components remains an immediate Further, the CoE IT, together with Bhutan
undertaking for the Group, or BT in particular, Telecom and BoB will lead Group’s
to pursue. transformation into a fully digitalized state.
DHI desires for the CoE IT to fill up at least
DHI, in the last few years, initiated a project 80% of the new IT Park building space within
on this front and consolidated the AMCs of the Roadmap period.

MILESTONES
• Best Internet speed and ARPU in the region : 2022 - 2023
• 1% dropped call percentage maintained for all core areas : 2020 – 2022
• No shadow zone between core towns : 2020 – 2021
• IT hardware and software consolidated and services offered : 2020 - 2022
through cloud
• All legacy systems/applications updated/replaced : 2020 – 2025
• CoE IT or TTPL occupies at least 80% of the new techpark building: 2023 -
• Group fully digitalized : 2025

POLICY INSTRUMENTS IMPACTING THE GROUP

1. DHI to initiate discussion with the government on policy intervention, related
to incentives on digitalization

63
Construction and real estate segment However, there is a huge deficit in supply
Construction and real estate sector has been of skilled national work force. According to
playing a vital role in the overall national PHCB 2017, there are 42,425 non-Bhutanese
economy. According to National Accounts residing in Bhutan, excluding tourists and day-
Statistics 2017, the construction sector workers. Of the total, 93.4% are aged between
sustained an accelerated growth of 12.31%. 15 and 64 years, indicating that the majority
The sector was the leading contributor to are of working age and are engaged in the
the GDP growth for the past two consecutive construction sector. The country’s labour
years, with 1.52% and 1.98% in 2015 and 2016 force participating rate (LFPR), however, is
respectively. The sector accounted for 16.28% assessed at 63.3%. The Ministry of Labour
of the GDP in 2016 which translates into Nu. and Human Resources (MoLHR), through
24,204 million. Furthermore, the total capital its TVET programs, is trying to introduce
expenditure outlay for the Royal Government professionally trained construction workforce
of Bhutan (RGoB) for the Financial Year since 2003. The four TVET institutes, that
2017-2018 was Nu. 29.346 billion and the imparts trainings related to construction
construction sector had a huge share of 63%, industry, are producing about 690 graduates
which translates to about Nu. 18.462 billion. annually, on an average.
Within the sector 34.50% was government
construction and 65.50% private and public Bhutan has been importing large quantity of
corporations’ construction. construction materials and labour force from

64 ROADMAP 2030
India every year. It results into huge outflow with the Government and initiate construction
of money, especially INR. Annually, RMA remits of tunnels and mega-bridges to reduce travel
close to Nu. 7 billion in Indian currency as times and decongest towns and cities.
payments for the workers and Nu. 5.76 billion
for the construction materials. Some of the Pre-fabricated construction materials
major problems affecting the construction Considering the opportunities stated above,
sector are poor quality construction, low level DHI will initiate investments in manufacturing
productivity and poor human resource skills. To of pre-fabricated construction materials
counter these challenges, we need to emphasize through CDCL, or through an independent
on technology development, enhance company, given its experience and initiative in
contractors’ capacity/skill development and the area. Together with the initiative, the group
concentrate on human resources development will emphasise on technology deployment
and management. and enhancing skills of contractors and
workers. Through other Group companies like
Construction of key components of WCCL and NRDCL, possibilities of wooden
hydropower plants pre-fabrications, panels and fittings, similar
CDCL has made head start in hydropower potentials will be explored and initiated.
construction having undertaken drift works for
Nyera-Amari DPR and through its engagement Home ownership
in Tangsibji project. Considering Kholongchhu With construction time and cost reduced, the
project’s agreement, which requires interested Group will work towards promoting home
foreign investors/contractors to have local ownership across lower and middle-income
partner, there is the need to enhance groups. For this purpose, DHI will initiate
CDCL’s capacity in hydropower construction takeover of NHDCL from MoF, as its mandate
without delay. While DHI will work with the complements the Group’s overall objective.
government to engage CDCL in construction
of hydropower built through IG model, CDCL For concrete roads
will itself have to engage in construction of DHI has already initiated R&D in cement
key components and enhance its capacity. concrete roads with the College of Science
and Technology (CST). Based on the R&D
Bridge and tunnel construction in the region result, DHI will work with the Government on
Considering its proven capacity in bridge the use of cement in construction of roads.
construction, DHI also plans to launch CDCL While the initiative will help reduce import
into construction activities, particularly of materials for road construction, it will also
bridges and tunnels, within the region. help enhance DCCL’s capacity.
Hence, DHI and CDCL will explore strategic
partnering with regional players initially to Urban hubs, neighborhood nodes
acquire contracts, enhance skills and engage In view of the critical need to decongest
in construction activities. Thimphu city, there are opportunities to take up
construction in urban villages, neighborhood
At home, DHI will have to identify and hand nodes and urban hubs. Likewise, there is need
over projects to CDCL, while CDCL will have to also for a modern bus terminal in the capital
bring in modern technologies and enhance its city. These construction activities could be
skills and expertise. DHI and CDCL will work addressed through DHI co-location initiatives.

65
Phuntsholing Township Development Project present IT park capacity is under expansion.
In the next five years or so, DHI would have In the next two years or so, this capacity is
made about Nu. 5,400 million on investments planned to be fully utilised. Considering the
in the Project. Strategic and deliberate effort ground situation then, DHI will look at further
needs to be put in by DHI to ensure demand expansion opportunities and also look at
for the commercial space created at PTDP. higher value Information Technology Enabled
Although the economic gains from the project Services.
is expected to be large for the country, DHI
will work out measures to ensuring the DHI CO-Location
vibrancy of the new township that will result In order to provide better customer
in financial gains. experience and convenience, DHI has started
the construction of its first co-location centre
IT Park expansion in Paro. Depending on its success, this model
TTPL has been able to function in a sustainable will be replicated to at least 3 more areas in
manner and has provided employment to the country.
many youths. Considering the success, the

66 ROADMAP 2030
 MILESTONES
• Construction of one of the main packages of hydropower project : 2025 – 2027
• Regional player in construction : 2026 - 2030
• Manufacturing unit for pre-fabricated construction materials : 2022 - 2023
• Home ownership : 2025 - 2026
• Complete R&D and implement cement use in road construction : 2019 - 2020
• Expand DHI Co-location concept to urban-hubs and : 2019 - 2020
neighboring nodes
• Transfer NHDCL from MoF to DHI : 2019
• PTDP project demand creation : 2022 - 2025
• IT Park and DHI Co-location expansion : 2020 - 2025

POLICY INSTRUMENTS IMPACTING THE GROUP

1. DHI to work with government (MoWHS) in relation to cement-concreting national
highways.
2. DHI to work with government on policy intervention to engage Group companies
in hydropower development pursued though Inter-Governmental model.

67
Manufacturing segment With regard to existing manufacturing
Realizing the opportunities for new companies, the Group plans to enhance
investments that additional firm power capacity use, and where required, invest in
presents, DHI has already initiated investments their expansion.
in manufacturing firms like pharmaceutical,
metallurgy and aluminum smelting. Existing manufacturing units
Considering construction delays and cost
The Group’s main focus for the coming overrun, DCCL was capitalised at much higher
decade will be to boost new investments and cost. Owing to that and the operational
set up numerous new industries both within teething problems, DCCL is yet to realize
the existing and new segments, such that the positive bottom line. However, considering
total cumulative returns to DHI’s dividend the improvements it is now making, DHI
income is at least Nu 5,000 million starting and DCCL plans to realize the returns as
2021 until 2030 or Nu 2,297 million in 2030 projected in the DPR. DHI will continue to
alone. explore synergy and opportunities to enhance
capacity use and increase sales.

68 ROADMAP 2030
Based on its raw material (rubber wood), indigenous crafts in its products.
WCCL’s products wear a mark of high quality
and standard. To avoid shocks from external DHI will also continue to work with other
environment (import of rubber wood) and manufacturing units under its hold, in terms
also to make WCCL products affordable and of exploring synergy and enhancing their
available to lower and middle-income groups, capacities; working with the government and
DHI and WCCL will increase the use of local streamlining policies; and servicing industries
timber and enhance production capacities. with specialized services through CoEs.
However, it will continue to promote

MILESTONES
• DHI’s income from new investments in 2030 is at least Nu 1,500 M : 2020 – 2030
• Enhance capacity of existing manufacturing units : 2019 - 2030

POLICY INSTRUMENTS IMPACTING THE GROUP

1. Power allocation framework
2. Investment incentives (Fiscal and Financial Incentive policies)

69
70 ROADMAP 2030
INVESTMENTS IN RESERVED
SECTOR (RESOURCE SEGMENT)
Operating in reserved areas, SMCL and NRDCL initiated numerous discussions with the
have been facing policy and regulatory issues Ministry and DoFPS, and will continue to
over the last few years. attempt resolution of these issues.

Natural Resource Development Corporation Additionally, to fulfil its mandate and convey
Limited to private saw millers how resources can be
NRDCL’s primary mandate is to ensure optimized by reducing wastage in sawing,
sustainable use of natural resources and to NRDCL invested in a few saw mills, joinery
keep them available, affordable and accessible and seasoning kiln. Together with NRDCL
for judicious use in the best interest of the and WCCL, DHI will initiate investments in
nation and its people. The Executive Order, pre-fabricated construction materials (mainly
2007 and the 2010 Guideline mandates NRDCL doors, window frames and panel boards) to
to also collect sand and stone from riverbeds bring about efficiency and cost reduction in
and manage them. However, the Forest and timber and timber products.
Nature Conservation Rules and Regulations
of Bhutan 2017 also allows private parties to For sand, western Bhutan is dependent on
operate in this reserved area. Wangduephodrang and Punakha for supply.
However, demand surpasses supply and
The main issue is over royalty payment. While customers are often forced to buy from
quarries approved by Department of Geology other sources. While freight charges add to
and Mines (DGM) pays Nu. 400 per MT of the overall cost, DHI and NRDCL will initiate
stones for export (as royalty and mineral rent), uniform pricing of these materials in every
DoFPS collects Nu. 50 per truck-load. There dzongkhag.
is a huge revenue loss to the government.
There is a need to streamline the policy on State Mining Corporation Limited
this front, which DHI has already initiated One of the primary mandates of SMCL
discussions with relevant ministries. is to be the designate body to develop
strategic minerals as defined by MoEA and
Similarly, there are issues with DoFPS- to increase contribution from mineral sector
approved modality of timber extraction, to the national economy besides creating
distribution and marketing. While NRDCL has employment opportunities for Bhutanese.
a huge responsibility of ensuring affordability At the same time, the Mineral Development
of construction materials, owing to restrictions Policy states that allocation of all strategic
stated in the distribution modality, NRDCL’s minerals shall be the prerogative of the RGoB,
role has been reduced to extraction and which means that SMCL, as a state owned
allocation of the materials to wood based enterprise, should enjoy the prerogatives
industries (WBIs). The end customers are at overall strategic minerals. Like hydropower,
the mercy of WBIs in terms of access to and mining sector too has as huge a potential in
affordability of timber. DHI and NRDCL have boosting the nation’s economy.

71
In the coming years, leaseholds for gypsum, There are also other minerals like graphite
coal and dolomite mines with private with proven deposit of 23 million tons,
companies will expire. DHI will liaise with and iron ore, that the Group could operate.
the government to acquire all three mines Particularly for iron ore, there is a high synergy
preferably through direct allotment as these quotient in a Group company operating it.
are natural resources, ownership of which vests There will be benefits to both DCCL and Druk
with the people of Bhutan,. The other option Metallurgy Limited.
is also for DCCL to apply for captive gypsum
mine. Comparing the financials of the private However, there are issues surrounding policy
mining companies17, SMCL in its second year and clearances in allotting mines directly
of operation of a small coal mine itself has to any party. As per the Mines and Minerals
performed at par with them and contributed Management Regulation, 2002, leasing of
both income tax to the government and mines are to be done on the basis of public
dividend to DHI. Government’s revenue from notification. DHI will actively pursue with
the private companies is limited to royalty and the government in bringing about clarity in
income tax only. DHI and SMCL will contribute policy for the benefit of both regulators and
dividends in addition. operators.

17
Druk Satair, Jigme Mining and SD Coal Company

72 ROADMAP 2030
 MILESTONES
• Invest in pre-fabricated construction materials : 2022-2023
(timber and its products)
• Uniform pricing of sand, timber and stones across dzongkhag : 2019
• Explore gypsum, coal and dolomite mines for SMCL : 2020 – 2022
• Explore iron ore and graphite mines : 2022 - 2023

POLICY INSTRUMENTS IMPACTING THE GROUP

1. Timber Extraction, Distribution and Marketing modality
2. Forest and Nature Conservation Rules and Regulations of Bhutan, 2017
3. Mines and Minerals Management Regulation, 2002
4. Mines and Minerals Management Act 1995

73
INVESTMENT ABROAD
Under new investments, DHI is also mandated its capacity to make investments abroad
to make investments abroad. The long-term independently by building in-house capacity
mandate of saving the national wealth for and expertise.
future generation makes it imperative for
DHI to consider geographical diversification. Further, through hydropower related
The Bhutan Future Fund has also been set consultancies, the Group will drive
up to consciously set aside fund for future employment of Bhutanese workforce outside
generations and national exigencies. While Bhutan. DHI, DGPC and CDCL will have to
the first investment has already been made, drive the initiative by acquiring projects,
the investments are presently being pursued contracts and consultancies outside Bhutan,
passively through fund managers. mainly in hydropower construction and other
construction related works.
In the coming decade, DHI will enhance

MILESTONES
• Investment abroad directly without use of Fund Managers : 2024 - 2025
• Major employment drive outside Bhutan through Group’s projects : 2027 - 2030

POLICY INSTRUMENTS IMPACTING THE GROUP

1. RMA’s regulation on Investment Abroad

INVESTMENT IN NEW SEGMENTS

Bioprospecting only players in the country. Further, out of
Bhutan is one of the 10 biodiversity hotspots more than 3000 species, only about 400
in the world endowed with thousands medicinal plants are used in our traditional
of species of plants, microorganisms and medicines. Many other plants with potential
animals. However, very little effort is for new medicinal applications are used by
being taken to systematically screen these local healers and practitioners in different
biodiversity resources for drug discovery and parts of Bhutan for the treatment of different
other applications. At present, Menjong Sorig conditions. All these hold immense potential
Pharmaceutical Corporation Limited (MSPCL) for value addition and new drug discovery
and Department of Traditional Medicine through bioprospecting.
(DoTM), Ministry of Health (MoH) are the

74 ROADMAP 2030
If we do not recognize the potential of this Agri-business
sector, we might lose out to other countries Considering its contribution to GDP (16.52%)
who are actively engaged in biopiracy of and employment generation (58%), agriculture
underdeveloped countries’ biodiversity and and forest is still the most important economic
exploitation of traditional knowledge of sector, involving the large majority of the
such poor countries for their own economic population. However, if not for the Koufuku
opportunities. initiative, the Group’s contribution to the
sector is almost non-existent.
While transferring MSPCL under DHI may
help realize the future of natural medicines Koufuku International Limited has immensely
and spa/cosmetic sector, the investment benefitted the farmers in the east. Everyday it
in scientific bioprospecting will require a contributes more than Nu. 30,000 to farmers’
more focused scientific approach whose income from the milk it buys. However, in
sole objective would be to discover new the last three years, Bhutan imported an
therapeutic entities for existing and emerging average of more than Nu. 1.0 billion worth of
health conditions and diseases. Establishment processed dairy milk products and packaged
of such a bioprospecting company will enable milk from India alone. This itself presents the
the systematic screening of our biodiversity dairy processing sector a huge potential for
resources and facilitate the development of growth. At the same time, government policy
biopharmaceutical industry in the country. is also favourable, with many investments and
Hence, DHI will explore and initiate research support being pushed from their side, which
infrastructure and specialized bioprospecting has seen the milk production in the eastern
and production technology in the sector in Dzongkhags significantly increase in last
the coming decade. few years. For instance, Samdrup Jongkhar

75
dzongkhag alone produces more than 5,000 involvement, which is only through Drukair,
litres of milk every day, but owing to lack of is minimal. Considering the year-on-year
domestic market, it is being sold as raw milk growth of tourist arrival, DHI will also explore
to the vendors across the border without any investment in this sector, particularly in areas
value addition. such as providing tourist infrastructure like
rope ways, water sports, developing camp
At the moment KIL is planning an Ultra High sites at exotic and remote places and high-
Temperature (UHT) plant at Dewathang to end relaxation/meditation centers. Presently,
capture the domestic UHT packaged milk DHI and DGPC have hydropower based eco-
markets. Similarly, there is significant milk tourism in the plan.
production in other parts of Bhutan and in
the next ten years expansion of companies a. Hydropower based eco-tourism
such as KIL can capture this potential for rural Elsewhere in the world, hydropower projects
development and revenue generation for the and their components, especially the
government through the sale of value added reservoirs that are created, become touristic
products. locations if the social and environmental
aspects are well addressed bringing in normal
Similarly, DHI will study and explore tourists as well as trekkers. Reservoirs also
opportunities in agriculture businesses to become fisheries and sporting places. It can
benefit farmers and also reach organic agri- be combined with normal tourism.
products to people in towns and cities.
Eco-tourism of the hydropower locations
Tourism and hospitality could to be promoted while ensuring that
Tourism and hospitality is the second highest there are no safety and other concerns for the
revenue contributor to the government. plants. DGPC could initiate an eco-tourism
However, in this sector too, the Group’s business around some its power plants.

MILESTONES
• Initiate R&D and Investment in Bioprospecting and biopharmaceutical: 2025 -2030
• Initiate investment in Agri-Business : 2024 – 2025
• Initiate investment in Tourism and Hospitality sector : 2025 - 2026

76 ROADMAP 2030
INVESTMENT IN SPECIALIZED AREAS AND LATEST
TECHNOLOGIES
Bhutan missed out on opportunities to lead, and confidently make decisions critical to
or at least, be at par with regional experts in production, market positioning and problem
Information and Communication Technology solving.
(ICT), when the IT revolution began in the late
1990s. Nonetheless, technology is advancing Block Chain Technology is a type of
at a pace much faster at an unprecedented digital information distribution system
rate and, thereby, new opportunities that will enable more stable and secure
present themselves. In the coming decade, information transfer and databases. This
DHI shall initiate R&D and investments in has vast implications on the banking and
latest technologies like Space and Satellite telecommunications sector for the security
technology, Artificial Intelligence (AI), Data and ease of access private information.
Analytics and Block-Chain Technology.
AI Technology is now engrained in almost
Data Analytics is the act of utilising consumer every single firm in the developed world,
and corporate data to create models and to some degree or the other. Besides image
generate better, strategic decision making. recognition, voice recognition and robotics, AI
Data Analytics will enable the service sector has become a fantastic tool to solve numerous
of Bhutan to provide more customised and problems. DHI could explore options to work
streamlined products and services. It will with Tech giants to be able to take up latest
also enable companies in the manufacturing modern technologies and develop capacities
sector to be able to fine tune their operations while working with them.

MILESTONES
• Initiate R&D is specialized areas and modern technologies : 2020 – 2025

77
 LEADING AND COMPLEMENTING
PRIVATE SECTOR
78 ROADMAP 2030
721
There is a misconception of DHI’s mandate frequency and increase aircraft use to benefit
to lead and complement private sector the hospitality sector.
development among many stakeholders,
including Group companies. To a certain In the coming decade, the Group proposes to
degree, it is clear that DHI will not take churn out entrepreneurs who can scale up their
competition to the private sector in areas businesses to greater heights. To promote and
where they are more efficient, or in operations encourage entrepreneurship and business
that are advantageous to the private sector, in development through venture capital and
terms of size and benefits to the customers. other required institutional support, a holistic
approach to entrepreneurship development has
However, for the Group to lead and complement already been initiated. It is mainly to promote
private sector development, DHI’s role is to Cottage and Small Industries (CSI) in Bhutan.
engage in areas where private sector is unable to
meet efficiency, standard, quality and for setting The other initiative that DHI will pursue under
standards in transparency, business integrity this is to encourage broad-based ownership of
and ethical conduct. Further, to complement public companies. As informed in sections above,
the development of a dynamic private sector, DHI will divest shares of some of its companies
the Group’s role is to deliver its products and in the non-strategic sectors through IPO. DHI
services efficiently to the private sector, so they, already engages private firms in its course of
in turn, achieve efficiency in their operations. business, especially in construction contracts,
Hence, the Group’s engagement in some of where they are hired as contractors (e.g.
the activities where private sector is already construction of substations), but in the coming
an active player is a conscious decision, to lead decade, DHI will also explore opportunities to
them by setting standards, achieving efficiency take up construction works in specialized areas
and ultimately benefiting the end consumers. through Public Private Partnership (PPP) model.

For instance, the Centre for Excellence concept Finally, under many of the segments, an
has been developed with private sector at initiative to liaise with regulators and
the core, to provide specialized services to independent agencies has been identified.
our industries at much lower costs. Similarly, This is mainly to streamline policies and
initiatives under communications segment are regulations that will also benefit private
geared towards enhancing business processes firms. DHI will work with the private sector
and communications at par with developed in this area too, to bring clarity in many of the
nations. Also, Drukair is required to increase government policies and regulations.

MILESTONES
• Broad-based ownership of public companies : 2020
• Engagement of private sector in the Group works : 2024 - 2030
through PPP model
• Work with government on streamlining policies and regulations

79
 REVENUE TO THE GOVERNMENT

63%
DIVIDEND
+
Income Tax and
Payment for Royalty Energy

80 ROADMAP 2030
For the 12th Five Year Plan, based on preliminary Similarly, the total outlay for the fiscal year
projections, the initial total budget outlay was 2029/30 has been projected at Nu. 94.83
estimated at Nu. 300 billion, out of which Nu. billion, out of which Nu. 68.76 billion
185 billion is current expenditure and Nu 115. accounts for current expenditure. However,
billion capital expenditure. Domestic revenue total resource has been projected at Nu.
has been estimated at Nu. 251.23 billion, which 88.39 billion, out of which Nu. 85.43 billion
is double of the 11th Plan’s Nu. 251 billion accounts for internal revenue. It is estimated
on account of commissioning of three new there will be a fiscal deficit of Nu. 6.43 billion
hydroelectric projects. Donor grant estimates even in that fiscal year. In fact, save for fiscal
linger at Nu. 54.42 billion, a decline from Nu. 68 year 2023/24, the first year of 13th FYP, it is
billion in the 11th FYP. Fiscal surplus projection projected that Bhutan will face fiscal deficit
stands at Nu 5 billion, a decrease of about 75% for the entire duration (until 2030).
over 11th FYP fiscal deficit of Nu. 19.8 billion.
The Group’s aim is to help government
However, based on the revised fiscal projection, achieve fiscal surplus for the entire period by
as of September 2018, the total domestic revenue contributing higher revenues. Hence, as set
has been scaled down to Nu. 219.28 billion, from out in the destination statement, the Group’s
Nu. 251.23 billion and donor grants have been goal is to cover the government’s entire
increased to Nu. 63.34 billion from Nu. 54.42 current expenditure for fiscal year 2029/30,
billion. The total outlay has been re-estimated which is Nu. 68.77 billion, and thereby help
at Nu. 309.68 billion, out of which Nu. 193.56 is achieve fiscal surplus for that year. The Group’s
current expenditure and Nu. 116.12 billion capital contribution to the government revenue will
expenditure. Hence, as against the fiscal surplus comprise (i) Dividends DHI remits to MoF, (ii)
of Nu. 5 billion in its initial projection, there will DHI’s Income tax paid on standalone accounts,
now be a shortfall of Nu. 27 billion. (iii) Companies’ income taxes paid on their
standalone accounts and (iv) Payments made
Starting 12th FYP and cumulative to fiscal year by DGPC on account of Royalty energy.
2029/30, the total outlay has been projected
at Nu. 895 billion and the total resource has Additionally, considering the requirement for
been projected at Nu. 833 billion (internal huge capital at times of national emergencies,
revenue of Nu. 729 billion and donor grants of the Group had created the Bhutan Future
Nu 93.95 billion). Hence, a fiscal deficit of Nu. Fund, benchmarked on earnings from the
62 billion has been projected for the entire hydropower and mining sectors. The Group’s
period. The Group will have to take this as an second main goal under this thrust area is to
opportunity to perform at its best and help ensure growth of the fund.
increase government’s internal revenue.

MILESTONES
• Finance the government’s entire current expenditure : 2030
• Increase Bhutan Future Fund to at least Nu. 30 billion : 2030

81
 IN

82 ROADMAP 2030
If the Group achieves the objectives and companies for last 2-3 years as reported in
milestones set out in the document, what RSEBL website. In certain areas, figures were
would it look like? based on DHI’s expectations of the subsidiary
companies.
While ambitious objectives and milestones
have been set out in this Roadmap, Hence, considering the simulation and
financial projections have been made rather then comparing with government’s revised
conservatively. Where available, assumptions fiscal projections, this final chapter seeks
were based on the figures and data used by to sketch a picture for the Group in 2030.
MFCC in their simulation and in the project The presentation is made using the guiding
DPRs. In others, growth percentages were themes used at the beginning to align with
based on performance of the industry over last Mission, Vision and Destination statements.
2-3 years, viz. performance of private mining

83
PERFORMANCE EXCELLENCE

84 ROADMAP 2030
In 2030, all Group companies are well
organized. Their business processes are
streamlined and every one of them performs at
its peak. New companies are also established
on those same platforms.

At the products and services level, all

companies have the best performance KPIs
in the region. All services are fully digitalized
and delivered through online platforms and
mobile apps.

The financial performances of the companies

have improved primarily on account of
efficiency and productivity. As against its
competitors, the Group companies’ returns to
the shareholder are consistently higher.

At the Group level, all areas with high

synergy quotient have been merged and,
on that account, increased earnings before
interest, tax and depreciation (EBIT), at the
consolidated financial statement level, have
been realized.

The Group’s contribution to the government,

therefore, has increased and the compounded
annual growth rate is much higher than the
first 10 years.

85
HUMAN CAPITAL EXCELLENCE

86 ROADMAP 2030
With a research and training institute for CG replaced all legacy systems. The center has
established, all board directors and senior also led the transformation of the Group in
managements teams of the companies digitalization and is now fully digitalized.
have attended at least one round of CG and
leadership training at the institute. In construction, the power-training institute
and TVET graduates have replaced foreign
DGPC’s nine Centre of Excellence provides labourers and they are also engaged in the
specialized services to the industries in construction of hydropower plants, tunnels
Bhutan and region. Similarly, the Druk Green and other mega structures.
Consultancy and R&D Centre is a technically
competent consultant that provides The Group has embarked on a path of latest
hydropower related consultancies in the modern technologies and has started working
region and also acts in the capacity of owner’s with tech-giants like Google, Facebook, NASA
engineer in the construction of a hydropower and Tesla, in the field of Artificial Intelligence,
plant in the country. Together with DGPC, the Cloud services, Space Technology and
CoE for Transmission and Rural Electrification Hyperloop transportation.
has also ventured into consultancy services in
the region. The Group also has competent Bhutanese
professionals to initiate and invest abroad,
The CoE for IT has completed consolidation without reliance on third party managers.
of all IT infrastructure in the Group and has

87
ECONOMIC TRANSFORMATION

Projected Groups remittance to

Ministry of Finance
2019-2030
(figures in Billion)

2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27 2027/28 2028/29 2029/30
6,435 7,162 8,450 12,633 12,811 18,872 19,521 20,903 29,364 30,592 31,936 34,936
4,139 4,987 5,882 8,636 8,883 12,836 13,376 14,092 19,673 20,674 21,789 24,049
2,659 2,653 2,656 7,369 7,336 10,470 10,470 10,470 14,596 14,596 14,596 14,596

Tax
Dividend
Payment for Royalty Energy

88 ROADMAP 2030
Based on fiscal projections for the period means that DHI’s revenue is 53% from hydro
2018/19 to 2029/30, of the total budgetary segment and 47% from non-hydro segment.
outlay of Nu. 895 billion, Nu. 607.47 billion
is the projected total current expenditure for Similarly, under new investments, without
the entire period. The total internal revenue considering specific investments that are
is estimated at Nu. 729.02 billion. For the initiated after detailed studies and analyses,
entire period, the Group’s total contribution DHI has set up at least five manufacturing units.
(cumulative for 2018/19 – 2029/30) is Nu. Under resource segment, SMCL mines three
505 billion. The contribution is 69% of the additional mines (Gypsum, Dolomite and Coal)
total internal revenue, up from 40% for the and WCCL and NRDCL have initiated ready-to-
first decade and 83% of the total current assemble construction materials. The transport
expenditure, up from 50% for the first decade. and communication segment, DHI has one
IT firm/IT CoE catering to Group’s IT needs,
Likewise, the total outlay for the fiscal year a transportation firm and the Group is fully
2029/30 is projected at Nu. 106.74 billion, out digitalized. Additionally, DHI has set up a non-
of which Nu. 68.76 billion accounts for current banking financial institution and is engaged in
expenditure. The total internal revenue is construction of one of the main packages in
projected at Nu. 85.43 billion. In 2030, the a hydropower project and tunnels for surface
Group’s contribution to government’s internal transport. And finally, the Group overall
revenue is Nu. 73 billion, which is about 86% has Centers of Excellence in more than 11
of the projected internal revenue and about specialized areas and at least two R&D facilities
107% of the projected current expenditure of that provide consultancies in hydropower,
fiscal year 2029/30. transmission and other constructions.

With respect to the share of dividend Benchmarked on earnings from hydropower

contribution to DHI, the hydro segment (BPC and mining sectors, the Bhutan Future Fund
and DGPC) contributes Nu. 24,564 million has grown to Nu 29.203 billion. Considering
and the combined total contribution of the interest earned, the Bhutan Future Fund is
non-hydro segments is Nu. 24,311 in 2030. It more than Nu. 30 billion.

86%
30 Billion
Internal
Bhutan Future
Revenue
Fund

100%
Current
Expenditure

89
 DHI Chairman, Dasho Ugen Chewang and CEO, Dasho Karma Yezer Raydi

90 ROADMAP 2030
CONCLUSION
There is clear, broad consensus that the Roadmap will transform the
Group and, the Group will be the catalyst for economic transformation
of the country.

The Group now has the best opportunity it will ever have to transform
itself and contribute significantly to the economic transformation of
the country. We must build on the achievements of the last decade and
ensure that the envisioned future is attained.

There may be those who feel that the envisioned future is unattainable,
those who undervalue our resources and underestimate our
determination and commitment to the future of the Group. If we are
firm in our beliefs and have the willingness to strive for excellence, it
is possible for every company to attain world-class performance and
together, we can help our country attain its economic development
goal of becoming upper middle-income country by 2030.

The Roadmap provides detailed recommendations for moving forward,

and identifies hurdles that we seek to remove. We would like to urge all
the companies to implement the recommendations with full dedication
and commitment.

91
 ANNEXURES
Revised fiscal projections as on September 2018

Projected consolidated financial statement

92 ROADMAP 2030
Projected financial for DHI (Standalone)

Projected financial for DGPC

93
 4. Projected financials for BPC

Projected financial for BPC

94 ROADMAP 2030
 5. Projected financials for DCCL
Projected financial for DCCL

95
 6. Projected financials for SMCL
6. Projected financials for SMCL
Projected financial for SMCL

7. Projected financials for BTL & Drukair

Projected financialfinancials
7. Projected for BTL & Drukair
for BTL & Drukair

96 ROADMAP 2030
 8. Projected
Projected financialfinancials
for BOB for BOB
8. Projected financials for BOB

9. Projected
Projected financialfinancials for Other SOEs
for Other SOEs
9. Projected financials for Other SOEs

97
Acronyms
APG Assetz Property Group DPR Detailed Project Report
ARPU Average Revenue Per User DR Disaster Recovery
ATS Associated Transmission System EBIT Earnings Before Interest and Tax
BAS Bhutanese Accounting Standards EDP Economic Development Policy
BBPL Bhutan Board Products Limited ERP Enterprise Resource Planning
BDBL Bhutan Development Bank Limited EVI Economic Vulnerability Index
BDFL Bhutan Duty Free Limited FDI Foreign Direct Investment
BEA Bhutan Electricity Authority FY Financial Year
BEGIN Business Entrepreneurship Growth and FYIFPs Five-Year Investment and Financing Plans
Innovation FYP Five Year Plan
BFAL Bhutan Ferro Alloys Limited GDP Gross Domestic Project
BHSL Bhutan Helicopter Services Limited GNH Gross National Happiness
BHSL Bhutan Hydropower Services Limited GNI Gross National Income
BICMA Bhutan InfoComm and Media Authority GPMS Government Performance Management
BITC Bhutan Innovation and Technology Centre System
BLL Bhutan Lotteries Limited GST Goods and Service Tax
BNBL Bhutan National Bank Limited HAI Human Asset Index
BOB Bank of Bhutan HRT Head Race Tunnel
BPC Bhutan Power Corporation IFC International Finance Corporation
BTL Bhutan Telecom Limited IG Inter-Governmental Model
CAGR Compounded Annual Growth Rate IN Intelligent Network
CDCL Construction Development Corporation IPO Initial Public Offering
Limited KIPL Koufuku International Private Limited
CEO Chief Executive Officer KPI Key Performance Indicator
CG Corporate Governance LDC Least Developed Country
CG Code Corporate Governance Code LFPR Labour Force Participating Rate
CoE Centre of Excellence MFCTC Macroeconomic Framework Coordination
CSI Cottage and Small Industries Technical Committee
CST College of Science and Technology MSPCL Menjong Sorig Pharmaceutical
DCCL Dungsam Cement Corporation Limited Corporation Limited
DG Druk Green MTPA Metric Tonnes Per Annum
DGPC Druk Green Power Corporation NBFI Non-banking Financial Institution
DHI Druk Holding and Investments Limited NHDCL National Housing Development
BiZAP Business Acceleration Program Corporation limited
DITT Department of Information Technology & PHCB Population and Housing Census of Bhutan
Telecom NRDCL Natural Resources and Development
DoAT Department of Air Transport Corporation Limited
DoFPS Department of Forest and Park Services SCADA Supervisory Control and Data Acquisition
DoTM Department of Traditional Medicine PCAL Penden Cement Authority Limited
DPL Dungsam Polymer Limited PMS Performance Management System
DPP DHI-Private Sector Partnership POS Point Of Sale

98 ROADMAP 2030
PPA Power Purchase Agreement SNBL Shin Nippon Biomedical Laboratories
PPP Public Private Partnership Limited
PTDP Phuentsholing Township Development SOE State Owned Enterprise
Project STCBL State Trading Corporation of Bhutan
RICBL Royal Insurance Corporation of Bhutan Limited
Limited TTPL Thimphu TechPark Limited
RMA Royal Monetary Authority TVET Technical and Vocational Education and
RoC Register of Companies Training
RSEBL Royal Securities Exchange of Bhutan UHT Ultra High Temperature
RSTA Road Safety and Transport Authority WBIs Wood Based Industries
RTM Round Table Meeting WCCL Wood Craft Center Limited
SMCL State Mining Corporation Limited WEF World Economic Forum

99
 Druk Holding & Investments
P.O. Box 1127, Motithang, Thimphu, Bhutan
Tel: +975 2 336257/58 Fax: +975 2 336259
www.dhi.bt