SOE’s Stand as Nation’s Economic Backbone

Bhutan’s state-owned enterprises (SOEs) are cementing their position as the backbone of the national economy, with new government reports showing that they account for nearly a quarter of the country’s economic output while controlling assets worth more than four-fifths of GDP. However, the report paints a more mixed picture beneath the headline figures. Not all SOEs are performing equally well.

According to the Ministry of Finance’s report, “The Share of State-Owned Enterprises (SOEs) in the Bhutanese Economy, 2025,” SOEs contributed 23.06 percent of Bhutan’s Gross Domestic Product (GDP) in 2023, underscoring their dominant role in strategic sectors such as hydropower, finance, telecommunications and transport.

The report also shows that SOEs held assets worth Nu 204.85 billion in 2023, equivalent to 82.14 percent of GDP, illustrating the significant concentration of state-owned capital in Bhutan’s economy. The figures demonstrate that the government continues to play a central role not only as a regulator but also as one of the country’s largest economic actors.

Financially, SOEs have recorded a remarkable turnaround over the past five years. Combined Profit After Tax (PAT) surged by 208.08 percent, rising from Nu 5.21 billion in 2020 to Nu 16.04 billion in 2024. The strongest annual growth came between 2023 and 2024, when profits increased by 36.38 percent, from Nu 11.76 billion to Nu 16.04 billion.

The Ministry of Finance attributes the sustained improvement to stronger operational efficiency, better cost management and improved performance across several key sectors.

Much of this performance was driven by companies under Druk Holding and Investments (DHI), which alone contributed 22.16 percent of GDP, while SOEs directly overseen by the Ministry of Finance accounted for 0.91 percent.

The report reinforces the central role of Bhutan’s hydropower sector in sustaining public enterprise performance. Hydropower-related activities contributed 11.61 percent of GDP in 2023, making electricity by far the largest contributor among all SOE sectors.

“The electricity sector has been a cornerstone of Bhutan’s economic stability,” the report states, attributing the sector’s consistent profitability to decades of strategic investment in hydropower infrastructure.

Other sectors also strengthened overall performance. Finance and insurance SOEs remained resilient through prudent management and adaptation to changing market conditions, while communication enterprises continued to improve both profitability and operational efficiency.

However, the report paints a more mixed picture beneath the headline figures. Not all SOEs are performing equally well.

Manufacturing-related SOEs continued to record persistent losses, suggesting that the sector remains constrained by weak productivity, limited competitiveness and market challenges. The report recommends improving operational efficiency, strengthening supply chains, encouraging innovation and expanding market opportunities to reverse the trend.

Agriculture-related SOEs also faced mounting pressures from climate variability, supply chain disruptions and fluctuating markets. According to the report, greater investment in technology, climate-resilient production systems and improved market access will be essential to improve long-term viability.

While SOEs make an outsized contribution to economic output, their role in employment remains comparatively modest. The report found that SOEs accounted for only 3.55 percent of Bhutan’s total employment, with jobs concentrated primarily in electricity, communications and financial services.

This contrast reflects the structure of Bhutan’s SOEs. Many operate in highly capital-intensive sectors where substantial infrastructure and technology generate significant economic value without requiring large workforces. In other words, their contribution to GDP is driven more by investment and productivity than by employment.

This is reflected in labour productivity figures. In 2023, SOEs recorded an average labour productivity of Nu 1,420.32 per hour, slightly exceeding the South Asian average.

Mining and quarrying recorded the highest productivity at Nu 3,902.47 per hour, followed by electricity (Nu 2,583.74) and finance and insurance (Nu 2,150.01), highlighting the strong returns generated in capital-intensive industries.

The report also indicates that SOEs have relatively limited reliance on domestic bank financing. Total outstanding credit stood at Nu 13.91 billion, accounting for only 6.49 percent of total domestic credit.

Manufacturing received the largest share of SOE borrowing at Nu 3.90 billion, followed by transport and storage (Nu 3.69 billion) and electricity (Nu 2.47 billion). According to the Ministry, most SOEs continue to rely primarily on retained earnings, shareholder equity, government support and alternative financing mechanisms rather than commercial bank loans.

Looking ahead, the report argues that Bhutan’s SOEs must evolve from successful public enterprises into globally competitive institutions. It calls for stronger corporate governance, greater adoption of new technologies, diversified financing sources and deeper collaboration with the private sector.

The report also recommends expanding public-private partnerships, strengthening accountability frameworks.

Nidup Lhamo, Thimphu

Post Views: 53