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Factba.se: Australia DFAT Country Briefs - Bhutan
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COUNTRY BRIEFS


POLITICAL OVERVIEW

System of government

The Kingdom of Bhutan's first democratic elections were held on 31 December 2007 for the National Council, Bhutan's upper house. This was followed by elections for the National Assembly, Bhutan's lower house, on 24 March 2008, to determine the nation's government.

The move toward democracy began in 2000, when the Fourth King decreed that day-to-day affairs would be handled by a council of ministers. In December 2006, the King abdicated power to his eldest son, Jigme Khesar Namgyel Wangchuck (who was crowned Fifth King on 6 November 2008), ahead of the implementation of major political reforms. A 39- member Constitution Drafting Committee was appointed by the Fourth King to draft the country's first written Constitution. This was intended to transform the country from an absolute monarchy to a constitutional one.

Recent political developments

Two political parties, the People's Democratic Party and Druk Phuensum Tshogpa (Bhutan Harmony Party-DPT), contested the country's first elections. Voters delivered a landslide victory to the DPT, which took 45 out of the 47 seats in the National Assembly. Since then the focus has been on the consolidation of Bhutan's transition to democracy. This process has focused on continued electoral reform and legislative drafting.

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ECONOMIC OVERVIEW

The guiding principle of Bhutan's economic development is Gross National Happiness rather than increased Gross Domestic Product. The four pillars underlying GNH are good governance, inclusive development, conservation and preservation of Bhutan's unique culture.

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

Bhutan is likely to see significant revenue as new hydropower projects become operational. Steep mountains and swift flowing rivers make hydropower production a natural fit in Bhutan. Close ties between Bhutan and India have provided the necessary political will to bring such projects to fruition and also a market for Bhutan's power as India has a large energy deficit.

Bhutan's Tenth Five Year Plan (2008-2013), launched in February 2008, has a central focus of poverty reduction. The strategic priorities under this plan are:

-- Encouraging industrial development;

-- Promotion of balanced regional development;

-- Integrated rural and urban development for poverty alleviation;

-- Expanding strategic infrastructure;

-- Investing in human capital; and

-- Fostering good governance.

Bhutan's transition to democracy and the Millennium Development Goals (MDGs), which Bhutan is on track to meet, underpin the Tenth Five Year Plan. The Plan aims for an economic growth rate of eight to nine per cent per year throughout the plan. In order to achieve this, it targets an agricultural growth rate of over four per cent and a non-agricultural growth rate of over ten per cent. This growth should allow Bhutan to reduce the overall poverty rate to below 15 per cent, including a rural poverty rate of less than 20 per cent. Other important social targets include:

-- achieving an 80 per cent national literacy rate;

-- lowering the infant mortality rate of 20 per 1000;

-- increasing the average life expectancy to over 70;

-- providing access to safe drinking water and sanitation by 95 and 96 per cent of the population respectively;

-- providing electricity to 84 per cent of the rural population; and

-- achieving a 15 per cent penetration rate for telecommunications across all districts.

The United Nations Development Programme (UNDP) Human Development Report (2011) ranks Bhutan 141 out of 187 countries in terms of the human development index (HDI) (which measures countries' relative standing in terms of life expectancy, educational attainment and adjusted real income. Bhutan faces the challenge of matching gains from strong economic growth (6-8 per cent per annum since the mid 1980s) to rising expectations of expanding employment opportunities and welfare improvements, while preserving its environment and culture. Changed community expectations as a result of the introduction of television and the internet add to the challenge. Providing employment opportunities for an expanding and increasingly urban and educated labour force will not be easy.

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BILATERAL RELATIONSHIP

Australia and Bhutan have traditionally enjoyed warm and friendly relations, going back many years before the two countries established formal diplomatic relations on 14 September 2002. Mr Peter Varghese AO is currently Ambassador to Bhutan (accredited from New Delhi).

Australia's then Parliamentary Secretary for International Development Assistance Mr Bob McMullan visited Bhutan in April 2010 to meet representatives of Bhutan's Government and represent Australia as an observer at the South Asian Association for Regional Cooperation (SAARC) Summit. Mr McMullan met King Jigme Khesar Namgyel Wangchuck and members of Bhutan's Government including Prime Minister Lyonpo Jigme Y. Thinley during his visit. Mr McMullan reiterated Australia's commitment to continue to support Bhutan as it consolidates democracy and works to achieve the MDGs. Mr McMullan also launched Australia's $1 million assistance program for earthquake recovery to be delivered through UNICEF (further details below).

Bhutanese Parliamentary delegation's have visited Australia twice, in 2009 and 2011, in order to meet with Australian parliamentarians and members of the Australian Bhutanese community. Representatives of the Australian Parliament visited Bhutan in 2010.

The then Foreign Minister of Bhutan, and now Prime Minister, Lyonpo Jigme Y. Thinley, visited Australia from 1 to 6 June 2003, accompanied by the then Foreign Secretary and now Foreign Minister. Ms Catherine Harris AO PSM, who is based in Sydney, is the Honorary Consul for Bhutan in Australia.A second Honorary Consul for Queensland, Ms Leonore Guthrie Willie, was appointed in 2010.Bhutan's Ambassador in Bangkok is accredited to Australia.

In September 2008, Mr Tim Fischer was appointed as Australia's Special Envoy to Bhutan. Mr Fischer has a long-standing personal association with Bhutan and has visited on several occasions. He co-authored a book about Bhutan entitled “Bold Bhutan Beckons” which was published in 2009.

An Australia-Bhutan Friendship Association (ABFA) (http://www.australiabhutan.org.bt/) was launched on 3 March 2003 in Thimphu to promote information exchanges and networking between the people of the two countries.

The two countries have continued to work together on new projects including the Asia-Pacific Group on Money Laundering and the Customs International Executive Management Program. A key area of common interest is in the field of climate change, which was the theme of the 2010 SAARC Summit and was expanded upon during Bhutan's participation in the Commonwealth and Small Developing States Meeting in Perth in October 2011.

Bilateral Trade and Economic Relationship

Two way merchandise trade totalled A$3 million (2010-11) with exports to Bhutan valued at A$2.9 million. The principal export to Bhutan is vaccines There is some potential for the development of commercial links through the involvement of Australian companies in developmental work, opportunities also exist in the food and beverage, tourism, building, infrastructure, resources and energy sectors, where demand for Australian expertise is growing.

Bilateral Aid Program

Australia has a long standing bilateral aid program in Bhutan, which was first established under the Colombo Plan in 1962. A large number of Bhutanese officials have received education or training in Australia. Over the past few years new areas of bilateral cooperation have developed including agricultural research, training for police officers, electoral assistance, assistance to Bhutan's vocational education sector and forestry planning.

Australia will provide an estimated $8 million in total aid flows to Bhutan in 2011-12. Most of this assistance will be in the form of Australian Development Scholarships of which 141 were granted to Bhutanese students to study in Australia in 2012. For further information refer to the website of AusAID (http://www.ausaid.gov.au/scholar/studyin.cfm) .

Australia has supported the World Food Program’s School Feeding Program in Bhutan since 2001, providing $500,000 in 2011-12. This program has been successful in improving school attendance and providing children with valuable nutrients.

Since 2010 Australia has provided Bhutan with $1.3 million to assist with reconstruction efforts following a major earthquake in September 2009. The money has been distributed through UNICEF and used to rebuild and improve water and sanitation facilities in schools in the affected district.

The Australian Centre for International Agricultural Research (ACIAR) has been working with Bhutan to improve agricultural production since 1997. In 2012 a $900,000 grant aimed at improving mandarin production (Bhutan's largest horticultural export) was initiated. The project is being implemented in collaboration with the New South Wales Department of Primary Industries and focuses on the production of disease-free planting material, pest and disease control and best-practice production techniques.

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MEMORANDUM OF UNDERSTANDING

The Australia-Bhutan Memorandum of Understanding on Development Co-operation was signed in January 2012 further promoting the goodwill and friendship between the two countries. The aim of the Memorandum is to reduce poverty and secure sustainable development in Bhutan whilst promoting stronger economic and social links between the two countries. It achieves this by providing the framework for the organisation of activities to assist Bhutan in areas of highest economic priority and in which Australia has expertise. The focus is on capacity building through the provision of finances, training, material, equipment and services to meet development outcomes.

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Last Updated: February 2012

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