Bhutan risk report

Updated: Wednesday. November 4, 2020

Corruption is not an obstacle for businesses investing in Bhutan. The government is faring well in keeping the levels of corruption at a low level in comparison to neighboring South Asian countries. The idea of serving the state and the king is an integral part of civil service and has contributed to constraining public corruption. However, the public procurement sector carries risks as favoritism exists. The Anti-Corruption Act criminalizes several forms of corruption, such as abuse of office and passive and active bribery in both the public and the private sectors. As a general rule, the government effectively enforces the anti-corruption framework.

Judicial system

Very low risk

The courts present businesses with a very low corruption risk. Just 1% of companies perceive the courts to be a major constraint to business (ES 2015). Bribes and irregular payments are rarely exchanged in return for obtaining favorable court decisions (GCR 2015-2016). The courts are guaranteed independence under the law, and the government generally respects these provisions in practice (HRR 2015). Companies perceive the courts as moderately reliable in settling disputes and in challenging government regulations (GCR 2015-2016). Enforcing contracts takes only 225 days (compared to a much higher South Asian average of over 1,000 days) (DB 2016).

Police

Very low risk

Authorities maintained effective control over police forces and have effective mechanisms in place to investigate and punish abuse (HRR 2015). Businesses perceive the police to be sufficiently reliable both in protecting business from crime and in enforcing the law (GCR 2015-2016). Almost no companies perceive crime and disorder to be a major constraint on business (ES 2015).

Public services

Very low risk

The public services sector carries a very low corruption risk to business. Bribes and irregular payments are very rarely exchanged when applying for public utilities (GCR 2015-2016). No surveyed companies expect to give gifts to officials to "get things done" or to obtain an operating license (ES 2015). The public administration functions well, but the burden of government regulations is considered a competitive disadvantage for the country (BTI 2016; GCR 2015-2016). Starting a business takes an average of 15 days (DB 2016).

The Bhutan Portal contains valuable information on legislation, requirements and various licenses.

Land administration

Very low risk

The land administration carries a low corruption risk for business. Almost no companies expect to give gifts to obtain a construction permit (ES 2015). Foreign ownership of land is not permitted in Bhutan, but property rights are otherwise protected (BTI 2016; GCR 2015-2016). Registering property is less costly than elsewhere in the region and takes an average of 77 days (DB 2016).

In 2013, Minister Minjur Dorji and National Assembly speaker Jigme Tshultim were convicted by a district court for corruption and the illegal distribution of land (FitW 2014). They were sentenced to one year and two-and-a-half years in prison respectively (FitW 2014). Since the guilty verdict was announced, the Anti-Corruption Commission has received several corruption allegations against public officials in relation to land matters (BTI 2016).

Tax administration

Very low risk

Bhutan's tax administration carries a very low corruption risk. There are almost no reports of companies being expected to give gifts when meeting with tax officials (ES 2015). While bribes and irregular payments are reportedly rarely (GCR 2015-2016). Paying taxes in Bhutan is less costly and significantly less time-consuming than the regional average, taking 85 hours per year compared to 299.3 hours per year in neighboring countries (DB 2016).

Customs administration

Low risk

The customs authorities carry a moderate corruption risk. Transparency at the border administration is low, and bribes and irregular payments associated with trading across borders are widespread (GETR 2014). Even though corruption levels are reportedly higher when dealing with importing than when exporting, no surveyed companies report being expected to give gifts to obtain an import license (GETR 2014; ES 2015). Importing and exporting are considerably less time-consuming and less costly when compared to regional averages (DB 2016).

Public procurement

Moderate risk

The public procurement sector carries a moderate risk of corruption. Bribes and irregular payments are sometimes exchanged in the procurement process (GCR 2015-2016), yet almost no businesses report being expected to give gifts to procurement officials to secure public contracts (GCR 2015-2016). Companies report that funds are rarely diverted to companies or individuals due to corruption; however, favoritism is perceived to occasionally taint the decisions of procurement officials when awarding contracts (GCR 2015-2016).

Bhutan has a comprehensive legal anti-corruption framework in place, and the government enforces the relevant laws effectively (HRR 2015). The government has been praised for its efforts to limit corruption, including a heavy focus on raising the standards of auditing and accounting to international levels (BTI 2016). The Anti-Corruption Act criminalizes abuse of office, money laundering, embezzlement, active and passive bribery and the bribery of foreign public officials. These provisions apply to both the public and private sectors. Small-scale embezzlement is punished by a minimum of one year to a maximum of three years in prison. The Anti-Corruption Act also imposes mandatory asset declaration for public servants. The Anti-Corruption Commission (ACC) works effectively towards promoting anti-corruption awareness, investigating and prosecuting corrupt officials (BTI 2016). The ACC offers online integrity courses, which more than 1,000 civil servants have completed (Transparency International, 2015). The conviction rate of corruption cases investigated by the ACC is 92%; nonetheless, the ACC struggles with staff shortages and a backlog in investigations threaten its effective functioning (Transparency International, 2015).

Bhutan has signed but not yet ratified the United Nations Convention against Corruption (UNCAC).

Freedoms of speech and press are provided by law, and the government generally respects these rights (HRR 2015). The media is free to expose and criticize government action and corruption, but evidence suggests the media engages in self-censorship (BTI 2016). There were no reports of intimidation or threats against journalists in 2014 (FotP 2015). The Journalist Association of Bhutan (JAB) is responsible for protecting free speech and the interests of journalists, yet its powers are limited as it depends on funding from the government-run Bhutan Media Foundation (FotP 2015). The government passed a freedom of information law in 2014, but government entities are reluctant to share information (FitW 2015; BTI 2016). Bhutan's media environment is considered "partly free" (FotP 2015).

Freedoms of assembly and association are protected under the law but are restricted in practice (BTI 2016). NGOs and professional associations are new in Bhutan in comparison to the more community-based traditions of civil society (BTI 2016). NGOs' cooperation with the government is limited, mainly due to their sponsorship, which often relies on royal patronage (BTI 2016).