Issuing Sovereign Bonds
- First Sovereign Bond Issuance: In 2020, Bhutan issued its first sovereign bond, raising Nu 3 billion. This move aimed to develop the domestic capital market and provide an alternative financing source for the government’s budgetary needs. The successful issuance demonstrated that, despite limited market infrastructure and a small population, Bhutan could tap into sovereign bonds for development financing.
Developing Public Private Partnerships (PPPs)
- ADB Recommendations: The Asian Development Bank (ADB) has highlighted the need for Bhutan to adopt innovative financing approaches, such as PPPs, to leverage private finance and bridge financing gaps. PPPs have been vital in other countries for mobilizing private investment in public infrastructure and services.
Attracting Global Venture Capital
- Attracting Global Venture Capital: Bhutan’s startup ecosystem has garnered attention from international venture capital firms. However, the absence of clear guidelines and regulatory frameworks for venture capital investments poses challenges. Entrepreneurs have called for policy enhancements to facilitate such investments, which are crucial for nurturing startups and small businesses with high-growth potential.
Engaging Climate Financing
- Climate Financing Initiatives: Bhutan has explored the potential of carbon-linked bonds (CLBs) as a means to attract private sector investment and bolster the country’s environmental commitments. These bonds, linked to future carbon prices, aim to create market-based incentives for businesses to invest in low-carbon solutions, aligning financial interests with climate action.
- Climate Investment Funds (CIF): Bhutan has engaged with international funds like the CIF to support sustainable land management and innovative financing in the context of climate resilience. These initiatives aim to promote sustainable practices and mobilize resources for environmental conservation.
Creating Regulatory Frameworks
- Regulatory Frameworks and Master Plans: Efforts have been made to establish regulatory and supervisory frameworks for fund management industries and domestic credit rating agencies. Formulating a capital market master plan has been part of Bhutan’s strategy to develop its financial markets, ensuring they support economic development and wealth creation among the populace.
Innovative National Infrastructure Development
- Innovative Urban Development Financing: Bhutan has embarked on an ambitious project to build the “Gelephu Mindfulness City” (GMC)” to boost its economy and create jobs. This city aims to be an economic hub linking South Asia to Southeast Asia, featuring eco-friendly infrastructure and promoting mindfulness-based education. The project spans over 2,500 sq km on the Indian border and will host businesses in various sectors, including finance, green energy, technology, and healthcare. The Bhutanese sovereign development body has initiated a fixed-term deposit program to fund the foundational infrastructure and an international airport for GMC.
