Bhutan first plugged in to the Internet and TV in 1999. So isolated was the tiny Himalayan nation that until then World Cup soccer fans had to drive to the Indian border to buy videotapes of the latest matches, which they would watch a day late.
Few could have predicted the scene seventeen years later. At Thimphu TechPark, a thriving government-run technology hub, a dozen coders hunch over flatscreen monitors. Downstairs, teenagers bark at Europeans through headsets. Soccer is a click away.
Twelve mostly foreign companies occupy the park, employing 750 people, a small but growing proportion of Bhutan’s roughly 350,000-strong economically active workforce.
The park launched in 2012 with World Bank support, amid much worry about white elephants. “Initially people expressed a lot of scepticism,” says CEO Tshering Cigay Dorji, “but these things take time.” A Singaporean investor, Assetz Property Group, pulled out after many of the commercial spaces continued to lie empty and one company suspended operations.
The government initially tried to attract big, high-end foreign companies — but before skills had been proven and without good enough infrastructure. Few people had experience of IT export. A fibre optic cable to India provides broadband fast enough for call centres but not for commercial high-bandwidth activities like video streaming.
It was only after American online photo company Scan Café decided to ramp up its initial 20-strong pilot project in May 2013 that others followed; Bangladesh’s SouthTec Ltd, a software development outfit, and Secure Link Services from Switzerland. Firms specializing in telecoms, business process outsourcing and online data services moved in soon after. Scan Café is now the park’s biggest tenant, employing 530 workers who create photo albums from holiday snaps uploaded online.
The successful attraction of a quality company willing to test the waters signalled that Bhutan was a good place to do business. Most of the ingredients were already in place; they just hadn’t yet been put to use in IT.
The success of Thimphu TechPark reflects many of the reasons why Bhutan is moving so quickly toward its goal of graduation from the least developed country category (LDC). Having been found eligible for graduation in 2015 at the last triennial review of UNDESA’s Committee for Development Policy (CDP), the country looks likely again to meet the standard at the next review in 2018, paving the way for potential graduation in 2021.
The CDP is the body of the UN that monitor Least Developed Countries (LDCs) and determines which are eligible to leave the category. As part of a new capacity-building project the CDP secretariat is supporting Bhutan’s government in understanding and preparing for graduation as well as putting in place policies to diversify the economy and to develop productive capacity.
Scan Café was attracted by Bhutan’s high educational standards, competitive wages, cheap electricity and low rent. Most Bhutanese are taught English from an early age, and the country scores particularly well on the human assets index that is part of the official LDC category.
Rent can be as little as half as in Dhakar or Mumbai. Although the government offers 10-year tax holidays, companies cite low-cost, high-quality labour and economical facilities as bigger advantages.
“The immediate future probably isn’t high-end,” admits Dorji. Bhutan is following a path well-trodden by successful IT exporters: start small and cheap, discover the appropriate markets through trial and error, and move into more sophisticated activities later on. Those youngsters learning basic online and computer skills will develop more advanced expertise and some may even set up their own businesses, perhaps using the incubator facilities provided at the TechPark.
In its quest to become a bigger IT player Bhutan has the advantage of adaptability. Many larger developing countries are lumbered with a large agricultural sector or powerful lobbies that resist new initiatives. Bhutan’s miniscule economy has the potential to respond quickly to new global trends.
Government leadership also harnesses the benefits of smallness. The national vision, Gross National Happiness (GNH), aims to “maximize the happiness of all Bhutanese and to enable them to achieve their full and innate potential as human beings”. The development strategy advocates “a harmonious balance between the material and non-material dimensions of development”.
As noted in the Bhutan Diagnostic Trade Integration Study, (DTIS) information technology fits well with the GNH vision. E-commerce and e-government have a low environmental impact because they localize service access and delivery. The DTIS, part of a joint UN programme from which Bhutan benefits as an LDC, recommends IT as a means of pursuing “green growth” or energy-efficient and climate-friendly economic expansion, which are more efficient than the old, carbon-heavy industries.
And for anyone worrying that the Internet is a sure-fire route to Western ways, many Bhutanese support the GNH emphasis on cultural identity. At the TechPark most women choose to wear a long traditional dress, the Kira, and a light outer jacket known as a Tego, while men wear the Gho, a knee-length cloak like a kimono. Buddhism remains widespread. This sense of national identity tends to incentivize workers and fosters a sense of the common good.
It’s too early to tell whether the TechPark will herald a transformation of the economy. Annual operating expenditure by all 12 companies totals only around US$1.8 million, and industries like hydropower and ferro alloys remain far bigger. As the government knows, it’s also risky to rely on a handful of businesses. Critical to the success of the park is that more investors follow Scan Café’s lead. But in a tiny, remote LDC that only opened up to the outside world less than two decades ago, Thimphu TechPark is a remarkable success story