RENUKA RAI | Thimphu
The Ministry of Industry, Commerce and Employment (MoICE) is turning to infrastructure, industrial development, tourism and improved business services to revive Bhutan’s traditional border economies, while rejecting a strategy of competing with larger neighbouring Indian markets simply by lowering prices.
The approach covers major border centres including Phuentsholing, Samtse and Samdrup Jongkhar, as well as Gelephu, Sarpang and Lhamoizingkha, which now fall within the Gelephu Mindfulness City.
At the national level, the ministry is also investing in the Pasakha and Nganglam dry ports, which are targeted to become fully operational by June 2027.
The facilities are expected to support cargo handling, customs clearance, warehousing, storage and transshipment, while developing wider logistics and value-addition businesses around them.
The minister for MoICE Lyonpo Namgyal Dorji said that there will not be a single special economic package for all border towns. Instead, each town will be developed according to its economic potential, with targeted interventions in infrastructure, trade facilitation, tourism and business development.
For Phuentsholing, the Government is relying on the Phuentsholing Township Enhancement Project, initiated under the Prime Minister’s Office, to strengthen Bhutan’s principal commercial gateway.
The project aims to improve the town’s attractiveness for business, tourism, trade and investment while upgrading urban amenities and border facilitation. The Government says renewed economic activity and confidence are already emerging in the town.
Samtse, meanwhile, is being positioned as an industrial and trade hub.
The Norbugang and Dhamdhum Industrial Parks are attracting industries and creating jobs. The proposed Banarhat–Samtse railway, planned Export Processing Zone and improved road connectivity towards Haa are expected to further strengthen the town’s economic position.
The ministry is also seeing growing demand for housing, commercial space, hotels and other services in Samtse, suggesting that industrial development is beginning to generate activity beyond the industrial parks themselves.
In eastern Bhutan, Samdrup Jongkhar is being developed around trade, tourism and the creative economy.
The operationalisation of the Integrated Check Post and the opening of the entry and exit point for international tourists are creating new opportunities, according to the Government.
The town’s proximity to Assam is also being seen as an advantage for tourism and the creative economy. A new movie theatre is expected to be completed by the end of this year, while the Department of Tourism is studying Samdrup Jongkhar Thromde’s proposal for a public-private partnership-based local arts, crafts and cultural centre.
The Phuentsho Rabtenling Industrial Park is already contributing to economic activity, while the ministry is studying the feasibility of another industrial park nearby.
Gelephu, Sarpang and Lhamoizingkha are on a different trajectory after being brought within the Gelephu Mindfulness City.
The ministry says this fundamentally changes the long-term economic prospects of these areas, potentially creating a different economic base around the development of the city.
The Government’s broader strategy comes against the reality that Bhutanese border towns operate next to much larger Indian markets.
The Ministry of Finance said Bhutan cannot sustainably compete with neighbouring markets simply on price because of differences in market size, economies of scale, supply chains and production costs.
“Bhutan should not enter a race that we cannot win,” Lyonpo Lekey Dorji said, arguing that continually lowering taxes or standards simply to match prices across the border could create a “race to the bottom.”
Instead, the Government wants border towns to compete through reliability, safety, quality, efficient services and distinctive Bhutanese products and experiences.
Lyonpo Lekey Dorji said the Government will focus on areas where its own policies and systems unnecessarily increase the cost or difficulty of doing business.
This includes improving border and customs processes, logistics and connectivity, commercial infrastructure, access to finance, business regulation and the overall ease of doing business.
The Ministry of Finance has also left the door open for targeted incentives.
However, blanket tax holidays or permanent concessions based only on geographical location will be assessed carefully against their fiscal cost and long-term effectiveness.
Similarly, tourism policy will focus on maximising sustainable economic value rather than competing for visitor numbers through lower prices or lower standards.
The longer-term objective is for each border town to develop its own economic identity based on its location, connectivity, tourism potential, trade opportunities and local production.
“Ultimately, revitalising our border towns cannot be achieved through Government incentives alone,” Lyonpo Lekey Dorji said. “It will require the Government to provide the right enabling environment and infrastructure, while the private sector invests, innovates and takes a long-term view of the opportunities.”
The Government’s position is therefore not to make Bhutan’s border towns the cheapest places to shop or do business, but to make them more efficient and attractive places to invest, trade, visit and live.
“We should not try to win by becoming the cheapest,” Lyonpo Lekey Dorji said. “We should build an economy that people trust, value and choose—and build strengths that endure well beyond the immediate competitive pressures at our borders.”
With major investments such as the Pasakha and Nganglam Dry Ports, industrial parks in Samtse and Samdrup Jongkhar, the Phuentsholing Township Enhancement Project and the emerging Gelephu Mindfulness City, the Government is effectively pursuing different economic models for different border regions.
The challenge now will be translating these investments into sustained private-sector activity, employment and business opportunities while making border towns competitive without relying on permanent subsidies or price competition with much larger neighbouring markets.
