TIL BDR GHALLEY | Thimphu
State-owned enterprises (SOEs) generated nearly a quarter of Bhutan’s economic output in 2023 while employing only a small share of the country’s workforce, highlighting their dominant role in capital-intensive sectors such as hydropower, finance and telecommunications, according to a new Finance Ministry report.
The report, Share of State-Owned Enterprises in the Bhutanese Economy 2025, found that SOEs contributed 23.06 percent of gross domestic product (GDP) in 2023, while accounting for 3.55 percent of total employment and 6.49 percent of domestic credit. It said the findings reflect the concentration of state-owned firms in strategic sectors that require large capital investments rather than large workforces.
The study comes as Bhutan pursues its long-term objective of expanding the economy to USD 22 billion by 2050, with the government prioritising investment in hydropower, tourism, agriculture, mining, manufacturing and the digital economy. The report said understanding the role of SOEs would help inform future investment, divestment and public-private partnership policies.
Bhutan has 24 state-owned enterprises, including 15 subsidiaries of Druk Holding and Investments (DHI) and nine companies directly overseen by the Ministry of Finance, operating across 11 sectors ranging from electricity and finance to transport, communications, manufacturing, mining and agriculture.
The report found that the industry sector contributed 14.65 percentage points of GDP, led by the electricity sector, which alone accounted for 11.61 percent of GDP. SOEs in the services sector contributed 8.15 percent, while agriculture accounted for 0.26 percent. Although SOEs remain central to Bhutan’s economy, their overall contribution remains below the global average of about 40 percent of GDP, suggesting scope to improve productivity and expand their economic role.
The report also found that SOEs remain concentrated in sectors considered critical to national development rather than labour-intensive industries.
SOEs employed 3.55 percent of Bhutan’s workforce in 2022. The electricity sector had the highest concentration of SOE employment, accounting for 97.94 percent of employment in that sector, followed by communications at 48.17 percent and finance and insurance at 36.76 percent. Agriculture, construction, manufacturing, wholesale and retail trade, and transport recorded much lower levels of SOE employment, reflecting greater participation by private businesses.
The enterprises also continue to hold a substantial share of national assets.
Combined SOE assets stood at Nu. 204.85 billion in 2023, equivalent to 82.14 percent of GDP. The electricity sector accounted for the largest share of assets, followed by finance and insurance, manufacturing, communications, and transport and storage, illustrating the concentration of public investment in infrastructure and other strategic industries.
Despite their sizeable economic footprint, SOEs relied relatively little on domestic bank financing.
According to the report, SOEs accounted for Nu. 13.91 billion, or 6.49 percent, of total domestic credit. Manufacturing received the largest share of bank lending at Nu. 3.90 billion, followed by transport and storage (Nu. 3.69 billion) and electricity (Nu. 2.47 billion). The report said SOEs finance much of their investments through retained earnings, government on-lending, shareholder equity and capital market instruments rather than commercial borrowing.
The report also points to improving financial performance among state-owned enterprises.
Profit after tax increased by 208.08 percent over the past five years, rising from Nu. 5.21 billion in 2020 to Nu. 16.04 billion in 2024. The strongest annual increase occurred between 2023 and 2024, when profits rose 36.38 percent. During the same period, operational efficiency improved as operating costs declined relative to revenue, reflecting stronger cost management and productivity.
Sectoral performance, however, remained uneven.
The electricity sector recorded consistent profitability and operational efficiency throughout the five-year period, while communications also posted sustained improvements. Mining and quarrying remained stable but continued to rely largely on raw material exports. Manufacturing recorded persistent losses, and agriculture experienced volatile performance due to climate variability, market fluctuations and supply chain disruptions. Transport and storage, construction, wholesale and retail trade, real estate, and finance and insurance all showed gradual recovery following weaker performance in earlier years.
Labour productivity across SOEs averaged Nu. 1,420.32 per hour in 2023, slightly above the South Asian average. Mining and quarrying recorded the highest productivity at Nu. 3,902.47 per hour, followed by electricity (Nu. 2,583.74) and finance and insurance (Nu. 2,150.01). The report noted, however, that these sectors remain highly capital-intensive, while agriculture, construction, manufacturing, professional services and real estate offer the greatest potential for productivity gains through innovation, technology adoption and skills development.
The report said strengthening corporate governance, improving operational efficiency and diversifying funding sources would be critical to ensuring SOEs remain competitive while supporting Bhutan’s long-term development goals. It recommends expanding public-private partnerships, increasing access to capital markets, accelerating technology adoption and improving transparency to maximise the contribution of state-owned enterprises as the country works toward its target of becoming a USD 22 billion economy by 2050.
