WORLD TRADE
ORGANIZATIONWT/COMTD/IF/35
17 September 1998
(98-3540)
Committee on Trade and Development
Integrated Framework for Trade-Related
Technical AssistanceOriginal:  English
TRADE-RELATED TECHNICAL ASSISTANCE NEEDS ASSESSMENT
SUBMITTED BY BHUTAN
INTEGRATED RESPONSES BY THE IMF, ITC, UNCTAD, UNDP,
WORLD BANK AND WTO1
BHUTAN
                                                     
1Published in accordance with the provisions of pa ragraph 5(e) of the Integrated Framework for
Trade-Related Technical Assistance (WT/LDC/HL/1/Rev.1).WT/COMTD/IF/35
Page 2
TRADE-RELATED TECHNICAL ASSISTANCE NEEDS-ASSESSMENT
PRESENTED BY BHUTAN
A. TRADE POLICY
Basic Policy
(i) Privatisation, where ample opportunities are being given to the domestic private sector to play
a lead role in commercial and industrial ventures, wherever possible.
(a) Privatisation of trading activities:  besides domestic trade, this includes trade with India,
Bangladesh and other countries.  The only exceptions in this regard are the Food
Corporation of Bhutan  (FCB) and the State Trading Cor poration of Bhutan (STCB).  In
the case of FCB, it is more a public service organisation which provides or oversees the
availability of essential food commodities at fair prices, deals in scarce food items, foodsecurity and procurement of some subsidised quota items from India.  The STCB is
primarily a government procurement agency and also deals in several scarce or
sensitive items like explosives, specialized steels and some scarce industrial raw
materials.  However, as of mid-1997, 49 pe r cent of STCB's share holdings have been
sold to the private sector and the management is being privatised with additionalprivatisation of shares.
(b) Privatisation of industrial ventures:  Go vernment share holdings in most industrial
ventures that were established earlier have been privatised to give an added opportunity
to the private sector.  The small share holding s that still exist with the Government are
either to meet contractual obligations or  for giving support to the industry due to
investment difficulties of the private sector.
(c) Privatisation in the communications sector which include:
- Privatisation of bus and truck services.  The Roads Safety and Surface
Transport Authority of the Ministry of  Communications plays a regulatory and
facilitative role;
- privatisation of road construction and maintenance works.  These works are
subcontracted to the private sector by the government.  The Public Works
Division has a supportive and regulatory role;
- liberalisation of the sale of telecommunications customer premise/terminal
equipment.  While the Ministry of Trade and Industry provides licence for
dealers, the Division of Telecommunica tions approves the equipment type.
This will change once the draft telecommunications legislations is enacted.  Aseparate regulator within the Ministry of Communications will be responsible
for licensing and type of approval.  Within this year, the government run
Division of Telecommunications will be changed into a state owned
corporation, responsible for the operation of telecommunications services in the
country.WT/COMTD/IF/35
Page 3
(d) Shares of any companies including that of the Government are required to be sold only
through the Royal Securities Exchange of Bhutan (RSEB) and purchases of shares are
open to only Bhutanese nationals.
(e) All tourism activities are in the private sector with the Tourism Authority of Bhutan
(TAB) acting only as a supervisory and regulatory body.
(f) A Substantial portion of the government Human Resource Development (HRD) budget
is allocated to the private sector.
(g) Giving financial and material support to the Bhutan Chamber of Commerce and
Industry which is purely a private sector or ganisation seeking to promote the interests
of the private sector.  It also acts as an agen t of the private sector for dialogues with the
private sector for dialogues with the government.
(h) Creating an "enabling environment" for private sector development through legal
instruments like the Companies Act of the Kingdom of Bhutan 1989, Mines andMinerals Management Act 1995 and Customs Rules and Regulations 1996.  More
legislations are being drafted to further th e objective of private sector development.
(i) Legislation in the form of the Roads Safety and Transport Act of 1997 has been
enacted and it provides for private sector participation in the provision of commercialtransport services.
(ii) Provision of cheap power to domestic, rural and industrial consumers.  The power
tariff rate of Nu.0.60 per Kwh (Nu.39.80=US$.1) is a rate fixed by the government to
give an advantage to domestic industries to use the cheap power.  (The present export
rate to India is Nu.1.00 per Kwh).  However, constructions and running of majorpower projects are being done by the government directly in view of the huge
investments involved in their establishmen t where only the government is entitled to
obtain grants and soft tern loans from donors like India, Austria and Japan.  Again
acquisition of large tracts of land and preservation of forest catchment areas including
measures to safeguard the fragile Himalayan environment can at present be done
most effectively by the government.
(iii) Establishment of small industrial estates where all the basic amenities such as water,
power and roads are made available minimum rents.
(iv) Except for industries of strategic importance, all manufacturing, processing and
service industries including contract types are allowed to be set up in the private
sector.
(v) In order to fulfil the objectives of a regionally balanced development and to meet
security concerns, location of projects away from international border areas are
encouraged, at least three Kms away.  In the case of all other areas, private sector
may freely choose their locations in keeping with the environmental requirements and
permission granted by the local authorities.
(vi) As far as possible, all industries have to be in the private sector, except for investment
requirements or other problems which the private sector finds difficult to resolve, the
government may be involved initially in their promotion.WT/COMTD/IF/35
Page 4
(vii) In order to avoid debt problems, industries in the medium and large scale categories
should normally be in the Debt Equity ratio of 2:1.  However, this provision can be
relaxed by financial institutions.
(viii) In view of the sustainable development policy approach followed by the government,
the views from the following organisations for the projects indicated against them aresought and given due weightage:
(a) Wood based - Forestry Services Division, Ministry of
Agriculture
(b) Mineral based - Geology and Mines Division, Ministry
of Trade and Industry
(c) Agro-based - Ministry of Agriculture(d) Foreign Exchange - Ministry of Finance/Royal Monetary
Authority
(e) Environment - National Environment Commission
(f) Foreign Labour
recruitment- Ministry of Home Affairs
(g) Industrial sites - Industry Division and Dzongkhag
(district) authorities
(a) What are the sectors that you believe have unexploited or underexploited export
potential?
Hydro power and energy-intensive industries, mine ral-based and chemical industries, industries
based on horticulture, industries based on forest resources like handicrafts, dyes and pigments, herbal
medicines and aromatic industries.  There could be good scope for electronic industries as well as
service industries.  There could be good scope for electronic industries for exports.  Packaging has stillto come up to the mark to meet export requirements.
(b) Could you please define your country's pers pective of the reasons for any changes in the
structure and direction of exports and imports?
The structure and direction of exports and impor ts are given as Annexure A.  Some of the
factors which have brought about a ch ange in the structure and direction of exports are the availability of
cheap power, and opening up of the Bangladesh market.  Recently, the liberalization moves in India and
the rest of the subcontinent, including similar moves in Bhutan have resulted in diversifying especially
imports into the country.  The growing public in vestment in the country requiring varied and
sophisticated materials (equipment,etc.) has dive rsified import sources from the traditional Indian
market.WT/COMTD/IF/35
Page 5
(c) What have been the objectives  of trade policy in the most recent period, compared to, say,
two decades ago?
The objectives of trade policy is to enhance Bhutan's earnings through exports, through
encouraging export oriented industries.  Emphasis is  placed on the development of the domestic private
sector for both imports and exports.  The import regime has been liberalized dramatically in the last year
or so keeping up with regional trends.  This was not the case two decades ago.
Objectives of trade policy of the VIII Five Year Plan (1997/98 - 2002/03)
(i) To enhance the contribution of the trade sector to the national economy by promoting
internal and international trade with increa sed private sector participation through the
creation of an environment conducive to growth of trade.
(ii) To expand trade on a sustained basis and gradually reduce trade imbalances.(iii) To diversify the export base through the identification and development of exportable
products in such a manner as to make the trade sustainable and competitive.
(d) What are the Ministries in charge of trade policy matters, including formulation,
implementation, enforcement and monitoring?  How is coordination made?  What are the
respective roles of the relevant Ministries (give particular attention to tariff policies and other
policies directly affecting exports and imports of goods and services)?
While the Ministry of Trade and Industry (MTI) is in-charge of trade policy matters, relevant
Ministries of the Government are consulted in  the process of formulation, implementation and
enforcement of such a policy.  The Foreign Exch ange and Tariff policy is framed by the Ministry of
Finance in consultation with the MTI and approved by the Cabinet.  The Planning Commission is the
main inter-ministerial body responsible for formula tion and co-ordination of all economic development
matters.
(e) How are the private sector and academic inst itutions associated with the formulation and
conduct of trade policy?
Annual General Meetings of the Bhutan Chambe r of Commerce and Industry are held where the
district secretaries and various Ministries participat e.  During such meetings, the views of the private
sector are consolidated and incorporated durin g the formulation of trade policy.  No academic
institutions are involved in the process at present as  such institutions have not taken interest thus far.
(f) What are the institutions in your country th at can play a role in implementation of a
trade-related project at the local level?  State their respective roles.
The Regional Trade and Industry offices of the MTI in coordination with the Dzongkhag
(district) Administration, the local BCCI representative and the Gewog Yargey Tschokchungs  (i.e. Block
Development Committee) at the local level could implement such projects.
(g) What are the main laws and regulations de aling with trade policy - on exports and
imports?  Please provide a short description of each.
- Trade licence Rules and Regulations - It provides the general criteria and prerequisites
for obtaining a trade licence and carrying out commercial trade in the country;WT/COMTD/IF/35
Page 6
- Export and Import regulations - It basically provides the framework and procedures for
the export and import of goods and specifies  those products whose export or import is
restricted;
- Tariff and non-tariff regulations - It provid es basic structure of customs checks and
controls and the simplified procedures that ensure adequate safety against any
possibilities of evasion of taxe s, prohibitions and restrictions;
- Foreign Exchange regulations - Provides gu idelines for obtaining foreign exchange for
international trade and specifies who is eligible to obtain it;
- Trade Agreement with Indian and Bangladesh;- The Agreement on the South Asian Preferential Trading Agreement.
(h) What are the main instruments of trade policy - on exports and imports?  Please elaborate
(e.g. on import restrictions, the questions might be :  on what products are there any import bans;
on what products are there quantitative import restr ictions;  licensing requirements, etc.;  what is
the highest tariff rate currently in use;  are there any excise taxes,  other "domestic" taxes that are
applied differentially to imported goods, or to goods of a type that are principally imported?).
Export Policy
The main thrust of Bhutan's export policy is the diversification of exports of goods and services
so as to increase foreign exchange earnings.  To this end, the policy is geared towards facilitating
increased opportunities for gainful employment, id entifying new and varied exportable products,
identifying new markets, etc.  Effo rts are made to ensure that the quality of the existing exports as well
as the new ones are consistent and competitive in the international market.  The government has
liberalised the exchange and trade regime.  There ar e no exchange restrictions on payments or transfers
relating to any transactions with India.  In or der to assist a potential exporter in conducting market
studies etc, foreign exchange is made available upon payment of counter value in local currency.  Any
Bhutanese national is permitted to carry out an export venture after obtaining an export licence which issolely for registration and income tax purposes and is  practically automatic.  Import of industrial plants
and machineries is totally exempted from duty while  import of raw materials from countries other than
India is subject to minimum import duty.  Import of  raw materials from India are exempted from all
taxes and charges in keeping with the free trade arrangement.
Export of Bhutanese finished products are free fro m all taxes and levies.  However, to ensure
value addition of natural resources, an Export Tax is  levied for export of timber (10 per cent of value)
and selected agricultural products such as or anges (Nu.500/MT), apples (Nu.500/MT) and cardamom
(Nu.3,000/MT).
Import Policy
RGOB has embarked on a forward looking economic policy to gradually liberalise trade,
industrial and financial sectors with  a view to encourage and facilitate the development of the private
sector.  The import policy has therefore been liberalis ed with the rules and procedures streamlined and
import tariffs significantly reduced.  Any Bhutanese national is permitted to carry out external trade after
obtaining necessary trade and import licence.  This re quirement is purely for identification of the private
businessmen and is used mainly for registration, income tax and transit purposes.  It is processed in a
transparent and automatic manner.  There are no quantitative import restrictions from September 1996WT/COMTD/IF/35
Page 7
with the introduction of the new Bhutan Customs Ru les and Regulations and Customs Tariff Schedule,
1996.  Items under the restricted list on which there is an import ban include arms, ammunition and
explosives, drugs, wildlife and certain chemicals.  The tariff rates normally range from 0.00 per cent to
30 per cent with the highest tariff rate of 100 per cent being applied tobacco and alcoholic goods.
Excise taxes in Bhutan are applied only on domesti cally produced liquors.  Customs duty as per tariff
policy is applied only on imports of third country origin which excludes imports from India in view of
the Agreement on Trade and Commerce between the two countries and hence a domestic sales tax is
levied which ranges from 0 per cent to 50 per cent to 50  per cent (for tobacco and liquors).  However,
the levy of tax on export of agriculture produce is imposed in lieu of income tax and not as export tax.
(i) In case you are a WTO Member or are in the process of acceding, how is your country
preparing itself to comply  with the WTO Agreements?
As we are not very familiar with the WTO Agreem ents, we intend to join as an observer to the
WTO so as to enable us to understand fully the provisions of the Agreement and assess its implications.
(j) What is the state of familiarity with the WTO framework:
- among government and government-related agencies?
- in the private sector?
The familiarity with the WTO framework is not ad equate in both the government as well as the
private sector.
(k) What are your technical assistance requireme nts with regard to you r compliance with the
WTO Agreements?
- Establish cells or local points in the relevant Ministries to carry out work related to the
WTO Agreements.  This will inter alia , ensure that notification and other WTO
obligations are fully implemented;
- training to enhance the human and instituti onal capacities in both the government and
private sectors.
(l) In which specific areas of the WTO Agreeme nts do you have technical assistance needs
(e.g. market access, agriculture, rules (anti-dumpin g, subsidies, import licensing, rules of origin,
safeguards etc.), TBT and SPS, Services, TRIPs)?
In all the areas, provision of training in trade policy under WTO and compliance requirements
as per document WT/LDC/HL/1 dated 10 October 1997 would be highly useful.
(m) What is your assessment of your existing tr ade analysis and negotiating capacities, both
multilateral and bilateral, in areas already  covered by the WTO Agreements and other
trade-related areas, e.g. competitio n policy and trade and environment?
The present capacities are quite limited in the absence of adequately qualified professionals and
other institutional bottlenecks.  Hence, orientation pr ogrammes have to be initiated to strengthen this
capacity.WT/COMTD/IF/35
Page 8
B. OBSTACLES TO TRADE EXPANSION
Obstacles to trade encompassing problems in export markets, infrastructure, human capacities,
institutional bottlenecks, trade financing problems a nd gaps in trade information can inhibit a least-
developed country from taking full advantage of trading opportunities.
Supply Constraints, Including Institutional Bottlenecks
(a) What are the main bottlenecks inhibiting the development of sustained export capacity of
goods and services (e.g. customs facilitation, frei ght charges, quality management, elimination of
cumbersome legal and administrative  procedures, paucity of human skills, access at international
prices to imported inputs, or inadequate telecommunication, port and transport facilities etc.)?
- Land-locked countries may fa ce additional problems, such as having to ship using
costly or unreliable transport and ports sy stems.  In case this applies to your
country, please indicate such problems.  What kind of technical assistance would
help you work out these problems?
In common with other land locked countries , Bhutan faces numerous problems with the
transport of goods for export and import through tr ansit countries.  While there is no doubt that the
existing Agreement on Trade an Commerce with th e Government of India has greatly facilitated
Bhutan's trade, there is always scope for further improvement.
Some of the bottlenecks faced are detailed below:- Problems of distance:  because Bhutan's land locked and remote position, most of the
hard currency earning exports, in particul ar the horticultural produce, are currently
limited within the region and on a seasonal basis.  Being perishable in nature, these
items are most often loaded directly from th e orchards and then transported by road to
the markets.  In the event some unforeseen in cident occurs in the transit country, the
chances of these goods reaching their dest ination is highly undependable.  Further,
unnecessary delays and repeated handling of these consignments along the way at
various custom points leads to the deteriorat ion of their quality.  Transporting them by
air is extremely costly which makes them commercially unviable;
- High costs:  insurance coverage of export and import cargo is an essential prerequisite.
In Bhutan's case, insurance cover is provid ed only up to Calcutta, India by the foreign
insurance companies.  The tran sit insurance from Calcutta to Bhutan has to be taken
separately which adds to the cost of insura nce.  Further, clearing and forwarding agents
at the ports in the transit countries need to be used adding further to the handling costs.
Any delays in the sea ports or inland customs stations, which are more or less
commonplace today, is bound to attract extra storage charges beyond the permitted free
periods, demurrage charges and late documentation fees which further increases the
cost.  Also, the freight charges for export by air is relatively high;
- Delays and uncertainties with schedules and documentation:  in the transit system that
is prevailing today for Bhutan, goods are frequently held up at maritime ports (Calcutta
for example) or at inland customs stations , because of the absence of documentation
(such as ocean bills of lading or commercial invoices), minor irregularities in thedocumentation, non availability of onward transportation, labour disputes, and the like;
This not only damages our reputation as an  exporting country but also discourages
importers from buying from Bhutan while adding  to the total cost as mentioned in theWT/COMTD/IF/35
Page 9
earlier paragraph.  For instance, the transit between Calcutta and Bhutan for export and
import cargo is over ten days on an average;
- Paucity of human skills:  Bhutan has a lot of untapped export potential, the private
sector has not been able to take advantage of this potential.  This is  mainly due to their
lack of experience and knowledge on quality c ontrol, market studies etc associated with
such trade;
- Quality management:  while we have the capacity to produce exportable products one
of the major problems faced is in ensuring sustained quality and uniformity of some of
our products.  Due to this, it has been difficult to access new markets as the products
cannot compete both in terms of quality and price;
- Shortage of information on export markets;- Inadequate export finance.
Technical assistance will be required in:
(i) The establishment of dry port facilities in Bhutan;
(ii) training in the management of the dry port;
(iii) identification of products having export capacity in Bhutan vis-à-vis  market studies;
(iv) the establishment of an institute for quality control and management;
(v) export promotion.
(b) Are there any institutional bo ttlenecks, which may impede the efficient conduct of your
country's trade policies?  Provide details. For ex ample, what are the problems perceived by the
different actors, e.g. exporters, producers, service providers (banks, insura nce companies, quality
control, transporters etc), professional asso ciations and Ministries?  Are problems mainly
perceived in the area of:
(i) Human resources
There is a shortage of trained manpower within  the Ministry who can analyse export and import
trends and make projections whereon future steps can be taken.  Besides, the entrepreneurial base in the
country is still relatively at a rudimentary st age and lack exposure, information and technical
qualification to trade within the new trade parameters.
(ii) Management of the institution
So far our approach towards trade promotion ha s been more on a sector by sector and product
by product basis.  There is no coordinating forum through which an integrated approach can be taken on
a regular basis.  An export Development Board wh ich functioned briefly in the early 1990's is now
defunct.
(iii) Financial and material resources
The inability to provide financial support to the extent required both from financial institutions
in terms of loans, and from the government in term s of incentives and subsidies, has impeded the growth
of exports.WT/COMTD/IF/35
Page 10
(iv) Transport and Communication
Although telephone and facsimile connections are adequate with improvements scheduled for in
the near future, we lack modern communications fac ilities like e-mail and Internet.  Further, due to the
geographic terrain, transit and transport costs are very high while at the same time not properly
developed.
(c) What are the main bottleneck s to export diversification?
(i) Small production base as the raw materials are scattered and most are uneconomical for
exploitation.  Due to this, the volume of production is low;
(ii) inadequate market information;(iii) high transportation costs;
(iv) insufficient knowledge on resource endowment;
(v) shortage or quality products;
(vi) lack of legislation for quality control and food standards;
(vii) lack of infrastructural facilities including laboratory facilities;(viii) lack of capital and technology.
(d) If investment in the production of goods a nd services is inadequate, what are the main
reasons?  Please elaborate them (e.g. structural constraints, difficulties in attracting foreign
investment, limited enterprise development, financing, lack of appropriate technology, etc)
(i) Shortage of financing;
(ii) inadequate infrastructure development;
(iii) lack of appropriate technology;
(iv) limited enterprise development as a result of a relatively young private sector.
(e) Is there a national policy to encourage expo rt-related investment opportunities?  Please
elaborate.  What arrangements are in place fo r reviewing, drafting and negotiating contractual
arrangements with foreign investors?
Any foreign partnership or technical collaborati on in industrial ventures require approval from
the Ministry of Trade and Industry.  Such collabora tion is considered on a case-by-case basis where the
expertise, technical know-how and capital require ment for involving a foreign company is known.
However, in this context, a cautious approach is  being followed in view of social, political and
environmental reasons and the need to import a large number of foreign labour in most cases.
(f) What are the main obstacles to the transfer, development and acquisition of technology?
Is there any national policy/strategy in this area?  Please elaborate.
Bhutan does not have a national policy/strategy in th is area.  This is mainly due to the fact that
this sector.  The absence of a national technology policy impedes the transfer, development andacquisition of technology in Bhutan.  Other impediment s in this area is the lack of access to capital for
investment in appropriate technology, shortage of skilled manpower in management, limited domestic
market, inadequate physical infrastructure. Technology assessment and forecasting capabilities are also
lacking.  The government does not undermine the impor tance of this sector and has plans to strengthen
the institutional capacity in this sector.  The objective here is to acquire labour saving technologies.WT/COMTD/IF/35
Page 11
(g) What are your technical assistance or other assistance needs with respect to supply
constraints.
Trade Promotion and Trade Support Services
Trade promotion comprises an integrated set of technical and financial services to enhance the
global competitiveness of enterprises and thus faci litate their entry and increasing participation in
international trade.
(i) Human resource development (HRD);
(ii) building up an information base within  the Ministry and developing the trade
information network system including equi pping the focal points and other reference
centres with computers, CD-ROM for info rmation gathering/dissemination and gaining
access to the Internet;
(iii) strengthening the institutional capacity of the relevant Ministries and government
agencies, particularly the Ministry of Trade and Industry;
(iv) identification of resources which can serve as inputs for export production;
(v) development of communications infrastructure;
(vi) alternative transportation mode and route;
(vii) improved technology for production increase and diversification and quality
development;
(viii) establishing an institutional set up whic h will facilitate transfer, development and
acquisition of appropriate technology.
(h) Do your enterprises, especia lly small and medium enterpri ses, experience difficulties in
expanding their exports?  What are thes e problems in the major export sectors?
(i) High transportation costs;
(ii) low quality of products in several cases;
(iii) lack of exposure to improved production methods and export markets in some products;
(iv) inadequate market information in several cases.
The main problem is that most of the small and medium enterprises have inherent difficulties
such as managerial competence, exposure, informati on gaps, etc even within the domestic market.  They
are still grappling with the fundamentals of the trade and have yet to reach a stage where the
sophisticated aspects of trade and finance can be fully comprehended.  The above is further magnified
when it comes to trading in the ex ternal markets to which they have very little exposure and hence do
not possess the human information or contacts vital to  such trade.  With regard to the major export
sectors namely horticultural produce and minerals, here again the land locked nature of the countryincreases the costs which makes it somewhat incompe titive.  There is also lack of information on the
competitive forces in the export market.
(i) What are the problems for your enterpri ses in obtaining reliable and up-to-date
information on export/import business opportunities?
In view of our geography, most of our exports  have been in the sub region only which is poorly
documented.  The information available is most often outdated or their authenticity is doubtful.
Government efforts in this area is limited so far.  We also lack institutional infrastructure and skills to
access, collect, store, process and disseminate trad e information from abroad using modem information
technology (for example - Internet).  Much of the ex isting gap in global trade information in Bhutan can
be filled up through the introduction of a Trade Point in the country under the Global Trade Point
Network (GTPN) introduced by UNCTAD.WT/COMTD/IF/35
Page 12
(j) Can your enterprises offer products of in ternationally acceptable design, quality and
packaging to foreign buyers?  If not, what are the problems?
Bhutan produces several products that are in ternationally acceptable like calcium carbide,
ferrosilicon, particle and laminated boards, furniture, liquors, fruit products, minerals and cement.However, some other enterprises also have the potential to produce and export products acceptable in
the international market, mainly those products indi genous to Bhutan in handloom textiles, bamboo and
wooden crafts and processed fruits to some extent.
While the export of processed fruit products have  not been much of a problem, we have had
limited success in the export of the others.  This is because we are not able to adapt these products to
consumer preference in the international market as we lack experience in these areas.  Also, our exports
apart from hydro-electric power are mainly in high value-low volume category.
(k) What problems, other than in terms of trade policy, do you anticipate in developing the
export of services (e.g. computer software, tourism)?
- Lack of infrastructure development;
- shortage of advanced technology;
- shortage of concessional financing;
- shortage of skilled manpower.
(l) What are the technical/professional proble ms encountered by trade support institutions
(e.g. trade promotion council, chamber of commerce, exporters association, etc) in your country in
providing their services to  export/import enterprises?
The Trade Division of the Ministry functions as the trade promotion council in the absence of a
separate institution for the same.  The Division does not have skilled manpower and the infrastructure
including modern communication facilities to discha rge this responsibility effectively. The Bhutan
Chamber of Commerce and Industry does not have suffi cient funds nor the necessary technical expertise
to provide much service to the export/import enterprises.
(m) What problems and deficiencies are experi enced by enterprises in  their international
purchasing and inventory management?
Most of the enterprises lack trade information in respect of availability price, quality, etc. of
goods, expertise, the exposure and experience including negotiating and managerial skills,
warehouse/port facilities to store imported goods and maintain proper inventory, inadequate access to
markets for spare telecommunications equipment and consumables.
(n) What are the present availabili ty and arrangements for trade finance facilities (e.g. export
credit guarantees, etc)?  Are there any p erceived deficiencies in this area?
The financial institutions, four in number, o ffer financial services but sometimes their
requirements prove a hindrance to traders.
(o) What are the main problems in the way of improving export/import management skills of
your business enterprises?  Do you have traini ng programmes in the country?  What are the
deficiencies?
Main problems are the inadequacy of training in stitutions in the country, high cost involved in
training abroad, shortage of profes sional resource persons and technology.WT/COMTD/IF/35
Page 13
The Cottage, Small and Medium Industries Unit under the Ministry conducts training courses
where the basic skills like inventory control, cost effective production techniques, book keeping, etc are
imparted.  This needs to be expanded to cover a wider range of areas for which financial and
technological assistance will be required.
(p) Does your trade representation  service actively promote your trade?  What are the
weaknesses?
We do not have any trade representation service other than the various Embassies, Permanent
Missions and the Liaison Offices of the Revenue  and Customs and STCB in Calcutta.  The main
problem is the lack of funds to estab lish such trade representation services.
(q) Briefly describe your technical assistance needs in the area of trade promotion and
support services.
(i) Human resource development (HRD);
(ii) establishment of a separate trad e promotion cell with trained manpower;
(iii) strengthening of the Bhutan  Chamber of Commerce and Industry;
(iv) strengthening training programmes for skill development in the public as well as private
sector;
(v) improving trade finance facilities;
(vi) building up information technology facilitie s including establishment of a Trade Point;
(viii) setting up and strengthening design development centres and a quality management
institution/organization.
Market Access
(r) What are your main market access problems?
- Land locked nature of Bhutan;
- cannot produce sustainable volumes;
- high cost of production and transportation;
- lack of information and knowledge;
- inconsistent quality and standard of products.
(s) What specific problems or barriers, and in  which countries, are most troublesome for
your exporters?
- Over 90 per cent of Bhutan's trade is w ithin the South Asian region and our major
export markets are India and Bangladesh.  We have an open and porous border with
India and any political unrest in the borderi ng states seriously affects the smooth
conduct of our exports;
- non tariff barriers which make our products incompetitive;- stringent quality and standards requirements;- technical barriers to trade in the future.WT/COMTD/IF/35
Page 14
(t) Regional and sub-regional trading arrangements (RTAs):  please list RTAs to which your
country belongs.  Are you satisfied with the pe rformance with these RTAs?  Please state the
problems of each.  Do you have suggestions on how to solve these?
Bhutan is party to the South Asian Preferen tial Trading Arrangement (SAPTA) which came into
operation in December 1995.  Under this arrangement, three rounds of tariff negotiations have been held
so far where reductions on a product by product basis have been granted.  Although around 2000
products have been covered thus far, actual trading in these items have not yet pick up in a major way as
these products falls in that category that ar e not actively traded within the SAARC region.
The Summit Meeting in Malé has decided that the year for South Asian Free Trade Area be
brought forward to 2001 A.D. and efforts are underway to ensure that this deadline is met.  Some of the
reason why SAPTA has not been as effective as perceived may be due to the fact that it is still in the
early stages of implementation, the political problem s between the member stat es, the existing trading
patterns of most of the member countries is outside  the region and that most of the member countries
produce similar export products.
(u) Are there any problems in utilizing the existing market access preferences, such as GSP,
GSTP?  Please state the nature of problems relating to each of these.
As our export base is still very small and we do not export in a major way to GSP giving
countries, we have not faced any problems so fa r.  Bhutan is also not a member of GSTP.
(v) What are your technical assistance n eeds with respect to market access?
- In-depth analysis of the present market acce ss problems in major export markets and finding
ways to overcome them;
- marketing studies on Bhutanese handicrafts including bamboo products;  essential oils;
aromatic substances and herbs;  environment friendly products;  textiles;  dyes;
matches;
- studies on enhancing Bhutan ese export under GSP scheme;
- identification of the products having potential for export and their adaptation, if,
required, export diversificat ion/product diversificati on and market exploration;
- assistance in marketing our products;- strengthening institutions and procedures relating to quality control.
C. TECHNICAL ASSISTANCE
Technical assistance is normally provided to de veloping and least-developed countries to build
or enhance their human resources and instituti onal capacities, provide trade information and
trade-related legal support, as well as improve th eir supply capabilities in order to make them more
active players in the field of multilateral trade.
(a) To the extent this kind of information is ea sily available, could you please briefly describe
what trade-related assistance you have received over the past five years from bilateral andWT/COMTD/IF/35
Page 15
multilateral sources and what projects/program mes are presently under consideration in this
area?
(i) Assistance to Development of Essential Oils in Bhutan - UNDP (FAO);
(ii) modernisation of Intellectual Property Systems - UNDP (WIPO);
(iii) promoting Sustainable Human Develo pment through Cottage Industry - UNDP
(iv) support to Agricultural Marketing - FAO;
(v) establishing of a seed association for public and private seed enterprises in the
Asia-Pacific region (Multi-country) - FAO;
(vi) programming mission and programme design for preparatory assistance for
SAARC -  ITC, UNCTAD, UNDP;
(vii) institutional strengthening in the Ministry of Trade and Industry - ADB;(viii) Trade Development Project -  EEC, scheduled to begin in March 1998.
(b) Please summarize your technical assistance need s as well as other needs as reflected in this
check-list.  Please rank them in terms of priority.
(i) Advice, guidance and assistance to the private sector to enhance setting up of
manufacturing industries;
(ii) marketing of Bhutanese products;
(iii) institutional strengthening and HRD in  the relevant Ministries and Government
agencies, particularly the Ministry of Trade and Industry and its affiliated agencies, toeffectively handle work relating to compliance with various WTO Agreements;
(iv) development of physical infrastructure incl uding the establishment of dry port facilities;
(v) building up institutional capability in fo rmulation and implementation of trade policy
matters;
(vi) establishment of a Trade Promotion and quality control Cells;(vii) conduct marketing studies on Bhutanese handicrafts including bamboo products;
essential oils;  aromatic substances and herbs;  environment friendly products;  textiles;
dyes;  matches.  Studies on enhancin g Bhutanese exports under GSP scheme;
identification of the products having potential for exports and their adaptation, if,
required;
(viii) export diversification/product dive rsification and market exploration;
(ix) building up an information technology facilities within the Ministry including
establishment of a Trade Point;
(x) strengthening the institutional capacity  of the Chamber of Commerce and Industry;
(xi) sponsoring product-wise marketing missions abroad and participation in international
trade fairs to assist Bhutanese industry and products.
(c) In the light of the information you have been able to provide so far in response to the
questions in this check-list, what types of information are, in your view, still missing or could be
improved upon?  In order to assist you in providing this missing information, would you need
technical assistance?
Most of the areas have already been covered above.WT/COMTD/IF/35
Page 16
(d) Does your country have the technological ca pacity and human resources to make use of
the new information/ communication technology to ols such as CD-Rom, the Internet etc.?  What
assistance would you need to enable your country to use these to ols in the context of training and,
more generally, in the context of trade development?
Basic facilities for the use of CD-Rom are availa ble in Bhutan.  Bhutan does not yet have the
facilities for use of the Internet.  Assi stance is needed in the following areas:
(i) Training for skilled manpower development through seminars, workshops, etc.
(ii) establishment of modern information technology;
(iii) making trade related software and infrastructural facilities easily available.WT/COMTD/IF/35
Page 17
INTEGRATED RESPONSES BY THE IMF, ITC UNCTAD, UNDP,
WORLD BANK AND WTO
BHUTAN
Technical assistance needs identified in the
questionnaireOrganization Response
In reply to question A(k):
Technical assistance requirements as
regards compliance with WTO Agreements
Establish cells or local points in the relevant
Ministries to carry out work related to the
WTO Agreements.  This will inter alia ,
ensure that notification and other WTO
obligations are fully implemented.
Training to enhance the human andinstitutional capacities in both the
government and private sectors.WTO A national seminar will be held in
September 1998.
An official from Bhutan attended a
three-week trade policy course held in the
spring 1998.  Another course will be held in
1999 to which an official from Bhutan will
be invited.
Participants from Bhutan will also be invited
to regional seminars for English-speaking
Least developed countries.WT/COMTD/IF/35
Page 18
Technical assistance needs identified in the
questionnaireOrganization Response
In reply to question A(l):
Technical assistance needs as regards
specific WTO Agreements
In all the areas, provision of training in
trade policy under WTO and compliance
requirements as per document
WT/LDC/HL/1 dated 10 October 1997
would be highly useful.WTO See A(k).WT/COMTD/IF/35
Page 19
Technical assistance needs identified in the
questionnaireOrganization Response
In reply to question A(m):
Assessment of the existing trade analysis
and negotiating capacities
The present capacities are quite limited in
the absence of adequately qualifiedprofessionals and other institutional
bottlenecks.  Hence, orientation
programmes have to be initiated to
strengthen this capacity.UNDP Both the Ministry of Trade and Industry
(MIT) and the Bhutan Chamber ofCommerce and Industry (BCCI) are
receiving UNDP assistance in institutional
capacity building through the nationally
executed Private Sector Development (PSD)
Programme, and Human ResourceManagement and Development Project.
Particularly under the PSD Programme, a
sub-component on Foreign Investment
Collaboration and Advice will be able to
expose the private sector to some
negotiating skills with multinationals.
WTO Officials from Bhutan are invited to attend
short trade policy courses in 1998 and 1999
for least-developed countries containing a
module for enhancing multilateral
negotiating skills.WT/COMTD/IF/35
Page 20
Technical assistance needs identified in the
questionnaireOrganization Response
In reply to question B(g):
Technical assistance needs as regards
supply constraints
Human resource development (HRD). ITC See below.
UNDP The Private Sector Development (PSD)
Programme, and the Human Resource
Management and Development project will
be able address some of these concerns.  SeeA(m).
World Bank(WIPO)The World Bank provides assistance to
assess the adequacy of intellectual property
rules and the government's capacity to
effectively implement them.
(WIPO executed)
Building up an information base within theMinistry and developing the trade
information network system includingequipping the focal points and other
reference centres with computers, CD-ROM
for information gathering/dissemination and
gaining access to the Internet.IMF A national accounts mission is to visit
Bhutan and could well cover trade statistics.
ITC See below.  In addition, the Ministry will
receive information on current market prices
and trends for selected products through theMarket News Service.
UNCTAD TRAINS-CD-Rom will continue to be
provided.WT/COMTD/IF/35
Page 21
Technical assistance needs identified in the
questionnaireOrganization Response
Question B(g) (cont'd):
UNDP The database and information on the
activities of the Entrepreneurship Promotion
Centre of the Ministry of Trade and Industry
set up under Cottage, Small, and
Medium-sale Industries (CSMI)
development project, will build upon and beintegrated into the Private Sector
Development (PSD) Programme.  Hardware
is also provided under both the programme
and the project.  Initially nation-wide
Intranet will be used.
World Bank See above.
Strengthening the institutional capacity ofthe relevant Ministries and government
agencies, particularly the Ministry of Trade
and Industry.UNDP Under the Private Sector Development
(PSD) Programme, the capacity of MTI is
being strengthened through training and
advisory services.
World Bank See above.
ITC/
UNCTADAn ITC programming mission is scheduled
to visit Bhutan in the second part of 1998.
Areas of proposed intervention which have
already been identified according to the
present needs assessment include humanresource development, institutional
strengthening, trade information and product
and market development activities.
*
UNCTAD is prepared to participate jointly.Synergies with the ongoing UNDP-fundedPSD-programme and the UNDP CSMI
development project will be explored.
Identification of resources which can serve
as inputs for export production.
Development of communicationsinfrastructure.
Alternative transportation mode and route. UNCTAD A study can be undertaken under the
land-locked programme.*
                                                     
*Funds are requested.WT/COMTD/IF/35
Page 22
Technical assistance needs identified in the
questionnaireOrganization Response
Question B(g) (cont'd):
Improved technology for production
increase and diversification and quality
development.
Establishing an institutional set up which
will facilitate transfer, development andacquisition of appropriate technology.
Establishment of dry port facilities inBhutan.UNDP Under the Private Sector Development
(PSD) Programme, a feasibility study willbe carried out regarding the establishment of
a dry port and a warehousing facility.
Funding will be required for physical
infrastructure construction.
*
Training in the management of the dry port. UNCTAD This may be undertaken under the
TRAINMAR Programme.*
Synergies will be sought with UNDP. Seeabove.
Identification of products having exportcapacity in Bhutan vis-a-vis market studies.ITC The possibility of carrying out the Country’s
supply survey will be discussed during the
above-mentioned ITC programming
mission.
UNDP Under the Integrated Horticulture
Development Project, activities are included
to develop products having export potential.
Establishment of an institute for qualitycontrol and management.
                                                     
*Funds are requested.WT/COMTD/IF/35
Page 23
Technical assistance needs identified in the
questionnaireOrganization Response
In reply to question B(q):
Technical assistance needs in the area of
trade promotion and support services
(i) Human resource development (HRD). ITC See under B(g).
(ii)  Establishment of a separate trade
promotion cell with trained manpower.ITC See under B(g).
UNDP The Export Promotion Centre established
within MTI will partly address this need.
(iii)  Strengthening of the Bhutan Chamberof Commerce and Industry (BCCI).ITC Consultations will be held with the Bhutan
CCI on the occasion of the planned ITC
programming mission.
UNDP See A(m).
(iv)  Strengthening training programmes for
skill development in the public as well as
private sector.ITC See B(g).
UNDP Under the Cottage, Small, and
Medium-scale (CSMI) development project,
skills are being developed, particularly of
the private sector.
(v)  Improving trade finance facilities.
(vi)  Building up information technologyfacilities including establishment of a TradePoint.UNCTAD A feasibility study to set up a Trade Point
can be undertaken.
*
(vii)  Setting up and strengthening designdevelopment centres and a qualitymanagement institution/organization.
                                                     
*Funds are requested.WT/COMTD/IF/35
Page 24
Technical assistance needs identified in the
questionnaireOrganization Response
In reply to question B(v):
Technical assistance as regards market
access
In-depth analysis of the present market
access problems in a major markets andfinding ways to overcome them.
Marketing studies on Bhutanese handicraftsincluding bamboo products;  essential oils;aromatic substances and herbs;
environment friendly products;  textiles;
dyes;  matches.UNDP Partially carried out under Cottage, Small,
and Medium-scale (CSMI) developmentproject and Integrated Horticulture
Development Project.
Studies on enhancing Bhutanese export
under GSP scheme.UNCTAD A study is envisaged for 1999.
Identification of the products having
potential for export and their adaptation, if
required, export diversification/product
diversification and market exploration.ITC See B(g).  Consultations on this subject will
be held with UNCTAD and UNDP.
Assistance in marketing products. ITC See B(g).  Consultations will be held with
UNCTAD and UNDP.
UNDP Under the Horticulture Development
Project, UNDP is providing some assistance
for the marketing of fruits.
Strengthening institutions and procedures
relating to quality control.WT/COMTD/IF/35
Page 25
Technical assistance needs identified in the
questionnaireOrganization Response
In reply to question C(b):
Summary of technical assistance needs
according to priority
(i)  Advice, guidance and assistance to the
private sector to enhance setting up ofmanufacturing industries.IMF Efforts should be made to encourage foreign
investment by reducing the effective limit onforeign participation and allowing majority
ownership where appropriate.
UNDP Under the Private Sector Development
(PSD) Programme, the sub-component on
drawing up an Industrial Master Plan will
address this.
(ii)  Marketing of Bhutanese products. ITC See B(g).
UNDP See B(v.)
(iii)  Institutional strengthening and humanresource development (HRD) in therelevant Ministries and Government
agencies, particularly the Ministry of Trade
and Industry and its affiliated agencies, to
effectively handle work relating to
compliance with various WTO Agreements.ITC/
UNCTADSee B(g).
(iv)  Development of physical infrastructure
including the establishment of dry portfacilities.UNDP See B(g).
*
                                                     
*Funds are requested.WT/COMTD/IF/35
Page 26
Technical assistance needs identified in the
questionnaireOrganization Response
Question C(b) (cont'd):
(v)  Building up institutional capability in
formulation and implementation of trade
policy matters.IMF As necessary, the Fund stands ready to
provide advice and assistance to address the
following concerns: in order to enhance the
environment for trade development, we
would advise that the authorities should
eliminate discretionary import licensing andreduce the number of tariff rates to four
(from seven). This should be seen as an
intermediary step in the transition to a low
uniform tariff during which time the
distortionary differences in tariff rates
between raw materials/intermediate inputs
and final goods should be reduced so as tosubstantially lower the effective protection
to manufacturers of consumer goods.
UNCTAD A project to strengthen the institutional
capacity of the relevant ministries in the
formulation and implementation of trade
policy may be formulated.*
This could be considered in the context ofthe joint ITC/UNCTAD programming
mission mentioned under B(g) above.
UNDP See A(m).
(vi)  Establishment of a Trade Promotion
and quality control Cells.ITC See B(g).
UNDP See B(q)ii.
(vii)  Conduct marketing studies on
Bhutanese handicrafts including bamboo
products;  essential oils;  aromatic
substances and herbs;  environment friendlyproducts;  textiles; dyes;  matches.  Studies
on enhancing Bhutanese exports under GSP
scheme.  Identification of the products
having potential for exports and their
adaptation, if required.ITC See B(g).
UNDP See B(v).
                                                     
*Funds are requested.WT/COMTD/IF/35
Page 27
Technical assistance needs identified in the
questionnaireOrganization Response
Question C(b) (cont'd):
(viii)  Export diversification/product
diversification and market exploration.ITC/
UNCTADSee B(g).
(ix)  Building up information technology
facilities within the Ministry including the
establishment of a Trade Point.UNCTAD See B(q)vi.
(x)  Strengthening the institutional capacity
of the Chamber of Commerce and Industry.UNDP Under the Private Sector Development
(PSD) Programme, and Human Resource
Management of Development Project, BCCIwill be strengthened to be an effective
advocate of private sector.
(xi)  Sponsoring product-wise marketingmissions abroad and participation in
international trade fairs to assist Bhutanese
industry and products.UNDP Under the Cottage, Small, and
Medium-scale (CSMI) development project,
provisions are made to attend trade fairs of
private sector people.WT/COMTD/IF/35
Page 28
Technical assistance needs identified in the
questionnaireOrganization Response
In reply to question C(d):
Technical assistance needs in the area of
information technology including training
of human resources
Basic facilities for the use of CD-Rom are
available in Bhutan.  Bhutan does not yet
have the facilities for use of the Internet.
Assistance is needed in the following areas:WTO A link up to the Internet will be set up in
November 1998 by the WTO at the focal
point on WTO matters in Bhutan.
(i)  Training for skilled manpowerdevelopment through seminars, workshops,
etc.WTO Training on computer and on the use of link
up with the WTO website will be provided
at the same time.
(ii)  Establishment of modern information
technology.WTO See above.
(iii) Making trade related software and
infrastructural facilities easily available.
__________