Overview

The Kingdom of Bhutan is a small, mountainous, landlocked country in South Asia, located in the eastern Himalayas, bordered by India and China.

Bhutan is home to a population of about 770,000 and is one of three countries that are carbon negative. Over 70 per cent of its land is covered by forest.

Bhutan is a Buddhist country which recognises its "spiritual heritage" under their Constitution. Practised by over 84 per cent of the population, Buddhism plays a vital role in the country. The remaining population is mainly Hindu.

Bilateral relations

Australia and Bhutan enjoy warm and friendly ties built on education and people‑to‑people links. 

Diplomatic relations with Bhutan began on 14 September 2002.  Our relations date to 1962 when Prime Minister Robert Menzies invited the Royal Government of Bhutan to attend the Colombo Plan meeting in Melbourne.  In the same year, the Colombo Plan countries admitted Bhutan as a member.

Australia and Bhutan share democratic values, a commitment to the international rules‑based order, and support a resilient, open and stable Indian Ocean region.

Australia was the destination for the first group of Bhutanese sent overseas for higher education in the 1970s.

There were several positive developments in the bilateral relations in recent years, including two‑way high-level ministerial visits, a development program that contributes to Bhutan's long-term needs, and the opening of a new Embassy of Bhutan in Canberra in late 2021.

Australia is one of six countries where Bhutan has an embassy. Australia's High Commissioner to India in New Delhi is responsible for Bhutan.

In 2023-24, Australia provided an estimated $4.9 million in Official Development Assistance to Bhutan.

Economic and trade relations

Australia's two-way trade with Bhutan increased from $123 million in 2021-22 to $354 million in 2022-23. 

Services trade made up almost 99 per cent of total bilateral trade, primarily in the education and skills sectors.  Two-way services trade increased to $351 million in 2022-23, up from $118 million in 2021-22.

People-to-people links

In the last decade, Australia has become home to Bhutan's largest community abroad, including 14,450 Bhutan-born residents in 2022, according to the Australian Bureau of Statistics. There were 10,899 international students from Bhutan in 2023.

Bhutanese diaspora communities, students and alumni in Australia play a vital role contributing to both our countries and bilateral relations.

The skills, knowledge and experience they gain in Australia benefit Bhutan's growth and development on their return to Bhutan. 

Our development cooperation further supports Bhutan's economic development, including by providing opportunities for many to remain in or contribute to Bhutan.

Development Program

Australia is supporting Bhutan to meet its sustainable development challenges by helping build human capital, supporting women's empowerment and addressing climate change. Australia is a modest but highly regarded donor to Bhutan.

In 2024-25, Australia will provide an estimated $4.7 million in Official Development Assistance to Bhutan focused on strengthening human capital, women's empowerment, and climate change, hydropower and water resource management. This includes an estimated $2.1 million in bilateral development assistance, unchanged from 2023-24, and an estimated $2.6 million from regional and global programs.

In line with the Sustainable Development Goals, Australia's development cooperation program in Bhutan aims to: build human capacity through the provision of Australia Award scholarships and fellowships; support water security, climate mitigation and adaptation through the Water for Women Fund; support gender equality and women's empowerment with the International Planned Parenthood Federation; and increase regional economic links and growth through the South Asia Regional Infrastructure Connectivity Program (SARIC).

Political overview

In 2008, Bhutan's political system changed from an absolute monarchy to a democratic constitutional monarchy. The fith King of Bhutan, His Majesty, King Jigme Khesar Namgyel Wangchuck is the head of state or Druk Gyalpo "Dragon King". 

The Buddhist kingdom is a new democracy and has held general elections every five years – in 2008, 2013, 2018 and 2023/24.

Bhutan's parliament consists of a lower and upper house. The lower house (National Assembly) consists of 47 members, each elected by a constituency. The upper house (National Council) consists of 25 members, 20 representing districts and five nominated by the King.

Bhutan has a unique two-round electoral system. In the first round, voters cast a ballot among all parties qualified for the election. The two parties that receive the most votes across the country advance. In the second round, the candidates of each of the top two parties compete in 47 single‑member constituencies. In the second round, the candidate with the most votes is elected.

Bhutan's head of government is its Prime Minister. The Prime Minister is nominated by the party that wins the most seats in the National Assembly.

The current Bhutan Prime Minister Tshering Tobgay served as Prime Minister from 2013 to 2018, and during that term visited Australia.

Economic overview

Bhutan's economy is largely based on agriculture, forestry, tourism and hydropower.

The agriculture and forestry sector provides employment and livelihoods to over 60 per cent of the population. Tourism and hydropower are the key export earners, with hydroelectricity exports to India accounting for approximately 28.7 per cent of GDP.

Despite forecasts of continued strong economic growth, Bhutan's economy faces challenges, including a narrow economic base, high trade costs impacted by remoteness and limited regional infrastructure, and a reliance on hydropower exports.

Gross National Happiness (GNH), a phrase first introduced by the fourth King of Bhutan, guides Bhutan's economic planning and development.

The Gross National Happiness Commission is the central planning agency of the Government of Bhutan which plays a key role in identifying priorities, allocating resources, setting targets, and coordinating, monitoring and evaluating policies and programs. The Commission uses the Gross National Happiness framework to assess all government programs, including the government's 5‑year plans.

Bhutan's 13th five-year plan is scheduled to commence from July 2024. It sets ambitious goals aspiring to elevate the country to a high-income status. The primary economic objectives include increasing Gross Domestic Product (GDP) from USD 2.5 billion to USD 5 billion by 2029.

The objective of Bhutan's Twelfth Five Year Plan (2018-2023) was a 'Just, Harmonious and Sustainable Society through enhanced Decentralization'.

Bhutan graduated from the Least Developed Country (LDC) country category in December 2023.

Climate change

The Government of Bhutan prioritises environmental concerns, as industrialisation increases, including through inclusion in the Five-Year Plan and Constitution, which requires a minimum of 60 per cent of Bhutan's land be maintained as forest. 

Bhutan is vulnerable to climate change. While reliant on agriculture, it has limited arable land. Subsistence farming practices rely on timely rainfall. Drought and irregular rainfall make the rural population vulnerable to impacts of extreme weather patterns.

An environmental concern for Bhutan is retreating glaciers. A high rate of glacier retreat increases water-flow in the short-term, however, a long-term reduction in water flow has implications for hydropower generation, a significant component of the economy.