Bhutan country brief

Political overview

System of government

Bhutan is continuing to consolidate its newly established democracy following its transition to constitutional monarchy in 2008. Bhutan's parliament consists of a lower and upper house. The National Assembly consists of 47 members, each elected by a constituency. The National Council consists of 20 members each elected to represent a Dzongkhag (district), who are joined by five members appointed by the King.

Decentralisation to local governments has been underway for several decades. The Local Government Act of Bhutan, 2009 provides the most recent statement of the powers and responsibilities of Dzongkhags (of which there are 20), Gewogs (groups of villages, 205 in total), and Thromdes (municipalities, of which there are 4).

The country’s first national elections took place in December 2007 (upper house) and March 2008 (lower house), with the Druk Phuensum Tsogpa (DPT) party winning government. Bhutan’s second elections (April to July 2013) delivered a peaceful change of government, with the People’s Democratic Party (PDP) gaining a majority. The current Prime Minister is Tshering Tobgay. The next elections will be held in 2018.

Despite the political changes, the King and royal family retain an important role in Bhutanese society. The current reigning monarch is His Majesty, King Jigme Khesar Namgyel Wangchuck, the Fifth King (Dragon King). The heir to the throne, His Royal Highness The Gyalsey, was born on 5 February 2016.

Economic overview

The guiding principle of Bhutan's economic development is Gross National Happiness (GNH). The four pillars underlying GNH are:

  1. Sustainable and Equitable Socio-Economic Development
  2. Conservation of the Environment
  3. Preservation and Promotion of Culture, and
  4. Good Governance.

All government programs are assessed against the GNH framework, with the aim of ensuring sustainable, holistic development.

The Bhutanese economy continues to grow strongly, albeit off a small base. Bhutan has a history of fiscal prudence and good governance and the currency is pegged to the Indian rupee. Bhutanese products enjoy free access to the large Indian market and India is Bhutan's main trade, investment and development assistance partner. Agriculture and forestry dominate Bhutan’s domestic economy, while hydropower and tourism are major export earners.

Steep mountains and swift flowing rivers make hydropower production a natural fit in Bhutan. It is estimated the country has a total potential hydropower generation capacity of 30,000 megawatts. Bhutan is likely to see significant increases in export and tax revenues as new hydropower projects become operational. Bhutan’s hydro sector is closely tied to India, which provides financial investment and technical assistance and imports a vast share of the produced electricity.

Tourism represents another major opportunity for economic growth. Bhutan is aiming to increase tourists from the Asia region and has recently launched direct flights with Singapore and Mumbai.

Bhutan's Eleventh Five Year Plan (2013-2018), the second plan to be implemented since the introduction of Democratic Constitutional monarchy in 2008 was launched in October 2013.

The United Nations Development Programme (UNDP) Human Development Report (2015) ranks Bhutan 132 out of 188 countries in terms of the human development index (HDI), up from 136 in 2014. Bhutan faces the challenge of matching gains from strong economic growth (6-8 per cent per annum since the mid-1980s) with rising expectations of employment opportunities and welfare improvements, while also preserving its environment and culture. Providing employment opportunities for an expanding and increasingly urban and educated labour force continues to be a key priority for the Bhutanese government.

Bilateral relationship

Australia and Bhutan have long enjoyed warm and friendly relations, predating the establishment of formal diplomatic relations on 14 September 2002. The Australian High Commissioner to India (based in New Delhi) is accredited to Bhutan, while Bhutan’s Ambassador in Bangkok is accredited to Australia.

Ms Catherine Harris AO PSM, based in Sydney, is the Honorary Consul for Bhutan in Australia. The Australia-Bhutan Friendship Association (ABFA) was launched on 3 March 2003 in Thimphu and continues to promote information exchanges and people-to-people links between the two countries. Bhutanese community associations have been established in Sydney, Canberra, Perth and Melbourne.

Australia and Bhutan held inaugural senior officials talks in January 2012 in Bhutan. Subsequent talks were held in Australia (July 2013 and April 2016) and Thimphu (October 2014). These talks enable Australia and Bhutan to exchange views on political and economic developments in their countries and the Asian region, and look for opportunities to further develop the bilateral relationship between the two countries.

There are regular political exchanges between Australia and Bhutan. In 2014, Australia welcomed delegations from the Parliament of Bhutan in August as well as Bhutan's Queen Mother in October. Australia's Ambassador for Women and Girls, Natasha Stott Despoja visited Bhutan in October 2015.

In October 2016, the Prime Minister of Bhutan, the Hon Lyonchhen Tshering Tobgay, visited Australia and met with the Prime Minister of Australia, the Hon Malcolm Turnbull MP, in Canberra. This was the first visit to Australia by a Prime Minister of Bhutan.

Bilateral Trade and Economic Relationship

Australia has a modest trade and investment relationship with Bhutan, with potential for greater links through the involvement of Australian companies in the education and skills sectors. Opportunities also exist in the agribusiness, ecotourism, infrastructure, resources and energy sectors, where demand for Australian expertise is growing.

Bilateral Aid Program

More information on development assistance to Bhutan.

Last Updated: 30 November 2016