Bhutan country brief

Political overview

System of government

In 2008 Bhutan’s political system changed from an absolute monarchy to a democratic constitutional monarchy. 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). 

The country’s first national elections took place in 2007 and 2008, with the Druk Phuensum Tsogpa (DPT) party winning government. Bhutan’s second elections in 2013 resulted in a change of government, with the People’s Democratic Party (PDP) gaining majority.  The King and royal family retain an important role, and a high level of influence, 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 Jigme Namgyel Wangchuck, was born on 5 February 2016.

Economic overview

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

Agriculture and forestry are the primary components of the domestic economy, providing 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 Gross Domestic Product (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 high reliance on hydropower exports to a limited market. 

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.

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.

Bhutan's Twelfth Five Year Plan (2018-2023), came into effect on 1 November 2018 and will conclude on 31 October 2023.The plan’s objective is ‘Just, Harmonious and Sustainable Society through enhanced Decentralization’.  Bhutan was found eligible for graduation from Least Developed Country status in 2018, however successfully obtained a 2-year extension to the normal transition period, and is now expected to graduate in 2023.

The United Nations Development Programme (UNDP) Human Development Report (2018) ranks Bhutan 134 out of 189 countries in terms of the Human Development Index (HDI); an assessment of health, education and standard of living.  

Climate change

Bhutan is carbon negative; sequestering more carbon than it produces due to large-scale renewable energy generation and significant forests — covering approximately 70 per cent of the country’s land-area. 

The Government of Bhutan has placed a priority on environmental matters, 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.  The Government of Bhutan has also expressed plans for all of the country’s agriculture to be organic through the gradual phase-out of chemical fertilisers and pesticides. 

Bhutan is, however, vulnerable to climate change. It is reliant on agriculture, but has limited arable land. Subsistence farming practises rely on timely rainfall; drought and irregular rainfall make the rural population vulnerable to impacts of extreme weather patterns.

A further 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 would have implications for hydropower generation, a significant component of the economy.

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.

Australia and Bhutan held inaugural senior officials talks in January 2012 in Bhutan. Subsequent talks continue to be held. These talks enable Australia and Bhutan to exchange views on political and economic developments in their countries and the region, and look for opportunities to further develop the bilateral relationship.

In October 2016, the Prime Minister of Bhutan, the Hon LyonchhenTshering 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, primarily in the education and skills sectors.

Bhutanese diaspora

According to the 2016 Census, 5,953 people reported their birthplace as Bhutan, an increase from 63 recorded in the 2001 Census.  Many are Bhutanese refugees, having arrived in Australia since 2008 under the Humanitarian Resettlement Program.

Bilateral Aid Program

More information on development assistance to Bhutan.

Last Updated: 30 November 2016