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 780,000 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 high-level ministerial and head of state 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 accredited as Australia’s Ambassador to Bhutan.

Australia will provide an estimated $4.7 million in Official Development Assistance to Bhutan in 2024–25.

Economic and trade relations

Australia's two-way trade with Bhutan increased from $388 million in 2022–23 to $990 million in 2023–24. 

Services trade made up over 99 per cent of total bilateral trade, primarily in the education and skills sectors. Two-way services trade increased to $987 million in 2023–24, up from $385 million in 2022–23.

People-to-people links

In the last decade, Australia has become home to Bhutan's largest community abroad, including 27,810 Bhutan-born residents in June 2023, according to the Australian Bureau of Statistics. There were 13,406 international students from Bhutan for the January–September 2024 period.

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 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 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; 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 fifth King of Bhutan, His Majesty, King Jigme Khesar Namgyel Wangchuck is the head of state or Druk Gyalpo "Dragon King". 

Bhutan’s Prime Minister is head of government, following a change from an absolute monarchy to a democratic constitutional monarchy in 2008. Bhutan has held general elections every five years since – in 2008, 2013, 2018 and 2023–24.

Prime Minister Tshering Tobgay has served in the role since January 2024. He previously served as Prime Minister from 2013 to 2018. He visited Australia in 2016 and 2025.

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 candidates with the most votes are elected. The Prime Minister is nominated by the party that wins the most seats in the National Assembly.

Economic overview

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

The agriculture and forestry sector provides employment and livelihoods to around 55 per cent of the population, according to the International Fund for Agricultural Development. Tourism and hydropower are the key export earners, with the hydropower sector currently accounting for around 13 percent of GDP and tourism accounting for about 20 percent of its non-hydro export income according to the World Bank in 2020.

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, spanning from July 2024 to June 2029, 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 2.9 billion to USD 5 billion by 2029.

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

Climate change

As a country that is carbon negative, 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.

High level visits

Recent high-level visits and meetings include: 

• 17–20 March 2025: The Prime Minister of Bhutan, His Excellency Tshering Tobgay visited Melbourne to attend as keynote speaker to the climate investor forum. He also met with Assistant Foreign Minister Tim Watts.
• 30–31 October 2024: Parliamentary delegation led by Bhutan Deputy Speaker, the Honourable Sangay Khandu visited Australia.
• 10–18 October 2024: The King of Bhutan, His Majesty King Jigme Khesar Wangchuck was the first Head of State to visit Australia. While in Australia, the King met with business leaders and the diaspora as well as government leaders including a meeting with the Governor General, Prime Minister and Assistant Foreign Minister.
• 15–16 May 2023: Assistant Foreign Minister, Tim Watts visited Bhutan to meet with government, community and religious leaders.
• 07–10 June 2023: Parliamentary and business delegation from Western Australia led by the Michelle Hopkins, MLA, Speaker of the Legislative Assembly visited Bhutan.
• 10–16 September 2022: Then Foreign Minister, Tandi Dorji visited Australia as part of the celebration to mark the 20th anniversary of our diplomatic relations.