Cracks showing in Bhutan's new order

Bhutan vaulted from feudal monarchy to parliamentary democracy in 2008 following a royal edict in 2006 by the Fourth Druk Gyalpo, or Dragon King, abdicating in favor of his eldest son and mandating elections in 2008.

For a mountain people who revere their king and don national dress every day, this sudden devolution of power has been most unsettling. While the outside world is enamored of the vision of a comic opera state that governs by the Gross National Happiness Index, the Bhutanese are struggling with reality. Who is the boss now? No one seems to know. None dare claim the role either.

The civil service has been left floundering between an elected parliament of newbies still unclear about their remit and a monarch who stepped back. While the civil service acted on orders of the monarch, it was beyond challenge. That certitude has evaporated. The demand for transparency and accountability plus a proliferation of newspapers has put the powerful bureaucracy on the defensive.

The new democratic dispensation allows elected representatives to criticize administrative shortcomings in open debate. The newspapers amplify that embarrassment. This is an entirely novel experience for civil servants. They feel insecure and unloved.

The resulting reluctance to take action on many pressing issues across the spectrum of administration is beginning to slow down and paralyze the system. Even routine queries from the press are parried by bureaucrats for fear of being blamed for giving the wrong answer. The civil servants feel they have been left high and dry without any precedent to follow. There is a leadership vacuum.

While devolution of power to the masses has a Utopian ring about it, the reality is that 70 percent of Bhutanese society is agrarian. The issues that preoccupy them are elemental - tilling the very limited (9 percent) arable land, tending livestock and eking out a subsistence in barren mountain terrain with difficult logistics, poor communications and freezing cold.

The finer points of parliamentary democracy and a free press seem too far from their lives to matter much. All the democratic noise and fury plays out in the capital Thimpu, where about 100,000 of Bhutan's 725,000 population and all its 12 newspapers reside.

GNH excites the UN

The fourth king, Jigme Singye Wangchuk, is credited with musing about the need to redefine traditional gross domestic product factors about 40 years ago, for a more inclusive matrix of social progress and well-being. That evolved over time into the Happiness Index introduced in 2005, for which Bhutan is now universally lauded.

The trashing of the capitalist narrative in the United States and Europe, climate change effects from abuse and depletion of the earth's limited resources plus anger at the "1 percent" has coalesced into a search for alternative development models which put people and the environment ahead of profit. Bhutan's GNH approach is becoming an interesting model for many more nations.

In July 2011 the General Assembly of the United Nations unanimously adopted Resolution 65/309 empowering Bhutan to convene a high-level meeting in New York on GNH - at its 66th session in April 2012.

Prime Minister Jigmi Thinley led the discussions which received wide international media coverage. That has given the tiny landlocked Himalayan Kingdom, sandwiched between China and India, an outsize international profile. The Bhutanese leadership basks in that limelight with great pride.

Too much GNH distraction?

Western academics have turned Bhutan's GNH into a conference-tourism industry. There is talk of a Center for GNH to be built in Bumthang, a 10-hour drive along hairpin curves from the capital of Thimpu, to facilitate international studies and research about the concept. Every other month there is a forum, seminar or international dialogue about GNH. There is no shortage of academic pilgrims journeying to Bhutan to talk GNH to death.

What is most curious about GNH seminars is that most of the speakers tend to be foreigners who do not live in Bhutan. The Bhutanese wisely stay out of the lecture circuit. They listen attentively and smile.

At the top where it matters, there is considerable GNH-fatigue and frustration with the hard realities Bhutan must confront. The young king, the deputy chairman of the National Council and the leader of the opposition are all railing for effective action to fix the obvious problems.

India bankrolls the Bhutan economy, supplies most of its imports, builds its infrastructure of bridges and roads and provides unskilled labor for construction. Most of Bhutan's teaching faculty for schools and colleges are also recruited from India.

All of that has led to a rupee crunch which saw the Bhutanese ngultrum, previously accepted at par with the Indian rupee, being discounted by Indian banks and traders. That has now turned into a rigid demand for rupees only. Petty border trade is grinding to a halt with severe disruption to small business.

Bhutan has run out of rupee reserves to pay for its one-sided Indian trade. Emergency loans from India and conversion of Bhutan's US dollar reserves into rupees are propping up the situation for the moment. Panic measures by the Monetary Authority to stop loans and slow rupee transactions have failed to address the fundamental problem of the utter imbalance of Bhutan-India trade flows. It is one-way: Indian goods and services imported into Bhutan which have to be paid for in rupees. Bhutan has little to export to India other than hydroelectric power (which is financed, built and traded by Indian energy companies).

Private sector not thriving

Entrepreneurial energy is needed to drive a private sector to promote import-substitution and to generate export earnings. Some have blamed excessive regulatory hurdles and difficult bank credit for the lack of a domestic private sector.

The agricultural sector is disorganized, handicapped by lack of silos to store rice, grain, vegetables and fruit and has to cope with long supply-chains across difficult mountain roads to get produce to market.

Rural-urban migration depletes the availability of educated youth to organize the agrarian economy. University students all aspire to join the civil service for the prestige it still carries plus the job security and pension it entails.

The capacity for government to absorb university graduates annually is running out. Already 75 percent of the government's operating budget goes to pay salaries to its civil service.

There is 9 percent youth unemployment and rising crime in Thimpu from drug and booze addiction compounded by undisciplined low-level imported labor.

Politicians and newspapers are gearing up for the second general election due in 2013. Unless elected representatives in parliament can lead a bottom-up, self-sufficiency revolution across Bhutan to deliver a 'democracy-dividend', time is running out rapidly for Happiness Land.