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    Bhutan’s Hydropower-led Growth Model Not Labour-intensive: World Bank

    CountriesBhutanBhutan's Hydropower-led Growth Model Not Labour-intensive: World Bank
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    Bhutan’s Hydropower-led Growth Model Not Labour-intensive: World Bank

    The authors of the report say that over 40 per cent of workers in Bhutan remain engaged in low-productivity agricultural employment. This finding is reflected in the low-skill nature of the labour market, where 37 per cent of employed workers have no formal schooling.

    Bhutan’s pressing structural challenges related to a lack of economic diversification away from the hydropower-led growth model, vulnerabilities to shocks, and weak productivity gains could complicate the government’s efforts to create more jobs, says a recently released World Bank assessment report on the country’s labour market.

    The World Bank’s ‘Bhutan Labour Market Assessment Report’ says the country’s human capital remains low.

    “A child in Bhutan will be only 48 percent as productive in adulthood as he or she could have been with a complete education and better health care.” The record number of Bhutanese migrating abroad with the reopening of the country’s borders in mid-2022 is fuelling further concerns by policy makers about the country’s development prospects, the report says, adding that “Workers in Bhutan face many challenges, including limited inclusion of women in meaningful employment and persistence of low-productivity agricultural employment.”

    It says that “Employment quality outside of the public sector remains weak, leading to public sector queuing, rising unemployment among urban workers, and a record number of Bhutanese migrating abroad.”

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    The authors of the report say that over 40 per cent of workers in Bhutan remain engaged in low-productivity agricultural employment. This finding is reflected in the low-skill nature of the labour market, where 37 per cent of employed workers have no formal schooling.

    “This outcome is a consequence of the hydropower-led growth model, which is not labour-intensive. It thus does not tempt workers to leave agriculture, nor does it directly affect agricultural productivity.”

    Diplomatic, yet scathing

    The report is scathing on the government’s employment generation efforts and says that the private sector that could be a big employer has not been promoted owing to the government’s policies. The underdeveloped private sector is dominated by low-productivity microenterprises — one of the main reasons for the high unemployment rate among skilled professionals.

    “The private sector in Bhutan faces the twin challenges of accelerating job creation in productive sectors that can absorb the increasingly educated workforce, while also improving the allocation of labour to fill existing vacancies in low and semi-skilled positions.”

    It also contributes to the low quality of employment outside the public sector and may explain in part the speed and scale of outmigration in recent months. “Over 95 per cent of registered firms in the private sector have five employees or fewer, and they do not grow over time. Close to 75 per cent of firms with fewer than five employees have been operating for one to nine years,” the report says.

    Sans it diplomatic speak, the World Bank’s report released last week is not charitable to the government policies on employment programmes. It says that although Bhutan has improved its employment programmes and policies over the last few years, significant gaps remain.

    “Bhutan’s employment support programs and delivery systems face gaps in addressing some of the challenges related to the activation of women, limited job-relevant skills, and the difficulties firms face in accessing trained labour.”

    “Most active labour market programmes remain small and do not specifically focus on the activation of women by alleviating some of the childcare or mobility constraints they face,” it says.

    Although the technical and vocational education and training (TVET) system is relatively well established, it remains too small to meet the existing labour demand. “For example, there were only 401 TVET graduates in 2022. Tracer surveys reveal that over 45 percent of graduates remain unemployed one year after completing training and that employers have no links to most TVET institutes.”

    Addressing Bhutan’s labour market challenges requires pursuing vertical growth policies that are sector-specific to support private sector development and job creation, it says. “In parallel, horizontal reforms that improve the business environment, strengthen human capital accumulation, and increase the effectiveness of employment support programs are needed.”

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