Bhutan

Bhutan is a beneficiary of the EU's "Everything but Arms" (EBA) scheme for least developed countries. Bhutan is considered a lower-middle income country by the World Bank and currently has a per-capita income of $ 3.290 (2021). Imports to the European market that make use of the preferential access amounted to about €2,2 million in 2022.

What is the EBA?

The “Everything but Arms”(EBA) scheme is a permanent arrangement covering Least Developed Countries (LDC’s) as classified by the United Nations. This arrangement enables duty-free and quota-free access for all products (7200 products in total) originating in LDC’s except for arms and ammunition. Different from the Standard GSP and GSP+, LDC’s are not excluded from the scheme if they benefit from other preferential arrangements.

Bhutan flag

At a glance: EBA beneficiaries' preferential imports to the EU

group

782,45 K

Population

account_balance
Constitutional Monarchy

Government

trending_up

4.40%

GDP Growth

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4.40%

Inflation

money

$ 2,77 B

GDP

63 ^

Freedomhouse index

- -

ITUC Global Rights Index

42.5 ^

Environmental Performance Index

Facts about Bhutan's economy

Landlocked Economy

Bhutan is a landlocked economy located in between the two powerful economies of China and India. Bhutan’s terrain is dominated by the Himalaya and the country controls a number of important mountain passes.

Export Products

Bhutan's most important export products are ferro-alloys, dolomite, semi-finished iron products, cement, carbides, and gypsum. The most important agricultural products for export are nutmeg and cardamom.

Trade Partners

Bhutan's trade is strongly focussing on India as a trading partner. India accounts for almost 90% of exports and imports, leaving Bhutan vulnerable to fluctuations on the Indian market.

Economic Structure

Hydropower construction is at the centre of the Bhutanese economy and is the most important source of income. The majority of Bhutan's population, however, is employed in the agricultural sector which is dominated by small scale farms with a low productivity. The main crops are rice, corn, potatoes, citrus fruits, and a number of spices. Four industries build the centre of the manufacturing sector: processed foods, wood, cement, and chemicals. The services sector, which contributes about 44% (2022) to Bhutan's GDP, is concentrated around public administration, trade, finance, and restaurants.

Carbon-negative Economy

Bhutan is the only carbon-negative economy in the world meaning it absorbs more CO2 than it emits, and the government has taken strict steps to protect the environment. Instead of taking the GDP as a baseline parameter for the country’s progress, the government has introduced the Gross Happiness Index.

Trade with the EU

Total trade with the EU summed up to € 49 million in 2022. With a small share of 1.3% the EU is the third most important trading partner for Bhutan.

Bhutan and the EU (2022)

Imports from Bhutan by product section

Imports from Bhutan over time (in € m)

BHUTAN AND THE EU’s GSP

Economic Impact

98%

Almost all of Bhutan's exports to the EU market are eligible for EBA preferences.

99%

Bhutan has a very high preference utilisation rate of 99%.

Preference utilisation and export diversification

Bhutan's imports to the EU

Preference Utilisation vs. total eligible imports

Bhutan’s preference utilisation rate only experienced minimal fluctuations over the regarded period and stood at above 95% for the majority of years. This is mirrored on the level of the individual product sections. Base metals (iron and steel), which are the largest product section under the EBA, show a preference utilisation rate of 100%. Eligibility of products included in other sections remains limited.

The largest product sections under EBA

Preferential imports from Bhutan are highly concentrated on base metals, particularly iron and steel imports. These products account for about 97% of overall preferential imports. This suggests a relatively small level of export diversification.

SUSTAINABLE DEVELOPMENT

Bhutan's preferential access to the EU market, as a beneficiary of the EU's EBA scheme, is not bound to the ratification of international conventions. Bhutan has ratified 2 out of 7 fundamental UN conventions on human rights and is a signatory to the International Convention on the Elimination of All Forms of Racial Discrimination. To date, Bhutan has not ratified any of the core ILO conventions for the protection of labour standards. Bhutan shows a strong commitment regarding environmental protection and good governance and has 11 conventions from these areas.

Core international conventions on human rights and labour standards

Ratified

  • International Convention on the Elimination of All Forms of Racial Discrimination (1969)
  • Convention on the Elimination of All Forms of Discrimination Against Women (1981)
  • Convention on the Rights of the Child (1990)

Not Ratified

  • Convention on the Prevention and Punishment of the Crime of Genocide (1948)
  • International Covenant on Civil and Political Rights (1976)
  • International Covenant on Economic Social and Cultural Rights (1976)
  • Convention Against Torture and other Cruel, Inhuman or Degrading Treatment or Punishment (1987)
  • Convention concerning Forced or Compulsory Labour, No 29 (1930)
  • Convention concerning Freedom of Association and Protection of the Right to Organise, No 87 (1948)
  • Convention concerning the Application of the Principles of the Right to Organise and to Bargain Collectively, No 98 (1949)
  • Convention concerning Equal Remuneration of Men and Women Workers for Work of Equal Value, No 100 (1951)
  • Convention concerning the Abolition of Forced Labour, No 105 (1957)
  • Convention concerning Discrimination in Respect of Employment and Occupation, No 111 (1958)
  • Convention concerning Minimum Age for Admission to Employment, No 138 (1973)
  • Convention concerning the Prohibition and Immediate Action for the Elimination of the Worst Forms of Child Labour, No 182 (1999)

Additional Conventions

  • Convention on International Trade in Endangered Species of Wild Fauna and Flora (1973)
  • Montreal Protocol on Substances that Deplete the Ozone Layer (1987)
  • Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal (1989)
  • Convention on Biological Diversity (1992)
  • The United Nations Framework Convention on Climate Change (1992)
  • Cartagena Protocol on Biosafety (2000)
  • Kyoto Protocol to the United Nations Framework Convention on Climate Change (1998)
  • United Nations Single Convention on Narcotic Drugs (1961)
  • United Nations Convention on Psychotropic Substances (1971)
  • United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (1988)
  • United Nations Convention against Corruption (2004)

EU-Bhutan Bilateral Development Assistance

DG INTPA

Access all info about EU-Bhutan relations on the International Partnerships website: https://international-partnerships.ec.europa.eu/countries/bhutan_en

Opportunities in Bhutan

  • Large potential for hydropower, of which currently only about 7% is used. An expansion of capacity is currently underway with the building of 12 new hydropower dams with an expected capacity of 10,000 megawatts.
  • Strong national approach towards environmental sustainability, with climate policies embedded in Bhutan's constitution
  • One of the fastest growing economies in South Asia with rising domestic demand and the ambition to reach middle income status by 2023

Contact points