tourism industry in bhutan

How Bhutan aims to balance economy and environment through tourism

Bhutan is already 72% carbon negative, meaning it absorbs more carbon dioxide from the atmosphere than it produces. Image:  Pexels/Soonam Wooeser

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Stay up to date:, travel and tourism.

• Bhutan, a tiny Himalayan kingdom known for its pristine environment and sustainable development, will cap tourist numbers at 200,000 a year from 2023 to protect its natural resources and fight climate change.
• The move is part of the country's efforts to become carbon neutral by 2025.
• Bhutan is already 72% carbon negative, meaning it absorbs more carbon dioxide from the atmosphere than it produces.
• The government said the cap would be enforced through a quota system, with each tourist paying a daily fee of $250. The money will be used to fund conservation and development projects.

In the scenic Himalayan kingdom of Bhutan, cleaning squads patrol forests and mountain trails on the lookout for litter left behind by tourists, removing empty water bottles and crisp packets stuck in bushes and trees.

The money to run these teams comes from a tourist tax Bhutan has levied for decades to avoid over-tourism and preserve its status as South Asia’s only carbon-negative country - meaning it absorbs more emissions than it produces annually.

Bhutan halved the daily “Sustainable Development Fee” (SDF) - to $100 - last week as it strives to strike a balance between supporting the local economy and jobs, and protecting nature and the environment in the face of worsening climate change impacts.

Under the country’s principle of “high-value, low-volume” tourism, Bhutanese officials told the Thomson Reuters Foundation that the tax goes towards upgrading infrastructure, preserving natural and cultural treasures, and investing in electric transport to cut fossil fuel dependency.

While the tiny country of fewer than 800,000 people is currently in the spotlight, it is far from alone in this regard.

A 2018 report by the Intergovernmental Panel on Climate Change found we have until 2030 – just 11 more years – to avert climate change.

The run-up to 2020 is a crucial period for delivering sufficient climate action to limit global warming to 1.5°C, as countries move to expand their climate commitments.

To help meet this global challenge, the World Economic Forum's 2019 Sustainable Development Impact summit has made Accelerating Climate Action one of four focus areas.

Following the UN Secretary-General’s Climate Action Summit this month, this meeting will bring together stakeholders to cap global warming at 1.5°C through innovative partnerships and smart technologies. The action areas include heavy industries and transport, energy innovation, nature-based climate solutions, restoring ocean health and the role cities, among others.

As nations globally seek to revitalise their tourism sectors after the COVID-19 pandemic, there is growing debate about how best to attract more visitors and boost revenues without causing overcrowding and fuelling pollution and harm to the environment.

Sustainability experts said the traditional approach of evaluating tourism through visitor numbers alone was outdated and damaging to the sector, and urged governments to consider ways of welcoming people for longer and more-considered stays.

“(A) sustainability fee is one of the ways to ensure a destination does not degrade,” said C.B. Ramkumar, vice chairman of the Global Sustainable Tourism Council, a U.S.-based non-profit. “It is a good tool for conservation.”

While many countries and cities have some form of tourist tax, few places have followed Bhutan’s lead in ensuring that the cash goes towards conservation or sustainability efforts.

New Zealand in 2019 introduced a NZ$35 ($21) tourist tax to fund conservation and infrastructure projects, while Indonesia’s holiday island of Bali is to impose a 150,000 rupiah ($10) fee from 2024 to help preserve its culture and environment.

Using the tourist tax to boost conservation efforts

Tourism is responsible for around 8-11% of global greenhouse gas emissions - mostly due to transportation - according to the World Travel and Tourism Council (WTTC), an international forum.

It is also among the most vulnerable sectors to the impacts of climate change, with researchers citing soaring temperatures and rising sea levels that can affect visitor numbers.

For example, about 20,000 foreign tourists were evacuated from the Greek island of Rhodes in July, where a wildfire burned resorts and hotels. Greece has said it will offer a week’s free stay on Rhodes in 2024 to visitors whose vacation was cut short.

Overall, demand for eco-friendly tourism is growing, yet very few people are willing to pay more for sustainable travel, according to recent studies and warnings from sector executives.

In Bhutan, the SDF has been revised over the years - with discounts available for visitors making longer trips.

When Bhutan reopened to tourists in September 2022 after more than two years of COVID-19 closure, it raised the tax to $200 from the $65 it had charged for about three decades - saying the money would offset the carbon generated by visitors.

This fee hike, coupled with the pandemic’s impact, hit tourist numbers and resulted in losses for tour operators, hotel owners, and handicraft and souvenir shops in the country.

Bhutan welcomed nearly 60,000 tourists between January and August this year, earning the nation $13.5 million in revenue from the SDF, according to government data.

In 2019, before the pandemic, there were about 316,000 tourists, generating $88.6 million in SDF revenue.

When Bhutan announced the SDF reduction this month, the government said the move aimed to revive the tourism sector, generate employment, and earn the country foreign exchange.

Bhutan plans to lift tourism’s contribution to its $3-billion economy to 20% from about 5% now - yet no time-frame has been set.

Dorji Dhradhul, the director general of Bhutan’s tourism department, said the tourist tax is vital to stepping up the nation’s conservation efforts as it faces climate change threats of melting glaciers and ever-more unpredictable weather.

The SDF has led the country to explore “solutions to balance its revered ecological conservation practices with socio-economic progress”, Dhradhul said by email.

The tax funds free healthcare and education for the country’s citizens and is used to offset the carbon footprint of visitors by planting trees, cleaning and maintaining trails, and electrifying Bhutan’s transportation sector, Dhradhul said.

“Our future requires us to protect our heritage and forge fresh pathways for forthcoming generations,” he said.

Bhutan’s “carbon negative” approach began in the 1970s, when its then-king pushed for an economy built in part on sustainable forest management - balancing conservation and development.

Its forests absorb more than 9 million tonnes of carbon each year, while its economy, which is designed to cut fossil fuel use and waste, emits less than 4 million tonnes, Dhradhul said.

Have you read?

3 ways hotels and tourists can work together to decarbonize travel, how global tourism can be more sustainable, how bhutan could provide the blueprint for climate-smart forest economies, what can bhutan teach the world about climate action, tour operators and local businesses fear for future.

Bhutan has long been a prime holiday destination for Indian travellers in particular. Entry for Indians had been free until 2022, when a daily tax of 1,200 rupees ($14.50) was introduced.

Mumbai-based tour operator Rakesh Kalyani has a longstanding collaboration with hoteliers in Bhutan, and said he was not surprised by the move to impose a tax on Indian tourists.

“Tourists littered, someone even climbed a stupa (Buddhist shrine) and took pictures. How do you stop that?” asked Kalyani, who said he now has no bookings for Bhutan with many clients instead preferring to visit nearby northeastern Indian states.

The fee for Indian tourists will remain in place for at least another two years as Bhutan prioritises the wellbeing of its environment, culture and people over “quantity in tourism”, according to Dhradhul.

As more and more places worldwide consider tourist taxes, they run the risk of excluding those seeking affordable travel.

“They want to preserve their culture, but not everyone is able to travel now,” said Arjun Verma, who runs Bhutan Divine Tour agency in Siliguri, a district in India’s eastern state of West Bengal, which serves as the country’s gateway to Bhutan.

“As tour operators, we are facing a lot of problems.”

In Bhutan, Jigme Tshering, chairman of the Hotel and Restaurant Association, a national federation, said that while the SDF was aligned with the country’s vision of sustainability, it also posed challenges in terms of “the impact on businesses”.

He said he hoped the reduced tax will help the tourism industry grow at a faster pace than in previous months - a view echoed by local businesses seeking more customers and income.

In Bhutan’s Paro, the picturesque valley home to the Tiger’s Nest Monastery, handicraft shop owner Tashi Lhamo said she had cut down spending on family holidays and new clothes due to the loss in business over the past year as tourist numbers dropped.

“Most of our customers are Asians and few are from the United States,” Lhamo said in a phone interview.

“But I am hopeful for more international tourists to come now that they have reduced the SDF. Indians buy small items, but our main business comes from international tourists,” she added.

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Bhutan: A model for sustainable tourism development

Bhutan’s long-term strategy of controlled tourism with a focus on sustainability and quality has secured the country’s reputation as an exclusive and distinctive destination while ensuring the long-term sustainability of the industry and its contribution to the economy.

Bhutan has a clearly established framework for the development of tourism underpinned by the country’s Gross National Happiness (GNH). Tourism was introduced to Bhutan in 1974 as part of a visionary modernization and economic development plan introduced by Bhutan’s former King, Jigme Singye Wangchuck.

Aware that an unrestricted flow of tourists could negatively impact Bhutan’s pristine environment and unique culture, the government adopted a policy of ‘high-value, low-volume’ tourism in order to control the type and quantity of tourism right from the start.

‘The principle of high-value, low-impact tourism development, guiding tourism’s growth in Bhutan, is highly commendable and has undoub­t­­edly contributed to the unique tourism brand of this country,’ said the World Tourism Org­an­ization (UNWTO) Secretary-General, Mr. Taleb Rifai, during an official visit to the country in January 2011.

So far, the government’s objective of maximizing foreign exchange earnings while minimizing the potentially adverse cultural and environmental impacts of tourism has paid off. The number of tourist arrivals has increased from just 287 in 1974 to close to 41,000 high-end tourists in 2010. There was also a 56% increase on 2009 figures in high-end arrivals from neighbouring countries, especially India, highlighting the importance of the regional market. Demonstrating the resilience of the sec­tor, these figures were achieved despite ev­ents such as ash clouds in Europe and un­stable political situations in the major gateways to Bhutan such as Bangkok.

Conservative figures by the Tourism Council of Bhutan estimate tourism’s con­tribution to GDP at US$ 90 million in 2010. It has also contributed to employment and created income opportunities through the development of locally owned and operated private-sector enterprises. There are now some 21,000 people employed directly and indirectly in tourism, and an increasing number of Bhutanese entre­preneurs are also investing in the sector. Close to 80% of Bhutan’s 700,000 inhabitants live in rural areas and most are engaged in the agricultural sector; but tourism has contributed to earnings from tourist transport, portage and the promotion of indigenous handicrafts. 

‘For a small landlocked country like Bhutan, tourism plays a very important role in gen­erating employment opp­ortunities and rev­enue. It is second only to hydro­power in terms of revenue generation,’ says Ms. Chhimmy Pem, the Head of Marketing and Promotion at the Tourism Council of Bhutan.

One of the key factors in the success of Bhutan’s tourism strategy has been the privatization of the industry. Until 1991, the Bhutan Tourism Corporation, a quasi-autonomous and self-financing body, implemented the govern­ment’s tourism policy, and all tourists came as guests of the Corporation. The Corporation, in turn, operated the transport services and nearly all the hotels and accomm­odation facilities.

The Tourism Council was established under the Ministry of Trade and Industry and the Department of Tourism with the primary responsibility of developing new tourism grow­th opportunities, undertaking research, protecting tourism assets and its impact on the environment, and managing the administration of visa and trekking permits.

Bhutan’s main tourism attractions are its traditional culture and way of life, its religious festivals, historic monuments and its pristine environment. Protecting nature and culture is part of the Bhutanese value system and is an important aspect of the traditional way of life in Bhutan, and its tourism policy reflects these concerns. The policy of imposing a US$ 200 per person per day tariff (including a US$ 65 royalty charged by the government plus food, accommodation, local transport and guides) has succeeded in providing a source of government income for education, health and building tourism and transport infrastructure, while at the same time making tourism in Bhutan an exclusive and distinctive experience.

The Tourism Council of Bhutan works in close cooperation with the Association of Bhutanese Tour Operators, the Hotel Association of Bhutan and the Guide Association of Bhutan to establish a channel for closer and more effective collaboration between the tourism industry and the Department of Tourism. It also ensures that the interests of the private sector are represented in developing tourism in a sustainable and responsible manner. The government encourages initiatives to enable the private sector to provide value for money to their clients. For example, new luxury hotels, the upgrading of existing hotels and foreign direct investment are encouraged through tax and fiscal incentives.  

With ecotourism being the fastest grow­ing market in the tourism industry in general and with the strength of the country’s nat­ural assets, Bhutan has focused on strategies to promote and develop its ecotourism and nature -based tourism. 

To overcome the industry’s biggest challenges – accessibility and seasonality – the Tourism Council of Bhutan is working with the national airline, Drukair, to increase the frequency of flights, improve connectivity, add more aircraft to its fleet, and build three additional airports to meet increasing demand. The Council is also working with hotel and tour operators to promote Bhutan as a year-round destination.    

For further information visit www.tourism.gov.bt .

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Making a big impression

Bhutan Is Reopening to Tourists, But Only to Those Who Can Afford a $200 Daily Fee on Top of Everything Else

T he tiny Himalyan kingdom of Bhutan reopens to tourism on Friday after two and a half years of border closures, but 35-year-old tour guide and driver Pema Wangyal doesn’t have any jobs lined up just yet. Nor is he expecting to for at least a few weeks.

There are many factors slowing the recovery of Asian tourism. Nestled between China and India, Bhutan may have just added one of its own: a daily fee of $200, imposed on anyone who wants to enter, for the length of their stay. The country was already well known for requiring visitors to spend at least $250 a day, but that sum went toward accommodation, food, transport, and the government’s “sustainable development fee.”

The new, additional $200 impost buys nothing except the privilege of enjoying Bhutan’s stunning scenery and fresh mountain air.

Wangyal understands the latest charge is meant to be a disincentive. Before the pandemic closed the country’s borders, “It was getting a little crowded,” he grants. “Bhutan is a very small country.” But he’s also worried about what it will mean for him. “I think very few tourists are coming over the next few weeks. I don’t think many guides will be employed right after the reopening, we’ll have to sit and wait.”

Read More: It Was a Booming International Resort Before COVID. Now Locals Are Enjoying It, Some for the First Time

Dorji Dhradhul, the director-general of the Tourism Council of Bhutan, is unapologetic. The number of pre-COVID visitors was stressing the country’s infrastructure and degrading the quality of the experience, he says.

“Tourism, as an industry, was becoming less professional and was becoming low-hanging fruit,” with locals seeing it “as a very easy way to make money,” he tells TIME. “We were basically, as a sector, racing towards the bottom instead of aspiring to go higher up.”

The silver lining to COVID-19 border closures, he argues, is that it gave Bhutan “a real opportunity to stop all the things that were going wrong and it gave us an opportunity to reset our tourism.”

Bhutan doubles down on selective tourism

Bhutan is already one of the most exclusive tourist destinations in the world. The kingdom only opened its borders to foreigners in 1974, adopting a “high value, low volume” tourism policy. Tourists had to book their trips though registered tour operators and shell out those hefty minimums.

Despite the costs involved, Bhutan received more than 315,000 foreign visitors in 2019. They came for the bragging rights as much as the spectacular environment. After all, how many people can say they’ve been to the Tiger’s Nest monastery, which dangles off a cliffside, or trekked through Bhutan’s snow-capped peaks ?

Read More : Asia’s Tourism Destinations Struggle to Come Back to Life

Now the country is going a step further. Starting Friday, package tours are no longer a prerequisite, but the $200 daily tax is, payable separately to lodging and meals. Officials say the new model will help rebrand the tiny Buddhist kingdom as an “exclusive destination” attracting “discerning tourists.”

The tourism industry is already feeling the impact. Tour company owner Karma Sangay Phuntsho understands that tourism numbers have been too high. Pre-pandemic, “There was a lot of litter,” he says. “Garbage all over.”

Phuntsho is now getting “a lot of inquiries,” but he says “many of them don’t book. They say ‘Bhutan is unreachable for middle class travelers like us.’”

Those who can afford it should see their daily $200 put to good use, however. The new funds are earmarked for tree planting, training programs and developing and maintaining trails. It builds on the work the government of Bhutan undertook during the pandemic, when it began upgrading roads, tidying up monuments, and even improving public restrooms around the country.

Dhradhul says that he wants to work on getting all accommodation certified as green, and says that discussions are underway to make all tourism related transport electric.

He also points out that the country of just 790,000 people has 3,000 registered tour operators and 3,500 guides. Less visitors means “they have to step up and they have to be competitive because we know for sure that the number of tour operators, the number of tour guides, this is just not feasible for the number of the tourists that we are going to get.”

Tour guide Wangyal says he plans to specialize in his native region, the Bumthang area in central Bhutan, known as the spiritual heartland of the kingdom for its sacred sites and monasteries.

Read More: The Trans Bhutan Trail Is One of the World’s Greatest Places 2022

Phuntsho’s tour agency will meanwhile receive its first guests in two and a half years on Sept. 28—a couple from Costa Rica. The next day, some guests from Brazil will arrive. In October and November, things pick up even more, with some groups coming for as long as 12 days so they can fit in the Gangtey Trek, which traverses a glacial valley and passes through several remote villages.

He’s worried about what the new fee will mean and how he will be affected by the ending of the rule requiring tourists to book through agencies like his. But he plans to remain competitive by offering more tours where guests can interact with locals, like a tour to meet local farmers, and he’s contemplating setting up tours focused on niche activities like bicycling, meditation, and yoga.

“It gives us an opportunity to look beyond the traditional sightseeing,” he says.

That is what the authorities are banking on.

“We are now really focusing on enhancing or elevating the visitors’ experiences,” says Dhradhul of the Tourism Council. “ Because of COVID-19 and so many other not very good things happening, we feel that the visitors wherever they go, will be looking for a place and space where they can have peace of mind.”

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Ecotourism Industry in Constrained Environments: Bhutan as a Case Study

• First Online: 17 March 2021

Cite this chapter

• Simona Azzali 4 ,
• He Qingyao 4 ,
• Shen Tianhui 4 ,
• Li Xinyi 4 &
• Jiang Qifeng 4  

Part of the book series: Managing the Asian Century ((MAAC))

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This chapter analyses the current situation of tourism in Bhutan and discusses the opportunities and challenges of ecotourism in this country. It combines Bhutan’s tourist data, the current tourism policy of the Bhutanese government and the government’s measures for culture and environmental protection, exploring the potential development methods to improve and maintain the sustainability of Bhutan’s natural and cultural environment by enhancing its ecotourism industry. Furthermore, it also enumerates the adverse effects of over-exploration of tourism in other cities such as Nepal with respect to the importance of ecotourism. A multi-layered qualitative research methodology was conducted to determine whether citizens and visitors are in favour of ecotourism activities that might benefit local communities and cultures. It can be concluded that the development of ecotourism is conducive to improving and maintaining the sustainability of Bhutan’s natural and cultural environment. Finally, this research ends by providing key recommendations to promote the development of ecotourism to protect Bhutanese people and the country’s Gross National Happiness.

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Azzali, S., Qingyao, H., Tianhui, S., Xinyi, L., Qifeng, J. (2021). Ecotourism Industry in Constrained Environments: Bhutan as a Case Study. In: Azzali, S., Thirumaran, K. (eds) Tropical Constrained Environments and Sustainable Adaptations. Managing the Asian Century. Springer, Singapore. https://doi.org/10.1007/978-981-33-4631-4_6

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Tourism in Bhutan

Development of the tourism sector in bhutan from 1995 to 2020.

Revenues from tourism

All data for Bhutan in detail

Bhutan announces new tourism incentives - click here to read more

Eco Tourism

Eco Tourism Nature Activities

There is a global push for sustainable tourism that does not disrupt the natural environment and local communities. Bhutan currently maintains a 70% forest cover and has been blessed with abundant biodiversity and pristine nature. The country is further protected by a vast network of protected areas. To maintain this status quo, this Himalayan nation is looking to become a premier ecotourism destination.

The Royal Government of Bhutan defines ecotourism as “responsible travel to natural areas and habitats, which conserves the environment, respects the culture and traditions of its people, and improves the overall well-being of its citizens within the overall concept of Gross National Happiness.” To implement this, the national tourism policy is that of ‘high-value low-volume’.

The Department of Tourism's GEF Ecotourism Project covers two protected areas of Bumdeling Wildlife Sanctuary and Sakteng Wildlife Sanctuary, and five districts of Lhuentse, Mongar, Trashigang, Trashi Yangtse and Zhemgang. The project aims to boost the rural economy by promoting wildlife-based tourism, creating employment opportunities and increasing community resilience and connection to nature.

Other ecotourism projects being developed include homestays, birdwatching sites, nature-based activities and community festivals. Visit Bhutan to experience sustainable tourism that conserves the environment for its wildlife inhabitants, community members and future generations.

The GEF Eco Tourism project’s flagship species for ecotourism are red pandas, black-necked cranes, Ludlow’s Bhutan Glory butterflies, golden langurs, golden mahseers, and other exotic birds of Bhutan.

Ludlow’s Bhutan Glory

The Bumdeling Wildlife Sanctuary in Trashiyangtse is home to this endangered species of butterfly. It is the national butterfly of Bhutan and is commonly seen in the months of August and September. This eastern district is also known to be a haven for birds like Ward's Trogon, Babblers and Pheasants.

Swallowtails of Bhutan

Swallowtail butterflies are large and striking butterflies identified by their forked tails. In Bhutan you can find 42 of 550 species of these majestic butterflies. They are commonly seen in Trashiyangtse in Autumn.

Black-necked Cranes

Black-necked Cranes are a globally threatened species. To locals, their arrival signifies good luck and good harvest. Their presence also indicates healthy agricultural land and surrounding ecosystems. They can be spotted in Phobjikha Valley in Western Bhutan, Bumthang in Central Bhutan and in Bumdeling in Eastern Bhutan. They migrate to these winter roosting sites in the months of September and October and fly back to Tibet between February and March.

Bhutanese believe that seeing a red panda in the wild will bring good luck on your travels. Found in temperate Himalayan forests, these globally threatened mammals have been seen in 17 districts of Bhutan including 7 protected areas and all 8 biological corridors.

Golden Langur

One of the world's most threatened primates, experts estimate that there are about 6000 golden langurs in Bhutan. Half of the current population is protected within the Jigme Singye Wangchuck National Park, Royal Manas National Park and Phibsoo Wildlife Sanctuary. On your way to Zhemgang, you can occasionally see these monkeys frolicking by the side of the road.

Birdwatching in Bhutan

Bhutan is a paradise for bird lovers and birdwatchers. More than 700 species of birds have been recorded. The country also harbors more than 16 species of vulnerable birds. Bhutan is also home to many species of birds that are in danger of extinction, including the Imperial Heron, one of the fifty rarest birds in the world and the rare Black-Necked Crane.

Golden Mahseer Fishing

There two types of Mahseer found in most Bhutanese rivers are chocolate and golden mahseer. A migratory fish, the Golden Mahseer is seen at elevations as high as 1000 meters during the spawning season in summer but return to lower elevations in winter months. To boost local income, Bhutan is working to develop recreational catch and release fishing of the Mahseer.

Despite severe population declines elsewhere, the golden mahseer is flourishing—thanks to Bhutan’s strong environmental protections and the religious reverence bestowed upon it. Among anglers, the golden mahseer is one of the world’s most prized catches. Up to nine feet long and golden-hued with big scales, it has a reputation as one of the world’s hardest fighting fish.

Based on the findings from the Mahseer research works carried out in Bhutan from 2015-18, and following the recommendations from the first International Mahseer Conference held in Bhutan in 2018, the ban on Mahseer fishing was lifted in Bhutan since February 2022 for exclusive catch and immediate release. Mahseer recreational fishing and for that matter, any fishing requires a permit from the Department of Forests and Park Services, Royal Government of Bhutan. For any foreign angler, a certified local fishing guide is required. The best time for fishing golden mahseer is between March – June, and September – November.

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Transforming the Economy Through Tourism

A High Value Low Impact Dilemma

For international tourists, Bhutan has long been a much sought after “global hotspot”, a rare destination. A veteran American tour operator who has been a promoter of high-end tours to Bhutan since the 1980s, now disagrees: “Bhutan used to be a high value, low impact destination,” he said, just back from Paro Taktsang in early December. “But not anymore.” If this is not quite a fact yet, it is a dire warning.

The second highest contributor to the national exchequer appears to have reached a crossroads: One way leads to exclusive cultural tours and spectacular treks, boutique hotels and traditional hospitality, the other to the ravages of mass tourism, like noise pollution, traffic jams, untended garbage and high stress.

Adding to the dilemma are “regional tourists” from India, Bangladesh, and Nepal, who outnumber “high end” international visitors, as the numbers increased to 254,704 in 2017. The regional influx is unplanned, with more Bhutanese cashing in on the trend every day and, in the process, threatening the balance of Bhutan’s “high value low impact” tourism policy.

The implication here is the tussle between Gross Domestic Product and Gross National Happiness. What measures must Bhutan take to prevent the destruction that challenges other niche destinations, in a world where a growing middle class is hungry for new destinations to explore? “Bhutan surprises me with its very progressive thinking on tourism,” said a recent visitor. “But if you let a million people in, you will destroy your environment, your culture. I hope you manage to keep mass tourism at bay.”

This article highlights the emerging threats and concerns facing an industry that earns the highest foreign exchange for the country. It emphasises the need for a concerted response and more integrated planning to maintain the balance of economic growth and a unique identity.

The Beginning

Bhutan opened its doors to tourism in 1974 with an image of exclusivity enhanced by its cautious high-yield tourism policy. The government charged USD 200/-to 250/-a day for foreign visitors, to control low spending, high impact tourists, or low spending tourists who tend to typically leave a higher carbon footprint with greater impact on the environment. This included a USD 65/-sustainable development fee (SDF) that goes directly to the government to support social welfare programmes.

This policy enabled the country to slowly open up to the world, set up services and regulate the flow of tourists into a landlocked kingdom where services and infrastructure were limited. This slow growth in tourism was necessary for several reasons. Bhutan is a small country with fewer than 750,000 people. Many of the country’s cultural festivals and spiritual places

• the essence of its identity — are small local events and sites that can be easily over-run by mass tourism. The pristine environment is recognised as a home to rare plant and animal species.

But “high value, low impact” is a loose policy that needs to be translated into a clear strategy and, more importantly, into action for an industry threatened by sheer numbers.

A Steady Growth

Tourism is Bhutan’s largest foreign exchange earner and second largest source of revenue after hydropower. In 2017, tourism revenue was USD 79.8 million (M), up from USD 73.7M in 2016. Tour operators, hotels, and affiliated tourism services earned USD 53.4M, up from USD 49.75M in 2016. This is a notable increase from the late 1980s when tourism contributed just over USD 2M to the government.

Statistics from the Tourism Council of Bhutan, the apex tourism organisation, show a steady growth in numbers. Arrivals increased by 35.1 percent in 2016 with 209,507 visitors. International visitors recorded a 35 percent increase over 2015 while regional visitors grew by 50 percent in the same period. 2017 saw a total of 254,704 visitors. International arrivals grew by 14.1 percent and regional tourists by 24.9 percent from 2016.

Graph 1: Tourism arrivals in Bhutan (TCB figures), 2008-2017

There are 3,100 licensed operators today but industry observers estimate that only about a quarter of them are active. Close to 2,500 guides have been licensed. Tourist class hotels have also grown from seven guest houses before 1991 to 53 international “tourist class” hotels and lodges offering 1,807 beds by 2002. By 2016, there was a total of 267 hotels with 10,278 beds for both foreign and regional tourists. 128 of them are in the 3 to 5 star category and above. Since 2016, an estimated 132 hotels (3-star and above) have been approved for development in Thimphu and Paro (TCB figures). Budget hotels, 2-star and below, are also increasing in numbers. Air BNB, a global online accommodation booking system, advertises about 70 or more Bhutanese properties that enable regional tourists to make direct bookings. Nearly half the regional tourists stay in budget hotels and the earnings from these stays are not available. Similarly, TCB surveys on regional tourists leaving Bhutan show that on average, about half the regional tourists surveyed individually spend about Nu 5,530/-apart from their normal travel costs 1 . This is a fraction of the total spendings of international visitors who represent a third of the total visitors.

Attractions and Access

Nineteen out of the 20 districts in Bhutan are open to tourists but the most popular destinations continue to be the districts of Thimphu, Paro, Punakha, Wangdue Phrodang, and Bumthang, where most of the budget hotels are being built. The remote districts have the same features that attract tourists but lack the management, organisation, resources and access.

Bhutan has opened 26 trekking routes across the country but two-thirds of them remain difficult to reach and need more facilities and services for high-end treks. Ironically, a part of the problem is the need for special travel permits that require cumbersome procedures. Industry specialists also point to the lack of regulations to govern the construction and occupancy of hotels, and the quality and safety of vehicles that are allowed into the country. Regional tourists without guides have even been spotted camping illegally in the forests. Regional tourists are exempted from the daily tariff, permitted to drive into Bhutan in Indian vehicles, and stay at non-certified hotels.

“We are vulnerable to crowds that will destroy our culture and environment,” says the chairperson of the Association of Bhutanese Tour Operators (ABTO), Rinzin Ongdrak, who acknowledges that Bhutan cannot afford to reduce the tariff or liberalise the industry to encourage mass tourism. ABTO has called for collaboration amongst stakeholders such as the Guides Association of Bhutan and the Hotel and Restaurants Association, and expects tourism arrivals to reach 500,000 by 2023.

But the numbers that do not pay the tariff are already threatening to edge out the high-end visitors. Aman Kora’s General Manager, John Reed, quotes agents in the United States as saying that Bhutan is no longer the idyllic and sought-after destination, but one that is prone to mass tourism. High-end operators agree.

Regional and International Tourists

The spiralling growth of regional tourists since 2015 has been straining the industry and adding pressure to liberalise tourism. Visitors from India, for example, represent 64.7 percent of tourists who came for leisure in 2016, and 72.7 percent of total arrivals in 2017. In 2017 just one third of tourists paid the tariff.

“All the regulations in Bhutan regulate the 70,000 international tourists, but there’s almost nothing to guide the regional tourists,” said Yeshey Norbu, proprietor of one of Bhutan’s top three travel agents, adding that this could edge out the international tariff paying tourists.

David Keen of Quo, a travel industry branding specialist and a regular visitor, says that the early 1990s policy, controlling tourist flow, enabled Bhutan to retain its dominant position as one of the most pristine, culturally and environmentally conscious nations on earth. “With the growth of regional traffic and incrementally affordable tourist flow, the environmental, social and cultural impact of huge tourism numbers will continue to erode both perception and the internal infrastructure of the nation,” says Keen.

Environmentalists like Karma Tshering also defend the fixed minimum pricing system. “The limited carrying capacity, due to the ecologically and culturally sensitive disposition of attractions and services, means we are already close to reaching our upper limits. Dismantling the pricing system will only mean achieving higher numbers at a faster rate with cheaper costs offering less benefits.” 2

Increasing Infrastructure in a High Value, Less Occupancy Scenario

Some attempts are being made to control budget travellers. Setting an entry fee to places like the Tiger’s Nest has helped, but the numbers are growing exponentially 3 . “We can handle more visitors with good management practices,” said Norbu. “But not in the current free-wheeling environment, where no one seems to be taking tough decisions to regulate and manage the industry.” An often quoted example is that while the Tourism Council regulates the tourist hotels (3-star and above), budget hotels fall under the purview of the Ministry of Economic Affairs. Air BNB is considered private residences.

Growing tourism is also affecting local residents and municipal services. Parts of Thimphu city are experiencing water shortage. Municipalities worry constantly about waste management, and Thimphu’s landfill has long surpassed its lifespan.

“I was shocked to see the garbage everywhere and the traffic jams in Thimphu. It’s not what I expected of Bhutan,” says a first-time visitor from Delhi, who added that the reality in Bhutan was very different from what he had heard.

Observers point out that even India’s hill stations have had to call for a “de-growth” of tourism as residents are crying out for basic amenities. The local population has also been known to turn against the industry and visitors.

Revenue Versus Consequences

Bhutan, too, is receiving calls for de-growth of tourism to protected areas. A 2016 study on Bhutan’s most visited wetland habitats has called for a “de-marketing” of Phobjikha Valley in the absence of regulations and a strict code of conduct. Karma Tshering also an eco-tourism consultant says that Bhutanese authorities and local communities are more reactive than preemptive in averting negative impact. He asserts that Bhutan’s plans to popularise eco-tourism has not yet taken off.

A road now runs through Phobjikha’s valley floor. Traffic regulations are absent and, without water treatment and septic systems, detergents from even high-end hotels are leaking into the ground. In 2016, Phobjikha had 30 home-stays and 15 hotels. Another seven to eight hotels are in the pipeline. People in Phobjikha report that a helicopter service frightens the Black-necked Crane ( Grus nigricollis ), according to the people.

“Wetland is the heart of Bhutan’s environment, but it’s losing out to the pursuit for economic returns,” says Karma. The report states that community involvement needs urgent attention and is critical for the success of eco-tourism. Local community members, however, lament the lack of control and their helplessness as investors from outside build hotels in Phobjikha.

A Disorganised Industry

In 2016, ABTO pointed out that the lack of collaboration and co-ordination in promoting and developing tourism has “stagnated” the industry, with various stakeholders “implementing actions in isolation”. 4 A lack of consultation has led to government approving budget accommodation infrastructure, and banks giving loans for building these budget hotels.

The report points out that even the local governments have gradually started to take decisions without consultations hampering the overall operation and development of the industry. Infrastructure development like road expansion is carried out without advance notice and consultations with the stakeholders. 5

Uncharted growth is more visible by the day. About 100 hotels are currently being constructed in Thimphu and Paro alone-rooms that are multiplying without a business plan and without a vision, and in breach of zoning regulations. 6 In the shortage of quality local products, a deluge of cheap crafts are imported for tourists. An industry analyst predicts that hotel owners, unable to repay bank loans, will soon pressure the elected government to liberalise tourism even further. “The tail will wag the dog,” he said.

Risks of Uncharted Growth and Possible Solutions

Given Bhutan’s vulnerability, an unregulated tourism sector is not an option. Tourism is a multi-dimensional industry where planning needs to be integrated with the communities involved. ABTO attributes many of the challenges in the tourism sector to the absence of a clear short and long-term progressive vision for the industry to move ahead.

To those paying high fees for exclusivity, “double standards” are not acceptable. The TCB believes that the policy needs to be same for all tourists but that it could consider a separate tariff for regional tourists. Tourism Director Chhimmy Pem says that there should be a minimum standard for hotels, tourists should be accompanied by a guide, and there should be rules governing transport.

The industry has identified issues that require clear decisions and action:

• Regulations for regional visitors to balance the numbers. Bhutan’s National Council called on the government to endorse a clear policy in Parliament in 2016 that is still awaiting action.
• Reports point to the “reverse discrimination” in protected areas. Local communities must be included in planning for sustainable tourism.
• Strengthen the capacity of local people to handle visitors and build appropriate services to spread the earnings. Simply providing discounts during the off-season is not enough to get people to visit these areas.
• Create a more equitable partnership between hotels and tour operators and reduce the dependency on tour operators for hotel bookings.
• Spiritual sites are living institutions and should be opened up to visitors with minimal negative impact. Hence, the need for trained guides and crowd control.

Bhutan’s planning document, the Bhutan 2020 report6 states:

“While giving access to our heritage, we must ensure that those who visit historical and religious sites demonstrate the appropriate respect for these sites. We must also be prepared to place some of our most treasured and hallowed sites beyond the reach of the merely curious, enabling them to retain their mystery and to serve as a source of inspiration”.

• Introduce regulations like the green tax on regional cars and motorbikes coming into Bhutan.
• Introduce updated regulations on monitoring and approval of the building of hotels. Encourage budget hotels to upgrade to a minimum of 3-star status to maintain the “high value” principle.
• Formally introduce the TCB e-permit system to reduce the long queues in the Phuentsoling checkpost and to enable the industry to track the number of regional visitors coming into Bhutan.
• At the rate at which budget hotels are expanding, Bhutan has to make a decision urgently.

Control and De-growth

ABTO recommended a policy for regional tourists as a priority. This was submitted to the chair of the Tourism Council (the Prime Minister of Bhutan) in June 2015. The issue, while widely discussed, is still awaiting action from the government and the various stakeholders.

The issue is not just about reciprocity or the concern about upsetting a large neighbour. It is about ensuring that Bhutan’s development aspirations of GNH and the environment are not compromised. It is about ensuring sustainability as the guiding principle for a small country that has committed to being a carbon sink for all time to come. 7 .

As the world grapples with over-consumption and growth, the new catchphrases emphasise the opposite-de-growth, de-marketing, slow tourism to resist the growth fetish. This thinking was pioneered in Bhutan when it began tourism, and has been the subject of study and recognition by other countries. TCB believes that the Sustainable Development Fee must remain. “Countries like Japan and New Zealand are trying to copy Bhutan and introduce tourism fees; it’s better we keep what we have,” says the TCB director.

Destinations inspired by de-growth thinking are wary of the homogenising impacts of globalisation. They do not have international retailers nor fast

• food outlets, but instead promote local distinctiveness and a sense of place and local identity. By doing so, they attempt to reduce the scale of the socio-economic system so that it will fit within the natural limits of their locality and capacity, such as the case of Phobjikha as a destination.

Veteran tourism stakeholders remind us of the many countries that came to study the high end, low impact model and how Bhutan is now, ironically, on the brink of tipping over if the complacency continues. If there’s one challenge of Bhutan’s democratic change, it is the ability — or inability — of newly elected governments to deal with a multi-dimensional industry and to take tough and clear decisions for the long-term.

While TCB defers to the government to make the tough decisions on regional tourism, the governments elected by the people do not seem to have the confidence to take these decisions, and have not prioritised tourism as an issue.

A draft Tourism Bill was prepared nearly 10 years ago but was never put to Parliament for adoption. Some measures were introduced, including the setting up of a Tourism Council to regulate the industry. Last year, the National Council raised the issue of passing the Bill but the government delayed decision on it.

In 2016 His Majesty The King reminded Bhutan’s youth 8 :

“… tourism as an industry was only introduced after the Coronation of His Majesty the Fourth Druk Gyalpo. It was suggested to us then that Bhutan would benefit economically from bringing in as many tourists as possible into the country. At that time, Bhutan was largely unknown to the outside world. And yet with Drukgyal Zhipa at the helm, we had the confidence to make our own decisions, to decide that our approach to tourism policy would be that of high value low volume. It seemed counter-intuitive at a time when tourists coming to Bhutan were so few. There were many sceptics. But because of that policy, Brand Bhutan emerged. And you see the results of that policy for yourselves today. People who make it to Bhutan feel privileged to be our guests. In hindsight, we realise the profound wisdom of that decision, but we could have easily gone the other way had it not been for that conviction we had to forge our own path, our future, and our destiny.”

Has Bhutan forgotten this wisdom?

• ABTO, Bhutan Tourism Review and Recommendations, 2016
• RSPN, carrying Capacity for Phobjikha, 2017
• TCB, Tourism monitors, 2014, 2015, 2016, 2017
• Tandi Dorji, Sustainability of Tourism in Bhutan, CBS journal
• Konstantinos Andriotis, De-growth in Tourism, Conceptual, Theoretical and Philosoohical issues, CaBI 2018

About Author: Siok Sian Pek-Dorji is the founder and currently, the Executive Professional Director for the Bhutan Centre for Media and Democracy. She is a journalist and has worked extensively in media and communications, and on women and children issues.

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The World Bank In Bhutan

The Kingdom of Bhutan is considered a development success story, with decreasing poverty and improvements in human development indicators. The Bank's engagement in Bhutan is aimed at supporting the government's goal of Gross National Happiness.

At A Glance

A small, landlocked country nestled deep in the Himalayas between India and China, Bhutan is characterized by steep mountains and deep valleys, which led to scattered population settlement patterns. Since Bhutan shifted to a democratic constitutional monarchy in 2008, the country has embarked on a development strategy founded on the principle of Gross National Happiness.

The country is known for its unique philosophy – Gross National Happiness (GNH) – which guides its development strategy. Abundant water resources in the valleys create ideal conditions to tap renewal energy sources with hydropower development which has spurred economic growth with quasi universal access to low-cost electricity. Fiscal revenues from selling surplus hydropower to India and tourism have helped the country invest substantially in human capital development. This has led to significant improvements in service delivery, education and health outcomes. Bhutan has made tremendous progress in reducing extreme poverty and promoting gender equality, with continuing efforts to address social inequality issues and regional disparities.

The economy has been significantly affected by the series of external shocks of the COVID-19 pandemic and the global ramifications of Russia’s invasion of Ukraine. Pandemic-related relief measures and weak public revenue performance have resulted in high fiscal deficits and public debt. Financial sector vulnerabilities remain substantial due to high non-performing loans. The state holding company—Druk Holding and Investments —invested in crypto-mining operations to accelerate digital transformation towards diversifying the economy, which resulted in a significant decline of international reserves and a widening of the current account deficit (CAD) due to imports of information technology (IT) equipment.

Election related spending and the materialization of financial sector contingent liabilities could further erode buffers in FY23/24 (July 2023 to June 2024), given that about 60 percent of assets of the financial sector are controlled by the public sector. Additional delays in the commissioning of hydro projects could further constrain the country’s ability to narrow fiscal and external balances.

Country Context

Bhutan is a lower-middle income country. Rapid economic growth in Bhutan has contributed to substantial poverty reduction over the last two decades. Annual real GDP growth averaged 7.5 percent since the 1980s, driven by the public sector-led hydropower sector and strong performance in services, including tourism. The ongoing poverty and equity assessment shows that extreme poverty based on $2.15/day was eliminated by 2022, and the population living below the $6.85/day poverty line for upper middle-income countries decreased from 39.5 percent to 8.5 percent between 2017 and 2022. The reduction in poverty can be attributed to the growth in labor and agriculture productivity and income, as well as remittances, which led to an increase in real per capita consumption, especially in rural areas. The Gini index, which measures income inequality, decreased from 37 in 2017 to 28 in 2022. Despite this progress, vulnerability to poverty and spatial inequality remains a significant challenge.

Bhutan maintains strong economic and strategic relations with India, particularly as its major trading partner, source of foreign aid and as a financier and buyer of surplus hydropower. While hydropower has provided a reliable source of growth, non-hydro sectors, facing constraints related to the country’s challenging investment climate including high trade costs and a small domestic market, remain less competitive. As a result, job creation outside of the public sector and agriculture has been limited. The lack of economic diversification and limited private sector activity pose risks to long-term growth and job creation. High unemployment rates since the COVID-19 pandemic, particularly among the youth, contributed to significant emigration. The youth unemployment rate, which was already high before the pandemic, stood at 29 percent in 2022.

Recent Economic Developments

The economy has grown by 4.6 percent in FY22/23, supported by the reopening of borders for tourism in September 2022. The industry sector grew by 5.1 percent, reflecting a strengthening of construction and manufacturing activities, but the electricity sector contracted. The services sector grew by 5.0 percent, supported by transport- and trade-related services, resulting in more employment opportunities in the sector, including an increase in hotel and restaurant jobs. Tourist arrivals remained below pre-COVID-19 levels because of weaker consumer confidence globally and the new tourism levy act, which tripled the sustainable development fee (SDF) for international tourists. However, the SDF was halved starting in September 2023 to attract more high-end tourists.

Average inflation moderated from 5.9 percent in FY21/22 to 4.6 percent in FY22/23, driven by a slowdown in imported food inflation. N However, non-food inflation remained elevated at 5.9 percent, in line with price movements in India (70 percent of Bhutan’s imports come from India, and the BTN is pegged to the INR). The food security situation has returned to pre-COVID levels in 2022, especially for the urban poor, which can be attributed to the deceleration in food prices.

The fiscal deficit narrowed from 7.7 percent of GDP in FY21/22 to 5.1 percent in FY22/23 due to higher domestic revenue and lower capital spending. Total revenue increased due to higher non-hydro revenue, reflecting the gradual recovery in the industry and services sectors. Total expenditures declined because of lower capital spending in the last year of the Twelfth Five Year Plan (FYP).

The CAD has remained elevated at 27.8 percent in FY22/23, due to imports of IT equipment and a slow recovery of tourism. Exports increased, reflecting higher tourism receipts (albeit from a low base given near-zero tourism receipts in FY21/22). Goods imports are expected to remain high, reflecting the import of crypto mining equipment and elevated commodity prices. As a result, gross international reserves are expected to decline further from US$833 million in June 2022 to US$533 million in June 2023, equivalent to 4.3 months of FY22/23 imports.

Economic Outlook

The real GDP growth rate is projected to decline to 4 percent in FY23/24. Overall growth is expected to be supported by higher growth in tourism-related services. On the demand side, growth is supported by private and public consumption, reflecting higher government spending. However, public investment is contributing negatively to growth due to a decline in capital spending. Medium-term growth is expected to be supported by a recovery in the non-hydro industry and services sectors, and by the commissioning of a new hydro plant.

Inflation is expected to remain elevated in the short-term owing to higher import prices, before moderating in the medium term. The incidence of poverty is estimated to decrease slightly to 0.4 percent and 7.9 percent in 2023, based on $3.65/day and $6.85/day, respectively. However, about 7 percent of the population will still be vulnerable to poverty.

The fiscal deficit is expected to increase to 6.1 percent of GDP in FY23/24 due to an increase in current spending following a major salary hike to address significant staff attritions. An increase in tax revenue will be offset by lower hydro profit transfers and external grants. Capital expenditures are projected to decline as the 12th FYP ended in June 2023, and capital spending is typically lower in the first two years of a new FYP. The fiscal deficit is expected to decline beyond FY24/25, reflecting a moderation in primary recurrent expenditure and increased hydro revenue.

Despite a decline in hydro debt, public debt is projected to remain elevated as a share of GDP in the medium term due to high fiscal deficits. Risks to debt sustainability are expected to remain moderate as the bulk of the debt is linked to hydro project loans from India with low refinancing and exchange rate risks.

The CAD is projected to decline to 17 percent of GDP in FY23/24 due to a large reduction in IT equipment imports, and to moderate further in the medium term, supported by an increase in tourism and electricity exports. International reserves are expected to increase to 6.2 months of import coverage in FY23/24.

Last Updated: Oct 03, 2023

The World Bank Group and Bhutan

Bhutan became a member of  The World Bank  in 1981,  International Finance Corporation  (IFC) in 2003, and  Multilateral Investment Guarantee Agency  (MIGA) in 2014. 

The WBG completed the  Systematic Country Diagnostic  (SCD) for Bhutan, which underpins the formulation of the CPF FY21-24. The SCD identified five major development challenges to accelerating poverty reduction and enhancing shared prosperity in Bhutan. It recognizes that Bhutan is a development success story in many respects but that spatial and gender disparities as well as youth unemployment remain a challenge. It also identified macroeconomic vulnerability; vulnerability to natural disasters; climate change, especially for the poor; and implementation gaps of policies as major challenges.

WBG support has been guided by the  Country Partnership Framework  (CPF FY21-24). The overarching goal of the CPF is to help  promote inclusive and sustainable development through job creation and enhanced equity . The CPF is aligned with the  Royal Government’s 12th Five-Year Plan  (FYP) and has two strategic focus areas—human capital and resilience—and focuses on both the supply and the demand sides of job creation.

A Performance Learning Review ( PLR ) to assess the CPF implementation progress, performance and make necessary strategic realignments is being planned for FY24.

Bhutan is eligible for concessional financing support from the International Development Association (IDA). Under IDA17 (FY2015-17), IDA18 (FY2018-20), and IDA19 (FY2021-22), Bhutan received a total allocation of $56 million, $120 million and 109 million, respectively. The Bank stands ready to support Bhutan development efforts with the increased availability of IDA financing and is waiting for the Government endorsement of the 13 th FYP to align the upcoming CPF with the priorities of this new plan.

Bhutan is among the top 30 earliest adopters of  the Human Capital Project  (HCP), engaged in a global effort to accelerate and improve investments in people for greater equity and economic growth. In this regard, Bhutan and Nepal organized a joint HCP Forum in June 2019.

Bhutan became the Chair of the Small States Forum in October 2021, for two years. Its chairmanship will end later this month (October2023) during an event at the margins of the upcoming Annual Meetings in Marrakech, Morocco.

World Bank Program

As of October 2023, the lending portfolio consists of 3 IDA projects totaling $85 million which include (i) a $50 million Green and Resilient Development Policy Credit, (ii) a $15 million Covid-19 Emergency Response and Health Systems Preparedness project and (iii) a $20 million Human Capital Recovery and Resilience project.  The World Bank complements the IDA funded operations with Recipient Executed trust-funded activities totaling approximately $26 million which include  (a) a $12.6 million   Food Security and Agriculture Productivity Project , (b)  a $4 million  Strengthening Public Financial Management project ,  (c) a $4.2 million Strengthening Risk Information for Disaster Resilience, (d) a $4 million Sustainable Hydropower Development project, and (e) a $1.7 million Green Transport Project among others.  

Analytical and knowledge products are used to guide / select areas of focus for World Bank engagement. Key reports already delivered include a Public Expenditure Review, a Country Environment Analysis, Bhutan Jobs platform, Water Sector Assessment, Health Service Delivery Indicators, Functional Labor Market Information System, Poverty Analysis Report 2022, Public Expenditure and Financial Accountability Assessment III.  Some of the analytical pieces underway include a Country Economic Memorandum, a Digital Development for Inclusive Growth and Regional Integration, Bhutan Poverty and Equity Assessment, Bhutan Country Climate and Development Report and the Bhutan Human Capital Acceleration PASA.

World Bank-IFC Collaboration

IFC has a total committed investment portfolio in Bhutan of $14 million. The portfolio consists of investments in the financial and agribusiness sectors. The advisory portfolio includes advice in structuring PPPs, strengthening agribusiness, improving Bhutan investment climate, and enhancing access to financial services. Key upcoming advisory programs include improving financial sector reforms, business enabling environment, etc. IFC continues to explore investments in the tourism sector, financial sector, agribusiness, manufacturing, renewable energy, and other sectors to support Bhutan’s economic development and enhancing private sector engagement and investment. IFC and the World Bank work together in most of these areas and coordinate the preparation of the CPF that supports the WBG engagement with the Royal Government of Bhutan. We collaborate to achieve strategic prior actions under the DPCs that are critical for private sector development in Bhutan.

On October 21, 2014, Bhutan became the 181st member of the Multilateral Investment Guarantee Agency (MIGA).  MIGA has yet to guarantee a project in the country and the Agency is ready to support eligible projects in Bhutan.

Improving fiscal discipline and Public Financial Management (PFM).  The WBG under this results area made good progress in supporting government reforms to increase revenues, lower deficit and stronger public financial management and procurement systems. The WBG deepened its engagement in this area through a series of Development Policy Credits and analytical activities to promote policy measures that enabled government to improve revenue mobilization and expenditure performance. The country’s fiscal discipline is expected to be further strengthened through the introduction of Goods and Service Tax and the work on fiscal rules as part of the ongoing DPC series. 

Last Updated: Oct 09, 2022

Bhutan: Commitments by Fiscal Year (in millions of dollars)*

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Tourism in Bhutan

Bhutan opened its door to the outside world with the formulation of Tourism Regulation in 1971 to raise its revenue and to promote the country’s unique culture and traditions. The actual arrival of tourists started only in 1974 with 287 visitors. Since then the number of tourists has been increasing every year and in 2013 with record high inbound arrivals of 116,209 as per Tourism Council records.

Despite being open to foreigners, the government is acutely aware of the environmental impact tourists can have on Bhutan’s unique and virtually unspoiled landscape and culture. The Royal Government of Bhutan therefore, adheres strongly to a policy of high value, low impact/volume tourism which serves the purpose of creating an image of exclusivity and high- yield for Bhutan.

Until 1991, then known as Bhutan Tourism Corporation (BTC), a quasi-autonomous and self-financing body, implemented the government’s tourism policy. Tourism was however, privatized in 1991, facilitating private sector investment and activity. As a result, today over 1300 licensed tourist companies operate in the country.

The Director of the Tourism Council of Bhutan the monitoring authority of the tourism sector writes “Bhutan tourism industry continued to grow in 2013 with a +10.25% increase over the previous year contributing significantly to GDP receipts, hard currency reserves, and employment generation in the country. The Royal Government continues to accord high priority to the industry as a major engine of economic growth in the 11th FYP period. The stable performance of the industry in the last five years indicate that tourism is poised to grow in the expected trajectory to meet the aspired targets by the end of 2018″ which is an encouraging statement for the sector.

Tourism sector today is one of the highest revenue earners for the nation.

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Tourism in Bhutan and COVID-19’s Lasting Impacts

THIMPU, Bhutan — The Kingdom of Bhutan is a small country landlocked between India and China. The country is well known for its Gross National Happiness Index and for being the only carbon-negative economy in the world. Bhutan has preserved both its culture and natural habitat throughout the rapidly globalized times. As a country that greatly limits outside influence, tourism in Bhutan has become both an economic boon and a bane.

COVID-19 in Bhutan

Bhutan’s economy, covid-19’s economic impacts, domestic tourism in bhutan, related posts, she investments: supporting cambodian female entrepreneurs, reshaping the economy through ecotourism in botswana, village enterprise: can entrepreneurship solve poverty.

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Making destructive tourism sustainable

F rom Thailand to Mallorca, local ecosystems have suffered under the weight of mass tourism. Can visitor number limits and sustainable practices help restore the balance?Tourism accounts for around 8% of global greenhouse gas emissions, with around half coming from flying to and from destinations.

As airlines and hotels out-compete each other on price, post-pandemic tourist numbers are breaking records, with one million people arriving in Greece per week in the summer of 2022 -- despite high inflation and an energy crises driven by the war on Ukraine, and intense wildfires linked to climate change.

The ecological and climate impact of this overtourism is forcing the industry to act, and to follow in the footsteps of some sustainable tourism pioneers.

'The Beach': Thailand's Maya Bay closes for restoration

Maya Bay, an an idyllic beach on an uninhabited island in Thailand's Phi Phi archipelago, become globally famous when it was the location for "The Beach," the 2000 film starring Leonardo DiCaprio.

Flanked by vast limestone cliffs, the secluded cove with its white sand and turquoise water became jammed with flotillas of boats and cruisers as thousands of tourists flocked to the beach daily for nearly two decades.

Tourist traffic led to pollution from discarded trash and damaged coastal vegetation, but the main problem was the boats dropping their anchors onto the coral below.

When "The Beach" was sealed off to the public in 2018, there was only 8% of the coral coverage in the bay, compared to up to 70% some 30 years before.

A restoration team set about replanting the destroyed coral to rehabilitate the reef in five to 10 years. Boats have to dock at a new pier rather than come ashore on the beach, swimming is forbidden, and new boardwalks keep visitors from trampling the delicate coastal ecostyem.

When Maya Bay finally reopened in early 2022, visitor numbers were cut from the previous height of around 7000 to around 400 per day, noted Thon Thamrongnawasawat, head of the restoration team, in an interview with China's State news agency, Xinhua.

"It is one of the most successful marine actions in many years not only for Thailand but for the whole world," he said.

Bhutan adapts to climate change via tourism fee

The tiny Himalayan kingdom of Bhutan, known for its philosophy of promoting "gross national happiness," introduced a Sustainable Development Fee (SDF) of $65 (E61) around three decades ago to limit mass tourism in the mountainous nation.

Under the mantra of "high-value, low-volume" tourism, the tax revenue has been invested into conservation and sustainability through planting trees, clean and maintain trails and to electrify transport. The fee has helped Bhutan become South Asia's only carbon-negative country as its protected forests continue to store more carbon than the country emits.

The money also addresses high vulnerability to climate change, with impacts ranging from severe drought to melting glaciers.

In 2022, the Bhutan government raised the daily fee to $200 dollars per person when it reopened following the pandemic, saying the cash would be used to offset tourism emissions.

But the fee hike hit tourist numbers and resulted in losses across the sector. In August, Bhutan halved the amount to US$100 to stimulate tourism as it strikes a balance between climate protection and the local economy.

Costa Rica fights deforestation with ecotourism

In 1997, Costa Rica implemented a Certification for Sustainable Tourism that became a pioneering blueprint for a climate- and environment-friendly travel industry.

The reform was in line with an attempt to reverse decades of deforestation, with around half the forest that once covered 75% of Costa Rica lost between the 1940s and 1980s.

Small ecotourism entrepreneurs soon created low impact resorts and ecolodges aimed at more affluent travellers wanting to explore the country's rich biodiversity and natural beauty.

Sustainable tourism is integral to the fact that over half the nation is again covered in forest. Meanwhile, more than 98% of the Latin American nation's energy comes from renewable sources.

As part of its strict ecotourism certification, Costa Rica has continued to prove the fact that some visitors will pay more for a genuine sustainable travel experience.

Mallorca: Can sustainability tax offset overtourism?

During peak tourist season, an airplane lands or takes off in the Balaeric Sea island of Mallorca every 90 seconds.

"There are few places in the world that contribute as much to global warming as Mallorca," Jaume Adrover, a spokesperson for the Mallorca-based environmental group Terraferida, told DW in 2022 of the tourist mecca. "And this is due to only one activity: tourism."

During its 2019 peak, 12 million visitors descended on an island whose population is a little over 900,000 people. The sheer weight of numbers has forced the government to limit the ecological and climate impact of the industry.

A new 2022 tourism law addresses issues of energy efficiency and CO2 reduction in the hotels sector. Hotels need to eliminate fuel oil or diesel boilers to reduce CO2 emissions, and also install water-saving devices while banning single-use plastics. A moratorium on any new tourist accommodation until 2026 aims to reduce the explosion in tourism numbers.

This follows the introduction in 2016 of a daily eco tourism tax, currently as high as E4 euros per day, that is being reinvested in sustainability, including the restoration of Posidonia seagrass meadows.

Dubbed the "lungs of the Mediterranean," the seagrass produces oxygen, absorbs carbon, provides habitat and shelter for a variety of species, yet has receded around Mallorca due to pollution, and like in Maya Bay, boat anchors.

But without significantly reducing the number of tourists, and therefore flights, local ecologists like Jaume Adrover still fear that not enough is being done to transform the tourist hotspot into a model of sustainability.

Edited by: Tamsin Walker

Copyright 2023 DW.COM, Deutsche Welle. Distributed by Tribune Content Agency, LLC.

Latest Move to Fight Overtourism in India – India Report

Bulbul Dhawan , Skift

April 30th, 2024 at 11:00 PM EDT

The court’s order follows the Tamil Nadu government report that said 20,000 vehicles enter these hill stations every day. This posed concerns for the elephants in the region as well as the drought prevailing in the Nilgiris.

Bulbul Dhawan

The Skift India Newsletter is your go-to platform for all news related to travel, tourism, airlines, and hospitality in India.

The Madras High Court has made it mandatory for all motor vehicles seeking to enter the Nilgiris and Kodaikanal between May 7 and June 30 to obtain electronic passes. The aim is to collect data on the number of tourists visiting and the number and types of vehicles that are entering these hill stations.

Heavy traffic in the hills: The court’s order came as the Tamil Nadu government filed a status report that said 20,000 vehicles enter these hill stations every day. This posed concerns for the elephants in the region as well as the drought prevailing in the Nilgiris, though the court clarified that there won’t be a cap on the number of e-passes issued. 

Last month, the government of Tamil Nadu had agreed to fix the carrying capacity for roads leading to these eco-sensitive hill stations after a scientific assessment. The court has now asked the district administrations to collect as much information as possible regarding the tourists visiting these areas while issuing the e-passes to help the assessment.

Overtourism in India: Hill stations in India have been facing overcrowding during peak summers as tourists in large numbers flock to these destinations.

In 2023, destinations such as Nainital, Kasauli, Shimla, and Manali faced an influx of tourists, causing local authorities to place entry restrictions. The government of India also supported the idea of determining carrying capacity of hill stations and eco-sensitive locations in the Himalayan states to curb overtourism.

Apart from measures like fixing carrying capacity at sensitive locations, the government is working to develop destinations and improve infrastructure to tackle possible overcrowding. These include building and revamping destinations like Ujjain and Varanasi. India is also trying to popularize alternative underpenetrated tourist destinations like Lakshadweep. Moreover, states like Goa and Kerala are also focusing on sustainable and regenerative strategies that can tackle ill-effects of overtourism.

Aditya Agarwal Steps Down as Cleartrip’s CFO

Online travel company has announced that its chief financial officer (CFO) Aditya Agarwal has decided to step down from his role. The company has said that Agarwal’s decision is due to personal reasons. He was with the company for nine years and played a key role in Cleartrip’s financial strategy and organizational growth.

This has come two months after Cleartrip CEO Ayyappan Rajagopal announced his decision to leave the company after 11 years. Rajagopal has plans to set up his own business after his departure from the company, he had said in a post on LinkedIn. 

In view of Agarwal’s departure, Cleartrip has said that Akshat Mishra will take over as the new head of business finance.

AirAsia Announces New Routes to Kozhikode, Guwahati

Low-cost carrier AirAsia has announced two new routes to Kozhikode and Guwahati from Kuala Lumpur in Malaysia. With this, the airline will have 15 direct routes in India. AirAsia will operate three weekly flights to both these destinations starting August 1. 

The airline’s group chief commercial officer Paul Caroll said that India is one of the biggest markets for AirAsia and it is accelerating its operations in the country. 

Since January this year, AirAsia has announced seven new routes in India, including those to Jaipur, Ahmedabad, Thiruvananthapuram, and Visakhapatnam. Till 2023, the airline was operating eight routes in India. 

Korea Tourism Holds Roadshows to Showcase Leisure, MICE Potential in India

The Korea Tourism Organization conducted roadshows in India to showcase its leisure and Meetings, Incentives, Conferences, and Exhibitions (MICE) potential. This comes as the country has set a target to welcome 200,000 Indian tourists this year. Of these, Korea aims to receive 20,000 MICE delegates. 

Regional director Myong Kil Yun said, “With a record-breaking target of welcoming 200,000 Indian travelers this year, the recent roadshows were a success. We are confident that by showcasing the diverse experiences Korea offers, we can achieve this ambitious goal.”

In 2023, 120,000 Indian travelers visited South Korea. In order to meet its goal this year, the country is looking at joint marketing promotions, familiarization trips, multi-city roadshows, as well as digital marketing promotions.

Thomas Cook, SOTC Operate Inaugural Bengaluru-Bhutan Charter Flight

Travel services provider Thomas Cook, along with its group company SOTC, operated its inaugural charter flight between Bengaluru and Bhutan’s Paro at 100% occupancy. “This exceptional delivery underscores the robust demand from Bengaluru and Karnataka for premium destinations-experiences,” the company said in a statement. 

The company’s charter flights scheduled for May 4 and 11 have also been fully booked. This has led to Thomas Cook’s decision to operate two additional charters on May 18 and 25. 

Thomas Cook country head for Holidays Rajeev Kale said, “We had handpicked Bengaluru airport as the hub/gateway for this initiative based on three clear opportunities. First is that Karnataka is our top source market. Moreover, there is a high demand for consumers for unique destinations-experiences. Another reason is the absence of direct connectivity for Bhutan from South India.”

Four Points by Sheraton Opens Resort in Jammu and Kashmir’s Sonmarg 

Four Points by Sheraton has announced the opening of Four Points by Sheraton Sonmarg Resort in Jammu and Kashmir. The 47-key resort marks the brand’s debut in Sonmarg. Marriott also operates a hotel under the Four Points by Sheraton brand in Srinagar.

At the launch, Marriott’s South Asia area vice president Ranju Alex said, “This strategic expansion underlines our commitment to growth in the region and showcases how our brands cater to a wide range of travel needs and preferences.” This year, the company aims to open 12 hotels in India and as part of its strategy, it also debuted its Moxy brand in January.

Uttarakhand Tourism Launches India’s First Astro Tourism Campaign

Uttarakhand Tourism Development Board has partnered with astro tourism company Starscapes to launch ‘Nakshatra Sabha’ , the first astro tourism campaign in India. As part of this initiative, the state tourism will promote astro tourism activities such as stargazing, special solar observations, astrophotography contests, and camping under the stars among others. 

The campaign activities will cover several destinations in the state, including Uttarkashi, Pithoragarh, Nainital, and Chamoli. With this campaign, the state is also hoping to advocate the preservation of dark skies in the state. 

With this, Uttarakhand is hoping to position itself as the preferred destination for astro tourism for enthusiasts from all over the world.

Booking.com Unveils Indian Travelers’ Trip Planning Preferences

Online travel company Booking.com has revealed that 61% Indian travelers prefer to book their flights first, before they secure their accommodation. It added that nearly 40% of the travelers book event tickets well in advance. Additionally, about 25% of the travelers prefer to book multiple aspects of their trips at the same time. 

More than half the Indian travelers choose to buy travel insurance before they even book their accommodation. Moreover, nearly a third of Indian travelers wait until after booking their stays and just before their trips, to arrange car rentals, restaurant reservations and taxis.

( Skift India Report will not be published on Thursday, May 2, as May 1 is a holiday. )

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Photo credit: The aim is to collect data on the number of tourists visiting these hill stations. (Image: Kodaikanal Lake) Tamil Nadu Tourism