The service sector is a driving force in Bhutan’s economy, making up a significant portion of business activity in the country. The sector which focuses on delivering services rather than goods, accounts for more than 50 percent of the country’s Gross Domestic Product. However, the Industry Census of Bhutan 2024 reveals that service-oriented businesses are struggling, with market access, financial constraints, and policy hurdles emerging as the biggest challenges.
Despite the significant contribution of the sector to GDP, the survey says that businesses are struggling due to poor market access. The study found that 43 per cent of service businesses have challenges in reaching customers due to the poor domestic market.
Entrepreneurs cite limited demand, lack of networking opportunities, and geographical constraints as key barriers. Industry experts say that while districts such as Thimphu offer a sizeable customer base, businesses in rural areas find it difficult to reach beyond their immediate surroundings. Adding to the challenge, local businesses are increasingly competing with foreign service providers and online platforms.
Access to finance is the second biggest challenge highlighted in the survey, with over 32 per cent of businesses facing difficulties. While financial institutions provide business loans, many entrepreneurs find the collateral requirements and interest rates too high.
Economists say that large-scale businesses often receive tax exemptions and subsidies, but small and medium enterprises (SMEs) lack the same level of financial support in Bhutan.
Another challenge faced by the service sector is policy. In the survey, businesses rated policy-related barriers at 8.1 out of 10 in terms of severity. Most businesses say that long licensing processes, slow government procedures, and frequent rule changes make planning and running a business harder.
Many entrepreneurs argue that policies fail to support emerging industries like fintech, e-commerce, and digital services.
The survey highlights the need for policy reforms, better financial access, skilled labour, and reduced fees. Meanwhile, experts suggest improving networking, leveraging digital platforms, and making loans more accessible to improve business confidence. Experts recommend the government introduce these changes in the service sector at the earliest possible.
Karma Samten Wangda
Edited by Kipchu
