More than 95 per cent of Bhutan’s industries are still operating as cottage and small businesses, with very few growing into medium or large enterprises. According to the latest Annual Industry Report 2026, this slow transition is limiting industrial growth and raises questions about what is preventing businesses from expanding.
According to the Annual Industry Report 2026, small industries account for 59.8 per cent of all active industrial licences, while cottage industries make up 35.7 per cent.
The report reveals that while the number of cottage industries is growing, medium and large industries make up only about four per cent, indicating that few businesses are able to scale up.
An economist BBS talked to says this is not because Bhutan lacks entrepreneurs but because many small businesses remain unprofitable, receive limited access to credit and struggle to become competitive. The economist added that larger industries, although fewer in number, contribute more through jobs, productivity, exports and tax revenue.
Likewise, the president of the Bhutan Chamber of Commerce and Industry says limited access to finance remains one of the biggest obstacles preventing businesses from expanding.
“They are more stagnant. By the structure, they are not given the platform to enhance their business. Number two, with the same business, there is no capacity to enhance. They need to diversify their sector. Well, during those increments or enhancements of the diversification of their business, again you need financial support. Finance is an important tool here, and lack of access to finance is what stops the expansion,” said Tandy Wangchuk, President, Bhutan Chamber of Commerce and Industry.
The report also shows that Bhutan’s industrial sector remains heavily concentrated in services.
Nearly 80 per cent of all industries are in the service sector. Production and manufacturing have grown modestly, increasing from about 12 per cent in 2022-2023 to almost 14 per cent this year.
Meanwhile, the share of construction industries has declined from 7.3 per cent to just over six per cent.
Experts say a service-led economy is not necessarily a concern. The bigger challenge is that many businesses operate in low-value-added activities such as retail trade, restaurants, bars and public transport, where competition is high, and growth opportunities are limited.
Experts say helping cottage and small industries grow into larger enterprises will be crucial for creating jobs, boosting exports and strengthening the economy.
Sonam Yuden
Edited by Sonam Pem
