AGP Executive Report

Gelephu Mindfulness City & trade push: Bhutan’s Gelephu bet is getting a major boost with the planned Gelephu International Airport, designed to serve the GMC special administrative region and strengthen cross-border connectivity with India. Tourism leadership: MICE Bhutan CEO Lizam Dorji has been named PATA Face of the Future 2026 Grand Winner, spotlighting Bhutan’s push to grow MICE while keeping sustainability at the core. Border economy & visitor rules: Bhutan is expanding the 24-hour SDF waiver in Phuentsholing from September, allowing regional tourists to visit Milarepa Lhakhang and the Pachu Community Ecotourism Site via approved packages and licensed guides. Energy & skills: Cleantech Industry Resources (CIR) has been selected by Royal University of Bhutan’s CST under STAR-C to train Bhutan’s next generation of solar engineers in PVsyst modelling. Finance & markets: Bhutan’s foreign reserves dipped to about USD 1.19bn in June-July amid higher import costs and fuel prices, while the Royal Securities Exchange of Bhutan reported July trading volume up 70% (value up modestly). Business climate: The Bhutan Chamber of Commerce and Industry (BCCI) is calling for amendments to the Tenancy Act 2015 to better protect commercial tenants from short notice periods and rent/termination uncertainty. Infrastructure & sustainability: DANTAK and Green Road will resurface a 6.5 km stretch on the Chuzom-Babesa highway using shredded plastic waste, scaling up a long-running Olakha pilot.

Solar Skills Push: Cleantech Industry Resources (CIR) was selected by the College of Science and Technology, Royal University of Bhutan, under STAR-C to run a three-day PVsyst training for 22 engineers and energy professionals, supporting Bhutan’s push toward 5,000 MW solar by 2040. Tourism Leadership: MICE Bhutan CEO Lizam Dorji was named the 2026 PATA Face of the Future Grand Winner in Kuching, spotlighting Bhutan’s MICE growth and sustainable tourism. Border Trade Pressure: A long queue of trucks at Bangladesh’s Banglabandha land port shows trade is rising but delays and suffering are growing as clearance bottlenecks slow movement for goods bound for India, Nepal and Bhutan. External Finance Watch: Bhutan’s foreign reserves fell about USD 31m to USD 1.19b in June–July, with rising import costs—especially fuel—still weighing on the external position. Capital Markets: Trading volume on the Royal Securities Exchange of Bhutan jumped 70% in July, even as the number of trades and active users dipped. Crypto Payments: Binance Pay expanded to 3,700+ Bhutan merchants via DK Bank QR, settling in USDT while customers pay in BTN. Credit Relief: RICB launched Special Rebate Scheme 2.0 to help borrowers clear legacy NPLs and charged-off loans through interest and, in some cases, principal rebates. Private Sector Rules: BCCI urged amendments to Bhutan’s Tenancy Act, saying the current two-month notice period for commercial tenants is too short and undermines business investment confidence.

Earthquake Relief: RICBL has paid over Nu 11.8M in insurance claims to 865 households after the 5.5 quake near Punakha, easing recovery costs for affected families. One-Stop Rural Services: Bhutan’s One Stop Shop push is moving through PACS, with an inter-ministerial meeting in New Delhi mapping government services, welfare schemes, products, training and market linkages onto village-level cooperatives. External Sector Watch: Foreign reserves fell about USD 31M to USD 1.19B in June–July as import costs and fuel prices stayed high, though Finance Minister Lekey Dorji says the buffer remains well above the critical threshold. Capital Markets: Trading volume on the Royal Securities Exchange of Bhutan jumped 70.43% in July, even as trades and active users dipped—suggesting bigger share movements rather than broader participation. Tourism Leadership: MICE Bhutan CEO Lizam Dorji was named PATA Face of the Future 2026 Grand Winner, spotlighting Bhutan’s MICE push and sustainable tourism. Border Economy & Retail: A CCAA study finds Phuentsholing shoppers increasingly rely on Jaigaon for cheaper essentials, with most residents crossing the border weekly. Crypto & Payments: Binance Pay expanded to 3,700+ Bhutan merchants via DK Bank QR, letting customers pay in BTN while settlement runs in USDT. Private Sector Rules: BCCI urges changes to Bhutan’s Tenancy Act for better protection of commercial tenants, citing short notice periods that can disrupt business investments. Public Finance Performance: MoF’s new performance-linked capital grant assessment will tie 30% of block grants to dzongkhag/thromde delivery, financial management and compliance starting FY 2026–27.

Bhutan Tourism & Branding: MICE Bhutan CEO Lizam Dorji was named PATA Face of the Future 2026 Grand Winner at PATA Travel Mart in Kuching, spotlighting Bhutan’s push to grow MICE while keeping sustainability at the core. Border Trade & Market Access: Bhutan and Bangladesh agreed to deepen bilateral trade and private-sector cooperation, expand product coverage under the PTA, and explore a future free-trade pact—aimed at turning goodwill into tangible economic outcomes. Phuentsholing Retail Pressure: A CCAA study finds 94.9% of Phuentsholing residents rely on Jaigaon for at least some shopping, with price gaps driving weekly cross-border buying—raising cost-of-living concerns for the border town. Private Sector Policy: MoICE says it has rolled out reforms to boost private investment, including FDI Rules and Regulations 2025 and full implementation of IBLS, as government targets higher private-sector participation. Business Regulation: Bhutan Chamber of Commerce and Industry (BCCI) calls for amendments to the Tenancy Act 2015, arguing the two-month notice for commercial tenants is too short and discourages investment. Finance & Recovery: RICB launched Special Rebate Scheme 2.0 to help borrowers clear long-overdue legacy NPLs, including 100% interest waivers for eligible charged-off loans. Infrastructure & Logistics: NFR completed track-linking from Jogighopa station yard to the Assam MMLP logistics park siding, expected to improve freight efficiency and strengthen connectivity that can benefit trade with Bhutan. Sustainable Roads: DANTAK and Green Road will resurface a 6.5 km stretch of the Phuentshogling–Thimphu highway using shredded plastic waste, building on a successful Olakha pilot. Water Security: A National Water Resources Inventory report warns 18 Paro/Thimphu sources have dried up and 227 are drying, pointing to climate and land-use pressures.

Tourism & Border Access: From September, regional tourists using Bhutan’s 24-hour SDF waiver in Phuentsholing can visit Milarepa Lhakhang and the Pachu Community Ecotourism Site, joining approved packages with licensed guides—aimed at keeping short-stay visitors in town and supporting local businesses. Debt Relief for Borrowers: RICB launched Special Rebate Scheme 2.0, offering rebates on outstanding interest and, in some cases, principal to help clear long-overdue legacy NPLs and charged-off loans, subject to assessment and approval. Local Government Funding Rules: MoF’s new performance-linked framework will tie 30% of capital block grants to dzongkhag/thromde delivery, financial management and compliance, starting FY 2026–27 baseline. Water Stress in Paro & Thimphu: A 2026 inventory reports 18 Paro/Thimphu sources already dried up and 227 more drying, with climate change, forest degradation and human activity flagged. Trade & Prices: Export prices rose faster than import prices in Q2 2026, but Bhutan’s terms of trade slipped slightly, keeping external trade pressure alive. Phuentsholing Retail Leakage: A CCAA study finds most Phuentsholing residents shop in Jaigaon mainly due to lower prices, making cross-border retail a cost-of-living issue. Matsutake Market Pressure: Exporters in Genye say rising Japanese demand is outpacing limited supply, constraining shipments. Digital Payments Push: Binance Pay expanded crypto payments to 3,700+ DK Bank QR merchants in Bhutan, settling in USDT while users pay in BTN. MoICE Delivery: MoICE hit 99.5% of KPIs in FY 2025–26, but the next test is turning targets into real jobs, exports and private-sector growth.

Performance-Linked Grants: Bhutan’s Ministry of Finance will start a new framework in FY 2026–27 to assess dzongkhags and thromdes on project delivery, budget execution and compliance, with 30% of capital block grants tied to results. Water Security: A National Water Resources Inventory report warns 227 water sources are drying in Paro and Thimphu, with 18 already dried up, pointing to climate change, forest degradation and human activity. MoICE Delivery Push: MoICE says it hit 192 of 193 KPIs in 2025–26 (99.5%), including plans to establish 2,000 new industries and attract Nu 10bn FDI, but one gap remains in intellectual property service revenue. Cross-Border Cost Pressure: Phuentsholing retail leakage is worsening as 94.9% of residents rely on Jaigaon for some shopping, mainly due to lower prices, turning border shopping into a cost-of-living issue. Tourism Beyond the West: Arrivals jumped to 149,141 in the first half of 2026, but the big question is whether spending is reaching central, eastern and southern communities. Matsutake Market Reality: Exporters in Genye say rising demand in Japan can’t be met—only 3.5–4 tonnes shipped versus buyers’ needs of at least eight tonnes—while the Matsutake Festival is drawing visitors and boosting local income. Legal Services Demand: The Office of the Attorney General handled 1,014 cases in 2025–26, with drug-related offences forming the largest share.

Disaster Preparedness: Bhutan’s Thimphu earthquake drill (7.5 scenario) with Nepal’s NSET support flagged gaps in emergency equipment and resource mobilisation, testing coordination among authorities, hospitals and responders under the Thimphu Earthquake Contingency Plan. Energy & Investment: Druk Holding Investments is moving beyond hydropower by advancing geothermal exploration at 11 hot spring sites, supported by the World Bank, ÍSOR and KenGen, as part of its 10X Roadmap. Business & Tourism: Bumthang operators want more tourism facilities and attractions after low occupancy keeps hotels underutilised, with some reporting only single-digit occupancy outside peak months. Trade & Costs: Informal trade and taxes/regulations are squeezing businesses in Phuentsholing, while a separate regional disruption shows how cross-border policy shifts can quickly raise project costs. Crypto Policy Debate: A new push argues that banning crypto isn’t working and Bhutan should focus on regulation instead.

Cross-border trade pressure: A third-month halt on Indian stone imports is disrupting Burimari Land Port trade, forcing traders to move more loads per truck, pushing up Bangladesh stone prices and raising costs on fixed-price projects. Digital payments expansion: UPI is already accepted in Bhutan and several other countries, while broader coverage highlights how India’s payment rails are enabling new fintech services. Rural income boost: Matsutake prices are lifting incomes in Genye Gewog, where collectors and exporters are seeing better returns and festival-linked sales. Disaster readiness: Thimphu’s 7.5 earthquake drill exposed emergency equipment and coordination gaps, with Nepal providing technical support. Highland support: Bhutan’s Home Affairs Ministry is setting up a Special Technical Committee to assess highlanders’ winter livelihood challenges across 10 districts. Tourism business strain: Bumthang businesses are urging more tourism facilities and attractions as occupancy remains low despite national visitor numbers. Informal trade squeeze: In Phuentsholing, informal cross-border goods movement is undercutting compliant formal importers through avoided taxes and procedures. Energy market shift (region): Nepal’s energy sector is moving from shortages to market management as surplus production grows and PPAs expand.

Disaster Preparedness: Thimphu ran a full-scale earthquake drill for a 7.5 scenario, exposing gaps in emergency equipment and resource mobilisation while testing the Thimphu Earthquake Contingency Plan with Nepal’s technical support. Tourism & Local Business: Bumthang business owners say low occupancy and limited attractions are hurting hotels and other services, urging more tourism facilities and private investment after weak visitor distribution. Trade & Compliance: In Phuentsholing, informal trade through private vehicles is undercutting formal importers by letting some traders dodge taxes, customs steps and regulatory costs. Labour Conditions: Bhutan’s private security guards report low wages despite long shifts, raising concerns about how businesses manage essential services. Agriculture & Policy: A call is making the rounds that Bhutan should treat agriculture as an economic mandate to secure the food future. Hydro & Investment Linkages: JSW Energy and Bhutan’s DGPC signed pacts tied to the 920 MW Punatsangchhu-III hydro project, reinforcing cross-border energy investment momentum. Highland Support: The Home Affairs Ministry is setting up a special technical committee to assess winter and livelihood challenges for highland communities, starting with 10 districts including Thimphu and Bumthang.

Tourism & Local Business Pressure: Bumthang businesses are pushing for more tourism facilities and attractions after persistently low occupancy, with hoteliers saying they can work only a few months and then struggle to sustain operations. Trade & Compliance Gap: In Phuentsholing, informal trade carried by private vehicles and informal distribution networks is undercutting formal importers by avoiding taxes, customs steps, and regulatory costs. Private Security Wages: Bhutan’s private security guards report long shifts and low pay despite guarding public and private premises, raising concerns about labour conditions in the services sector. Budgeting for Highland Resilience: Thimphu district’s capital allocations for 2026-27 are being shaped by poverty, climate risks, GNH indicators and transport needs, reflecting how planning criteria can steer local economic outcomes. Highlanders Support Plan: The Home Affairs Ministry is setting up a Special Technical Committee to assess winter and livelihood challenges for highland communities, with district representatives from key highland areas. India-Bhutan People-to-People Ties: Bhutan’s King met India House officials and Bhutan India Friendship Association leaders in Thimphu, underscoring continued cooperation on development, energy, trade, and connectivity. Trade Deficit Watch: Bhutan’s Q2 trade deficit widened to nearly Nu 24bn as imports rose faster than exports, with fuel, food, smartphones and vehicles driving the import bill.

Hydropower Deal: JSW Energy and Bhutan’s Druk Green Power Corporation (DGPC) signed a shareholders’ agreement to jointly develop the 920 MW Punatsangchhu-III project, with DGPC holding 51% and JSW Neo Energy 49%, and detailed project work now underway. Trade & Reserves: Bhutan’s trade deficit widened to nearly Nu 24bn in Q2 as imports hit about Nu 42.7bn, driven by fuel, food, smartphones, vehicles and networking gear; India remains the biggest import source. Local Budgeting: Thimphu District allocated about Nu 706M for 2026-27, with gewog funding shaped not just by population but also poverty, climate risks, GNH indicators and transport needs. Cordyceps Market: In Naro, some cordyceps collectors held back sales after auction prices disappointed, citing limited buyer competition and uncertainty over future trade. Mental Health Services: PEMA expanded mental health and protection services nationwide, including helpline 1098, school and community support, and maternal mental health screening across all 20 dzongkhags. Tax Clarity: Bhutan’s Finance Ministry clarified that fixed-deposit interest earned before Jan 1, 2026 stays tax-exempt even if credited later.

Trade & Finance: Bhutan’s trade deficit widened to nearly Nu 24bn in Q2 as imports hit about Nu 42.7bn, up from Nu 37bn in Q1; fuel (diesel/HSD), smartphones, vehicles and networking gear drove the bill, while exports lagged—India remained the biggest partner for imports (Nu 32.4bn) and exports (Nu 10.5bn). Hydropower Investment: JSW Energy and Bhutan’s DGPC signed a shareholders’ agreement to jointly develop the 920MW Punatsangchhu-III project in Wangdue Phodrang, with DGPC holding 51% and JSW Neo 49%; DPR work is underway, marking JSW’s first power generation venture outside India. Local Governance & Planning: Thimphu district allocated about Nu 706M for 2026-27 capital spending, with gewog shares shaped by poverty, climate risks, GNH indicators and transport needs—not just population or area. Tax Clarity: Bhutan’s Finance Ministry clarified that interest earned on fixed deposits before Jan 1, 2026 stays tax-exempt even if credited later under the new Income Tax Act. Digital Economy & Connectivity: A Bhutan dialogue pushed people-centred digital transformation as AI and online risks grow, while India’s e-visa entry points expansion (including Jaigaon and Darranga) supports Bhutan-related travel flows. Social Policy: The Third Child Plus Programme confirms monthly support for eligible families, including Bhutanese living abroad who opt in. Business Signals: Page Industries reported Q1 FY27 revenue up 7.9% to Rs 1,420.44 crore, though net profit fell 4%—a reminder that demand can stay steady even as costs squeeze margins.

Hydropower Deal: JSW Energy and Bhutan’s Druk Green Power Corporation (DGPC) signed a shareholders’ agreement to jointly develop the 920MW Punatsangchhu-III project in Wangdue Phodrang, with DGPC holding 51% and JSW Neo 49%; the detailed project report is now being prepared. Tax Clarity: Bhutan’s Finance Ministry clarified that interest earned on fixed deposits before Jan 1, 2026 stays tax-exempt even if credited after the new Income Tax Act took effect. Tourism & Connectivity: Bhutan added Darranga (Assam) and Jaigaon (West Bengal) as entry/exit points for foreign nationals holding Indian e-Visas, aiming to boost access for eastern Bhutan. Local Development: Haa Dzongkhag lifted its construction moratorium inside the Haa Throm boundary, restarting approvals under revised local planning rules. Trade Risk Alert: India’s DGFT advised exporters and banks to exercise heightened vigilance with two Bhutan-based firms, Legoy Powersports and Druk A-Z Store, citing unresolved trading risks. Tourism Momentum: July arrivals nearly doubled year-on-year to 14,913 international visitors, with Indians still the largest share. Digital Governance Dialogue: Bhutan held a high-level dialogue on inclusive digital transformation and responsible digital governance as online services and payments expand.

Hydropower Deal: JSW Energy and Bhutan’s Druk Green Power Corporation (DGPC) signed a shareholders’ agreement to jointly develop the 920 MW Punatsangchhu-III hydro project in Wangdue Phodrang, with DGPC holding 51% and JSW Neo 49%; the detailed project report is now being prepared. Tax Clarity: Bhutan’s Finance Ministry clarified that interest earned on fixed deposits before Jan 1, 2026 stays tax-exempt even if credited later under the new Income Tax Act. Cross-Border Trade & Retail: A Bhutan study finds 94.9% of Phuentsholing residents shop in Jaigaon for at least some goods, driven mainly by lower prices and wider choice, while local retailers face higher costs and fragmented supply chains. Tourism Momentum: Bhutan’s July 2026 international arrivals nearly doubled to 14,913 (up 98.5% year-on-year), led by India (65.5% of visitors). Local Business Risk Watch: India’s DGFT issued a trade notice advising heightened vigilance over two Bhutan-based firms, Legoy Powersports and Druk A-Z Store, citing unresolved trading risks and lack of response. Digital Governance: Bhutan held a high-level dialogue on inclusive digital transformation and responsible digital governance as public services and payments move online.

Cross-Border Hydropower Deal: JSW Energy and Bhutan’s Druk Green Power Corporation (DGPC) have signed a shareholders’ agreement to jointly develop the 920 MW Punatsangchhu-III project in Wangdue Phodrang, with DGPC holding 51% and JSW Neo 49%; DPR work is underway. Tourism Momentum: Bhutan’s international arrivals surged in July 2026, nearly doubling to 14,913 visitors (up 98.5% year-on-year), with Indians still the biggest share. Business & Trade Risk Controls: India’s DGFT has issued a trade notice advising “heightened vigilance” when dealing with two Bhutan-based firms, citing unresolved concerns and urging due diligence. Food Safety at the Border: BFDA tightened mango import testing and rules after calcium carbide was detected in consignments, expanding lab checks and enforcement. EV Affordability Watch: Bhutan says EVs keep strong tax advantages, but it will assess the market before adding more incentives as it targets 70% of new vehicle sales to be electric by 2035. Banking Oversight: RMA is reviewing Bhutan National Bank after customers reported double deductions of annual maintenance charges affecting over 54,000 accounts. Local Economy Pressure: A study finds Phuentsholing residents increasingly shop in Jaigaon due to lower prices and higher choice, putting local retailers under strain. Minerals Prospecting: Bhutan’s airborne survey flagged promising copper and tungsten targets (plus rare earth and geothermal potential), with ground studies needed next.

Cordyceps Market Watch: Many collectors in Naro Gewog held back sales after auction prices fell below expectations, citing limited buyer competition and uncertainty in the trade; earnings ranged from Nu 190,000 to Nu 936,000 depending on quality and quantity. Mental Health & Safety Nets: PEMA expanded mental health and protection services nationwide, including prevention, early intervention, specialised treatment and reintegration, plus maternal mental health screening in all 20 dzongkhags and wellbeing training for teachers. State vs Jobs: A Finance Ministry report says SOEs drive 23.06% of Bhutan’s GDP in 2023 but employ only 3.55% of the workforce, reflecting their capital-heavy focus in sectors like hydropower and finance. Hydropower Deal: JSW Neo and DGPC signed a pact to jointly develop the 920 MW Punatsangchhu-III project, with DGPC holding 51% and JSW Neo 49%, and DPR work underway. Banking Oversight: RMA is reviewing Bhutan National Bank after some customers faced double deductions of annual maintenance charges affecting 54,000+ account holders. Food Safety: BFDA tightened mango import testing and rules after calcium carbide was detected in consignments, with further surveillance following initial positive samples. EV Policy: Government will assess the EV market before considering extra incentives, even as EVs keep tax advantages over conventional vehicles. Tourism Pulse: July saw international arrivals nearly double year-on-year to 14,913, led by India (65.5%). Trade Risk Alert: India’s DGFT issued a notice urging heightened vigilance with two Bhutan-based firms, citing unresolved trading risks.