The United Nations (UN) classifies Bhutan as one of the world’s least developed nations. The country is predominantly agricultural with limited industrial activity and services. Agriculture, animal husbandry, and forestry employ 94 percent of the workforce and contribute 38 percent of gross domestic product (GDP). GDP was $440 million in 1999.
Bhutan itself has been able to finance less than 10 percent of its total development expenditures. For the other 90 percent, it has depended on external assistance from India, the World Bank, the United Nations, and the Asian Development Bank. The success of the five-year plans has depended largely on the regular flow of funds from India and upon the availability of Indian technical personnel. The Chhukha Hydel project, which harnesses the waters of the Raidak River, is the largest single investment undertaken in Bhutan and represents a major step toward exploiting the nation's huge hydroelectric potential. The surplus energy from the Chhukha project is sold to India, which has financed the entire venture.
The economy, one of the world's smallest and least developed, is based on agriculture and forestry, which provide the main livelihood for more than 90% of the population. Agriculture consists largely of subsistence farming and animal husbandry. Rugged mountains dominate the terrain and make the building of roads and other infrastructure difficult and expensive. The economy is closely aligned with India's through strong trade and monetary links. The industrial sector is technologically backward, with most production of the cottage industry type. Most development projects, such as road construction, rely on Indian migrant labor. Bhutan's hydropower potential and its attraction for tourists are key resources. The Bhutanese Government has made some progress in expanding the nation's productive base and improving social welfare. Model education, social, and environment programs in Bhutan are underway with support from multilateral development organizations. Each economic program takes into account the government's desire to protect the country's environment and cultural traditions. Detailed controls and uncertain policies in areas like industrial licensing, trade, labor, and finance continue to hamper foreign investment.
