National Development Planning and Sustainability: The Case of Bhutan

Abstract

Bhutan is a developmental success story that since the 1960s has consistently used five-year national development plans to make substantial socio-economic progress and promote sustainability. Many other developing countries had abandoned medium-term national planning by the 1980s, but Bhutan continued using these instruments as the principal mechanisms for developing the country and making substantial welfare gains for its population while attending to the sustainability of its development path and environment. Poverty has been greatly reduced, incomes have grown in real terms, life expectancy has markedly increased, there has been enormous growth in the provision of education and the country has become a world leader in environmental protection with 71% of Bhutan still under forest, making it the first carbon negative country in the world. The reasons for Bhutan’s success include always working within the capabilities of government, economy, and society; a demonstrated capacity to reorient development strategies with new plans; a stable political environment; good governance; the gradual inclusion of multiple stakeholders into the development process; a strong supportive relationship with neighbouring India; and the wise use of income from hydropower to fund development. Though there have been disruptions, mistakes, and failures in planning in Bhutan, the general trajectory of solid progress and continued attention to sustainability has been maintained; however, there are considerable challenges ahead for the ambitious Thirteenth Five-Year Plan (2024–2029). To investigate the Bhutanese experience, this article adopts a qualitative case study approach.

1. Introduction

During the 1950s and 1960s, newly independent countries of the global south began their quests for development with great hope and enthusiasm [1]. Freed from the shackles of colonialism, they hoped to employ the principles and techniques of scientific planning to become rich industrialized countries within a few decades. Most countries adopted the medium-term framework of the five-year plan to pursue their ambitions [2,3]. However, the visions of rapid progress largely failed to materialize, leading to widespread abandonment of comprehensive national development planning [4]. But a handful of countries persevered with national development plans, often in a much less ambitious form, with less substance and lower expectations than those of the 1950s and 1960s. One of these countries was the reclusive Himalayan Kingdom of Bhutan, which adopted five-year national development plans in 1961 and has maintained its faith in them ever since. Bhutan is now commencing its Thirteenth Five Year plan (2024–2029). Using these five-year plans to direct and organize its socioeconomic development, the country has enjoyed great developmental success, rising from being one of the world’s least developed nations to become a lower middle-income country with medium human development status and “well on track in implementing the SDGs [Sustainable Development Goals]” [5,6,7]. These observations lead to the primary research questions of this study: how has Bhutan managed to achieve developmental success using five-year development plans when most other developing countries met with failure using this approach? This leads to a supplemental question: what lessons does the Bhutanese experience have for other developing countries?

Developmental success in Bhutan has relied extensively on five-year planning and demonstrates how such a planning tool, used judiciously, can lead to achieving the goals of development or in Bhutan’s case, Gross National Happiness (GNH), the nation’s developmental philosophy. This article takes a historical perspective, showing how planners have utilized and adapted five-year plans to establish and maintain sustained developmental progress. It charts how Bhutanese government officials have modified various aspects of five-year plans over time to fit developmental needs, state capacity, and the demands of a volatile environment. The case study provides lessons for other countries, especially small ones, on the effective use of national development planning to achieve desired development outcomes. The article commences with a short history of national development planning, followed by a brief background on Bhutan’s development. Next comes a chronology of five-year plans that identifies their changing nature. The lessons of Bhutan’s national planning experience are then set out.

2. The Rise, Fall and Rise Again of National Development Planning

In the 1950s and 1960s, the emerging countries of the global south were seeking rapid socioeconomic development to address their multiple challenges. There was optimism in a narrative of hope that visualized these new nations making great strides towards much brighter futures [1]. Four major factors supported this narrative of hope. First, there were examples of planning bringing about societal transformation, notably the rapid industrialization of the Soviet Union and the Marshall Plan that swiftly rehabilitated post-World War II Western Europe [4]. Second was the intellectual climate of the time that displayed confidence in the rational techniques of management disciplines [8]. Through the application of scientific thinking and techniques to economy and society, progress could be engineered. There were tools such as cost benefit analysis and input–output models to advise decision-making. Prime Minister Nehru of India believed that development had become a “mathematical problem which could be worked out scientifically” [9] (p. 24). In centrally planned economies, the plans focused on state control and direction, while in mixed economies, the state not only programmed the investment of public resources but also used other measures to encourage and direct the private sector. Third, to gain external finance for modernization, there was a need for a plan as a basis for negotiations with donors. Finally, plans were important legitimation devices for fledgling governments to provide a rosy vision of the future and to demonstrate their commitment to rapid socioeconomic development for all citizens.

Most countries of the global south quickly adopted national development plans. As Waterston observed “the national plan appears to have joined the national anthem and the national flag as a symbol of sovereignty and modernity” [10] (p. 28). It was seen as the essential mechanism for overcoming obstacles to development [11]. While plans showed variation there were some common elements: a strong emphasis on economic development and a strategy for achieving it; principles to guide implementation; coverage of the whole economy and sometimes society; and macroeconomic models to forecast performance [12]. The plans generally took a medium-term view of five years. India was the first developing country to produce one of these five-year plans (1951–1956). It “covered virtually all aspects of the economy and social welfare in its 671 pages”, estimated resources available and production targets, and calculated the outcomes [13] (p. 185).

By the 1980s, enthusiasm for national development planning had waned considerably as its promised benefits had often failed to materialize and the narrative of hope attached to planning became one of false hope and disillusion [1]. Planning’s problems were many. Thus, a World Bank review of development planning in the early 1980s found that plans were often overambitious, lacked sufficient and up-to-date data, used analytical tools that could not cope with the complexity of economic change, and were poorly linked with budgetary and evaluation processes [14]. Furthermore, there could be inadequate cooperation between ministries while bureaucrats and other sectional interests could obstruct plans as they promoted policies in their own self-interest. Politics had been overlooked [12,15,16]. In Latin America, the post-World War II policy of import substitution industrialization failed to meet its objectives while crippling foreign debts hampered further progress leading to the “lost decade” for development in the 1980s [17,18,19]. Across Africa, planning failed to bring about the hoped for transformative economic growth while the sky rocketing oil price increases in the 1970s led to the widespread suspension of development planning amidst ballooning debt [20]. Even in India, the pioneer of development planning, interest in planning cooled as results failed to match expectations [21,22]. Where success had occurred in East Asia, planning had been characterized by flexibility and undertaken in partnership with the private sector and the promotion of export-led industrialization [22,23].

The disappointing experiences in most parts of the developing world did not herald the end of planning. National development planning continued in some countries in modified forms while planning on a smaller scale in programmes and projects dominated the field. The rise of neoliberalism in the 1980s put national development planning under further assault with some voices calling for its complete abandonment [13]. The state was to be rolled back, and the market allowed to determine allocative efficiency. But, in the 1990s, national development planning staged a comeback as the optimistic predictions of neoliberals proved to be yet another false narrative. It became accepted that both state and market were necessary for effective development policy management [24]. The renaissance of planning was given a boost by international financial institutions’ requirement for countries to prepare Poverty Reduction Strategy Papers (PRSPs) while the global pursuit of the Millennium Development Goals (MDGs) in the twenty-first century gave additional impetus. Yet more support came with the Sustainable Development Goals (SDGs), the successors of the MDGs. Thus, between 2006 and 2018, the number of countries with national development plans more than doubled from 62 to 134 to cover 80% of the global population [25]. This “new national planning” was practice--led and locally generated. It was characterized as being based on collaborative rationality featuring communication and negotiation about a desired future among multiple stakeholders [26,27]. The technocrats were still in place but this time as one of a large cast of participating actors.

Bhutan did not experience this national planning roller coaster ride. It embraced national planning in the early years of development and persisted with the five-year framework from 1961 until the present. Furthermore, it did not immediately adopt the comprehensive models unfortunately deployed in many other countries. Bhutan then refused to let the market determine priorities and resource allocation as prescribed by neoliberals. It chose its own course. Planning in Bhutan has evolved from very simple beginnings to become a sophisticated endeavour encompassing many sectors of economy and society. As we shall demonstrate, the authentic Bhutanese path to developmental success is firmly rooted in its national development planning.

3. Methodology

To answer our research questions a qualitative case-study methodology has been adopted [28,29,30]. It is an especially useful approach to investigating complex societal phenomena in particular contexts, in this instance assessing success in planning and development (the phenomenon) in Bhutan (the context). The case-study method offers explanations where boundaries between research phenomena and context are not clearly evident and where in-depth insights cannot be gained from quantitative methods because of the complexity of the phenomena under scrutiny [28]. Thus, the case-study method is widely used in a wide range of social science disciplines, law, medicine, policy, and management.

This research utilizes a single-case approach, analogous to a single experiment and is frequently applied to unique or revelatory phenomena [29]. Bhutan’s experience reflects both these characteristics. The approach does not seek a “one best way” explanation but accepts that equifinality can be achieved in different ways. Nevertheless, the single case can provide lessons and can be used as a basis for constructing theories that can be tested against other similar phenomena.

The case study approach uses qualitative data often drawn from multiple sources. They are subject to constant review and evaluation during data collection to ensure quality control, although major data analysis generally occurs on completion of data gathering. Drawing on multiple data sources is a strength of the qualitative case study method as it facilitates a “thick description” of the object of study and its contextual influences. Such richness of data enables the construction of “plausible narratives” to explain what the data demonstrate [1,30]. There can be conflicting evidence, but this is not a methodological weakness. It merely reflects the complexity of societal phenomena and the interpretations promoted for them. The qualitative data used in this study are drawn from a range of sources including government documents and statistics, reports by multilateral and bilateral aid agencies, academic writing from journals, books and assorted papers, and media reports and commentaries. The ability to select what data are relevant and of sufficient quality for the case study is an important element for achieving excellence in this type of research. The authors of this study have considerable first-hand experience of research in Bhutan and wide knowledge of the field of study both locally and internationally. This is demonstrated in strong publication records for Bhutan and internationally. These attributes enable the identification and selection of appropriate data and the capacity to critically analyze them to produce a plausible narrative.

4. Socioeconomic Development in Bhutan

Bhutan came late to development. It was 1961 when the third king gave instruction for modernization to commence. Never having been a colony and remaining reclusive and largely isolated from the outside world, Bhutan lacked any of the features of a modern society. Indeed, Phuntsho has characterized Bhutanese society at that time as being “medieval in character” [31] (p. 565). The vast majority of the population engaged in agriculture, eking out their subsistence livings from small low-productivity landholdings in the country’s mountain valleys. Even by 1980, only 5% of the population was classified as urban [32]. Thimphu, the capital, comprised scattered hamlets whose inhabitants relied largely on agriculture for livelihood. There were no modern industries and no national currency until 1974, although some Indian currency was in circulation to complement the barter economy. There were no roads to link the different parts of the kingdom and provide access to the outside world. Thus, when the Indian Prime Minister, Jawaharlal Nehru, visited in 1958 to solidify bilateral links, he had to travel by yak, pony, and on foot for 5 days [33]. Except for monasteries where Buddhism and crafts were taught, there was very little formal education and no formal education system [34,35]. Western medicine had hardly penetrated the country. Thus, in 1961, there were only two hospitals, two Bhutanese doctors and one missionary doctor, and two nurses [36,37]. There was no bureaucracy. The institutional framework of the modern state simply did not exist. Bhutan in 1961 was a strong contender for the least modernized country in the world.

It is difficult to provide statistics to measure socioeconomic progress in Bhutan’s early development decades as they do not exist or can be suspect. The state lacked the organizations and capabilities to collect such data. However, from the description of conditions in 1961 in the above paragraph it is clear that Bhutan scored extremely low on all conventional socioeconomic indicators that are used to track development. Once the modernization programme had been launched, progress in the fundamental components of development—notably road infrastructure, education, health, and livelihood—was incremental and sustained, but starting from such low levels in all indicators meant that the task was enormous and could not be fast-tracked as financial, physical and human resources were lacking, and the capacity to absorb foreign aid very limited. Nevertheless, by the time the first Statistical Handbook of Bhutan was published in 1985 it was evident that much had been achieved although there was still a long way to go. For example, in 1983 there were 18 hospitals and 166 schools with 43,782 pupils and 1520 teachers [38]. Industry had started to appear with six large industries, 15 medium industries, and 404 small industries. A fledgling tourism industry had begun to emerge with 1469 recorded visitors in 1983. The extent of the motorable road system had increased from zero kilometres in 1960 to 1691 kilometres in 1983, used by 2980 petrol-driven vehicles. Life expectancy at birth had improved from an estimated 27.8 years in 1950–1955 to 45.6 for 1980–1985.

The pattern of improvement in multiple development indicators achieved over the first two decades of modernization was sustained in the following years. For example, the average annual growth in Gross National Income (GNI) per capita over the period 2000–2019 was 7.2%, giving a threefold increase in Purchasing Power Parity (PPP) [5] (p. 1). Hydropower and tourism were the main contributors to this growth. Electricity was available across the whole country. Using the national measure of poverty, rates have been in decline from 23.2% in 2008 to 12.4% in 2022 [39,40]. Extreme poverty (based on the USD 2.15 per day measure) has been eliminated. The expansion of education has been maintained, and, in 2021, there were 1928 schools and other educational institutions with 247,572 students and 12,487 teachers. Life expectancy in 2017 had risen to 70.2 years and there was a network of 54 hospitals in 2022. Finally, Bhutan has been described as “a stellar performer on sustainability indicators” [41] (p. 2).

5. The Evolution of Bhutan’s Five-Year Plans

While Bhutan has remained steadfast in the sustained use of five-year plans, much has changed in terms of content, ambition, approach and institutional framework. In this section, the five-year plans are grouped together into clusters that share particular characteristics that distinguish one period of national development planning from another. The commencement of each era can be seen through the concept of a critical juncture. Such junctures refer to “moments of contingency” that permit choices to create new policies that send history along a particular trajectory but not necessarily one that is predicted [42,43]. In the case of national planning in Bhutan, the trajectories have always been predicted if not necessarily realized as it is in the nature of planning to try and determine the future. The start of each planning era has seen the government provide new emphases or paths for national development to follow—the critical junctures. The length of eras has been variable. It is important to note from the outset that most investments in raising human welfare and safeguarding the environment and culture have been made through the five-year plans.

5.1. The Era of Dependency (1961–1971)

This era in Bhutan’s national development planning history was characterized by total dependence on India. One result of Indian Prime Minister Nehru’s visit to Bhutan in 1958 was his commitment to support the introduction of five-year development plans in Bhutan [44,45]. But Bhutan had no bureaucracy and no qualified planners so the First Five Year Plan (1961–1966) was necessarily designed by staff recruited from India with the help of the Planning Commission of India [44]. They formed a small office called the Development Wing, which managed projects without much consultation with Bhutanese officials [46]. What projects were included in the plan and how they should be implemented depended mainly on the Indian Secretary-General of the Development Wing, although royal approval was necessary. Not only were the personnel Indian, but the finance also came from India. This situation was replicated for the Second Five-Year Plan (1966–1971). Funding for the First Plan was USD 10.7 million, with USD 20.2 million for the Second Plan. These were modest amounts, necessarily so, because the absorptive capacity of Bhutan for foreign aid was very limited [47].

The main emphasis of the plans was roads to connect Bhutan with India and to interlink Bhutan’s regions. Thus, 66% of the First Plan budget and 40% of the Second Plan budget went into roads. Significant investments were also made in education, health, and agricultural infrastructure and personnel development. Neither plan made any attempt to be comprehensive. Rather, they comprised projects in fields identified as priorities by the government, which were deemed feasible by the planners. However, data on basic socioeconomic indicators were still largely absent and precluded the measurement of overall development progress.

5.2. The Era of Nationalization (1971–1981)

This was an era in which the planning system was taken over by Bhutanese officials and the country embarked on a policy of self-reliance. A Planning Commission was established in 1971 with an initial mandate of developing the Third Five-Year Plan (1971–1976). However, there were still insufficient qualified Bhutanese personnel for the task, and once again, there was reliance on Indian experts [48]. Nevertheless, the Bhutanese government did start to diversify its funding for the plan from exclusive reliance on India. Three percent of the funds came from the UN and 7% was raised from internal revenue. The Fourth Five-Year Plan (1976–1981) saw self-reliance emerge as an explicit goal of the Bhutanese government and was marked by Bhutanese officials taking over all planning functions. The plan also contained the first excursions into experimentation in development. First was the Intensive Valley Development Project. This project focused on particular rural areas and represented Bhutan’s interpretation of the then-popular idea and practice of Integrated Rural Development that aimed to help people meet basic needs and improve the overall quality of life for the poor [49]. Thus, the Bhutanese programme focused on agriculture, especially improving production through irrigation. The second experiment was with Model Villages, which aimed to provide basic facilities and materials for village development [50]. These experiments marked a notable shift in the pattern of expenditure towards agriculture, the basic aim being to improve production and the overall welfare of poor farmers in the overwhelmingly agrarian economy. Thus, 29% of the Fourth Plan’s budget went to agriculture. While the Third and Fourth Plans saw changes in sectoral priorities, they still incorporated the methods and formats that had characterized their predecessors. However, the Planning Commission’s increasing capabilities saw the organization take its first steps in gathering and processing relevant data that could inform future plans. This was of high importance as the investments in national planning had continued to rise rapidly—USD 47.5 million for the Third Plan and USD 101.6 million for the Fourth Plan —and the king and his top officials were demanding positive developmental results and value for money.

5.3. The Era of Decentralization (1981–1996)

This era of three plans was characterized by attempts to move away from an exclusively top-down approach to incorporate bottom-up developmental decision-making from the grassroots. It was a time when the king was keen to experiment with decentralizing authority to subnational institutions [51]. It was also a time of increased aid from multiple donors. These two features of the era meant that national planning became a more complex business.

It was on the instruction of the king that decentralized planning was introduced. The institution to make this happen was the Dzongkhag Yargye Tshogchung (DYT—District Development Committee). Its members included the elected heads (gups) of the subdivisions (gewogs) of the districts and the elected member of the National Assembly for the district [51]. Their purpose was to make proposals for district development and to communicate the needs and priorities of districts through their elected representatives to the institutions of the central government [52,53]. The feedback was that these central bodies did indeed become more aware of local-level issues [54]. However, there were problems with the new arrangements [51]. First, the DYTs tended to assist district officials from the ministries rather than take the lead. Second, there was a high dependency on technical support from central government agencies. Third, central assistance tended to produce uniform plans across diverse districts. Fourth, civil servants in the districts reported to their central ministries and by-passed the local administration. Fifth, many dzongdags (district governor) were sacked and/or imprisoned for misusing district planning budgets. Sixth, DYTs were intended to mobilize local resources and labour as a contribution to the pursuit of self-reliance. However, local expenditure by the government was not reduced and, if anything, districts became more dependent on the centre to realize their development plans.

There was a brief experiment with zonal administration as another form of decentralized planning. The country was divided into four zones, each of which was to prepare a development plan, but the plans did not materialize and the experiment was terminated in the mid-1990s. But the government continued with efforts to improve the performance of DYTs and make them more participatory institutions.

During the era of decentralization, India remained the principal funder of development planning in Bhutan, with the two countries meeting annually to discuss support for projects and programmes of the Bhutanese government. Other topics were to identify Bhutan’s priorities, to review plan progress, and to agree on fund release. India’s commitment to Bhutan’s development and stability owed much to geopolitics. Like the British colonialists before them, the government of independent India saw Bhutan as a friendly buffer state between India and China [55,56]. Giving strong and sustained support to Bhutan’s development maintained and entrenched the relationship as well as Bhutan’s dependence on its giant neighbour. However, other countries and multilateral donors signed up to provide finance and technical assistance for projects listed in the plans. To ensure the aid was coordinated and that projects were making satisfactory progress, round table meetings involving the Bhutan government and donors were held every 2.5 years.

Greater domestic financial contributions to development plans occurred in this era of decentralization. The major reason was the commissioning of the large Chhukha hydroelectric project. The funding for this project came from India, as did the construction expertise and labour. Much of the electricity was scheduled to go to India at an agreed tariff, a model that was replicated for other hydro schemes in later years in Bhutan. The advantage for Bhutan was having a predictable and sizeable income stream that could be invested in national development plans. However, the hydro projects were not included in these plans but financed and managed separately.

The hydro income and additional donor involvement in funding development plans was essential in this era as the cost of plans continued to rise substantially. For example, the Sixth Plan required double the funds allocated to the Fifth Plan. However, such was the increasing scope of the plans that some high-cost projects in the Seventh Plan had to be postponed. The make-up of the plans also continued to change. For example, the Fifth Plan was strongly oriented to increased agricultural production, a result of the push for self-reliance. The Sixth Plan contained much increased investments in industry, mining, and commerce in an effort to diversify the economy and give a further boost to self-reliance.

5.4. The Era of Delegation and Increasing Complexity (1997–2007)

This was an era in which the king stepped back from his major role in planning and delegated authority to other officials and in which the complexity of planning increased. In the previous era, the king had taken a very activist role, becoming involved in multiple aspects of planning from the discussion of projects with central government officials to visiting rural areas to learn first-hand of the residents’ needs. He was the chair of the Planning Commission and the focal point in the planning system. But the Eighth Plan was implemented by a newly structured government headed by the six cabinet ministers to whom the king had handed over executive power in 1998. The Planning Commission was now chaired by the Head of Government, appointed for a period of one year on a rotational basis among the six cabinet ministers.

The delegation of authority was also evident in central–local relations. Despite the problems associated with the DYTs, the government persisted in its promotion of decentralized planning. In this era the major thrust was to promote participatory planning at subnational levels—not only in the dzongkhag but also in the gewog (a group of villages), where the Gewog Yargye Tshogung (GYT) had been established in 1991. In 2002, a partnership planning model was introduced whereby the district offices staffed by public servants would work with beneficiaries who contributed labour and locally available materials to construct facilities identified by the community. The contents of dzhongkhag and gewog plans were determined by the community, albeit within guidelines provided by the central government. It was a case of aligning the traditional top-down mode of planning with bottom-up decision-making [51].

The introduction of this decentralized planning model was a contributor to the growing complexity of national development planning. This was evident in the “matrix structure” in the Ninth Plan that incorporated area planning (dzongkag and gewog) with the sectoral planning of central government organizations. For the first time, there was also a need to fit the plans to a longer-term perspective—20 years. This vision was set out in the 1999 document, Bhutan 2020: A Vision for Peace, Prosperity and Happiness [57]. This meant that the Ninth Plan had to be framed to fit the vision. The planners for both plans in this era had to ensure that programmes and projects fit with a set of objectives including self-reliance, good governance, national security, sustainability, improving the quality of life, and decentralization. Cross-cutting issues also came into the planning calculus, especially poverty which was identified as “the most pervasive cross-cutting issue in development” [58]. This issue was explored in the first study on the subject in 2001, followed by the start of the regular collection of poverty data [59]. It was found that poverty levels remained extremely high in rural areas at 38.7% of the population, with only 4.2% overall making a national figure of 31.7% [60]. A final factor contributing to complexity was the changing economy. At the beginning of the Eighth Plan, the contribution of agriculture to GDP had declined from 55% in 1985 to 38%. Other economic activities such as manufacturing, commerce, tourism, and communications were on the rise. These had now to be taken into account by the planners.

5.5. The Era of Gross National Happiness (GNH) (2007–2023)

This was an era when Bhutan’s unique concept of Gross National Happiness (GNH) became the guide to development planning. GNH utilizes the idea of happiness to reflect “the creation of enabling conditions where people are able to pursue wellbeing in sustainable ways” [61] (p. 7). GNH is a holistic perspective on development as it recognizes people’s multiple needs, whether spiritual, material, physical or social, which incorporates notions of sustainability, equity, balance, and the collective good [62]. Although the concept is attributed to a comment by the fourth king in 1972, it was not evident in planning documents until 1996 when it appeared once in the national budget and then once in the Eighth Plan [63,64]. After that, it began to appear more often, eventually enjoying “exponential growth” after 2002 [63]. GNH was constructed on four pillars or strategic areas: good governance, sustainable socio-economic development, preservation and promotion of culture, and environmental conservation. These were complemented by nine normatively determined domains or dimensions which identified areas for action ranging from health and education to community vitality and psychological wellbeing. While such codification of GNH had not been undertaken and promulgated under the previous development plans, they nonetheless contained many references to elements of GNH such as environmental conservation, good governance, and the preservation and promotion of traditional culture, but they were not explicitly linked to GNH [58,64].

The elaboration of GNH as a philosophy of development and associated practices also coincided with political transition in Bhutan. In a surprise announcement in 2001, the fourth king issued a royal decree for drafting a constitution to establish a democratic constitutional monarchy and replace the 1953 royal decree that awarded the monarchy absolute powers [65]. While there had been varying forms of popular representation at national and local levels, the 2001 decree heralded the commencement of a system in which the government of the day was chosen through democratic national elections every five years [66,67]. It meant that political authority over national development planning would be in the hands of elected politicians in the National Assembly and National Council. To give even greater emphasis to these major changes in the Bhutanese polity, the fourth king abdicated in 2006 and his son took over as the fifth king [66]. The first national democratic elections were held in 2007–2008, a government was installed, and the fourth king’s coronation took place. The constitution was ratified and included the assertion of the country’s commitment to GNH and the state’s responsibility to promote conditions leading to it [63]. This means that the objective of development—GNH—cannot be challenged. Only the means of achieving it are disputed by the political parties when seeking election.

The institutional apparatus of national development planning also underwent transformation with the advent of democratic government. The Planning Commission of Bhutan was reformed and renamed as the Gross National Happiness Commission (GNHC) with the aim of providing improved coordination of government functions and goals to achieve GNH [68]. The GNHC was the highest government organization for the formulation and monitoring of policies and was made officially responsible for creating an “enabling environment for all to be happy and steer national development towards the promotion of happiness for all” [69].

The Tenth and Eleventh Plans were guided and assessed using a result-based management matrix. In the matrix, all development activities were designed to achieve predetermined sets of targets, which were framed in terms of the four pillars and nine domains of GNH. Central and local government development plans were all linked to national outcomes and indicators. In addition, all development plans and projects were placed under the lens of GNH using a newly designed screening tool. This tool was applied to all programmes and projects, whether national or subnational in scope. Only plan activities that the tool identified as supporting the attainment of GNH were approved.

For much of the GNH era, plans were designed to fit with the long-term development goals set out in Vision 2020, authorized in 1999. In addition, the king—still a powerful figure in the democratic polity—made speeches which gave further indications of his preferences for long-term policy, such as in December 2019, when he suggested that it was “time to recalibrate ourselves to succeed in the fast-paced world”. He called for a clear “economic road-map”, and in 2020, a task force was assembled by the government to provide such a map. Several drafts of this roadmap were produced during the time of the Twelfth Plan. While the priorities changed slightly between drafts, one crucial objective remained constant; that is, Bhutan aimed to become a high-income economy by 2030 [70,71]. Further goals that influenced Bhutan’s planners during the GNH era were the Millennium Development Goals (MDGs) and the successor Sustainable Development Goals (SDGs). Bhutan had signed up to these development goals, which had been promulgated by the United Nations with the approval of all its member countries. Many of the MDGs and SDGs aligned with Bhutan’s official domestically produced development goals. The UNDP has acknowledged that the five-year plans “resonate” with the SDGs and that all 17 SDGs are contained in GNH [72].

While there was a well-established system of monitoring and evaluation of plan activities before the advent of the GNH era, a significant additional development in this era was the introduction of the GNH Index. This measure aimed to capture the holistic nature of Bhutan’s development under GNH in a single number. This number represented the people’s happiness using 33 indicators across the nine domains of GNH—psychological wellbeing, health, time use, education, cultural diversity and resilience, good governance, community vitality, ecological diversity and resilience, and living standards [73] [p. 8]. There were multiple purposes for the index. It measured progress over time towards achieving GNH; it provided comparisons of happiness across the country; and it produced indicators to different sectors to guide policy, planning, and resource allocation [73]. The first survey was conducted in 2010 and was followed by further surveys in 2015 and 2022. The results showed incremental progress towards achieving GNH with the measure rising from 0.743 in 2010 to 0.756 in 2015 and 0.781 in 2022 [74].

5.6. The Era of Economic Growth (2024–2034)

After 2 years of extensive consultations and deliberations, the Thirteenth National Development Plan (2024–2029) was finally delivered to the National Assembly of Bhutan by Finance Minister Lekey Dorji on 14 June 2024 [75]. It is ambitious and innovative in content, conceptualization, and institutional structure. The central message is that Bhutan aims to become a high-income economy by 2034, at the end of the Fourteenth Plan. That objective had been earlier flagged in drafts of a 10-year road map for economic development and is indicative of a return to five-year plans being nested within longer-term visions such as the “Bhutan 2020” vision [57]. The new vision sees Bhutan’s GNI per capita rise from USD 3833 in 2023 to USD 12,000 by the end of the Fourteenth Plan in 2034. But there are major problems to overcome including low productivity, a weak private sector, constraints on finance, and limited market access. Creativity, enterprise, innovation, and new technology are to be harnessed to overcome these obstacles and achieve the planned economic growth. In more concrete terms, this includes an improved business ecosystem involving things such as enhanced business service delivery, greater private sector participation, the promotion of growth centres, and improved access to trade and logistics facilities. There will be improvements in infrastructure for greater connectivity both internally and externally. An up-skilling of the labour force is also planned both to address the persistent problem of youth unemployment and to provide personnel for new technological industries. The “sustainable sector” is also expected to contribute to growth through tourism, renewable energy, climate financing, and carbon trading. Hydropower is identified as a major contributor to growth, with the delayed major projects Punatsangchhu I and II scheduled to be in production soon and ten other large projects listed in the plan. Power-hungry industries such as crypto-mining and ferrosilicon will welcome the boost to hydroelectric production.

While the Thirteenth Plan’s prime focus is on economic growth, the plan avers that it is not growth for its own sake. GNH is reasserted as Bhutan’s guiding philosophy for development, concerned with the social, ecological, and spiritual wellbeing of the country. This entails continuing to improve scores on the GNH wellbeing index. In conceptual terms, it is expressed in the Thirteenth Plan’s three pillar (3 Ps) model—people, progress, and prosperity, with the 3 Ps being described as interconnected and indivisible. In more practical terms, it is expressed in aims such as to quadruple the income of the bottom 40% in Bhutanese society by 2029, make measurable improvements in health and education, and provide safe and livable human settlements with equitable access to affordable housing. Overall, the Thirteenth Plan lists eight outcomes and thirty-six outputs at the national level. These are divided between four strategic themes—economic development, social development, enhancing security, and trusted and transformed governance. The deliverables are to be achieved through eight national programmes and local government plans.

The ambitious nature of the Thirteenth Plan means that it is the most expensive plan yet, with a total outlay of USD 6.132 billion, a 63% increase from the Twelfth Plan. Domestic revenue’s contribution is anticipated to be 71.7% higher than that for the Twelfth Plan, during which time COVID played havoc with domestic revenue. Domestic revenue should fund all current expenditure and 24.5% of capital expenditure for the Thirteenth Plan, demonstrating progress in the long-term quest for fiscal self-sufficiency. Nevertheless, external grants are still vital and account for 27% of total plan resources. Just over two-thirds of these grants will come from India, which has increased its financial support for Bhutan’s development [76]. The remaining funds for the plan will need to be raised through concessional lending from multilateral and bilateral foreign aid organizations and domestic debt market borrowing.

Finally, the institutional arrangements for national planning have been drastically changed with the declared aim of providing more efficient and effective plan governance. The GNHC, which formerly presided over the entire planning system and aid management, has been abolished and new arrangements put in place [77]. Top-level strategic planning has been entrusted with the Office of Prime Minister and Cabinet. The planning and budgeting functions of the five-year plans have been moved to the Department of Planning, Budget and Performance in the Ministry of Finance while external aid management is the responsibility of the Department of Macro-Fiscal and Development Finance, also in the Ministry of Finance. To complement these measures across the bureaucracy, the Royal Civil Service Commission (RCSC) appointed four coordinating secretaries for four clusters of government activities that align with the four strategic themes of the Thirteenth Plan—economic development, social development, governance, and security [78]. The four coordinating secretaries comprise the Committee for Coordinating Secretaries (C4CS) and take the lead in organizing the civil service to coordinate and align their activities in the particular clusters. The idea is that such an alignment of activities in a broad area of government should enable the thematic development of policies and their implementation in a cluster. We cannot know whether these institutional changes will lead to the intended increases in policy, planning, and administrative efficiency and effectiveness until the implementation of the Thirteenth Plan is well under way.

6. Discussion

This study has pursued the question of how Bhutan has managed to achieve notable developmental success using five-year planning while many other developing countries produced such disappointing results. There was also the supplemental question that asked about the lessons of the Bhutanese experience for other countries. Thus, in this section, the reasons for the success are set out, indicating those that are replicable and those that are not. The explanatory success factors are listed and briefly characterized in

Table 1. Explaining the success of national development planning in Bhutan.

Field	Actions	Benefits
Capabilities	Planning within changing capabilities of government, finance, economy, and society.	Avoided overambitious plans. Focused on what was feasible.
Reorientation	Reoriented aims and contents of plans in line with the changing socioeconomic and political environment.	Willing and able to change the level of attention given to particular objectives and sectors.
Focus	Consistent focus on citizen welfare.	Led to steady improvements in health, education, and livelihood.
Authenticity	Plan priorities, designs, and implementation have been entirely locally determined except for first two.	Provided a sense of ownership of development activities in plans.
Political stability	Strong legitimacy of both authoritarian and democratic regimes.	Predictable and secure political environment for plan design and management.
Good governance	An honest and competent bureaucracy.	Low levels of corruption ensure that funds go where intended and are spent as intended.
External support	Bhutan has consistently accessed substantial financial and political support from India and enjoyed excellent relations with other donors.	Certainty about sources and amounts of external plan finance.

and then discussed in greater depth in rest of the section. Also included is an analysis of planning disruptions, mistakes, and failures associated with Bhutan and the additional lessons that they provide.

One of the key strengths of national development planning in Bhutan is that it has always been undertaken within the changing capabilities of government, economy, and society. This observation applies to capabilities in human resources, finance, physical capital, and the country’s absorptive capacity for aid and investment. Thus, in the early years, plans were very modest. This was necessary because of the country’s obvious lack of capabilities across all areas of development activity. This contrasts with some other countries’ comprehensive national development plans in the 1960s, which were unrealistic and overambitious given their resource and knowledge constraints [4,12]. As Bhutan’s capabilities developed, so too did the scope and complexity of its national development plans. This was an incremental process that started from a short list of feasible projects in 1961 and developed into sophisticated planning frameworks and monitoring and evaluation tools in the era of Gross National Happiness (2007–2023). Even this institution was not sacrosanct and has been replaced with more complex decentralized networks for policy, planning, and aid management.

Related to planning capabilities, Bhutan has been successful in reorienting the overall aims and characteristics of its planning in line with changes in the socio-economic and political environments. There have been critical junctures when realignments have occurred [43]. For example, the first two plans in Bhutan were entirely dependent on Indian planners and finance, with plans simply being short lists of essential projects. But the Bhutanese government then entered a period involving the nationalization of planning and the first attempts towards the aim of self-sufficiency in plan finance, a project that is still ongoing. The official desire to decentralize marked another era in the country’s planning history in which attempts—not always successful—were made to involve local communities in planning and taking responsibility for their own socio-economic development. The popularization and codification of GNH characterized yet another planning era. The common thread in these changes is that the government appreciated changes in the country’s internal and external environments and took action to either align with those changes or to forge feasible new directions for national development. The Thirteenth Plan marks yet another change in direction in line with domestic and international environments, with Bhutan aiming to become a high-income country by 2034.

Authenticity has been another strength of Bhutanese development planning. Apart from the first two plans, Bhutanese officials have been entirely in charge of identifying the contents and management of plans. This has enabled government to construct a path to development that has been of the country’s own making and not according to the demands and structures of donors, although the wishes of India, Bhutan’s main financier, will have been a constant important consideration. Other donors have cooperated with the Bhutanese government but have not influenced the approach taken. Their investments have fit in with Bhutan’s authentic visions and plans. Bhutan has thus enjoyed ownership of these visions and plans.

Although donors have willingly accommodated to Bhutan’s plans for national development, the country has remained highly dependent on India, which has been supportive of Bhutan’s five-year development plans and does not appear to have interfered in their contents. There are mutual advantages to the arrangement. Bhutan has received guaranteed development finance and expertise from India. This has meant that planning is undertaken with certainty about resource availability. India’s motives for this support have been highly influenced by geopolitical considerations. Bhutan is perceived as a buffer state, a nation that separates two hostile major powers. In the case of Bhutan, the major powers are India and China, and it is India that has actively promoted Bhutan’s buffer status. At independence in 1947, the new government of India immediately followed the foreign policy towards Bhutan as that adopted by the British colonial authorities. That is, Bhutan was perceived as a buffer with China (and Tibet before it) and that it was important to maintain the loyalty of Bhutan to India to preserve that buffer. It has also been important for India to assist Bhutan to become a success story in terms of its development [79]. Hence, India has been a very willing supporter of Bhutanese socioeconomic development and is satisfied that Bhutan still has no formal diplomatic relationship with China. For other countries wishing to learn from Bhutanese planning success, the geopolitics of its situation is not a factor that can be replicated.

An environment of political stability and important aspects of good governance have generally accompanied Bhutan’s embrace of five-year planning. Until democratization in 2007–2008, the country was under a benevolent form of authoritarian rule. Under both political systems, there was widespread acceptance of regime legitimacy except in one instance in the late 1980s into the 1990s, when there was an uprising by some residents of Nepali origin in some southern districts [80,81]. When democracy did come to Bhutan, it was not generated from challenges to the regime but was ordered by the king in what has been described as “democratization by decree” [60] (p. 184). The designers of the new democratic system paid close attention to ensuring political stability [82]. For example, five-year plans coincide with the five-year election cycle, parties must pursue GNH, there is only one winning party in a national election, and that party retains power for the full five years until the next national election. There are also low levels of corruption, a generally well-functioning independent legal system, and a competent public service [83,84]. These are important factors that provide a supportive environment for an efficient and effective planning system.

The nature of participation in Bhutan’s national development planning has varied over the years but has ended up moving towards the collaborative rationality model of “new national planning” [17]. The early plans were not only top-down but also produced by Indian officials. The totally top-down nature of planning continued with Bhutanese takeover of the process. However, in the 1980s and 1990s, some planning was decentralized to sub-national territories for these lower levels to make decisions on resource allocation specifically for their jurisdictions. In the 2000s, there were efforts to seek the inputs of various interest groups representing a variety of fields, from business to environment. This has been most evident in the latest Thirteenth Plan, which has involved much consultation and deliberation over about 2 years. However, there are still significant top-down characteristics.

While many activities have been included in the five-year plans, especially infrastructure, agriculture, education, health, and communication, there is one notable omission—hydroelectric power projects [85]. Such projects, utilizing the fast-flowing rivers descending from the Himalayas, have powered the country’s economic growth and have created the fiscal space for Bhutan’s government to invest in human capital development and welfare through the five-year plans. Furthermore, hydropower has fit well with Bhutan’s development philosophy, being green and clean and contributing significantly to the goals of self-reliance and sustainability. Currently, hydropower accounts for over one third of the country’s exports and domestic revenue and 26% of GDP [86]. The capital, expertise, and labour for hydropower projects have overwhelmingly come from India, an arrangement that has suited Bhutan’s government. India provides loans for large-scale hydropower projects and enters agreements to purchase excess power—most of the production—at agreed rates. Such agreements provide substantial predictable income streams for Bhutan. But the loan agreements and construction contracts are undertaken outside of the framework of the five-year national development plans. There has been some concern about burgeoning debt incurred from these projects, but the most recent IMF-World Bank study of the country’s fiscal situation classifies the risk of debt stress as moderate due to new hydropower projects scheduled to come on stream soon [87]. As a postscript to hydropower’s role in Bhutan’s national development, an emerging industry which appears to be aimed at providing financial flows to government, thus boosting fiscal sustainability and self-reliance, is cryptocurrency mining [88]. It utilizes considerable amounts of electricity, a resource which Bhutan has in abundance. Over the period from July 2021 to June 2023, the Bhutanese government invested USD 539 million, amounting to 21% of GDP in cryptocurrency mining. Like hydropower investment, cryptocurrency mining has been funded outside of the five-year planning framework through a loan from the Royal Monetary Authority to Druk Holding and Investment (DHI), the commercial arm of the government.

Although national planning can be judged as successful in Bhutan, it has not always been smooth sailing. There have been disruptions, mistakes, and failures that have adversely affected the achievement of plan goals. These events have led to projects being abandoned, performance targets not being met, and wasteful expenditure. There have been three major disruptions. The first was the political disturbances of the late 1980s–1990s in the southern parts of the country. This was followed by insurgent groups from Northeast India setting up bases inside Bhutan’s southern border to mount raids into India. This necessitated concerted action by the Bhutanese military in 2003 to send the insurgents back across the border [89]. Finally, there was the COVID-19 pandemic of 2020–2022, which led to travel bans, a significant decline in government income, and the loss of livelihood for many workers, especially in the tourism industry [90]. Mistakes were made in the early design and implementation of decentralization [51]. The new subnational governance arrangements did not function as hoped for and there was widespread corruption among local officials. A notable failure in planning was Education City, a new development outside of the capital, Thimphu, which was supposed to attract prestigious international educational institutions to Bhutan [91,92]. However, the project became mired in dubious land deals, questionable tendering processes, political scandals, and an underqualified private sector partner. It was eventually abandoned before completion.

Another longer-term failure has been the inability to diversify the economy to provide a broader base for economic growth and jobs for educated young persons [93]. This situation appears to have contributed to significant losses of human capital through migration from Bhutan to Australia in the past few years [94]. The State of the Nation Report 2024 estimated that around 64,000 Bhutanese, around 9% of the population, have moved overseas since 2014 [95]. This development is particularly worrying for policy-makers and planners as the migrants are drawn from the most productive age groups and are highly educated. For example, the departure of doctors and nurses has led to severe strains in the provision of health services [96,97]. It has also made it necessary to recruit foreign personnel whose higher salaries than their Bhutanese equivalents have allegedly led to dissatisfaction among the remaining Bhutanese staff. The education sector has experienced problems with teacher attrition rates rising over the past few years [98]. One 2023 report alleges that 100 teachers a week were resigning [99]. Finally, there is concern that Bhutan is not fully prepared for the threats posed by climate change—erratic rainfall, extreme weather, and shrinking glaciers [95]. Agriculture, which still accounts for 40% of the labour force, is highly vulnerable [100]. Dependency on hydropower is threatened by less predictable and irregular river flows. Floods, landslides, glacial lake outbursts, and wildfires are possible destructive events that endanger life and livelihood in Bhutan.

7. Conclusions

Bhutan has been a development success. It has been transformed from being a largely “medieval society” in 1961, when the decision was made to modernize, to a country that now aspires to become a high-income economy by 2030. A major contribution to Bhutan’s success story has been national development planning. From the start of its transformational journey, Bhutan has used national development planning through the medium of five-year plans to frame and determine its path of socioeconomic improvement with sustainability. But simply adopting five-year national plans does not guarantee developmental success. The five-year plan is simply a temporal framework. Many factors determine whether the framework will be a success. For example, there need to be clear goals, preferably within a longer-term vision. Policies and projects should be oriented towards achieving that vision and planning and resource allocation should be undertaken within the limits of available capabilities. Contextual factors such as political stability, trust in government, societal consensus on development objectives, and low levels of corruption are also important. Such factors have been evident in Bhutan and are part of a larger constellation that accounts for the country’s success in planning the future. But things will go wrong as planners and politicians are faced with uncertain and volatile environments and cannot accurately predict what is going to happen. However, risk can be reduced and bounded rationality can be allowed to operate. So far, this has been accomplished in Bhutan through clear developmental objectives, a shared development philosophy, robust planning structures, an understanding of what is feasible, and the flexibility and capacity to change. Whether such success can be replicated for the very ambitious Thirteenth and Fourteenth Plans in today’s turbulent and unpredictable environment remains to be seen.