Nestled between the high Tibetan plateau and the northeast plains of India, the Himalayan kingdom of Bhutan is thought by many to be somewhere between Shangri-La and Brigadoon.
The magic of this realm is embodied in its administrative-monastic fortresses (dzongs), ancient temples and chortens, and ubiquitous prayer flags fluttering in the mountain winds. But this home to more than 700,000 people is not all an earthly paradise.
My recent journey to this land revealed both a rich culture and important lessons for developing countries as they face modernity and human rights problems.
Although it was unified in the 17th century out of a number of warring fiefdoms, Bhutan's modernization dates only from the 1950s when currency was first used, roads constructed and five-year development plans set. Gross domestic product data dates from only 1977, and banks first opened in 1968.
In the 1970s, Bhutan's fourth king promoted the idea of Gross National Happiness as a complement to GDP. As a concept, economists have been studying happiness or what is described as "well-being" and a number of countries now produce "wellbeing" statistics. Encouraged by Bhutan, the United Nations has declared March 20 as the International Day of Happiness.
In Bhutan, GNH is used as a guide to public policy and offers useful lessons to poor countries struggling with political, economic and environmental problems. "Happiness" - read balanced growth - is a catchy slogan, but is meant to address cultural, educational, health and environmental concerns as well as purely economic growth. With a fairly vibrant democracy and with people and social institutions involved in development at both the local and national level, Bhutan has avoided some of the growing pains experienced by other countries.
Environmental protection is a key factor in Bhutan's growth strategy, but modernization is increasing pressure on nature, including large hydroelectric projects, agriculture, mining, industrialization and roads.
Hydro projects, particularly, have contributed to strong economic growth in recent years. Most of this power will be sold to India - India faced power blackouts just a few weeks ago.
S till, an estimated seven per cent real GDP growth in 2012 and a low unemployment rate of just above three per cent belie less favourable data. Inflation is a high 8.5 per cent and youth and urban unemployment is well above the national average, due to slow-growing manufacturing and a construction sector that relies on contracted labour from India.
Twenty-three per cent of the population still lives below the poverty line, highlighting the need for growth and improved social programs.
Electrification, water supply, education (all classes are taught in English) and health care are improving, but foreign investment has been hampered by excessive government controls over industrial licensing and finance.
Bhutan is essentially a satellite economy of India with virtually all trade conducted with its southern neighbour.
As well, India funds 60 per cent of the country's government expenditure. Public debt has increased and is an estimated 99 per cent of GDP.
Bhutan worries that modernization, including television and the Internet, is changing the predominantly Buddhist culture of the land. Yet Buddhist respect for life has not extended to all the people. A rising population of Nepalese-speaking people in southern Bhutan in the 1980s and 1990s has resulted in government discrimination of many, including the disenfranchisement of some Nepalese born in Bhutan.
Citizens and "illegal aliens" have been exiled or have emigrated voluntarily and now reside in refugee camps in eastern Nepal. Some have also been accepted as refugees in other countries.
To date, debate over the refugee issue remains unresolved. Repatriation to Bhutan has been promised, but little progress has been made. "Happiness" does not exist for all.
In all, Bhutan seems like an unfolding experiment in nationbuilding. Relations with India, its chief ally, are good, and the country is important as a buffer state between India and China to the north. Dependant on others, including India, but also Norway (grants and investment), Austria, Japan and the U.S. (tourism), the country remains confident and self-determined in its pursuit of balanced progress. It will likely succeed, though slowly.
Government is mostly "enlightened" as befits a Buddhist culture under a constitutional monarchy.
Lessons are to be learned from the country's measured approach to growth. But ethnic and human rights issues must be solved and government needs to be less controlling.
For some who visit this fabled land and its beautiful architecture, landscape and culture, the experience may fill a spiritual void and give a taste of the exotic and mysterious. But, isolated as it is, Bhutan is not Shangri-La or a paradise on earth. Journey to Bhutan and you will experience a new culture and learn the value of balance and moderation as a nation seeks "well-being" with economic progress on the road to a better future.
Ross Peters, a former Royal Bank senior economist, is retired and lives in Oak Bay.
