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BHUTAN BACKGROUND NOTES (MAY 1990)
PUBLISHED BY THE BUREAU OF PUBLIC AFFAIRS
DEPARTMENT OF STATE

May 1990
Official Name: Kingdom of Bhutan
PROFILE
Geography
Area:  46,620 sq. km. (18,000 sq. mi.); about the size of Vermont and New
Hampshire combined.  Cities:  Capital--Thimpu (population 20,000).  Terrain:
Mostly mountainous--up to 7,000 m. (24,000 ft.), heavily forested; some
arable land and savanna.  Climate:  Subtropical in south, temperate in
central region, alpine in north.

People
Nationality:  Noun and adjective--Bhutanese (sing. and pl.).  Population
(1989 est.): 1.5 million.  Annual growth rate:  2.1%.  Ethnic groups:
Ngalops and Sharchops 75%, Nepalese 25%.  Religions:  Mahayana
Buddhism (state religion) 75%, Hinduism 25%.  Languages:  Dzongkha, a
Tibetan dialect (official), Sharchop, Bumthap, Nepali, English (medium of
instruction in schools), and a number of dialects.  Education:  Years
compulsory--none.  Primary enrollment--25%.  Adult literacy--15%.  Health:
Life expectancy--47 yrs.  Work force:  Agriculture--90%.  Industry and
commerce--1%.  Other--9%.

Government
Type:  Monarchy.  Constitution:  None.

Branches:  Executive--king (head of government and chief of state), Council
of Ministers (cabinet), Royal Advisory Council.  Legislative--Tshogdu
(unicameral National Assembly, 150 members).  Judicial--Supreme Court.

Administrative subdivisions:  18 districts.

Political parties:  None.  Suffrage:  One vote per family.

Central government budget (1989-90):  $107 million.

National holiday:  December 17.

Flag:  Divided diagonally with yellow on the left over orange on the right; a
white dragon in the center.

Economy
GDP (1988):  $297 million.  Annual growth rate (1982-88):  8.3%.  Per capita
income:  $217.  Avg. inflation rate (1988):  10%.

Natural resources:  Timber, hydroelectric power.

Agriculture and forestry (44% of GNP in 1988):  Products--rice, corn, wheat,
buckwheat, barley, potatoes, oilseeds, cardamom, and timber.

Industry (6% of GDP in 1988):  Types--handicrafts, cement, calcium carbide
production, food processing, wood milling, distilling.

Trade (1988-89):  Exports--$70.9 million:  cement, talc powder, fruit
products, potatoes, alcoholic beverages, rosin, cardamom, sawn timber,
pressboard, calcium carbide.  Major market--India.  Imports--$138.3 million:
textiles, cereals,
fuel, investment goods, including motor vehicles.  Major source--India.

Official exchange rate (Avg. FY 88-89):  15.1 ngultrums= US$1.  The
ngultrum is set at par with the Indian rupee.

Fiscal year:  July 1-June 30.

Membership in International Organizations
UN and some of its specialized and related agencies, including the
International Monetary Fund (IMF), the World Bank (IBRD), Economic and
Social Commission for Asia and Pacific (ESCAP), Food and Agriculture
Organization (FAO), UN Educational, Scientific, and Cultural Organization
(UNESCO), World Health Organization (WHO), and the Universal Postal
Union (UPU); Colombo Plan; Nonaligned Movement; Group of 77; Asian
Development Bank (ADB), South Asian Association for Regional
Cooperation (SAARC).

PEOPLE
The people of Bhutan can be divided into three broad ethnic
categories--Sharchops, Ngalops, and those of Nepali origin.  The
Sharchops, believed to be the earliest major group of inhabitants, live in
eastern Bhutan and appear to be closely related to the inhabitants of
northeast India and northern Burma.  The Ngalops are said to be of Tibetan
origin, arriving in Bhutan in the 8th century A.D. and bringing with them the
culture and Buddhist religion that prevail in the northern two-thirds of
Bhutan.  The Nepalis, most of whom are Hindus, arrived in the late 19th and
early 20th centuries. They farm Bhutan's southern foothill region.

The official language of Bhutan, Dzongkha, is related to classical Tibetan
and is written partly in the classical Tibetan script, Choekay.  Nepali
predominates in southern Bhutan.  As many as 11 other vernacular
languages are spoken.  English, the official working language and the
medium of instruction in schools and colleges, is widely used.  Population
density is a relatively low 32 per sq. km. (83 per sq. mi.), contrasted with
India's 255 per sq. km. (660 per sq. mi.).  Communities are clustered in
fertile valleys around dzongs, fortified monasteries that have served for
centuries as administrative as well as religious centers.

HISTORY
Bhutan's early history is obscure.  The country may have been inhabited as
early as 2,000 B.C., but not much is known about it until Tantric Buddhism
was introduced in the 8th century A.D.  The country's political history is
intimately tied to its religious history and relations among the various
monastic schools and monasteries.

The consolidation of Bhutan began 300 years ago.  Ngawang Namgyal, a
lama from Tibet, defeated three Tibetan invasions, subjugated rival religious
schools, codified an
intricate and comprehensive system of laws, and established himself as
ruler (shabdung) over a system of ecclesiastical and civil administrators.
After his death civil strife broke out, which, over the next 200 years, eroded
shabdungs' power to the advantage of regional governors and local
leaders.  In 1885, the central authority recruited Chinese aid to crush the
most powerful governors.  This move was countered by a local Tongsa
leader, Ugyen Wangchuck, who arranged for a British presence in the area.
In 1907, after the shabdung's death, Ugyen became Bhutan's first
hereditary king.

In 1910, King Ugyen and the British signed the Treaty of Punakha, which
provided that British India would not interfere in the internal affairs of Bhutan
if the country accepted British advice in its external relations.  Similar
provisions were included in the 1949 Indo-Bhutan Treaty signed with
independent India.

GOVERNMENT AND POLITICAL CONDITIONS
Traditionally a decentralized theocracy, and since 1907 a monarchy, Bhutan
is moving gradually toward representative government.  The Tshogdu
(National Assembly) is composed of not more than 150 members:  105
village elders or family heads, 12 representatives of regional monastic
bodies, and 33 senior government administrators appointed by the king.
Members are elected for 3-year terms.  Any Bhutanese over 25 years of age
can stand for election to the assembly.

The late King Jigme Dorji Wangchuck, who reigned from 1952 to 1972,
guided his country toward constitutional monarchy and helped modernize
public administration.  He established the assembly in 1953, the Royal
Advisory Council (Lodoi Tsokde) in 1965, and the Council of Ministers in
1968.  The Lodoi Tsokde is responsible for advising the king and
government ministers on important questions and for supervising the
implementation of programs and policies legislated by the Tshogdu.  It
consists of a chairman appointed by the king, five representatives of the
people, two of the monastic hierarchy, two southern Bhutanese
representatives, and a women's representative.  The Council of Ministers,
composed of the ministers (lyonpos) of the government departments, is
charged with implementing policy.

The present monarch, Jigme Singye Wangchuck, took the throne in 1972
and pledged to continue his father's progressive policies.  Under Jigme
Dorji the king was subject to a vote of confidence every 3 years, but this
practice was dropped by Jigme Singye.  Heads of government
departments, however, are required to subject themselves and their policies
to the scrutiny of the Tshogdu at least once a year.

The spiritual head of Bhutan, the Je Khempo--the only person besides the
king who wears the saffron scarf, an honor denoting his authority over all
religious institutions--is nominated by monastic leaders and appointed by
the king.  The monastic order is involved in government at many levels.

No political parties function within the Bhutanese governmental structure.
Bhutan is divided into 18 districts, each headed by a district officer
(dzongdad) appointed by the king.  Each district is divided into subdistricts
headed by an officer called a ramjam, who is assisted by a number of
village leaders.  Each leader (gup) controls several villages and is elected
for 3 years by the villagers, who cast one vote per family.  The gup
convenes village meetings to discuss local issues.

Principal Government Officials
King--His Majesty Jigme Singye Wangchuck
Minister of Communication and Social Services--His Excellency (HE) Lyonpo
Tashi Tobgyel
Minister of Finance--Her Royal Highness (HRH) Princess Sonam Chhoden
Wangchuck
Minister of Foreign Affairs--HE Lyonpo Dawa Tsering
Minister of Home--HRH Prince Namagel Wangchuck
Minister of Trade, Industry, and Tourism--HE Dasho Om Pradan
Chairman of Royal Advisory Council--HE Kungang Tangbi
Chief of Royal Bhutan Army and Police--Goongleon (Maj. Gen.) Lam Dorji

ECONOMY
Bhutan's economy is largely rural-based.  More than 90% of the work force
is employed in subsistence farming and animal husbandry.  Although the
United Nations identifies Bhutan as "least developed," economic welfare
levels and nutrition are probably above the average for Asia.  There is no
shortage of land, and farmland generally is equitably distributed.

Once self-sufficient in food, Bhutan now imports about 7% of its foodgrains
from India.  Terrace agriculture is extensive; rice paddies can be found at
elevations above 8,000 feet.  Fruits grown in the inner valleys and on the
plains are processed for local consumption and export.

The country has an abundance of untapped natural resources.  These
consist mainly of the vast forests, rivers with excellent hydroelectric
potential, and various minerals in commercially exploitable quantities.

Bhutanese forest resources could sustain a net annual yield of about
400,000 cubic meters.
In 1988, about 28,000 cubic meters were harvested.  Preliminary estimates
indicate that Bhutan possesses a potential for generating 20,000 megawatts
of hydroelectric power.  The Jaldhaka River power project, a joint
Bhutanese-Indian venture begun in September 1961, provides 18
megawatts to West Bengal and southwestern Bhutan.  At Chukha, a
modern hydroelectric facility, completed in 1988 with Indian assistance, now
produces 336 megawatts.

Bhutan's mineral resources include dolomite, limestone, coal, graphite,
gypsum, slate, marble, lead, zinc, and copper.  Of these, only dolomite,
limestone, slate, and coal have been mined.

Bhutan's industrial sector consists mainly of home-based handicrafts and
some 60 privately owned small- or medium-scale factories producing mostly
consumer goods.  Cement, plastic pipe, and calcium carbide factories have
been built recently.  The cement factory, near Samchi, makes Bhutan
self-sufficient in cement and produces a surplus for export.  Another factory
produces plywood, particle board, and furniture components.  A ferrosilicon
production plant and a marble mine are planned.

In 1987, the government opened a number of public enterprises to private
equity participation or partial divestiture.  The government limits foreign
participation to selected agro-industry projects or projects that generate
foreign exchange and technology transfers.

The use of Bhutanese and Indian currency is replacing barter as the
principal means of exchange.  In 1968, the Bank of Bhutan became the
principal repository of the national currency.  The bank's main office is in
Phuntsholing on the Indian border, and there are 23 branches throughout
the country.

Traditionally, Bhutan traded with Tibet.  Since the abortive 1959 Tibetan
uprising against China, Bhutan has channeled most of its trade toward
India.  The Royal Monetary Authority provides the services needed to
conduct foreign exchange operations.  The country's largest source of
convertible foreign exchange (1988-89: $1.8 million) is tourism.  In 1988-89,
Bhutan had a total trade deficit of about $67 million, of which $26 million
was with India.  In the same year, India provided foreign aid grants to
Bhutan of almost $23 million.  Other countries provided about $4 million.

In 1961, India agreed to finance Bhutan's first development plan.  The
outlay for Bhutan's fifth plan (1981-87) was $364 million (at the 1987
exchange rate).  Of this amount, India provided $156 million in grants, and
other foreign sources provided $76 million.

Bhutan's sixth plan (1981-87) envisaged a total outlay of $635 million (at the
1988 exchange rate).  Of this amount, Bhutan expects to obtain 31% from
internal sources, 37% from Indian grants, and the rest from other external
sources.  Emphasis in the sixth plan is on strengthening government
administration, preserving national identity, mobilizing internal resources,
improving rural incomes and living standards, developing human resources,
and promoting national self-reliance.  Given the economy's increasing
manpower requirements, primary education and technical training receive
high priority.

In addition to foreign assistance from India, Bhutan receives support from
the following sources: Colombo Plan, UN Development Program (UNDP),
International Monetary Fund, World Bank, and the Asian Development Bank.
India, Japan, New Zealand, Australia, and Switzerland provide scholarships
for Bhutanese to study in those countries.

DEFENSE
The Royal Bhutan Army was formed into a regular military force in the early
1950s, following the Chinese invasion of Tibet.  The army consists of about
8,000 lightly armed troops.  Conscript forces serve up to 15 years at the
government's discretion.  The officer corps is trained almost exclusively by
the Indian army, and virtually all arms and equipment are manufactured in
India.  The Royal Bhutan Army assists the Royal Bhutan Police in internal
security in addition to defending the country's frontiers.

FOREIGN RELATIONS
Under the 1949 treaty between Bhutan and India, Bhutan agreed to "be
guided by the advice" of India in foreign affairs.  Bhutan does not interpret
the treaty as binding.  In 1971, Bhutan opened an office in New Delhi to
handle diplomatic matters with other countries.  In the same year, with
Indian sponsorship, it became a UN member.  In 1978, the Bhutanese
mission in New Delhi was raised to embassy status.  Bhutan is now a
member of most Asian regional and international organizations, including
the South Asian Association for Regional Cooperation, Asian Development
Bank, Colombo Plan, Nonaligned Movement, World Bank, International
Monetary Fund, and the Universal Postal Union.

Bhutan has full diplomatic relations with India, Pakistan, Bangladesh, Nepal,
Maldives, Kuwait, Switzerland, Norway, Netherlands, Denmark, European
Economic Community, Sweden, Japan, Sri Lanka, and Thailand.  Only
India, Bangladesh, and the UN Development Program have missions in
Bhutan.  Bhutan maintains embassies in India, Bangladesh, Kuwait, New
York (UN), and Geneva.  It also maintains honorary consuls general in
Hong Kong, Macao, Singapore, and South Korea.

No formal diplomatic relations exist between the United States and Bhutan,
although informal and friendly contact is maintained through the Bhutanese
embassy at New Delhi, through occasional visits to Bhutan by US officials
stationed in India, and by Bhutanese visitors to the United States such as
the foreign minister.  In 1986, the Bhutanese UN mission in New York (tel.
212-826-1919) was accorded consular jurisdiction in the United States.  The
US Embassy in New Delhi provides consular contact with Bhutan.