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Foreign Relations
King Jigme Singye Wangchuck outlined the basic framework of Bhutanese foreign policy in May, 1983 as, ‘Our aim continues to be threefold; firstly, we are committed politically to a strong and loyal sense of nationhood to ensuring the peace and security of our citizens and the sovereign territorial integrity of our land. Secondly, to achieve economic self-reliance and thirdly to preserve the ancient religious and cultural heritage that has for so many centuries strengthened and enriched our lives’.
Relation with China
Contrary to India, Bhutan does not have any diplomatic ties with the People’s Republic of China, despite sharing a contiguous northern boundary of 470km. Bhutan never had an 'equi-proximity' or 'equi-distance' foreign policy towards its northern neighbor. However, in recent years, exchange of visits at high levels has significantly increased. This new interactions can be largely ascribed to the on-going border talks started since 1984. Bhutan’s border with China remains un-demarcated and unresolved.
Until seventies, Bhutan’s border issues with China were incorporated with in the scope of Sino-Indian border discussions. Later China and Bhutan started direct bilateral border talk in early eighties.
Bhutan had traditional trade relation with Tibet. However, Bhutan closed its northern borders after the Chinese attacked Tibet and influx of Tibetan refugees in 1960. Since then, there has been no official trade or business relation between Bhutan and China.
Bhutan voted in favor of restoring China's seat in the United Nations in 1971. Bhutan invited Chinese Ambassador to India, to attend the coronation ceremony of King Jigme in 1974. Chinese Foreign Minister Wu Xueqian and Bhutanese Foreign Minister Dawa Tsering held consultations on developing bilateral relations in New York in 1983.
Bhutan also supported China in the United Nations Human Rights Conference. Bhutan opposed Taiwan's bid to host the 2002 Asian Games. Bhutan was Vice-Chairman of the 55th UN General Assembly Meeting. It voted against the draft on Taiwan's participation in the UN.
Bhutan and China have signed an Agreement to Maintain Peace and Tranquillity in 1998 during the 12th round of bilateral border talk. This was the first Sino-Bhutanese agreement.
In September,1959 Chinese Premier Mr. Chou-En-Lai wrote to Indian Prime Minister Mr. Jawaharlal Nehru expressing desire for a direct bilateral border talk with Bhutan. He wished to take the boundary question between Bhutan and China out of the scope of Sino-Indian border talks. Bhutan for the first time went alone for border talks with China in 1980. This was a major foreign policy initiative for Bhutan. China also showed interest in establishing residential diplomatic mission in Bhutan. China conveyed its desire first in 1974 during the coronation of King Jigme, but has not been successful.
China had offered a package to Bhutan which included the resolution of border dispute with the establishment of diplomatic missions and trade relationship with Bhutan. On 27 June, 1997 during the question-answers session in the National Assembly (Parliament) of Bhutan Lyonpo Om Pradhan, Minister for Trade and Industry, who headed the first Sino-Bhutan border talk, informed that the Chinese government had made proposals that the border negotiations be based on the establishment of bilateral trade and diplomatic relations.
The Tenth round of Bhutan-China border talk was held in Beijing, in November, 1996. China proposed to exchange 495 sq km area of Pasamlung and Jakarlung valleys in the northern borders of central Bhutan (which China claims) for Sinchulumpa, Dramana and Shakhtoe with an area of 269 sq km in the north-west Bhutan. Bhutan in principle accepted the proposals as also reported by the BBC on July13, 1997.
The Eleventh border talk was held in Thimphu in August 1997 but no final decision on the exchange of territories as discussed in Tenth Talk were taken.
The Fifteenth round of boundary negotiations held in Thimphu, Bhutan on the last week of November 2001, with Chinese delegation led by Vice Foreign Minister, Wang Yi and Bhutanese delegation by its foreign minister, Lyonpo Jigmi Thinley, focused on the international boundary between the two countries.
On 04 July 2002, the Bhutanese foreign minister informed the National Assembly of Bhutan that the Chinese claimed to have documentary evidence on the ownership of the disputed tracts of land. When Bhutan asked them to be generous with a small neighbour like Bhutan they said that, as a nation which shared its border with 25 other countries they could not afford to be generous with one particular neighbour. The Chinese government had also identified three aims for the successful resolution of this problem: to understand each other’s interests and come to a decision that would best benefit both countries; to trust each other; to seek solutions that had long-term benefits. So far the biggest success of the Sino-Bhutan discussions had been the signing of an “interim agreement”, the first between the two countries, to build trust and confidence. The agreement, between two independent and sovereign nations which shared mutual respect and understanding, was signed to help solve the border issue in an atmosphere of friendship and understanding. The foreign minister said that, after the agreement was signed, the Chinese government had responded immediately to the problem of the mule track and timber extraction in Pasamlum. The agreement also helped settle the complaints that Tibetans crossing into Bhutan searching for the medicinal herb, Yartsa Guenbub, were given severe and unwarranted punishment at Pasamlum by the Bhutanese border security. The two countries had agreed on most issues until the 14th and 15th meetings. The foreign minister said that the Chinese government, including their prime minister, were unhappy and questioned why Bhutan was raising new issues after many years of boundary talks. “It was agreed, therefore, that we bring in the technical experts to decide which part of the territory was ours and which part was theirs and to depict the claims on a map,” said the foreign minister. “We also agreed to use the common names of the disputed areas to avoid confusion.”
The Sixteenth round of China-Bhutan boundary talks held in Beijing on 12 October, 2002 strengthened ties for resolving their boundary issues through mutual understanding and reconciliation. China appreciated the Bhutanese government's support on the issues like Taiwan and human rights, and hoped to develop cooperative relations based on the principle of equality, mutual benefit and non-interference in each other's internal affairs.
Bilateral Visits
The Speaker of National Assembly of Bhutan, Dasho Ugen Dorjee led an official delegation to Tibet Autonomous Region on 22-25 April, 2002. He held discussion with Chairman Raidi of the Standing Committee of the People's Congress of the Tibet Autonomous Region.
On June 10-13, 2002, Bhutanese home secretary led the expert team to China for the first meeting of the expert group.
Bhutan’s Foreign Secretary Dasho Ugyen Tshering, led an official delegation to China from July18 to 25 2001. The delegation comprised officials from the ministry of trade and industry, ministry of communications, ministry of agriculture and the ministry of foreign affairs. The delegation held discussion with Chinese Foreign Minister Mr. Tang Jiaxuan, and the Vice Minister of foreign affairs Mr. Wang Yi. The delegation discussed Bhutan-China border and other issues of mutual interest. The Chinese government assured Bhutan that it treats all nations equally irrespective of the differences in their size, strength or wealth.
China’s Ambassador to India, Mr Hua Junduo visited Bhutan on April 13 to 16, 2003, met with the prime minister, Lyonpo Kinzang Dorji, and the foreign minister, Lyonpo Jigmi Y Thinley.
Bhutan-China Agreement On Maintenance Of Peace And Tranquility Along The Sino-Bhutanese Border Areas, 1998
Agreement between the Government of the people's Republic of China and the Government of the Kingdom of Bhutan on the Maintenance of Peace and Tranquillity Along the Sino-Bhutanese Border Areas
The Government of the People's Republic of China and the Government of the Kingdom of Bhutan, in accordance with the five principles of mutual respect for each other's sovereignty and territorial integrity, mutual non-aggression, mutual non-interference in each other's internal affairs and peaceful co-existence and for the purpose of maintaining peace and tranquility along the Sino-Bhutanese border, have reached the following agreements:
Article 1
Both sides hold the view that all countries big or small, strong or weak are equal and should respect one another. The Chinese side reaffirmed that it completely respects the independence, sovereignty and territorial integrity of Bhutan. Both sides stand ready to develop their good-neighborly and friendly cooperative relations on the basis of the Five Principles of Peaceful Co-Existence.
Article 2
Both sides are of the view that during the ten rounds of talks that have been held so far, they have reached consensus on the guiding principles on the settlement of the boundary issues and narrowed their differences on the boundary issues in the spirit of mutual accommodation, mutual trust and cooperation and through friendly consultations. The mutual understanding and traditional friendship between the two countries have been deepened. Both sides stand ready to adhere to the above-mentioned spirit and make joint efforts for an early and fair solution of the boundary issues between the two countries.
Article 3
Both sides agreed that prior to the ultimate solution of the boundary issues, peace and tranquillity along the border should be maintained and the status quo of the boundary prior to March 1959 should be upheld, and not to resort to unilateral action to alter the status quo of the border.
Article 4
Both sides reviewed the progress made after ten rounds of border talks. As both sides have already expounded each other's stand on the disputed areas, both sides agreed to settle this issue through friendly consultations.
Article 5
This agreement will come into force on the date of signing.
This agreement was signed on December 8, 1998 in Beijing, done in two copies in the Chinese, Bhutanese and English languages, all three languages are authentic. If differences arise, the English text will be the standard text.
Tang Jiaxuan
(Signed)
Representative of the of the People's Republic of China
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Jigme Y Thinley
(Signed)
Representative of the of the Royal Government of the Kingdom of Bhutan |
Relation with India
Bhutan signed a political Treaty with independent India in 1949, much before it stepped out of its self-imposed isolation in early sixties. According to Article 2 of the Indo-Bhutan Treaty, 1949, at least theoretically, Bhutan is required to consult India in the conduct of its external relations. Although, the basic framework of the bilateral relations may be the Treaty of Friendship and Cooperation of 1949. However, the Treaty which was signed in 1949 has never become an irritant factor in the traditional warm relationship between the two countries. There are frequent state visits between two countries. The Indian ministers and top army brass also keep visiting Bhutan, frequently. India is responsible for Bhutanese security. Indian Military Training Team (IMTRAT) is based in Bhutan to provide training to Bhutanese security forces.
Since a decade, the militants of North-east India have taken un-authorized shelter in the territories of Bhutan. The militants of United Liberation Front of Assom (ULFA), the National Democratic Front of Bodoland (NDFB) and Kamtapuri Liberation Organisation are operating against Indian security forces from their bases in southern, eastern and central Bhutan.
The United Liberation Front of Assom (ULFA) and other militant organizations have been demanding independence from India. The Indian army, the Government of India and the state government of Assam have been persuading the government of Bhutan to initiate a joint Indo-Bhutan army operation to drive out these militants from Bhutan. The United Liberation Front of Assom (ULFA) and the National Democratic Front of Bodoland (NDFB) have been outlawed by the government of India.
The 78th session of Bhutan’s National Assembly held in June, 2000 decided four-pronged strategies to resolve the ULFA-Bodo problem: (1) to continue peaceful negotiations with the militants to try and make them leave the country peacefully; (2) to stop ration and other supplies to the camps of the militants; (3)to punish all persons who helped the militants in accordance with the National Security Act; and, (4) as a last resort, use military action to evict them from Bhutanese soil.
The government of Bhutan under Indian pressure finally launched the "Operation All Clear" to flush out the Indian militants on December 15, 2003. Bhutanese army was aided by the Indian army. The operation ended on January 15, 2004.
Bhutan’s economy is wholly dependent on India. It was the benevolent Nehru, who put Bhutan on the path of economic development. As a least developed country Bhutan depends on foreign aids for financing its developmental programmes and establishment costs. India has been the largest donor of external aid to Bhutan and its main development partner. It was at the Indian initiatives that Bhutan launched its First Five Year Economic Development Plan in 1961. Bhutan’s first and second Five Year Economic Development Plan (1962-67) were totally funded by India. India has committed Nu/Rs.9000 million (US $ 215 million) for the current Eighth Plan (1997-2002). India has contributed generously from the First to the current Eighth Five Year Plan (1997-2002).
The total outlay of each of eight five year plans (FYP) of Bhutan and India’s contribution in the respective plan is as follows:
(In million of Nu/IRS )
| Year/FYP |
Total Plan Outlay |
India's Contribution |
% of India's Contribution |
| 1961-1966/First |
107.2 |
107.2 |
100 |
| 1966-1971/Second |
202.2 |
202.2 |
100 |
| 1971-1976/Third |
475.2 |
426.6 |
90 |
| 1976-1981/Fourth |
1106.2 |
853 |
77 |
| 1981-1987/Fifth |
4440.5 |
1340 |
30.2 |
| 1987-1992/Sixth |
9500 |
4000 |
42.1 |
| 1992-1997/Seventh |
23500 |
7500 |
31.9 |
1997-2002/Eighth
|
32610 |
9000 |
27.6 |
During the current Eighth Five Year Plan (1997-2002), India has provided assistance primarily in the development of infrastructure. Indian assistance during this plan period is to the tune of Nu/IRS 9,000 million - Nu/IRS 4,000 million as development subsidy and Nu/IRS 5,000 million as project-tied funds. The assistance provided during the Eighth Plan is exclusive of the three mega projects, - Tala Hydroelectricity Project (THPC), Kurichu Hydro Electric Project (KHEP), and the Dungsam Cement Plant, which are funded separately. Some of the projects envisaged during the current plan period are as follows:
(In million of Nu/IRS )
| Project |
Cost Estimate |
| Strengthening and Upgradation of Sub-transmission & Distribution System in Thimpu and Paro (Phase II) |
395.2 |
| Eastern Grid Power Transmission |
800 |
| Urban Electrification |
393.8 |
| Improvement and Upgradation of Electrical Services |
810 |
| Power Training Institute |
132.3 |
| Improvement of National Highways (Thimpu-Paro widening) |
179 |
| Realignment of Roads Tamchhu-Chukha Sector |
134 |
| Gaylephug-Sarpang-Tsirang Road |
210 |
| Construction of Bakuli-Daifam Road |
264 |
| Construction of Bridges |
83.6 |
| Punakha Dzong Renovation |
228.5 |
| Construction of High Court Building |
108 |
Projects
a. Penden Cement project
In February 1982, Bhutan’s first cement plant, Penden Cement Project started it commercial production. Its installed capacity was the 300 tons per day. It was constructed at a cost of NU/IRS 142 million, funded by the Government of India. The surplus is exported to neighbouring Indian states.
b. Chhukha hydroelectricity project (CHEP)
The current online Chhukha Hydroelectricity Project (CHEP) was entirely funded by the Government of India. India constructed the 336 mega watt Chhukha Hydroelectricity Project (CHEP) - Bhutan’s first mega power project on a turnkey basis. The project costing NU/IRS 2,470 million (then approximately US $ 200 million) was successfully commissioned in October 1998. India provided a 60 percent grants and 40 percent loan at 5 percent per annum repayable in 15 years in equated annual instalments, the first repayment commencing 3 years after each withdrawal of the loan.
The Government of India at the insistence of Bhutan increased tariff of the Chukha power on 01 April 1997. The power tariff was revised from 50 paisa to Re 1.00. India further revised the tariff to Rs 1.50 per unit on July 01, 1999.
The project was handed over to Bhutanese management in June 1991. 70% of power generated by this project is exported to India. It has an installed capacity of 336 MW. In 1998, electricity valued at Rs1338.8 million was exported to India. In 2000, it exported electricity worth Rs 1650 million to India. In 2000, according to the government newspaper Kuensel, the Chukha Hydro Power Corporation alone contributed Nu. 2007.3 million (US $ 40.75 million –Eds) to the national exchequer. Today, the power sector contributes about 45 percent to the gross revenue generation in the country and accounts for about 11 percent of the GDP.” Ngultrum is at par with Indian rupees. The Chhukha Hydro Power Corporation (CHPC) manages the project.
According to the government sources, by the year 2006, Bhutan would be exporting about 6,400 MUs of power annually. The revenue from hydropower projects along with earnings from the other traditional revenue sources could reach about Nu. 15 billion annually.
c. Paro Airport
The Government of India provided financial and technical assistance in the construction (runway and the hangar) of Bhutan’s first and only Paro airport in 1990. The Government of India also funded the Phase II construction ( terminal building, control tower and cargo warehouse ) of Paro Airport on turnkey basis at a cost Nu/IRS 217.5 million. It was completed in April 1999.
d. Tala Hydro-electric Project
In the early eighties, the two new potential hydroelectricity projects -- 1020 MW Tala Hydroelectric Project (THEP) and 500 MW Chhukha II -- were identified as two downstream hydroelectricity projects of Chhukha. The 1020 MW THEP was taken up for implantation in 1996. It is located in Tala, 60 km up from Phuentsholing, the gateway to Bhutan. The THPC has an installed capacity of 1,020 MW. It is a run-of-the-river project on the Wangchu River, downstream of Chukha Hydroelectric project. Please visit Hydro project- Power projects of Bhutan page for full information on Bhutan's hydro power project and Indian assistance.
It will comprise a 92-meters dam, a 22.25 kilometre long head race tunnel, an underground power house complex at Tala village to house 6 units of 170 MW generators. And three 440 KV single-circuit transmission lines to reach the Ind0- Bhutan border.
The original cost for the THEP was estimated at Bhutanese (Ngultrum) Nu 14.80 billion (Us $ 0.3 billion). The cost of project has been revised at Nu/Rs 30,000 million (approximately $ 600 million) The THPC is the biggest Indo-Bhutan joint project.
This project is entirely funded by the Government of India (GOI) by way of grants and loan. India will provide a 60 percent grants and 40 percent loan at 9 percent interest. It will produce 3,962 million units (MUs) of power in a "90 percent dependable year". The construction of initial work on the dam, power tunnel, and power house complex and transmission system was started in 1998. It is targeted for commissioning in the year 2004-2005. Bharat Heavy Electrical Limited of India is the supplier of the complete generating plant at a cost of Nu. 4,210 million. Tala Hydro-electric Project Authority (THPA) manages the project. M/s Hindustan Construction Company, M/s Larsen and Toubro and M/S Jaiprakash Industries are other Indian contractors.
e. Kurichhu hydro-electric Project
The second hydroelectricity project was planned and implemented in quick succession. The Kurichhu hydro-power project is having an installed capacity of 60 MW. The project planned to install 45 MW with three 15 MW generators in the first phase and later install the fourth generator. The project is located in Gyepshing, Mongar in eastern Bhutan. The project will generate 322 MUs in a "90 percent dependable year".
The cost of Kurichhu project in the initial agreement was estimated at Nu. 2,560 million and was revised in 1994 to Nu. 2,860 million. It was again revised at Nu.5600 million ($ 110 million)
The project is also being fully funded by the GOI. The GOI will provide 60 percent as a grant and 40 percent as a loan at 10.75 percent interest. The pay-back period will be mutually agreed upon. The National Hydro-power Corporation of India is the turn-key contractor of the project. The Kurichhu project is expected o be fully commissioned by June 2002. The two generating units of the Kurichu hydroelectric project have been connected to the Indian grid at Salakati, Assam state of India. The National Hydroelectric Power Corporation (India) Limited (NHPC) completed the 198 kilometres of 132kv transmission line from Gyelposhing to Gelegphug via Pema Gatshel, Nganglam, Panbang and Tingtibi. The Kurichhu power will be available to the districts of Mongar, Trashigang, Trashiyangtshel, Pema Gatshel, Samdrup Jongkhar, Gaylegphug and Zhemgnag. The Water and Power Consultancy Services (India) Limited of India is the consultants to the project.
f. Dungsum Cement Plant (DCP)
The Government of India has agreed to provide Nu/IRS. 4,000 million for the construction of Dungsam Cement Project (DCP). Out of which, Nu/IRS. 1,000 million is earmarked for infrastructural development. The DCP is a dry-process plant. It is envisaged to produce 500,000 tons per year. The project is a joint venture between ACC Ltd., India and the Royal Government of Bhutan. Initially, the ACC, India held 20% equity with the balance 80% equity remaining with the Royal Government of Bhutan. However, due to security reasons, ACC has withdrawn from the DCP. The DCP has been facing problems due to the insurgency problems in the north-east India.
Future Projects
a. Sunkosh
On January 4, 1993, Bhutan and India in signed a MoU for the preparation of the DPR for the Sankosh Multi-purpose Project. The Sunkosh Multipurpose Project (SMP) is the biggest identified hydroelectricity project of Bhutan. The Central Water Commission of India (CWC) was retained as the contractor to prepare a Detailed Project Report (DPR) on the project. Accordingly, after three years’ study, the CWC submitted a 37 volume DPR on the SMP, to the Royal Government of Bhutan (RGOB) on December 30, 1997.
The SMP could be Bhutan’s largest hydroelectricity project. According to the DPR, it would have two power stations with an installed capacity of 4,060 MW of power. The cost is estimated at Nu 77.93 billion ( Us $ 1.60 billion). The cost could escalate in ten years. The SMP will be located at Karbari village in Sarbhang district in Southern Bhutan. The project would comprise two dams, the main one for power generation and the second to feed a 141 kilometres irrigation canal. Out of the proposed 141 kilometres canal, only 13 kilometres of canal will be inside Bhutan while the rest will be in India. It would supply power to the entire North-east and reach as far as Merrut in Uttar Pradesh state of India. It would irrigate and supply drinking water to the Indian states of West Bengal and Bihar. The project is expected to take about 10 years to complete.
Bhutan has already submitted two project reports on the development of 360 MW Mangdechhu and the 870 MW Puna Tsangchhu hydroelectric projects to the Government of India. It has requested the Government of India to consider financing of these two hydroelectricity projects along the Kurichhu and Tala modalities. The Mangdechhu power project is estimated to cost about US$ 349 million, whereas the Puna Tsangchhu will cost around US$ 813 million.
Trade with India
Bhutan enjoys complete free trade with India. A completely free trade regime exists between India and Bhutan. Despite the efforts of diversification, India has been the biggest market for Bhutan’s products and imports. India is not only the major foreign aid contributor to Bhutan’s economic development, but a mainstay for its economic survival. India wholly financed the first two five year economic development programmes. As a landlocked country, India had been and is a major trading partner of Bhutan in her economic development and external trade. Before eighties, third country import and export was non existent in Bhutan. Indian aid accounts for more than sixty percent in its fifth five year economic development plan.
According to Royal Monetary Authority of Bhutan, in 2000/2001, Bhutan's total exports to India were Rs.4.91 billion. This included the sale of electricity to India. It constituted 94.4% of Bhutan's total exports. In the same period Bhutan imported goods worth Rs.7.38 billion from India equivalent to 78.7% of its total imports.
Indo-Bhutan Trade Treaty was signed in 1972. It is renewed every ten years – up to March, 2005. The statistics on import from and export to India are given below:
(In Millions of NU/IRS)
| Year |
Import |
Export |
Trade Balance |
| 1990-91 |
1254. 92 |
1129. 57 |
(-) 1253. 5 |
| 1991-92 |
1814. 14 |
1465. 13 |
(-) 349. 01 |
| 1992-93 |
2082. 62 |
1522. 18 |
(-) 564. 08 |
| 1993-94 |
2065. 90 |
1785. 98 |
(-) 279. 92 |
| 1994-95 |
2750. 00 |
2088. 00 |
(-) 662. 03 |
| 1995-96 |
2856. 41 |
2489. 18 |
(-) 367. 23 |
| 1996-97 |
2890. 00 |
3220. 00 |
(+) 330.00 |
| 1997-98 |
3450.0 0 |
4040.0 0 |
(+) 590.00 |
| 1998-99 |
3620.0 0 |
4180.0 0 |
(+) 560. 00` |
| Source: Indian government publications |
Bhutan-India Trade statistics
(NU/ Rupees in Billion)
| Year |
Import |
Export |
| 1994-95 |
2.22 |
2.05 |
| 1995-96 |
2.79 |
3.07 |
| 1996-97 |
3.06 |
3.22 |
| 1997-98 |
3.68 |
4.04 |
| 1998-99 |
4.91 |
4.18 |
| 1999-2000 |
6.06 |
4.71 |
| 2000-2001 |
7.38 |
4.91 |
| Source: Royal Monetary Authority of Bhutan |
Support in educational and technical enhencement
Every year, the Government of India provides various scholarships (bilateral) to the Bhutanese students in the field of medicine, law, engineering, computer, science, humanities and commerce. Indian government scholarships are granted to around 50 Bhutanese students every year in various institutions in India. Besides, India provides specialist and technical expertise and services to Bhutan in various fields. Bhutan’s only degree college, Sherubtese College is affiliated to Delhi University. Many Indian teachers are also posted at Sherubtese College. Besides, a large number of Bhutanese students attend schools and colleges in India on private expenses.
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