At the recent Bhutan Innovation Forum, Nobel Laureate economist Joseph Stiglitz highlighted the transformative power of dynamic cities in driving innovation and knowledge spillovers. He called for a careful approach to managing economic hubs like the Gelephu Mindfulness City to prevent tax arbitrage. Stiglitz commended Bhutan’s impressive socio-economic progress and its ambitious vision of evolving into a vibrant knowledge economy.
For a society like Bhutan that prioritizes well-being, the economist noted that not all enterprises looking for profits will serve the society.
“One has to manage that very carefully, Economists use a technical term whether it’s trade diversion or trade creation. Is it investment that might otherwise have come to Bhutan, but take advantage of what we call regulatory and tax arbitrage or is it really creating new things? That then has the positive spillovers that we talked about a minute ago. So that’s really where one has to be very careful that it’s really a creation of new enterprises and real learning that goes on”
He added that a dynamic city offers a huge opportunity to help the rest of the country. Nonetheless, the economist explained, considering how enterprises will be focused on making profits, the country should take in only those enterprises that will benefit society and maintain basic values and wellbeing.
“The skills that individuals might learn in an enterprise, you know one of the great successes of China and the reason why China grew so fast is they had joint ventures and in the joint ventures you had foreigners, but the foreigners were effectively required to teach locals skills and you know pretty soon the locals took over the foreign firms and it became local firms.”
Joseph Stiglitz highlighted that investing in high-quality education, promoting digital literacy, and supporting local innovations in sectors such as agriculture, tourism, and renewable energy can empower Bhutanese youth to become active participants in the global knowledge economy.
“The good thing is the 21st Century economy is very different from the manufacturing economy. It’s become partly a knowledge economy, a service sector economy, and a caring economy. It’s an economy that’s concerned about mindfulness and about culture. And that’s a very different economy and so in a way, it’s lucky that Bhutan is in the development phase that it is because it’s arriving at the stage of developing just at the time where the kinds of economy is well suited for where Bhutan wants to go.”
Stiglitz said Bhutan has an advantage in pursuing special economic zones considering its development philosophy of GNH, attractive destinations, digital connectivity and political stability.
Samten Dolkar
Edited by Phub Gyem
