The Ongoing Resistance To The MDPR Dismantling Brigade

Stealthy, secretive, elusive and something of a mirage called the “Committee on Tourism Reform” is supposedly working on reforming the tourist industry in Bhutan. The tourism stakeholders are clueless about who or where they are and what they are working on. But no matter - eventfully they will have to put the pudding on the table for all to taste.

The whole human civilization is founded on hope – and our hope is that this Committee will come up with something even better than what we already have – I mean that is the whole idea, isn’t it?

There is no confusion which path we must tread - more capable people before us have shown us the way

My continuing worry is the attempt by some interest groups to dismantle the MDPR (Minimum Daily Package Rate) policy that has been in place and working fabulously, for the last close to half a century, since 1974. The MDPR policy, if done away with, will have over two dozen impacts on the government and the people of Bhutan. But today I want to touch only on the following two issues – there are other issues that are even more damaging – but these two impact the government directly:

1.  A drastic drop in the inflow of foreign exchange; and
2.  A dramatic drop in tax collection from the tourism sector.

DROP IN INFLOW OF FOREIGN EXCHANGE

Under a SDF (Sustainable Development Fund) only regime, the tour operators will be required to deposit only the SDF portion of the tour cost – resulting in a very huge reduction in the inflow of foreign exchange. Instead of US$250.00 per person per night halt, the tour operators will get away by bringing in only US$65.00 per person per night halt. Do your mathematics and see what is the percentage of drop in foreign exchange earnings.

Please read the following Constitutional provision. Will the government be able to fulfill this Constitutional requirement – under the SDF only regime?

          Article 14
          Finance, Trade and Commerce ?
          7.  A minimum foreign currency reserve that is adequate to meet the cost of not
               less than one year’s essential import must be maintained.

In addition to the need to fulfill the Constitutional requirement of holding foreign exchange reserve to meet atleast a year’s essential imports, there is the other issue we must not overlook - our need to buy Indian Rupee from time to time - to pay for our imports. So far, we have been using our foreign exchange reserve to buy the Indian Rupees, whenever needed. With such a huge drop in the inflow of $$, will we have enough to fund the purchase of the Indian Rupees? Ofcourse the inward remittance by none-resident Bhutanese is a welcome development.

The MDPR Dismantling Brigade does not present a true and accurate picture to the government – they are simply enticing the government with the carrot that the government will not lose, in fact they offer to enhance the SDF in the hope that the government will be tempted and take a bite. That is a lousy game to play – unworthy of a true Bhutanese with Bhutanese interest at heart.

DRASTIC DROP IN TAX COLLECTION
Under a SDF only regime, the Tour Operators are open to tax evasion. Because they are required to deposit only the SDF portion of the tour cost, the true size of their business will not be known or recorded. Thus there will be rampant under-declaration of turnover. This means there will be huge drop in tax collection by the government.

Under the current MDPR regime – tax evasion is impossible – every turnover of the tour operator is recorded with the TCB thus, under-declaration is not possible.

Tax collection is important and essential – because it is a mechanism to redistribute the country’s wealth. The tour operators make money through the opportunities provided to them by the country’s natural wealth. Through the collection of tax from the tour operators’ earnings, the tax money can be ploughed back to fund essential projects that will benefit other segments of the society. This way we achieve some level of equitable distribution of the country’s pool of wealth.

In my view, no single person or institution or government can dare touch the MDPR in its present form – because if they do, what will follow will be devastating and irretrievable.

The DNT government has been in an unfortunate position to be caught in the middle of the pandemic and they did not really have the opportunity to demonstrate their acumen. I feel sorry for them and hope that they get a second chance to prove themselves. But I urge them to leave alone a matter that successive governments for the past forty-five years that have preceded them, have seen wisdom in leaving it well alone - and untouched.

I accept that change has to come – but change must come at the right time. And the Bhutanese people – not the carpetbaggers from outside who are starting to muddy the pool in the country - must direct that change.