The future of Small and Medium enterprises in Bhutan is not substitution but niche exports

There may be plenty of entrepreneurship trainings, financial accessibility, fiscal measures, but when it comes down to domestic trade and market integration, are we there yet? In keeping with that, The Bhutanese interviewed some experienced business owners, along with startup business owners on their perception of the current market scenario.

A challenge that many startup entrepreneurs face comes in regard with pricing their final product. Some of them said, regardless of cost reduction during production, they are unable to compete in the market when the imported products dominate the market.

One of the entrepreneurs said that products made by Multi-National Companies (MNCs), due to their large scale of production, the cost of purchasing raw materials and the cost of production, is significantly cheaper and competitive in the market, and unless the products could be restricted or partly restricted and substituted by domestic products, it would almost be pointless to even try and create a direct substitute product.

An entrepreneur said cottage and small-scale industry (CSI) stand no chance against MNCs.

“The other risk is that if these companies decide to compete with smaller businesses, they can easily turn the tables on the domestic products, as they have huge separate reserves for promotion, branding, marketing and market presence.”

CEO, Bio Bhutan, Ugyen, has been in business for more than 15 years, and he said that the domestic market has received better turnout of local consumers compared to when he had first started the venture. However, he stated that there have not been firm reports or surveys to determine whether these changes had arisen from consumers’ willingness to purchase local products or if it could be credited to other factors.

He said, “When we first started our venture, one of the main challenge was in obtaining licenses required to operate the business. Even today, from what I know, this is still a drawback factor for a lot of domestic products.”

 Managing Director of Bhutan Shilajit, Wangchuk Tshering, said that for some of the licensing cases, neither the Drug Regulatory Authority (DRA) nor the Bhutan Agriculture and Food Regulatory Authority (BAFRA) have the capacity to test and allot licenses.

Bhutan Shilajit faced the licensing problem when the venture started 15 years ago, even with the manufacturing technology and process being brought in by their partner in the United Kingdom. Reportedly, the enterprise passed the United States of America (USA) certification standards.

He said, “The regulatory bodies or policy makers should also look at who are producing Shilajit in the market, considering that I have heard and seen that there are even people who use flour to increase the quantity.”

 Managing partner for Bhutan Organics, which produces a range of juices and teas with medicinal properties, said that one of the main challenges for them comes in the form of pricing their products and matching up to the quality level, as the existing brands that dominate the market are already preferred by the consumers, and to turn the consumers around towards their product is a bigger challenge.

He said the company receives good interest from prospective buyers from external markets. Though numerous certification processes have delayed or retained avenues for sales, however, the Bhutan Organics brand has carved a niche for itself.

 Druksell.com is an online trade platform listing Bhutanese products to over 30 countries. It is following its vision to push local products despite the initial hiccups caused by the COVID-19 pandemic.

Founder of Druksell, Sonam Chophel, said, “We have over 600 local suppliers for whom we are the distributor.” He said that the portal’s existence might not be well known in Bhutan since it primarily focuses on exports but the establishment is in its eighth year of service.

He added, “Our primary buyers are the United States and countries in Europe along with regional countries like Singapore and a bit to Bangladesh and India.”

He said, “People are generally reluctant to buy the home-product, and we are aware that our products are a bit pricier, comparatively. But it is time for people to change the overall mindset when it comes to buying the domestic products.”

 He added, “People talk about the need for better markets or that CSIs are not taking off, but we would like to request people to come to us and do due-diligence rather than sit back and not take heed of the efforts being invested.”

He added, “When people do that, it does not help the products grow and get recognized, they have to understand the ground reality.”

He said since Bhutan’s market is small, the approach should be towards markets beyond the domestic market, and that is where the government could play a part in exploring and facilitating for domestic sellers, he added.

“We have to be mindful about how we navigate our business models, in order to achieve more and we can’t always keep looking towards the government, as there is only so much they can do. It is time for the private sector to take responsibility and come together,” he added.