The Bhutan Chamber of Commerce and Industry (BCCI), in the last three decades have achieved nothing significant for human resource development in the private sector, its primary mandate.
Instead, the Royal Audit Authority’s (RAA) performance audit, 2018 on the chamber found that Projects implemented by the BCCI do not have clear linkages with its primary objectives and did not benefit its members.
In particular, the RAA spotted that few projects- sustainable entrepreneurship and food security facility, one dzongkhag three products, green public procurement, and SME loan project – have not been as successful in delivering the results and creating impact towards private sector development.
For instance, the Sustainable Entrepreneurship and Food Security Facility project funded by Netherlands Enterprise Agency, is primarily focused on milk supply chain development for Zimdra Foods Private Limited. The project is envisaged to benefit milk-supplying farmers of Samtse and Chukha. However, the RAA found that this project did not bring direct benefits to its members except Zimdra Foods Private Limited as most dairy farmers groups already existed and had been selling their dairy products in the market with technical backstopping from Department of Livestock.
“Food security in the country is a national concern and it is the central theme of the 11th FYP. There are agencies responsible for implementation of the programmes. BCCI had work at hand to develop the capacity of its members instead,” the audit report stated.
Similarly, Green Public Procurement is another project to encourage green features of consumption and procurement. The RAA stated that there are other agencies like finance ministry, government procurement and property management division looking at this national concern.
“This has very remote linkage with the primary objectives of developing the members of the private sector. There was no visible impact on the members of the private sector except advocacy,” the report stated.
One Dzongkhag Three Products (ODTP), a flagship project undertaken by BCCI replicating the experiences of countries such as Japan, Thailand, China and particularly Nepal also fell under the RAA scanner.
This too, according to the RAA is a national concern and there are successful programmes such as One Gewog One Product (OGOP) under the aegis of Queens’s project.
After finalisation of economic resource mapping exercise in mid-2013, the BCCI identified projects that could be implemented as pilot projects. Sixty products were identified in 20 districts and Nu 3.54M was mobilised and allocated with funding from DHI and agriculture ministry among others.
Under this project, kiwi cultivation in Chasilakha and Wangkha in Chukha was initiated in 2016 with 1,500 grafted saplings planted at the cost of Nu 314,168. RAA found that the cultivation site in Wangkha is on track but the one at Chasilakha is not yielding fruits due to persistent hailstorms.
It was revealed that the ODTP was undertaken based on desk research and failures were attributed to lack of prefeasibility studies and timely monitoring.
Asparagus project in Dolungang, Gelephu was initiated in May 2016 by planting 24,000 crowns on two acres by three households with an investment of Nu 96,000. The project as on date of audit (April 2018) was declared failed. The reasons cited for the failure was selection of unsuitable species of asparagus crowns.
It was revealed that the species of asparagus was not suitable for sub-tropical climate of Gelephu. “It is apparent that appropriate feasibility studies were not conducted,” the report stated.
The RAA also pointed out that red cherry pepper project, which was piloted in 2016 in Zhungkhar village, Lhuntse where 16 households participated failed. The reasons cited were bad weather conditions and lack of rainfall. “But the main reasons apparently were lack of monitoring, inadequate research and feasibility studies,” RAA pointed out.
As of December 31, 2017, BCCI has incurred Nu 3.35 million on five projects with 94.61 percent of the total funds exhausted.
BCCI in partnership with the Bhutan Development Bank Limited (BDBL) also initiated Group Guarantee lending and Saving Scheme (GGLSS) to cater to the need of micro small entrepreneurs who could not avail loans under the conventional banking systems.
The Scheme was officially launched on April, 2010 in Mongar and disbursed loan to 14 clients with a ceiling of about Nu 100,000 each at an interest rate of 10 percent for three years, collateral free. The MoU for second phase was signed in November 2013 with a ceiling amount of Nu 150,000, 12 percent interest and changed the name to Micro & Small Enterprise (MSEs) Development loan Scheme. In the third phase the ceiling was increased to Nu 300,000 and interest was 11 percent.
As per the branch wise portfolio at risk (PAR) report of the BDBL, a total of Nu 118M were disbursed and overall PAR was 43.9 percent. RAA found that loan portfolio for Pangbang showed 100 percent PAR, which indicates that the loan portfolios are risky.
The default cases, according to RAA were mostly due to migration and closure of shops. “Limited initiatives were taken by the BCCI to track migrant beneficiaries and report to BDBL,” the report stated.
It also revealed that BCCI and BDBL have not put in collaborative efforts in improving and enhancing the loan scheme.
“Should BCCI align its programs and projects upon assessment of actual needs of the members of the private sector and the mandates of the organisation, it could accrue immediate and direct benefits to its members,” the report stated. BCCI, the RAA stated is sustaining on membership fees and there are little to no direct benefits to its members through such projects implementation.
The RAA also found that the chamber has not undertaken any studies to assess the needs of the members in private sector. Without such studies, the RAA is of the view that any training conducted may not address the gaps.
This has happened because of lack of clear legal mandate for BCCI, inadequate strategic focus and planning.
No Legal Basis
The audit also spotted irregular increase in the terms of office for the President, Vice President and other members and pondered issues on legitimacy of membership fee collection and unsustainable revenue operations.
BCCI, as per the performance audit report, is limited mainly by the lack of clear legal basis and legitimacy in its operations. It pointed out that the chamber was not created out of law or registered under any legal instrument. BCCI was supposedly formed in 1980 and remained unoperational until 1988. Thereafter in 1996 the members ratified the BCCI Charter and currently its operations are governed by it. “BCCI is not registered under any other law or Statute as such.”
While the chamber had drafted a Bill in 2006 and submitted to the Parliament, it could not be enacted. Instead BCCI was suggested by the National Assembly to get registered under Civil Society Organisation Act 2007. However, BCCI did not register stating that as an interest-group representing business and private sector it did not have social mandates like other CSOs.
“For an institution like BCCI, which as it claims to be the apex body for private sector development and representation, it is vital to have a legal basis,” the report stated.
BCCI is also challenged by the lack of proper systems, policies such as financial rules and regulations and internal audit functions. The lack of due diligence on the part of officials concerned resulted into lapses because of imprudent revenue and expenditure management.
Among others, the RAA pointed out that BCCI does not have an adequate strategic planning framework although it has endorsed the vision and mission statements.
It was also found that the chamber undertakes an annual planning exercise, largely confined to programmes and activities without clarity as to how they are going to contribute towards achievement of its vision and mission.
RAA found no documented procedures for the election of President and Vice Presidents. As such, confusions persist over the roles, position and even lines of reporting of the Vice-Presidents in the overall operation of BCCI management.
BCCI sustains its operations from Annual membership fees of the business entities, voluntary fees, rental income, sale proceeds of form, and documentation fees of GGLSS. BCCI also receives grants from the government.
Over the period of five years BCCI has generated total revenue of Nu 258.669 million and received grant of Nu 42.750 million from the government.
The report stated that BCCI had been in operation for more than two decades and it is not yet financially secure because it could not tap its potentials. “BCCI management had not yet devised a strategy for securing the financial soundness of the organisation,” the report stated.
While observing several discrepancies in membership fee collection, budgeting process, procurement, monitoring and revenue management, the RAA stated that BCCI is financially distressed.
However, upon RAA’s review, it was revealed that BCCI had used up 70 to 80 percent of revenue from membership fee on hospitality and entertainment. Most of the expenditures were found unnecessary and avoidable.