Please note this is not meant to be a comprehensive article but rather giving a general overview of what has happened, its implications and its consequences.
David Cameron promised to hold a referendum if he was voted the prime minster. Fast forward and he kept good on that promise and the results were devastating with the United Kingdom (UK) leaving the EU. Now this may seem insignificant but this could have a profound impact on Bhutan.
In order to understand how this may affect Bhutan we must first understand the political and economic implications and consequences of the UK leaving the EU.
Politically the UK has to re-write a good chunk of its legislation concerning foreign workers working in the UK as most do so under the free movement policy of the EU, which no longer applies to them. This will be a time consuming and expensive affair, as simply deporting them back to their home countries is not an option as many hold assets, be it in the form of houses, savings, cars or pensions. Protests might soon engulf London as a result of the threat of deportations.
Ireland and Scotland voted to stay within the EU thus creating a conflict between England and the other two states. As a result Ireland and Scotland are calling for referendums in order to gain independence and re-join the EU. It should be noted that a major factor for Scotland’s first referendum failing is the threat that leaving the UK meant leaving the EU. A threat that is no longer valid making Scottish independence a very possible reality.
The EU like the UK will have to deal with British immigrants in their countries, something that will also be time consuming and expensive. Yet another major threat the EU will have to deal with is the threat of other states like Denmark leaving, something that could have a domino effect leading to the destruction of the EU as it stands today.
Prime minister David Cameron has also announced he will resign as it was his campaign promise that has brought the UK to this.
Economically this situation is just as big a mess as it is with several large EU decide to leave to have their headquarters somewhere in the EU which makes more sense leaving tens of thousands of people unemployed and what more leaving housing, restaurants and other small companies devastated with the loss of their customers.
EU exports to the UK might also be taxed leading to both the EU suffering from lack of export revenue but also the common British people as they see not only their travel expenses rise due to lack of free movement that the EU guaranteed but also they will see the rise in everyday products that dominate the supermarkets like Co-Op and Phil-co. There is a small bright side as due to the drop in British Pound, exports to other countries will increase, something that will barely mitigate a fraction of the damage caused by the UK leaving the EU.
It should also be mentioned that the British Pound has dropped to the lowest since 1985 caused by the political instability of the British exit of the EU or Brexit as they call it.
The Euro is also suffering, however, it pales in comparison as The Guardian puts it: “Brexit panic wipes $2 trillion off world markets” with world stock markets suffering in Europe, Asia, and America. Economists predict the UK will suffer a massive recession as a result of this.
So how does this affect Bhutan?
Well tourism is the second most important industry after hydropower with many other industries such as hotels, restaurants, shops, tourism as a whole (tour agents, tour operators, guides, drivers, cooks, trekking specialists) relying on it to provide income for them. This political and economic instability will most likely lead to less tourists coming from not only the UK and Europe but America as well.
There are four other domestic factors to consider as well.
1) International tourism for the last 4 years has been on the decline
2) A large part of Bhutan’s GDP is reliant on tourism.
3) A shortage of foreign currency reserves might lead to the deterioration of the Ngultrum and could lead to supply of essential Indian exports to be cut short.
4) A large amount of investment in the forms of hotels and other tourist infrastructure is currently underway meaning a shortage of tourists could lead to defaulting of loans.
However it could be argued that the market for Bhutanese tourism under the High impact, Low volume might not be affected by the British exit at all. This can however only be told with time.
I have left out a few things and barely scratched the surface of what is happening and what is going to happen however but my predictions for Bhutan might be wrong, something I honestly hope so.
Contributed by Thrizong Dawa