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All economic activities can be divided into BASE ACTIVITIES and SERVICE ACTIVITIES. BASE ACTIVITIES export their goods and services outside of the economic region, resulting in an inflow of money in the form of payments for those export commodities. SERVICE ACTIVITIES like bakeries, barber shops and laundries, circulate goods and services, and the payments for these, within the economy. Every industry, or economic activity, imports some percentage of its “productive inputs,” but even if all the components of a complicated assembly are imported, both the labor component (salaries) and the “value added” stay in the country. The imported parts are then assembled and exported, paying for the cheaper imports. Thus, the nation has imports for consumption and imports for production, a good deal of which can be re-exported. When the value of the exports exceeds the value of the imports, the country has a positive balance of trade, and the surplus represents accruing wealth! Urban economics is based on exactly the same theory, in which the economic region is taken as the closed economy, and the city’s imports and exports are analyzed to determine if the city is in decline, or a center of wealth creation.

A country that does not aggressively plan, invest in and expand its ECONOMIC BASE activities is living in a dream world, which can only turn into a nightmare! A country which creates a strong economic base is a viable, growing nation!

When there is a surplus of exports in all forms, there is a surplus of inflow of money. This money pays for salaries, becomes profits, generates investment capital in financial institutions of the country, and is taxed to generate still more social and economic infrastructure. There is a point where enough internal surplus capital is generated when the economy can generate its own growth. This is called “Economic Take-Off!”

Even salaries have a tremendous “spin-off” effect within the SERVICE SECTOR of the economy! Consumers buy automobiles, apartments, televisions, consumer goods, food and entertainment. They invest in the education of their children and they save through retirement and insurance funds! Studies show that for every one hundred dollars of new salary brought into the economy, $164 dollars is spun around in the SERVICE SECTOR as the new income, buys cakes, the bakery owner uses the same money to engage a tailor, and the tailor uses the same money to get a hair cut! The same pay check “spins around” in the local economy.

Thus, creating a strong ECONOMIC BASE generates employment, spins money in the local economy, creates investable capital, eradicates trade deficits, and creates a range of wealth. Urban and regional planning creates the scenario and the structure for this. Good town plans attract investment, the managers and technicians who are the captains of modern industry.

Higher level health facilities in a hospital with pathology laboratories, surgery facilities and extensive diagnostic facilities will be located in Gelephu. There will be several colleges, high schools and hostels for students. There will be vocational training facilities preparing youth for high skill, blue collar jobs. All of these facilities will act as referral centers for lower tier facilities that can send problems, via the Service Centers, to Gelephu for resolution. Very specialized problems will be referred still further up to the capital, in the small number of cases which cannot be resolved at Gelephu. Thus, a chain of facilities will be interrelated down to the village level. This system has been under assimilation for the past four decades. Growth Centers also provide a number of financial services to investors, through banks and development finance institutions.

Growth Centers are also "out-reach" hubs from which professional services, training support, technical support, security force and development support communications emanate. An important function of the plan is to provide institutional space for these services and facilities.

The Sarpang-Gelephu Zone offers unique opportunities for Bhutan, as well as for the citizens within the services catchment area. It is the largest flat area in the country lying at low altitude. Its access to the trans-Assam National Highway opens the export doors, not only to India, but through its ports to a global market. It is also the import "portal" through which all of the goods and services for central Bhutan flow, and is the staging place for all major infrastructure projects in central Bhutan. Most important is the immediate access to electric power, access to the growing surplus of educated Bhutanese youth, the new industrial estate and ample water resources for industrial use, making the zone a prime investment location for Indian and Bhutanese industrial groups, for the Royal Government itself, for individual entrepreneurs, and for global, multi-national companies (MNCs). The added potential of a rail head in the area makes the zone even more attractive for investment.

In this regard a Special Economic Zone should be created by the Royal Government of Bhutan in which an integrated policy package attracts high-tech manufacturing and assembly activities to the area. These in turn will generate wealth, tax revenues and sustainable employment for Bhutanese youth. Such a strategy will widen the economic base and export spectrum of the country, and attract population from all over Bhutan to settle in the area. This Special Economic Zone will run between Gelephu and Sarpang.

The underpinning public policy required to create a huge profit center for Bhutan will be articulated in three areas. These areas are

These policy initiatives will act as a convergence of "development fillips," which serve multi-dimensional goals:

The Ministry of Trade and Industry has initiated the development of a large industrial estate, well placed between Sarpang and Gelephu. The rationally laid out sites, access roads, electricity and water supply will all serve to attract investments into this Special Economic Zone. This, along with other economic infrastructure, phased-in, in an orderly manner, will attract private sector investments.

As the portal to central Bhutan, and the "staging center" for all major infrastructure development in Central Bhutan, it is essential that sea born and road born shipping containers can be imported and exported from Bhutan directly, without the added costs of customs and clearances through neighboring ports. In this regard, it is of utmost importance that a Dry Port be established in Gelephu, and a Economic Zone be part of the Special Economic Zone as well. In this manner manufacturing units can import components into the Special Economic Zone, assemble them and re-export the completed products with the “value added profits," capital assets, jobs and corporate taxes staying within Bhutan.

At present the south of Bhutan holds huge potentials for employment, exports, import substitution, capital formation, revenue generation and maturing all sectors of the economy. The major bottleneck today is access via good road transport. With the up-gradation of the existing roads, and filling in gaps along the southern border of the country, Bhutan could within a matter of a decade have its own, secure southern east-west road system! The present plans for sectors of the Sibsu-Daipham National Highway, as in the case of Samtse to Phuentsholing, are great steps in filling this strategic lacuna. The portion from Samtse to Phuentsholing has been aligned and the budget for initiation has been allotted. Alignment along the Phuentsholing to Gelephu link has also been carried out, which will connect the eastern part of southern Bhutan to major centers. This is essential for trade to develop in the southern belt and for the easy movement of security forces. It will open up the entire southern zone for development in stages, through strategies which are evolving in Samtse, Phuentsholing, and which will emerge from the Sarpang-Gelephu Special Economic Zone practices.

Discussions are in progress for a new rail head to be located in the zone, making the import of components and the export of finished products possible on a large scale.