International context 112

The international role is one the key factors which influence HRM policies and practices of countries (Brewster, 1995; Budhwar & Khatri, 2001). Using the lens of Brewster’s HRM framework or the ‘European model of HRM’, this thesis reviews the influence of international factors on HRM policies and practices of Bhutanese civil service.

4.3.1 Bhutan prior to joining the international community

Bhutan followed a policy of self-imposed isolation to protect its national sovereignty and identity, and to strengthen the institution of the monarchy. It had limited interaction with the rest of the world because of its landlocked geographical terrain and inaccessible thick forest (Collister, 1996). Its first documented contact with people from a foreign country was in 1557 when some people from Portugal visited Bhutan (White, 1996). Due to its vulnerable geopolitics, Bhutan followed a policy of self-imposed isolation and made efforts to maintain its traditional culture and national sovereignty and identity (Dessallien, 2005).

With the annexation of Bhutan’s seven plain territories bordering Assam and eleven territories adjacent to Bengal, British-India in return agreed to pay annual monetary compensation of an amount not more than Nu. 100, 000 annually. Moreover, as per the 1910 Treaty of Punakha, Bhutan agreed to be guided by British- India for its external affairs; a situation which continued until India’s independence in 1947; however, British-India agreed not to interfere in the internal affairs of Bhutan (Centre for Bhutan Studies (CBS) & Japan Institute of Developing Economies (JIDE), 2004; Schreven, 2008).

With the independence of India in 1947, Bhutan and India signed the Indo- Bhutan Treaty of 1949 where Bhutan’s foreign affairs are to be guided by India, but India agreed not to interfere in Bhutan’s domestic affairs (Centre for Bhutan Studies (CBS) & Japan Institute of Developing Economies (JIDE), 2004). The 1949 Treaty was never a hindrance to Bhutan’s sovereignty and independence, in fact the special relationships developed between India and Bhutan as a result of the 1949 Indo- Bhutan Treaty helped Bhutan in gaining the full support of India for Bhutan’s UN membership in 1971 (Mathou, 2000). As there were minimal external threats or influence from China and India, the monarchy had the opportunity to gradually chart out and manage change at its own pace without pressure and interference from outside (Sinpeng, 2007). Nonetheless, the Chinese annexation of Tibet in 1951 and 1959; and claims of some Bhutanese territories by China, motivated Bhutan to foster even stronger relations with its southern neighbour, India (Galay, 2004; Penjore, 2004). The potential threats from its northern neighbour, China, encouraged Bhutan to move away from its self-imposed isolation policy and motivated it to seek international support for the socio-economic development of the country.

4.3.2 Interaction with the world

Bhutan began to interact with the outside world from 1961 with the start of its first five-year planned economic development program (Aris, 1994; Mehra, 1974; NCWC et al., 2013; Rajesh, 1999; UNDP, 1998). Bhutan’s first international membership was established in Melbourne, Australia in 1962, with the Colombo Plan and the support of the Australian government (Galay, 2004; Penjore, 2004; Tashi, 2012). Membership in the Colombo Plan marked a turning point for Bhutan. Firstly, as a member of the international community, Bhutan was no longer under the policy of self-imposed isolation and was able to project itself to the world as a sovereign and independent country. Secondly, as a member of the international community, Bhutan began to gain financial and technical assistance from donor member countries, particularly in modernising education through scholarships in Australia and socio-economic development through various grants. Then in 1971, Bhutan became a member of the UN which further strengthened its sovereignty as a member of the world community (Galay, 2004; Penjore, 2004).

Opening itself to the world led to changes in the nature of the Bhutanese workforce. In the early 1960s, expatriates constituted 99 per cent of the Bhutanese civil service (PC, 1987; RCSC, 1984). As there was a lack of qualified Bhutanese, many foreign employees from India were recruited in the fields of road construction, mining, agro-based industries and hydro-power projects and finance – virtually in all areas of the economic development programs (Choden, 2004; Mathou, 2000). However, Bhutan made every effort to ensure that there was no direct impact on Bhutanese governance (Mathou, 2000). By the beginning of the sixth five-year plan (FYP) in 1987, expatriates constituted only 20 per cent of the civil service as more and more nationals graduated from schools, colleges and universities (PC, 1987). Currently, as of 2013, there are only 488 (1.93%) expatriates and 53 (0.21%) international volunteers working in Bhutan (RCSC, 2013).

Bhutan started to expand its international relations beyond India after Sikkim, a close neighbour of Bhutan, was occupied by India in 1975 (Galay, 2004). Bhutan had valid reason to be concerned with national security and sovereignty as China occupied Tibet to the north and India occupied Sikkim to the south. Bhutan responded to this challenge by joining a series of international organisations (CBS & JIDE, 2004; Galay, 2004): IMF, WB, FAO in 1981; WHO, UNESCO and ADB in

1982; SAARC and UNCTAD and ICIMOD in 1985. Bhutan established a Permanent Mission to the UN in Geneva and New York in 1985 and diplomatic relations with many countries (Galay, 2004).

4.3.3 Donor aid and potential implications

There are potential implications associated with depending on donor financial assistance. Some countries such as Britain, France, Germany, the Nordic countries and the US consider democracy as the best form of government and promote the idea that democracy is central to good governance and development (Dessallien, 2005). These ideas are supported by international development institutions. For instance, for countries in Africa, receiving assistance from the EU in 1989 was conditional on having a democratic system of government. Similarly, the World Bank and the IMF also made democratisation a pre-condition for financial assistance. In this way, donor countries encourage developing countries to privatise state-owned enterprises; downsize government bureaucracy and open economies to foreign direct investment (FDI) (Dessallien, 2005).

Bhutan has been receptive to the changes taking place in the region and globe, particularly in the field of HRM. The Royal Charter of the RCSC stipulates that the “commission shall review personnel policies from time to time to ensure that such policies are in keeping with the changing situations” (RCSC, 1982, p. 8). In order to provide training and education to meet the developmental needs and to cope with the changes taking place in the region and the world, Bhutan became heavily dependent on financial assistance from India and other donor countries (IMF, 2014). However, donor countries have looked positively at the Bhutanese approach to development and refrain from imposing conditions on the aid (Mathou, 2000, p. 231).

While India is the main donor country for Bhutan, other donor countries include: Australia, Denmark, Japan, the Netherlands, Norway, Switzerland, Singapore and Thailand (RGOB, 2006). Donor aid in training and educating the Bhutanese helped to reduce an over reliance on expatriate employees. However, Bhutan’s government also recognised the potential implications of dependence on donor aid in that “there are dangers as well as benefits associated with aid” (PC, 1992, p. 3). So, while receiving the aid from donor countries, Bhutan ensures that the objective of the donor aid complements the overall objectives of the development

programs of the country. The other multilateral and bilateral donor countries assisting Bhutan’s development program are reflected in Table 4.2. The donor aid agencies include UNDP, bilateral agencies and multilateral agencies like World Bank; International Fund for Agriculture Development (IFAD); IMF; European Commission; and ADB. Bhutan continues to receive a large share of financial assistance for human resource development (ADB, 2014a; IMF, 2014; PC, 1992; RGOB, 2006).

Table 4.2 Donor grants in million Ngultrums

Donors 1999 2000 2001 2002 2003 GOI 1928.5 2187.9 2551.2 945.3 631.8 DANIDA 385.2 318.7 394.8 534.8 525.8 JICA 0 7.1 0 4.2 0 Netherlands 88.8 74.4 147.6 274.5 201 UNDP 122.1 140.8 51.4 132.7 85.6 Austria 170.7 143 174.2 44.2 68.7 Helevetas 147.2 75.8 94.3 0 0

Swiss Dev Corp 200.6 106.2 66.8 62.6 103.5

EU 35.1 29.9 18 112.5 130.8

UNCDF 37.4 10.6 27.2 26.9 26.6

Others 146.9 179.7 185.4 559.3 707.9

Total 3262.5 3274.1 3710.9 2697 2481.7

Source: JIDE (2004)

Bhutan, although heavily dependent on foreign aid, follows its own set of priorities and criteria. As a result of this development strategy, development in the country is free from political, socio-economic and cultural interference of the donor countries (Mathou, 2000). The individual grants for the years from 1999-2003 are reflected in Table 4.2. For instance, in realising some of the potential implications of being a member of some international organisations, Bhutan has yet to confirm its membership of the WTO. Wangdi (2010) notes that if Bhutan is to accept WTO membership, it is required to amend or adopt at least 35 laws to fulfil WTO requirements. The WTO is one of the powerful tools of globalisation which could constrain the policy options of governments as national laws, policies and administrative procedures have to conform to WTO agreements (Wangdi, 2010). Becoming a member of the WTO, leads to surrendering decision making authority by the smaller states to the super powers through economic measures (Mancall, 2003; Wangyel, 2004). Although the Bhutan economy is dependent on donor agencies, it is

not legally obligated to abide by the terms and conditions of the WTO as Bhutan has not formally confirmed its WTO membership.