Bhutan May Be Opening Up to the World After Being One of the Most Closed-Off Countries. The strategy, however, demands significant investments in a landlocked country nestled between India and China, which boasts abundant freshwater resources and hydropower potential.
Bhutan is landlocked between two major powers, limiting its options
Bhutan, a landlocked nation between India and China, spans just two-thirds of Denmark's area and has a population of merely 790,000. Its dilemma and vision exemplify how landlocked developing nations are constrained by their geopolitical circumstances, akin to countries like Kazakhstan, Mongolia, and Kyrgyzstan.
Topographically, Bhutan is highly diverse, located on the southern slopes of the Himalayas. From mountain peaks over 7,000 meters high to a 50-km-wide belt of lush tropical lowlands in the south, the country is home to significant freshwater reserves, including glaciers, and immense hydropower potential. These resources are highly sought after by both China and India.
- Bhutan's hydropower potential is estimated at over 30 GW, of which only 2.5 GW is currently utilized.
- While Tibet supplies 50% of the water for the Brahmaputra River, an additional 10-15% originates in Bhutan.
Hydropower is crucial for Bhutan’s own economic development, as all other forms of energy must be imported. However, Bhutan lacks foreign currency reserves and export revenue, making new hydropower plants a prerequisite for economic growth and energy exports, i.e., earning foreign currency.
But Bhutan’s landlocked position between two major powers leaves it without free choice of export partners, potentially impacting the price of its energy exports.
Bhutan fears for its independence and has tried isolation...
When India was partitioned in 1947, Bhutan decided to remain an independent kingdom, initially as a relatively open country. However, when China invaded and annexed Tibet, Bhutan feared a similar fate. Consequently, it closed its northern border with China and strengthened its ties with India. Tourism was excluded entirely.
The country was almost hermetically sealed to outsiders until 1961. Officially, this isolation was to protect its state religion, the traditional Mahayana Buddhism, including from Nepalese Buddhist groups.
However, when China released new “standard maps” in 1961 that marked parts of Bhutan as Chinese territory, the nation deepened its strategic alliance with India. These maps sparked a cold conflict between Bhutan and China that remains unresolved. Since 1961, 25 official diplomatic efforts have been made, the most recent in October 2023. Yet, there is no sign of a resolution.
Testing India’s commitment, Chinese soldiers crossed the Bhutanese border at multiple points in November 2005.
...but this isolation made Bhutan overly reliant on India
Bhutan’s military of 6,000 soldiers is no match for either China’s 2.2 million or India’s 1.3 million soldiers. As Bhutan’s longest-standing ally, India has wielded significant influence and maintained a strong presence in the country. Today, India has several hundred troops stationed permanently in Bhutan and allocates 36% of its total development aid to the nation.
India’s interest in Bhutan’s defense is multifaceted:
- Bhutan supplies water to the Brahmaputra River, a lifeline for eastern India and Bangladesh.
- India seeks to purchase electricity from Bhutan’s hydropower plants.
- More critically, India fears that a Chinese invasion of Bhutan could expose the Siliguri Corridor in Doklam, located in Bhutan’s westernmost region.
- This narrow corridor, only 25 km wide, is India’s sole land route to its northeastern states. In recent years, China has been actively building roads and what appear to be military facilities in this area.
- The latest formal Chinese proposal to resolve border disputes was made in 1996, offering to withdraw from a 495 sq. km area in exchange for Bhutan ceding a 269 sq. km region near Doklam. The proposal sent shockwaves through New Delhi.
Bhutan envisions independence from its geopolitical dependencies
The increasingly strained relationship with China prompted King Wangchuck in 1998 to initiate significant political reforms, transferring executive powers to the Prime Minister and granting Parliament the authority to impeach the king with a two-thirds majority. Additionally, access to television and international broadcasts was allowed, a subtle step toward opening the country to the outside world.
This paradigm shift has recently gained momentum. Bhutan’s government believes that reducing its dependence on India or China can be achieved through a major technological leap. The strategy involves prioritizing the development of the country’s technological infrastructure, which, in theory, could enable exports to nations beyond India with minimal reliance on Indian transit routes (e.g., for internet cables).
Visionary Project: Gelephu Mindfulness City (GMC)
In late 2023, Bhutan announced one of the world's most ambitious development initiatives: Gelephu Mindfulness City (GMC). This high-tech city, envisioned to span over 1,000 square kilometers (larger than Singapore), is planned near the Indian border. The city will be powered by hydropower and designed to house 1 million residents—more than the country’s current population of 790,000. The previously insular nation aims to attract tech nomads, Buddhist pilgrims, cryptocurrency entrepreneurs, and wealthy expatriates. The Danish architecture firm Bjarke Ingels Group has already submitted design proposals for the project.
India has recognized the strategic potential of GMC and is constructing roads and railways to connect with Gelephu. In March 2024, Indian Prime Minister Narendra Modi visited Bhutan for two days to strengthen ties. Reliance Group (Ambani) also announced plans to invest in two new hydropower plants in October 2024.
While China and its Belt and Road Initiative (BRI) are currently absent from the project, Bhutan has not ruled out future collaborations with China. The scale of investment required for GMC is immense, and the country seeks economic independence rather than dependence on either of its neighboring giants. Bhutan’s reliance on hydropower for energy-intensive industries, such as AI data centers and cryptocurrency mining, forms a cornerstone of its vision.. Bhutan has already mined Bitcoin worth $750 million, making it the world’s fourth-largest cryptocurrency miner.
The GMC initiative draws parallels to other mega-projects like Saudi Arabia’s Neom, Indonesia’s Nusantara, and Egypt’s New Cairo.
But Bhutan will hardly free itself, and Climate Change can erode the GMC payback
Bhutan’s primary concern is that GMC’s success hinges entirely on foreign investments. The country also worries about China’s aggressive territorial claims, as evidenced by the 2024 annexation of Bolshoi Ussuriyski Island near Russia’s Khabarovsk. Over the past decade, Bhutan has cautiously pursued trade with China despite lacking formal diplomatic ties.
However, GMC’s long-term viability is threatened by climate change. Melting glaciers in the Himalayas risk destabilizing Bhutan’s water supply, creating uncertainty around its hydropower output—a crucial revenue source.
These uncertainties make it harder to attract Foreign Direct Investment (FDI), potentially leaving Bhutan reliant on either India or China as primary investors—the very dependence it seeks to escape.
