One Step Beyond Symbolism: An Assessment of Increasing Bhutan-Thailand Relations

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On 19 June 2025, the National Assembly of Bhutan discussed the recently signed Free Trade Agreement (FTA) between Bhutan and Thailand. This closely followed the Thai King and Queen’s visit to Bhutan in April 2025, and marked their first official state visit since assuming the throne in 2016. This momentum underscores increasing cooperation and high-level engagements between the two countries. While both nations have enjoyed a cordial partnership, their ties have largely been based on relations between royal families, soft power, and people-to-people relations. However, geopolitics and economic interests are convincing them to enhance close ties and augment them with new avenues of cooperation.

Humble Beginnings

Before establishing diplomatic relations in 1989, Bhutan and Thailand had close relations, driven by cultural affinities and amiable ties between their Royal families. These relations paved the way for Bhutan to trust Thailand and involve the country in its strategy to open up gradually to the world through India.  Thailand became one of the first countries with which it diversified its ties. Since the 1980s, Bhutan has sought Thailand’s assistance with capacity building, health, and human resources development cooperation. In 1997, Bhutan also established a mission in Thailand, making it one of its only 10 diplomatic missions around the world. This galvanised the foundations for further collaboration.

Thailand's development diplomacy is a key pillar of this engagement—a soft power strategy to position the country as a responsible regional leader and cooperative Asian partner.

For Thailand, a combination of soft power ambitions, economic strategy, and cultural camaraderie convinced them to invest in Bhutan’s development. Thailand's development diplomacy is a key pillar of this engagement—a soft power strategy to position the country as a responsible regional leader and cooperative Asian partner. Through the Thailand International Cooperation Agency (TICA), Bangkok has rolled out development assistance programmes across Asia and Africa, cultivating an image of a country that has successfully ‘graduated’ from aid recipient to donor. In Bhutan’s case, such assistance fosters goodwill among both the Bhutanese public and leadership. This is particularly significant considering Bhutan’s often reclusive international posture; its warm relationship with Thailand enhances Bangkok’s global image. Thai officials regularly highlight the ‘satisfying achievements’ of TICA’s programmes, which have empowered communities across Bhutan. Each Bhutanese civil servant trained in Thailand or at a school supported by a Thai royal project becomes a living symbol of Thai soft power at work.

Soft Power and People-to-People Relations:

The two countries also share several mutual interests and ideas. The roles and responsibilities of the monarchy in their respective countries resemble each other. Both nations are constitutional monarchies with democratic principles, each having a revered King who embodies unity and serves as a guardian of heritage, thus fostering natural diplomatic alignment. There are also similarities between Thailand’s Sufficiency Economy Philosophy (SEP) and Bhutan’s Gross National Happiness (GNH), which shape their community development and achievement of the Sustainable Development Goals (SDGs).  This bond further translates into aligned government and royal development initiatives (See Table 1) on capacity building, volunteering, agriculture, entrepreneurship, and tourism. Bhutan and Thailand have also launched various consultations and working group meetings to strengthen and explore additional areas of collaboration.

Table 1. Major Development Initiatives between Governments (2014–2025)

Source: Authors’ Compilation

This cooperation has also strengthened people-to-people relations. Over 1,200 Bhutanese civil servants have undergone capacity building and training in Thailand. Thailand has also become a popular destination for trade, pilgrimage, leisure and treatment. In 2023, over 1,300 Bhutanese were estimated to be living in Thailand. Before the pandemic, the country was also a popular destination for education, with over 400–450 students studying there. While these numbers have taken a notable hit following the post-pandemic exodus to Australia, the country remains a popular destination for education and training.

Economics and Trade

Although these relations have existed for decades, domestic compulsions have largely shaped recent bilateral engagements between the two countries. Bhutan today faces severe economic issues; youth unemployment (18 percent in 2024), combined with COVID-related challenges, triggered a mass exodus. In 2024, the government revealed that over 9 percent of Bhutanese live abroad, with more than 3 percent of the country’s population estimated to be living in Australia alone. This has triggered severe anxieties about the country’s future and its economy.

Bhutan is thus establishing a US$100 billion worth Special Administrative Region—a Mindfulness City in Gelephu (GMC). The city will serve as an economic and technology hub, rooted in the principles of sustainable development,  environmental conservation and GNH. The project will expand over 2.5 percent of the country’s land and host a population of 1-2 million. With this project, Bhutan aims to connect South and Southeast Asia, as their regional trade has increased from US$38 billion in 2000 to US$349 billion in 2018. Given Thailand has been a significant investor in the country—accounting for 10-17 percent of overall annual Foreign Direct Investments (FDIs) between 2017–2024—Thimphu is expediting its outreach. On its part, Thailand has expressed interest in investing in infrastructure, retail, healthcare, and agricultural technology. Thailand's growing commercial interest is evident in its participation in Bhutan’s GMC, which also involved a prominent Thai consulting firm in the planning phase.

The two countries hope to increase trade from US$31 million to US$120 million. The FTA also attempts to boost economic and technical cooperation in renewable energy, investments, education, and tourism.

Furthermore, Bhutan and Thailand also accelerated their FTA negotiations, culminating the same in only nine months. Set to be implemented in 2026, the agreement will remove tariffs on 94 percent of Bhutanese exports, especially agricultural products, which face 5-60 percent tariffs. This would directly benefit 43 percent of the country that depends on the agricultural sector.  On the other hand, it seeks to eliminate import tariffs on all 5,867 tariff lines from Thailand, making processed and frozen foods, apparel, electronics, and electrical appliances competitive and more affordable. Thus, the two countries hope to increase trade from US$31 million to US$120 million. The FTA also attempts to boost economic and technical cooperation in renewable energy, investments, education, and tourism. Bhutan has also proposed to attract 100 percent FDI equity investments to boost its agro-industries and production, and expects Thai companies to play a significant role. Thai companies are also helping Bhutan with tech transfer and access to domestic and international markets.

Although Bhutan is a small market, Thailand’s active presence carries regional importance. By aiding Bhutan’s development, Thailand opens doors for its businesses and strengthens trade relations. It is already one of Bhutan’s top three import sources. Such ventures provide economic dividends and strategic access to Bhutan’s future development trajectory. Thailand sees long-term strategic benefits in cultivating Bhutan as a close ally and economic partner in South Asia.

Interests, Geoeconomics and Connectivity

Thailand is also a potential partner for Bhutan to further its goals of reducing dependence on India, promoting economic growth, and acting as a bridge between South and Southeast Asia. India's goal to establish connectivity with Myanmar and Thailand through a trilateral highway will also advance Bhutan's aspirations. India’s part of the road project is currently expected to start in Kolkata and end at Moreh, through Kokrajhar in Assam. Parallely, Kokrajhar is also being connected to Bhutan’s Gelephu with their first rail line  to supplement the GMC project. Additionally, India and Thailand signed MoUs to reduce  travel time between Ranong port and the  Kolkata port—a prime transhipment and transit hub for Bhutan. India has also designated the Jogighopa multi-modal logistics park and inland water transport terminal as the entry and exit point for Bhutan to trade with Bangladesh. Furthermore, Bangladesh’s offering of Chittagong and Mongla ports for transit purposes will boost Bhutan’s trade with third countries, especially Thailand.

Thailand’s involvement in Bhutan, as well as in Nepal and Bangladesh, signals a deliberate effort to position itself as a bridge between South Asia and Southeast Asia.

Thailand’s engagement with Bhutan also reflects broader geopolitical and economic calculations. South Asia has traditionally been India’s sphere of influence. However, Thailand’s involvement in Bhutan, as well as in Nepal and Bangladesh, signals a deliberate effort to position itself as a bridge between South Asia and Southeast Asia. These initiatives will boost its broader connectivity ambitions within the Bay of Bengal Initiative for Multi-sectoral Technical and Economic Cooperation (BIMSTEC) and enhance regional connectivity. Albeit small in size, Bhutan enjoys global recognition for its environmental stewardship and values-driven governance as a carbon-negative nation. Supporting Bhutan allows Thailand to reinforce regional stability and project itself as a leader in South–South cooperation. Every successful intervention, investment, and initiative in Bhutan showcases Thailand’s development model, adding to its diplomatic capital in international forums.

Bhutan and Thailand have enjoyed good ties, fueled by cultural and royal connections. Historically, their relationship has focused on soft power and people-to-people connections, but in recent years, their outreach efforts have significantly increased. Bhutan, today, sees Thailand as a reliable partner with which it can diversify ties and further its economic growth and interests. On its part, Thailand sees Bhutan not simply as a partner but as a platform to showcase its development model, gain strategic footholds in South Asia, and elevate its regional and international diplomatic profile. Bhutan and Thailand are thus crafting the way for more win-win engagements for themselves and the rest of the region.

Aditya Gowdara Shivamurthy is an Associate Fellow with the Strategic Studies Programme at the Observer Research Foundation.

Sreeparna Banerjee is an Associate Fellow with the Strategic Studies Programme at the Observer Research Foundation.

• Neighbourhood
• Neighbourhood
• Bhutan
• south Asia
• bhutan thailand diplomatic relations
• bhutan thailand free trade agreement
• bhutan thailand fta
• bhutan thailand relations
• bhutan thailand trade relations
• thailand bhutan bilateral cooperation

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