This study analyzes the constraints facing the private sector in Bhutan by conducting a nation-wide questionnaire survey of 168 micro/cottage, small, and medium-sized enterprises. Regulatory constraints are found to be the topmost constraint followed by the lack of finance and poor infrastructure. The variance and severity level of constraints differ significantly between urban and rural districts with respect to size, sector and ownership. Categorization and segregation approach generated a distinct portrayal of constraints and idiosyncratic requirements of urban vis-à-vis rural firms, even within and among micro and small enterprises. Factor analysis and multiple regression analysis further corroborated these results. The findings suggest a strong need to promote the growth of Bhutanese private sector through multifaceted, demand-driven approach, but specifically targeted and guided by a geographic spread and severity level of constraints. The work should be of interest to government as well as development partners involved in promoting the private sector, particularly micro, small and medium enterprises, in developing countries.
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