Craft manufacture is the predominant industrial occupation, and homespun textiles—woven and embroidered cottons, wools, and silks—are the most important products. Other Bhutanese handicrafts include daphne paper; swords; wooden bowls; leather objects; copper, iron, brass, bronze, and silver work; wood carvings; and split-cane basketry.
The economy in the 21st century has become increasingly dominated by the hydroelectric sector, and the building of new power projects has led to double-digit growth in the transport and construction sectors, including a number of local cement operations. The country's first cement plant was completed in the border town of Penden in 1982 by India, to which the bulk of its output is exported. Bhutan's first mega power plant, the 336-MW Chukha hydroelectricity project (CHEP), came on line in early 1987, having been first agreed to as a turn-key operation with India in 1961, on what has become a standard arrangement of 60% grant and 40% concessional loan. 70% of the power generated by the CHEP is exported to India, and by 1996 export receipts were sufficient to produce a trade surplus with India. Nevertheless, it is estimated that only about 3% of Bhutan's hydroelectric potential has yet been exploited, and even less of its industrializing potential. The decade following the opening of the Chukha facility, 1988–1998, saw more government resistance to industrialization of Bhutan than support, and progress has been slow. In 1988, in conjunction with the country's sixth economic plan (1987–1992), the Bhutan Development Finance Corporation was established to promote small- and medium-scale businesses. A second cement plant was established in Nanglam by the late 1980s, and another, in 1995, in the same town, by an Indian investor, along with several manufacturing plants producing carbide, particleboard and other products destined for the Indian market, but Bhutan industrialization was hobbled by stridently anti-foreign, anti-modernity policies. In fact, security problems in Nanglam have caused to government to close down the Project Office there and shift to a temporary office in Gelepu. There has been some renewed opening in the late 1990s, but by the end of 2002 only one rather small power plant and part of a second have been brought on line: the India-sponsored 60 MW Kurichhu hydroelectric project, and the first, smaller phase of the Austria-sponsored 65 MW Basochu hydropower project. The truly major, and fully India-funded, 1020 MW Tala Hydro-electric Project (THEP) was begun in 1998 with targets for completion in 2004 and 2005. Plans for the even more ambitious Sunkosh Multipurpose Project (SMP), with installed capacity envisioned at 4,060 MW, were developed by the India's Central Water Commission in 1997. It is expected to take 10 years to complete. Two other projects that have been submitted to government of India for consideration are a 360 MW plant at Mangdue Chu and a 870 MW plant at Puna Tsangchhu.
There are a large number of small, privately owned sawmills throughout Bhutan since most of its domestic energy actually comes from firewood, not electricity. A sawmill with a furniture-making unit has been established in Thimphu. Industrial estates have been set up at Phuntsholing and Geylegphug, and the Ninth Five Year Plan (2002 to 2006) calls for five to be located around the country.
Besides cement, there is a narrow range of other manufactures exported—ferro-alloys, calcium carbide, processed foods and particleboard—which tend to rely on energy-and capital-intensive methods and expatriate labor. Bhutan Ferro Alloys Ltd., which makes ferrosilicon and exports to India and Japan, began operations at a new plant at Pasakha in April 1995. Calcium carbide is produced at several private dolomite-mining operations, as well a private and joint public-private limestone mining operations. Manufacturing as a share of GDP has risen from 3.2% in 1980 to 8.2% in 1990 to 12% in 1998 to an estimated 20% in 2001. It is likely that with the emphases in the Ninth Five Year Plan on commercial and private sector development as means of achieving economic self-sufficiency and generating employment, this share will continue to grow.