World Bank Group Consultations in Bhutan

From 7 to 12 December 219, the World Bank Group (WBG) conducted its in-country face-to-face consultations with private sector representatives of Thimphu and Phuntsholing, municipality representatives of Phuntsholing Thromde, the local government leaders and the communities in Samtse, students of Samtse High School, government officials, parliamentarians, Civil Society Organizations, non-governmental organizations, academia, youth groups.

Mercy Miyang Tembon, the World Bank Country Director (CD) for Bhutan and Bangladesh chaired and facilitated the consultations. She urged participants to highlight some pertinent and critical issues of their concern in their state and fields. She expressed her pleasure and interest in hearing from them the challenges and opportunities they have; and ways in which the World Bank Group can help in the country’s overall development agenda.  The Country Partnership Framework under preparation will  build on the findings of the Systematic Country Diagnostic, the WBG Country Opinion Survey of 2018 and will be fully aligned with the Government’s 12th Five Year Plan, adopted in January 2019. Yoichiro Ishihara, Resident Representative, Tenzin Lhaden, Operations Officer, Yutaka Yoshino, Program Leader, Pia Pallavi Trivedi, Strategy Officer, IFC and Yann Doignon, External Affairs Officer for South Asia External Communications (SAREC) were part of the consultation delegates from the WBG.

Challenges

• Lack of trust and collaboration between the government and the private sector 
• Heavy regulations and the impact of India’s GST
• Policies and the implementation gap
• Youth unemployment and human resources brain-drain

Opportunities

• Low power tariff
• No excise duty from the Free Trade Agreement 

Expected WBG Support

• Bhutan can become the Switzerland of Asia, leveraging  its small size and organic agriculture.
• Market diversification beyond India especially with Bangladesh.
• Ferrosilicon is the most traded item to Bangladesh. However, bilateral talk between Bhutan and Bangladesh did not focus on ferrosilicon, but agricultural products. It will be helpful to include ferrosilicon in future trade negotiations with Bangladesh. The WBG could inform the government to consult with the private sector before signing any trade agreements.
• Support for waterways as a transport alternative would be a welcome initiative from the WBG to have transportation advantages across regional markets (India and Bangladesh).
• Help build better trust and collaboration between the private sector and the government.
• Help improve Bhutan’s ranking in the Ease of Doing Business.
• Bhutan can benefit from being a facilitator rather than adopting technology from regional trade.
• Bhutanese trade officials need to promote businesses/trade more through value propositions than the mere mention of political stability, clean-green environment, etc.
• Bhutan should look into a new horizon of developmental activities beyond hydropower, as the absorption capacity of electricity by the Bhutanese industries is unclear.
• State-Owned Enterprises (SOEs) need to revisit their mandate and activities in order to avoid overcrowding the private sector.
• Help branding of organic products to the regional and international markets.

Last Updated: Dec 13, 2019

Challenges

• Population. The condensed population into a small-town area poses a challenge to carry the developmental activities smoothly. The other challenge is the lack of proper town development planning since its inception in the 1950s.
• Traffic congestion. This is due to one entry border point where heavy vehicles including Indian cars also go through the city. However, this problem is expected to get resolved with a road diversion plan and construction of a dry port from Dalshingpara, India to Pasakha industrial state. All the heavy vehicles particularly for the industries located in Pasakha will be diverted to the new road.
• Housing. Lack of adequate and affordable housing is another issue. Lack of housing has pushed Bhutanese people to reside in cheaper housing in Jaigaon, India. Residents often report frequent power outages, water shortages, and other social problems.
• Youth unemployment. This problem is mainly due to the lack of readiness of Bhutanese youth to take up manual jobs. For instance, almost all the vehicle parking fee collectors are Indian. This could be mainly due to social culture and stigma over low level, low salary and high costs of living. Even if there are some Bhutanese willing to do the job, the fee collecting agents could not employ them as they demand higher salaries than the Indian workers.
• Issue on Women. The women working in Drayangs (night entertainment clubs) are reported being sexually exploited and many of those are residing in Jaigaon, India. The Thromde is currently working with the concerned authorities to address this.  

Opportunities

• The municipality has a plan to develop road, sewerage improvement, and ensure 24/7 safe drinking water.
• Eco-tourism. To achieve this, it is planning and building infrastructures such as parks and to bring in cable cars.
• The municipality plans to build a pedestrian-friendly town in core city areas.
• Youth center to keep youths engaged
• Thromde has mandates to come up with an affordable housing policy.

Expected WBG’s Support

• Partner in Amochu park development for tourists.
• Revenue Management system supported by the WBG is in full use. It has helped reduce revenue leakages. Even the digitized assets can be registered in the system. ICT must be customer friendly and accessible in paying taxes and MBoB is already in use in paying utility bills.
• The12^th FYP indicates Phuntsholing municipality to support over 500 CSIs. So, the municipality has infrastructure plans in which WBG can collaborate.
• Infrastructure development. Southern belt of Bhutan has monsoon related challenges such as road and bridge damages. So, if WBG could come up with a mitigation project in slope management projects in southern belts. Also, work on low housing colony and support in promoting eco-tourism.

Challenges

• The farmers continue to face difficulty in growing vegetables due to climatic conditions and pests. They expressed their enthusiasm to learn more about the technical know-how to grow different cash crops (vegetables) for different seasons and help grow these organically. Support to curb pest attacks on vegetables is also very much needed.
• Despite people’s capacity and potential in growing vegetables and dairy, they have not been able to upscale their production owing mainly to the absence of markets. 
• Lack of arable land and availability of cows with good bloodline were a few of the other challenges.
• The availability of undisrupted drinking water supply was also an issue.

Opportunities and Expected WBG Support 

• More opportunities to pursue dairy farming if farmers get more government land on lease.
• Having a sales counter/vendor houses constructed on the Phuntsholing-Samtse highway can be an alternative to better market their products.
• Initiate field trips for farmers to another region that has successfully ventured into vegetable farming (focus on organic and for all seasons including monsoon) and impart more training on cultivating commercial vegetables and raising the dairies.
• Help to expand their access to markets and explore the scope to digitize the agriculture businesses.

Challenges 

• Water: Most of the gewogs lack access to safe drinking water. Water resource seepage is also a problem.
• Human-wildlife conflict: The farmers suffer a considerable loss to their crops due to wild animals like wild boars, peacocks, deer, and elephants. Unless this is addressed, no amount of government assistance to subsidized seeds, machinery, and manures will help sustain the agricultural activities.
• Sustainable agriculture development: Pursuing agriculture has been difficult mainly due to lack of proper irrigation, modern technologies and adequate knowledge on commercial and large-scale farming. Moreover, the monsoon has severely affected agriculture fields. Also, rearing livestock and maintaining sanitation is also a challenge owing to water shortages. So, it will be useful if the WBG could provide financial support to crop damaged farmers, build irrigation channels, and initiate land development programs in sloppy areas. Climate change mitigation and adaptation measures need to be put in place to respond to natural calamities/disasters.
• Market issues: There is a sharp drop in cardamom prices. The WBG may, therefore, help to facilitate the export of some of the commercial agricultural products directly to external markets. 
• School equipment: Students suffer from a shortage of supplies and equipment at school. The district has inadequate schools, boarding facilities, and teachers and also have short of boarding facilities. The district does not have a single private school. Therefore, the students have to seek admission in Thimphu, requiring to live in expensive rented houses posing affordability challenges on them and their parents.
• Unemployment issues: The district has the highest youth unemployment rate in Bhutan. In some of the Samtse gewogs, getting to one village from another requires crossing numerous rivers and mountains, and the lack of proper roads and bridges makes it more difficult. Placing more incentives for workers in remote areas/villages may pull back the human capital from commercial hubs ensuring balanced development.
• Health-related issues: The district has no proper health facilities, including diagnostic equipment and machinery despite the infrastructure (hospital) in place. The district has two landfill areas but has no transport service facilities. The district town has no proper sewerage and drainage systems, and street lights. 

Opportunities 

• Tourism: Some of the sub-districts have enormous potential and opportunities for eco-tourism. And road and bridge development projects could aid hugely in visualizing this opportunity for the community.
• Vocational training institute: The local government foresees vast opportunity to improve youth skills, address unemployment issues, and instill entrepreneurship in them through establishments of such centers.
• Irrigation channel: In 2013, Dumtey gewog proposed 13 km of sustainable irrigation channels for paddy cultivation, but the government could not approve the project due to budget constraints. The WBG is requested to support this.

Priority areas suggested for the  CPF

• Incomplete projects from aiding agencies: The WBG needs to follow through on its projects as some of them are reportedly left incomplete. 
• Drinking water: The participant acknowledged the WBG’s concern on access to water resources and sought their support for a 24/7 supply of safe drinking water.
• Rural infrastructure development and agriculture sector: The investments in infrastructure such as roads, agriculture-based industries and eco-tourism in rural areas would impact sustainable development, employment opportunities and balanced regional development.
• Improved public transport: There is a need for improving public transport services with special attention to assess and control emissions.
• Youth and sports facilities and rehabilitative intervention are needed to address youth related problems. Enhance youth employability by collaborating with the schools and the institutes with the right curriculum imparting the right set of skills required for the jobs.
• Affordable housing and necessary facilities in cities/towns: Needs to address affordable housing for urban dwellers. Help in having liveable and climate-resilient city planning projects. Support in instituting Early Childhood Care and Development (ECCD) projects in the country would help address equity issues in terms of accessing basic educational related services/facilities.
• Spatial issues: The WBG could help manage conflicting resources such as land use by identifying functional and dysfunctional land. Participants requested the WBG to continue supporting a scientific process for the optimum and judicial use of limited land resources.
• Investment in human capital development program is needed across the sectors.
• Private sector development and access to finance: There is a need for deeper diagnosis and deeper analysis on access to finance for the private sectors are to grow.
• Data integration and sharing: The WBG along with other development partners can assist in addressing the data gap.
• Look into country credit rating: This is mainly owing to financial support with guarantees of accessing lower and cheaper rates of loans from the WBG for future DHI projects.
• Achieve Sustainable Development Goals (SDGs): This is specific to green energy (hydro projects), its sustainability, and diversity. Also, the WBG can look into the alternative renewable energy especially the non-hydro projects such as solar and wind power to supplement and ensure sustenance in energy sector.
• Strengthen e-governance and capacity building: This would help enhance efficiency and effectiveness of the central and the local government systems: Training human resources on this would be a necessary step.
• Look into the banking eco-system: The WBG and the RMA needs to look into banking eco-system and come up with strategic solutions on financing issues.

Challenges

• Boosting private sector development: This is necessary to creating employment opportunities and balancing trade deficits. Yet many developmental projects and businesses are dominated by government agencies which slow down their growth. 
• Poverty rate and rural concerns: Although the poverty rate is going down, cross cutting issues still need to be addressed. The WBG can think in terms of building the private sector’s NPLs; help develop skills of the youths to encourage entrepreneurship, empower rural people, and provide infrastructure and facilities to curb rural-urban migration. 
• Collaboration with the Universities and R&D: The RUB can help evidence-based policy formulation with support from WBG. The WBG can help mitigate the gap betweem academia, private sectors/industries, corporates, and the government agencies in terms of R&D. 
• Lack of market: Help create market within and outside of Bhutan for agricultural products, and develop the country's ICT sector banking for market penetration. 
• Besides collateral, find out some other alternatives to ease access to finance.  The youths lack preparedness for the job and are found having no long-term professional planning. Investing in education and human capital would be helpful. 
• Less access to finance for artisans despite their skills. APIC promotes to enhance the skills of people of artisans but they have less access to finance due to lack of collateral. 
• The next cycle of the WBG’s partnership is critical since Bhutan will be graduating from LDC by 2023 and the way the WBG do business might change. Having a proper structure to engage CSOs is important as they face red-tapism, bureaucratic process, and cultural hindrances while working with the government in addressing some address common national issues. 

Challenges and opportunities

• There is a lack of involvement of the  private sector in the overall policy and decision-making process and many often, their challenges and opportunities are often pre-assumed.
• The UN currently takes the lead in coordinating the disaster management with the Royal Government of Bhutan and welcomes WBG and others to join this effort.
• More focus is needed on creating employment opportunities for the educated youth.
• Finance domestic investments (capital market development)
• Facilitate trade facilitation in order for a smooth transition from the LDC status to a self-reliant economy.
• Think through innovation and facilitate to create lab and think tank groups
• Work towards greater service delivery in all the sectors.
• Focus on local governance as the 12FYP places utmost importance on decentralization (with 50% of the budget being allocated to LG).
• Optimize resource in promoting private sector growth.
• Promote and support gender equality by investing in women and their initiatives. 
• Coordinate and collaborate with different institutions and committees on climate change issues.
• The overall bureaucratic system of not getting prompt response from government officials is a challenge.
• Help curb both quantity and quality from the city infrastructure developmental activities.
• Work with the NSB for data management programmes like the WBG has before, e.g.  updating of the NSDS and conducting of the living standard surveys and the country’s first economic census.
• Waste management is a gorwing concern.
• Address youth employment by coming up with programmes that also focus on engagement of parents.
• Creation of regional power pull as heavy reliance of Bhutanese economy on India exposes its economy to risk and vulnerability. 

Areas for collaboration

• Have an entrepreneurship support system. 
• Maintain and monitor a master plan and task force for development of policies by the government.
• Guide the government and decision-making bodies in decentralizing any developmental activities.
• WBG help upscale human capital and social protection.
• Bhutan welcomes data collection unlike some other countries, so help formulate data driven policies.
• Help the government make climate change-mitigation and adaptation plans.
• Sanitation and agriculture are another area of collaboration. 
• Collaborate and work on the behavioral aspect of youth with universities. 
• Semi-autonomous plan called TVET is expected to transform the challenges of unemployment and reduce skill gaps.
• Use tele or virtual conferencing for as medium for consultations with districts for broader consultation.
• The e-consultation should be made available online.
• Sharing of information on eachother’s projects and programs in a multisectoral way before discussing with relevant ministries and other shakeholders.
• Partners need to think through together over holistic development approaches to have better footprints in the fields.
• The WBG should conduct more consultations at the individual level and involve GNHC and planning department to ensure coordination.
• Any infrastructural plans need to be looked at broader horizon with a holistic approach. 

Key areas where WBG support can help 

• There is a need for longer and sustainable policies that are followed up with until implementation. 
• Gender inequality in public companies. 
• Lack of access to finance for private sectors. 
• Mismatch of skills and the job.  
• Inefficient service delivery. 
• Need for investment in R&D.
• Need for disinvestment. 
• Weak online service system; for example, a cloth designing business can’t sell abroad due to money transaction issues/services at banks. 
• Water resource management- it is common problem in all the districts. 
• The WBG’s initiative into capital business like Nubri Capital would help businesses access capital. The Public Private Partnership (PPP) is also a good model to have access to finance.
• Lack of collaboration between the bureaucracy and elected members hampering implementation of plans and policies.