Regions and Countries

	Table of Contents
p. 11 of 20 BACK | NEXT I. Country Performance Assessment II. Country Operational Strategy III. Sector Strategies A. Agriculture B. Infrastructure C. Social Infrastructure and Environment D. Governance Dimensions of ADB Operations E. Gender Dimensions of ADB Operations F. Private Sector Development IV. Regional Cooperation V. Donor Activities and Aid Coordination VI. Cofinancing and Catalyzing External Resources VII. ADB’s Operational Program VIII. Economic and Sector Work Program IX. Local Cost Financing

Country Assistance Plans - Bhutan : III. Sector Strategies

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C. Social Infrastructure and Environment

1. Urban Development

65. Enrolment at all levels has grown at an impressive rate over three and a half decades. For instance, the gross primary enrolment rate was estimated to have reached 72 percent in 1995 from a level of just 12 percent in 1980. Having achieved significant improvement in the country's basic education system, the emphasis in the sector is gradually shifting to skills development. The acute shortage of trained personnel at all skill levels, however, has been a major impediment to national development in Bhutan. To overcome this constraint, the country has to rely on expatriate personnel. The Government has realized that dependence on expatriates is only a temporary solution. Developing indigenous human resources to improve the efficiency and productivity of public and private agencies is the long-range development objective. Bhutan's vocational training system, however, is inadequate, and there is a severe mismatch between the demand and supply of skilled workers in terms of quality and aspirations. The Government has introduced a policy to include vocational elements in the education system, in an effort to make education more relevant.

66. ADB has provided assistance for the establishment of the Royal Institute of Management (RIM) and the Royal Bhutan Polytechnic (RBP) under a loan for Technical and Vocational Education and Training project. Based on the recommendation of Bank assistance, the National Technical Training Authority (NTTA) was established to strengthen the capabilities in providing necessary skills training to meet the market demand. Efforts under all existing technical institutes will be consolidated to achieve this objective under the NTTA. National Employment Board (NEB) was recently established and may eventually become the Ministry of Labor. It will be necessary to develop mechanisms to link closely training requirements with employment opportunities. An ADTA is planned in 2000 to assess and develop the necessary institutional requirement of NTTA.

67. ADB will be to continue to address the country's need for basic skills in order to achieve a better balance in the supply of available skills and the demands of the labor market. This is an important measure to address one of the major constraints for private sector development. Efforts include the creation of demand-driven structures for technical and vocational education training, namely by: (i) strengthening the currently weak but improving institutional capacity; (ii) addressing to the extent possible the negative perceptions of manual work; (iii) improving the quality of technical and vocational training; and (iv) widening access to training facilities and programs particularly the rural population and women even in urban areas.

68. The challenge of ADB's proposed intervention is to have a national impact on incomes and the skills' situation, pursue ways to reach more people-particularly women-and to do so in cost-effective as well as responsive ways to meet the needs of the market. Ongoing and related activities to support skills development, which were financed by Government of Denmark and UNDP through Ministry of Trade and Industry and Bhutan Chamber of Commerce and Industry as well as the World Bank and the Swiss Development Cooperation (SDC) under the Secondary Education Project, will need to be closely coordinated. German Development Cooperation (GTZ) and Netherlands Development Organization (SNV) are also providing assistance to further the development of basic skills in the country. Based on the findings and recommendations of the ongoing PPTA on basic skills development, a loan is envisaged for 2001. Possible parallel financing particularly with GTZ will be explored.

2. Health

69. In the last 15 years the health status of the population of Bhutan has improved substantially (see also para. 23). Most of this improvement is the result of a significant increase in access to primary health care services, which was made possible by the establishment of 145 basic health units widely disbursed over the country. Immunization coverage among children is over 90 percent, a remarkable feat given the country's terrain and significant rural population. Similarly, the contraceptive prevalence rate has increased from 18 percent in 1994 to about 37 percent in 1998. Health indicators such as infant and maternal mortality have dropped, but remain high by regional standards. Despite the extraordinary accomplishments, the Bhutanese health care system faces some serious challenges. The 1994 National Health Survey found a population growth rate of about 3 percent per year and a total fertility rate of 5.6 children per couple.

70. An important element of the new COS is to promote financial sustainability and national self-reliance of public service. While the Government has made excellent progress in health care, there is a need to put the long-term financing of health services on a sustainable footing, and to improve the quality of care as well as the efficiency with which it is dispensed. ADB's proposed intervention of Health Care Reform Program in 2000 would help introduce crucial sector reforms to meet the current costs of improved services, reduce the fluctuations in the annual allocations of essential drugs and vaccines, and encourage the introduction of new vaccines and drugs on a sustainable basis. The scope of ADB's involvement will be consistent with the sector development framework and not overburden the capacity of the Department of Health and complement the activities of other donors, particularly the Health Sector Programme Support II from Denmark, as well as other health sector assistance from Government of India, Japan International Cooperation Agency (JICA), UNICEF, UNFPA, and the WHO. In addition, the proposed program will support establishing a Health Trust Fund that would provide an effective indirect means of addressing the health indicators through improved governance particularly in sustainable health care financing as well as supporting poverty reduction. Further assistance to meet institutional requirements for improving health services efficiency is programmed for 2001.

3. Urban Development

71. Thimphu (the capital) and Phuentsholing (the commercial center) with some smaller district center towns are already experiencing rapid population growth (e.g., 7-10 percent growth per annum in Thimphu). Urban problems are conspicuous in large urban centers, including shortage of low-income housing, squatting on vacant government land, unplanned conversion of agricultural land without proper urban infrastructure, inadequate water supply, and sanitary/environmental problems due to inadequate solid waste, wastewater, and storm water disposal systems.

72. While urban planning was introduced during 1983-1987, it remains rudimentary due to shortage of experienced staff, an underdeveloped enforcement mechanism, and inadequate budgetary provision. The Government recently established the autonomous Thimphu City Corporation with the authority to impose and retain user charges for the provision of municipal services. This new institution needs to be fully developed with clearly defined responsibility and authority and with capabilities to undertake urban management effectively. Land management is underdeveloped, causing irregular development in the peripheral areas of large urban centers. The Government has recognized these issues and has adopted policies designed to develop regional growth centers, devolve authority to local levels, and provide needed urban infrastructure to the expanding urban population in Thimphu and Phuentsholing. Under the Eighth Plan, the Government plans to achieve a balanced and sustainable system of settlements, which would incorporate the growth center strategy. The Government has recognized the problem of rural-urban migration and has taken a comprehensive approach, namely: (a) population, family planning and employment; (b) investment in rural areas to retain people in rural areas by creating job opportunities; (c) development of secondary towns; and (d) efficient management of the two major cities of Thimphu and Phuentsholing. The Bank will assist the Government in achieving orderly urbanization on a sustainable basis through development of urban management systems and provision of project finance.

73. ADB's urban development focus is on improvement in infrastructure. A loan was approved in 1998 to improve drainage, roads, footpaths, parking areas, river protection works in Thimphu and Phuentsholing. Under the Bank's ongoing TA on capacity building in the urban sector, one of the major activities to be undertaken was the preparation of a draft housing sector policy document. This draft policy was completed in March 1999, and it provides an overall framework for further development by the Government of its final national housing policy statement. The policy document will guide the future development of the country's housing sector, including the subsequent preparation of housing programs, and will provide the focus for possible external support by donor agencies.

74. ADB has provided assistance to support urban infrastructure development in close coordination with Denmark. Issues were also identified and focussed on the need to develop a housing policy that can be shown to be financially sustainable. They include provision for the development of affordable housing; for full cost recovery, with limited subsidies only for low-income groups; for the identification of medium-term land requirements and the development of a land bank for future housing needs, especially in Thimphu and Phuentsholing; for the creation of long-term finance mechanisms; and for private sector participation in the provision of housing. Denmark is currently providing assistance to the Government to finalize and implement the draft housing policy as well as a pilot housing schemes for low-income households in urban areas. Based on the outcome of this pilot program and the implementation of the housing policy, the provision of loan assistance for housing development could be considered by ADB and, if it transpired, would represent an important aspect of ADB's strategy to assist low income groups and to reflect ADB's overarching objective of poverty reduction. A PPTA is tentatively planned for 2002 with a loan in 2003. The Government reiterated the priority of urban housing development and ADB would consider advance the TA and loan assistance to 2001 and 2002 respectively whenever they are appropriate.

4. Environment

75. Bhutan has a rich and largely intact natural resource base, but environmental problems are slowly emerging with soil erosion, land degradation and urbanization. Apart from NEC, the Government, recognizing the need to achieve sustainable development, also established the Bhutan Trust Fund (BTF)¹⁵ in 1991 to finance field activities for environment conservation. The BTF has performed well financially and is conscientiously managed by a secretariat in Bhutan and offshore fund manager. Over the last two years, disbursements from the BTF and field activities have increased.

76. Under Bank assistance¹⁶, the Government's EIA capabilities were strengthened. The Government was also able to establish the environmental guidelines for key sectors. While the guidelines for six key sectors have been completed, the necessary environmental guidelines for the urban sector are still lacking. The Government is utilizing its own resources to complete the environmental guidelines for the urban sector, which is considered a priority for the Government. The Government also confirmed that adequate donor resources particularly from the World Bank, Government of Denmark, and UNDP are currently available for the sector.

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