Countries and Regions

	Table of Contents
p. 14 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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F. Private Sector Operations

65. In the Eighth Plan, the Government is committed to provide an "enabling environment" for private sector development in the country. The Government recognizes the important role of the private sector and considers it the single most important source of future employment. At the same time, tax revenues generated by an expanding private sector will become an additional source of revenue for the Government. The key constraints to private sector development are: lack of adequate physical infrastructure; stringent government policies over private sector activities; limited institutional and regulatory capabilities to effectively utilize credit facilities; inadequate legal framework; limited entrepreneurial skills, including lack of manpower of varying levels of skills; and lack of information on export markets and modern technologies.

66. In addition, policy impediments have to be removed and support to enhance entrepreneurial skills is required. UNDP is assisting the Government in this effort, and ADB is closely coordinating with UNDP in formulating the proposed assistance in skills development. The Government will continue to pursue further liberalization of external trade, export promotion, and liberalize the access of foreign exchange for both industrial and consumption purposes.

67. ADB approved a sector development program (SDP) in 1997 to facilitate financial sector intermediation.¹² One component of the SDP is an equity investment in BNB. This is the first time that ADB had been involved in direct equity investment in Bhutan. Through this loan, ADB will assist the Government in implementing important financial reform measures, strengthening the capabilities of financial institutions, and developing entrepreneurship. Under ADB’s proposed TA on portfolio management for financial institutions, project appraisal, monitoring and evaluation, and risk management will be enhanced to further support private sector development. ADB is preparing a private sector strategy this year to identify the most effective means of supporting private sector development in the country. ADB is also assisting the Government to corporatize the DOP with an agreed Action Plan for restructuring the power sector. ADB will also help to promote private sector participation in hydropower development.

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