Countries and Regions

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p. 4 of 4 BACK | NEXT I. Current Development Trends and Issues II. Implementation of the Country Strategy and Program III. Portfolio Management Issues IV. Country Performance and Assistance Levels

Country Strategy and Program Update 2003-2005: Bhutan

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IV. Country Performance and Assistance Levels

A. Lending Level Proposed

33. Based on the performance-based allocation (PBA) exercise, indicative ADF lending of $35 million was programmed for 2003–2005, or an annual average of $11.7 million. The actual allocation is however subject to the outcome of the annual PBA exercise each year. Further, the assessment of the country-specific criteria is the basis for triggering a high or low lending scenario each year (Appendix 1, Table A1.10).

34. There are 4 loan projects in the pipeline for 2003–2005 (Appendix 1, Table A1.11), of which 3 projects are classified as poverty interventions including 1 core poverty intervention. The lending program will assist the Government in reducing rural poverty by expanding market access and power, creating an enabling environment for private sector development by trade promotion, and accommodating urban growth and related demand for services by providing urban infrastructure particularly housing. Part of the rural development projects to promote cross-border trade and expand the transport network¹² will be funded by the subregional cooperation initiative. The concept papers for the lending products are in Appendix 2.

B. Nonlending Program

35. A TA program comprising 12 projects (2 project preparatory technical assistance [PPTAs], 2 economic, thematic, and sector works, and 8 institutional development technical assistance) is proposed for 2003–2005, for a total amount of $4.4 million (Appendix 1, Table A1.12). This is equivalent to an average of about $1.5 million a year, which is in line with the TA resources available but substantially lower than the actual average of $2.2 million provided to Bhutan in 1997–2001. Concerted efforts will be thus required to augment TA resources through cofinancing. The TA program excluding PPTAs is largely focused on institutional strengthening of the power sector that is the most important sector in Bhutan and the financial sector that facilitates private sector development. The concept papers for nonlending products and services are in Appendix 3.

C. Summary of Changes to Lending and Nonlending Program

36. The new program now includes (i) the subregional infrastructure development and trade promotion project to develop the private sector; (ii) two financial sector TAs—development of payment system, and development of non-bank financial institutions; and (iii) three energy sector TAs—capacity building of Bhutan Energy Authority, establishment of Druk Hydro Power Corporation, and energy efficiency management. ADB will also help the Government monitor poverty, improve environmental sector capacity, improve quality of education, and undertake decentralization.

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