ADB Loan to Help Improve and Expand Bhutan's Road Network

MANILA, PHILIPPINES - ADB will help improve Bhutan's primary road network and expand accessibility in rural areas through a loan approved for US$27.3 million.

The project will upgrade about 140 kilometers of the 244-km Gelephu-Trongsa national highway, a strategic road link connecting the Indian border at Gelephu and the main east-west highway at Trongsa. Included in the highway upgrade is realignment between the Mangdichu and Wangdigang bridges that will shorten the highway.

The project will also construct feeder roads - Mirchim-Bongo and Tekizam-Bjena in the west region, and Garbagtang-Autsho and Khardungla-Kangpara in the east - to provide access to rural areas presently not connected by motorable road.

"In a landlocked country like Bhutan, socioeconomic development depends largely on an efficient and reliable road network," says Hiroaki Yamaguchi, an ADB Transport Specialist. "As such, it is important and challenging for the Government to expand the road network while maintaining the existing road infrastructure."

Bhutan's vehicle fleet has grown rapidly in recent years, doubling from 13,600 vehicles in 1997 to almost 27,000 by the end of 2004. The country's road network, however, with 4,153 km of motorable roads, is limited in terms of coverage and unable to meet the growing demands of larger and heavier vehicles.

While all national highways are paved, 20% of these are in poor condition and improvement, maintenance, and expansion of the existing road network are urgently needed. Many rural communities also remain unconnected, with half of the country's population living more than half a day's walk from the nearest motorable road.

"The Government's budget is limited in covering the expansion of the trunk and feeder road networks while maintaining and improving the existing network, and so concessionary foreign borrowing is required," says Mr. Yamaguchi.

"This is the first ADB project in Bhutan to upgrade a north-south link road and construct feeder roads, shifting ADB's assistance in the sector to expanding economic opportunities and social welfare. This reflects the Government's commitment to road maintenance using domestic revenue after completion of the ongoing ADB-funded Road Improvement Project."

It will improve the economic prospects, living conditions, and the quality of life for communities near the project roads by providing nonfarm job opportunities, shortening travel times, decreasing transport costs, and improving access to health services and education.

To support the Government's initiative for private sector participation in the construction industry, local competitive bidding will be used for all the construction works.

A $376,000 technical assistance grant, financed by the Japan Special Fund, from the Government of Japan, accompanies the loan to help strengthen the Department of Roads' capacity in road asset management and road safety audit.

ADB's loan, covering 80% of the project's total estimated cost of $34.1 million, comes from its concessional Asian Development Fund. The loan has a 32-year term, including a grace period of eight years, with an interest rate of 1% per annum during the grace period and 1.5% per annum thereafter.

The Government will contribute $6.8 million equivalent toward the project. The Department of Roads is the executing agency for the project, which is due for completion around June 2010.