Project Data Sheet

Project Data Sheets (PDS) contain summary information on the project or program: Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.

PDS Creation Date
PDS Updated as of 25 Sep 2014

Project Name Supporting Participation in the South Asia Subregional Economic Cooperation Trade Facilitation Program
Country Bhutan
Project/Program Number 47025-001
Status Approved
Geographical Location
In preparing any country program or strategy, financing any project, or by making any designation of, or reference to, a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.
Sector Industry and trade
Subsector Industry and trade
Strategic Agendas Inclusive economic growth (IEG)
Regional integration (RCI)
Drivers of Change Governance and capacity development (GCD)
Gender Equity and Mainstreaming Categories

Financing

Type/Modality of Assistance Approval Number Source of Funding Approved Amount (thousand)
Technical Assistance8437Japan Fund for Poverty Reduction1,500
TOTAL US$ 1,500

Summary of Environmental and Social Issues

Environmental Aspects
Involuntary Resettlement
Indigenous Peoples

Stakeholder Communication, Participation and Consultation

During Project Design
The SASEC Transport and Trade Facilitation Working Group (TFTWG) met in Kolkata, India in March 2012 and in Thimphu, Bhutan in November 2012, where continued support from ADB was requested for the implementation of priority trade facilitation measures in SASEC countries. In particular, the DRC of Bhutan requested ADB to provide specific technical support to strengthen the capacity of Bhutan's Customs in trade facilitation. In November 2012, an ADB mission to Thimphu, Bhutan met with the Ministry of Finance (Department of Public Accounts [DPA]) and the DRC to further discuss TA requirements. The SASEC Trade Facilitation Week held in Bangkok, Thailand in March 2013, together with an ADB mission to Thimphu, Bhutan in April 2013 that met with DRC and DPA, identified specific customs components for inclusion in the TA. All consulted parties agreed on the expected impacts and outcomes of the TA with strong support for the TA design and implementation.
During Project Implementation

Description

Project Rationale and Linkage to Country/Regional Strategy

The International Finance Corporation/World Bank's 2013 Doing Business report ranks Bhutan 172 out of 185 countries in its trading across borders category, largely due to infrastructure bottlenecks. In addition, Bhutan's trade competitiveness and market opportunities are hampered by (i) regulatory constraints, (ii) complicated trade procedures and formalities, (iii) absence of fully automated customs system, and (iv) weak coordination among domestic agencies. These barriers contribute to an estimated 38 days required to both import and export a standard container, at a cost of $2,230 (export) and $2,330 (import), placing Bhutan below the South Asia regional average in each component, and negatively impacting the country's trade potential. (i) Regulatory Constraints. Bhutan's regulatory framework for cross-border trade is complex. A lack of comprehensive import and export regulations has led to a current legal framework consisting of subsidiary legislation, such as notifications and regulations issued by various agencies. This creates overlap and complicates the legal context for trade. Further, most of Bhutan's customs practices are not aligned with international standards as outlined in the RKC. Although Bhutan became a member of the WCO in 2002, the country has not yet signed the RKC. Many regulatory documents do not conform to international standards such as the United Nations Layout Key, and the United Nations Trade Data Elements Directories: data elements on Bhutan's forms are neither coded nor do they use international codes. (ii) Complex Trade Procedures and Formalities. Several trade restrictions remain in place, affecting mostly imports, including import/export license by road from third countries, registration, and prior import/export approvals. These procedures require more documents and increase the time and cost of trading, making the current trade environment restrictive. For example, exporting oranges from Bhutan to Bangladesh requires 16 documents, takes 15 days, and costs $1,852 per truck. (iii) Lack of Fully Automated Customs Management System. Bhutan customs procedures are not generally considered a major barrier to the business climate. Although only 3.3% of manufacturing businesses view customs as a major constraint, Bhutan customs could still do better to facilitate trade. Bhutan is currently applying the Bhutan Automated Customs System (BACS) to provide trade statistics and process declarations. This only allows for semi-automated clearance, however, and does not provide real-time linkages between regional offices. BACS is also slow and unstable: in particular, updating of information in the system is not easy and requires additional manual processing. There is no risk management system linked to the BACS. Recently, the DRC included a customs functionality in RAMIS which is being developed and implemented with ADB's support. (iv) Weak Coordination of Government Agencies Involved in Trade. Currently, 11 domestic agencies are involved in entry/exit clearance of goods, including customs, quarantine, health, agriculture, forestry, environment, economic affairs, narcotics control agency, immigration, army border control, and information and communication. Not all of these agencies are present at border crossings and stations. There is no integrated clearance workflow and limited sharing of data or information among different agencies. Although working relationships are good, the absence of collaboration and sharing of information adds to the time for traders and the burden for customs. In addition, there is no forum that (i) could serve as an institution to promote trade facilitation, and (ii) where public and private entities engaged in international trade can discuss problems and jointly seek solutions. ADB's strategy is to support improvements in trade facilitation though a combination of interventions at the policy and institutional level, as well as in developing the physical infrastructure that enables trade. The SASEC Trade Facilitation Program loan/grant for Bhutan ($11.67 million) was approved on 29 November 2012 to provide assistance in reducing policy, institutional, and technical constraints to trade facilitation. The Program loan aims to (i) establish a modern and effective customs management system through accession to, and alignment with the RKC and the Framework of Standards to Secure and Facilitate Global Trade (SAFE); (ii) streamline and increase transparency of trade processes and procedures through support to the implementation of a National Single Window; and (iii) improve services and information for traders through the establishment of trade portals and trade facilitation committees. The funds from the Program loan will be released in two tranches and are anchored on Bhutan's compliance to agreed tranche conditions. The first tranche release was approved in May 2013 and the second tranche will follow 18 months after the first tranche release. The proposed TA will provide needed assistance to Bhutan in fulfilling the conditions set in the loan agreement, and at the same time support the overall SASEC trade facilitation sector.

Development Impact

Reduction in time and cost for Bhutan's trade

Project Outcome

Description of Outcome
Better alignment of Bhutan customs procedures and practices with internationally accepted standards
Progress Towards Outcome
Bhutan acceded to the Revised Kyoto Convention in September 2014, and is committed to implementing necessary measures to bring regulatory frameworks and procedures into line with the General Annex of the Convention. The amended Customs Act and Rule and Regulatory Impact Assessment, drafted with assistance from the TA, will be considered by Parliament in the next session (January 2015).

Outputs and Implementation Progress

Description of Project Outputs
1. Bhutan accedes to the Revised Kyoto Convention (RKC) 2. Enhanced capacity of customs automation 3. A functional national trade facilitation body
Status of Implementation Progress (Outputs, Activities, and Issues)
1. Bhutan acceded to the Revised Kyoto Convention 15 September 2014, as the ninety-eighth contracting party. The technical assistance is supporting implementation of the General Annex of the RKC. Training delivered on implementation of specific modules of the RKC delivered 9-13 June 2014 in Thimphu, Bhutan for the Department of Revenue and Customs, together with external stakeholders meeting for sensitization purposes. 2. A Regulatory Impact Assessment Report (based upon amendments made to Bhutan s Customs Act and Rule) has been certified by the Department of Revenue and Customs. 3. The first phase User Acceptance Testing of the Customs module within RAMIS was conducted 26-29 August 2014. 4. Support rendered to Bhutan s National Trade Facilitation Committee in strategic planning and logistical convening of first three General Meetings of the Committee (January, May, and September 2014).
Status of Development Objectives
Material Changes

Business Opportunities

Date of First Listing 2013 Jun 20
Consulting Services
A total of 147 person-months of consultancy services will be engaged for this TA including 86 person-months of national consultancy. Consultant firms and individuals will be engaged in accordance with ADB's Guidelines on the Use of Consultants (2010, as amended from time to time).
Procurement
Procurement and Consulting Notices
http://www.adb.org/projects/47025-001/business-opportunities

Timetable

Concept Clearance 16 May 2013
Fact-finding
Management Review Meeting
Approval 20 Aug 2013
Last Review Mission

Milestones

Approval No. Approval Signing Effectivity Closing
Original Revised Actual
Technical Assistance 8437 20 Aug 2013 11 Sep 2013 11 Sep 2013 31 Jul 2015

Utilization

Date Approval Number ADB (US$ thousand) Others (US$ thousand) Net Percentage
Cumulative Contract Awards
Cumulative Disbursements

TA Amount (US$ thousand)

Approval Number Approved Amount Revised Amount Total Commitment Uncommitted Balance Total Disbursement Undisbursed Balance
Technical Assistance 8437 1,500 1,500 134 1,366 92 1,408

Contacts and Update Details

Responsible ADB Officer Rosalind McKenzie (rmckenzie@adb.org)
Responsible ADB Department South Asia Department
Responsible ADB Divisions Regional Cooperation and Operations Coordination Div, SARD
Executing Agencies

Links

Project Website http://www.adb.org/projects/47025-001/main
List of Project Documents http://www.adb.org/projects/47025-001/documents