46189-001: Enhancing Development Management for Sustainable and Inclusive Growth

Project Data Sheet (PDS): Details


Project Rationale and Linkage to Country/Regional Strategy

The Bhutanese economy has consistently performed well over the last few decades. Its Gross Domestic Product (GDP) grew, on average, by about 8% between 2001 and 2010, which was the highest among South Asian economies. While growth is estimated to have moderated slightly to 8.3% in FY2011 from 9.3% in FY2010, it is forecast at 7.9% for FY2012 and 8.4% for FY2013 largely on the account of continued hydropower construction. In response to the high and sustained growth, Bhutan has also been successful in reducing poverty. Based on the national poverty line, the incidence of poverty declined from about 32% to about 23% between 2003 and 2007. Sustaining a high economic growth, however, remains a major challenge in Bhutan: the economic growth is largely financed by external aid; the fiscal deficit is high; balance of payment situation is weak; public debt is mounting; and foreign exchange reserves are difficult to sustain as it is not built through exports. The recent Indian rupee liquidity issue also highlights the vulnerability of the Bhutanese economy. Recognizing these emerging challenges, the Economic Development Policy 2010 aims to achieve economic self-reliance by 2020. As a provider of stewardship for the implementation of the Policy, there is a growing need for enhancing the capacity of the Ministry of Finance (MOF). For MOF to play a stronger stewardship role in a dynamic macroeconomic context, it needs to adopt best practices pertaining to, among other things, fiscal policy and medium term fiscal framework; budgeting and public expenditure management; taxation reforms and revenue forecasting; debt sustainability analysis; and government property management and public procurement reforms. As the nodal agency for all the ADB-funded projects, MOF also plays a critical role in ensuring efficient programming as well as providing oversight of effective portfolio management. The country assistance program evaluation (CAPE) conducted in 2010 rated ADB's operations in Bhutan as successful. Bhutan also achieved the 100% success rate for completed projects based on project completion reports issued in 2000-2011. Nevertheless, CAPE highlighted that implementation efficiency, although still above the ADB average, has been declining in recent years, possibly due to the increasing size of projects and complexity of project designs, frequent project design changes, and increasing work volumes coupled with limited capacity of domestic contractors. In light of the expected increase in ADB's operations in Bhutan in coming years, there is a need for enhancing MOF's stewardship role to enhance implementation efficiency and improve development effectiveness of ADB's support in the country. In order to enhance development effectiveness of the government interventions as well as ADB's support, it is critical to ensure that they are more evidence-based. Data from the Third Bhutan Living Standards Survey (2012) under ADB's ongoing TA will be particularly useful to update the country's assessment on poverty and other various development outcomes. The 2012 survey data together with data from the 2007 Second Bhutan Living Standards Survey also allow for evaluating key achievements of the government's Tenth Five Year Plan (2008-2013) and the development impact of some of ADB's key projects implemented in Bhutan. While ADB's support for undertaking such assessments will be useful, it is equally important for ADB to provide support for enhancing the government's analytical capacity to formulate more evidence-based policies. Bhutan 2020: A Vision for Peace, Prosperity and Happiness (Bhutan Vision 2020) indeed highlights the need for strengthening the capacity of the government to monitor and evaluate the development process and to undertake policy relevant research on development issues and this TA aims to support this identified need. In addition, the government is elaborating a new economic paradigm that is based on wellbeing and happiness. The proposed TA also aims to contribute to this effort in response to the government's recent request for ADB's support.

Impact

Improved socio-economic management of the government for sustaining a high and inclusive growth trajectory.

Project Outcome

Description of Outcome

Improved MOF and government capacity in development management

Implementation Progress

Description of Project Outputs

Strengthened analytical skills in macroeconomic management and project implementation Enhanced knowledge of socioeconomic assessment and impact evaluation studies

Stakeholder Participation and Consultation

During Project Design
The government will be consulted regarding the TA concept paper and the TA report.

During Project Implementation
The Ministry of Finance (MOF) willl be the executing agency. The Department of Public Accounts (DPA), MOF will be implementing agency. The Director of DPA will oversee the TA implementation.



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.

Project Data Sheets (PDS)

Timetable

Concept Clearance
10 Oct 2012

Fact-finding
29 Oct 2012 to 31 Oct 2012

Approval
28 Nov 2012

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