THIMPHU, BHUTAN (6 June 2018) — The Board of Directors of the Asian Development Bank (ADB) has approved a loan and grant package totaling $53 million to promote growth in and around Phuentsholing by developing a township area adjoining the city protected by new defenses against floods and riverbank erosion.

“Erosion and annual flooding are holding back the growth of Phuentsholing, which is one of a number of Bhutan cities increasingly experiencing water-related disasters such as landslides and floods,” said ADB Senior Water Resources Specialist Mr. Lance Gore. “By addressing this issue, the project is expected to not only develop a sustainable and effective model for township management but provide opportunities for investment, create jobs, and relieve existing housing pressures.”

As Bhutan’s second most populous city with a 25,000 population, Phuentsholing is located on two major trade corridors developing under the South Asia Subregional Economic Cooperation framework and handles more than 80% of Bhutan’s trade.

Given its importance, the government in its Eleventh Five Year Plan, 2014–2018, identified Phuentsholing as one of the country’s potential growth centers that can take advantage of a location on the Indian border to become an economic hub for trade, transport, storage, and manufacturing.

Land scarcity is holding back growth, since the city is confined by steep Himalayan hills, the Amochhu River, and international borders. It is also significantly exposed to landslides caused by rain and earthquakes. Flash flooding triggered by monsoon rains occurs more frequently due to dense development, the loss of natural ground cover, and climate change.

Since 2002, the government has been addressing these issues by constructing flood and erosion defenses along the river and expanding the city away from mountain slopes onto flat riverside land for residential, commercial, and recreational use.

ADB has supported Phuentsholing’s development including urban infrastructure and road connectivity through various projects. The new Phuentsholing Township Development Project will compliment these investments.

On the left side of the riverbank next to the existing city, the project will construct 4 kilometers (km) of river walls to protect about 66 hectares of vacant land for development against floods. It will also put into operation a flood early warning system and management plan.

On the newly protected land, the project will construct urban infrastructure, including 10 km of roads with footpaths, landscaping, and streetlights, together with drinking water supply and wastewater collection and treatment systems, power and telecommunications, and solid waste management.

Beyond the infrastructure investments, the project will build capacity to improve the urban land management and service delivery of the municipal government, while streamlining coordination between the new township and Phuentsholing municipality.

The total cost of the project is $63 million, of which $24.26 million is a grant from ADB’s Asian Development Fund, which supports its lower income developing member countries, and $28.74 million is a concessional loan. The government will contribute $10 million toward the project, which is due for completion around the end of June 2025.

ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members—48 from the region. In 2017, ADB operations totaled $32.2 billion, including $11.9 billion in cofinancing.

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