Loan to Improve Urban Infrastructure and Services in Bhutan's Cities

News Release | 18 October 2006

MANILA, PHILIPPINES - A US$24.6 million loan aims to improve urban infrastructure facilities and basic urban services in Thimphu and Phuentsholing, Bhutan's two largest cities, as well as in Dagana, a regional center.

Urban settlement is a new phenomenon in Bhutan. But the quickening pace of urbanization in the last 15-20 years is already putting pressure on the country's cities. The 4.1% unemployment rate in urban areas, for instance, is much higher than the countrywide rate of 2-3%.

Thimphu and Phuentsholing face the full force of urban migration and urban sprawl, as a result of limited job opportunities in rural areas. One result is that the expansion urban infrastructure is not keeping up with demand, for instance in the area of water coverage. Dagana, meanwhile, faces water shortages at times during the year and lack of water treatment facilities and intermittent flows pose a public health risk.

In Thimphu, the project will develop a new water supply system, upgrade a wastewater treatment plant, and improve solid waste management infrastructure. Local urban infrastructure, such as secondary roads, tertiary water distribution pipes, drainage, and sewerage, will also be provided in four new areas in the southern part of the city.

In Phuentsholing, roads and drainage, footpaths and a pedestrian bridge, and social infrastructure such as fire hydrants and street lighting will be provided.

Dagana, located in the same geographical corridor as the two project cities, is one of 20 regional centers that is yet unassisted by external aid. Under the project, water supply sources will be augmented, and the treatment and distribution system as well as sanitation will be improved, and roads and drainage upgraded.

"ADB's past assistance in the capital Thimphu and commercial center of Phuentsholing has been well received," says Tomoo Ueda, an ADB Urban Development and Planning Specialist. "By further improving health and general living standards, the project will boost the growth potential of these three areas and assist the Government's drive toward meeting the Millennium Development Goals targets."

About 55,000 people will directly benefit from improved urban infrastructure, while around 19,000 in poor areas will benefit from improved water supply and sanitation.

The project will also help increase awareness in the communities of proper hygiene, and boost management of urban facilities by government agencies.

ADB's loan, which covers 80% of the project's total estimated cost of $30.75 million equivalent, comes from its concessional Asian Development Fund. It carries a 32-year term, including a grace period of 8 years, with interest charged at the rate of 1% per annum during the grace period and 1.5% per annum after. The Government will finance the $6.15 million balance.

The Department of Urban Development and Engineering Services at the Ministry of Works and Human Settlement will serve as the executing agencies for the project, which is due for completion in 2012.