fbpx 53428-001: Improving Market Linkages for Cottage and Small Industries | Asian Development Bank

Bhutan: Improving Market Linkages for Cottage and Small Industries

Sovereign (Public) Project | 53428-001 Status: Proposed

The knowledge and support technical assistance (TA) Improving Market Linkages for Cottage and Small Industries (CSIs) will help Bhutan to develop the capacity of CSIs to expose and profitably operate in domestic and international markets. The TA will support the Government in streamlining its standardization and certification processes while implementing an integrated market access program to promote select high-end CSI products. The TA is aligned with three operational priorities of ADB Strategy 2030, i.e., addressing remaining poverty and reducing inequalities, accelerating progress in gender equality, and fostering regional cooperation and integration. The proposed project is also included in the Country Operations Business Plan (COBP) 2020 2022.

Project Details

Project Officer
Tshering, Nidup South Asia Department Request for information
Country
  • Bhutan
Sector
  • Industry and trade
 
Project Name Improving Market Linkages for Cottage and Small Industries
Project Number 53428-001
Country Bhutan
Project Status Proposed
Project Type / Modality of Assistance Technical Assistance
Source of Funding / Amount
Strategic Agendas Inclusive economic growth
Regional integration
Drivers of Change Gender Equity and Mainstreaming
Governance and capacity development
Partnerships
Sector / Subsector

Industry and trade / Small and medium enterprise development

Gender Equity and Mainstreaming Effective gender mainstreaming
Description The knowledge and support technical assistance (TA) Improving Market Linkages for Cottage and Small Industries (CSIs) will help Bhutan to develop the capacity of CSIs to expose and profitably operate in domestic and international markets. The TA will support the Government in streamlining its standardization and certification processes while implementing an integrated market access program to promote select high-end CSI products. The TA is aligned with three operational priorities of ADB Strategy 2030, i.e., addressing remaining poverty and reducing inequalities, accelerating progress in gender equality, and fostering regional cooperation and integration. The proposed project is also included in the Country Operations Business Plan (COBP) 2020 2022.
Project Rationale and Linkage to Country/Regional Strategy

1. Socioeconomic Profile. Bhutan is one of the smallest, but fastest-growing economies. Its annual average economic growth of 7.0% since the late 1980s. Despite high growth rates, Bhutan has faced a persistent development challenge the economy remains relatively undiversified and heavily reliant on hydropower exports. CSIs account for 95% of total number of industries in the country and provide an estimated employment of 99,228. The CSI sector is considered significant in terms of future growth potential and economic diversification. While the sector is perceived to be promising for employment and broad-based economic growth, it faces a number of challenges.

2. CSI growth in the country is impeded by factors including weak market access. Although CSIs are considered crucial to drive Bhutan's economic growth, the performance of CSIs is constrained by factors that prevent them from realizing their full potentials. Some of the main challenges faced by CSIs are poor entrepreneurship culture, lack of access to finance, lack of access to effective business development services, and weak market linkages. In order to expose and gain sustained market access for CSI products in higher value domestic and international markets, there is a need to undertake a multipronged strategy including direct and indirect support to CSIs.

3. Weak coordination and limited capacity to formulate and implement a harmonized product standardization and certification. Currently, the Department of Cottage and Small Industry (DCSI), Bhutan Agriculture and Food Regulatory Authority (BAFRA), Department of Trade (DoT), and Bhutan Standards Bureau (BSB) are mandated to support CSI product standardization and certification. However, there is a lack of proper institutional network and coordination among these agencies. Fragmentation of strategy formulation, weak communication and coordination among agencies impedes the establishment of a harmonized framework for product standardization and certification as well as the setting up of a one-window service delivery system.

4. CSI products need to leverage on Brand Bhutan to overcome inherent sector challenges. CSI products are not competitive in the regional and international market due to challenges posed by a lack of economies of scale, high transportation costs, and underdeveloped logistics. These challenges translate into higher prices for CSI products relegating them as uncompetitive in the regional international market. In order to capitalize on the unique features of Bhutanese CSI products demonstrated in aspirations of Brand Bhutan, CSIs must leverage on this brand to gain exposure first and then sustained access to international market.

5. CSIs lack capacity for proper packaging and labeling. Packaging and labeling play an important role in influencing consumer choice and decision. While proper packaging ensures integrity and quality of the product, consumers rely on the information provided on the labels to understand the quality and value attributes of the products. Currently, CSIs do not understand and appreciate the value of proper packaging and labeling in promoting their products. It is, therefore, crucial to build the capacity of CSIs for enhanced packaging methods to realize the aspirations of Brand Bhutan and enhance access to regional and international market.

6. Additional support needed in the sector to consolidate planned investment. The government recognizes that a strong CSI base can become the bedrock of economic development for the country. Cognizant of the importance of the sector, the government has approved a Nu. 1.2 billion flagship program for CSI development in the 12th five-year plan. The program aims to promote high growth potential CSIs to enable them to become competitive in creating a niche in regional and international markets and to mainstream CSIs into the economy (footnote 3). To help the government achieve the results of the program, it is important to rally all possible support to consolidate these results and fill in missing links.

7. ADB experiences and Lessons. In 2007, ADB supported the CSI sector through the Micro, Small and Medium-Sized Enterprise Development Program to carry out policy reforms, stimulate credit to the sector and support business development services. The proposed TA reflects lessons from these ADB projects in terms of : (i) need for concerted efforts from agencies mandated to improve market linkages for SHG products; and (ii) emphasize product design, packaging and labeling to gain access to higher value markets.

Impact Increased contribution of CSIs to GDP and employment.
Outcome CSIs' access to higher value domestic and international market improved.
Outputs

National level framework for CSI product standardization and certification established

Bhutan CSI product brands developed.

Integrated market access program for the promotion of select CSI products designed and implemented.

Geographical Location Nation-wide, Bhutan
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design
During Project Implementation
Business Opportunities
Consulting Services

(2) firms will be recruited for CSI Product Promotion through CQS

(5) individual consultants will be recruited

Procurement no procurement envisaged
Responsible ADB Officer Tshering, Nidup
Responsible ADB Department South Asia Department
Responsible ADB Division BHRM
Executing Agencies
Ministry of Economic Affairs
Thimphu, Bhutan
Timetable
Concept Clearance 03 Feb 2020
Fact Finding 27 Feb 2020 to 28 Feb 2020
MRM -
Approval -
Last Review Mission -
Last PDS Update 05 Feb 2020

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.

The Access to Information Policy (AIP) recognizes that transparency and accountability are essential to development effectiveness. It establishes the disclosure requirements for documents and information ADB produces or requires to be produced.

The Accountability Mechanism provides a forum where people adversely affected by ADB-assisted projects can voice and seek solutions to their problems and report alleged noncompliance of ADB's operational policies and procedures.

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.

None currently available.

Safeguard Documents See also: Safeguards

Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.

None currently available.

Evaluation Documents See also: Independent Evaluation

None currently available.

Related Publications

None currently available.


The Access to Information Policy (AIP) establishes the disclosure requirements for documents and information ADB produces or requires to be produced in its operations to facilitate stakeholder participation in ADB's decision-making. For more information, refer to the Safeguard Policy Statement, Operations Manual F1, and Operations Manual L3.

Requests for information may also be directed to the InfoUnit.

Tenders

No tenders for this project were found.

Contracts Awarded

No contracts awarded for this project were found

Procurement Plan

None currently available.