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Bhutan: Strengthening Policy Formulation and Implementation

Sovereign (Public) Project | 54141-001 Status: Active

The knowledge and support technical assistance (TA) Strengthening Policy Formulation and Implementation will help the Royal Government of Bhutan (the government) build its institutional capacity in the areas of policy formulation and implementation for effective debt management and robust macro- economic analysis including private sector participation. The TA is aligned with two operational priorities (OP) of ADB Strategy 2030, (i) (OP1) addressing remaining poverty and reducing inequalities including spatial disparities; and (ii) (OP6) strengthening governance and institutional capacity through innovative and sustainable solutions to strengthen the country's capacity in macroeconomic coordination and debt management. The proposed TA 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
  • Public sector management
 
Project Name Strengthening Policy Formulation and Implementation
Project Number 54141-001
Country Bhutan
Project Status Active
Project Type / Modality of Assistance Technical Assistance
Source of Funding / Amount
TA 6527-BHU: Strengthening Policy Formulation and Implementation
Technical Assistance Special Fund US$ 750,000.00
Strategic Agendas Inclusive economic growth
Drivers of Change Gender Equity and Mainstreaming
Governance and capacity development
Knowledge solutions
Private sector development
Sector / Subsector

Public sector management / Economic affairs management

Gender Equity and Mainstreaming Effective gender mainstreaming
Description The knowledge and support technical assistance (TA) Strengthening Policy Formulation and Implementation will help the Royal Government of Bhutan (the government) build its institutional capacity in the areas of policy formulation and implementation for effective debt management and robust macro- economic analysis including private sector participation. The TA is aligned with two operational priorities (OP) of ADB Strategy 2030, (i) (OP1) addressing remaining poverty and reducing inequalities including spatial disparities; and (ii) (OP6) strengthening governance and institutional capacity through innovative and sustainable solutions to strengthen the country's capacity in macroeconomic coordination and debt management. The proposed TA is also included in the Country Operations Business Plan (COBP) 2020 -2022.
Project Rationale and Linkage to Country/Regional Strategy

1. Bhutan's hydropower led growth has slowed. Bhutan's impressive annual average economic growth of 7.0% since the late 1980s has slowed down in the last two years ( 3.8% growth rate in fiscal year (FY) 2018 and 4.4% in FY2019). This year, Bhutan's economy was expected to rebound from two consecutive years of lackluster growth but the prospects were dampened with the impact of the COVID-19 pandemic and growth is projected to further slide to 1%. The high growth till 2017 was primarily driven by public sector led hydropower development, a major source of government revenue but the sector has very low employment. Additionally, the high import content of hydropower construction has resulted in a large external imbalance and high foreign currency debt, at over 100% of GDP.

2. Public sector dominates Bhutan's growth. The dominance of the public sector in the economy is reflected in the large number of state-owned enterprises (SOEs) and government linked companies. The SOEs generate about 40% of government revenues and almost half of all jobs outside agriculture. In contrast, the private sector remains underdeveloped and mainly engaged in low-scale, low-productivity investments even though the government has introduced reforms and provided incentives to improve the regulatory environment for business operations. Currently, there is limited platforms to initiate policy dialogue and carry out analysis- aiming particularly at improving ease of doing business in which Bhutan needs drastic improvement - to accelerate private sector growth and enhance contribution of private sector in the country's development process.

3. Government effectiveness is laudable but needs improvement. Bhutan has made significant progress in state-building and institutional development. It has established core institutions and expanded access to basic services resulting in impressive gains in human development including poverty reduction from 23% in 2007 to 8.2% in 2017. Currently, the government does not have a sound macroeconomic model to track and forecast key macroeconomic variables and an early economic warning system that can ensure appropriate timely macroeconomic policies and decisions. Furthermore, there is a weak vertical and horizontal coordination mechanism between the central agencies and local governments in terms of macroeconomic forecasting and planning.

4. Improvements in government effectiveness could help in stimulating private sector participation. There is an urgent need for Bhutan to refocus its policy framework to meet the requirements of a country on graduating from a least developed country status, in which the private sector is expected to play an increasing role. The government will have to keep up its momentum to enable greater participation of the private sector.

5. Government underscores strengthening Institutional capacity. The 12th Five Year Plan (FYP) targets for economic growth and job creation while also minimizing social and climate related vulnerabilities at the same time. The government is undertaking reforms to strengthen domestic resource mobilization efforts including adoption of a public finance management strategy that places priority on mobilizing domestic revenue to compensate for declining external grants.

6. ADB experiences and Lessons. In 2012, ADB supported the government with the TA Enhancing Development Management for Sustainable and Inclusive Growth. Lessons and evaluation of the TA interventions indicate that continued capacity strengthening in the areas of macroeconomic analysis (including enhancing private sector participation) and macroeconomic forecasting, fiscal planning and effective debt management is required to enhance effectiveness, efficiency and success of development projects and programs.

Impact Bhutan's macroeconomic coordination strengthened
Project Outcome
Description of Outcome Macroeconomic planning and debt management improved
Progress Toward Outcome
Implementation Progress
Description of Project Outputs

Macroeconomic forecasting and debt management system strengthened

Integrated knowledge management and institutional capacity-building program in research and analysis improved

Status of Implementation Progress (Outputs, Activities, and Issues)
Geographical Location Nation-wide
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) Individual International consultants

(4) Individual National consultants

Procurement (1)Debt management system upgradation (single source selection)
Responsible ADB Officer Tshering, Nidup
Responsible ADB Department South Asia Department
Responsible ADB Division BHRM
Executing Agencies
Ministry of Finance
Royal Government of Bhutan
Thimphu, Bhutan
Attention: Director
Timetable
Concept Clearance 20 May 2020
Fact Finding 26 May 2020 to 27 May 2020
MRM -
Approval 26 Jun 2020
Last Review Mission -
Last PDS Update 29 Jun 2020

TA 6527-BHU

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
26 Jun 2020 06 Jul 2020 06 Jul 2020 30 Jun 2022 - -
Financing Plan/TA Utilization Cumulative Disbursements
ADB Cofinancing Counterpart Total Date Amount
Gov Beneficiaries Project Sponsor Others
750,000.00 0.00 80,000.00 0.00 0.00 0.00 830,000.00 26 Jun 2020 0.00

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.

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Safeguard Documents See also: Safeguards

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None currently available.

Evaluation Documents See also: Independent Evaluation

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Related Publications

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Tenders

Tender Title Type Status Posting Date Deadline
Strengthening Policy Formulation and Implementation Individual - Consulting Closed 19 Nov 2020 25 Nov 2020
Strengthening Policy Formulation and Implementation (Economist, International Consultant) Individual - Consulting Closed 10 Aug 2020 16 Aug 2020

Contracts Awarded

No contracts awarded for this project were found

Procurement Plan

None currently available.