81703 World Bank Group - Bhutan Partnership Country Program Snapshot September 12, 2013 1 Recent Economic and Sector Developments The recent slowing of the Indian economy and the Indian Rupee’s sharp depreciation Growth Performance are having a negative, albeit still limited, Bhutan’s growth remains strong, at an impact on the Bhutanese economy. The first average annual rate of over 8 percent. GDP impact is from imported fuel prices. Bhutan is growth in fiscal year 2013 is estimated to have highly dependent on trade with India, with four- moderated to 6.9 percent (see below), following fifths of Bhutan’s imports originating there, and the rupee shortage and subsequent measures that its currency is pegged to the Indian Rupee. drastically slowed credit expansion. Hydropower Foreign exchange denominated debt service will is estimated to contribute a third of GDP, and a be higher in domestic currency. Despite the fifth of economic growth, including direct and economic turmoil, the Government of India has spillover activities. The construction of ongoing indicated its full support for the 11th five-year and pipeline hydropower projects will continue plan (2013-2018). to be the major drivers of growth. Inflation Figure 1: Economic growth is driven directly and Inflation is accelerating, mostly as a result of indirectly by hydropower developments 10 the effects of higher fuel prices imported from 9 India. Nevertheless, year-on-year inflation was 8 5.5 percent during the second quarter of 2013, 7 compared to 8.4 percent in the first quarter. Taxes net of subsidies 6 Prices of fuel and gas jumped by 6.3 percent in Services 5 Industry (other) July following the removal of subsidies by India. Construction 4 Electricity Figure 2: Inflation and Relative Price Trends 3 Agriculture (Food, non-food, headline, year-on-year) 2 1 0 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 Source: Bhutan Statistical Office and Staff calcultations The overheating episode, which started in 2011, has ended, though its effects linger. Rapid private-sector credit growth—widely held to be a cause of the rupee shortage—has significantly dampened, following a drastic credit crunch with the Royal Monetary Authorities (RMA) putting a sudden stop to new Source: Bhutan Statistical Office and Staff construction and personal loans in an attempt calcultations curtail the demands for rupees. Fiscal Performance With the recently approved budget featuring Bhutan continues to depend on donor funding an expansionary stance, combined with off to finance its capital expenditures. The budget quasi-fiscal spending, it seems more FY2013 fiscal position is estimated to be a unlikely that the authorities will succeed in moderate deficit of 0.9 percent of GDP, down curtailing aggregate demand on the sole basis of from the previously-estimated 1.6 percent, tightened credit. The fiscal year 2014 budget is following the incorporation of donor grants not announced to have a higher budget deficit of 3.7 initially foreseen. percent combined with an off-budget “stimulus plan of around 4 percent of GDP executed The FY 2014 budget proposed in September through the banking system” (see below). by the newly elected government and recently 2 approved by the National Assembly is yet is expected to ensure future demand for another example on how exposed the country Bhutan’s electricity. No major spike in is to donor financing. A sharp drop of project electricity export revenue is expected in the next grants from India, combined with an expected four or five years, until the Punatsangchhu I and decline in nominal terms of tax collection, will II plants come on-stream with the potential to lead to a significant increase in the deficit to an more than double power generating capacity. estimated 3.8 percent of GDP. Tax revenues have been impacted this year by a change in The tourism sector has turned into an excise duty refunded from India to just a single important contributor of export revenues in year, compared to 2 years in the past. Given the recent years. Tourist arrivals and revenues tight budget constraints under which the (from convertible currency-paying tourists) have government is operating, electoral promises been expanding at an average of 15 percent per could not be fulfilled. year in the 5 years to 2012. Some 44,000 tourists arrived into Bhutan in 2012, earning the country Table 1: Fiscal framework US$ 60 million in convertible currency. About 2012/13 2013/14 an equal number of tourists arrive by land, % Nominal GDP Revised Budget mainly from India, but the statistics are not up to Revenue & Grants 36.9 26.3 date on this segment. In 2013, year-to-date (i.e. Domestic Revenue 20.7 19.2 Grants 15.5 7.1 January to August) arrivals and revenues Outlay 37.8 30 showed only a modest increase of less than 3 Total Expenditure 38.5 31.7 percent, although the peak autumn tourist season Current 18.2 16.8 Capital 20.3 14.9 is now underway progress. Net lending (NL) -0.7 -1.7 Fiscal Balance -0.9 -3.7 Figure 3: Bhutan’s balance of payments Memorandum Item Nominal GDP (Nu. in 102,149.10 113,892.90 mill) Source: Government of Bhutan, Ministry of Finance, Macroeconomic Framework Coordination Committee. The overall fiscal deficit for FY14 could well reach close to 7.8 percent of GDP, taking into account the off-budget Ngultrum 5 billion (4 percent of GDP) economic stimulus plan announced by the new government to “restart lending to productive and priority sectors”. Funded by India, the plan will be executed Source: Royal Monetary Authority and Ministry of outside the budget with the funds being mostly Finance channeled through the banking sector. Bhutan runs a growing capital account deficit Trade projected at 30 percent of GDP this fiscal year. It is essentially financed by donor Export revenues from sales of electricity are resources, of which India contributes the most expected to improve in step with better through loans and grants to finance hydropower monsoon rains in the current year. Since no development. Gross international reserves had new hydropower projects have become grown to US$938 million at end-June 2013, or operational since 2006, the fluctuation in export about 11 months of merchandise imports.1 revenues reflects the vagaries of hydrological flows. Exports of minerals and mineral-based Financial Sector products account for nearly one-half of total exports, with hydropower exports comprising a 1 further 40 percent. India receives almost 90 The Constitution requires that foreign exchange percent of Bhutanese electricity production, and reserves should be maintained at 12 months of essential imports. 3 Bhutan’s financial sector compares relatively included robust economic growth, spillover well with the rest of South Asia, with a private effects from large hydro projects, expansion of credit ratio of 49.1 percent of GDP in 2011; in the financial system with the increased number line with the South Asia average of 47 percent. of banks, large salary increases in the public The financial sector is dominated by banks the sector, and demographic factors such as urban country’s stock market lists only 20 companies, migration and high demand for housing. which is hardly surprising given a nation this size. Policy measures have slowed private sector credit growth. The liquidity squeeze – coupled Significant investments in financial sector with measures taken by the RMA to contain the infrastructure occurred in the last 3 years. rupee shortage in March 2012 (including a Among others, the use of electronic payments in freeze on new loans to the construction and commercial banks is more widespread, and a transport sectors) – appears to have dramatically fully functional Credit Information Bureau slowed credit growth. Credit growth eased from (public registry bureau) is now in place. Banking 33.8 percent in December 2011 to 12.4 percent regulations and supervision have also been by December 2012. Banks’ lack of liquidity strengthened and access to financial services has could evolve into a credit crunch with negative progressed, although unequally. repercussions for the economy. Access to financial services has improved. For Emergency prudential measures have been instance, the percentage of adults with a loan taken by the central bank, the Royal account almost tripled between 2007 and 2011 Monetary Authority. Some measures initially to 14.2 percent. The geographical coverage of considered to be temporary, such as the total ban bank branches has also risen, but remained at a on new lending in the housing and transport low average of two branches per 1,000 km2 in sectors, are still in place. Other measures have 2011. Policy efforts to improve financial been recently announced, including increased inclusion brought the launch in 2011 of a risk weightings that may result in several banks countrywide financial literacy campaign. In falling below the statutory minimum capital addition, with the support of the World Bank, adequacy ratio of 10 percent. the government developed in 2012 a financial inclusion policy to draw out policy objectives Figure 4: Credit growth (% point) and strategies to increase financial inclusion. Banking regulation and supervision are being strengthened, with the establishment of the new Royal Monetary Authority (RMA) Act. In addition, the Financial Services Act of 2011 and associated regulations aimed to better regulate the activities of various financial service providers, including non-bank financial institutions. In addition, the overall financial sector environment has improved as financial services have expanded: electronic payment systems are being adopted by commercial banks, Poverty and Statistical Capacity Building and the Credit Information Bureau is becoming operational. Bhutan is a star performer in poverty reduction with only 12 percent of the Bank credit to the private sector has grown in population below the national poverty line in recent years. Credit to private sector stood at 49 2012, having fallen from 23 percent in 2007. percent of GDP in 2012, above the average of Bhutan is the third-least poor county in South the South-Asia region (47 percent of GDP). Asia behind Maldives and Sri Lanka, with 4 Factors that contributed to the credit boom 4 percent of the population classified as poor in disparity of around 15 percent between poor and 2010 when relying on the US$1.25/day non-poor households in both urban and rural international poverty line, and barely 1.7 percent areas. Nearly all (97 percent) of households in of the population below this benchmark in 2012. urban areas, including the poor, have electricity This remarkable progress is founded on very whereas in rural areas, however, only 69 percent robust high per-capita annual GDP growth of 5 of poor households have power. Only 21 percent percent. of poor households have television, compared to 59 percent in non-poor households. Multidimensional indicators of poverty suggest that as much as a quarter of the Bhutan’s statistical system is considered population lived in need in 2010, based on fragile with limited human resources, absence results in four of the 13 indicators. In the same of legal framework, data weaknesses and poor year, Bhutan’s innovative Gross National data coordination. However, notable progress Happiness Index (GNHI) indicated that nearly has been made in remedying data weaknesses in half the population has yet to reach sufficient select areas such as price data collection and happiness levels as per GNHI measurements dissemination using a map portal. Updating the based on 33 indicators. 2008 National Statistical Development Strategy and resources to implement such a strategy are Figure 5: Poverty rates (2007-2012) relevant areas of Bank engagement with the government. Private Sector Bhutan's economy remains dominated by state-owned enterprises (SOEs), with private sector contributing a mere 8 percent of total national revenue. Advantages include a stable and low-corruption environment, reasonably good human development (including widespread knowledge of English), access to low-cost and reliable electricity, preferential access to the large Indian market, and easy access to skilled The remaining concerns are regional disparities in poverty reduction and and unskilled labor from India. Against these persistence of poverty in some dzongkhags advantages, private sector development is (districts) and urban areas. A new poverty limited by the absence of scale economies, assessment will shed light on ways to address unequal access to finance, mismatched skills of these concerns and there is a potential need for the labor force, and the lack of adequate an urgent census of poor households. The new infrastructure. government manifesto for its first 100 days mentions the conduct of such a census to To spur private sector development, a identify households that are below the poverty number of policies and laws have been line and help them with formal social transfers formulated. These include the Economic to the poor households. Development Policy and the amended foreign direct investment policy and rules and Bhutan provides equal access to public regulations. Forthcoming policies include the services. Nearly all (98 percent) of the industrial infrastructure development policy population has access to improved water (governing economic zones), the licensing sources, and there is little disparity in this protocol, the mineral development policy, the respect between poor and the non-poor renewable energy policy, the micro, small, and households. At least 80 percent of households medium enterprises (MSME) policy, the have access to improved sanitation, with a consumer protection bill, and the enterprise 5 registration act. With the support of the World Bank, Bhutan launched its first high-technology park in 2012 as a public-private partnership. Despite reforms, Bhutan’s ranking in ease of doing business in 2013 remains in the last tier, having decreased to 148 (out of 185 economies) from 142 in 2012, suggesting that more needs to be done. The private sector remains small, and while 15- to 24-year-olds represent 20 percent of the Bhutanese population, unemployment among these youth remains high. To stimulate the business sector, a The most significant health problem is the new policy addressing public-private high rate of malnutrition. Though there has partnerships has been drafted. been improvement in recent years, it is nevertheless still estimated that some 35 percent Health of Bhutanese preschool children are stunted. The government finalized the draft of the Bhutan has sustained its investments in National Food and Nutrition Security policy health over the last two decades and made during 2012. Although the burden of non- remarkable progress. In 2010-11, public health communicable diseases is growing, the health expenditure stood at 4 percent of GDP and 9 services continue to spend most of their percent of government spending, considerably resources at the district level on traditional higher than in other South Asian countries. The infectious diseases such as common cold, expansion of the network of health facilities now diarrhea, skin diseases, and conjunctivitis. In ensures that 90 percent of the population lives addition, alcoholism remains a significant health within 3 hours’ walk to a health facility. There challenge. are 25 traditional medicine clinics at Basic Health Units, and more than two functioning Education ambulances at each district hospital. Bhutan’s education expenditures are equally Access to health services is satisfactory, with strong. Public education expenditure stood at their utilization and quality requiring 7.3 percent of GDP and 16.7 percent of total improvement. The 2008 Constitution declared government spending (Ministry of Finance, that the state will provide basic public health 2012). These figures are among the highest in services free of cost to all citizens. Currently, all the South Asia region. The Constitution health services (barring a handful of dental, provides for the state to ensure free education up cosmetic, and other services) continue to be to Grade 10 for all children of school-going age, provided by the government free of charge. and to make technical and professional Nevertheless, some outreach centers are very education generally available, and higher remote and require health workers, the unsung education equally accessible to all on the basis heroes of the country’s public health system, to of merit. At the same time, this progress has led endure long walking hours (or even days) prior to a refocus by development partners on other to reaching the remote facilities. priorities, which may make it difficult to sustain high education spending. 6 Table 2: Poverty and Social indicators existing inequitable pattern of participation in secondary education. There is a growing role of private institutions and financing in the tertiary sub-sector. The government’s expansion plans for tertiary Bhutan is on track to achieve the Millennium education are ambitious, but essential for Bhutan Development Goals (MDGs) in education by to build up a human resource base to support a the end of the 10th five-year plan for 2008- knowledge-based economy. Student intake is to 2013. Bhutan has established and grown an increase to 15,000 (from just over 5,000 organized public education system since the currently). To keep this from overburdening 1960s. This diversified sector now includes over public expenditures, a greater role for the private 650 schools and institutes, more than 180,000 sector is seen, but this raises new issues of students, and nearly 9,000 teachers. Notably, quality and relevance. Since it will take the gender parity has been achieved up to Grade 10. Education City Project some years to become Females constitute nearly 50 percent of operational, the Royal University of Bhutan is enrolment in higher secondary education and the main reference point for the quality nearly 40 percent at the tertiary level. The gross assurance and accreditation framework. enrolment ratio was 71 percent at the secondary level and 30 percent at tertiary level in 2011 The government’s has decided to adopt a (World Development Indicators, 2011). single quality assurance model for both public and private tertiary institutions. This A key challenge is that, despite high will involve endorsement of accreditation as the enrolment and levels of public financing, mode of quality assurance (as distinct from learning levels remain low. Poverty remains solely audit or assessment); and structure the key among constraints on enrolment and Quality Assurance and Accreditation attendance, as corroborated by data from the implementation procedures in three tiers, Bank’s poverty analyses, demonstrating that whereby “accreditation” is the third tier, those groups of villages where fewer children preceded by registration and licensing of attend school tend to be those with institutions (tier one) and self-appraisal and peer comparatively higher poverty rates. This is review (tier two). mainly due to the high out-of-pocket expenditure for households. Social Protection A preponderance of education service There is no formal system of social protection delivery is provided through the public in Bhutan. The lack of safety nets – sector. The exception is higher secondary particularly for those outside of public sector education (Grades 11-12) where 50 percent of employment – leaves the majority of the the students are in private institutions. The 11th population vulnerable to shocks and risk. five-year plan’s proposal to expand student Employment opportunities for youth are limited, numbers will require more intensive particularly at higher-level managerial jobs, and collaboration with the private sector and change in social structures and rapid attention to school mapping to attenuate the urbanization is likely to leave many elderly rural poor without informal or social safety nets. 7 The coverage of Bhutan’s pension system is While the contribution of the agriculture limited to civil servants and joint-sector sector to GDP has been declining, it continues companies. These groups encompassed a little to be an important sector. It is particularly less 7 percent of the population in 2012. In important as a source of employment and addition, the armed forces are covered under a reducing poverty. The sector’s growth remained separate scheme. The participation in National insufficient to adequately address poverty, and Pensions and Provident Fund extends across attain food security. Immigration from rural to some part of the formal sector workforce beyond urban areas, particularly by youth and men higher income groups and a similar proportion looking for a more modern life style, has of the elderly are receiving some benefits from resulted in the feminization of the agriculture the system. This influences the decisions of the sector, particularly in the under-served areas. young people of Bhutan entering the labor market with a majority of youth focused on entering the limited opportunities in the public sector. Employability of Bhutanese youth is a key priority. The government is seeking to bring down the youth unemployment rate from 7.3 percent in 2012 to 5 percent or less by the end of the next plan period (2013-2018). With this context, the Ministry of Labor and Human Resources has decided to develop a social protection strategy, which will provide more A range of policies are needed to improve equity of social protection to those who work rural life and maintain rural population. across different sectors. Physical access to rural areas (and between rural areas and markets) needs to be improved, as There are some existing specialized grant dispersed and small-scale production hinders programs such as scholarships, and welfare adoption of good agriculture practices. Greater schemes, distributed by His Majesty the King, or access to credit and technology is needed, and a few non-governmental organizations (NGOs), sustainable approaches to pest and wild life but few are integrated into social assistance, encroachment are needed. Other issues include social insurance, or labor market programs. loss of agricultural land for other development, There is also little coordination. There is low lack of infrastructure (such as irrigation, farm coverage of target groups, as most of the poorest roads, and post-harvest storage,) labor shortages, 20 percent have no social protection coverage. and the scarcity of existing market traders and Other support to the elderly only exists through wholesalers. family and social networks. The agriculture sector is in the process of Agriculture developing its contribution to the 11th five- year plan for 2013-2018. To achieve Bhutan is predominantly an “agriculture- eradication of poverty to less than 10 percent by based society”. Smallholder subsistence farmers the end of 2018, the sector needs to grow at an who occupy the majority of the arable land and annual rate of 4 percent. The 11th five-year plan produce most of the crop and livestock products, is expected to adopt a multi-dimensional dominating the shape of the agriculture sector. approach to develop the under-served regions. According to a 2011 Labor Force Survey Report To achieve this, the Ministry of Agriculture and of the Ministry of Labor and Human Resources, Forestry has a mandate to improve food security the agriculture sector provided livelihoods to and nutrition, improve rural livelihoods to 68.4 percent of the total population, contributing overcome poverty, and sustainable management 14.3 percent of the total GDP. and utilization of natural resources. 8 Environment and Cultural Heritage policies, including the need for investments to meet basic environmental and cultural standards. Environmental conservation is a cornerstone of Bhutan’s unique development approach. Bhutan remains endowed with dense and virtually untouched forests, abundant water resources and diverse wild species. Nevertheless, it confronts chronic pressures, primarily related to land degradation and biodiversity loss due to development and population growth. Land degradation can stem from inappropriate agriculture production and mining practices, overgrazing, and excessive forest harvesting, as well as solid waste disposal in and around population centers. Threats to biodiversity include illicit forest harvesting, Bhutan has also taken steps to preserve its human-wildlife conflict, poaching, and habitat cultural heritage. Protection of its culture is fragmentation arising from land development one of the four pillars of Bhutan’s unique Gross projects. National Happiness vision. It is also a key economic driver throughout the tourism A particularly important element is the need industry. Accordingly, the conservation of for integrated water management. Despite the heritage monuments needs to be prioritized in positive outlook for water availability, incipient synergy with the development of urban challenges relate to the sustainability of urban infrastructure and services. water supply systems and functionality of existing rural water supply schemes. Ongoing Disaster Risk Management soil erosion and deforestation threaten watershed Bhutan is highly prone to disasters and conditions and their functional integrity. climate-related risks. Its rugged topography, Concern over water quality stems from the rise and geographic and climatic features make it in domestic and industrial waste generation prone to flooding, landslides, glacial lake along with improper disposal, as well as run-offs outburst floods, drought, and earthquakes. Over from agricultural fields and urban centers. the past 40 years, several earthquakes above a The government has taken several important magnitude of 6 on the Richter scale have steps to preserve the environment. Bhutan’s occurred. According to the World Bank report environment policies include mandating a on Natural Disaster Hotspots (2005), risk areas minimum forest cover of 60 percent of the amount to 31.3 percent of Bhutan’s total area, country’s total land area in the Constitution, and and 60.8 percent of population is at high increasing the proportion of land under protected mortality risk from multiple hazards. area status to around 50 percent from 26 percent The frequency and intensity of extreme in 2000. It has established a permanent Land weather events appears to be increasing. The Management Unit for sustainable land country has become increasingly vulnerable to management, and a plan for the Bhutan Trust glacial lake outburst floods, floods, drought, Fund for Environmental Conservation to adopt forest fires and loss of vegetation and more modern governance and business practices. biodiversity. Heavy seasonal monsoon rains and It has also launched a wildlife crime unit within glacial melt contribute to flooding and the Department of Forest and Park Services, landslides. Of the 2,674 glacial lakes that exist including an online reporting system on wildlife in Bhutan, 25 have been identified as potentially offenses. Protection of the environment is also dangerous. This poses not only a threat to the embedded in its Gross National Happiness development of hydropower in the country but also a threat to food security. 9 The government adopted the Disaster Management Act in 2013 to strengthen the disaster management system. The Act decentralizes disaster management activities, empowers the cross-cutting with the legal status to implement disaster reduction strategies and emphasizes a consultative process at the village level. The Department of Disaster Management under the Ministry of Home and Cultural Affairs (the national coordinating agency) is formulating a comprehensive National Disaster Risk Management Strategy for Bhutan. It is expected to result in the formation of a National Disaster Bhutan is relatively well positioned to meet Management Authority under the leadership of the challenge of rapid urbanization, given its the Prime Minister. Key challenges include low population. Nevertheless, urban strengthening preparedness and early warning institutional and governance systems need to be systems, mainstreaming disaster risk strengthened. Spatial planning is also needed, as management, including in construction, and lack of affordable housing for lower-income strengthening disaster response capacity. groups is becoming a critical issue. Another important issue is to provide for jobs for an Urban Development increasingly urban youth population. Bhutan is undergoing a rapid transition from Energy a rural economy to an urban society. The average annual urban population growth rate has Hydropower development has underpinned been around 4 percent since 2007. The Bhutan the rapid growth of Bhutan’s economy. The National Urban Strategy (NUS, 2008) projects total installed capacity of existing hydropower that by 2020, the country will be most likely 60 plants is 1,488 megawatts (MW). Of total percent urbanized. As Bhutan evolves into a annual power generated, 80 percent is exported more urbanized society, the government to India after meeting domestic consumption. recognizes the country’s unique challenges in Power exports account for the largest source of urban development, namely the rapid rates of national revenue in the form of taxes and urbanization, and the limited availability of dividends, generating more than 40 percent of serviced land. government revenue. Power exports also contribute to 25 percent of GDP, and The urbanization rate across the country is hydropower infrastructure development skewed toward the Western region. Thimphu contributes another 25 percent of GDP through and Phuentsholing are the two most favored the construction sector. destinations for migrants. Through the enactment of the Local Government Act (2009) However, power generation can get disrupted and the approval of the Municipal Finance during winter months. During wet seasons Policy (2012), the government has established existing hydropower plants can generate four autonomous cities (Thimphu, sufficient electricity to meet domestic demands Phuentsholing, Gelephu, and Samdrup-Jokhar). and power exports. Nevertheless, since all the Under the proposed National Urban System, existing plants are run-of-the-river, the total these centers would play an important role as generation capacity drastically drops to around future engines of growth. 288 MW during the winter dry seasons, being December–March. This low capacity does not meet the system peak demand during winter dry seasons. To deal with the seasonal power shortage, industrial loads have been curtailed 10 during the winter months. Winter power Bhutan has set an ambitious goal of providing shortages will likely remain until 2016 when the electricity for all by 2015. Mountainous terrain Punatsangchhu-I hydropower plant (1,200 MW) and the resultant difficulties of grid extension is expected to come online. have kept some of the rural population without access to clean energy. Traditional fuels, such as In 2008, Bhutan agreed to develop and export kerosene and fuel wood, cause indoor pollution 10,000 MW of new capacity with India by and health burdens. To reduce poverty and 2020. Under the bilateral framework, one project stimulate inclusive economic development, the at Punatsangchhu (Stage 1, 1,200 MW) has government has embarked on a large-scale rural started construction and contracts for two electrification campaign. As of December projects at Punatsangchhu (stage two, at 1,020 2012, 84 percent of households had access to MW) and Mangdechhu (720 MW) have been electricity, supported by the ADB and the Japan awarded. Seven other large hydropower projects International Cooperation Agency. In addition to are at various development stages with the grid extension to rural areas, households in Indian government and its own enterprises. remote villages may have access to electricity through standalone solar home systems. In addition, small- and medium-sized hydropower operations are being developed Bhutan has also begun to develop renewable as public–private partnerships (PPPs). In energy to diversify the energy supply base 2008, the Asian Development Bank (ADB) through wind, solar, biomass, and small and agreed to finance the Dagachhu hydropower micro hydropower. Wind power projects have project (126 MW) as the first PPP infrastructure the potential to generate clean energy to in Bhutan. The project’s joint venture was supplement hydropower in winter dry seasons. established between Druk Green Power Corp. Bhutan also has biogas development potential as and India’s Tata Power Company. The an alternative energy source to replace fuel Department of Hydropower and Power Systems wood for cooking in rural areas. Rural also intends to promote independent power households depend heavily on fuel wood, which producers as the next step after formulating emits indoor air pollutants and poses a health applicable rules and guidelines. hazard. To promote renewable energy, a national policy must be established and financial and Hydropower development will require fiscal incentives provided to help overcome the extensive investments in power transmission. entry and financial barriers for development. While these transmission lines are expected to be developed and aligned with hydropower Transportation development, a holistic development approach will be crucial for the network expansion to Transportation is the biggest infrastructure maximize the investment benefits and minimize problem encountered by firms in Bhutan any adverse safeguard impacts on transmission according to Bhutan’s 2010 Investment Climate corridors. Assessment. In rural areas transport connectivity is also a key determinant of affordable access to basic social and economic services. The Bhutan Living Standards Survey (2012) reports that transportation services alone account for approximately 23 percent of the cost incurred where households sought health care to address sickness or injury. In the broader economic context, roughly 40 percent of all firms and 70 percent of large firms surveyed had experienced losses due to ground transportation difficulties. 11 urban areas nearly tripled between 1990 and 2010. Increasing rates of motor vehicle ownership and use have accompanied this trend bringing with them unprecedented impacts on the urban environment (many negative, including emissions, congestion, noise, etc.). Bhutan’s urban transport systems are still developing to meet increasing demand for urban mobility. Nevertheless, less than one third of urban households in Bhutan report using public transport in a given month. Bhutan has achieved significant milestones in Governance, Public Financial Management the transport sector. Investments under the 10th and Procurement five-year plan have helped increase connectivity towards the official goal of having 85 percent of Bhutan outperforms its neighbors on the population within half a day's walk from the Transparency’s International’s Corruption nearest road. Parliament has also passed the Perception Index. In 2012, Bhutan moved Road Act in 2012, which empowers the further up the index from 38th to 33rd in Department of Roads to coordinate various recognition of additional steps it has taken to institutions working in the roads sector. These strengthen its anti-corruption legal framework, accomplishments show a strong government including passage of the 2011 Anti-Corruption commitment to developing Bhutan’s transport Act, the establishment of an Anti-Corruption sector and the institutions that will sustain it into Commission, and further strengthening of rules the future. Recent achievements, supported by governing asset declaration by public servants in World Bank projects, include: (i) 67 km of new 2012. A key element for improving governance roads, (ii) 24 km of improved roads; and (iii) has been an ambitious government-to-citizen Seven newly constructed automobile-capable program to provide services electronically bridges. Project beneficiaries have experienced a through community centers, which is 62 percent reduction in travel time to reach particularly important in light of geographical schools, clinics, and other services. barriers. Similarly, with support from the International Finance Corp. (IFC), the Looking forward, Bhutan Transport 2040 government has developed a government-to- envisages meeting increased demand for rural business e-portal to provide a comprehensive transport with a dzongkhag (district) road inventory of licenses and other information on network that is three-and-a-half times its current business processes. length with connections to every geog (an administrative reference to a group of villages). Achieving such targets will require approximately 2,500km of new roads. Bhutan Transport 2040 also targets major investments such as (i) widening of the existing East–West Highway (and other key routes) to two lanes; (ii) improving access routes between industrial centers and major border crossings; and (iii) improving various existing alignments along the Public financial management reforms are national highways network to improve safety among national priorities. Bhutan over the and travel times. years has been making progress in the area of accounting, budget execution oversight, control, Improving urban transport services is also a and reporting. Parliamentarians increasingly pay priority. The number of Bhutanese living in attention to the budget approval process and also 12 in reviewing the audit observations through and one Global Environment Facility grant public accounts committee. The public at large operation (Sustainable Financing for has also become more demanding in terms of Biodiversity Conservation). In addition, the transparent and efficient government. World Bank manages several small grants for Nevertheless, further improvement is needed on Bhutan on disaster management, corporate oversight of public sector entities, predictability governance, public financial management, urban in funds available for expenditures, the quality budget processes, and improving resilience to and timeliness of budget reports and financial seismic risk. statements, and effectiveness of internal audits. The World Bank has also extended three Significant progress has been achieved on development policy operations over the last public procurement reforms. Among the six years. The World Bank’s Board of outcomes are: (i) the introduction in 2009 of Executive Directors approved the most recent new procurement rules and regulations, and (Development Policy Credit-2) in November standard bidding documents for goods, works 2012 for a total of US$36 million. This and services, (ii) the establishment of the Public operation has focused on: (i) Promoting Procurement Policy Division in August 2008, government efficiency and effectiveness through (iii) the career path and recruitment tools put in sound fiscal and public financial management place for a procurement profession, (iv) the and procurement, and strong public generally well-functioning procurement market, administration; (ii) Fostering private-sector and (v) a strong framework for control and audit, development by improving the policy spearheaded by the Royal Audit Authority and environment and facilitating productive the Anti-Corruption Commission. Because of employment opportunities; and (iii) Expanding this progress, the World Bank is moving towards access to infrastructure in a sustainable manner. use of country systems for all procurement in Bhutan from end FY2014. The World Bank also provides knowledge support. Recent analytic work includes a The World Bank Program in Bhutan Human Development Public Expenditure Review, a review of higher education, and an The current joint World Bank/IFC-Bhutan Investment Climate Assessment, which served Country Partnership Strategy (CPS) covers to underpin the most recent budget support the period FY11-14. It is aligned with three operation to improve the policy framework key strategic frameworks: the Principles of governing private sector development. A Gross National Happiness; Bhutan 2020 Vision, poverty assessment, a financial sector and the 10th five-year plan (2008-2013). The assessment, and a green growth study are CPS has two areas of engagement: (i) economic underway. diversification, job creation and financial inclusion and (ii) spatial planning and public The next CPS is scheduled to begin in FY services, with two crosscutting themes: capacity 2015. It is anticipated that many of the themes of building and environmental sustainability. the current CPS will continue to resonate. The bulk of IDA financing is expected to continue in The World Bank provides around US$15 the form of development policy lending, million-20 million of new resources from the supplemented by a limited number of specific International Development Association (IDA) per year. There are four ongoing specific investments in key areas, particularly investment operations for a net commitment of infrastructure, and a robust analytic program. US$82 million of IDA resources. These include The next CPS probably will also reflect a shift three country-specific IDA operations toward a blend of support from IDA and the (Decentralized Rural Development, Urban International Bank for Reconstruction and Development II, Remote Rural Communities Development, in keeping with Bhutan’s Development), one regional IDA project emerging middle-income country status. (Regional Cooperation on Wildlife Protection), International Finance Corporation (IFC) 13 The IFC has a total committed investment partnership development and the financial sector portfolio in Bhutan of over US$31 million. is expected to continue. The portfolio consists predominantly of IFC’s recent equity participation in Bhutan National Multilateral Investment Guarantee Agency Bank. The advisory portfolio includes advice in (MIGA) structuring public-private partnerships, improving Bhutan’s investment climate, and Bhutan has taken the first step to becoming a enhancing access to financial services. IFC member of MIGA by signing the MIGA continues to explore areas of assistance in Convention in January 2013, which will be hydropower, tourism, manufacturing, ratified by parliament in September 2013. agribusiness, health and education sectors among others. IFC’s advisory support on investment climate reforms, public-private 14 Bhutan: Decentralized Rural Development Project Key Dates: Approved: March 21, 2011 Effective: April 26, 2011 Closing: December 31, 2013 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IBRD/IDA Govt. Multi-Donor Trust Fund 5.00 3.73 1.27 Total Project Cost 5.00 *As of June 30, 2013 Project Background: The Decentralized Rural Development Project (DRDP) was approved on March 1, 2005 for a credit of US$7 million. Effective March 21, 2011 under the Global Food Crisis Response Program (GFRP), a grant for US$5 million was allocated to Bhutan as additional financing for the DRDP to help finance the costs associated with scaled-up activities and to address the impact of the continuing high prices associated with essential food commodities. Project Development Objective: The project development objective is to improve market access and increase agricultural output for rural communities in selected areas of Bhutan. The project supports improvements to or rehabilitation of rural infrastructure (rural roads and irrigation) and promotes extension activities particularly for rice, maize, and potato crops to address disease outbreaks and low productivity. The DRDP additional financing supports three components. The first component focuses on the rehabilitation and construction of irrigation canals and on the improvement of selected roads that support rice, potato and maize production areas. The second component helps farmers improve production of rice and maize through demonstration, knowledge sharing, improved technologies, and capacity building. Finally, the third component focuses on institutional strengthening activities such as capacity- building at the local-level administration, for planning aspects, and for the physical reporting of project implementation performance, to ensure the appropriate transfer of funds to the local level. In addition, capacity-building activities for pest surveillance, financial management, environmental and social screening will be supported. Results: 1. The project is on course to achieving its targets in improving rural infrastructure (irrigation canals and farm roads) and food crop production (rice, maize and potato). To date the project has benefitted over 5,853 households (target 6,700 households) from improved infrastructure and over 7,952 households (target 8,500 households) through improved extension services. 2. A little more than 34 km of farm roads have been improved, exceeding the project’s target of 15 km. Similarly, 130 km out of a required 200 km of irrigation canals have been rehabilitated, and the remaining 70 km of canal are on track to be completely rehabilitated by project closure. 3. In the last cropping season Jan-Feb 2012, 338 tons of basic seeds of potatoes were produced. With the increase in number of contract farmers for seed production – and also with the increase in National Seed Center area for cultivation – total basic seed production is expected to exceed the 700 metric ton target by the project closing date. The multiplication of seeds of new rice, maize, and potato varieties has started, and is expected to be increasingly adopted by farmers. The adaptation rate for improved rice varieties is 45 percent against a project target of 25 percent. On the other hand 34.4 metric tons of Green Leaf Spot disease tolerant maize seeds were produced by community based seed production groups, resulting in 75 percent of affected maize seeds being replaced. The target replacement rate for the project is 80 percent. Key Partners: Ministry of Agriculture and Forests. 15 Bhutan: Second Urban Development Project Key Dates: Approved: April 29, 2010 Effective: August 24, 2010 Closing: December 31, 2015 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IDA 12.0 5.0 6.7 Govt. 0.7 Total Project Cost 12.7 5.0 *As of June 30, 2013 Project Background: Bhutan has experienced rapid social and economic development over the past two decades, and this socio-economic transition is fueling rapid urbanization. Meeting the challenges of urban development, management and finance is now a key developmental agenda of the government its international development partners. The World Bank began its support with the Bhutan Urban Development Project (1999-2006), which helped develop urban infrastructure systems in 10 secondary towns. The government showed strong interest and appreciation of the Bank’s policy advice through the project and technical assistance to prepare the National Urbanization Strategy (2008) and the Thimphu City Development Strategy. On the government side, the Local Government Act of 2009 and Municipal Finance Policy (2012) provide the framework for the roles and responsibilities of urban local governments. In that context, the ongoing second iteration of the Bhutan Urban Development Project focuses on supporting urban and municipal development in Thimphu (the capital and Bhutan’s largest city) and Phuentsholing (second -largest city and a commercial hub), as well as technical assistance for the urban local governments and the Ministry of Works and Human Settlement. Project Development Objectives: The project development objectives are to support Bhutan’s municipal reform program by strengthening municipal finance and management services in Thimphu and Phuentsholing, and improve infrastructure services in northern Thimphu where no formal services are currently available. The project consists of three components: (i) municipal finance and management; (ii) Thimphu Northern Area Development; and (iii) capacity building. Component 1 (US$1.5 million) aims to strengthen the institutional systems of Thimphu and Phuentsholing Thromdes (city corporations). The support for city-specific reforms is being done broadly through a strengthening of the local revenue administration systems and processes, and by improving the expenditure management systems and financial management systems and processes of the two Thromdes. This component also supports government policy reforms aimed at setting up a policy framework for municipal financing. Component 2 (US$9.3 million) supports the development of basic infrastructure systems in two ‘local area plans’ in northern Thimphu, including roads, storm water drainage, water supply, sewerage, and street lighting, as well as support for an increase in low-income housing units in these areas. Under component 3 (US$1.2 million), resources are being provided for training programs, equipment, technical assistance, and studies based on the needs of Thimphu and Phuentsholing Thromdes. It aims at significant upgrading of each Thromde’s capacities in various aspects of their internal work processes and service delivery to citizens through training of operational staff and provision of relevant equipment. Key Results:  Increase in local revenue collection: 50 percent by Thimphu and 40 percent by Phuentsoling.  New building permits issued for serviced plots: 175 in two Thimphu Local Area Plans being developed.  Number of households with new piped water and sewerage connections: 600 in two Thimphu Local Area Plans.  Number of municipal staff trained: 250, with 150 in Thimphu and 100 in Phuentsholing. Key Partners: Ministry of Works and Human Settlement, Ministry of Finance; Thimphu and Phuentsholing Thromdes. 16 Bhutan: Sustainable Financing for Biodiversity Conservation and Natural Resources Management Key Dates: Approved: May 15, 2013 Effective: Grant signature expected in July 2013 and effectiveness by September 2013 Closing: December 31, 2018 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IBRD IDA Other – GEF 4.08 0 4.08 Total Project Cost 4.08 0 4.08 *As of June 30, 2013 Project Background: As development proceeds apace (with 8 percent average GDP growth in the past three decades), Bhutan is facing pressures on its natural endowment stemming from population growth, agricultural modernization, hydropower and mineral development, industrialization, urbanization, and infrastructure development. In keeping with Bhutan’s enduring national commitmen t to protecting the environment, one of the five main development objectives included in Bhutan’s 20-year perspective of development goals (Bhutan 2020: A Vision for Peace, Prosperity and Happiness) is environmental conservation. Nevertheless, conservation efforts have been challenged by an inadequate system of prioritizing the wide range of environmental needs, weak institutions and capacity as well as limited financing. In recognition of the constraints, the government established the Bhutan Trust Fund for Environmental Conservation (BTFEC) in 1992. A grant from the Global Environment Facility of US$10 million (implemented during 1992-97) helped to create a permanent, well capitalized institution. In comparison to BTFEC’s notable growth in capital from bilateral donor contributio ns and careful management of investments, its grant-making performance has been modest and below its potential. With the socioeconomic development needs of a modernizing and growing population especially with the advent of constitutional democracy in 2008, BTF EC’s challenge has become more formidable. It needs to gain greater prominence, authority and credibility as an effective and reliable institution for sustained funding of conservation activities and for setting annual conservation priorities. Project Development Objective: The project’s goal is to improve the operational effectiveness and institutional sustainability of the Bhutan Trust Fund for Environmental Conservation. The project components are: (1) enhancing the operational effectiveness and sustainability of BTFEC by adopting more modern governance and business practices and ensuring the adequacy of its resources and tools going forward; (2) improving conservation management of the high altitude northern areas that support a globally important ecosystem under threat from population growth, patterns of agricultural cultivation, livestock grazing and urbanization; and (3) capacity building for mainstreaming of conservation and sustainable forest and natural resource management approaches into national policies, strategies, and plans. Results: Grant effectiveness is expected by September 2013. Key Partners: Bhutan Trust Fund for Environmental Conservation; Ministry of Agriculture and Forests, and Royal Government of Bhutan. 17 Bhutan: Remote Rural Communities Development Project Key Dates: Approved: October 2, 2012 Effective: November 15, 2012 Closing: May 31, 2018 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IDA 9.00 0.30 8.7 Total Project Cost 9.00 *As of June 30, 2013 Project Background: The Remote Rural Communities Development Project (RRCDP) project area covers 26 geogs (administrative areas containing several villages) in six dzongkhags (districts) located in southwestern and south central Bhutan. The RRCDP is designed to improve living conditions and incomes in the country's poorer and more remote rural areas. The populations in these areas currently rely on subsistence agriculture, and lack roads, irrigation, technologies, and community and social infrastructure that would allow them to improve their incomes and social integration. Project Development Objective: The main objectives of the project are to increase agriculture productivity and access to community assets in remote rural areas by improving access to markets, irrigation, agricultural technologies, and community infrastructure. Improvement in market access would be achieved by investments in farm roads and marketing infrastructure. Agricultural productivity and rural incomes would increase through promotion of improved irrigation and agronomic practices and rehabilitation of productive assets for key commodities. Community-led investments will improve the access of the poorest people to the critical and missing infrastructure in the selected area. The RRCDP consists of three components: Component A. Rural Infrastructure: The focus of this component is to connect the communities to larger roads and regional markets and to improve production potential through improved availability of irrigation. Component B. Community, Marketing and Productive Infrastructure: This component would cover investments in marketing and post-harvest infrastructure, critical community-level infrastructure, and investments identified by producers to increase agricultural productivity. Component C: Project Management and Institutional Strengthening : This component supports project management, including the monitoring and evaluation functions of the project. It covers: (a) technical and financial management, (b) procurement, and (c) supervision of compliance with environmental and social safeguards. This component will strengthen the capacity of the Ministry of Agriculture and Forests to effectively coordinate implementation and provide procurement support to local communities as needed. Results: 1. The Remote Rural Communities Development Project became effective mid-November 2012 and had its first implementation support mission in March 2013. It is therefore too soon to assess progress against the project objectives or report on results in relation to the intermediate outcome indicators. 2. The project management team has been taking proactive steps to develop 18-month work plans for the project components; identify geogs where project activities will be first implemented; begin the recruitment process for key staffing positions; and update its operations manual and procurement plans. 3. Key results indicators are:  Productivity of crops to increase by at least 20 percent in targeted irrigation systems;  Marketed value of agricultural production to rise by 20 percent in the targeted area;  Share of beneficiaries with access to critical community infrastructure to climb by 20 percent in targeted area. 4. The project is expected to directly benefit about 6,440 rural households in the project area. Key Partners: Ministry of Agriculture and Forests. 18 Bhutan: IFC’s equity investment in Bhutan National Bank Key Dates: Approved 20 December 2012 Effective: 31 December 2012 Closing: n/a Financing in million USDollars*: Financier Financing Disbursed Undisbursed IBRD IDA Govt. Other – IFC 28.5 28.5 0 Total Project Cost *As of June 30, 2013 Project Background: Bhutan faces a set of challenges typical of countries seeking to make a rapid transition from a mostly rural, agrarian society to one characterized by increasing levels of education, a large number of young people looking for more opportunities and, with increased globalization, shifting expectations and aspirations on the part of its population. It is critical for a country with such potential – yet facing a diverse set of challenges – to foster private sector-led growth and poverty alleviation. Strengthening of the banking sector is a key prerequisite in this. Project Development Objective: This landmark investment by IFC in a leading commercial bank in Bhutan, is one of IFC’s most significant and impactful investments in South Asia. IFC’s US$28.5-million investment for 20 percent stake in Bhutan National Bank (BNB) was IFC's first equity investment in Bhutan, its fourth and largest investment in Bhutan to date, and for the country, the largest investment at that time by a foreign investor. IFC’s funding will help expand the bank’s outreach into the under-banked population of Bhutan. By capitalizing on BNB’s strong platform to reach under served small and medium enterprises, the expected improved access to finance will help address a key impediment to private sector competitiveness. Results: The project will have a strong development impact on many fronts. It will initiate and generate: (i) increased access to finance in Bhutan, a frontier market, with a sizeable under-banked and rural population; which will also support inclusive growth and job creation in the country (ii) benefit Bhutan by providing BNB with access to international best practices in the areas of information technology, risk management, social and environmental management, and corporate governance, (the latter three are initiated) and by assisting the Bank in implementing its new growth strategy and expanding into new underserved market segments; (iii) positive influence on the country’s developing finan cial market and strengthening of the country's investment climate by introducing international guidelines and standards, thereby reducing systemic risk; and (iv) improvement in overall financial intermediation by promoting beneficial competition in the cou ntry’s banking sector. Key Partners: Bhutan National Bank, Royal Monetary Authority, Ministry of Economic Affairs, Ministry of Finance. 19 Bhutan: Amankora Key Dates: Approved:12/11/2003 Effective: Closing:12/19/2003 Financing in million US Dollars*: US$10 million Financier Financing - Outstanding Undisbursed IFC US$10 million US$2.9 million IDA Govt. Other US$8 million Total Project Cost US$18 million *As of June 30, 2013 Project Background: The Amankora project involved the construction of five luxury guest-house type resorts at different locations in Bhutan. The project operates under the Amanresorts brand of hotels, which is recognized in the tourism industry for its ability to create high-end resorts in unique, frontier destinations. The project is funded through a long-term loan of US$10 million and an equity investment of US$8 million. Project Development Objective: The project contributes to the development of the tourism sector in Bhutan through the pursuit of the following goals:  Creating demonstration and catalytic effects with regard to attracting private investment into Bhutan in general and to higher end hotels in particular (The Uma, Taj etc);  Direct and indirect job creation;  Supporting the government's 'high value - low impact' approach to expanding the tourism sector in Bhutan by attracting high spending, environmentally conscious and culturally interested visitors to the country;  Transferring international best practices in hotel management, including service and quality standards, occupational health and safety, and environmental management, by an experienced sponsor to the emerging Bhutanese tourism industry;  Reducing the risk of the dominance of the Indian Rupee on Bhutan's foreign exchange reserves by generating US dollar revenues for the country; and  Encouraging utilization of a significant proportion of goods and services required by the resort guests from local sources which will help develop the local supply base and encourage the growth of small and medium enterprises. Results: Bhutan appeals to world travelers seeking exotic locations and unique habitats. The Amankora project helped address limited hospitality infrastructure to enable the country to take advantage of its natural beauty to attract the tourist trade. The construction of the fivw lodges has resulted in the creation of more than 200 jobs. These developments have also stimulated an arts community, as local craftspeople, artisans, and performers benefit from tourist spending. Key Partners: The sponsors of the Amankora project are: Bhutan Hotels Limited, a company incorporated in Bhutan and fully -owned by Silverlink Holdings Limited, the owner of the Amanresorts brand of luxury hotels; and Bhutan Tourism Corporation Limited, a publicly listed Bhutanese company and the third largest tour operator in Bhutan. 20 Bhutan: Licensing Simplification Project Key Dates: Approved: November 4, 2010 Effective: November 4, 2010 Closing: December31, 2013 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IBRD IDA Govt. Other $0.522 $0.446 $0.076 Total Project Cost *As of June 30, 2013 Project Background: According to Doing Business 2010, Bhutan’s ranking in ease of doing business and starting a business was 126 ( from 124 in 2009) and 80 (from 66 in 2009) respectively. In this context, the government undertook a broad range of reforms to improve efficiency of its services. Its Economic Development Policy (2010) set the goal of reducing the burden of compliance through elimination of overlapping approvals and streamlining requirements for business start-up and operations by 2011. As requsted by the government, IFC conducted an inventory of business licenses and identified 119 licenses that had been issued by 29 agencies. The inventory also identified business entry constraints such as inefficient and cumbersome procedures related to ex- ante licenses, systemic shortcomings including gaps in the regulatory basis, duplication of information required by different issuing agencies, and poor access to information, which affects both domestic and foreign investors. To improve business licensing in Bhutan, IFC designed this project to play a special role by focusing on the in-depth analysis of key technical licenses, bringing knowledge of good international practice, and corresponding regulatory changes. In addition, the project covers system-wide reforms to introduce good practice in business licensing and to develop an electronic Licensign e-portal containing information related to business licenses. Project Development Objective: This project will help the government improve regulatory requirements underlying selected business licenses and promote streamlining, and achieve at least 25 percent time savings to the private sector due to process streamlining of three selected priority licenses. It also aims for better availability, quality, and transparency of licensing information with a targeted 10 percent reduction in compliance costs for entry licenses made more accessible through improved provision of information. Licensing Policy: The project is supporing the government to adopt a Licnesing Policy to apply international good practices in business licensing. Information Access: The project is supporting the government to improve information both online (www.g2b.gov.bt) and at the issuing agencies’ offices. Prirority License Reform: The project identified three priority licenses namely foreign direct investment (FDI) approval, project approval, and environmental clearance for in-depth reform. Results: 1. G2B Licensing e-Portal developed and launched. 2. Information about licensing made more broadly available through information charters and brochures for 11 pilot licenses. 3. FDI approval process and policy streamlined, making it significantly quicker to obtain FDI approvals. For the priority sectors, the time reduction is from 213 days to 10.5 days, and compliance cost savings are US$1.1 million. 4. Domestic project approval for medium and large businesses has been streamlined, making it faster and easier. The project also aims to contribute to the following impacts by April, 2015 (i.e. three years after project completion): • US$1 million in compliance cost savings, and; • US$10 million foreign direct investment facilitation. Key Partners: Ministry of Economic Affairs, Gross National Happiness Commission, National Envir. Commission, Ministry of Finance 21 22