TenthPlan Vol1 Web

8/17/2019 TenthPlan Vol1 Web

1/184iTenth Plan Document, Volume 1

TENTH FIVE YEAR PLAN

Gross National Happiness Commission

Royal Government of Bhutan

VOLUME 1: MAIN DOCUMENT

2008-2013


2/184iiTenth Plan Document, Volume 1

© Copyright Gross National Happiness Commission (2009)

Published by: Gross National Happiness Commission

Royal Government of Bhutan

ISBN 978-99936-769-0-4

ISBN 978-99936-769-2-8 (For Set)


3/184iiiTenth Plan Document, Volume 1

His Majesty Jigme Khesar Namgyel Wangchuck


4/184iv Tenth Plan Document, Volume 1


5/184 v Tenth Plan Document, Volume 1


6/184 viTenth Plan Document, Volume 1


7/184 viiTenth Plan Document, Volume 1

CONTENTS

ACRONYMS ...........................................................................................................................xii

GLOSARY ..............................................................................................................................xiiiCHAPTER 1 .............................................................................................................................. 1

1.1: Background ..........................................................................................................................3

1.2: An Overview of Ninth Plan Achievements ........................................................................3

1.3: Economic Performance .......................................................................................................4

1.3.1: Growth .................................................................................................................................... 4

1.3.2: Structural Changes in the Economy .................................................................................... 5

1.3.3: Consumption, Investment and Savings .............................................................................. 6

1.3.4: Change in Prices .................................................................................................................... 61.3.5: Balance o Payments and External Resources .................................................................... 6

1.3.6: Ninth Plan Development Outlay and Expenditure .......................................................... 8

1.4: Social Development rends .................................................................................................9

1.4.1: Education & Literacy ............................................................................................................. 9

1.4.2: Health and Nutrition ...........................................................................................................11

1.4.3: Sae Drinking Water and Sanitation .................................................................................. 12

1.5: Human Development Progress .........................................................................................13

CHAPTER 2 ............................................................................................................................ 15

2.1: Introduction .......................................................................................................................17

2.2: Development Outlook and Vision ....................................................................................17

2.2.1: Evolving Strategies to Achieve Gross National Happiness ............................................. 17

2.2.2: A Vision o Bhutan in the Year 2020 ................................................................................. 19

2.2.3: International Development Goals .....................................................................................21

CHAPTER 3 ............................................................................................................................ 23

3.1: Poverty Reduction..............................................................................................................25

3.2: Vitalizing Industry ............................................................................................................28

3.2.1 Strengthening the Manuacturing and rade Sector ........................................................ 28

3.2.2: Accelerated Development o Hydropower ....................................................................... 31

3.2.3: Promoting and Facilitating the Development o Cultural Industries ........................... 33

3.3: National Spatial Planning ..................................................................................................34

3.3.1: Managing Sustainable Urban Development and Housing .............................................35

3.3.2: Conservation o the Environment .....................................................................................37


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5.2.2: Causes o Unemployment ...................................................................................................78

5.2.3: Objectives and Strategies to Promote Employment ........................................................ 79

5.2.4: argets or the Employment Sector ................................................................................... 80

5.3: Women in Development ....................................................................................................80

5.3.1: Policy and Strategies or Women in Development .......................................................... 81

5.3.2: Strategic Measures to Promote Gender Mainstreaming .................................................83

5.4: Information and Communications echnology ..............................................................84

5.4.1: IC Challenges ....................................................................................................................84

5.4.2: IC Policy and Strategies ....................................................................................................84

5.5: Environment ......................................................................................................................85

5.5.1: Opportunities and Challenges ...........................................................................................86

5.5.2: Environment Policy and Strategies .................................................................................... 87

5.6: HIV/AIDS .........................................................................................................................88

5.6.1: Introduction .........................................................................................................................88

5.6.2: Challenges .............................................................................................................................89

5.6.3: Policy and Strategies ............................................................................................................89

CHAPTER 6 ............................................................................................................................ 91

6.1: Introduction .......................................................................................................................93

6.2: Opportunities and Challenges ..........................................................................................93

6.3: Policy and Strategies ..........................................................................................................94

6.4: argets for the RNR Sector ...............................................................................................96

6.5: Financial Outlay for the RNR Sector ...............................................................................99

CHAPTER 7 .......................................................................................................................... 101

7.1: rade .................................................................................................................................103

7.1.1: Opportunities and Challenges .........................................................................................103

7.1.2: Policy and Strategies ..........................................................................................................104

7.1.3: argets or the rade Sector .............................................................................................105

7.1.4: Financial Outlay or the rade Sector .............................................................................105

7.2: Industry ............................................................................................................................105



7.2.3: argets or the Industrial Sector ......................................................................................106

7.2.4: Financial Outlay or the Industrial Sector ......................................................................106

7.3: ourism.............................................................................................................................106


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7.3.3: argets or the ourism Sector ......................................................................................... 109

7.3.4: Financial Outlay or the ourism Sector ........................................................................109

7.4: Geology and Mines ..........................................................................................................109


7.4.2: argets or the Geology and Mines Sector .....................................................................110

7.4.3: Financial Outlay or the Geology and Mines Sector .....................................................110

CHAPTER 8.......................................................................................................................... 111

8.1: Introduction .....................................................................................................................113

8.2: Opportunities and Challenges ........................................................................................113

8.3: Policy and Strategies ........................................................................................................114

8.4: argets for the Energy Sector ..........................................................................................115

8.5: Financial Outlay for the Energy Sector ..........................................................................115

CHAPTER 9.......................................................................................................................... 117

9.1: Introduction .....................................................................................................................119

9.1.1: Constraints and Challenges ..............................................................................................119

9.1.2: Basic and Secondary Education Objectives and Strategies ......................................... 121

9.1.3: argets or the Education Sector ...................................................................................... 125

9.1.4: Financial Outlay or the Education Sector .....................................................................125

9.2: ertiary Education ...........................................................................................................125

9.2.1: Constraints and Challenges ..............................................................................................126

9.2.2: Strategies .............................................................................................................................127

9.2.3: Financial Outlay or the ertiary Education Sector ......................................................129

CHAPTER 10 ........................................................................................................................ 131

10.1: Introduction ...................................................................................................................133

10.2: Policy Objectives and Strategies....................................................................................133

10.3: argets for the Health Sector .........................................................................................136

10.4: Financial Outlay for the Health Sector .........................................................................136

CHAPTER 11 ........................................................................................................................ 137

11.1: Introduction ...................................................................................................................139

11.2: Opportunities and Challenges ......................................................................................140

11.3: Policy and Strategies ......................................................................................................140

11.4: argets for the Road Sector ...........................................................................................142


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11.5: Financial Outlay for the Road and Bridge Sector ........................................................142

CHAPTER 12 ........................................................................................................................ 143

12.1: Introduction ...................................................................................................................145



12.4: argets for the Urban Development ............................................................................146

12.5: Financial Outlay for the Urban Development..............................................................146

CHAPTER 13 ........................................................................................................................ 147

13.1: Introduction ...................................................................................................................149

13.2: Opportunities and challenges .......................................................................................149


13.4: Financial Outlay for the Information and the Media Sector .......................................150

CHAPTER 14 ........................................................................................................................ 151

14.1: Surface ransport Sub-Sector .......................................................................................153

14.1.1: Introduction ....................................................................................................................153

14.1.2: Opportunities and Challenges .......................................................................................153

14.1.3: Policy and Strategies .......................................................................................................154

14.1.4: Financial Outlay or the Surace ransport Sub-Sector .............................................. 157

14.2: Air ransport Sub-Sector ..............................................................................................157

14.2.1: Introduction .....................................................................................................................157

14.2.2: Challenges and Opportunities .......................................................................................157

14.2.3: Policy and Strategies ........................................................................................................157

14.2.4: Financial Outlay or the Air ransport Sub-Sector .....................................................158

CHAPTER 15 ........................................................................................................................ 159

15.1: Introduction ...................................................................................................................161


15.3: Policy and Strategies to Conserve and Promote Cultural Heritage ...........................162

15.4: Financial Outlay for the Cultural Sector ......................................................................164

CHAPTER 16 ........................................................................................................................ 165

16.1: Introduction ...................................................................................................................167



16.4: argets for the Sports Sector .........................................................................................169

16.5: Financial Outlay for the Sports Sector .........................................................................169


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ACRONYMS

AIDS Acquired Immuno Deficiency SyndromeANC Ante Natal CareAPF Alternative Planning Framework AP Apprenticeship raining Program

BDI Bhutan Development IndexBHMC Bhutan Health and Medical CouncilBHF Bhutan Health rust FundBHU Basic Health UnitBHW Basic Health WorkerBIMSEC Bay o Bengal Initiative or Multi-Sectoral echnical and Economic CooperationBLSS Bhutan Living Standards Survey BoP Balance o PaymentsBPFFS Budget Policy and Fiscal Framework StatementCPI Consumer Price IndexDEC District Environment CommitteesDGPC Druk Green Power CorporationDPR Detail Project ReportDRA Drug Regulatory Authority

DVCD Draktsho Vocational and raining Centre or the DisabledEA Environmental AssessmentECCE Early Childhood Care and EducationEFRC Environment Friendly Road ConstructionEmOC Emergency Obstetric CareFYP Five Year PlanGDP Gross Domestic ProductGG Plus Good Governance PlusGLOF Glacial Lake Outburst FloodGNH Gross National HappinessHACCP Hazard Analysis Critical Control PointHDI Human Development IndexHIES Household Income and Expenditure Survey HIV Human Immunodeficiency Virus

HRD Human Resource DevelopmentICOR Incremental Capital Output RatioIC Inormation and Communications echnology IDD Iodine Deficiency DisorderIEC Inormation Education and CommunicationIMR Inant Mortality RateIPP Individual Power ProducerKcal Kilo CalorieLDC Least Developed Country LFPR Labor Force Participation RateLSE Lower Secondary EducationMCH Maternal and Child HealthMDGs Millennium Development GoalsMMR Maternal Mortality RatioMoA Ministry o AgricultureMoE Ministry o EducationMoF Ministry o FinanceMoH Ministry o HealthMSME Micro Small and Medium EnterprisesMSF Multi-Sectoral ask ForceMEF Medium erm Expenditure Framework MR Mid erm Review MF Medium erm Fiscal Framework NCWC National Commission or Women and Children


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NEC National Environment CommissionNFE Non-Formal EducationNID National Institute or the DisabledNIM National Institute o raditional MedicineNLFS National Labor Force Survey NSB National Statistical Bureau o BhutanNSDS National Sustainable Development Strategy

NWFP Non Wood Forest ProductsNu NgultrumNUS National Urbanization Strategy ODA Official Development AssistanceORC Outreach ClinicPAAR Poverty Assessment and Analysis ReportPAR Poverty Analysis ReportPCS Position Classification SystemPHC Primary Health CarePHCB Population and Housing Census BhutanPoA Program o ActionPPP Power Purchasing Parity PRSP Poverty Reduction Strategy PaperPVR Poverty Vulnerability Indicators

RBM Results Based ManagementRGoB Royal Government o BhutanRIHS Royal Institute o Health ServicesRMA Royal Monetary Authority o BhutanRNR Renewable Natural ResourceRM Round able MeetingRWSS Rural Water Supply and SanitationSAARC South Asian Association or Regional CooperationSDGs SAARC Development GoalsSME Small and Medium EnterpriseSI Sexually ransmitted InectionU-5MR Under-five Mortality RateVE Vocational Education and rainingVSDP Village Skills Development ProgramVI Vocational raining Institutes

GLOSARY

Chimi People’s representative and member o National Assembly Drangpon JudgeDruk Gyalpo His Majesty Te King o BhutanDrungtsho Indigenous physiciansDzong FortressDzongkha National languageDzongkhag District

Dzongkhag Yargye shogdu District Development CommitteeGewog Block Gewog Yargye shogchung Block Development CommitteeGup Elected Gewog LeaderLhenkhag Ministry Lhengye Shungtshog CabinetMenpa Indigenous compounderssa Trim Chhenmo Te ConstitutionTromde Municipal bodiesshogdu National Assembly shogpa Village Representative


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CHAPTER 1 REVIEW OF DEVELOPMENTPERFORMANCE IN THE NINTH PLAN


17/1843REVIEW OF DEVELOPMENT PERFORMANCE IN THE NINTH PLAN

1.1: BACKGROUND

Te Ninth Plan was launched in July 2002 initially for a five year period with a total outlay of Nu. 70billion. Te plan period has been extended by one year to end in June 2008 in order to completeall the Ninth Plan activities so that the enth Plan could start a resh with the launching o the

Constitution and installation o the new government in 2008. Te five year planning mechanismhas been an effective instrument through which the country has made impressive progress in itssocio-economic transormation towards the actualization o Gross National Happiness (GNH).Te Ninth Plan to date has been the most ambitious plan, both in the size o the outlay thatrepresented a three-quarter increase over the Eighth Plan and in the immense scope o developmentoutcomes that it set out to accomplish. A significant eature o the Ninth Plan was to introduce andimplement Gewog based planning system wherein the decision-making or development activitiesand financial powers were effectively devolved to the local government levels.

Te Ninth Plan had five major goals and these were to improve the quality o lie and income,especially o the poor; ensure good governance; promote private sector growth and employmentgeneration; preserve and promote cultural heritage and conservation o the environment; and

achieve rapid economic growth and transormation. An important part o the developmentstrategy towards attaining these plan objectives involved prioritizing inrastructure developmentand improving the quality o and access to social services.

Other critical strategies o the Ninth Plan included consolidating governance reorms throughstrengthening the decentralization process, enhancing popular participation and initiatingdemocratization efforts. Additionally, the development activities or the plan period were to beimplemented while maintaining a stable macro-economic environment through sound macro-economic management policies aimed at sustaining growth, expanding investments and savings,keeping domestic and external borrowings within sustainable limits, limiting budget deficits,controlling inflation and generally meeting the rising recurrent development expenditures throughenhanced domestic revenues. Tese goals continue to remain highly pertinent or the enth Plan

too.

1.2: AN OVERVIEW OF NINTH PLAN ACHIEVEMENTS

An evaluation o the major political, economic, physical and social indicators and developmentsover the Ninth Plan period provides a picture o significant and tangible achievements. Most o theplanned development activities were implemented successully and a majority o the importantdevelopment targets ulfilled.

Over the Ninth Plan, the country successully maintained past trends o sustained rapid economic

growth. Indeed, the country has never witnessed such high growth levels beore in any o the earlierplan periods, including massive expansions o the economic and social physical inrastructure.More importantly, this has been accomplished in a highly sustainable manner with minimal impacton the physical, social and cultural environments. Tere has also been remarkable progress madein advancing social and human development conditions in the country on the basis o the RoyalGovernment’s strong social redistributive policies and investments made over the plan. As a result,Bhutan remains firmly on track to achieve the MDGs and has come that much closer to realizingits long-term Vision 2020 goals.

Te ollowing highlights some o the concrete achievements in socio-economic developmentattained over the Ninth Plan period. Bhutan’s per capita income has risen to an all time high o US



$ 1,414 in 2006 rom US$ 835 in 2002. Even in absolute terms this represents a airly high level oGDP per capita by both LDC and regional standards. Te country’s HDI value has similarly beenrising steadily over the plan period with HDI value assessed at over 0.613 in 2006 as compared to0.583 in 2003.Tese HDI gains over the Ninth Plan period have come not only rom growth in realincome but have accrued as a result o across the board improvements in social indicators such aspoverty reduction, expanded educational enrollments, impressive declines in child and maternal

mortality and securing high access levels in the provisioning o water and sanitation acilities.As such, Bhutan continued to retain its place among the medium human development countriesthroughout the Ninth Plan period. Tese accomplishments appear particularly noteworthy giventhat only a ew decades ago, Bhutan was ranked among the poorest countries in the world withextremely low levels o human and social development.

Politically, the Ninth Plan period also stands out as a critical watershed era in the history o thecountry. Most notably, the period witnessed the drafing and national consultation on the sa TrimChhenmo or Constitution that ormally marked the historic transition in the country’s politicalsystem to a Democratic Constitutional Monarchy. Te Constitution was adopted in 2008 and anew government that is elected directly by the people installed on the basis o the constitutionalprovisions. Unlike the experience o many countries where such ar-reaching political changes wereofen brought in with tumultuous social upheaval and violence, the democratization processes inour country were solely ushered in under the enlightened, selfless and benevolent leadership oHis Majesty the Fourth King. Remarkably, these historic political changes were also introduced ata time o unprecedented peace, economic prosperity, improved social conditions and general well-being or the nation and its people.

1.3: ECONOMIC PERFORMANCE

1.3.1: Growth

Real GDP grew at an average o 9.6% over the Ninth Plan period between 2003 and 2007, takinginto consideration an estimated growth o over 21.4% in 2007. GDP per capita in 2006 was estimatedat US$ 1,414.01 as compared to US$ 835 in 2002.

Te growth rate o 9.6% exceeded the8.2% growth targeted or the Ninth Plan.Tis represents an exceptionally high andsustained rate o growth that matchesthe pace o growth in the astest growingeconomies around the world. Real GDPgrew rom Nu. 23.5 billion at the starto the Ninth Plan in 2002 to Nu. 37.5

billion in 2007. Te major impetus or thissustained growth was derived rom thecontinuous and sustained expansion othe electricity sector [see able 1.1]. Tespike in the electricity sector growth in thefinal year o the plan was directly linkedto the completion o the ala hydro-electric power project and the subsequentenhanced generation and export o energyto India.

Chart 1.1Real GDP Growth in Ninth Plan

0%

5%

10%

15%

20%

25%

2000 2003 2004 2005 2006 2007



Table 1.1: GDP and sector growth rates

GDP Growth and SectoralGrowth Rates

2000 2003 2004 2005 2006 2007

Real GDP Growth 7.2% 7.2% 6.8% 6.5% 6.3% 21.4%*

Agriculture, Livestock &

Forestry 4.6% 2.1% 1.8% 0.4% 1.9% 0.4%

Mining -2.8% -1.1% -5.2% 17.1% 19.0% 23.2%

Electricity -9.8% 18.3% -1.7% 9.4% 34.6% 120.8%

Construction 32.8% 2.8% 8.3% -2.5% -9.7% 5.7%

Manufacturing 3.2% 6.4% 5.4% 3.5% 3.8% 5.8%

Trade, Financial & OtherRelated Services

8% - 15% 21% 11.5% 6%

Public Administration & SocialServices

1.6% 7.8% 0.6% 13.2% 4.4% 3.2%

Transport & Communications 1.4% 0.4% 21.90% 8.7% 7.4% 11.3%

Source: Derived from NSB, National Account Statistics 1990-2007

Te agriculture, livestock and orestry sector grew on average by 1.3%, much lower than the plannedgrowth rate o 2.5%. In contrast, the 36% annual average growth in the electricity sector over theplan period ar surpassed the envisaged growth. Tis significant difference is largely explainedby the enhanced tariff revisions or electricity exports and that revenue generation rom the alaHydro-electric power project was expected to impact the economy in the first year o the enthPlan rather than at the close o the Ninth Plan as it did. Te trade and other services sector grew atan average o 13% and exceeded plan projections. Similarly, the public administration and social

services sector grew aster than projected. Te construction and the transport and communicationssectors grew strongly but growth was short o the planned targets. Growth in the manuacturingsector though was extremely low.

1.3.2: Structural Changes in the Economy

As has been the trend over the decades, the economy continues to transorm into a more moderneconomy with the tertiary and secondary sectors growing much more rapidly than the primarysector. Tese shifs though – largely due to significant growths in the electrical and constructionsectors - have not yet been accompanied by dynamic growth and marked improvements in themanuacturing and industrial base o the country which still remains relatively under-developed.

Given the more rapid growth in the modern sectors o the economy, the share o the primary sectorin the economy has declined steadily rom 29% o GDP at the start o the Ninth Plan to 20.3% in2007. At the start o the Eighth Plan in 1997, the share o the primary sector stood at close to athird o GDP. Macro-economic projections urther suggest that this trend o a declining share othe primary sector in the national economy is likely to continue over the current plan period.

In comparison to the significantly slower growth in the primary sector with annual average growthso less than 2%, the secondary and tertiary sectors averaged much higher growth rates over the



plan period resulting in significant changes in the GDP composition. Te secondary sector at theend o the plan period constituted 43.3% o GDP, while the tertiary sector accounted or 36.4%o GDP and the primary sector or 19.5%. In 2007, the agriculture livestock and orestry sectorwas surpassed by the electricity sector or the first time as the most important contributor to thenational economy. Te latter now contributes close to a quarter o the GDP or 23.4% as comparedto 18.6% or the agriculture, livestock and orestry sector, and 13.5% and 6.4% or the construction

and manuacturing sectors respectively in 2007.

1.3.3: Consumption, Investment and Savings

Over the Ninth Plan period, total consumption grew steadily at 10% and on average amounted toaround 64% o GDP with private consumption accounting or about 68% o total consumption.Investments also grew at comparable levels (9.4%) and on average amounted to around 58% o GDPthrough the period, with private investments comprising about 79% o total investments. Savingsgrew even more rapidly and approximately comprised on average around a third o GDP between2002 and 2007. Te increased saving rates were primarily due to higher private (corporate) savingsthat by the end o the plan period accounted or over 90% o the total gross domestic savings.

Bhutan over the Ninth Plan period thus enjoyed exceptionally high and sustained rates o growthsin savings and investment that has helped uel the country’s high economic growth rates. Teincremental capital-output ratio (ICOR) has been rising quickly and in Bhutan’s context is explainedby the cyclical effect o the construction and commissioning o mega-hydropower projects that alsoresult in the peaking o GDP growth rom time to time.

1.3.4: Change in Prices

Inflation (measured by the rate o change in consumer price index) over the plan period remainedbelow 6% and approximately averaged around 3.5% annually. Tis compares avorably to the averageannual inflation rate o 6.5% over the eighth plan period. Tis relatively lower rate o inflation was a

result o the declining rate o price increases in both ood and non-ood items, with much sharperdrops or the latter principally on account o stable clothing prices. Notably, inflation or non-ooditems declined rom around 8% in 2001 down to around 5.4% in 2006. However, in the later yearso the plan the CPI rose sharply to over 5% in 2005, 2006 and 2007.Te GDP deflator over the NinthPlan years too has remained below 6% and averaged about 4.3% annually.

1.3.5: Balance of Payments and External Resources

Bhutan’s overall balance o payments situation over the Ninth Plan period has generally beencomortable and showed small surpluses on account o the significant inflows o grant and loanassistance. Tis inflow o external resources has helped balance out the trade and other invisibles

account deficits resulting in an overall positive balance o payments position that averaged around5% o GDP over the plan period. Te trade deficit has been markedly large, climbing to recordlevels even in the ace o strong and sustained export growth. In 2004/2005, the trade deficit crossedNu.10 billion or 27% o GDP. However, the trade deficit has since declined and in 2006/07 Bhutanenjoyed a small trade surplus on Nu. 555 million.



Imports and Exports

As in past years, Bhutan’s major trading partner was India with 92% o Bhutan’s imports andexports over the plan period coming in rom and going to India. otal imports have been surgingsporadically and on average grew at over 32% over the plan period. Imports over the plan periodwere largely on account o capital machinery and equipment, uel, vehicles, ood and a wide range

o consumer products. In 2006/07, the total value o imports was estimated at Nu. 22.19 billion.Exports during the plan period grew at an annual average rate o 35% and in 2006/07 were valuedat Nu. 22.64 billion. Export growths or the Ninth Plan have thus vastly exceeded export growthrates in the Eighth Plan period which averaged only around 9%. Tere have been no changes inthe composition o the exports or its principal markets, which predominantly comprise the sale ohydro-electricity and mineral products to India. Electricity continued to dominate the country’sexports and roughly comprised around hal o total exports over the plan period.

External Resources

Despite trends reflectinga decline in officialdevelopment assistance todeveloping countries aroundthe world, total officialdevelopment assistance toBhutan registered morethan a 45 percent increasein the Ninth Plan. Aiddisbursements averagedaround Nu. 6.5 billion p.a. orapproximately 19% o GDP

over the plan period.

While there has been asignificant increase inexternal grants and loans accruing to the country in absolute terms, Bhutan’s dependence on ODAto finance the country’s development expenditures has been decreasing steadily. As compared toODA levels that financed around 70% and 60% o the total development outlays o the Seventh andEighth Plans, ODA unding has just financed around hal o the total Ninth Plan outlay. Additionally,ODA as a percentage o the total GDP has declined remarkably and has come down to less than20% at present rom levels in the eighties that exceeded hal o GDP as reflected in Chart 1.2

Bilateral sources provided around 75% o the country’s development assistance and as in past

plans, India remained the country’s major development partner. Te other important developmentpartners or the country were the ADB, WB, Denmark, Japan and the UN systems. Reflecting theRoyal Government’s Ninth Plan priorities, most o the development assistance that the countryreceived was allocated to the social, the RNR, energy, inrastructure and communication sectors.

Te country had virtually no oreign direct investments until the Eighth Plan period. In the NinthPlan, FDI grew steadily rom Nu.101 million in 2001 to Nu. 274 million in 2005/06 and climbed toa record Nu.3,238 million in 2006/07.

0%

10%

20%

30%

40%

50%

60%

0

000

000

000

000

000

000

000

000

000

ar . x erna ss s ance o u an

2002-2007



Reserves and Debt

Reflecting the positive overall balance o payments situation over the plan period, the country’sreserves have been growing steadily. As o September 2007, this amounted to US$ 611.1 million uprom US$ 315 million in 2001. Gross reserves over the plan period have generally been adequateto finance around twenty months o current levels o imports though in 2007 this came down to

around 13.4 months.Te country’s external debt though has also been growing steadily on account o long terminvestments into hydro-power development, extensive inrastructure development and socialinvestments. Under the World Bank’s debt sustainability analysis Bhutan was “debt distressed.”Te total stock o outstanding external debt more than doubled rom US$ 291.8 in 2001 to US$755.7 million as o March 2008 and GDP comparative terms, the debt to GDP ratio increased rom62.9% to 74.4%. While extremely high in relation to the size o the national economy, much othis debt can be regarded as being sustainable in the context o expectations that these investmentswill provide sizeable uture economic and social capital returns. Debt servicing ratio has also beenmaintained at sustainable levels and was estimated at 5.6% o total exports over the plan period.

1.3.6: Ninth Plan Development Outlay and Expenditure

Te public expenditures or the Ninth Plan are projected to be about 93% percent o the original planallocation o Nu.70 billion. Te budget deficit or the plan period on the whole has been maintainedbelow 5% o GDP. Te social sector received the largest share o the Ninth Plan budget with arounda quarter o the total realized budget. Around 19% and 18.5% o the total realized budget were spentor the general public administration and services and the transport, communications and publicworks sectors respectively. Te agriculture and the trade, industries and energy sectors receivedaround 9% and 8.5% o the realized budget.

Table 1.2: Summary Ninth Plan Budget Expenditures (In Million Nu)

2002/03 2003/04 2004/05 2005/06 2006/07(proj)

2007/08(proj)

Revenue 4,785 5,055 6,066 6,093 10,038 11,129

External Grants 2,269 5,367 5,033 5,478 7,156 5,183

Total Revenue +External Grants

7,054 10,423 11,099 11,571 17,194 16,312

Current 4,581 5,149 6,506 6,888 8,756 9,471

Capital 5,310 4,653 9,056 7,764 9,461 9,703

Total Expenditure(without Druk Air Planes) 9,890 9,802 15,562 14,652 18,217 19,174

Lending (net) -48 -6 39 49 -1103 -1283

Overall Surplus/Decit

-2891 580 -4106 -3745 80 -1539

Budget Surplus/Decit as % of GDP

-10% 1.75% -11% -8% 0% -3%



1.4: Social Development Trends

Improving the social conditions o people through enhancing access to and the efficiency and qualityo social services was a strategic thrust area o the Ninth Plan. Tis high priority was appropriatelyreflected in the significant scaling up o resources allocated or the social sector which receivedmore than a quarter o the Ninth Plan’s total development outlay, which includes social sector

expenditures at both the central and the Dzongkhag and Gewog levels.In this regard, the country has exceeded its commitment to the global 20:20 compact agreed on atthe World Summit or Social Development in 1995. Te compact required developing countries todevote 20 percent o their national budget or basic social programs. Bhutan remains among the very ew countries in the world to have done so.

As a result o these sustained social investments, Bhutan achieved significant progress in advancingthe general social conditions in the country, a development reflected in continued improvementsin most o the social and human development indicators. A comparison o the major socialindicators over the Seventh, Eighth and Ninth Plans illustrated in able 1.3 provides an indicationo these sustained improvements. A more detailed treatment o the prevailing social and human

development context over the plan period is provided in the ollowing sections.

1.4.1: Education & Literacy

Progress in terms o access to education over the Ninth Plan period has been particularly notable.With the construction o 128 new schools and the significant expansion and upgradation oexisting schools, the total enrolment o students has increased rom 129,160 in 2003 to 157,112 in2008. Enrolment growth at the higher secondary level has risen the astest, averaging close to 20.9% a year between 2002 and 2008. At the middle/lower secondary and primary levels, enrolmentgrowths have been more modest at 6.6% and 2.7 % respectively over the same period. While thesheer growth in numbers o enrolling students has placed an enormous burden on the educationalsystem, strenuous efforts have been made to maintain and urther improve the quality o education.

Maintaining the quality o education in the light o this unrelenting growth o enrolment has beena major challenge and is likely to remain an important and significant one or the uture.

Reflecting this brisk growth in enrolment, the Gross Primary Enrolment Rate (GPER) has increasedrom 81% in 2002 to 112 % in 2008. As such, the Ninth Plan target to attain a GPER between 90-95%was comortably achieved. With enrolment rate or girls growing at a aster rate at both primaryand secondary levels, the country has achieved gender parity in primary and basic education.Significant gains in the girls enrolment rate at higher secondary level has also moved the countrymuch closer in achieving gender parity at this level rom 0.61 in 2002 to 0.86 in 2008.

Primary and secondary school completion rates have also improved significantly over the planperiod. It rose rom 77% to 87% at the primary level and rom 43% to 54% at the secondary

level (basic education) between 2006 and 2008. Tis improved efficiency within the primary andsecondary education system is partly attributable to the improvements in the teacher student ratioin schools which has improved rom around 1:38 at the end o the Eighth Plan to 1:32 at the end othe Ninth Plan (combined primary and secondary estimate). Most schools have achieved the NinthPlan targeted teacher student ratio o one teacher or every thirty two students.



Table 1.3 Social and Human Development Indicators

End of 7th FYP(1997)



Education

GPER 72% 81% 112.0%

NPER - 62% 88.0%

Primary School Completion Rate - 77.% 87%*

Teacher Student Ratio (Primary) 1:41 1:39 1:30

Teacher Student Ratio(Secondary) 1:38 1:36 1:26

Gender Parity in Education

-Gender Parity Index (GPI) -Primary - 0.90 1.00

-GPI –Lower & Middle Secondary - 0.87 1.05

-GPI –Higher Secondary - 0.61 0.86

Girls for every 100 boys

- Girl-Boy Ratio (Primary) - 88 98 - Girl-Boy Ratio (Lower & Middle Secondary) - 87 100.7

- Girl-Boy Ratio (Higher Secondary) - 61 81.3

- Girl-Boy Ratio (Tertiary): - 39 54

National Literacy - - 59.5%

Adult Literacy - - 53%

Health & Sanitation

Life Expectancy 66.1 - -

Population Growth Rate 3.11 2.52 1.33

IMR (per 1,000) 70.71 60.12 40.13

U-5MR (per 1,000) 96.91 842 61.53MMR (per 100,000) 3801 2552 150-200

Trained Birth Attendance (%) 10.91 23.62 51%

Access to improved sanitation80%

(1996)88%

(2000) 89%

Access to improved drinking water - 78% (2000) 84%

Nutrition (Children)

% underweight 17 - -

% stunted 40 - -

% wasted 2.6 - -

Human Development Index ( HDI)0.550(1998)

0.583(2003)

0.613(2006)

Some o the other notable achievements in the education sector over the Ninth Plan relate toestablishment o the Royal University o Bhutan; upgrading the basic education level rom theeighth standard to the tenth standard; the establishment o decentralized education monitoring andsupport services; the continued promotion o Dzongkha and acilitating its usage; the introductiono computer science and applications as an optional subject in the ninth and tenth standards; settingup o national and regional level school sports programs; and various initiatives to upgrade thequalification and competency o in-service and new teachers.



In view o the urgency to provide employment or the growing numbers o educated youth enteringthe labor orce, the Royal Government attached a high priority to vocational training. Over theNinth Plan, the annual intake capacity o vocational training programs was enhanced by around35% rom around 1,271 to 1,700. In addition to ormal training programs in the VIs, severalother alternative modes o training were also organized under the Apprenticeship, Village SkillsDevelopment and Special Skills Development training programs. However the annual intake o

all training programs ell below the targeted figure as only our o the thirteen new vocationalinstitutes proposed could be established due to a lack o resources. In addition to enhancing access,significant efforts were also directed at improving the quality o vocational training through theadoption and implementation o a VE policy, the establishment o a Skills raining ResourceDivision and the development o the Bhutan Vocational Qualifications Framework.

Table 1.4 Health Human Resources & Infrastructure

o address the low levels o adult literacy,the Non-Formal Education Programhelped train close to 14,000 learners

through 736 instructors by the end othe 9th Plan (2008). Tis represents asignificant increase rom 9,700 learnersand 256 NFE instructors at the start o theplan period. Not only has the instructorstudent ratio or NFE programs improvedsignificantly, qualification levels ornew instructors have also been raisedto a minimum o the twelfh standard.However, adult literacy levels are still lowand assessed to be 53% as reflected by thePHCB 2005. National literacy levels tooare not significantly higher at 60%. Tisalls significantly short o the Ninth Plantarget to attain literacy level o 70% butthis may have been an unrealistic targetin the first place as it was projected onthe basis o weak baseline data o existingliteracy and adult literacy levels.

Source: AHB 2002, 2006.

1.4.2: Health and Nutrition

Over the Ninth Plan period, primary health care coverage has been sustained at above 90%.Additionally, immunization coverage levels were also maintained at over 85% or all Dzongkhags.Tis sustained level o primary health coverage has contributed significantly in raising the healthstatus o the country’s population which is reflected in marked improvements in health indicatorsacross the board.

2002 2006

Health Human Resources

Doctors 122 145

Dungtshos and Menpas 55 66

Doctors per 10,000 population 1.7 2.3

Nurses 495 529

Health assistants 173 210

Nurses per 10,000 population 6.9 8.3

Technicians 335 438

Health Workers 176 253

Total Workers 1,356 1,641

Health Infrastructure

Hospitals 29 29

Indigenous hospital 1

Basic Health Units 166 176

Out-reach Clinics 455 485

Indigenous hospital units 19 21

Total hospital beds 1,023 1,400

Hospital beds per 10,000population

14 17

Total health facilities 670 711


26/184



reduction in the rural-urban gap in terms o their access. Tis is in large part due to the highlyeffective implementation o the Rural Water Supply (RWS) schemes all around the country. Asthe MDG target o reducing by hal those without access to sae drinking water has already beenachieved well in advance, the uture challenge will be to achieve and maintain universal access tosae drinking water, particularly in rural areas o the country.

In addition to improved access, considerable efforts were also directed during the plan periodto enhance the quality o drinking water and monitor these qualitative aspects in light o theirsignificance to public health and efforts to decrease the spread o water-borne diseases.

Access to sanitation has similarly shown marked improvements over the decade though it has onlymarginally improved by a percentage point over the plan period. Te proportion o the Bhutanesepopulation with access to toilet acilities was 89.2% in 2005 as compared to 88% in 2000. In ruralareas sanitary latrines were also available to 86.6% o the rural population. Te MDG target in thiscontext o halving the proportion o people without access to sae sanitation was also achievedsome time ago. Tis represents a notable achievement as these levels o access to sae sanitation arecomparable to those in considerably more developed countries with much higher levels o humandevelopment and GDP per capita levels.

1.5: Human Development Progress

Te Royal Government has consistently sought to assess development in terms beyond the incomeor economic growth dimension. In light o the current absence o a country specific and relevantdevelopment index that takes into account the core principles and dimensions o GNH, the HumanDevelopment concept and its measurement, the Human Development Index (HDI) has been auseul interim tool to assess all-round development in the country. In addition to helping assessnational development progress, the HDI also provides meaningul comparisons across countriesand over time through the annual Global Human Development Reports.

Te HDI is a composite index that seeks tocapture holistic development progress incountries towards promoting a long andhealthy lie, knowledge and a decent standardo living. It comprises the three indicatorso lie expectancy, educational attainmentand real GDP per capita in PPP terms. Asreflected in Chart 1.3 that traces the HDI value trends spanning roughly the last ourplan periods, it is clearly evident that thecountry has effectively and rapidly scaledup its HDI, roughly doubling in value over

the last two decades. Tis extremely positivetrend has resulted in Bhutan’s movement outo the low human development countries intothe category o medium human development

countries. With a HDI value o 0.613 in 2006, Bhutan currently is ranked 131 among all countries.

In assessing current levels o the HDI value or 2006 and analysing the reasons or their sustainedimprovements, certain trends become apparent. Over the eighties the HDI value grew largely onaccount o improvements in lie expectancy and real GDP per capita growth. Over the nineties

0.325

0.427

0.521 0.550

0.583

0.613

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

1984 1991 1994 1998 2003 2006

Chart 1.3 HDI Valu e for Bhut an

1984-2006



and more pertinently over the Ninth Plan period, sustained improvements accrued largely onaccount o improvements in educational attainments (growth in primary and secondary schoolenrolments) and real income growth. Te latter has been the one constant actor underlying theseHDI achievements and GDP per capita growths will likely propel and sustain uture HDI gains.Lie expectancy levels have stagnated at around 66 years.

Past and existing low adult literacy levels below 53% (PHCB 2005) has been a major reason retardingwhat would otherwise have been even more stellar improvements in HDI values. Te improved butstill weak enrolment rates at the tertiary education level constitute another sub-indicator that hasheld back national HDI progress. As such, uture gains in HDI growth will depend on the progressmade in addressing these weak aspects o human development in the country. Tis will also bedetermined to a large extent by the success that the country has in resolving rural-urban gaps interms o income, educational attainment and lie expectancy levels. In addition to highlightingthe importance o tackling existing rural-urban development disparities, the National HumanDevelopment Report 2005 conveys strongly the imperative o tackling the challenges o povertyand youth employment to promote human development progress and avoid any possibilities oregression.



CHAPTER 2 DEVELOPMENT OUTLOOK ANDPERSPECTIVES


31/18417DEVELOPMENT OUTLOOK AND PERSPECTIVES

2.1: INTRODUCTION

Te development process in Bhutan has been visualized and ramed in a broad and utilitariancontext that seeks to address a more meaningul purpose or development than just the mereulfillment o material satisaction. Accordingly, Bhutan’s all-encompassing and penultimate goalo development is the maximization and realization o Gross National Happiness (GNH). Tis

has served and continues to remain as the principal guiding philosophy or the country’s longterm development vision and rationale. However, strategies or achieving it must and will remaindynamic and evolve based on the particular situation and challenges that conront the country.It is within this overarching development perspective and the Bhutan Vision 2020 ramework,coupled with a rank recognition o existing constraints, shortcomings and emerging challengesthat has helped shape and determine the enth Plan’s immediate objectives and strategic priorities,including the imperative to rame a results-based planning approach.

Tis chapter articulates the enth Plan’s primary objective o poverty reduction, its strategicpriorities and development targets to be achieved within the broad context o the country’s long termdevelopment vision and outlook. Te final section urther provides details o the implementationand monitoring aspects o the enth Plan’s planning process and highlights the main elements and

eatures o the results based planning ramework.

2.2: DEVELOPMENT OUTLOOK AND VISION

Te core principles o Bhutan’s development planning have essentially ocused on ulfilling theundamental objectives o achieving broad based and sustainable growth, improving the qualityo lie, ensuring the conservation o the natural environment, preserving the country’s rich cultureand strengthening good governance. Broadly, these are recurring and constant themes that havepermeated the spirit and content o all the five year plans undertaken in the country since theinception o development activities in the country. Tese development objectives also notablyunderscore a consistent approach taken by the Royal Government to secure a synergistic and

harmonious balance between material well-being and the spiritual, emotional and cultural needso an individual and society.

Tis approach ound a natural and spontaneous expression in the articulation o the proounddevelopment philosophy o Gross National Happiness (GNH), propounded initially by HisMajesty the ourth King in the eighties. Tis alternative development model that squarely andunapologetically places human happiness and holistic well-being at the centre o the developmentequation has since guided Bhutan’s normative development approach. Te concept o GNH isurther elaborated in the ollowing section.

2.2.1: Evolving Strategies to Achieve Gross National Happiness

Te single uniying idea that guides the nation’s long term development is the Bhutanese concepto maximizing Gross National Happiness. Te spirit and intent o this concept as articulated inthe Bhutan Vision 2020 document is to “Maximise the happiness o all Bhutanese and to enablethem to achieve their ull and innate potential as human beings.” Reflecting the importance o theconcept, the promotion o enabling conditions or GNH has also been enshrined as an importantprinciple o state policy under Article 9 o the Constitution.

Incorporating the notion o happiness and the emotional and spiritual well-being needs o humansinto the development equation represented a paradigm shif. It sought to go beyond the conventional



income-based measures o development and attempted to address the ends o development ratherthan just the means. Te GNH concept does not in any way exclude or deny the importance oeconomic growth but strongly advocates achieving a harmonious balance between the material andnon-material dimensions o development.

In order to translate the multi-

dimensional concept o GNH intocore objectives or a more ocuseddirection or the country’s longterm development, our prioritystrategic areas were initially defined.Tese our oundation pillars oGNH were the goals o sustainableand equitable socio-economicdevelopment; environmentalconservation; preservation andpromotion o culture; and goodgovernance. Tey constituted thebroad strategic ramework throughwhich national developmentprocesses were to be actualized orthe maximization o GNH.

While the our pillars o GNHprovided or and still constitutea useul ramework that definesthe broad areas o developmentactivity through which GNHcan be pursued, it needs a

clearer strategic perspective andramework to operationalize GNHand guide development planningmore effectively. As such it willbe necessary to revisit the GNHconceptual ramework and developeffective and detailed strategiesor its realization. Naturally, ameaningul and effective strategicramework must evolve with thechanging times and needs andrespond dynamically to a particular

set o challenges to best achieveGNH. Te process must necessarilybe open ended and progressive thatwill allow a variety o creative andinnovative strategies to emergethat constantly actors in the varieddevelopment lessons and learningexperiences or Bhutan. Te ideals

Box 2.1: MEASURING WELL-BEING and HAPPINESS: THE GNHINDEX

In keeping with the spirit of the results based planning approach of the Tenth Plan, efforts were undertaken to develop an appropriatedevelopment measure that will capture the essence of GNH andhelp in tracking national progress towards meeting this overall long-

term development objective. The GNH Index (GNHI) is that criticalevaluation tool for the results based planning framework of the TenthPlan and future plans to ensure that development truly contributes to

the achievement of GNH.

The GNH indicators considered were those indicators that aredesigned to be measures of the specific dimensions which make

up the GNH model. For instance, demographic indicators constitutean important set of indicators to allow an analysis of the distributionof GNH dimensions across different social and demographic groupsin the country. This includes various age and gender groups,occupational and employment clusters, educational backgrounds,

types of households, language groupings and geographical areas. Thecausal indicators that were considered were those factors affecting

the per formance of GNH status indicators. For instance, the generalratings of central government performance were broken down intomore specific components to allow a more detailed analysis of factorsaffecting general governance performance ratings.

As such these indicators are being broadly classified into variousdomains relating to the areas of psychological well being, cultural

diversity and resilience, education, health, time use, good governance,community vitality, ecological diversity and resilience and economicliving standards. These areas and their various indicators/indiceswere determined based on a pilot survey and a National GNH Surveyconducted in 2006 and 2008.

The composite GNH index is to be aggregated from these indices andindicators from among the nine domains with appropriate weighting.These indices and indicators – include a wide range of factors witha significant bearing on individual and collective happiness andinclude the mental health index, family relationship index, financialsecurity indicator, healthy days per month indicator, body mass index,education level indicator, local air and water pollution indicators,house ownership indicator, human rights indicator and government

performance index

Given the nature of human happiness and well being, the evolutionof GNH policies and strategies and the index must necessarilyfollow a dynamic, inclusive and open ended process that takes intoconsideration the relative importance of different variables and factorsof happiness and well being that may or may not be relevant toBhutanese society at a particular point of time.



o GNH, however, necessarily implies that the broader strategic ocus will always and constantlybe one that places people at the centre o development, that regards people as the real wealth andasset o a nation and human well-being and happiness as the ultimate end and purpose o alldevelopment activities.

On the basis o a recommendation emanating rom the Good Governance Plus Review 2005, efforts

are currently underway to develop a relevant index [Box 2.1] or measuring development progressin the country. Te proposed GNH Index (GNHI) will be a composite index o relevant indicatorsthat reflects as closely as possible the essential dimensions o GNH. However, it is unlikely that theGNHI will be a ully comprehensive measurement or be able to entirely capture the diversity andsignificance o GNH. Even i the measures were limited, this may yet provide a useul quantitativedimension through which the country can explore additional ways to urther the prospects omaximizing happiness or its people. Te measure, just like the strategic ramework or GNH, willalso need to be dynamic in that it incorporates relevant changes as and when it becomes highlynecessary to do so.

2.2.2: A Vision of Bhutan in the Year 2020

Bhutan 2020: A Vision or Peace, Prosperity and Happiness is a twenty year perspective strategywhich sets the preerred direction or where Bhutan wants to be in the year 2020 starting rom thebase year o 2000. o reinorce the guiding direction or the enth Plan, it would be useul to recallhere briefly some o the desirable long term outcomes or the Kingdom envisioned in the Bhutan2020 Vision. Te enth Plan period afer all straddles the critical hal-way point on to the year 2020and presents an opportune time to reresh and recollect that special vision and assess what needsto be done to accomplish the milestone goals targeted in that vision. In particular, the Vision 2020development targets set to be achieved by the end o the plan period are highlighted in the latersection on enth Plan argets.

Te Vision 2020 projects that Bhutan will emerge to become a respected and active member

o the international community and a country recognized or its role in promoting peace andstability in the region. It envisages that Bhutan’s sovereignty and borders will be firmly secure,based on constructive and mutually beneficial relationships with its neighbours rather than onmilitary capability. Te vision urther anticipates that Bhutan will have demonstrated to the worldthat it is entirely possible to embrace the benefits o modernization without being overwhelmedby accompanying negative influences, while proudly maintaining a distinct identity that is wellrecognized, valued and respected. In terms o societal outcomes, the vision visualizes the emergenceo a compassionate, tolerant, sel-confident and egalitarian Bhutanese society with its people livingin harmony and unity and imbued with a common sense o purpose and destiny.

Economically, the vision pictures that hydro-power led development and growth will have helpedthe country achieve a high degree o sel-reliance, with much o the responsibility or the financing

o development in its own hands. Bhutan by 2020 is expected to be able to sustain rising social-sectorinvestments, meet its growing physical inrastructure development requirements and stimulate theurther expansion o and growth in economic activity in order to continually raise the standard oliving and quality o lie.

Te availability o low-cost hydro-power energy and resource endowments deriving rom electricityexport revenues are anticipated to help transorm the industrial landscape in Bhutan with thedevelopment o a wide range and host o clean industries and high-technology enterprises. Exportsto international markets o high-value Bhutanese niche and eco-based products are also projected



to contribute significantly to the national economy and gain notable prominence or their quality.Te private sector is expected to grow significantly and become more dynamic, providing the majorimpetus or the growth in the manuacturing sector that is expected to contribute around onethird o GDP by 2010. Another prominent area o private sector engagement, the tourism industryis envisaged to contribute to a quarter o GDP by 2017 with revenues increasing by 150% romprevailing levels in 2000.

As such, the Vision 2020 pictures that while the country’s economic uture will be rooted in anddriven by hydro-power based investments, the economy will also be well-balanced and sufficientlydiversified by a thriving horticulture and organic based high-value agriculture sector, a solid andclean manuacturing base and a burgeoning hospitality industry. Tese non-hydro power sectorsare also expected to contribute in very significant ways towards generating productive employmentor the growing numbers o youth entering the labor market.

Socially, the Vision anticipates that in 2020, providing equitable access to and delivering improvedquality social services across will no longer be an issue. Te Vision 2020 expects that the countrywill in that time boast a health care system comparable to those in developing countries with highlydeveloped indigenous medicine expertise and capabilities. By 2020, child and maternal mortality

indicators and lie expectancy figures are expected to approach levels comparable to the currentaverage or all developing countries in 2000.

With regard to education, the Vision 2020 envisages Bhutan will have the ull range o institutionsrequired or the ormation o all relevant knowledge and skills. Te vision expects that educationwill evolve in ways that successully develops the innate potential o Bhutanese children and instillin them an awareness o the country’s rich cultural values and heritage and a deep appreciation othe importance o ethical and moral choices in their lives. Te vision urther oresees the imperativeor a transormed learning environment wherein education will have better prepared the country’syouth or employment and helped them develop a natural curiosity and aptitude to continuallylearn and acquire new knowledge and skills. In terms o some o the important education targets,the Vision 2020 sees the ull attainment o enrolment levels at Class X by 2012 and realization oull adult literacy levels by 2017.

In terms o the state o the natural environment, the Vision 2020 is optimistic that the naturalenvironment and natural resource endowments will still be richly intact, with 60 percent othe country orested and sizeable tracts o protected national parks and reserves harboring anincredibly rich bio-diversity, the envy o many nations. Te vision anticipates that the environmentalconservation approach will be dynamic rather than static and will not merely treat natural resourcesas something to be preserved but as an immense asset that can also be sustainably and wiselyutilized or socio-economic development.

Bhutan in 2020 is expected to not only have its rich culture still vibrant, alive and clearly visiblein Bhutanese lives, but that it will be richly inused with contemporary relevance and meaning.Te vision perceives the latter to be particularly important or young people. It envisages that thecountry’s rich traditions, values, ideals and belies must ideally live on in the minds o Bhutaneseyouths - reerred to appropriately in the vision as cultural custodians - and become a positive orceand source o inspiration or them. In terms o activities, the vision placed a high priority towardsthe active promotion o traditional arts and crafs, architectural styles and national language andthe conservation and protection o the historical monuments, sites and artiacts while improvingaccessibility to this rich legacy. Te inventorying and recording o this cultural legacy, including therich oral traditions and olklore were also viewed as being very important.



In terms o good governance outcomes to be attained by 2020, the Vision anticipated the ulldevelopment o the country’s governance and legal institutions and the emergence o a systemo jurisprudence based on a body o law respected by all. It also oresaw that these developmentswould ultimately give rise to new dimensions o the existing traditional concepts o representationand democracy in the country. Te Vision however did not quite anticipate that it would happenas early as this, the vast extent o it or the noble manner o its initiation through the ongoing

democratization processes and the ormulation and adoption o a written constitution, the saTrim Chennmo. Te Vision urther envisaged that the ongoing decentralization processes wouldbe completed by 2020 with local governments ully and effectively empowered and responsible ormany o the development planning and management unctions. Trough this it is expected thatthe Bhutanese people would genuinely “own” the development process, thereby helping ulfill bothlong term national goals and local aspirations and priorities.

2.2.3: International Development Goals

Millennium Development Goals (MDGs)

Te MDGs derived rom the Millennium Summit held at the United Nations in 2000, wheremember countries, including Bhutan, pledged to achieve tangible and quantifiable progress in keydevelopment areas by 2015. Te Millennium Declaration articulated a strong commitment to “createan environment – at the national and global levels alike – which is conducive to development andthe elimination o poverty” and mainstreamed a set o inter-connected and mutually reinorcingdevelopment goals and targets.

Te Millennium Development Goals (MDGs) thus emerged as the principal means o implementingthe Millennium Declaration and comprised eight major development goals and eighteen specifictargets that were to be monitored by a set o 48 indicators. Te MDGs in a sense represents adeparture rom past approaches in dealing with development and poverty issues as it ocused onsetting quantifiable targets and time-limits in order to help track progress and tangibly assess the

impact o development interventions. Tese eight MDGs, to be achieved by 2015 rom the baselineyear o 1990, included the ollowing primary goals o halving extreme poverty and hunger; achievinguniversal primary education; promoting gender equality; reducing child mortality; improvingmaternal health; combating HIV/AIDS, malaria and other diseases; ensuring environmentalsustainability; and developing a global partnership or development.

While Bhutan remains potentially on track towards achieving most o the MDG indicators, progress varies on various goals and targets. Additionally, while there have been notable advancementsin the context o reducing gender gaps in various areas, particularly in primary and secondaryeducation enrollment levels, alleviating existing gender differences in tertiary level education andin the workplace is still a challenge that needs to be continuously addressed. In the case o healthsector, even i there is a low prevalence o HIV/AIDS cases in the country today, the increase in thenumber o cases detected each year is a cause o grave concern.

Te country’s national development goals and targets are in essence ully compatible and inagreement with the MDGs. In the case o several development indicators, Bhutan has set evenhigher national targets than the MDGs and these may also be achieved at a aster rate o progress.On the basis o current projections, many o the MDGs will likely be attained by the end othe enth Plan in 2013, two years ahead o schedule. Te Royal Government o Bhutan is thuswholeheartedly implementing the Millennium Declaration in the ull spirit o what was intendedand is systematically monitoring the MDGs within the national development ramework.



o acilitate the country’s urther progress on the MDGs and integrate and mainstream these goalsmore effectively into the development planning and resource allocation processes, an MDG NeedsAssessment and Costing exercise was carried out in 2007. Tis important exercise was undertakento help provide comprehensive and flexible financial models and policy options to consider

development scenarios or achieving the MDGs and estimate critical resource needs to attain thosegoals.

SAARC Development Goals (SDGs)

Te SDGs were conceptualized and ormulated as a strategic regional response to the urgentimperatives o ridding South Asia o poverty and achieving the international MillenniumDevelopment Goals (MDGs) by 2015. Indeed in certain aspects, the SDGs seek to go much urtherthan the MDG targets and aster. Te SDGs are also in a sense a road map or the implementationo the SAARC Social Charter. Endorsed at the Tirteenth SAARC Summit in Bangladesh in 2005,the SDG mandate covers several important development goals within the our broad areas olivelihood, health, education and environment. aking into consideration both the South Asiancontext and specificities and the relevant linkages with international goals such as the MDGs, theSDGs include 22 priority goals or the period 2007-2012, eight o which pertain to livelihood, ourto health, our to education and six to the environment. Progress towards achieving these specificSDGs will also effectively determine the success the countries will have in combating poverty in theregion. In recognition o its importance, the Tirteenth SAARC Summit declared 2006-2015 as theSAARC Decade o Poverty Alleviation.



CHAPTER 3

STRATEGIC FRAMEWORK


39/18425STRATEGIC FRAMEWORK

3.1: POVERTY REDUCTION

Despite rapid economic growthand significant developmentefforts in the past, around oneourth o the country’s people

mostly rom rural areas continueto live below the poverty line.In addition to income poverty,notwithstanding the act that thegeneral quality o lie in Bhutanhas greatly improved, substantialqualitative and quantitative rural-urban differences still remain interms o access to social services,basic amenities and economicopportunities. As various surveysand studies reveal, there are

extensive gaps between rural andurban areas on various socio-economic indicators, includingincome levels.

Tis has not been due to the lack oeffort or commitment by the RoyalGovernment but determined to a very large extent by the harsh geo-physical reality that has inhibiteda more effective mainstreamingo rural communities into thedevelopment process. Tere are alsodeep structural constraints suchas low agricultural productivityand subsistence arming; the lacko significant spillover effects onon-agricultural growth or thepoor; weak social and economicinrastructure in rural Bhutan,particularly or access to roadsand electricity; and landholdingand access to arable land issues,

priorities that will need to beaddressed on a continual basis.

It is with the clear and unambiguous aim o achieving equitable socio-economic development thatthe enth Plan has adopted poverty reduction as the overarching theme and primary goal. Tis iswholly consistent and compatible with the country’s long term development vision o GNH andBhutan’s commitment to meeting the various global compacts, including the MDGs.

Te overall macro strategy o the enth Plan or poverty reduction will include promoting economicopportunities through broad-based growth and boosting critical sectors such as agriculture and

Box 3.1 TARGETED POVERTY REDUCTION

The Royal Government in the past addressed poverty reducon

broadly through social sector and rural development programs

to improve the quality of life and promote income generaonacvies. While rapid economic growth and pro-poor

expenditures have improved living condions and ameliorated

poverty, experience and lessons learnt from the implementaon

of Ninth Plan acvies indicate that poverty reducon eorts

can be beer served, accelerated further and complemented

with specic and improved targeng. Hence, targeted poverty

reducon programs are to be iniated in the Tenth Plan directly by

the Royal Government or in collaboraon with NGOs or agencies

with relevant experse to help the poor and vulnerable. This

will complement mainstream development programs of central

agencies and local governments.

A more focused targeng would provide benets directly to the

poor based on an inmate understanding of localized poverty

and development condions in various areas. In order to do this

eecvely, detailed mapping of poverty levels and small scale area

esmaons are being made. The Tenth Plan also incorporates the

principle of allocang resources based on a formula that include

criteria like poverty incidence that will help channel addional

resources to poorer communies.

Targeng is to ensure that resources and development acvies

directly benet the poor. The approach will be to work in close

partnership with those living in or vulnerable to extreme

poverty and are unable to harness the benets of mainstream

development programs. It will seek to address the core causes,

structural constraints and limitaons facing them at an individual,

community or local level and will take the form of programs or

projects specically tailored to enhance their capabilies to secure

sustainable livelihoods in addion to providing immediate relief.

Key targeng processes will be to idenfy and develop the potenal

of the poor, increase their producve capacity and reduce barriers

and improve access to sources of livelihood. As limited access toland or landlessness is a dening characterisc of the poorest, targeted poverty reducons will include the distribuon of land

to the landless and a program of reselement for the landless orland-poor families to areas where arable and producve land is

available.



rural industries and enterprises that are important or the poor. Increased resources and investmentswill be channeled into developing rural regions to help promote income and employment generating

activities, expand access to marketsand enhance the quality o ruralliving conditions. Tis will beaddressed through the generic

development programs andactivities as well as specific targetedpoverty interventions. [See Box3.1]

Tere is a close interrelationshipbetween educational attainmentand poverty incidence.Additionally, considering thatuture development opportunitiesdepend critically on productivitylevels and the knowledge andtechnological skills base o thenational labor orce, the RoyalGovernment’s long term pro-poor strategy can be best andsustainably served by the creationo a knowledge-based society.Te empowerment o the poorwith inormation and knowledgeis extremely imperative as thisis the age o the knowledgeeconomy and inormation

society. Tis will undamentallyshape the potential productivecapacities and capabilities o thepoor and ultimately determinetheir prospects or escapingrom poverty or a marginalizedliestyle. As much as the divisiono the rich and poor nations atthe international level is criticallyinfluenced by advancements inknowledge and technologicaldevelopment, this is also likely tobe mirrored at national and locallevels. Hence, the imperative andneed to emphasize this as a criticallong term strategy or povertyreduction.

However, the strategy odeveloping a modern society thatis highly knowledgeable, skilledand technologically developed

Box 3.2 Bhutan Poverty Profle

Te Poverty Analysis Report 2007 estimated that 23.2 percent o the

population was poor. In absolute numbers this translates to 146,100individuals. Poverty in rural areas is significantly much higher thanin urban areas and poverty in Bhutan can be clearly characterized asa rural phenomenon. Around 98% o all the poor live in rural areaswith most o the poor primarily engaged in subsistence arming astheir primary occupation.

Poverty Incidence Bhutan 2007

National

Poverty

Rural

Poverty

Urban

Poverty

Five Least

Poor

Districts

Modestly

Poor

Districts

Five

Poorest

Districts

0

10

20

30

40

50

racking this or the years that the data are available, income povertyincidence has declined to present levels o 23.2% in 2007 rom 36.3%in 2000 and 31.7% in 2003. However, subsistence or ood poverty hasrisen rom 3.8% in 2003 to 5.9% in 2007. In addition to headcountratios, measuring poverty gap and severity ratios provide a useul

perspective on the depth and severity o poverty. Available data or2003 and 2007 reflect significant reductions in the national and ruralpoverty gap ratios that declined rom 8.6% to 6.1% and rom 10.5%to 8.1% respectively. Te poverty severity ratios at both the nationallevel and in rural areas also respectively declined rom 3.1% to 2.3%and rom 3.8% to 3%.

Policies to address poverty in Bhutan are also viewed rom a broaderand multi-dimensional context than just an income perspective. Tistakes into account several other aspects o human deprivation suchas access to improved drinking water and sanitation, educationaland health attainment levels and access to basic inrastructure suchas roads and electricity. While significant progress has been made

to reduce human poverty levels, more effort needs to be addressedto enhance access to rural roads and electricity, particularly in ruralareas. Such inrastructural investments in rural areas have not onlybeen strongly identified by rural communities as a top priority butdo have highly beneficial benefits to alleviate conditions o humandeprivation and improve the quality o rural lie.


41/18427STRATEGIC FRAMEWORK

cannot be achieved within a single plan period. Tis necessarily constitutes a long term approachthat will span several years and plans but will ultimately contribute positively to poverty reductionand help in the realization o many o the Vision 2020 Goals including GNH.

Tematically, the ollowing five strategies will constitute the core strategies and set o sub-objectivesthrough which poverty reduction will be addressed. Tese strategic priorities are not to be viewed

as being separate or sel-standing and have close inter-linkages and requently spill over into eachother. Notably, while they take into consideration the pertinent aspect that poverty in Bhutan isessentially a rural occurrence, these strategies primarily take into consideration the need or anintegrated approach to synergize development opportunities in both rural and urban areas ormutual benefit.

• Tese strategic priorities or poverty alleviation are detailed in the ollowing sections:

• Vitalizing Industry

• National Spatial Planning

• Synergizing Integrated Rural-Urban Development or Poverty Alleviation

• Expanding Strategic Inrastructure

• Investing in Human Capital

• Fostering an Enabling Environment through Good Governance

Chart 3.1 reflects the strategic ramework or the enth Plan towards poverty reduction and thelonger term goals arti

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