46189-001: Enhancing Development Management for Sustainable and Inclusive Growth

Project Data Sheet (PDS): Details

Description

The main objective of the government's Tenth Five Year Plan (2008-2013) is poverty reduction with an aim to reduce the poverty rate to less than 15% by 2013. The government also aims to achieve an average annual GDP growth rate of 9% during the plan period. Closely aligned with the Tenth Five Year Plan, the overarching goal of ADB's forthcoming interim Country Partnership Strategy (CPS) 2012-2013 for Bhutan will be poverty reduction through economic diversification, which has been adopted from the previous CPS 2006-2010. In order to sustain a high economic growth in a dynamic macroeconomic context, there is a growing need for strengthening the capacity of the government to guide, monitor, and evaluate the development process, identify the need for remedial measures, and take responsive actions to address the issues as noted in Bhutan Vision 2020. Given that one of the key strategic thrusts of the interim CPS is to provide support for capacity development in the overall management of the development process, the proposed technical assistance (TA) is relevant and responsive to the strategic objective of the Tenth Five Year Plan as well as the interim CPS. The proposed TA is also a direct response to the request made by the government for ADB's support for strengthening the operational capacity of MOF. The proposed TA will build on ADB's ongoing assistance for undertaking the 2012 Third Bhutan Living Standards Survey. The socio-economic assessment and impact evaluation studies proposed under the TA using the household survey data will be highly relevant and useful for guiding the design of future interventions by the government, ADB, and development partners and enhancing their continuous efforts in further reducing poverty in Bhutan. The TA will have the following two outputs: Output 1: Strengthened analytical skills in macroeconomic management and project implementation. Under this output, in-country training, seminars and/or workshops will be organized for MOF staff to enhance their economic management capacity. In-country training workshops on project implementation-related issues, including procurement, disbursement and safeguards, will also be organized for officials from MOF and other key government ministries. In addition, a field trip(s) will be conducted for exchange of best practices and knowledge sharing with other Developing Member Countries. The exact topics of the activities will be demand driven and determined in consultation with MOF. Policy advice will also be provided when and as requested by MOF to support them to address emerging issues in a timely manner. The policy advice provided under this output will be published as an analytical report and/or policy briefs for wider dissemination. Output 2: Enhanced knowledge on socio-economic assessment and impact evaluation studies. This output will generate various knowledge products based on data from the Third Bhutan Living Standards Survey, including socio-economic assessment and impact evaluation studies, which will assist the government and other key stakeholders in fine tuning their policies and operations. The output will also include analytical work that will directly contribute to the body of knowledge being established for the new economic paradigm that has been the government s recent initiative (i.e., measuring and achieving wellbeing and happiness, fair distribution, efficient use of resources, among others). Inception and consultation workshops will be organized to ensure that the consultative approach will be undertaken in the conduct of the studies. Study reports as well as various policy briefs will be produced. Under this output, in-country training will also be organized to enhance the analytical capacity of officials from key government ministries and agencies, which will help them formulate more evidence-based policies.

Project Rationale and Linkage to Country/Regional Strategy

The Bhutanese economy has consistently performed well over the last few decades. Its Gross Domestic Product (GDP) grew, on average, by about 8% between 2001 and 2010, which was the highest among South Asian economies. While growth is estimated to have moderated slightly to 8.3% in FY2011 from 9.3% in FY2010, it is forecast at 7.9% for FY2012 and 8.4% for FY2013 largely on the account of continued hydropower construction. In response to the high and sustained growth, Bhutan has also been successful in reducing poverty. Based on the national poverty line, the incidence of poverty declined from about 32% to about 23% between 2003 and 2007. Sustaining a high economic growth, however, remains a major challenge in Bhutan: the economic growth is largely financed by external aid; the fiscal deficit is high; balance of payment situation is weak; public debt is mounting; and foreign exchange reserves are difficult to sustain as it is not built through exports. The recent Indian rupee liquidity issue also highlights the vulnerability of the Bhutanese economy. Recognizing these emerging challenges, the Economic Development Policy 2010 aims to achieve economic self-reliance by 2020. As a provider of stewardship for the implementation of the Policy, there is a growing need for enhancing the capacity of the Ministry of Finance (MOF). For MOF to play a stronger stewardship role in a dynamic macroeconomic context, it needs to adopt best practices pertaining to, among other things, fiscal policy and medium term fiscal framework; budgeting and public expenditure management; taxation reforms and revenue forecasting; debt sustainability analysis; and government property management and public procurement reforms. As the nodal agency for all the ADB-funded projects, MOF also plays a critical role in ensuring efficient programming as well as providing oversight of effective portfolio management. The country assistance program evaluation (CAPE) conducted in 2010 rated ADB's operations in Bhutan as successful. Bhutan also achieved the 100% success rate for completed projects based on project completion reports issued in 2000-2011. Nevertheless, CAPE highlighted that implementation efficiency, although still above the ADB average, has been declining in recent years, possibly due to the increasing size of projects and complexity of project designs, frequent project design changes, and increasing work volumes coupled with limited capacity of domestic contractors. In light of the expected increase in ADB's operations in Bhutan in coming years, there is a need for enhancing MOF's stewardship role to enhance implementation efficiency and improve development effectiveness of ADB's support in the country. In order to enhance development effectiveness of the government interventions as well as ADB's support, it is critical to ensure that they are more evidence-based. Data from the Third Bhutan Living Standards Survey (2012) under ADB's ongoing TA will be particularly useful to update the country's assessment on poverty and other various development outcomes. The 2012 survey data together with data from the 2007 Second Bhutan Living Standards Survey also allow for evaluating key achievements of the government's Tenth Five Year Plan (2008-2013) and the development impact of some of ADB's key projects implemented in Bhutan. While ADB's support for undertaking such assessments will be useful, it is equally important for ADB to provide support for enhancing the government's analytical capacity to formulate more evidence-based policies. Bhutan 2020: A Vision for Peace, Prosperity and Happiness (Bhutan Vision 2020) indeed highlights the need for strengthening the capacity of the government to monitor and evaluate the development process and to undertake policy relevant research on development issues and this TA aims to support this identified need. In addition, the government is elaborating a new economic paradigm that is based on wellbeing and happiness. The proposed TA also aims to contribute to this effort in response to the government's recent request for ADB's support.

Impact

Improved socio-economic management of the government for sustaining a high and inclusive growth trajectory.

Project Outcome

Description of Outcome

Improved MOF and government capacity in development management

Progress Towards Outcome

Capacity building activities for selected local government officials have been conducted. Studies on selected macroeconomic issues are ongoing.

Implementation Progress

Description of Project Outputs

Strengthened analytical skills in macroeconomic management and project implementation Enhanced knowledge of socioeconomic assessment and impact evaluation studies

Status of Operation/Construction or Implementation Progress

Nima Tshering attended training on procurement. Study visits to Public Debt Management Office, Thailand were conducted to gain hands-on learning experience on the public debt policy in Thailand which then can be used as important reference in the formulation of Bhutan s debt policy. Institutional visits to Singapore and Republic of Korea were conducted to gain hands-on learning experience on how early warning system on economic shocks works in practice. A consultant has been contracted to conduct study on the development of early warning system of the banking sector. Consultants have been contracted to conduct study on the development of trade and industry framework within the Budget Policy and Fiscal Framework.

Stakeholder Participation and Consultation

During Project Design
The government will be consulted regarding the TA concept paper and the TA report.

During Project Implementation
The Ministry of Finance (MOF) willl be the executing agency. The Department of Public Accounts (DPA), MOF will be implementing agency. The Director of DPA will oversee the TA implementation.

 

Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.

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