The new country partnership strategy 2024-2028 provides an overview of ADB’s initiatives to be undertaken, encouraged by success stories from the past
In their bid to reinforce Bhutan’s efforts in fostering inclusive, sustainable, resilient, and job-creating growth, the Asian Development Bank (ADB) launched its new country partnership strategy (CPS) 2024-2028 earlier this week. The priorities of the CPS are based on Bhutan’s needs, ADB’s comparative advantage and experience, and lessons and recommendations of the final review of the CPS, 2019–2023 and its validation report prepared by ADB’s Independent Evaluation Department.
The CPS aims to enable inclusive, sustainable, resilient, and job-creating growth and it will build on ADB’s investments in renewable energy, technical and vocational training, and in health care.
“First, strengthen the public sector management and enable private sector development. The second is to build climate adaptive and resilient infrastructure and systems. And the third is to support human capital development in order to enhance the employability of Bhutan’s youth,” the ADB Bhutan Country Director (CD), Shamit Chakravarti has said.
“We believe these strategic priorities will go a long way in helping Bhutan strive toward its development goals and to also meet some of these challenges of out migration and high youth unemployment.”
The CPS will focus on strengthening public sector management (PSM) and enabling private sector development (PSD), building climate-adaptive and resilient infrastructure and systems, and supporting human capital development and enhancing the employability of youth. There will be more focus on regional cooperation and integration (RCI) to facilitate trade, improve cross-border connectivity, and create business and employment opportunities. ADB staff across sovereign and non-sovereign teams will work together to offer multisector, integrated solutions. Gender equality and social inclusion will be further mainstreamed in the design and implementation of loans, technical assistance (TA), and knowledge products.
Under the CPS 2024–2028, ADB will reinforce the government’s efforts in working towards these goals. The strategic priorities are aligned with the operational priorities (OPs) of ADB Strategy 2030—in particular, addressing remaining poverty and reducing inequalities (OP1); accelerating progress in gender equality (OP2); tackling climate change, building climate and disaster resilience, and enhancing environmental sustainability (OP3); strengthening governance and institutional capacity (OP 6); and fostering RCI (OP7); strengthening governance and institutional capacity (OP6); and fostering RCI (OP7).
ADB will add value by tapping synergies across different sectors and themes, and its sovereign and non-sovereign operations. The three strategic priorities will be operationalized through a combination of policy-based loans that support public sector and financial market reforms to unlock systemic obstacles impeding PSD and trade, and to incentivize climate adaptation; investment loans to create sustainable, resilient, and ecologically friendly infrastructure; and TA and knowledge products to build capacity for analytical work and policy reforms, improve PSM, promote public–private partnerships (PPPs), and strengthen climate adaptation and disaster resilience. ADB will be selective and operate in areas of its comparative advantage—e.g., renewable energy (solar and hydropower), river basin management, urban resilience, transport connectivity with a focus on RCI, and human capital development—where other development partners are either absent or operate at a small and fragmented level, and where the government values on ADB’s expertise and knowledge.
ADB’s sovereign and non-sovereign operations teams will work together to undertake sector feasibility studies and provide transaction advisory services to promote PPPs in health diagnostics, solar power, and urban waste management as requested by the government. This will help catalyze private sector investment from within and outside Bhutan, and improve the design and delivery of public services. Consulting support will be provided to build the government’s capacity to identify and structure PPPs and raise the awareness of policy makers. ADB will assist the government in drafting a competition bill to ensure equal opportunity for all businesses. It will update Bhutan’s Bankruptcy Law to align insolvency procedures with the needs of small and medium enterprises.
The Bank is helping the government to review the FDI policy and improve the investment climate. ADB will support reforms to strengthen policies, institutions, and infrastructure for open trade, including simplification and harmonization of cross-border protocols. It will target improvements in Bhutan’s trade digitalization, competitiveness, and governance so that the full benefits from improved road and digital connectivity along Bhutan’s southern border with India can be tapped to boost trade, business, and employment opportunities. ADB will build on past support for financial market development by helping Bhutan to undertake additional reforms in banking, nonbanking, insurance, and capital markets, and build the capacity of banks to transition to non-collateral based lending for businesses.
ADB has supported Bhutan in designing national adaptation plans for agriculture and livestock, energy, and water. It will help the government in implementing these plans and identifying sources of climate financing for priority adaptation investment projects. The scope for mobilizing additional green financing and tapping carbon credits will be explored.
ADB will assist Bhutan in accessing carbon finance to incentivize investments in mitigation actions. Resources will be mobilized from ADB’s Article 6 Support Facility to help Bhutan increase its engagement under the Paris Agreement and access carbon finance through the sale of carbon credits in international carbon markets including through ADB’s Climate Action Catalyst Fund.
Considering Bhutan’s infrastructure gaps and the growing threat of climate change and disasters, ADB will increase support for sustainable, resilient, and ecologically friendly infrastructure investments. For example, it will help Bhutan to expand its solar power capacity to reduce its winter power deficit and scale up its hydropower capacity; build a 92-kilometer ecologically friendly highway connecting Lhamoizingkha to Sarpang along Bhutan’s southern border with India to reduce travel time by nearly 2 hours and promote cross-border trade; and support sustainable river basin management and resilient urban development.
Under the new CPS, ADB’s support will go beyond project-by-project mainstreaming of climate change adaptation. It will take a catchment-level approach to analyze multi-hazard risks, inform the design of ADB and government projects, and adopt appropriate risk management measures, including nature-based solutions, to enhance adaptation and resilience. The TA for Building Adaptation and Resilience in the Hindu Kush Himalayas (Bhutan and Nepal) will build the capacity of government agencies to assess multi-hazard risks and strengthen early warning systems.
International best practices, including nature-based solutions for stabilizing slopes and managing landslide and flood risks, will be tailored to Bhutan’s needs. ADB will use its project readiness financing facility to help Bhutan develop a pipeline of well-designed energy, transport, and urban projects. Project teams will draw on multisector expertise and explore PPP solutions, where feasible, to ensure that integrated and nature-positive solutions are offered to Bhutan.
ADB will continue to help Bhutan maintain progress on SDGs pertaining to education and health quality and access, especially for the poor and disadvantaged, including unemployed youth, women, persons with disabilities, and rural inhabitants. This support is especially critical given high levels of outmigration.
The Bank will strengthen skills pathways through vocational secondary schools and market-driven, mid- to advanced-level skilling programs. It will continue to support TVET and life skills with a focus on females and youth with disabilities, and upgrade the facilities of special needs schools.
ADB will continue to strengthen Bhutan’s health system by providing medical equipment at primary, secondary, and tertiary levels; develop human resources for health; and support digitalization of health services to enhance equitable access to quality health care. It will provide advisory support to explore private sector engagement in health diagnostics and telemedicine.
Meanwhile, ADB has prepared a country climate change and disaster risk management plan that aligns planned interventions with the government’s climate commitments and priorities. It identifies potential synergies across various sectors to promote climate, nature, and social benefits. ADB will boost support for solar energy and hydropower, river basin management, and urban resilience. Nature-based solutions will be incorporated to strengthen the overall sustainability of projects.
ADB will continue to build on its past support as outlined in the RCI assessment prepared for the CPS. The proposed Lhamoizingkha to Sarpang highway will improve connectivity with India and the Asian Highway.
The support for expanding Bhutan’s hydropower and solar power capacity will increase the share of clean and renewable energy in the sub-region’s power market. These RCI-focused infrastructure investments will be complemented by ADB’s support to improve Bhutan’s trade competitiveness and governance, including in customs modernization; and assisting it in aligning with the World Trade Organization’s Trade Facilitation Agreement, and sanitary and phytosanitary standards for food safety, animal, and plant health regulations, and addressing technical barriers to trade.
ADB will ensure convergence with Bhutan’s bilateral economic and trade cooperation initiatives with the governments of Bangladesh and India, and the World Bank’s Accelerating Transport and Trade Connectivity in Eastern South Asia Program so that Bhutan benefits from access to improved trade logistics and wider export markets. These initiatives fall under strategic priorities 1 and 2 of the CPS, which are aligned with the South Asia Subregional Economic Cooperation program’s newly launched initiatives since 2023 such as tourism, food regulations for trade, and business linkages with the private sector. ADB will continue to provide TA to the programs of the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation, and the South Asian Association for Regional Cooperation.
By Tashi Namgyal, Thimphu
