The World Bank FOR OFFICIAL USE ONLY

Transcription

Document of
The World Bank
FOR OFFICIAL USE ONLY
Report No: 50888-BT
PROJECT APPRAISAL DOCUMENT
ON A
PROPOSED CREDIT
IN THE AMOUNT OF SDR 7.75 MILLION
(US$12.0 MILLION EQUIVALENT)
TO THE
KINGDOM OF BHUTAN
FOR A
SECOND URBAN DEVELOPMENT PROJECT
APRIL 5, 2010
Sustainable Development Department
Urban and Water Unit
South Asia Region
This document has a restricted distribution and may be used by recipients only in the
performance of their official duties. Its contents may not otherwise be disclosed without World
Bank authorization.
CURRENCY EQUIVALENTS
(Exchange Rate Effective March 23, 2010)
Currency Unit = BTN
BTN 1 = US$0.02
US$ 1 = BTN 45.5
FISCAL YEAR
July 1 – June 30
ABBREVIATIONS AND ACRONYMS
ADB
AFD
ARCS
ASCI
BAS
BLSS
BLPR
BNUS
BUDPI
BUDPII
CAS
CFO
CIPS
CQS
CS
CST
DANIDA
DEC
DNB
DPA
DUDES
EA
EAA
e-GP
EMP
ERR
EUSPS
FBS
FIC
FM
FRR
GBFA
GDP
Asian Development Bank
Administrative & Finance Division
Audit Review and Compliance System
Administrative Staff College of India
Budget and Accounting System
Bhutan Living Standard Survey
Land Pooling Rules of the Kingdom of Bhutan 2009
Bhutan’s National Urbanization Strategy
Bhutan Urban Development I Project
Bhutan Urban Development II Project
Country Assistance Strategy
Chief Financial Officer
Chartered Institute of Purchasing & Supply
Selection based on Consultants’ Qualifications
Country Systems
College of Science and Technology
Danish International Development Agency
District Environment Committee
Department of National Budget
Department of Public Accounts
Department of Urban Development and Engineering Services
Environmental Assessment
Environment Assessment Act
Electronic General Procurement
Environmental Management Plan
Economic Rate of Return
Environmental & Urban Sector Program Support
Selection under a Fixed Budget
Financing Item Code
Financial Management
Financial Rules and Regulations
Government Budget Fund Account
Gross Domestic Product
GNH
GNHC
GRC
HH
IBRD
ICB
ICR
ICT
IDA
LAP
LC
LCS
LGA
LIB
LP
M&E
MDG
MIS
MoF
MoU
MoWHS
MYRB
NEC
NECS
NEPA
NCB
NGO
NIFM
NPV
OECD-DAC
OP
PAD
PAF
PAP
PAVA
PEFA
PCC
PDO
PEMS
PFM
PLC
PLM
PMU
PPD
QAP
Gross National Happiness
Gross National Happiness Commission
Grievance Redressal Committee
Household
International Bank for Reconstruction and Development
International Competitive Bidding
Implementation Completion Report
Information Communication Technology
International Development Association
Local Area Plan
Letter of Credit
Least Cost Selection
Local Government Act
Limited International Bidding
Land Pooling
Monitoring and Evaluation
Millennium Development Goals
Management Information Systems
Ministry of Finance
Memorandum of Understanding
Ministry of Works & Human Settlement
Multi-Year Rolling Budget
National Environment Commission
National Environmental Commission Secretariat
National Environmental Protection Act
National Competitive Bidding
Non-Governmental Organization
National Institute of Financial Management (India)
Net Present Value
Organization for Economic Cooperation and Development-Development
Assistance Committee
Operational Policies
Project Appraisal Document
Project Affected Families
Project Affected People
Property Assessment and Valuation Agency
Public Expenditure and Financial Accountability
Phuentsholing City Corporation
Project Development Objective
Public Expenditure Management System
Public Financial Management
Project Letter of Credit
Planning and Monitoring System
Project Management Unit
Policy and Planning Division
Quality Assurance Plan
QBS
RAA
RAP
RAPII
RECOP
RFP
RGOB
RIM
SA
SAI
SBD
SDR
SDRC
SIL
SSS
TA
TOR
TCC
Quality Based Selection
Royal Audit Authority
Resettlement Action Plan
Rural Access Project II
Regulations for Environmental Clearance of Projects
Request for Proposal
Royal Government of Bhutan
Royal Institute of Management
Social Assessment
Supreme Audit Institution
Standard Bidding Document
Safeguard Diagnostic Review
Social Development and Resettlement Cell
Specific Investment Loan
Single Source Selection
Technical Assistance
Terms of Reference
Thimphu City Corporation
Vice President:
Country Manager/Director:
Sector Manager:
Task Team Leader:
Isabel M. Guerrero
Nicholas J. Krafft
William D. Kingdom (Acting)
Toshiaki Keicho
BHUTAN
SECOND URBAN DEVELOPMENT PROJECT
PROJECT APPRAISAL DOCUMENT
SOUTH ASIA
SASDU
Date: April 5, 2010
Country Director: Nicholas J. Krafft
Sector Manager/Director: John Henry Stein
Team Leader: Toshiaki Keicho
Sectors: Urban Development (100%)
Themes: Access to urban services and housing
(50%); Municipal governance and institution
building (25%); Other urban development
(25%)
Project ID: P090157
Environmental category: B
Lending Instrument: Specific Investment Loan Joint IFC:
Joint Level:
Project Financing Data
[ ] Loan [X] Credit [ ] Grant [ ] Guarantee [ ] Other:
For Loans/Credits/Others:
Total Bank financing (US$m.): 12.0
Proposed terms: 20 years maturity, including a grace period of 10 years
Financing Plan (US$m)
Source
Local
Foreign
BORROWER/RECIPIENT
0.7
0.00
International Development Association
7.5
4.5
(IDA)
Total:
8.2
4.5
Borrower:
The Royal Government of Bhutan
Thimphu
Bhutan
Responsible Agency:
Ministry of Works and Human Settlement, Thimphu City Corporation
Total
0.7
12.0
12.7
Estimated disbursements (Bank FY/US$m)
FY
2011
2012
2013
2014
2015
2016
Annual
0.5
1.7
2.7
3.2
2.7
1.2
Cumulative
0.5
2.2
4.9
8.1
10.8
12.0
Project implementation period: From July 1, 2010 to June 30, 2015
Expected effectiveness date: July 1, 2010
Expected closing date: December 31, 2015
Does the project depart from the CAS in content or other significant respects?
Does the project require any exceptions from Bank policies?
Have these been approved by Bank management?
Is approval for any policy exception sought from the Board?
Does the project include any critical risks rated “substantial” or “high”?
Does the project meet the Regional criteria for readiness for implementation?
Project development objective
[ ]Yes [X] No
[ ]Yes [X] No
[ ]Yes [ ] No
[ ]Yes [X] No
[ ]Yes [X] No
[X]Yes [ ] No
The proposed project development objectives are to: (i) support Bhutan’s municipal reform
program by strengthening municipal finance and management systems in Thimphu and
Phuentsholing; and (ii) improve infrastructure services in northern Thimphu where no formal
services are currently available. The first objective supports RGOB’s municipal reform agenda
and helps implement the country’s new legal framework for urban local governments through a
series of technical assistance, policy support, training programs, and studies. The project also
aims to help establish an effective intergovernmental fiscal transfer system. The second objective
addresses an urgent need for serviced urban land in rapidly growing Thimphu City, given the
already substantial and increasing migrant population settling in the peripheries of Thimphu.
The process of attaining these objectives would help develop models and capacity for broader
urban management in Bhutan.
Project description [one-sentence summary of each component]
Component 1 (Municipal Finance & Management Component, US$1.5 million) aims at
strengthening the institutional systems and processes of the two city corporations of Thimphu
and Phuentsholing to enable them to function effectively as efficient, transparent and
accountable urban local governments.
Component 2 (Thimphu Northern Area Development Component, US$9.3 million) will develop
infrastructure systems through land pooling in the two local areas of northern Thimphu
(Dechencholing and Langjophakha), where the preparation for land-pooling is most advanced.
The project will finance development of basic infrastructure systems in these areas, including
roads, stormwater drainage, water supply, sewerage, and street lighting.
Component 3 (Capacity Building Component, US$1.2 million) will provide resources for
training programs, equipment, technical assistance, and studies based on the perceived needs of
the Thimphu and Phuentsholing city corporations (TCC and PCC respectively) and of the
Ministry of Works and Human Settlements (MoWHS).
Which safeguard policies are triggered, if any?
Environmental Assessment (OP/BP/GP 4.01) and Involuntary Resettlement (OP/BP 4.12).
Significant, non-standard conditions, if any, for: None
Board presentation: None
Loan/credit effectiveness: None
Covenants applicable to project implementation: See the section C6 of the PAD.
BHUTAN
Second Urban Development Project
CONTENTS
Page
A. STRATEGIC CONTEXT AND RATIONALE ................................................................. 1 1. Country and sector issues.................................................................................................... 1 2. Rationale for Bank involvement ......................................................................................... 2 3. Higher level objectives to which the project contributes .................................................... 2 B. PROJECT DESCRIPTION ................................................................................................. 3 1. Lending instrument ............................................................................................................. 3 2. Program objective and Phases ............................................................................................ 3 3. Project development objective and key indicators.............................................................. 3 4. Project components ............................................................................................................. 4 5. Lessons learned and reflected in the project design............................................................ 5 6. Alternatives considered ....................................................................................................... 6 C. IMPLEMENTATION .......................................................................................................... 7 1. Partnership arrangements (if applicable) ............................................................................ 7 2. Institutional and implementation arrangements .................................................................. 7 3. Monitoring and evaluation of outcomes/results .................................................................. 8 4. Sustainability....................................................................................................................... 9 5. Critical risks and possible controversial aspects ................................................................. 9 6. Loan/credit conditions and covenants ............................................................................... 10 D. APPRAISAL SUMMARY ................................................................................................. 10 1. Economic and financial analyses ...................................................................................... 10 2. Technical ........................................................................................................................... 11 3. Fiduciary ........................................................................................................................... 12 4. Social................................................................................................................................. 14 5. Environment...................................................................................................................... 16 6. Safeguard policies ............................................................................................................. 16 7. Policy Exceptions and Readiness...................................................................................... 17 Annex 1: Country and Sector or Program Background ........................................................ 18 Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ................ 21 Annex 3: Results Framework and Monitoring ....................................................................... 22 Annex 4A: Detailed Project Description .................................................................................. 25 Annex 4B: Land Pooling in Bhutan ......................................................................................... 31 Annex 5: Project Costs .............................................................................................................. 34 Annex 6: Implementation Arrangements ................................................................................ 35 Annex 7: Financial Management and Disbursement Arrangements .................................... 37 Annex 8: Procurement Arrangements ..................................................................................... 45 Annex 9: Economic and Financial Analysis ............................................................................ 53 Annex 10: Safeguard Policy Issues ........................................................................................... 64 Annex 11: Project Preparation and Supervision .................................................................... 73 Annex 12: Documents in the Project File ................................................................................ 75 Annex 13: Statement of Loans and Credits ............................................................................. 76 Annex 14: Country at a Glance ................................................................................................ 77 Annex 15: Map IBRD37549 ...................................................................................................... 79 A.
STRATEGIC CONTEXT AND RATIONALE
1.
Country and sector issues
1.
Bhutan is a small landlocked country in South Asia, located in the eastern Himalayas
between emerging economic giants of the world, India and China. The Kingdom is home to a
population of about 672,0001 spread over an area of 38,500 square kilometers with about 70
percent of land under forest cover. In the past couple of decades, the Kingdom of Bhutan has
experienced rapid social and economic growth as a result of prudent macroeconomic
management, beneficial exploitation of hydropower resources and support from development
partners. Also the country has seen significant political changes and transitions in recent years.
Bhutan’s political system has evolved from an absolute monarchy into a constitutional
monarchy, following a decade of planning and consultations.
2.
The social and economic transition is fueling rapid urbanization. Since 2000, the urban
population in Bhutan is estimated to have grown by about 4.7 percent per year. Starting from a
low base, the urban population now accounts for about a third of total population, and is
expected to reach 50 percent by 2020. Rapid urban growth is generating a host of major
challenges for this hilly country of scattered small settlements. Meeting the challenges of urban
development, management and finance has become a key developmental agenda for the Royal
Government of Bhutan (RGOB) and international donors.
3.
Thimphu, the country’s capital and by far the biggest city with about 80,000 residents,
provides the largest stage for the new urban challenges. The city was growing rapidly at the pace
of 7 to 10 percent during the decade up to 2005 and to accommodate this growth, the city area
was expanded towards both south and north in 1997 and 2002. The nation’s first comprehensive
Structural Plan was prepared in 2002 for the greater Thimphu region, and Thimphu City
Corporation (TCC) was established in 2003. While the Structural Plan provides a good longterm framework and the TCC provides services competently with adequate cost recovery in core
areas (at least as far as water and sewerage services are concerned), the city has been struggling
to manage the urban expansion and the newly extended areas in the North and South of Thimphu
City remain underdeveloped and lack basic urban infrastructure.
4.
In order to avoid the legal and financial burden of land acquisition, necessary for building
public infrastructure, the government has adopted an area development strategy through land
pooling, requiring land owners to contribute up to 30% of their land in exchange for internal
roads, drainage, water and sewerage infrastructure and street lighting. Detailed Local Area Plans
(LAPs) have been prepared for these settlements – five in the North and five in the South – and a
moratorium on new housing construction was imposed by the RGOB in 2002 until demarcations
of land plots are finalized and agreed. However, the consultations with landowners have
progressed slowly as the legal framework, procedures, and the staff skills needed to be developed
through experience. Agreements on the layout of the LAP and the land pooling arrangements
have been reached in some areas, and RGOB approached International Development Association
(IDA) and Asian Development Bank (ADB) for financing infrastructure development - ADB in
the South and IDA in the North. The ADB loan was approved in December 2006.
1
The first full census of 2005 revealed a population of 672,425 in Bhutan.
1
5.
The experience with the LAPs illustrates the need to develop new approaches, institutions
and capacities for urban management. The construction freeze and the initial plan of providing
high-standard public infrastructure services are consistent with the government-led development
approach which has yielded Bhutan’s rapid social as well as economic advances. The rapid
urban growth, however, is likely to require sizeable investments and management capacities that
cannot be met solely by the government. The land pooling is a significant innovation to share
the cost of urban development with landowners, but it needs to be refined for higher efficiency
and flexibility. Further, the overall urban management and finance systems need reorientation to
enable the market and enhance efficiency and equity.
2.
Rationale for Bank involvement
6.
IDA started supporting Bhutan’s urban development with the Bhutan Urban
Development Project (1999-2006), which helped to develop urban infrastructure systems in ten
small and medium-sized towns as well as serviced sites in three of the towns. It also helped
strengthen local government’s project management and cost recovery for water supply. The
government has shown strong interest and appreciation of the Bank’s policy advice, through this
project as well as the recent Technical Assistance (TA), to prepare the Bhutan National
Urbanization Strategy and the Thimphu City Development Strategy. Given the need to
accommodate an increasing urban population and to develop Bhutan’s policy and institutions to
facilitate and manage urban growth, the proposed project could make significant contribution to
the equitable and sustainable expansion of urban services, an essential element of the first pillar
of the Bank’s Country Assistance Strategy (CAS) for Bhutan (2005), and would also contribute
to private sector development, the second pillar of the CAS.
7.
Given the smooth transition to a parliamentary democracy and ongoing decentralization
process in the country, the Bank’s involvement in this project will provide an excellent
opportunity to assist RGOB in creating a more autonomous and accountable local government
system through a series of policy support, technical assistance and institutional capacity building.
3.
Higher level objectives to which the project contributes
8.
While a primary objective of Bhutan’s Tenth Five Year Plan (2008 -2013) is poverty
reduction, the plan also emphasizes the importance of sustainable urban management and
decentralized governance. It places high priorities on developing urban infrastructure for the two
major cities and several towns as well as on the necessary capacity development of central and
local institutions dealing with urban management.
9.
In parallel with the country’s smooth transition towards a parliamentary democracy and
ongoing decentralization, Bhutan’s legal framework for urban local governments has recently
seen a significant change by enacting the Thromde Act (Municipal Act) of 2007. Before this Act,
the country’s only two city corporations (Thimphu City Corporation and Phuentsholing City
Corporation) were functioning under the aegis of the Royal Charter and the Municipal Act 1999.
The Thromde Act mandates establishment of democratically-elected local governments with an
enhanced autonomy and accountability with regards to planning, staffing, finance and budget.
2
The Act introduces classification of urban areas based on their socio-economic profiles such as
population and economic activities, and assigns clearer responsibilities according to the
classification. It should also be noted that the Act recognizes land pooling as an urban
development tool for the first time. Recently, Bhutan’s parliament passed the new Local
Government Act of 2009, integrating all the laws related to local governments including the
above-mentioned Thromde Act of 2007.
10.
What the new Local Government Act envisages is influenced by many initiatives in the
past few years, one of which is formulation of Bhutan’s National Urbanization Strategy (BNUS).
Financed by the Cities Alliance and supported by the World Bank, RGOB started to develop
BNUS in 2006 and finalized it in early 2008. BNUS articulates the future direction of Bhutan’s
urbanization and emphasizes the need for the following initiatives among other things: municipal
reform towards more decentralized and accountable local governments; balanced regional
development by creating urban hierarchy and identifying regional centers; prioritization of
investments in the two major cities and regional centers; environmental protection and cultural
conservation; and capacity building of urban institutions. In parallel, the Thimphu City
Development Strategy was also prepared, which contains analysis of the city’s existing situations
and key priority actions.
B.
PROJECT DESCRIPTION
1.
Lending instrument
11.
The proposed project would be financed by IDA credit. A Specific Investment Loan
(SIL) will be the lending instrument.
2.
Program objective and Phases
12.
Not applicable.
3.
Project development objective and key indicators
13.
The proposed project development objectives are to: (i) support Bhutan’s municipal
reform program by strengthening municipal finance and management systems in Thimphu and
Phuentsholing; and (ii) improve infrastructure services in northern Thimphu where no formal
services are currently available. The first objective supports RGOB’s municipal reform agenda
and helps implement the country’s new legal framework for urban local governments through a
series of technical assistance, policy support, training programs, and studies. The project also
aims to help establish an effective intergovernmental fiscal transfer system. The second objective
addresses an urgent need for serviced urban land in rapidly growing Thimphu City, given the
already substantial and increasing migrant population settling in the peripheries of Thimphu.
The process of attaining these objectives would help develop models and capacity for broader
urban management in Bhutan.
14.
Outcome indicators: The achievement of the Project Development Objectives (PDO)
will be measured by the following indicators:
3
a. Local revenue collection (percentage increase) to assess the use and application of
systems financed under the project;
b. Number of building permits issued for Dechencholing and Langjophakha to gauge
demand for serviced plots;
c. Number of households in Dechencholing and Langjophakha with new piped water and
sewerage connections to ascertain that infrastructure systems are being used.
15.
Intermediate outcome indicators underpin the achievement of these project outcome
indicators. These along with their respective baseline values and targets are listed in Annex 3.
4.
Project components
16.
The Project will consist of three components: (i) municipal finance and management
component; (ii) Thimphu northern area development component; and (iii) capacity building
component. A summary of these components are described below, and more details are attached
in Annex 4A.
Municipal Finance and Management (US$ 1.5 million)
17.
With the enactment of the Thromde Act in 2007 and the passage of the comprehensive
Local Government Act by Bhutan’s parliament in 2009, the local governments of the two cities
in Bhutan, viz Thimphu and Phuentsholing are expected to function as fully functional local
governments with the responsibility to provide urban services to their citizens in a sustainable
manner. However, the existing gaps in the framework for the financing of municipal services for
resource mobilization and management at the city level are constraining the abilities of the city
corporations to transform themselves into fully functional local governments capable of catering
to the development requirements of their citizens. This component aims at strengthening the
institutional systems and processes of the two city corporations of Thimphu and Phuentsholing to
enable them to function effectively as efficient, transparent and accountable urban local
governments capable of providing urban services in a sustainable manner. It will also support
RGOB to undertake further policy reforms with the objective of putting in place a sustainable
policy framework for financing municipal services. The support for the city-specific reform
measures will comprise of two broad areas, namely: (i) strengthening the local revenue policies
and local revenue administration systems and processes of TCC and Phuentsholing City
Corporation (PCC); and (ii) strengthening the expenditure management systems and financial
management systems and processes of TCC and PCC. The support for policy reforms will
enable the relevant RGOB agencies in the design and implementation of an inter-governmental
fiscal transfer system to urban local governments that is based on sound principles and is
rational, predictable and transparent.
Thimphu Northern Area Development (US$ 9.3 million)
18.
RGOB/TCC has been planning to develop the Northern areas, consisting of five Local
Area Plans (LAPs), through a land-pooling approach. Earlier, RGOB made it clear to IDA that
given the history of planning and community consultation processes that have taken place for the
past many years in these areas, there would be no alternative to the land-pooling approach.
4
RGOB decided to prepare Bhutan’s own land pooling rules, and the Cabinet approved the Land
Pooling Rules of the Kingdom of Bhutan 2009 on March 17, 2009. As per the new Rules, at least
two thirds of the landowners have to support the land pooling in order for the development plans
to proceed (a background for land pooling in Bhutan is included as Annex 4B).
19.
This component will focus on two smallest LAP areas in northern Thimphu, where the
preparation for land-pooling is most advanced (Dechencholing and Langjophakha). The project
will finance development of basic infrastructure systems in these areas, including roads,
stormwater drainage, water supply, sewerage, and street lighting. At the same time, this
component will support increase in low-income housing units in these areas, and RGOB agreed
to use several pieces of surplus plots generated through land pooling for this purpose.
Capacity Building (US$ 1.2 million)
20.
Under this project component, resources will be provided for training programs,
equipment, technical assistance, and studies based on the perceived needs of TCC and PCC
respectively and of MoWHS.
21.
This component aims at significant upgrading of the capacities of each city corporation in
various aspects of their internal work processes and service delivery to citizens through training
of staff and provision of relevant equipment. As the populations in both cities are projected to
grow over the coming years, the requirement for increased and improved urban services delivery
will also expand rapidly. The two city corporations as well as the Department of Urban
Development and Engineering Services (DUDES)/Policy and Planning Division (PPD) of
MoWHS will have to cater to the urban population with an array of services which will call for
strengthening both the quantity and quality of their staff.
22.
The training program will be designed to initially cater to the operational staff of the two
city corporations and the DUDES/PPD with the objective of augmenting their technical skill
levels. During the early years of project implementation, in-country courses of short durations
will be administered and participants will be selected by a coordination committee comprising of
representatives from the MoHWS, the city corporations and the concerned training institution(s).
23.
It is planned that most of these technical training courses will be conducted by/at the
College of Science and Technology (CST), Royal University of Bhutan, located near
Phuentsholing, while some proposed courses, mainly on the management side, may be provided
by the Royal Institute of Management (RIM) in Thimphu. This component will also support the
procurement of appropriate equipment for TCC, PCC and MoWHS, purchase/rental of a vehicle
for TCC and incremental operational costs.
5.
Lessons learned and reflected in the project design
24.
The following key lessons were identified under the Bhutan (first) Urban Development
Project (BUDPI), most of which are highlighted in its Implementation Completion Report (ICR).
These lessons have been taken into account in the design of the Bhutan Urban Development II
Project (BUDPII).
5
25.
A project should have a sufficient level of readiness for implementation before its
approval. BUDPI suffered from the lack of implementation readiness, and most of the project
preparation activities started after the project approval, leading to the very low disbursement
amount for the first few years and delayed implementation. The physical component of BUDPII
will be implemented in phases (starting from Dechencholing) and the engineering documents for
the first year investments in Dechencholing are ready.
26.
There is a trade-off between the number of project towns and the level of effective
engagement with local governments, especially in Bhutan. BUDPI covered 10 towns spread all
over the country, making it difficult for the Bank and the Government to effectively monitor and
supervise project activities, exacerbated by Bhutan’s inaccessible terrain. This led to rather
superficial engagement with each Dzongkhag administration participating in the project.
Creating lasting capacity in local governments requires more capacity building efforts and deeper
engagement. BUDPII will target only two biggest cities (Thimphu and Phuentsholing) with
physical investments confined to northern areas of Thimphu.
27.
Clear implementation arrangements and identification of capacity constraints are
paramount in a project, especially with decentralized implementation responsibilities. Under
BUDPI, insufficient attention was paid to the capacity available within Dzongkhag
administrations to implement the project. This led to knowledge and capacity gaps unfilled by
needed technical assistance and adequate training. BUDPII will ensure that city corporations will
have an adequate level of counterpart staff assisted by tailored technical assistance and training
programs not only to support smooth implementation but also to build their capacities.
28.
Land development components require careful preparation. BUDPI included a few
schemes of land development called sites and services, which were very challenging due to the
high cost of acquiring necessary land and also due to the difficulty in allotting developed plots to
beneficiaries in an equitable and transparent manner. BUDPII is adopting a land pooling
approach where land owners will remain in-situ after contributing a certain percentage of their
land for infrastructure and public spaces.
6.
Alternatives considered
29.
Land acquisition versus land pooling: RGOB and TCC had decided to develop these
areas through land pooling and already conducted extensive community consultations long
before IDA’s involvement. Although the project design tried to explore alternative approaches in
improving service delivery, such as upgrading in the built-up areas, it is not acceptable to RGOB
to change its earlier commitment to land pooling. Also, a traditional approach of acquiring land
and developing public infrastructure was rejected as too costly.
30.
Development of all northern five LAPs simultaneously versus a phased approach
targeting fewer areas: RGOB and TCC initially wanted to develop five LAP areas in northern
Thimphu simultaneously through a land pooling approach. This was not possible at all because
of the limited amount of funds available for this project, but more importantly because of the
different pace of preparing a land pooling scheme in each LAP. Land pooling is very often a long
6
process involving local area planning, community consultation and consensus building, plot
demarcation, collection of formal agreements, handing-over of plots, and so on. In northern
Thimphu, Dechencholing is most advanced in terms of this process, followed by Langjophakha.
Therefore, the project will be only implemented in two LAP areas (Dechencholing first and
Langjophakha second). Given the TCC’s capacity constraint and the uncertainty related to land
pooling, this gradual approach would allow the project to learn lessons from Dechencholing
before implementing Langjophakha and significantly reduce the project risk.
31.
Establishing a Project Management Unit (PMU) versus working with existing
institutions: Given the sustainability concern, the project will be implemented by existing
divisions/departments both at central (MoWHS) and local levels (TCC/PCC). The project will
strengthen the institutional capacities of these divisions/departments rather than creating a
project-based unit such as a PMU.
C.
IMPLEMENTATION
1.
Partnership arrangements (if applicable)
32.
Under its Bhutan Urban Infrastructure Development Project (approved in December
2006), ADB is financing a very similar project in southern extended areas of Thimphu with an
aim to develop basic infrastructure systems through a land pooling approach. Therefore, a strong
coordination with the ADB-financed project is essential. The IDA-financed BUDPII will focus
on developing northern areas to avoid any overlap, but will adopt the similar infrastructure
service standards. During project preparation, BUDPII has also tried to avoid any duplication
with the ADB’s project in terms of technical assistance to strengthen local government
capacities. During implementation, further coordination is certainly necessary for land pooling,
construction and operations of infrastructure systems, and capacity building.
2.
Institutional and implementation arrangements
33.
There will be a high-level steering committee overseeing project implementation,
consisting of representatives from MoWHS, Ministry of Finance (MoF), TCC, and PCC. The
committee will meet at least semi-annually but if necessary, as and when required to review
implementation progress and to discuss key implementation issues including any issue of
coordination with the on-going similar project in southern Thimphu financed by ADB.
34.
All physical works under the project will be implemented by TCC’s Engineering
Division in close coordination with its Planning Division. TCC has recently strengthened the
Engineering Division by increasing the number of technical staff such as water engineers and
designated them for this project on a full time basis. This group, responsible for procurement,
technical designs, construction supervision, contract management, etc., is led by a senior
engineer who will serve as the Component 2 Coordinator. DUDES will provide technical
backstopping for TCC. The project will also finance TA consultancies to TCC to assist them in
implementing this component. Executive Secretary of TCC will have the ultimate responsibility
for any physical aspects of the project in the city.
7
35.
TCC’s Planning Division, headed by the Chief Urban Planner, have already designated
one urban planner each for the two project areas (Dechencholing and Langjophakha) and also
newly recruited two social development specialists. Working closely with the Engineering
Division, the Planning Division will ensure that land pooling schemes will be implemented in a
smooth manner. Their responsibilities include: continuous community consultation, information
dissemination, timely execution of safeguard actions specified in the resettlement action plans,
and any planning adjustment that might become necessary in the course of implementation. The
Division will also serve as a secretariat for a Grievance Redress Committee which will consist of
council members, a legal officer, local representatives, a concerned urban planner, and other
stakeholders.
36.
The policy-related TAs will be procured by the Policy and Planning Division (PPD) of
MoWHS, and procured services/goods will be provided to TCC and PCC. The Chief
Administrative Officers of TCC and PCC, heading their Finance and Administrative Division,
will play a key role in implementing the TA activities under this component. Most of the incountry training under the capacity building component will be administered under the MoU
between the Ministry and the CST, Royal University of Bhutan. Please see Annex 6 for more
details.
3.
Monitoring and evaluation of outcomes/results
37.
A comprehensive household survey has been conducted in both Dechencholing and
Langjophakha. The survey data has been used for: (i) identifying project affected people (PAPs)
and providing inputs to the Social Assessment (SA); (ii) understanding the socio-economic
situation in these settlements and conducting an economic analysis; and (iii) establishing a
baseline scenario on parameters against which the project’s success will be measured.
38.
TCC and PCC, as implementing agencies, will be responsible for collecting data on
project progress, which will be collated, cross-checked and forwarded to PPD in MoWHS, which
receives data from all departments (including urban development, roads, etc.) within their
ministry. These already existing functions need to be strengthened under the technical assistance
component of this project.
39.
In addition to monitoring project progress data, the Bank’s supervision mission will assist
both TCC and PCC in introducing a citizen score card. This will help to institutionalize a score
card that would evaluate their service delivery performance. It will be implemented at a low
administrative cost, so it is easily replicable within the resources available to these institutions.
40.
The Gross National Happiness Commission (GNHC) has embarked on a broader effort to
monitor the implementation of the planned activities based on jointly agreed indicators in various
ministries and Local Governments. During project implementation, guidance will be provided to
MoWHS on suitable sectoral indicators that could be usefully employed for monitoring urban
progress.
8
4.
Sustainability
41.
The key sustainability issue is TCC’s capacity to successfully operate and maintain new
infrastructure assets to be created under the project. TCC has already demonstrated its potential
by successfully managing its water and sewerage systems serving the core areas with adequate
level of cost recovery. The project will further strengthen TCC’s capacity through technical
assistance and training programs to upgrade skills needed for urban management and
infrastructure operations and also help generate more local revenues through more efficient
collection of user charges and property taxes.
5.
Critical risks and possible controversial aspects
Description of risk
Mitigation measures
Rating of
residual risk
Demand for housing in Thimphu is high, as evidenced by
increasing rents and continuous inward migration.
Nevertheless, the proposed project takes a phased
approach and will increase serviced land for housing in
only two local areas in Northern Thimphu (i.e.
Dechencholing and Langjophakha).
M
To mitigate this risk, the physical component of the
project will start small and be implemented in a phased
manner. However, TCC has recently increased its staff
strength in the Engineering Division, Planning Division,
and Finance & Administrative Division and has
demonstrated certain improvements in their capacity. In
addition, the project will provide technical assistance to
address this risk.
M
Since the project proposes to use existing public financial
management systems of RGOB, PPD staff is already
acquainted with these systems and rules.
All project expenditure will be accounted and reported
using the BAS and RGOB’s financial rules and
regulations will be applied. In addition, the project is
subject to annual audits by RAA.
M
PPD staff already has prior experience in World Bank
procurement procedures. The project provides specific
training on procurement to TCC to strengthen its
capacities. A procurement guidance note has been
prepared specifically to guide project implementation.
Social and Environmental Safeguards
Compensation for
A RAP has already been prepared for Dechencholing,
involuntary resettlement
and is being prepared for Langjophakha. The RAP
and/or loss of assets/income outlines the policy and procedures for acquisition of land
M
Technical Design
Demand for serviced land
may be lower than
projected, resulting in
underutilization of
infrastructure systems.
Implementation Capacity
Weak capacity of TCC to
implement this project, in
parallel with ADB’s similar
project, poses a significant
risk to speed and quality of
implementation.
Financial Management
Weak financial
management capacity
within the PPD resulting in
weak accountabilities and
oversight of project FM
activities.
Procurement
Weak procurement
capacities within PPD and
TCC resulting in delays in
procurement.
9
M
Description of risk
Mitigation measures
and compensation based on the 2009 PAVA rates. Social
Audits during the course of the project will verify the
implementation of the RAP. In addition, TCC will also
establish a transparent and independent Grievance
Redressal Committee (GRC) for each LAP.
Possibility of gentrification, RGOB has agreed to facilitate the increase in low-income
driving poorer households
housing units in some of the serviced plots generated
out of the area.
through land pooling. The project will support analyses
of low-income housing options, and will review existing
incentive systems (such as the vacant land tax and
development control regulations) for their suitability of
increasing private provision of low-income housing.
L = Low; M = Moderate; S = Substantial
Rating of
residual risk
may not be paid at the
market rate.
S
The overall risk is Moderate
6.
Loan/credit conditions and covenants
42.
Disbursement Condition: Preparation and disclosure of a RAP for Langjophakha
satisfactory to IDA before any withdrawal for civil works in Langjophakha.
43.
Effectiveness Condition: Execution of Subsidiary Agreement between RGOB and TCC.
44.
In addition to the standard covenants such as financial management, reporting and
auditing, some safeguards-related covenants will apply. These include: (i) implementation of a
RAP before any civil works start in Dechencholing; and (ii) implementation of a RAP in a
manner satisfactory to IDA before any civil works start in Langjophakha.
D.
APPRAISAL SUMMARY
1.
Economic and financial analyses
45.
Given the project’s objectives --i.e. increased serviced land for housing -- the economic
analysis started by asking how many users of the planned water and sewerage systems are
needed to make the investments cost-effective, where cost-effectiveness is assessed by simply
comparing the per capita cost to international benchmarks. For greenfield water and sewerage
treatment plants and network, ballpark estimates range typically from 130 to 140 US Dollars per
person for water or from 160 to 170 US Dollars per person for sewerage. At the given investment
cost, this requires about 5,700 users of these facilities in Dechencholing and 3,200 users in
Langjophakha to arrive at similar cost figures. The feasibility study assessed the number of
persons moving into Dechencholing at 7,187 and into Langjophakha at 6,460, so the required
number of future users of the utilities is well within these population projections, serving as the
minimum lower bound.
46.
The economic analysis then proceeded estimating the value of a household moving to
Dechencholing or Langjophakha, asking the question how much more is a family willing to pay
10
for moving into an apartment or house that has access to urban services versus one that has not.
Making use of regression techniques, it was possible – using the 2007 BLSS – to estimate the
relationship between rental values (constituting the amount a household is willing to pay for a
given accommodation) and certain housing characteristics. Using household data for Thimphu
city2 shows that, on average, households pay 71 percent more in rents for housing with urban
amenities and road access. The estimated coefficients were applied to the household survey data
in Dechencholing and Langjophakha, and the net present value of future incremental rental
income was used as measure of the increased productive use of the serviced land after the
project.
47.
Under the base-case scenario, proposed investments (water, drainage, sewerage,
streetlighting and roads) yield a rate of return of 28 percent for Dechencholing and 33 percent for
Langjophakha, assuming a horizon of 20 years. Although the respective ERRs are sizeable, the
results are highly sensitive to: (a) the number of households that will move to Dechencholing
and Langjophakha; and (b) the estimate of incremental welfare a household derives from
improved infrastructure services. While the latter estimate seems quite robust, also when
computed land values are compared to quotes by commercial banks and developers, there is no a
priori certainty about the number of households moving into these two areas, other than that
demand for housing in Thimphu has been high, due to significant immigration from rural areas
during the past ten years.
48.
The details of this economic assessment are outlined in Annex 9, including the results of
the regression analysis, a look at the potential impact of gentrification, a sensitivity analysis and
policy recommendations that could address some of the risks identified.
2.
Technical
49.
The project will finance infrastructure development in northern LAP areas focusing on
Dechencholing and Langjophakha areas. The type of basic infrastructure to be financed includes
roads and drains, water supply, sewerage, street lighting and water treatment plant. The projects
civil works components aim to introduce quality, cost effective, and technically feasible solution
to address Bhutan's topographical and climatic factors The civil works component will also
mainstream social and environmental practices. To ensure sustainability maintenance planning
and budgeting of the developed infrastructure will be also addressed under the project. Design of
phase-I works has been completed and tender documents are ready for invitation of bids. Design
of roads have been done incorporating topographical and safety features; special attention has
been given for safety of pedestrians. For water supply, drains, and water treatment plants
adequate consideration has been given to safety and environmental issues. Experienced
supervision consultant will be engaged to provide implementing agencies with engineering and
advisory services to manage more effectively technical aspects of the project including ensuring
of quality control.
2
Due to lack of heterogeneity in the Thimphu data, a separate regression was estimated including households from
Paro to test the significance and to retrieve the size of the coefficient for road access.
11
3.
Fiduciary
50.
Financial Management: Given past experience in handling the Bank financed project
and the Bank’s prior understanding of the Public Financial Management (PFM) systems in
Bhutan, no separate Financial Management (FM) assessment of the PPD and MoWHS has been
considered necessary. However, the lessons from implementation experience have been
considered and built into the design of project FM arrangements. TCC presently operates within
the same public financial management architecture and the strengths and weaknesses found in
the RGOB systems apply to TCC as well. The Municipal Finance Policy document prepared by
the MoWHS with the support under EUSPS (Environment & Urban Sector Program Support) of
DANIDA provides a clear description of the essential elements of an efficient delivery of public
services from Municipalities. This policy document read along with the provisions of newly
passed Local Government Act, 2009 have provided the basis for the development of the road
map of PFM reforms in Municipal Corporations in Bhutan.
51.
The project will be budgeted for MoWHS under a separate Financing Item Code (FIC)
for the project. The activity/sub-activity codes will allow for all project-related expenditures to
be separately identified, accounted and reported in the consolidated Budget and Accounting
System (BAS) reports.
52.
Accounting for project expenditures will be maintained on cash basis under BAS itself
and no separate project level accounting will be required. The prevailing rules of RGOB i.e.
Financial Rules and Regulations (July 2001) will apply to all project expenditures. The
accounting and financial reporting functions at PPD, MoWHS and TCC will be managed by the
existing accounting staff and supplemented by additional regular/contractual staff as required.
This may be necessary for the PPD, which will have the primary responsibility of (a) routing all
fund requests to Department of Public Accounts (DPA) and tracking the fund releases; (b)
reconciliation of the Designated Account; and (c) preparing and submitting the quarterly
consolidated interim financial reports to IDA.
53.
Project funds will be deposited in advance into the designated account maintained in
Ngultrums, to be opened at the Bank of Bhutan. The designated account will be segregated and
used only to deposit advances for the project and make payments for eligible project
expenditures. The designated account will be operated by the DPA in MoF. Funds will be
withdrawn from the designated account on an `as required’ basis and transferred as an advance to
the Government Budget Fund Account (GBFA) by DPA. These transfers are based on requests
from PPD to meet its own requirements; all requests for fund releases from TCC will also be
routed through PPD (no fund flows will be made to PCC for project expenditures). Based on the
approved requests, the Department of Public Accounts (DPA) in the MoF will release funds to
the respective PLC accounts of the implementing agencies.
54.
Reporting for eligible expenditures will be based on interim unaudited financial reports
and will be processed by DPA on a quarterly basis. The interim unaudited financial reports will
provide information on expenditure made in the previous quarter and forecast for two subsequent
12
quarters. Quarterly advances would be made based on these financial reports, providing funds for
two subsequent quarters after adjustment for past disbursements.
55.
Consolidated annual project financial statements will be audited each year by the Royal
Audit Authority (RAA), which is the Supreme Audit Institution (SAI) in Bhutan and acceptable
to IDA. PPD and MoWHS will be responsible for submitting the consolidated annual project
financial statements to RAA by September 30 of each financial year. The Terms of Reference
for the audit have been prepared in agreement with the Bank and have been endorsed by RAA.
56.
Procurement: Procurement for this project would be carried out in accordance with the
World Bank’s "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004
as amended October 2006; and "Guidelines: Selection and Employment of Consultants by World
Bank Borrowers" dated May 2004 as amended October 2006, and the provisions stipulated in the
Financing Agreement.
57.
Procurement of works anticipated under this project includes roads and drains, water
supply, sewerage, street lighting, new water treatment plants, water distribution pipelines, sewer
trunk mains, sewer networks, paved roads with stormwater drains and footpaths. Three packages
of International Competitive Bidding (ICB) contracts are anticipated.
58.
Procurement of goods: To support the TCC and PCC to computerize property tax records
and create and maintain up-to-date tax payers’ database.
59.
Existing Public Procurement Environment: In Bhutan, there are several activities with
respect to strengthening procurement, such as the ‘Institutional Capacity Building for
Procurement’ that is being implemented through an international firm. The Standard Bidding
Document (SBD) has been issued for use by RGOB’s own procurement staff, a Procurement
Manual has been updated and issued during April 2009 for use by RGOB. There are other
activities such as assessment of Use of Country System by using OECD-DAC tool, Assessment
of e-GP readiness. Proposal to issue SBD’s for Information Communication Technology (ICT)
and Health sector goods are on record.
60.
Selection of consultants would mainly include hiring of consultancy services for:
construction supervision and any engineering design; and various policy-related studies and
technical assistance. Hiring of consultant services will follow the World Bank’s standard RFP
documents and Guidelines for Selection of Consultants. Shortlists of consultants for services
estimated to cost less than US$200,000 equivalent per contract may comprise entirely of national
consultants in accordance with the provisions of paragraph 2.7 of the consultant guidelines.
61.
An assessment of the capacity of TCC and PPD to implement the procurement
arrangements was undertaken by the Bank procurement team and included: (a) a review of the
organizational structure for implementing the project: and (b) interaction with the concerned
procurement staff of TCC and PPD. Most of the issues/risks concerning the procurement
components for implementation of the project have been identified in Annex 8.
13
4.
Social
62.
Ethno-culturally Bhutan has three major groups each defined by their language and
culture. These are the Ngalong that inhabit most of western Bhutan, the Sharchokpas of eastern
Bhutan and the Lhotsampas of southern Bhutan. There are, however, many small population
groups of people spread across the country in small pockets that may speak a distinct language or
practice a unique culture. In both the LAPs the inhabitants, owners and tenants alike, may have
their origins from other parts of the country, and around ¾ of residents in both the LAPs still
have their registration outside Thimphu, where they may also own land. The socio-economic
survey shows people engage in varied occupations ranging from farmers, civil servants and
employment in the armed forces or the private sector. There are also business people with some
of them having their business establishments within the LAP while others commute to their
enterprises and work places.
63.
Dechencholing is a settlement located 6km away from Thimphu’s city center. The LAP
area is 91.44 acres, characterized by agricultural and orchard land interspersed with settlements
of a mix of permanent and temporary structures. Water supply, sewerage and solid waste
management are very basic or absent. Power and telecommunications have been provided
through overhead cables and there are no street lighting facilities in place. There is a population
of 187 households, with 152 titled landowners owning 179 plots in the LAP. As of December
2009, only two land owners had not signed the land pooling agreement, as they could not be
traced.
64.
Langjophaka is located 2km away from the city center. The total area covered by the
LAP is 55.87 ha. spread below the road leading northwards to Dechencholing. The settlement
lies on the east bank of the Thimphu chhu directly opposite the Tashichhodzong. The population
is 246 households with 104 title holders owning 121 plots in the Langjophaka LAP. As of
December 2009, 7 land owners have not yet signed the land pooling agreement.
65.
The latest Poverty Analysis Report (2007) identified 23.2 percent of the population of
Bhutan as living below the general poverty line of Nu. 1,096.94 per person per month. Poverty
is largely a rural phenomenon, with only 2 percent of the total poor residing in urban areas. Other
important social distinctions are related to occupation and gender. Although gender differences
are considered less pronounced in Bhutan than in other countries in the region, women are still
under-represented in tertiary education and governance, but issues of insufficient reproductive
health care and increased domestic violence are pressing concerns. Hence, the SA recommends
that mechanisms for equitable gender representation should be developed through a process of
dialogue to ensure that women take up positions in the Local LAP Committees.
66.
TCC has carried out a Social Assessment covering both Dechencholing and
Langjophakha LAPs based on a household survey and a series of public consultations in the
areas. In Dechencholing, the number of families which will be affected by land pooling in terms
of losing structures, assets or livelihood is 52, among which 20 are tenants. In Langjophakha,
there are 246 households and a total population of 1026 persons, of which 104 are land owners.
The number of families which will be affected by the land pooling by losing structures, assets or
livelihood is 76, and 48 of these are tenants. In both areas, the average household size is 4 pers.
14
Details of affected property and compensation matrix are covered in the Resettlement Action
Plan (RAP) for each LAP.
67.
Houses in both LAPs can be categorized as permanent, semi-permanent and temporary
structures, the latter being made of mud, stone, bricks and timber mostly with CGI sheet roof
with timber flooring. Only 32 percent of all households in Dechencholing live in houses that are
of permanent nature, while in Langjophakha 34 percent live in permanent structures. Around 40
percent of all households in both LAPs live in temporary dwellings, but these households are
almost exclusively tenants, and in both LAPs around 50 percent of all tenants live in temporary
buildings.
68.
In Dechencholing, only 25 percent of the households own the dwellings presently
occupied while 75 percent do not own houses but stay on rent; in Langjophakha, even fewer (20
percent) own the dwelling they presently live in. Tenants are in both LAPs comparative
newcomers, as 82 percent tenants have lived in Decencholing less than 5 years as compared to
90 percent of the tenants in Langjophakha, whereas most owners in both LAPs have lived more
than 5 years in the LAP (98 percent in Dechencholing and 90 percent in Langjupkakha). The rent
paid by tenants range from Nu. 500.00 or less to Nu. 5,000.00 per month paid both in kind and
cash.
69.
Households derive their income from agricultural activities, non agricultural activities or
from other sources such as employment, rent, remittances and charity. 169 households earn
income from non-agriculture activities like salaried jobs and from business. Income from
agriculture is earned both within Thimphu and outside Thimphu. The average monthly income
from non-agriculture activities (Nu. 12,030.00) is more than double the income from agriculture
and income from other sources suggesting that agriculture activities carried out in the LAP are
on a small and mainly subsistence scale. In Langjophakha, only one household has agriculture
as the only source of income, while the far majority derive their income from a range of nonagricultural sources, in general yielding higher incomes than agriculture.
70.
The official poverty line is monthly per capita income of Nu 1,096. Although there are
big differences in income across the population within the two LAPs, no household in either
LAP fall below the official poverty line. In both LAPs, landowners as well as tenants are among
Project Affected Families (PAFs), i.e. families being negatively impacted by loss of structures,
assets or livelihood. The number of PAFs, families affected by the Land Pooling in terms of
losing structures, assets or livelihood, is in general poorer than the average household in the
LAPs, primarily because of the high proportion of tenants affected. The RAP provides special
compensation to the poorest PAF households.
71.
Where the land pooling arrangements impact structures, these are normally of temporary
nature rather than permanent structures, and a number of tenants (20 households in
Dechencholing) will have to resettle as their dwellings will be impacted. Some of the displaced
tenants expect to relocate to other areas, as they may not find affordable rental housing in
Dechencholing. With the increasing land values following provision of services, it can be
expected that house rents will increase in both LAPs, which may force more low income tenants
to leave the areas.
15
72.
Although the RAP identifies nine households as ‘vulnerable’ (women headed, widows
and elderly), none of the households in Dechencholing LAP seem to live below the official
poverty line.
73.
The TCC is responsible for providing services to facilitate urban development. There
were a few households that availed such services in northern extended areas. Although most
households are within 30 minutes walking distance to the bus stop, health facility, drug store,
school and road, more than 50 percent of the households express dissatisfaction with the present
infrastructure and services provision such as urban roads, water supply, garbage collection,
drainage, street lighting, sewerage and parking provisions. In particular street lighting and road
improvement are prominent priorities for the population.
5.
Environment
74.
Use of Country Systems (CS): BUDPII is one of the projects in Bhutan to pilot the use of
Country Systems that meet the World Bank safeguard requirements. Thus the project has been
prepared in accordance with the requirements of the World Bank operational policy (OP/BP
4.00). This pilot on OP 4.00 relates to application of environmental safeguards for the project.
Under this pilot, all investments to be financed by the project will apply RGOB environmental
laws, regulations and Environmental Impacts Assessment guidelines for selected safeguard
policies on a pilot basis as appropriate. Considering the provisions of OP 4.00, Safeguard
Diagnostic Review (SDR) Report was prepared which reviews equivalence of CS and defines
measures to attain and sustain acceptability of CS. Annex 10 provides the details of SDR and
agreed actions.
75.
Environmental Assessment (EA): Though limited, the expected environmental impacts
due to the project include: clearing of trees, soil erosion resulting in impacts on Wangchu River,
construction related impacts due to location of camp sites, temporary disturbance to local traffic,
and operation stage impacts due to sewage disposal. However, the proposed project activities
will not have any adverse impacts on Natural Habitats and forest resources. The EA conducted
based on SDR findings, and application of CS as well as the Bank policies addresses the
environmental issues integrating the relevant environmental management measures as part of
project preparation. The proposed measures in the form of specific Environmental Management
Plans (EMPs) including monitoring plans will also form part of project implementation actions.
6.
Safeguard policies
Safeguard Policies Triggered by the Project
Environmental Assessment (OP/BP/GP 4.01)
Natural Habitats (OP/BP 4.04)
Pest Management (OP 4.09)
Cultural Property (OPN 11.03, being revised as OP 4.11)
Involuntary Resettlement (OP/BP 4.12)
Indigenous Peoples (OD 4.20, being revised as OP 4.10)
Forests (OP/BP 4.36)
16
Yes
[X]
[]
[]
[]
[X]
[]
[]
No
[]
[X]
[X]
[X]
[]
[X]
[X]
Safety of Dams (OP/BP 4.37)
Projects in Disputed Areas (OP/BP/GP 7.60)*
Projects on International Waterways (OP/BP/GP 7.50)
[]
[]
[]
[X]
[X]
[X]
76.
Involuntary Resettlement OP 4.12: The land pooling approach applied in BUDPII is
based on the The Land Pooling Rules of the Kingdom of Bhutan 2009, which requires voluntary
agreement from a minimum of 2/3 of land owners in the affected area to contribute a defined
proportion (in the present case 25 percent) of their land in exchange for provision of
infrastructure services in the LAP. By emphasizing in situ development, the land pooling
approach thus minimizes resettlement and enables original owners to retain title to the majority
of the land. While loss of land is not compensated, the infrastructure provision will increase the
value of the remaining plot. According to the Social Assessment (November 2009), 97 percent of
land owners in Dechencholing and 80 percent of landowners in Langjophakha have already
signed the land pooling agreements, i.e. fulfilling the requirements for application of the land
pooling approach in the respective LAPs. While land is voluntarily contributed, Project Affected
Families will receive compensation for loss of structures, other assets, and livelihood plus
resettlement assistance to the most vulnerable according to a RAP developed by TCC, compliant
with OP 4.12. In the case of landowners who do not agree to the Land Pooling agreement, their
plots will be fully acquired through the Bhutan Land Act of 2007 land and following procedures
and compensation framework compliant with OP 4.12.
77.
The RAP for Dechencholing LAP identified a total of 52 Project Affected Families (out
of the total of 187 families) of which 32 are landowners. Twenty tenant families will also be
affected and have to relocate. The RAP for Langjophakha will be prepared before any
construction works start there. The TCC has formed a Plan Implementation Subcommittee for
each 11 LAPs to resolve grievance/complaints from affected people comprising members from
TCC, LAP/Plot owners’ representatives, a representative from the District Court and a
representative from a local non-governmental organization (NGO). The redress system is
composed of three steps: a) the SDRC will attempt to solve grievances, b) Grievance Redress
Committee, and c) if resolution still not found, complainants can approach the court of law.
Grievances against the RAP and entitlement framework can be submitted within two weeks of
disclosure. However, the GRC will be functioning throughout the implementation of the local
area plan.
7.
Policy Exceptions and Readiness
78.
The project will be implemented in phases, and the first phase is in a state of readiness.
No policy exceptions are required.
*
By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the
disputed areas
17
Annex 1: Country and Sector or Program Background
BHUTAN: Second Urban Development Project
This annex provides detailed information on the sector to support the statements in Sections A.1
and A.2 of the main text.
Country Background
1.
The Kingdom of Bhutan is a small landlocked country in South Asia, located in the
eastern Himalayas between emerging economic giants of the world, India and China. The
Kingdom is home to a population of about 672,0003 spread over an area of 38,500 square
kilometers with about 70 percent of land under forest cover. In the past couple of decades, the
Kingdom of Bhutan has experienced rapid social and economic growth as a result of prudent
macroeconomic management, beneficial exploitation of hydropower resources and support from
development partners.
2.
Bhutan’s economic performance has been strong in recent years, with per capita Gross
Domestic Product (GDP) estimated to have exceeded US$1,900 in mid-2008—higher than in
other South Asian countries like Sri Lanka, India, Nepal, and Pakistan.4 Bhutan has recorded
real growth rates in excess of 9 percent per annum during the Ninth Five-Year Plan (2002/03 2007/08, extended by one year), and real GDP growth for 2007-08 is estimated to be over 14
percent, reflecting the recent tripling of Bhutan’s power generation capacity as the Tala
hydropower project came on-stream. The major engines of growth have been electricity, and
construction, as well as financing, insurance, and real estate, which have contributed about half
of the growth in this period. Driven by the exploitation of vast hydropower potential—currently
estimated at 30,000 MW - and donor support, revenue from electricity sales have gone up fivefold since 2002. As a result of public investment in hydropower and other infrastructure, the
construction sector is growing swiftly. Private investment in housing and hotels is also boosting
the sector. Tourist arrivals have risen sharply since 2004, increasing activity in the services
sector. Opportunities are expanding for the formal private sector, but with power sector revenues
and donor financial support flowing through the government, the public sector remains the
primary engine of growth in Bhutan. Prices in Bhutan track Indian prices, and headline inflation
accelerated to 8.9 percent in the second quarter of 2008 from about 6 percent in 2007.
3.
The country has seen significant political changes in recent years. Bhutan has made the
transition to a democratic constitutional monarchy, following a decade of planning and
consultations. A Constitution was adopted in mid-2008, following a process involving
widespread public consultations within Bhutan and with the international community. The
Constitution seeks to promote good governance, emphasizing transparency, accountability,
efficiency and professionalism. The new democratic system comprises of the National Council
and the National Assembly, the latter based on political party affiliations. Elections for the
National Council were held on December 31, 2007, while elections for the National Assembly
were held on March 24, 2008.
3
The first full census of 2005 revealed a population of 672,425 in Bhutan.
In purchasing power parity terms, GDP per capita was estimated at US$4,842 in 2007, and Bhutan is ranked 106th among 194
countries (World Development Indicators, World Bank, 2008).
4
18
4.
Bhutan’s development goal is uniquely rooted in the concept of Gross National
Happiness (GNH), which places human happiness and holistic well-being at the center of the
development equation. Four foundation pillars of GNH were: (i) sustainable and equitable
socio-economic development; (ii) environmental conservation; (iii) preservation and promotion
of culture; and (iv) good governance.
Sector Background
5.
The spirit and intent of GNH is articulated in the Bhutan Vision 2020 document (A Vision
for Peace, Prosperity and Happiness) which provides a strategy for the country’s path of
development over the next 15 years. It recognizes that the country faces unique developmental
challenges. In particular, the report documents that the country is undergoing a profound and
extremely rapid demographic transition from being a subsistence rural economy to an urban
society, with an urban population reaching up to 50 percent, as the number of urban residents
quadruples over the next 20 years.
6.
Finally, Bhutan Vision 2020 recognizes that while the country’s relatively recent opening
to the world economy offers many advantages, it also carries with it risks to Bhutan’s traditional
values and fragile environment. Vision Bhutan 2020 is translated into sectoral policies, strategies
and programs through five-year development plans. While a primary objective of the latest Tenth
Five Year Plan (2008-2013) is poverty reduction, the plan also emphasizes the importance of
sustainable urban management and decentralized governance. It places high priorities on
developing urban infrastructure for the two major cities and several towns as well as on the
necessary capacity development of central and local institutions dealing with urban management.
7.
In parallel with the country’s smooth transition towards democratization, Bhutan’s legal
framework for urban local governments has recently seen a significant change by enacting the
Thromde Act (Municipal Act) of 2007. Before this Act, the country’s only two city corporations
(Thimphu City Corporation and Phuentsholing City Corporation) were functioning under the
aegis of the Royal Charter and the Municipal Act 1999. But the Thromde Act mandates
establishment of democratically-elected local governments with an enhanced autonomy and
accountability with regards to planning, staffing, finance and budget. The Act introduces
classification of urban areas based on their socio-economic profiles such as population and
economic activities, and assigns clearer responsibilities according to the classification. It should
also be noted that the Act recognizes land pooling as an urban development tool for the first
time. Recently, the Bhutan’s Parliament passed the new Local Government Act of 2009,
integrating all the laws related to local governments including the above-mentioned Thromde
Act of 2007.
8.
What the new Local Government Act envisages is influenced by many initiatives in the
past few years, one of which is formulation of Bhutan’s National Urbanization Strategy (BNUS).
Financed by the Cities Alliance and supported by the World Bank, RGOB started to develop
BNUS in 2006 and finalized it in early 2008. BNUS articulates the future direction of Bhutan’s
urbanization and emphasizes the need for the following among other things: municipal reform
towards more decentralized and accountable local governments; balanced regional development
by creating urban hierarchy and identifying regional centers; prioritization of investments in the
two major cities and regional centers; environmental protection and cultural conservation; and
19
capacity building of urban institutions. In parallel, the Thimphu City Development Strategy was
also prepared, which contains analyses of the city’s existing situations and key priority actions.
9.
Today, Bhutan’s urban population comprises about 30 percent of the total population and
by 2020, it is projected that 50 percent of the population will be living in the urban areas. With
this rapid urbanization, the country’s major urban centers of Thimphu and Phuentsholing have
already started experiencing adverse effects such as water shortages, housing scarcity, sanitation
and waste management problems, and proliferation of squatter settlements in environmentallysensitive areas.
10.
Thimphu, the country’s capital and by far the biggest city with about 80,000 residents,
provides the largest stage for the new urban challenges. The city was growing rapidly at the pace
of 7 to 10 percent during the decade up to 2005 and to accommodate this growth, the city area
was expanded towards both south and north in 1997 and 2002. The nation’s first comprehensive
Structural Plan was prepared in 2002 for the greater Thimphu region, and TCC was established
in 2003. While the Structural Plan provides a good long-term framework and the TCC provides
services competently with adequate cost recovery in core areas (at least as far as water and
sewerage services are concerned), the city has been struggling to manage the urban expansion
and the newly extended areas in the North and South of Thimphu City remain underdeveloped
and lack basic urban infrastructure. Thimphu’s population is projected to continue to grow,
though at a slower rate of about 4 percent a year till 2020, when the population is expected to
reach 135,000.
20
Annex 2: Major Related Projects Financed by the Bank and/or other Agencies
Sector Issue
Balanced regional
development and
infrastructure service
improvements in 10
secondary towns
Donor Agency
ADB
DANIDA
Cities Alliance
Project
ICR Rating
Bank Financed – closed
(first) Bhutan Urban
Moderately Unsatisfactory
Development Project (Cr.
33100) –closed on
6/30/2006
IEG Rating
Moderately Unsatisfactory
Other Development Agencies
Sector Issue
Project
Review of housing related
 TA for Housing Sector Reform (2004)
regulations aiming to
 Urban Infrastructure Development Project (Ongoing)
increase low-income
housing; Infrastructure
development in extended
areas in southern
Thimphu
Environmentally
sustainable urban
management; Review of
municipal finance policy
and recommend future
reforms
Formulation of strategies
to deal with rapid
urbanization
 Environment and Urban Sector Program (2004-2008)
 Municipal Finance Policy Study (Ongoing)
 Bhutan National Urban Strategy (2008)
 Thimphu City Development Strategy (2008)
21
Annex 3: Results Framework and Monitoring
Results Framework
PDO
(i) support Bhutan’s municipal
reform program by strengthening
municipal finance and management
systems in Thimphu and
Phuentsholing; and (ii) improve
infrastructure services in northern
Thimphu where no formal services
are currently available.
Intermediate
Outcomes/Outputs
Improve municipal financial
management systems
Improved access to infrastructure
services
Outcome Indicators
Use of Outcome Information
1. Local Revenue Collection
2. Number of building permits issued
for Dechencholing and
Langjophakha
3. Number of households in
Dechencholing and Langjophakha
with new piped water and
sewerage connections
To assess the usefulness of database
To gauge demand for serviced plots
Intermediate
Outcome/Output Indicators
Use of Intermediate
Outcome/Output
Monitoring
1. Number of property tax records
computerized
2. Number of key policy makers
trained on the principles of fiscal
decentralization
3. Number of staff at TCC and PCC
trained
1. Serviced land for construction
(number of plots)
2. Kilometers of internal roads
constructed
3. Frequency (per month) of solid
waste collection services extended
to areas
22
To ensure infrastructure systems are
used
To verify satisfactory and timely
progress of this activity
To verify satisfactory and timely
progress of this activity
Arrangements for results monitoring
Outcome Indicators
1. Local Revenue Collection
(percentage increase)
 TCC
 PCC
2. Number of building permits
issued for
 Dechencholing
 Langjophakha
3. Number of households with
new piped water2 and
sewerage connections
 Dechencholing
 Langjophakha
Baseline
YR1
YR2
Tbd1
Tbd1
30
45
Target Values
YR3
YR4
tbd
tbd
30
45
35
50
40
55
YR5
70%
70%
Data Collection and Reporting
Frequency and Reports
Data Collection
Instruments
Annually starting from
mid-term review
Local Revenue
Database, Project
Progress Reports
TCC and PCC
finance department
Annually
GIS-system
(baseline) and
building permit
database (annually)
Household Survey
(baseline) and TCC
water unit database
(mid-term review
and ICR)
TCC building
permit unit
90%
90%
100
75
75
65
At baseline, mid-term
review and ICR stage
0
0
0
0
100
0
150
100
200
250
Responsibility for
Data Collection
250
350
TCC water unit
Intermediate Outcome/Output
Indicators
1. Number of property tax
records computerized
 TCC
 PCC
2. Number of key policy makers
trained on the principles of
fiscal decentralization
3. Number of staff within TCC
and PCC trained
 TCC
 PCC
mid-term review
0
0
0
0
4000
1000
4500
1500
5000
2000
ICR stage
0
0
0
4. Serviced land for construction
(number of plots)
 Dechencholing
 Langjophakha
0
0
Tax Database,
Project Progress
Reports
0
0
0
0
0
0
0
0
15
10
179
0
10
30
20
179
121
20
TCC and PCC
finance department
MWHS
30
45
30
Annually
Project Progress
Reports
TCC and PCC
Annually
Project Progress
Reports
TCC engineering
department
60
40
179
121
179
121
23
5. Kilometers of internal roads
constructed
 Dechencholing
 Langjophakha
6. Frequency (per month) of
solid waste collection services
extended to areas
 Dechencholing
 Langjophakha
0
0
0
0
0
0
1
1
0
0
2
2
6.3
0
3
3
mid-term review
Project Progress
Reports and ICR
TCC engineering
department
Annually
Project Progress
Reports and ICR
TCC waste
collection unit
6.3
5.8
6.3
5.8
4
4
4
4
Notes: 1 The project supports the computerization of tax records to enable collection of taxes and fees due to the urban authorities. Before mid-term review,
the computerization should be finalized, allowing the computation of a precise percentage of current revenue collection as a baseline.
2 Although a significant number of households in the project area have private piped water (i.e. almost 40 percent) these are makeshift connections
with water being tapped from non-purified sources.
24
Annex 4A: Detailed Project Description
The project is proposed as a specific investment loan with a technical assistance and an
investment component, each designed to achieve the project development objectives. Details of
these components are described below:
1.
Municipal Finance and Management (US$ 1.5 million):
2.
The Thromde Act of Bhutan (2007) assigns a range of functions and responsibilities to
the city corporations of Thimphu and Phuentsholing, expecting them to function as accountable
local governments providing the necessary urban services to the two largest cities in Bhutan.
Though both the city corporations have been in existence for some time now, they have been
functioning more or less as agencies of the central government. With the enactment of the
Thromde Act in 2007 and the passage of a comprehensive Local Government Act by Bhutan’s
parliament in 2009, both the city corporations are now being expected to function as fully
functional local governments with the responsibility to provide urban services to their citizens in a
sustainable manner. However the existing gaps in the framework for the financing of municipal
services and the outdated systems and practices for resource mobilization and management at the
city level are constraining the abilities of the city corporations to transform themselves into fully
functional local governments capable of catering to the development requirements of their
citizens.
As part of BUDPII, this component will support RGOB to put in place a sustainable
policy framework for financing municipal services and at the same time support the two cities
governments to strengthen their systems and processes that will help them to mobilize and
manage resources to finance their growing service delivery responsibilities. Thus, this
component will finance the consulting services, goods and training necessary: (a) to strengthen
the financial management systems and processes of the Thimphu City Corporation (TCC) and
Phuentsholing City Corporation (PCC) with the objective of enabling them to function as
efficient, transparent and accountable urban local governments capable of providing services in a
sustainable manner; and (b) to strengthen the policy framework relating to the sustainable
financing of urban services in Bhutan as described in the following paragraphs:
3.
4.
Activity 1.1 Strengthening Local Revenue Policies and Administration: the objective
of this activity is to strengthen the policy and administrative framework relating to local revenues
as well as to improve the efficiency of their administration. The support for this activity has been
defined based on the Municipal Finance Policy Diagnostic commissioned by the MoWHS. This
component will support the relevant units of RGOB like the Ministry of Finance and the
Ministry of Works and Human Settlements to strengthen the policies relating to various local
revenue sources of urban local governments. The component will also support TCC and PCC to
improve the efficiency of their local revenue administration. Accordingly the project will support
two broad two broad areas; viz (a) Strengthening Local Revenue Policies; and (b) Strengthening
Local Revenue Administration:
25
(a) Strengthening Local Revenue Policies: A key factor responsible for the low mobilization
of local revenues in the two cities is the weak policy framework relating to local revenue
sources. While both the cities have been assigned various revenue sources (tax and non
tax), the revenue yield from them has been quite low, due to weaknesses in their policy
and implementation. For example, the property tax rates have remained unchanged since
1992 and the tax base has not been revised to reflect the growth of the cities in recent
times. This activity will provide advisory support through consultants and experts to
prepare targeted policy notes in areas like tax base coverage, setting of rates, assessment
and enforcement procedures that will provide policy reform options for the RGOB.
These policy notes will inform the RGOB on the options and choices of reforming the
policy framework relating to current revenue sources of urban local governments as well
as on good practices in local revenue policies both from within the region as well as
outside. This activity will also provide technical assistance to both TCC and PCC to
prepare a local revenue enhancement plan that will help identify sustainable sources of
local revenue and will support the implementation of the plan.
(b) Strengthening Local Revenue Administration: The current systems and practices in TCC
and PCC for the administration of local revenues are grossly inadequate to meet the needs
of the two growing cities. Both TCC and PCC use a manual system of billing and
collection for both tax and non tax revenues. The systems for the monitoring of revenues
receivable and revenue collection are outdated. Various diagnostic studies in the past
have recommended that improving the efficiencies of revenue administration will by
itself enable both the cities to increase revenue collection. This project proposes to
improve the efficiency of local revenue administration by supporting the following
specific activities to: (1) The project will support both TCC and PCC to computerize
their property tax records and create and maintain an up-to-date tax payer database. The
property tax database will be linked to the ongoing efforts by RGOB to modernize land
records and update land valuation (being carried out by the Property Assessment and
Valuation Agency), so that the updated land valuation is also reflected in the tax records;
(2) A database for the various non tax revenue sources will be created and a system for
receivables management will be introduced; (3) the business processes for the billing and
collection of local revenues will be reengineered to make the revenue administration
process more systematic and citizen friendly; (4) the billing and collection system for
local revenues will be computerized to make it more efficient as well as to enable the
finance department of TCC and PCC to ensure robust monitoring of revenue collection
and ensure timely collection of revenue receivables; and (5) Manuals relating to Revenue
Administration will be prepared and training provided to the staff of TCC and PCC on
the principles and practices of modern revenue administration.
5.
Activity 1.2 Design and piloting of an intergovernmental fiscal transfer system for
Urban Local Governments: Section 95 of the Thromde Act states that “local governments will
be allocated a proportion of the national revenue to ensure self reliance and sustainability of the
Thromde”. RGOB is currently in the process of reforming the intergovernmental fiscal transfer
systems. Based on the resource allocation formula for rural local governments and the GNHC
has formulated guidelines for the allocation of annual grants to the District and Rural local
governments (Dzongkhags and Geogs) on a formula basis and would like to formulate such a
26
system for urban local governments too. The Department of National Budget (DNB) in the
Ministry of Finance is desirous of restructuring the present system of providing recurrent and
capital grants provided to TCC and PCC into a more systematic basis. This intention of GNHC
and DNB is to make the flow of resources from RGOB to the urban local governments to be
predictable and flexible enough to address local priorities, and at the same time ensure that local
governments utilize such financial resources provided in an efficient, transparent and
accountable manner.
6.
The project will support the relevant RGOB agencies to design and implement a
systematic intergovernmental financing framework for urban local governments. Advisory
support through international consultants will be provided to the above departments to design a
formula based intergovernmental fiscal transfer system for urban local governments and for
preparing the operating rules for implementing such a system. Representatives of relevant
agencies along with the city corporations will be trained in the policy and practice aspects of
intergovernmental fiscal systems through exposure visits and training courses. The project will
also provide technical assistance for piloting the new transfer system in TCC and PCC as a first
step before scaling up in the future when more urban local governments are expected to be
constituted.
7.
Activity 1.3 Strengthening Local Government Expenditure Management and
Financial Management: As the city corporations are being expected to function as fully
functional local governments instead of as implementing agencies of the central government, it is
important that they develop the necessary systems and capacities for efficient and accountable
management of public expenditure at the local level. This requires preparing comprehensive and
participatory strategic plans for meeting local priorities and having efficient operating plans for
their execution. The project will support both TCC and PCC to achieve the above objective by
strengthening their planning and budgeting systems as well as by strengthening their financial
management systems and processes. Consultant support will be provided to the city corporations
that will enable them to prepare participatory City Development Plans where they are not
currently available and for preparing financial and operating plans. This will then be used to
enable the cities to prepare realistic proposals as inputs for the RGOB’s Five year plans. The
budgeting procedures in the city corporations will be streamlined and staff in the finance
department of the two city corporations will be trained in budget preparation and budget
execution. .
8.
The project will support the strengthening of the core financial management systems and
processes of the two city corporations. Advisory support and technical assistance will be
provided for improving the quality and comprehensiveness of the financial and performance
reporting of the two cities. Support will be provided for both the cities to prepare an annual
Financial Statement and Balance Sheet that will provide comprehensive reporting on the
revenues, expenditures, assets and liabilities of the two cities. The project will help both TCC
and PCC to prepare an inventory of their assets and develop a computerized asset register.
Technical assistance and advisory support will be provided to strengthen internal controls and
the recently constituted internal audit cells of the two city corporations. The staff of the finance
departments of the two cities will be trained in the various aspects of municipal financial
management so that the city corporations are able to sustain the improvements in the financial
27
management systems and processes. The project will make available the services of a Municipal
Finance Specialist who will ensure quality assurance and coordination of the various activities
planned to be implemented under this component. The Municipal Finance Specialist will be
stationed at the PPD (MoWHS) and will provide strategic and operational inputs to the municipal
finance capacity building component of the project.
9.
The project will also support the strengthening of the general management capacities of
the two city corporations with regards to service delivery. As part of this, the project will
strengthen the offices of the Thrompon/Executive Secretary and the Chief Administrative Officer
by introducing modern information technology for the administrative and monitoring systems.
Support will be provided for the design and implementation of a Management Information
System (MIS) for enabling the city management to ensure robust monitoring of service delivery.
The systems and procedures for service delivery will be made systematic through the
streamlining of business procedures and training of staff in the provision of efficient and citizenfriendly services.
Thimphu Northern Area Development (US$ 9.3 million):
10.
The project will finance infrastructure improvement and development in the northern
LAP areas through a land pooling approach, focusing on Dechencholing and Langjophakha
where land pooling preparation is most advanced. The types of basic infrastructure to be
financed will include: roads and drains, water supply, sewerage, street lighting. Implementation
will be done in phases with Dechencholing first followed by Langjophakha to allow lessons to be
learned and incorporated in a later phase.
11.
Decentralized new water and sewerage systems will be introduced in Dechencholing.
This will include: a new water treatment plant with a capacity of 1.4 MLD; a new sewage
treatment plant with a capacity of 0.9 MLD; 3.2 km of water mains; 7km of water distribution
pipelines; 0.8km of sewer trunk main; and 5km of sewer networks. In addition, approximately
6.3 km of paved roads with storm water drains and footpaths will be constructed.
12.
Langjophakha will receive new treated water from the existing Jongshina Water
Treatment Plant. The current capacity of the Jongshina Plant is 5.2 MLD, which will likely be
augmented by 1.3 MLD under the project. 4.5km of water distribution pipelines will be
constructed. For sewerage in Langjophakha, a new sewage treatment plant is proposed to be
constructed with a capacity of 0.6 MLD. 4.1km of sewer networks will be built. In addition,
Langjophakha will receive 5.8km of paved roads with drains and footpaths.
13.
This component will also facilitate the increase in low-income housing units in some of
the serviced plots generated through land pooling. Analyses to look into low-income housing
solutions will be conducted under the project, which will analyze demands, standards, eligibility
criteria, modalities, and financing for low-income housing. Also, the existing incentive systems
such as the vacant land tax and the development control regulations will be reviewed, aiming to
encourage private landowners to build more low-income housing.
28
14.
The project will finance consultancy services to assist TCC in construction supervision as
well as any engineering design work required. Also, the consultancy services will include a
social audit to review implementation of RAP.
Capacity Building (US$ 1.2 million):
15.
This component aims at significant upgrading of the capacities of each city corporation in
various aspects of their internal work processes and service delivery to their citizens through
training of staff and provision of relevant equipment. The institutional development of Thimphu
and Phuentsholing city corporations will be designed and implemented under the general ambit
of the new Local Government Act of 2009 and the ongoing decentralization/democratization
process in the country, including the municipal reform component (as above).
16.
While the number of employees in each city corporation is determined by its RGOBapproved organogram, the upgrading of the staff skills and augmentation of equipment will
necessarily be the basis of improved, expanded services. Under this project component,
resources will be provided for training programs, equipment, technical assistance, and studies
based on the perceived needs of the Thimphu and Phuentsholing city corporations (TCC and
PCC respectively) and of the Ministry of Works and Human Settlements (MoWHS).
17.
The training program is designed to initially cater to the operational staff of the city
corporations and the DUDES/PPD with the objective of augmenting their technical skill levels.
Given the available training needs assessment(s) and analyses done earlier for TCC, PCC, and
MoWHS and the agencies’ recent proposals for such training courses/programs under the
capacity-building component, the first batch of the training program will comprise of courses
commonly suggested by the two city corporations and DUDES/PPD (for example: AutoCAAD;
Short Training for Surveyors, etc.) and will be conducted in-country at appropriate institutions.
During the initial year (or two) of project implementation, it is expected one such course of twoweeks duration will be administered every month; the participants will be selected by a
coordination committee comprising of representatives from the MoHWS, the city corporations
and the concerned training institution(s).
18.
The MoWHS has recently (June 2009) signed a Memorandum of Understanding (MoU)
with the Royal University of Bhutan, under which the College of Science and Technology (CST)
will collaborate with the MoWHS in providing educational, training and consultancy services.
As such, it is planned that most of these technical training courses will be conducted by the CST
located near Phuentsholing. Some of the other proposed training courses, mainly on the
management side, may be conducted by the Royal Institute of Management (RIM) in Thimphu.
Under this component, resources will be provided towards the costs of these training programs,
and it is envisaged that it will also assist CST, RIM, and any other institution towards developing
sustainable training programs that would contribute to the professional development of
engineering and other staff and help serve the needs of urban and other local governments.
19.
The agencies’ training proposals also include longer-term (including post-graduate)
courses for their various professionals/officials, which are available abroad. Given the resource
29
availability and updated needs assessments, ex-country training may be financed at a later stage
of project implementation with the concurrence of the RGOB and the IDA.
20.
This component will also support the formulation of Human Resource (HR) Rules and
Regulations for TCC/PCC, which will be consistent with the mandates of the organization and
responsibilities delegated to its staff. The HR Rules and Regulations will focus on enhancing the
productivity and efficiency of employees through accountability and incentive measures. HR
Rules and Regulations, once implemented, should attract qualified and experienced professionals
and also must ensure the retention of competent and qualified manpower.
21.
Both TCC and PCC have identified the needs to procure some equipment for the
maintenance of their municipal infrastructure and to provide for better service delivery and
response to their citizens. The provision of such equipment for the TCC, PCC (as well as some
for MoWHS) would complement the upgraded skills of the staff. In addition, this component
supports purchase/rental of vehicle for TCC, incremental operational costs including
communication expenses, vehicle rental and fuels for supervision activities, office supplies, and
remunerations for contractual staff.
30
Annex 4B: Land Pooling in Bhutan
1.
Land Pooling (LP) is a technique for managing the planned development of urban-fringe
lands, whereby a public agency consolidates a selected group of land parcels, subdivides them
into a layout of streets, open spaces and serviced building plots, and then distributes the
remaining plots back to the landowners to develop or to sell for development. Each landowner
must contribute a portion of their previous land holding to provide space for public infrastructure
systems such as roads and parks but also social facilities like a school. The original landowners
retain title to the majority of their land, and LP is considered to be less disruptive to the existing
community than the large scale land expropriations and development. In the process, irregular
shaped plots become regularized, making them more suitable for development. Widely used in
Japan, South Korea and Taiwan, China, LP usually leads to substantial increases in land values
even though the remaining plot size is smaller than the original size. LP is essentially a long
process, requiring strong commitment from a public agency in charge and extensive stakeholder
consultations.
2.
The RGOB had been studying this technique, and the first pilot application of LP was
implemented in Rangjung in Trashigang District, involving 69 households, under the IDAfinanced Urban Development Project in 2002-2003. The Rangjung scheme was regarded as a
success since the majority of the households who participated in the scheme expressed their
appreciation of the new development. RGOB especially preferred LP to the traditional sites and
services schemes where they struggled for equitable allotment of new serviced plots under the
same project. According to the survey conducted in Rangjung in 2007 (after completion of LP
scheme there), key lessons from Rangjung include: (i) community consultations require
continuous follow-up; (ii) an agency in charge needs to have a capacity to manage social issues
related to LP; (iii) there needs to have a legal backing for LP; and (iv) while all landowners
accepted the LP plan at the end, 35 percent land contribution was regarded too much.
3.
In 2007, Bhutan’s Parliament enacted the Bhutan Thromde Act (Municipal Act) and the
Land Act, recognizing LP as a development tool for the first time in the country’s laws. In March
2009, the Bhutanese Cabinet approved the new Land Pooling Rules of the Kingdom of Bhutan
2009 (BLPR), which contains detailed processes and procedures in planning and implementing
LP schemes. According to BLPR, two thirds of landowners have to formally agree if any LP
scheme is to be implemented. In September 2009, Bhutan’s parliament passed the Local
Government Act of Bhutan (LGA), integrating the earlier enacted Thromde Act and another law
governing rural local governments. LGA gives city corporations a power to carry out LP
schemes under the section 273p (Powers and Functions of Thromde Administration).
Land Pooling in Thimphu
4.
Land for urban development is in short supply throughout Bhutan due to the country’s
topography. Thimphu City, developed on the narrow valley along the Wang Chu River, is a
typical case. Despite the limited supply of urban land, Thimphu had been attracting massive
migration from rural areas as the annual population growth rate of 7 to 10 percent (up to 2005)
shows.
31
5.
To accommodate the rapid growth, the city’s boundaries were expanded both towards
south and north in 1999, adding approximately 1,800 hectares (ha) of land to the city. The
Thimphu Structural Plan of 2002 proposes to divide these extended areas into ten local areas
(five in south and five in north) and develop them as new residential areas called “urban
villages.” Subsequently, detailed LAPs were prepared for each extended area using the LP
concept, in order to ensure an adequate supply of serviced land for new housing development.
At the same time, a moratorium was placed on land development by TCC aiming for an orderly
urban expansion, but this effectively froze construction activities in these extended areas for a
long time as finalization of detailed LAPs and preparation for LP schemes took more than years.
The moratorium in some areas was lifted only recently after the finalization of LAP and
completion of plot demarcation. Four LAPs in south are supposed to be developed under the
ADB-financed Urban Infrastructure Development Project, approved in December 2006.
Housing Demand in Thimphu
6.
Given the Thimphu’s rapid growth, there is no doubt that Thimphu will need to clear
huge backlogs in the provision of housing units. According to the Housing Sector Study of 2004,
Thimphu would need about 1,000 new housing units every year for the next ten years or so if the
city’s population continues to grow at 7 percent annually. Due to the scarcity of undeveloped
land in the city’s core areas, the majority of these projected demands will have to be met in the
extended areas in the south and north.
Project Areas (Dechencholing and Langjophakha)
7.
The proposed project will be implemented in two LAP areas in northern Thimphu,
namely Dechencholing and Langjophakha. It was decided to develop these two LAPs first
among the five in the north because these two are the smallest in size and LP preparation is most
advanced in these two areas (LAP finalized, demarcation completed, more than two thirds of
landowners agreed, etc.). Each landowner in these areas contributes 25 percent of their original
land in exchange for public infrastructure services.
8.
Dechencholing is a settlement located 6 km away from Thimphu’s city center. The LAP
area is about 37 ha, characterized by agricultural and orchard land interspersed with both
permanent and temporary houses. Water supply, sewerage and solid waste management are very
basic or absent. Power and telecommunications have been provided through overhead cables and
there is no street lighting facilities in place. There are 187 households at the moment, with 152
titled landowners owning 179 plots in the LAP. As of November 2009, 97 percent of the owners
(except two) had signed the land pooling agreement. According to LAP, Dechencholing is
planned for a population of about 6,700 with 1.2 ha of the Neighborhood Node (an area for
commercial and service facilities). This means the planned density (gross) in Dechencholing is
about 180 person per ha. There is one plot reserved for a school. The maximum number of
floors permitted at the moment is three except in Neighborhood Node where four-storey
buildings are allowed.
9.
Langjophakha is located 2 km away from the city center. The total area covered by the
LAP is about 18 ha. The settlement lies on the east bank of the Wang Chu River directly
32
opposite the Tashichhodzong. There are 246 households with 104 title holders owning 121 plots
in the Langjophaka LAP. As of now, 80 percent of the owners had signed the land pooling
agreement. According to LAP, Langjophakha is planned for a population of about 5,600 with 0.8
ha allocated for the Neighborhood Node. The planned density (gross) in Langjophakha is about
300 person per ha. Like Dechencholing, the maximum number of floors permitted is three except
in the commercial area.
33
Annex 5: Project Costs
Project Cost By Component and/or Activity
Local
US $million
1. Municipal Finance & Management
0.2
1.3
1.5
2. Thimphu Northern Area Development
5.1
2.4
7.5
3. Capacity Building
1.0
0.2
1.2
Total Baseline Cost
Physical Contingencies
Price Contingencies
6.3
0.6
0.6
3.9
0.3
0.3
10.2
0.9
0.9
7.5
4.5
12.0
Total Project Costs1
Interest during construction
Front-end Fee
Total Financing Required
Foreign
Total
US $million US $million
1 These costs exclude resettlement-related compensation and any land acquisition necessary, which is estimated to be around US$ 0.7 million
and will be financed by RGOB.
34
Annex 6: Implementation Arrangements
Steering Committee: A project steering committee will be formed and meet at least semiannually to review implementation progress and to discuss key implementation issues. This
committee will consist of representatives from MoWHS, MoF, TCC and PCC.
1.
2.
Thimphu Northern Area Development: All physical works under this component will be
implemented by TCC’s existing Engineering Division in close coordination with its Planning
Division. Without creating a new project-based entity, TCC has recently strengthened the
Engineering Division by increasing the number of technical staff such as water engineers and
designated them for this project on a full time basis. This group, responsible for procurement,
technical designs, construction supervision, contract management, etc., is led by a senior
engineer who will serve as a de-facto project director in charge of any technical aspects and
oversee four engineers below him. The group is fully integrated into the existing Engineering
Division, enabling close interactions and mutual learning with other engineers and technical
personnel in the Division headed by the Chief Engineer.
3.
TCC’s Planning Division, headed by the Chief Urban Planner, have already designated
one urban planner each for the two project areas (Dechencholing and Langjophakha) and also
newly recruited two social development specialists. Working closely with the Engineering
Division during project implementation, the Planning Division will ensure that land pooling
schemes will be implemented in a smooth manner. Their responsibilities include: continuous
community consultation, information dissemination, timely execution of safeguard actions
specified in the resettlement action plans, and any planning adjustment that might become
necessary in the course of implementation. The RAPs will be implemented by the TCC’s
Planning Division through the Social Development and Resettlement Cell (SDRC) established
within the Division, headed by the Chief Urban Planner, who will be assisted by two Social
Scientists, a Resettlement & Rehabilitation Coordinator and a Data Management Specialist.
4.
Grievance Redressal Committee (GRC): By notification on May 14, 2008, TCC formed
a Plan Implementation Subcommittee for all 11 LAPs to resolve grievance/complaints from
affected people. The GRC in Dechencholing LAP comprises nine members from TCC,
LAP/Plot owners’ representatives, and other relevant stakeholders. The redress system is
composed of three steps: a) the SDRC will attempt to solve grievances; b) Grievance Redress
Committee; and c) if resolution still not found, complainants can approach the court of law.
Grievances against the RAP and entitlement framework can be submitted within two weeks of
disclosure. However, the GRC will be functioning throughout the implementation of the local
area plan.
5.
DUDES will provide technical backstopping for TCC. The project will also finance TA
consultancies to TCC to assist them in implementing this component. Executive Secretary of
TCC will have the ultimate responsibility for any physical aspects of the project in the city.
35
6.
Municipal Finance and Management Component: This component will mainly target
TCC and PCC at the local level, and also provide technical assistance to RGOB to help establish
a formula-based intergovernmental transfer system to urban local governments. These policyrelated TA will be procured by PPD of MoWHS under the leadership of its Chief Planning
Officer, and services/goods will be provided to TCC and PCC. The Chief Administrative
Officers of TCC and PCC, heading the Finance and Administrative Division, will play a key role
in implementing the TA activities under this component.
7.
Capacity Building Component: The first batch of the training program will comprise of
courses commonly suggested by TCC, PCC and DUDES; these will be conducted in-country at
appropriate institutions to be identified by the agencies and the MoWHS in consultation with
IDA. Participants at each training course will be selected by a coordination committee, proposed
to comprise of representatives from the Ministry, the city corporations, and the concerned
training institutions. Most of these in-country training will be administered under the MoU
between the Ministry and the College of Science and Technology (CST), Royal University of
Bhutan. Under this component, resources will be provided towards the costs of the training
programs and it is envisaged that this will lead towards developing sustainable training programs
that would contribute to the skills augmentation and professional development of engineering
and other staff, and help serve the needs of urban local governments.
8.
Monitoring and Evaluation: PPD of the MoWHS is responsible to collect monitoring
data from all departments and both City Corporations. The role of monitoring has gained even
more importance now that GNHC has launched a web-based monitoring program, requiring all
planning departments to report according to pre-defined formats on the Millennium
Development Goals (MDGs) and related outcome indicators. Several training workshops have
been launched informing Monitoring and Evaluation (M&E) appointed staff in the respective
planning departments of the different ministries and the Dzongkhags on how the software works
and what are the processing steps. The responsibility of defining the log-frame for each program
listed under the 5 year plan and related indicators remains with the respective planning
department.
36
Annex 7: Financial Management and Disbursement Arrangements
1.
Improving public financial management and accountability is a central part of the reform
program in Bhutan. Diagnostic studies conducted earlier by the Bank and other donors have
indicated that while the core elements of an effective financial management system are largely in
place, several major challenges remain. There is a need to improve the current computerized
budget and accounting systems to provide a fully linked system that enables monthly and annual
reporting at the entity and the national level. External and internal audits are not as effective as
they should be in ensuring that systems of internal financial controls work well. Further, there is
a need to improve the reliability and consistency of reporting by using the format of the Cash
basis IPSAS. Also, adoption of international standards for auditing will help provide the basis
for assuring competent financial reporting and transparency. Finally, there is a need to further
strengthen the capacity of the accountability and oversight institutions, and to establish the
necessary legal underpinnings they require to meet the financial management and transparency
demands arising from increased revenues and spending expected over the coming years.
2.
With these considerations in mind, the RGOB has been pursuing several reform
initiatives in the areas of accounting and audit and most are underway. Many of the steps taken
in the areas of budget execution, monitoring and cash management have produced visible
positive results, and provide a strong trajectory for PFM improvement. The RGOB has
demonstrated its will to continue the PFM reforms, evidenced by the scale and variety of actions
underway. Overall, the reform program in this area is progressing well, though substantial
further effort is needed if the RGOB is to meet its goals in substance as well as in form.
3.
It is also expected that the Bhutan Public Financial Management Assessment, using the
Performance Measurement Framework5 developed under the PEFA program6, which is
underway will provide better insight of the status on PFM in Bhutan and thereby to have
coordinated approach and future strategies to bring improvement in PFM.
4.
Ongoing work notes the following strengths of the existing financial management system
in Bhutan:

The existence of detailed guidelines for the budgeting and monitoring of public funds,
especially at the individual transaction level. The system provides good procedural
transaction control over individual items of expenditure and receipts. All donor funds for
development activities are included in the annual budget (Public Finance Act 2007).
5
The PFM Performance Measurement Framework has been developed as a contribution to the collective efforts of many
stakeholders to assess and develop essential PFM systems, by providing a common pool of information for measurement and
monitoring of PFM performance progress, and a common platform for dialogue.
6
The PEFA Program is a partnership among the World Bank, the European Commission, the UK Department for International
Development, the Swiss State Secretariat for Economic Affairs, the French Ministry of Foreign Affairs, the Royal Norwegian
Ministry of Foreign Affairs, the International Monetary Fund, and the Strategic Partnership with Africa. A Steering Committee,
comprising members of these agencies, manages the Program. A Secretariat is located at the World Bank in Washington, DC.
37


The independence of the external auditor, the RAA, is well established and recognized.
Audits are regularly carried out and the Annual Audit Report of the RGOB is issued on a
consistent basis (usually about 13 to 15 months after the end of the year). Annual reports
are submitted to Public Accounts Committee for scrutiny and presented to Parliament
and made publicly available.
The ongoing up-gradation of computerized Budgeting and Accounting System (BAS)
and integration of Multi-Year-Rolling-Budget (MYRB) of Department of National
Budget (DNB), Public Expenditure Management System (PEMS) of Department of
Public Accounts (DPA) and Planning and Monitoring Systems (PLaMs) of Gross
National Happiness Commission (GNHC) is aimed at facilitating the real time
information with connectivity with Ministries, Dzongkhags/Geogs and other budgetary
agencies. This will not only facilitate the information for financial reporting but will also
be used as a tool for monitoring the work progress.
Lessons from Implementation experience of BUDPI
5.
Based on the Bank’s understanding of the weaknesses in the public financial management
systems and lessons emerging from BUDPI experience, the following issues were examined
further during the project appraisal to assess their impact on the financial arrangements designed
for this project.




Similar to other projects in the Bhutan lending portfolio, slow disbursements have been
an area of major concern. In BUDPI, the delays were traced back to the decentralized
nature of the project implementation arrangements, wherein the Dzonkhags were the key
implementing units and budget provisions were centralized though district-wise in
DUDES. While the country financial management system requires the districts to report
on financial progress regularly to the AFDs of the concerned Line Ministries, this
institutional linkage is noted to be weak, resulting in delays in information flows to the
PMU, who is responsible to prepare consolidated project financial progress reports as
well as withdrawal claims for reimbursement from the Bank.
Delays in joint measurements of completed works and irregular submission of the bills
by the contractors were other reasons for delays in payments to the contractors. Large
gaps were noted between the withdrawals from the Credit, as none of the contractors had
submitted bills. At other times, the total value of bills received from the numerous
contractors would exceed the amount available in the Special Accounts and as a result,
the SA would be exhausted. Inclusion of a clause for submission of a monthly bill for
works from the contractors in the Conditions of the Contract could have avoided
instances of irregular payments.
Replenishment of the Special Account was affected by the delays in submitting
withdrawal applications by DADM/DPA because the project implementation units often
provided inadequate or incorrect information, which needed several corrections. The
accountants at the project sites faced capacity constraints to handle project reporting
requirements.
For accounting of and reporting on project expenditures, the DUDES used a
computerized project financial management system (PFMS) specially designed to meet
the Bank’s financial reporting requirements. This entailed a second level (in addition to
38
BAS, Bhutan’s own computerized Budget & Accounting System) of data entry, with no
in built internal control measures for reconciliation, increasing the exposure to risk that
the expenditures reported may not be correct or reliable.
Risk Assessment and Mitigation
Risk
Weak accounting and reporting
relationships between dzongkhags (local
district level governments) and Central
Line Ministries leading to delays in
information flows on financial progress at
the project level
Irregular submission of bills for works
completed by contractors leading to
substantial disbursement lags
Weak capacity leading to submission of
incomplete documentation required for
traditional SOE method of disbursement
Risk
Risk Mitigation Measures incorporated
Rating
into project design
M
Institutional arrangements for the BUDPII have been
centralized with only two agencies involved (PPD and,
TCC). Physical works will be implemented only by TCC,
which is responsible for day-to-day supervision of works
and ensure quality of materials and works and
measurement of works carried out by the contractor. TCC
shall also be responsible for checking payment
certificates submitted by the contractors and certifying
verified payments.
M
Conditions for the Contract for works will include a
clause requiring the contractors to submit running bills at
least on a quarterly basis, if not monthly, depending on
the progress of the works. This will ensure that payments
are made uniformly over the project life.
M
The project will use interim unaudited financial reports
used for project reporting as supporting documentation
for purposes of disbursement. Under this arrangement,
the requirement for submitting additional documentation
is minimal.
Special Account exhausted due to
lumpiness of payments.
M
Use of stand alone project financial system
(PFMS) requiring a second level (in
addition to BAS, Bhutan’s own
computerized Budget & Accounting
System) of data entry, with no in built
internal control measures for
reconciliation, increasing the exposure to
risk that the expenditures reported may not
be correct or reliable.
M
Disbursements based on interim unaudited financial
reports will allow the quantum of the advance to be
responsive to fund requirements of the project.
Project expenditures will be accounted and reported from
the BAS records – no separate PFMS will be used to
meet Bank requirements.
Overall Risk Rating
M
H – High, S – Substantial, M – Modest, N – Negligible
Strengths
6.
This project will be the first Bank financed project to be implemented by TCC, however
MoWHS has earlier implemented Bank financed project and is familiar with Bank’s
disbursement and financial management requirements.
Weaknesses and Resolutions
Weakness
Country Level
Resolution
39
Weakness
BAS, budgeting and accounting
system is not networked on a real
time basis and information is
transferred on an offline basis, often
resulting in delays in consolidation of
financial statements. This severely
impairs the MoFs ability to prepare
in-year budget reports required to
make meaningful management
decisions.
Evidence from the external audit
reports, identifying a large number of
irregular transactions, suggests that
the transactional controls are often
not complied with and are
circumvented.
Internal audit function exists in all
ministries, but its operation is very
limited. With a present strength of
ten internal auditors placed in six
ministries, the size of the function is
not commensurate with the
requirement. In addition, there is no
uniformity in the organizational
structure – in some ministries they
report to the Minister as well as the
Secretary.
Project Level
Internal audit mechanism is not
effective
Financial management capacities are
noted to be weak. There is also a
shortage of capable and experienced
accountants in RGOB.
Resolution
The up-gradation of existing computerized system which is underway
is aimed at networking on the real time basis and will facilitate the real
time information.
At the project level, consolidated interim financial reports will be
prepared on a quarterly basis. During negotiations, specific
commitment will be sought from RGOB for submission of quarterly
interim unaudited financial reports, which will form the basis for
withdrawals from the IDA Credit. This assurance has been converted
into a legal covenant.
The external audit reports establish accountability of the irregularity on
individual officers and this mechanism (along with the requirement of
obtaining clearances from the RAA for important career developments)
helps in the follow-up processes of eliciting responses, resulting in
adjustments or recoveries. The increasing reduction in the total
irregularities in monetary terms from the earlier years suggests that this
additional control mechanism is more effective.
Developing an appropriate institutional framework for the internal
audit function in RGOB is an identified area of reform. Recent
developments include the development of the Charter and Code of
Ethics for the internal audit function. Under the existing IDF Grant,
Consultant is going to review Internal Audit Charter, Code of Ethics
and standards as well as its legal and institutional framework. The
consultant will also develop internal audit manual and implementation
guidelines and provide on the job training to the internal audit staff on
the use of the implementation guidelines.
It has been agreed that the internal auditor designated to MWHS will
review project activities in a manner that each of the spending units
will be covered at least once every financial year. MWHS has also
agreed that any exceptional internal audit reports on project activities
will be made available to RAA and IDA during project
review/supervision.
The accounting and reporting function will be handled by the
accountants in Municipalities and AFD, who have substantive
experience in established works procedures.
Financial Management assessment of implementing entities
7.
Given past experience in handling the Bank financed project and the Bank’s prior
understanding of the PFM systems in Bhutan, no separate FM assessment of the PPD, MoWHS
considered necessary. However, the lessons from implementation experience have been
considered and built into the design of project FM arrangements.
8.
TCC presently operates within the same public financial management architecture and
the strengths and weaknesses found in the RGOB systems apply to TCC as well. While PCC will
be a recipient of technical assistance and other capacity building inputs financed under the
project, no fund flows are envisaged under the project to PCC. The Municipal Finance Policy
document prepared by the MoWHS through the EUSPS project provides a clear description of
40
the essential elements of an efficient delivery of public services from Municipalities. This policy
document read along with the provisions of newly passed Local Government Act, 2009 have
provided the basis for the development of the road map of PFM reforms in Municipalities in
Bhutan.
Budgeting
9.
The project will be budgeted for MoWHS under a separate Financing Item Code (FIC).
The activity/sub-activity codes will allow for all project-related expenditures to be separately
identified, accounted and reported in the consolidated Budget and Accounting System (BAS)
reports.
Accounting
10.
Accounting for project expenditures will be maintained on cash basis under BAS itself
and no separate project level accounting will be required. The prevailing rules of RGOB, i.e.
Financial Rules and Regulations (July 2001) will apply to all project expenditures. Information
on project sub components required for project monitoring, movement in security deposit
deducted from/paid to contractors will be tracked by the project outside the BAS.
11.
Key aspects of financial management under the project are as follows:






All payments to contractors, consultants and suppliers against invoices and running bills
are considered as expenditure, other transfers inter departments or spending units are
considered as advances;
Mobilization advances, etc. are accounted for in BAS under ‘Suspenses’ and adjusted
with expenditures as when these are adjusted with the running bills;
All sources of funds and all expenditure, advances will be reflected in the project
Financial Statements;
Standard Books of Account/ Records will be maintained at the implementing agencies. A
register of fixed assets, indicating assets created/acquired through the project will also be
maintained. Particular attention will be given to maintenance of works and contractor’s
registers;
TCC shall also be responsible for checking payment certificates submitted by the
contractors and certifying verified payments. PPD shall not certify any interim payment
of items for the works, which does not conform to QAP and EMP; and
Penalties collected from contractors as liquidated damages under the project will be
adjusted from expenditures reported under the project.
41
Staffing
12.
The accounting and financial reporting functions at PPD, MoWHS and TCC will be
managed by the existing accounting staff and supplemented by additional regular/contractual
staff as required. This may be necessary for the PPD, which will have the primary responsibility
of: (a) routing all fund requests to DPA and tracking the fund releases; (b) reconciliation of the
Designated Account; and (c) preparing and submitting the quarterly consolidated interim
financial reports to IDA.
Internal Control and Internal Auditing
13.
RGOB’s Financial Rules & Regulations (FRR), 2001 provides the required control
framework for procedural transaction control over individual items of expenditure and receipts.
The FRR also provides detailed guidance on internal controls including safeguarding of cash,
control over inventories, segregation of duties and delegation of authority for approvals and
operating the bank accounts.
14.
It has been agreed that the internal auditor of MoWHS will review project activities in a
manner that each of the spending units will be covered at least once every financial year.
MoWHS has also agreed that any exceptional internal audit reports on project activities will be
made available to RAA and IDA during project review/supervision
Funds Flow and Disbursement Arrangements
15.
Project funds will be deposited in advance into the designated account maintained in
Ngultrums, to be opened at the Bank of Bhutan. The designated account will be segregated and
used only to deposit advances for the project. The designated account will be operated by the
DPA in MoF. Funds will be withdrawn from the designated account on an `as required’ basis and
transferred to the GBFA by DPA as an advance These transfers are based on requests from PPD
to meet its own requirements; all requests for fund releases from TCC will also be routed through
PPD. Based on the requests, the DPA in the MoF will release funds to the respective PLC7
accounts of the implementing agencies.
16.
PPD and TCC will issue checks against the PLC/LC to meet the project expenditures and
account for the same in BAS. On a monthly basis, TCC will submit a copy of the financial report
generated from the BAS to PPD. PPD will consolidate the information and prepare financial
management reports, in form and contents of which will be agreed with IDA before project
negotiations. Replenishments into the designated account will be based on interim unaudited
financial reports and will be processed by DPA on a quarterly basis. The interim unaudited
financial reports will provide information on expenditure made in the previous quarter and
forecast for two subsequent quarters. Quarterly disbursements would be made based on these
financial reports, providing funds for two subsequent quarters after adjustment for past
disbursements.
7
A PLC is DPA’s authorization to the Bank of Bhutan (RGoB’s bankers) to honor payments from each implementing unit up to
the limit set in the PLC.
42
Bhutan: Second Urban Development Project
Figure: Funds & Information Flow Arrangements
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Ministry of Finance
Ad van ces fro m DA fo r p roject
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Fun d s
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Req uest fo r
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Thimphu City
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Mo n th ly BAS
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Contractors, Suppliers, Consultants etc.
Fund Flow
Inform ation Flow
Financial Reporting
17.
Information on project related expenditure will be compiled by PPD, i.e. for payments
made by itself or by the city corporations on the basis of BAS generated financial reports. This
information will be utilized to prepare quarterly interim financial reports for the project. The
interim unaudited financial reports will report opening and closing bank balances, expenditure
incurred during the period and the level of advances and will form, part of the project Reports,
required to be submitted to IDA within 45 days of close of each quarter.
Disclosure of information
18.
In order to increase the transparency regarding project activities, MoWHS and TCC will
disclose key financial information on project activities, including procurement notices on their
web site on a regular basis. These will be available through the internet as well as other local
media.
43
Auditing
19.
Consolidated annual project financial statements will be audited each year by the RAA,
which is the SAI in Bhutan and acceptable to IDA. The format of the annual financial statements
will consist of consolidated annual financial statements of the project along with a statement
reconciling credit disbursements, as per claims submitted to IDA and balances available in the
Special Account, as reported in the Interim unaudited Financial Reports. PPD, MoWHS will be
responsible for submitting the consolidated annual project financial statements to RAA by
September 30 of each financial year. The Terms of Reference for the audit have been prepared in
agreement with the Bank and have been sent to the RAA for their approval. Agreement for the
same is still awaited and must be obtained before negotiation.
20.
The following audit reports will be monitored in the Audit Reports Compliance System
(ARCS):
Implementing Agency
Ministry of Works & Human
Settlement and Department of Public
Accounts, Ministry of Finance
Audit
Annual Project Financial
Statements, including
designated account
Auditors
Royal Audit Authority
Supervision Plan
21.
From a financial management perspective, the project will need regular supervision. This
will be through a combination of periodic desk reviews and field visits. Special focus will be
given to building of staff capacity and timeliness and quality of financial information.
44
Annex 8: Procurement Arrangements
A.
General
Procurement for the proposed project would be carried out in accordance with the World
Bank’s "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004 as
amended October 2006; and "Guidelines: Selection and Employment of Consultants by World
Bank Borrowers" dated May 2004 as amended October 2006, and the provisions stipulated in the
Financing Agreement. The various items under different expenditure categories are described in
general below. For each contract to be financed by the Loan/Credit, the different procurement
methods or consultant selection methods, the need for pre-qualification, estimated costs, prior
review requirements, and time frame are agreed between the Borrower and the Bank in the
Procurement Plan. The Procurement Plan will be updated at least annually or as required to
reflect the actual project implementation needs and improvements in institutional capacity.
1.
Procurement of Works: Works procured under this project would include: Roads,
drains, water supply, sewerage, street lighting, new water treatment plants, water distribution
pipelines, sewer trunk mains, sewer networks, paved roads with stormwater drains and footpaths.
The procurement will be done using the Bank’s Standard Bidding Documents (SBD) for all ICB
and National SBD agreed with or satisfactory to the Bank. The details can be found in the
Procurement Guidance Note.
2.
Procurement of Goods: Goods procured under this project would include: computers
and computer peripherals [hardware], etc. to support both TCC and PCC to computerize property
tax records and create and maintain an up-to-date tax payers’ database. Office furniture to
support the new computerized systems. The procurement will be done using the Bank’s SBD for
all ICB and National SBD agreed with or satisfactory to the Bank.
3.
Procurement of non-consulting services: To provide short-term training to the PCC
and TCC staff to augment their technical skills.
4.
Selection of Consultants: Consultants will be hired for construction supervision and any
engineering design required. Consultancy services will also be hired for various policy-related
studies and technical assistance. The shortlist of consultants for services estimated to cost less
than US$ 200,000 or equivalent per contract may be composed entirely of national consultants in
accordance with the provisions of paragraph 2.7 of the Consultant Guidelines.
5.
Operating Costs: The project will support incremental operating costs including
communication expenses, vehicle rental and fuels for supervision activities, office supplies, and
remunerations for contractual staff.
6.
The procurement procedures and SBDs to be used for each procurement method, as well
as model contracts for works and goods procured, are presented in the Procurement Guidance
Note.
45
B.
Assessment of the agency’s capacity to implement procurement
7.
Procurement activities will be carried out by Thimphu City Corporation (TCC) and the
Policy and Planning Division of MoWHS. An assessment of the capacity of the Implementing
Agencies to implement procurement actions for the project has been carried out by the World
Bank’s Procurement Specialist in November 2009. The assessment reviewed the organizational
structure for implementing the project and the interaction between the project’s staff responsible
for procurement and the Ministry’s relevant central unit for administration and finance. In each
of the implementing agency, a suitable staff has been identified to handle the procurement. The
procurement activities relating to Phuentsholing City Corporation will be carried out by the
Policy and Planning Division of the Ministry of Works and Human Settlement
8.
The key issues and risks concerning procurement during project implementation have
been identified, which include the need for training TCC staff. The other implementing agencies
such as PPD and DUDES have exposure when they handled Urban Development Project I.
However, it has been agreed to impart training to all the implementing agencies of the project in
Bank’s procurement. Procurement training was conducted on December18, 2009 in the TCC
office and staff from both the implementing agencies participated. A Procurement Guidance
Note has been prepared for this specific project explaining the various steps to be followed by
using a particular method of procurement. This is also shown in the form of a flow chart. The
training needs will be assessed at periodical interval and necessary training will be provided by
World Bank’s procurement specialists.
The overall project risk for procurement is [Moderate].
B.1
9.
Risks related to procurement and Mitigation Plan
The following table lists perceived procurement related risks and the mitigation plan.
Perceived Risk
1. Documentation
Maintenance
Action
Completion
Mitigation measures
1. During project 1. At the beginning of the project a brief overview
implementation
of the documents to be maintained and filed would
phase.
be discussed with implementing agencies.
Subsequently during project implementation, the
record keeping and documentation regarding
procurement will be monitored.
2. Probability of staff 2. During project 2. Agree with the implementing agencies that the
handling procurements implementation
trained procurement staff will normally not be
being transferred
phase.
transferred during the project period.
3. Capacity Building & 3. During project 3. Joint project launch workshop which covers
training
implementation
review of procurement plans and responsibilities.
46
phase.
Provide periodical training as a capacity building
measures by the Bank or at appropriate institutions
such as Administrative Staff College of India
(ASCI) or National Institute of Financial
Management (NIFM), and follow up with
refreshers if required.
4. Contract
Management
4. A quarterly report of all the ongoing contracts a
4. Every quarter
after the project is detailed status report including contract
declared effective. management issues such as delays, payment, etc.
will be submitted to PPD and the Bank.
5. Establish a
Complaint redressal
mechanism.
5. A quarterly report of all complaints received and
5. Every quarter
after the project is action taken will be submitted to PPD and the
declared effective. Bank.
B-2
Capacity Building Component
10.
The cost for the training component (excluding the municipal reform-related training) is
estimated to be US$0.3 million over the first three years. All of the training courses will be
conducted at/by the Bhutan College of Science and Technology (CST) and the Royal Institute of
Management (RIM). These training courses will essentially be on topics/skills related to the
services provided by each city corporation (Thimphu and Phuentsholing as well as the
MoWHS/DUDES), aimed at the augmentation and upgrading of the skills of relevant staff, as per
identified/assessed training requirements and the preferences of each agency. The subject and
timing of each course along with the number/selection of participants would be finalized by a
committee to be formed at/by PPD of the MoWHS comprising of representatives of the agencies
(DUDES, MoWHS, TCC and PCC) and the training institutions. Based on the committee's
decisions, the costs of each course to be conducted by CST or RIM would be detailed out by
PPD along with the management of the procurement of these training services. The component
costs have been estimated based on inputs from the CST (via the MoWHS, PPD) on the
approximate costs for courses with varying number of participants and different duration. The
average approximate costs are Nu. 500,000 for each course (including professionals' cost,
training reproductions, facility charge, management charges, daily subsistence allowance,
training fees, etc.). With 10 courses to be administered each year, the annual cost of the training
courses would amount to approximately Nu 5,000,000 equivalent to US$100,000 (at $1=Nu. 50)
and thus, for three year, the amount would be $0.3 million. Most of these in-country training
courses will be administered under the MoU between the Ministry and the College of Science
and Technology (CST), Royal University of Bhutan. It is envisaged that this will lead towards
developing sustainable training programs that would contribute to the skills augmentation and
professional development of engineering and other staff, and help serve the needs of urban local
governments.
11.
CST and RIM are dependent institutions of the Royal Government of Bhutan.
Therefore, using them as training institutes under the project would trigger the provisions
contained in para. 1.11 (b) and (c) of the Consultancy Guidelines, May 2004 as amended October
47
2006. But there is no other training institute in the country which can conduct the types of
training programs proposed under the project, and RGOB is not in a position to finance these
training programs. Therefore, the Bank has decided to provide a waiver for the particular
provisions of the Guidelines in selecting CST and RIM for the training purposes.
C.
Procurement Plan
12.
The Borrower, at appraisal, developed a procurement plan for project implementation
which provides the basis for the procurement methods. This plan has been agreed between the
Borrower and the World Bank on December 18, 2009 and is available at Thimphu City
Corporation (TCC) and the Policy and Planning Division. It will also be available in the project’s
database and in the Bank’s external website. The Procurement Plan will be updated in
agreement with the Bank annually or as required to reflect the actual project implementation
needs and improvements in institutional capacity.
D.
Procurement Thresholds
13.
Goods and Equipment - No ICB procurements are anticipated. However, contracts for
goods and equipment above US$ 200,000 equivalent (if required) will be procured following the
Bank ICB procedures and Bank’s approved SBD’s. Contracts between US$ 200,000 and US$
30,000 equivalent will be procured following NCB procedures and Bank’s approved SBD’s and
contracts below US$ 30,000 equivalent may be procured following Shopping procedures.
Proprietary items and software which meet the requirements of Clause 3.6 of the Procurement
Guidelines may be procured following direct contracting with the Bank’s prior agreement.
14.
Works - ICB procurement is anticipated. Any contract for works above US$1 million or
its equivalent will be procured following the Bank ICB procedures and using Bank’s approved
SBD’s. Contracts less than US$1 million and above US$30,000 equivalent will be procured
following NCB procedures and using Bank’s approved SBD’s and contracts below US$30,000
or its equivalent will be procured following Shopping procedures.
15.
Consultancy Services - Procurement of Consultants shall follow the standard documents
of the Bank and Guidelines for Selection and Employment of Consultants. Except as provided in
the following paragraphs, consultants’ services shall be procured under contracts awarded in
accordance with the provisions of paragraphs 2.1 through 2.31 thereof applicable to Quality and
Cost Based Selection of consultants. Shortlists of consultants for services estimated to cost less
than US$200,000 equivalent per contract may comprise entirely of national consultants in
accordance with the provisions of paragraph 2.7 and foot note 21 of consultant guidelines.
16.
Services for assignments which the Bank agrees to meet the requirements set forth in the
corresponding paragraphs under Section III of Consultant Guidelines, may be procured following
Quality Based selection (QBS), Least Cost Selection (LCS), and Selection under a Fixed Budget
(FBS).
17.
Services estimated to cost less than US$100,000 per contract, may be procured under
contracts awarded in accordance with the provisions of paragraphs 3.1 and 3.7 of the Consultant
48
Guidelines following Selection Based on Consultants’ Qualifications (CQS). Services estimated
to cost less than US$100,000 per contract, may, with the Association’s prior agreement be
procured in accordance with the provisions of paragraphs 3.9 through 3.11 of the Consultant
Guidelines following Single Source Selection (SSS).
18.
Assignments that meet the requirements set forth in Section 5 of Consultant Guidelines
may be procured under contracts awarded to individual consultants. Selection of individual
consultants on sole source basis that meet the requirements of paragraph 5.4 of Consultant
Guidelines shall be subject to prior approval of the Bank.
19.
Method, Threshold and Prior review Threshold for Goods, Woks and Services: The
procurement threshold and prior review by the Bank as stated in Appendix 1 to the guidelines for
Procurement is shown in the table below:
Sl. No
1
2
3
E.
Method of Procurement
ICB and LIB [Goods]
ICB [Works]
NCB [Goods]
4
NCB [Works]
5
6
7
8
9
Shopping-Good & works
Direct Contracting
Consulting firm
Individual Consultant
Sole Source Selection
Threshold
More than USD 200,000
More than USD 1,000,000
More than USD 30,000 and less
than USD 200,000
More than USD 30,000 and less
than USD 1,000,000
Less than USD 30,000
Prior review Threshold
More than USD 1,000,000
All post review
All prior review
All Prior review
Frequency of Procurement Supervision
20.
In addition to the prior review supervision to be carried out from Bank offices, the Bank
team will visit the field to carry out post review of procurement actions once in a year. The
regular supervision mission will be once in six months.
F.
Basic Principles for NCB Procedures
•
•
•
•
•
•
Invitation to bid shall be at least advertised in at least one widely circulated national
newspaper, at least thirty (30) days prior to the deadline for submission of bid.
Bid documents should be made available, by mail or in person, to all who are willing
to pay the required fee.
Evaluation of bids shall be made in strict adherence to the criteria disclosed in the
bidding documents, in a format and specified period agreed with the Association.
Bids shall be opened in public in one place, immediately after the deadline of
submission of bids.
Foreign bidders shall not be precluded from bidding and no preference of any kind
shall be given to national bidders.
Qualification criteria (in case pre-qualifications were not carried out) shall be stated
in the bidding documents, and if a registration process is required, a foreign firm
49
•
•
•
•
•
•
•
•
•
•
•
declared as the lowest evaluated bidder shall be given a reasonable opportunity of
registering, without let or hindrance.
Contracts shall be awarded to the lowest evaluated bidders.
Post-bidding negotiations shall not be allowed with the lowest evaluated bidders or
any other bidders.
Bids shall not be rejected merely on the basis of a comparison with an official
estimate without the prior concurrence of the Association.
Annual rate contracts entered into by the implementing entity shall not be acceptable
as a substitute for National Competitive Bidding Procedure; such contracts shall be
acceptable for any procurement under Shopping as one of the quotation.
Re-bidding shall not be carried out without the prior concurrence of the Association.
All bidders/contractors shall provide bid/performance security as indicated in the
bidding/contract documents.
A bidder’s bid security shall apply only to a specific bid, and a contractor’s
performance security shall apply only to the specific contract under which it was
furnished.
Split award or lottery in specific contracts shall not be carried out; when two (2) or
more bidders quote the same lowest price, an investigation shall be made to determine
any evidence of collusion, following which:
i. if collusion is determined, the parties involved shall be disqualified and the
award shall then be made to the next lowest and evaluated and qualified bidder;
and
ii. if no evidence of collusion can be confirmed, then fresh bids shall be invited
after receiving the concurrence of the Association.
Extension of bid validity shall not be allowed without the prior concurrence of the
Association: (i) for the first request for extension if it is longer than eight weeks; and
(ii) for all subsequent requests for extension irrespective of the period.
Bids shall not be invited on the basis of percentage premium or discount over the
estimated cost.
There shall not be any restrictions on the means of delivery of the bids except
electronic submission of bidding documents.
50
G.
Details of the Procurement Arrangements Involving International Competition
1.
Goods, Works, and Non Consulting Services
(a)
List of contract packages to be procured following ICB and direct contracting:
1
2
3
4
5
6
7
8
Pac
kage
No.
TCC
/DE
CH/
P1
Contract
(Description)
Procurement
Method
P-Q
ICB
No
Review
by Bank
(Prior / Post)
Prior
Expected
Bid-Opening
Date
September
15, 2010
Comments
Construction
of Road,
water
distribution,
sewerage,
street lighting
Construction
of water
treatment
plant and
sewerage
treatment
plant
Construction
of roads,
water
distribution,
sewerage,
street lighting
Domestic
Preference
(yes/no)
Yes
ICB
No
Yes
Prior
July 1, 2011
ICB
No
Yes
Prior
December 15,
2011
TCC
/DE
CH/
P2
TCC
/LP
HA/
P3
(b)
ICB contracts estimated to cost above US$1,000,000 or its equivalent per contract and all
direct contracting will be subject to prior review by the Bank.
Consulting Services
(a)
List of consulting assignments with short-list of international firms.
1
2
1
2
3
4
5
6
Ref. No.
Description of
Assignment
Selection
Method
Individual/
Firm
Expected
Proposals
Submission
Date
July 1, 2010
Comments
Design review
and construction
supervision
Computerization
of tax and nontax
records and asset
register at
Review
by Bank
(Prior /
Post)
Prior
Prior
April 30, 2011
QCBS
51
3
TCC/PCC
Design and
Implementation
of a MIS for
Budget
Monitoring at
TCC and PCC
QCBS
Prior
June 30, 2011
(b)
Consultancy services estimated to cost above USD 200,000 or its equivalent per contract
and single source selection of consultants (firms) for assignments irrespective of the
value will be subject to prior review by the Bank.
(c)
Short lists composed entirely of national consultants: Short lists of consultants for
services estimated to cost less than USD 200,000 or its equivalent per contract may be
composed entirely of national consultants in accordance with the provisions of paragraph
2.7 of the Consultant Guidelines.
52
Annex 9: Economic and Financial Analysis
Economic Analysis
A.
Background
1.
The proposed BUDPII finances infrastructure in two outer areas of Thimphu city, namely
Dechencholing and Langjophakha. Dechencholing is situated about 6 kilometers in the North of
the center of Thimphu and Langjophakha is located half-way. Although both areas are within
the boundaries of Thimphu City Corporation (TCC), residents do not receive formal urban
services, as the network has not yet been extended to these areas, capacity at the existing water
treatment plant in nearby Jungshina is insufficient to cover the additional population, and there is
no existing capacity for sewerage treatment in the North. RGOB’s infrastructure development
plans envision to eventually cover all areas under TCC administration with formal infrastructure
services, as to increase serviced land for housing to meet the ever-increasingLangjophakha
demand for
accommodation in the capital.
2.
As explained earlier in this appraisal document, RGOB’s strategy to increase serviced
land is to ask each land owner to “donate” a certain percentage of their land in exchange for
infrastructure development (including internal roads, drainage, water and sewer network, cable
sleeves for electricity lines, pavements, and street lighting) and for paying urban taxes on land
and services received. This land pooling approach is applied in both Dechencholing (152
landowners) and Langjophakha (116 landowners) with support by the World Bank, as well as in
the four areas of southern Thimphu with ADB assistance.
3.
This Annex is organized as follows: Section B outlines the framework of the economic
analysis adopted for appraisal. It outlines the key assumptions and the way benefits were
estimated using a hedonic rental pricing regression and possible affordability constraints arising
from gentrification. Section C discusses the findings for Dechencholing, and Langjophakha
including a sensitivity analysis on key parameters assumed. Section D concludes with broader
policy issues that the project will help address.
53
B.
Framework of Economic Analysis
4.
From an economic perspective, there are three benefits that accrue from the proposed
investments: the first one relates to increased value of land in the areas serviced with improved
infrastructure; the second one measures improved services for the population currently residing
in the areas; and the third one is an increase of serviced housing plots that will contribute to an
ease in the shortage of housing and may, in the long-term, make housing more affordable in
Thimphu city. For being too speculative, this analysis is not assessing the third benefit, as it will
depend on a variety of factors including RGOB’s future policies on taxation, existing regulation
on housing (i.e. minimum plot sizes for housing construction, etc.) and, most importantly,
demand by future migrants. One may argue that the benefit of improved services for existing
residents is already embedded in the increased value of land (or housing, where existent), and
including this benefit may amount to double-counting benefits. However, for the existing
residents – the majority being tenants – proposed investments yield a benefit by not having to
fetch water from distant sources or having to boil water because their current source of water is
not treated, and this benefit accrues to residents irrespective and in addition of land value
increases. As evident from the results, including the second benefit stream will have only a small
influence on the assessed rate of return and the net present value.
5.
Against these benefits, there are a number of cost streams, some of which are financial in
nature, thus mere transfers from one stakeholder to another and neutral to the computed
economic rate of return. However, they will have sizeable effects on the distribution of net
benefits and should inform redistribution policies of RGOB. All cost and benefit measures are
outlined in Table A-9.3 in the addendum to this Annex. Given the wealth of information
emanating from a comprehensive household survey (census) covering both project areas and the
availability of the Bhutan Living Standard Survey (BLSS) with 1,220 household observations
collected in 2007 for Thimphu City alone, the analysis had to rely on very few assumptions.
Perhaps the two most critical parameters for the computation of the NPV and the ERR are
estimates on incremental land values in the project areas, and the assumed population density in
the areas over time. As will be shown in the following paragraphs, these two parameters are
interrelated.
6.
Assumed Population Density. Given the project’s objectives – i.e. increased serviced
land for housing -- the economic analysis started by asking how many users of the planned water
and sewerage systems are needed to make the investments cost-effective, where costeffectiveness is assessed by simply comparing the per capita cost to international benchmarks.
For Greenfield water and sewerage systems including network, ballpark estimates range typically
from 130 to 140 US Dollars per person for water or from 160 to 170 US Dollars per person for
sewerage. At the given investment cost, this requires about 5,700 users of these facilities in
Dechencholing and 3,200 users in Langjophakha to arrive at similar cost figures. The feasibility
study assessed the number of persons moving into Dechencholing at 7,187 and into
Langjophakha at 6,460, so the required number of future users of the utilities is well within these
population projections, serving as the minimum lower bound.
7.
Government regulation stipulates a minimum plot size for constructing a house, which is
set at 10 decimals for the areas that are subjected to land pooling and 13 decimals in the rest of
54
Thimphu city. Further exceptions are granted for landowners that fall below the 10 decimals
after pooling, but own still more than 7 decimals. Minimum plot size and restrictions on the
number stories allowed to be built put a constraint on future population density in the areas, with
a lowering effect on the economic viability of the project.
8.
Assuming that land owners pursue a profit-maximizing strategy, at the given minimum
plot size 332 houses can be accommodated in Dechencholing and 176 houses can be built in
Langjophakha. Taking a mixture of four, three, two and single storey houses to be built, the
economic analysis assumed an average of 5.1 units per house in Dechencholing and 5.5 units per
house in Langjophakha, which appears much in line with other housing construction patterns in
Thimphu city. However, since ownership of land is distributed among several owners,
subdivision of land to ensure maximum use may not be feasible. Projected future population
density is perhaps the most contentious assumption in this analysis, and this has been taken into
consideration in the sensitivity analysis.
9.
Estimating Incremental Land Values. Land prices have increased in Dechencholing and
Langjophakha ever since the government announced the plan to build infrastructure services in
these areas. With historic land prices being difficult to observe as baseline, the approach taken in
this economic analysis is to assess the incremental productive gains that can be derived from the
land after the project. Given the project’s objective to increase the housing stock in the capital,
one way to assess incremental productivity is to estimate how much more rent is a family willing
to pay for moving into an apartment or house that has access to urban services versus one that
has not. Once the rental difference is estimated for each location, the net present value of future
incremental rental income can be computed, using a twenty year horizon, and this represents the
incremental productive value of land that is attributable to the project.
10.
Making use of regression techniques, it is possible – using the 2007 BLSS – to estimate
the relationship between rental values (which is the amount a household is willing to pay for a
given accommodation) and certain housing characteristics, including, for instance, whether the
housing is a single house or other, the number of rooms, the distance to the next Bank (being
only two located in the center this made a good proxy for distance to the city center), the material
of the walls and floors, the presence of glass in the windows, piped water to household, a private
toilet versus one shared with other households, a flush toilet, and access to a tarred road. The
difference between accommodations with these urban amenities versus those without is
estimated in this regression, using a sample of 1,044 households in Thimphu city. Several
variations of this equation were estimated8, but the model estimated in Table A-9.1 proofed most
robust in terms of its adjusted R-squared and other post-regression tests on the normality and
randomness of errors.
11.
According to the results, access to a tarred road was not significant in explaining
variations in the log of rental values, yet having private piped water (17.6 percent), a private
toilet (13.6 percent) and a flush toilet (27.2 percent) appear to have a sizeable and significant
8
Including ownership of house and interaction variables among different infrastructure services, which were both
insignificant.
55
influence on rental values.9 Reported distance to the city center has a small but statistically
significant effect, by lowering rental values by 2 percent for each mile. Most of the households in
Thimphu have immediate access to a tarred road, so it is likely that the lack of variation among
the observed data explains why the road coefficient is not significant. Since the vast majority of
households in Langjophakha (65 percent) and Dechencholing (91 percent) expressed as first
priority the improvement of road access, the importance of this benefit to householders cannot be
ignored. The same equation was estimated with a more heterogeneous sample by including urban
Paro, generating a statistically significant coefficient for roads of 0.132, suggesting a rental price
higher by 13.2 percent for accommodation with immediate access to a tarred road.
Table A-9.1: Results from Hedonic Rental Pricing Regression – BLSS 2007
Source
SS
df
MS
Model
Residual
365.098951
313.030222
10
1033
36.5098951
.303030224
Total
678.129173
1043
.650171786
lnrent
Coef.
house
nrooms
dist_bank
wall_d
floor_d
window_d
water_d
toilet_d
flush_toilet
tarred_road
_cons
.1362511
.2849134
-.0284113
.2570077
.0983834
.3287197
.1761203
.136235
.2721052
.0227649
6.058247
Std. Err.
.0417361
.0142706
.003959
.0569375
.0367882
.0621621
.0676877
.0477503
.050516
.065828
.0693646
t
3.26
19.97
-7.18
4.51
2.67
5.29
2.60
2.85
5.39
0.35
87.34
Number of obs
F( 10, 1033)
Prob > F
R-squared
Adj R-squared
Root MSE
P>|t|
0.001
0.000
0.000
0.000
0.008
0.000
0.009
0.004
0.000
0.730
0.000
=
=
=
=
=
=
1044
120.48
0.0000
0.5384
0.5339
.55048
[95% Conf. Interval]
.0543538
.2569106
-.0361799
.1452813
.0261952
.2067412
.0432992
.0425363
.1729795
-.106407
5.922135
.2181483
.3129161
-.0206427
.3687342
.1705716
.4506981
.3089414
.2299337
.3712309
.1519367
6.194358
12.
While the regression results are as good as they can get, they only explain 53 percent of
the variation in rental values, and this needs to be considered when applying these results to the
survey data in Dechencholing and Langjophakha. Mean rental values in these locations in 2009
were 2,249 and 3,281 Ngultrum per month, respectively. Applying the 71.6 percent increase for
fully serviced accommodations next to a road would therefore yield an estimated future rent,
averaging in Dechencholing to 3,861 and in Langjophakha to 5,632 Ngultrum per month.10
These new rental estimates seem very much in line with what current residents in each locality
already pay for accommodations with piped water (a makeshift connection!) and a private toilet
that flushes into a septic tank: the rental charges for these households are, on average, 4,266 in
Dechencholing, and 5,203 Ngultrum per month in Langjophakha.
13.
The difference between the average rent before and after the project therefore constitutes
the welfare future renters derive from appropriately serviced housing, amounting to 1,611 in
Dechencholing and 2,351 Ngultrum per accommodation per month in Langjophaka.
9
One may argue that the effects of 58 percent increase in rent for water and sewerage may be overstated, since
water and sewerage access may simultaneously influence rental values. Although correlation between water and
sewerage access is 33 percent, the interaction terms are not significant when included in the regression.
10
Ideally and instead of applying the percentage increase to the average rent, one would compute the increase for
each household depending on what type services are missing as to arrive at a new mean rental value. This
computation would have been however very tedious, even in Stata.
56
14.
When modeling the economic benefit stream, one has a choice of either assuming a
steady increase of the number of population over the assessment horizon and apply incremental
rental values as the realized benefits under the project, or one computes the present value of
future incremental rental income to estimate the increased productive value of land due to the
project. In this analysis, the latter was chosen since landowners have the choice today to sell their
land and any increased productive use of the land would be embedded in that price. Assuming
densities computed earlier under para 6ff, the present value of future incremental rental income
over 20 years yields an increase in the price of land of 264 Ngultrum per square foot in
Dechencholing and 364 Ngultrum per square foot in Langjophakha.11
15.
As a robustness check, these estimates were compared with land prices per square foot in
Dechencholing and Langjophakha, as reported by two commercial banks and developers. The
Bhutan National Bank estimates the market value of land in Dechencholing at approximately 425
Ngultrum per square foot, whilst developers quote the price of land in about 10 to 12 kilometers
distance to the center (constituting a reasonable baseline land value for Dechencholing before the
project) at 184 Ngultrum per square foot. Taking the difference yields about 240 Ngultrum per
square foot, which is slightly lower than the incremental value estimated in this analysis, but
very much in a comparable range. The Bank of Bhutan reported the market value of land in
Langjophakha at about 780 Ngultrum per square foot. Unfortunately, there is no baseline value
available, but should the PAVA rates be any guide, the increase in land values due to proposed
investments would amount to 550 Ngultrum per square foot, much above the value estimated in
this analysis.
16.
Affordability Constraints. One concern arising from the projected increase in rental
values is whether poorer households are priced out during the gentrification of the areas. Both
areas have a sizeable number of tenants among existing residents, i.e. 75 and 81 percent in
Dechencholing and Langjophakha, respectively. Although the household survey included
questions on income and expenditure, there are many missing observations in these categories
and a number of implausible responses that cannot be verified. The survey instrument employed
included similar questions on assets and household characteristics as the BLSS implemented in
2007. It was therefore considered more prudent to match households on as many identifying
characteristics and apply the consumption estimates computed in the BLSS.12
17.
Based on the matching, none of the households fall under the official poverty line, which
was established in 2007 as 1,097 Ngultrum per person per month and was suitably inflated to
reflect current prices. Average per capita consumption (using adult-equivalent) is 5,991
Ngultrum per month in Dechencholing and 5,784 Ngultrum per month in Langjophakha. The
lowest reported per capita consumption estimate is 2,324 Ngultrum per month, being low but still
almost twice the inflated poverty line of 1,435 Ngultrum per month.
11
These figures are exclusive of already built up area with current residents, for which incremental rental values
were assumed as a transfer stream between existing tenants and landowners.
12
This is a standard technique typically used in poverty mapping. In order to ascertain that both populations are
comparable, each variable used for matching was tested for similar distributional properties. Because of better
matching outcomes (evidenced by higher R-squared), matching was done at the household and not the individual
level. Household consumption estimates were then inflated by 20 percent to convert from 2007 to 2009 prices.
57
18.
Average household income is estimated at 18,600 Ngultrum per month in Dechencholing
and 20,620 Ngultrum per month in Langjophakha. The smallest computed household
consumption estimate is 6,410 Ngultrum per month in Langjophakha for a household of two.
More generally, in both Dechencholing and Langjophakha consumption estimates below 7,750
Ngultrum per month are recorded for a quarter of households, suggesting potential constraints in
affording increased rents. The distribution of aggregate household consumption is shown
graphically for each area below. Of the 418 households captured in this analysis, 183 have an
aggregate monthly consumption of less than 15,000 Ngultrum and all but 7 are tenants.
Graph A-9.1: Monthly Household Consumption Estimated from BLSS
Langjopakha
Frequency
40
60
Dechencholing
N=231 households
0
20
N=185 households
0
20000
40000
60000
80000 0
20000
40000
60000
80000
19.
While it is often difficult to prevent lower income households to be driven out of
neighborhoods as the area gentrifies, low income housing options are missing in Thimphu.
Standards of existing low income housing have been so high that middle income households or
public servants were moving in those units earmarked for a lower income population. Unless
standards are lowered by, for instance, building smaller housing units in which poorer
households can self-select themselves, the availability of affordable housing for the poor will
remain a problem in Thimphu. Suitable options will be studied and piloted during
implementation.
C.
Results and Sensitivity Analysis
20.
Throughout the analysis reality checks of estimated parameters, such as for instance the
computed incremental value of land or assumed population densities have been carried out. Yet,
despite the caution exerted when estimating the benefits, there is always a residual uncertainty
with respect to the future. The computed economic rate of returns for Dechencholing and
Langjophakha are reasonable – 28 and 33 percent respectively – but are highly sensitive to (a)
the number of households (housing units) that move to Dechencholing and Langjophahkha; and
58
(b) the welfare households derive from well serviced housing (i.e. the incremental rental value
that forms the basis for computing increased land values).
21.
As one can see in Table A-9.2 below, both in Dechencholing and Langjophakha, an
increase in the minimum plot size required to build would reduce the number of users for the
infrastructure dramatically and make the investments economically non-viable. Since RGOB has
already agreed to a minimum plot size of 10 decimals (which, incidentally, is equivalent to 4,356
square feet and thus not very small by international standards), the probability for this scenario to
occur is perhaps low, unless landowners cannot divide their land efficiently into 10 decimal plot
sizes. Equally, restricting the number of storeys allowed to be built in either area will reduce the
number of housing units available, thereby risking the economic viability of proposed
investments.
22.
In both Dechencholing and Langjophakha, assuming a ten percent decrease of the
incremental value of improved housing stills yields a positive net present value under most
scenarios. Yet, lowering the incremental value of improved housing by 35 percent makes the
project economically non-viable in most cases, unless density is increased dramatically.
Table A-9.2: Results of Economic Rate of Return including Sensitivity Analysis
Base case ERR
Base case NPV
28%
46,707,107
33%
42,257,580
Dechencholing
Langjophakha
% of gov
land
auctioned
number of
housing units
minimum
plot size
(decimals)
Incremental Value of Serviced Housing (in Nu. per month)
1,050
1,450
1,611
1,520
2,120
2,351
7
10
13
26%
n/a
n/a
43%
15%
n/a
54%
28%
n/a
7
10
13
34%
18%
n/a
57%
26%
n/a
65%
33%
3%
1,356
1,525
1,694
1,864
2,033
n/a
n/a
n/a
n/a
11%
n/a
n/a
15%
23%
30%
n/a
19%
28%
35%
42%
776
873
970
1,067
1,164
n/a
n/a
n/a
8%
18%
n/a
15%
26%
35%
42%
10%
23%
33%
42%
50%
20%
50%
100%
n/a
n/a
n/a
11%
15%
20%
25%
28%
32%
0%
50%
100%
n/a
n/a
n/a
26%
27%
28%
33%
34%
35%
Note: Shaded area is base case scenario.
n/a means not available, as ERR turned negative and can therefore not be computed.
23.
As with all economic analyses, whilst costs are observed fairly accurately the benefits are
not, as some benefit streams cannot be converted into numeric terms without wild speculations.
The approach taken in this economic analysis seeks to ascertain a sufficient number of future
users of the systems built under the project. This is a reasonable approach, since infrastructure
59
systems need to be tailored to prospective use and demand. Langjophakha and Dechencholing
are the first two out of five areas in the North that are planned to be serviced with improved
infrastructure. Therefore, even if population densities in Dechencholing and Langjophakha are
lower than projected in this analysis, other households that are likely to move into the
surrounding areas can benefit from improved utility services, i.e. water and sewerage treatment,
made available under the project for Northern Thimphu. Therefore, the risk of underutilized
infrastructure systems is perhaps overstated above.
24.
Moreover, if release of serviced land in Thimphu has a stabilizing or perhaps lowering
effect on the rental prices that have sky-rocketed over the past years, this could generate a
significant welfare gain to all renters in Thimphu and improve mobility of the rural population.
D.
Conclusion and Recommendations
25.
The findings of the economic analysis highlight a couple of areas, where appropriate
policy decisions could generate benefits beyond the ones projected and reduce some of the
uncertainties outlined in the discussion above.
Assumed densities for the analysis are within the range of the population figures
estimated by TCC, and on which basis the design of systems were made. For the project to
achieve the intended results, RGOB will need to revisit the incentives of landowners to build
housing on their land by revising (a) the design of current vacancy tax that is not linked to
density but is only triggered when land is completely vacant; and (b) the level of both urban land
taxes (i.e. Nu.0.25/sqft annually) and the level of the vacancy tax (50 percent of urban land tax).
Technical assistance will be provided under the Municipal Finance Component of the project for
revising these rates and providing suitable options. RGOB will also need to reconsider
restrictions imposed on minimum plot size and number of storeys, if housing shortage should be
addressed in Thimphu city.
26.
Estimated rental increases (that capture renters’ willingness to pay for improved housing)
27.
are in line with reported land values, when the present value of annual rental income over 20
years is computed for comparison. Given the robustness of the regression estimates, it is likely
that well serviced housing in Dechencholing and Langjophakha will fetch 71 percent more in
terms of rent due to the project. It will be more important that RGOB considers lowering
standards for low income housing to levels affordable by poorer households in Thimphu.
28.
A third recommendation stemming from this analysis, is for RGOB to align its strategy of
bringing unserviced land into the urban realm through landpooling with a higher urgency of
recovering part of its investment costs. Urban land taxes have not been revised since 1992 and
any increase in the next few years is unlikely to be large enough to compensate RGOB for its
cost. However, RGOB could consider a higher share of land to be pooled, so that RGOB can
retain land to auction off after pooling.
60
Table A-9.3: Computation of Economic and Financial (Shaded) Cost and Benefit by Stakeholder
A. RGoOB
Cost
1. Project cost
B. TCC
1. Maintenance cost
Benefits
2. Incremental revenue
from land tax
3. Incremental Revenue
from service tax
4. Incremental revenue
from house tax
5. Collection of tariffs
for water supply and
sewerage
6. Auction of Public
Land in LAPs
C. Tenants
1. Increase in rental
prices
Methodology/Assumptions
Cost is inclusive of taxes, a standard conversion factor of 0.8 was applied and an
implementation schedule estimated. Taxes assumed were 15 percent in the form of
VAT.
Estimated at annually 1 percent of the project cost for water, sewerage, roads and
street lighting.
Annual Land tax paid by owner: difference before and after applied to land after
pooling.
Before: Dechencholing Nu. 0.24 per decimal1
Before: Langjophakha Nu. 54.45 per decimal2
After: Urban land tax Nu. 108.9 per decimal
Monthly service tax3 for housing units to be paid by owner and applied to existing
units in Dechencholing (Langjophakha residents already pay the service tax) and
projected number of units. Analysis used average of Nu. 10.5 per unit per month.
Monthly house tax paid by owner: difference before and after applied to existing
number and projected number of units. Again Langjophakha residents already pay
the house tax.
Before: Dechencholing Nu. 20 per building
Before: Langjophakha Nu. 100 per unit (771 sq.ft)
After: Urban house tax Nu. 100 per unit (771 sq.ft)
Based on hh survey there is currently no or negligible expenditure on water and
sanitation in Dechencholing and Langjophakha. Consumption data from TCC
suggests average water consumption of 135 lpcd.
The water tariff is an IBT with the lowest block applied from 0 to 20 m3 at Nu. 2.3
and the next block from 21 to 40 m3 at Nu. 2.75. The sewerage surcharge is 50
percent of water bill. A review on cost recovery of current tariff structure shows
that TCC is recovering its operating costs for water and sewerage by 119 percent.
In Dechencholing, 483 decimals of land (ex school building plot and endowment
for future) could be auctioned off, and this analysis assumed that RGOB auctions
50 percent of that land off. In Langjophakha, there may be some 50 decimals that
could be auction off, but for the base case scenario, no auction of public land is
assumed for Langjophakha.
A hedonic rental model was estimated from the Bhutan BLSS 2007 on data for
urban Thimphu (n=1044). Significant coefficients for infrastructure were applied to
61
Cost
Benefits
2. Payment for water
and sewerage
consumption
3. Avoided cost from
fetching water
boiling water
D. Landowners
1. Land contribution
2. Incremental land tax
3. Incremental service
tax
4. Incremental house
tax
5. Payment for water
and sewerage
consumption
hh data in Dechencholing and Langjophakha, suggesting a 71.6 percent increase
from current rental levels. The detailed result of this analysis is outlined in the main
text.
The computation applies the data outlined under B.5 above. It assumes that all
current households with tenants will be connected to the water and sewerage
system. While this is likely for water, where the water source is not treated, it may
not be true for households that have currently a septic tank. Costs are therefore
slightly overestimated.
Estimated from hh responses (existing tenants) in the hh survey: time spent as hh
fetching water per day multiplied with the opportunity cost of labor. Opportunity
cost of labor was computed from the 2007 monthly poverty line per capita (i.e.
1096.94), multiplied by 1.09 (the reported price adjustment for urban Thimphu
when applying the poverty line4, and inflated by 20 percent from 2007 to 2009,
using the CPI, yielding Nu. 71.74 per person per day.5
Estimated from hh responses (existing tenants) in the hh survey applied to the
project areas: number of hhs that boil their water for drinking purposes, multiplied
by the difference on expenses, by cooking fuel, for hhs that boil versus those that do
not boil.
Assessed at the compensation value that would have been paid by RGOB for
purchasing the land before infrastructure development, which is assessed at Nu.
230.38 per square foot. This price is multiplied by the 25 percent of land being
pooled in each area.
Computed in the same way as under B.2.
6. Incremental income
The computation applies the data outlined under B.5 above. Both the payment for
improved water and sanitation services by current landowners residing in the
project area, as well as future landowners is computed. This assumes that land by
owners is sold outright to other owners. While this does not affect the total rate of
return or NPV, it does lower the benefits accrued to land owners and increases the
benefits (or lowers the cost) to future tenants.
As computed under C.1 for existing tenants.
62
Cost
Benefits
from increased rent
from existing tenants
7. Increased value of
land
fetching water
boiling water
1
2
3
4
5
The value of land was approximated by using the present value of future
incremental rental income, using the hedonic rental regression results explained
under C.1 and further explained in the main text.
As computed under C.3, but for existing land-owners.
As computed under C.4, but for existing land-owners.
1 decimal=0.01 acres=40.47 square meters=435.6 square feet
Tax level is smaller than full urban tax, since Langjophakha is not receiving full urban services
Tax is categorized into 4 classes depending on the type of dwelling, ranging from Nu. 6 to Nu. 15 per unit per month
Bhutan Poverty Monitoring Report (2007)
The minimum wage is Nu. 100 per day
63
Annex 10: Safeguard Policy Issues
SOCIAL SAFEGUARDS
1.
Involuntary Resettlement: The land pooling approach applied in BUDPII is based on
The Land Pooling Rules of the Kingdom of Bhutan 2009, which places emphasis on in-situ
development, minimizes resettlement, and enables original owners to retain title to the majority
of the land. In addition, the provision of information and public consultations are envisaged as
standard procedures. The land pooling approach is based on voluntary agreement with affected
landowners and the Regulations stipulates that at least two thirds of land owners in a given area
should sign Land Pooling Agreements. Based on the economic analysis for the ADB funded
Bhutan Urban Infrastructure Development Project, the net economic benefit from the land
pooling exercise was quantified for land owners as follows: without land pooling, the existing
land would continue to have economic value as agricultural land while with land pooling, the
remaining land would be developed as urban residential areas. For a land owner, the net
economic benefit due to land pooling would be typically be in the range of a 15 times increase of
the economic value of the remaining land.
2.
According to the Social Assessment (November 2009), 97 percent of land owners in
Dechenchholing and 85 percent of landowners in Langjuphaka have signed the land pooling
agreements, i.e. fulfilling the requirements for application of the land pooling approach whereby
they will contribute 25 percent of their land in exchange for provision of infrastructure services
in the LAP. However, the government is still trying to reach a 100 percent acceptance of the land
pooling approach among the land owners of the LAP.
3.
In accordance with World Bank Operational Policy (OP) 4.12, a Resettlement Action
Plan (RAP) has been prepared for the Dechencholing LAP to address issues related to
involuntary resettlement and/or the loss of assets or income as a result of the land pooling
approach and the demarcation of location of facilities in the LAP. This RAP identifies the broad
scope of the project and outlines the policy, procedures for acquisition of land, compensation and
other assistance measures for affected persons, as well as required institutional arrangements.
Social Assessment for Dechecholing and Langjophakha
4.
TCC has carried out a Social Assessment for both LAPs and conducted public
consultations in the areas. In Dechencholing, there are a total of 187 households with a total
population of 736 persons (332 males, and 404 females). Of the 187 households, contributing 25
percent of their land to the LAP in Dechencholing, 52 households will experience other losses as
well, ranging from loss of fencing walls to houses that they are presently occupying, and of these
20 households are tenants who will have to relocate. In Langjophakha, there are 246 households
and a total population of 1026 persons, of which 104 are land owners. The number of families
who will be affected by the land pooling by loosing structures, assets or livelihood is 76, and 48
of these are tenants. In both LAPs, the average household size is 4 persons.
64
5.
Houses in both LAPs can be categorized as permanent, semi-permanent and temporary
structures, the latter being made of mud, stone, bricks and timber mostly with CGI sheet roof
with timber flooring. Only 32 percent of all households in Dechencholing live in houses that are
of permanent nature, while in Langjophakha 34 percent live in permanent structures. Around 40
percent of all households in both LAPs live in temporary dwellings, but these households are
almost exclusively tenants, and in both LAPs around 50 percent of all tenants live in temporary
buildings.
6.
In Dechencholing, only 25 percent of the households own the dwellings presently
occupied while 75 percent do not own houses but stay on rent; in Langjophakha, even fewer (20
percent) own the dwelling they presently live in. Tenants are in both LAPs comparative
newcomers, as 82 percent tenants have lived in Decencholing less than 5 years as compared to
90 percent of the tenants in Langjophakha, whereas most owners in both LAPs have lived more
than 5 years in the LAP (97 percent in Dechencholing and 85 percent in Langjupkakha). The rent
paid by tenants range from Nu. 500.00 or less to Nu. 5,000.00 per month paid both in kind and
cash.
Dechencholing Resettlement Action Plan (RAP)
7.
The RAP for Dechencholing LAP identified a total of 52 Project Affected Families, of
which 32 are landowners. Twenty tenant families will also be affected and have to relocate.
8.
Compensation to PAFs for Acquisition of Land: If a landowner is not interested in or not
in agreement with the concept of land pooling/land donation, his/her land would be fully
acquired as per the provisions of the Land Act and the compensation rate for the land would be
as per the ‘Fair Price’ or any other reasonable rate approved by the Royal Government of
Bhutan.
9.
Compensation to PAPs for loss of Structures and Assets: All Project Affected Families,
who have agreed to the Land Pooling Approach and thus contribute 25 percent of their land, will
receive compensation for loss of structures, other assets, and livelihood plus resettlement
assistance to the most poor/vulnerable according to a Resettlement Action Plan (RAP) developed
by TCC, compliant with OP 4.12
10.
Where the land pooling arrangements will impact structures, these are normally of
temporary nature rather than permanent structures, and a number of tenants (20 HH in
Dechencholing) will have to resettle as their dwellings will be impacted. Some of the displaced
tenants expect to relocate to other areas, as they may not find affordable rental housing in
Dechencholing.
65
Compensation Framework, Dechencholing RAP
11.
All Project Affected Families title owners, who have agreed to the Land Pooling
Approach and thus contribute 25 percent of their land, will receive compensation for loss of
structures, other assets, and livelihood plus resettlement assistance. Affected tenants will also be
compensated for any loss of structures, assets and livelihood and resettlement assistance. The
poorest/most vulnerable PAFs have been identified and will receive a special assistance.
12.
The following entitlement matrix will guide to offer compensation and assistance to those
persons affected by the project. No displacement beyond the RAP is expected. However, if it
occurs or if felt unavoidable at the time of implementation all affected persons will have the
same rights.
Entitlement Matrix by type of impact and unit
Type of Impact
Loss of structures
(house, sheds,
temporary structures,
boundary walls etc)
Entitlement Unit
Title holders and
non-title holders
(tenants)
Entitlement
1. Cash compensation equivalent to the amount as per
latest BSR rates at replacement cost (without
depreciation).
2. Lump sum shifting allowance of Nu. 1500/- (or actual
cost on production of bills)
3. Rights to salvage materials
Loss of economic
asset (fruit trees)
Title holders
Loss of
incomes/livelihood
Title holders and
non-title holders
(tenants)
Title holders and
non-title holders
(tenants)
1. Compensation at replacement cost based on the latest
2008 rates
2. Right to salvaged materials
1. Compensation at replacement cost based on the net
revenue earned per month for 3 months to enable them
to re-establish their livelihoods.
1. Reimbursement of rental deposit or unexpired lease
amounts.
2. Lump sum shifting allowance of Nu. 1500/- (or actual
cost upon production of bills)
3. Lump sum rental assistance of 2 months @Nu
2500/month. (As per survey median rent paid is Nu
2500/month).
1. Resettlement assistance to those most vulnerable (poor
residents that are elderly and widows) to enable them to
restore or improve pre-displacement level livelihoods.
A lump sum of Nu. 5000 special assistance is proposed
for the elderly while for women-headed households and
widows a lump sum amount of Nu. 10,000 as
assistance will be given.
2. Special resettlement assistance to vulnerable families
@ Nu 5000/3. Special resettlement assistance to vulnerable families
headed by female and the physically challenged @ Nu
10,000/-
Loss of dwelling
Loss of dwelling
Shifting/readjustment
of plots
Vulnerable
groups (below
poverty line,
women headed
households,
disabled and the
elderly). This
compensation is
paid over and
above the
compensation
paid for loss of
structures.
Title-holders
1. Consultations with PAPs will take place during
demarcation of the plots to reduce negative impact
66
Responsibility
TCC, and
Community
representatives
Those refusing to
contribute to land
pooling
Title-holders
1. For those present but further refusing to contribute,
their entire plot will be acquired at PAVA rates
2. Deposit the cost of acquired land (at PAVA rates) in
joint account of title holder and spouse
3. The owner, if it is the only land owned, chooses to
take replacement land instead of cash will follow
government procedures for replacement land of same
size and value of land within the District.
4. Compensation for affected structures, assets and
livelihood along the lines with PAF from the Land
Pooling.
Absentee titleholders
that cannot be traced
Title-holders
1. Deposit the cost of entire land (at PAVA rates) in
account opened and operated by TCC for future
payment to holder if absent.
2. On return of the owner, contribution to land pooling
will be discussed and if the owner signs the land
pooling agreement, the cash deposited in account will
revert to TCC.
3. If the owner refuses to sign the land pooling
agreement, the owner’s entire land will be acquired as
per the Land Act and compensation paid at PAVA
rates.
4. Deposit the cost of acquired land (at PAVA rates) in
joint account of title holder and spouse. The owner, if
it is the only land owned, chooses to take replacement
land instead of cash will follow government
procedures for replacement land of same size and
value of land within the District.
Any other loss not
identified
Title holders and
non-title holders
1. Unanticipated involuntary impacts will be documented
and mitigated at the time of implementation based on
the principles provided in World Bank Resettlement
Policy.
Note: All compensation/assistance shall be paid before relocation/displacement so as to allow the
family to construct new house before displaced from the present location.
13.
The compensation package to PAFs will be paid through a joint bank account for
husband and wife of the household
14.
Additional measures: The RAP proposes additional measures for restoration of livelihood
for the poorer families in the LAP:
1. The project will encourage contractors to employ both skilled and unskilled labour
among people living in the LAP. If the PAPs lack the skills but are in dire need of a
means of income for the household, the project will facilitate with the contractor on-thejob training for needy and interested PAPs;
2. Facilitating the linkage of interested PAPs with the Entrepreneurship Development
Programme conducted by the Ministry of Labour & Human Resources to promote
investment of compensation money in sound business opportunities in Dechencholing.
Additionally, such PAPs could be leased out facilities in the Neighborhood Node to carry
out a business.
67
15.
Staffing: The RAP also specifies the staffing requirements for TCC to be able to
implement the RAP in a satisfactory manner, stressing the needs for extensive information
dissemination and public consultations throughout the implementation period.
Grievance Redressal
16.
Any aggrieved PAFs shall have the right to get their grievances resolved and the TCC
shall have the obligation to solve them judiciously and within the RAP implementation period.
Vide notification dated May 14, 2008; TCC has formed a Plan Implementation sub-committee
for all 10 LAPs under the city committee to resolve the grievances/complaints of plot owners in
all the LAPs with adequate representation of the affected plot owners. The composition of the
Sub-Committee of Dechencholing Local Area Plan is as follows:
I. Concerned City Committee member of the zone – Chairman;
II. Executive Secretary, TCC, Member;
III. Chief Urban Planner,TCC, Member Secretary;
IV. Legal officer,TCC, Member;
V. Head, Development Control Division, TCC, Member;
VI. Urban Planner,TCC, Member;
VII. LAP/Plot owners Representatives (3 persons); and
VIII. Any other relevant stakeholders.
17.
As per the requirement of the project and to comply with the World Bank Policy on
Involuntary Resettlement, the project will establish a GRC for each LAP. This committee will
hear complaints and facilitate solutions; and the process, as a whole, will promote dispute
settlement through mediation to reduce unnecessary litigation. In order to avoid the duplication,
the LAP Sub-Committee may be designated as GRC with inclusion of new members like Chief,
Planning Division, and Social Development Specialists with the additional functions mentioned
below:
a. Provide support to PAPs on problems arising out of eligibility for RAP-provided
entitlements and assistance provided;
b. Record the grievances of the PAPs, and categorize, prioritize and solve them;
c. Inform TCC of serious cases within one week; and
d. Report to the aggrieved parties about the developments regarding their grievance
and decisions of the TCC, within one month.
18.
The GRC will meet regularly during implementation of the RAP, at least once a month.
The committee will suggest corrective measures at the field level itself and fix responsibilities
for implementation of its decisions. The Chief, Planning Division would be empowered to take
the final decisions and shall not be challengeable in any other forum except in the courts of law.
However the Division will form the first level of intervention in resolving PAP related
grievances, thereby facilitating implementation of the R&R program.
19.
The steps in the redress process:
68
1. At the first level intervention the Planning Division will attempt to resolve the
grievance;
2. The second step will be to approach the Grievance Redress Committee;
3. If all the above fails, the PAPs can approach the court of law.
20.
It is the responsibility of the SDRC to inform the affected persons of the GRC, to make it
effective.
Information and Dissemination
21.
Apart from compensating the PAFs based on their entitlements, the following measures
will be taken to provide correct information, prevent distress and counter misinformation:

TCC will consult people and disseminate information on the RAP entitlement package
and options for each impact category to PAPs. This will involve explaining the
Entitlement Framework and resettlement options to the PAPs and soliciting their support
and co-operation. The process of consultation will be continued till affected persons are
resettled and rehabilitated; ensure all questions of PAPs are answered comprehensively by
TCC. Print and audio-visual materials will be of secondary use in such areas;

The Executive Summary of the SA and RAP Report for Dechencholing has been posted
in both English and Local language (Dzongkha) on the MOWHS, DUDES and TCC
websites and through the BBS and local newspapers;

Comments have been solicited and received;

The finalized RAP has been disclosed and placed in the public domain. It will be ensured
that the information, deadlines for complaints etc. be made readily available to all
households in the two LAPs, including the households which are illiterate and thus may
be dependent on verbal information in local language;

All comments made by the PAFs/PAPs will be documented in a project register opened to
record such comments and summarized in project monitoring reports;

Final Copies of R&R Policy and RAP will be made available both in English and
Dzongkha language for reference and review by the public; and

The RAP reports shall be kept mainly as print documents available in the TCC and with
the elected representatives, community leaders and in public libraries so that PAPs and
the general public can access these documents.
ENVIRONMENTAL SAFEGUARDS
22.
Bhutan Environmental Regulations: The National Environment Protection Act (NEPA)
of Bhutan 2007 and Environment Assessment Act (EAA) 2000 mandate the National
Environmental Commission (NEC) to protect and promote a safe and healthy environment;
prevent control and abate environmental harm including pollution; ensure conservation and
sustainable use of natural resources; and institutionalize environmental assessment process as an
integral part of the development planning process. The NEC mandates also include monitoring
69
the impact of development on the environment, putting in place the necessary controls,
regulations and incentives to the private/public sectors to achieve sustainable development
through the judicious use of natural resources, coordination of inter-sectoral programmes, the
implementation of policies and legislation with regard to the environment. The urban sector
projects also require environmental clearance from NEC depending on nature or urban projects.
The current project activities require environmental screening and Environmental Assessment.
23.
As part of the procedure for determining the relevance of the use of country systems for
addressing environmental safeguards, the equivalence analysis for the Second Rural Access
Project (RAPII) completed in 2006 was updated to reflect the enactment of the National
Environmental Protection Act (NEPA). However, the enactment of NEPA does not change the
substantive findings of RAPII Safeguard Diagnostic Report (SDR) because the Environmental
Assessment Act (EAA) and Regulations for Environmental Clearance of Projects (RECOP) have
remained the defining documents in relation to the EA process in the country. An acceptability
assessment was conducted specifically relating to activities of BUDPII.
24.
Equivalence Findings Relevant to BUDPII: In the context of BUDPII, the Bank
Safeguards Diagnostic Review Report (SDR) under the World Bank’s program to pilot the use of
borrower safeguard system (OP/BP 4.00) found equivalence of RGOB’s systems with respect to
the corresponding World Bank safeguard policy on Environmental Assessment.
25.
Acceptability Findings Relevant to BUDPII: In the context of BUDPII, the following
agreed measures were deemed necessary to attain and sustain acceptability in respect to the
safeguard policy on EA:
a) Clarifying mandates, roles and responsibilities:
Revision of the regulation,
environmental codes of practices and guidelines is necessary to clarify the multiplicity
of roles of agencies involved in urban development activities with reference to
environmental assessment and management. These in particular include environmental
mandates, roles and responsibilities of NECS, MoWHS/PPD, DUDES, TCC as well as
of other relevant central agencies such as Ministry of Economic Affairs, Department of
Forest, and private sector (consulting firms and contractors) in different types of urban
development activities. Revision is also necessary in the context of recently enacted
NEPA in order to streamline the provisions of NEPA, EA Act and Regulations. These
are proposed to be taken up as part of Strengthening Institution Capacity component of
the project for Implementation of Environmental Safeguards.
b) Capacity and awareness building: Capacity of all the involved institutions needs to be
enhanced to discharge the function for which the agencies are made responsible.
Shortage of qualified human resources at NECS, MoWHS and TCC needs to be
addressed.
c) Improving consultations: Consultation with the affected party and stakeholders take
place at two stages – when NoC is issued by the responsible agency and during
preparation of full EA. General practice is to consult the directly affected party
individually. Current public and stakeholder consultation practice can be improved by:
i) holding consulting with general public and civil society also (not only with directly
affected party/person); ii) consulting with stakeholders/interest groups during different
70
phases of environmental assessment and management (such as during drafting ToR for
EA, in the process of issuing EC, during compliance monitoring, etc.).
d) Enhancing coordination: Use the current mechanism of monthly review meetings at
MoWHS for mechanism for enhancing coordination not only for environmental
management but for overall urban development. Coordination needs to be strengthened
with agencies such as TCC, NECS, MoEA, District Environment Committee and others
agencies involved in the urban development.
e) Strengthening monitoring: Improve current compliance monitoring system involving
multi-stakeholder participation/ responsibilities as well as ambient environmental
quality monitoring for few key /priority/ selected environmental parameters for
Thimphu City. Such a monitoring system to be integrated with Urban Environmental
Information System for Thimpu City, established by MoWHS with support from
UNEP.
26.
The summary action plan of proposed measures to sustain acceptability for BUDPII
includes the following: (table to be changed as per financing agreement)
Action
Time
Responsible
agencies
Clear and agreed
responsibilities and
authorities in
environmental
management functions
among agencies involved
in BUDP II (particularly
among NECS,
MoWHS/PPD, DUDES,
TCC).
Implementation roles
have been clarified.
MoWHS and TCC have
committed to deploy
environmental
coordinators by
negotiations.
MoWHS and
TCC to
coordinate with
NECfor
implementation
compliance
Revision of EA Act,
regulation, application
guidelines, and codes of
practices as well as
developing new guidelines
and codes of practices.
Revision of EA Act is in
progress and to be
formalized by June 30,
2011
NECS in
cooperation with
other relevant
stakeholders
Environmental Capacity building
Capacity building of NEC,
MoWHS/PPD, DUDES
and TCC as well as
contractor and field
persons (junior engineer,
supervisor/ operator) and
preparation of capacity
building plan (including
Capacity building to be
undertaken as part of the
project implementation
71
MoWHS, NEC,
and TCC
necessary training such as
SEA, and full EA, on-site
training to field persons
etc)
NECS and MoWHS/UDP
II agreement on specific
tasks such as schedule of
NECS surprise and regular
inspection/ monitoring in
BUDP II.
Prior to BUDP II
implementation
effectiveness
BUDP II/
MoWHS and
NECS
Explore possibilities of
sending MoWHS/PPD and
TCC’s environmental staff
as intern to international
agencies for a limited
period of time (and send as
intern).
During BUDP II
preparation and initial
stage of implementation.
MoWHS and
TCC in
cooperation with
international
agency
Improved consultation in
BUDP II environmental
process
Agree on the process of
consultation within 3
months of project
effectiveness
MoWHS jointly
in consultation
with NEC and
TCC
72
Annex 11: Project Preparation and Supervision
PCN review
Initial PID to PIC
Initial ISDS to PIC
Appraisal
Negotiations
Board/RVP approval
Planned date of effectiveness
Planned date of mid-term review
Planned closing date
Planned
April 16, 2008
March 31, 2008
Actual
April 16, 2008
March 31, 2008
December 2009
February 3, 2010
April 29, 2010
June 2010
December 2012
December 2015
December 2009
February 3, 2010
Key institutions responsible for preparation of the project:
Ministry of Works and Human Settlement
Thimphu City Corporation, Phuentsholing City Corporation
Bank staff and consultants who worked on the project included:
Name
Toshiaki Keicho
Kirsten Hommann
Asta Oleson
Samantha Forusz
Tashi Tenzing
Surendra Govinda Joshi
Mohi Uz Zaman Quazi
Rama Krishnan
Venkateswaran
Manvinder Mamak
Kumaraswamy
Sankaravadivelu
Rock Levesque
Zahed Khan
Sita Ramakrishna Addepalli
Lilian MacArthur
Robin Rajack
Title
Senior Urban Environment Specialist;
Task Team Leader
Senior Economist
Senior Social Development Specialist
Senior Social Development Specialist
Senior Sanitary Engineer
Senior Transport Specialist
Senior Transport Engineer
Senior Financial Management
(Municipal Finance) Specialist
Senior Financial Management
Specialist
Procurement Specialist
Sr. Counsel
Senior Urban Specialist
Environmental Specialist
Program Assistant
Senior Urban Development Specialist
Unit
SASSD
SASSD
SASDI
HRSAS
SASSD
SASSD
SASSD
SARFM
SARFM
SARPS
LEGES
SASSD
SASDI
SASSD
FEUUR
Bank funds expended to date on project preparation:
1. Bank resources: US$859,134
2. Trust funds: US$692,765 (Japan’s Policy & Human Resource Development Grant)
73
3. Total: US$1,551,899
Estimated Approval and Supervision costs:
1. Remaining costs to approval: US$0.00
2. Estimated annual supervision cost: US$120,000
74
Annex 12: Documents in the Project File
Environmental Assessment Report
Safeguards Diagnostic Review Report
Social Assessment Report including Resettlement Action Plan for Dechencholing
Bhutan National Urbanization Strategy 2008
Thimphu City Development Strategy 2008
The Land Pooling Rules of the Kingdom of Bhutan 2009
Technical Design Documents and drawings
Procurement Guidance Note
Financial Management Assessment Note
75
Annex 13: Statement of Loans and Credits
Difference between
expected and actual
disbursements
Original Amount in US$ Millions
Project ID
FY
Purpose
IBRD
IDA
SF
GEF
P099126
2008
Instit. Cap. Bldg. Project for Proc.
0.00
1.50
0.00
P073458
2007
BT Private Sector Development
0.00
8.00
0.00
Cancel.
Undisb.
Orig.
Frm. Rev’d
0.00
0.00
1.40
0.33
0.00
0.00
0.00
6.82
0.77
0.00
P100332
2007
Second Rural Access Project
0.00
10.00
0.00
0.00
0.00
5.23
-0.27
0.00
P087150
2005
Decentralized Rural Development
0.00
7.00
0.00
0.00
0.00
2.11
2.08
0.00
P074114
2004
Education Development Project
0.00
32.60
0.00
0.00
0.00
6.86
1.08
0.00
P083169
2004
HIV/AIDS and STI Prevention and Control
0.00
5.77
0.00
0.00
0.00
1.68
1.51
0.37
0.00
64.87
0.00
0.00
0.00
24.10
5.50
0.37
Total:
BHUTAN
STATEMENT OF IFC’s
Held and Disbursed Portfolio
In Millions of US Dollars
Committed
Disbursed
IFC
FY Approval
Company
2004
BRCL
Total portfolio:
IFC
Loan
Equity
Quasi
Partic.
9.41
0.00
0.00
0.00
0.00
0.00
0.00
9.41
Loan
Equity
Quasi
Partic.
9.41
0.00
0.00
0.00
9.41
0.00
0.00
0.00
Approvals Pending Commitment
FY Approval
Company
Total pending commitment:
76
Loan
Equity
Quasi
Partic.
0.00
0.00
0.00
0.00
Annex 14: Country at a Glance
B hut a n
S o ut h
A s ia
Lo we rm iddle inc o m e
0.66
1,770
1.2
1,520
880
1,339
3,437
1,887
6,485
2.3
6.3
1.6
2.1
1.1
1.5
..
33
65
63
..
81
60
102
103
101
..
29
64
62
41
87
58
108
111
104
..
42
69
41
25
88
89
111
112
109
P O V E R T Y a nd S O C IA L
2007
P o pulatio n, mid-year (millio ns)
GNI per capita (A tlas metho d, US$ )
GNI (A tlas metho d, US$ billio ns)
D e v e lo pm e nt dia m o nd*
Life expectancy
A v e ra ge a nnua l gro wt h, 2 0 0 1- 0 7
P o pulatio n (%)
Labo r fo rce (%)
M o s t re c e nt e s t im a t e ( la t e s t ye a r a v a ila ble , 2 0 0 1- 0 7 )
P o verty (% o f po pulatio n belo w natio nal po verty line)
Urban po pulatio n (% o f to tal po pulatio n)
Life expectancy at birth (years)
Infant mo rtality (per 1,000 live births)
Child malnutritio n (% o f children under 5)
A ccess to an impro ved water so urce (% o f po pulatio n)
Literacy (% o f po pulatio n age 15+)
Gro ss primary enro llment (% o f scho o l-age po pulatio n)
M ale
Female
GNI
per
capita
Gro ss
primary
enro llment
A ccess to impro ved water so urce
B hutan
Lo wer-middle-inco me gro up
KE Y E C O N O M IC R A T IO S a nd LO N G - T E R M T R E N D S
19 8 7
19 9 7
2006
GDP (US$ billio ns)
0.26
0.37
0.94
1.1
Gro ss capital fo rmatio n/GDP
Expo rts o f go o ds and services/GDP
Gro ss do mestic savings/GDP
Gro ss natio nal savings/GDP
36.2
23.2
21.9
..
32.2
35.3
22.1
26.0
45.3
31.6
31.7
42.2
52.5
58.2
60.1
72.1
-36.8
0.2
15.6
1.0
..
..
4.9
0.6
32.1
6.0
..
..
-3.9
0.4
75.7
2.6
74.6
184.1
11.5
..
..
..
..
..
Current acco unt balance/GDP
Interest payments/GDP
To tal debt/GDP
To tal debt service/expo rts
P resent value o f debt/GDP
P resent value o f debt/expo rts
2007
E c o no m ic ra t io s *
Trade
Do mestic
savings
Capital
fo rmatio n
Indebtedness
19 8 7 - 9 7 19 9 7 - 0 7
(average annual gro wth)
GDP
GDP per capita
Expo rts o f go o ds and services
4.9
5.4
..
8.2
5.5
25.0
2006
2007
8.5
6.5
1.1
19.1
17.5
118.8
2 0 0 7 - 11
B hutan
6.4
0.0
14.6
Lo wer-middle-inco me gro up
S T R UC T UR E o f t he E C O N O M Y
19 8 7
19 9 7
2006
(% o f GDP )
A griculture
Industry
M anufacturing
Services
37.7
25.7
5.7
36.6
32.5
33.2
10.0
34.4
22.3
37.9
7.4
39.8
20.9
42.9
5.1
36.3
Ho useho ld final co nsumptio n expenditure
General go v't final co nsumptio n expenditure
Impo rts o f go o ds and services
64.3
13.8
37.4
56.3
21.5
45.3
47.2
21.1
45.2
17.9
22.0
50.7
19 8 7 - 9 7 19 9 7 - 0 7
(average annual gro wth)
A griculture
Industry
M anufacturing
Services
Ho useho ld final co nsumptio n expenditure
General go v't final co nsumptio n expenditure
Gro ss capital fo rmatio n
2006
2007
2007
2.5
11.3
2.3
5.0
2.8
8.3
10.8
8.8
1.4
63.0
35.3
8.6
1.8
4.0
106.4
22.1
..
..
..
..
2.9
13.5
11.8
13.5
6.6
10.4
0.8
-0.3
-43.3
23.9
37.7
33.1
G ro wt h o f c a pit a l a nd G D P ( %)
60
40
20
0
- 20
02
03
04
05
GCF
06
07
GDP
G ro wt h o f e xpo rt s a nd im po rt s ( %)
150
100
50
0
-50
02
03
04
Exports
05
06
07
Imports
No te: 2007 data are preliminary estimates.
This table was pro duced fro m the Develo pment Eco no mics LDB database.
* The diamo nds sho w fo ur key indicato rs in the co untry (in bo ld) co mpared with its inco me-gro up average. If data are missing, the diamo nd will
be inco mplete.
77
Bhutan
P R IC E S a nd G O V E R N M E N T F IN A N C E
D o m e s t ic pric e s
(% change)
Co nsumer prices
Implicit GDP deflato r
G o v e rnm e nt f ina nc e
(% o f GDP , includes current grants)
Current revenue
Current budget balance
Overall surplus/deficit
19 8 7
19 9 7
2006
2007
6.4
0.7
6.5
13.0
5.0
4.4
5.2
-0.3
Inf la t io n ( %)
8
6
4
2
0
..
..
..
34.4
17.1
-2.2
32.5
16.4
-0.8
34.8
18.2
-2.4
2006
2007
02
-2
03
04
05
06
GDP def lator
07
CPI
TRADE
19 8 7
(US$ millio ns)
To tal expo rts (fo b)
A gricultural pro ducts
Electricity
M anufactures
To tal impo rts (cif)
Fo o d
Fuel and energy
Capital go o ds
19 9 7
E xpo rt a nd im po rt le v e ls ( US $ m ill.)
29
..
..
..
101
..
..
..
99
13
37
..
131
45
19
..
312
..
77
..
435
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
19 8 7
19 9 7
2006
2007
50
144
-95
115
143
-28
364
499
-136
573
558
16
0
..
0
46
-7
106
3
108
-10
Current acco unt balance
-95
18
-37
127
-20
Financing items (net)
Changes in net reserves
79
16
13
-31
45
-8
-148
21
-30
74
13.0
176
36.3
582
44.0
1,246
44.9
19 9 7
2006
2007
120
0
22
713
0
76
..
0
87
1
0
0
7
0
0
10
0
1
..
0
1
15
16
0
..
0
36
14
-2
-1
0
58
39
0
6
0
..
..
..
..
..
0
5
0
5
0
5
0
1
0
1
0
1
0
10
1
10
1
9
0
9
1
8
1
7
Expo rt price index (2000=100)
Impo rt price index (2000=100)
Terms o f trade (2000=100)
500
400
300
200
100
0
01
02
03
04
05
Export s
06
07
Imports
B A LA N C E o f P A Y M E N T S
(US$ millio ns)
Expo rts o f go o ds and services
Reso urce balance
Net inco me
Net current transfers
M emo :
Reserves including go ld (US$ millio ns)
Co nversio n rate (DEC, lo cal/US$ )
E X T E R N A L D E B T a nd R E S O UR C E F LO WS
19 8 7
(US$ millio ns)
To tal debt o utstanding and disbursed
40
IB RD
0
IDA
9
To tal debt service
IB RD
IDA
Co mpo sitio n o f net reso urce flo ws
Official grants
Official credito rs
P rivate credito rs
Fo reign direct investment (net inflo ws)
P o rtfo lio equity (net inflo ws)
Wo rld B ank pro gram
Co mmitments
Disbursements
P rincipal repayments
Net flo ws
Interest payments
Net transfers
No te: This table was pro duced fro m the Develo pment Eco no mics LDB database.
78
C urre nt a c c o unt ba la nc e t o G D P ( %)
20
10
0
01
02
03
04
05
06
07
-40
C o m po s it io n o f 2 0 0 6 de bt ( US $ m ill.)
G: 16
B: 76
D: 119
E: 502
A - IBRD
B - IDA
C - IM F
D - Other mult ilateral
E - Bilateral
F - Privat e
G - Short -t erm
9/24/08
Annex 15: Map
79
89°E
91°E
90°E
0
10
20
0
30
10
BHUTAN
SECOND URBAN
DEVELOPMENT PROJECT
40 Kilometers
20
30 Miles
PROJECT CITIES
MAIN CITIES AND TOWNS
DZONGKHAG (DISTRICT) CAPITALS
BHUTAN
NATIONAL CAPITAL
MAIN ROADS
DZONGKHAG (DISTRICT) BOUNDARIES
INTERNATIONAL BOUNDARIES
GASA
92°E
Ch
u
28°N
Ph
o
Gasa
Thunkar
To
Gamba
PA R O
THIMPHU
Wangdue
os
TRONGSA
k
h
Lingmithang
Yebilaptsha
DAGANA
Chhukha
ZH
W
Daga
ang
G
Sarpang
To
Goalpare
To
Alipur Duar
Panka
G
Chu
Pheuntsholing
N
TSIRA
S A R PA N G
EM
sa
ng
To
Damphu
Chu
CHHUKHA
Bumthang
Torsa
Tendru
Zhemgang
Mongar
MONGAR
an
as
Khasadrapchu
S an
oC
hu
Kisona
Samtse
Trashi
’Yangtse
u
Jakar
Paro
HAA
SAMCHI
Lhuentse
Trongsa
r
Pa
Haa
Tang
Trashigang
TRASHIGANG
Wamrong
M
hu
BUMTHANG
Punakha
hu
Ha
aC
TRASHI
'YANGTSE
C
ong
Kul
Tango
Chari
LHUENTSE
Kur C
hu
THIMP HU
THIMPHU
Shingkarap
WA N G D U E
PHODRANG
Mangde
PUNAKHA
27°N
28°N
To
Cona
Pemagatshel
AN
G
Panbang
SAMDRUP
SAMD RUP
JONGKHA R
JONGKHAR
PEMAGATSHEL
Nganglam
Daifam
Samdrup
Jongkha
To
Guahati
To
Goalpare
90°E
91°E
IBRD 37549
JANUARY 2010
This map was produced by the Map Design Unit of The World Bank.
The boundaries, colors, denominations and any other information
shown on this map do not imply, on the part of The World Bank
Group, any judgment on the legal status of any territory, or any
endorsement or acceptance of such boundaries.
89°E
27°N

The World Bank FOR OFFICIAL USE ONLY

Transcription

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