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European Commission

MEMO

Brussels, 17 October 2014

EU development cooperation with Bhutan

Main development challenges of the country

Bhutan has quite recently become a democracy (a parliamentary monarchy with first national assembly elections being held in 2008) which still needs to be strengthened. A second national election was held and a new Government was established in July 2013. The country is stable and traditions are strong but the "modernisation" of its society is rapid and linked to urbanisation and increased communication. On the economic side, Bhutan is very much dependent on India and this will continue with the development of hydropower exports to India.

The country hopes to graduate soon from its current Least Developed Country (LDC) status but Official Development Assistance (ODA) needs will remain important at least until 2020 when electricity exports are expected to reach full level. The main development challenges are linked to equitable growth including for rural areas where the majority of population still lives. The uniqueness of the Bhutanese concept of ‘Gross National Happiness’ (a concept developed in Bhutan in the 1970s which brings social and environmental well-being to the development agenda) and sustained progress made on the Millennium Development Goals (MDGs) showed the strength of the national development plans and systems even if local capacity remains occasionally weak.

Main objectives of the EU – Bhutan development cooperation 2014-2020

The new EU - Bhutan cooperation programme for the time period 2014-2020 (known as the Multiannual Indicative Programme (MIP)) amounts to a total of €42 million. The EU will provide assistance to the Royal Government of Bhutan in moving towards its overall goal of achieving self-reliance and inclusive socioeconomic development as identified in the 11th Five Year Plan (FYP) as part of the philosophy of ‘Gross National Happiness’.

The following have been chosen as priority sectors following consultations with the Royal Government of Bhutan and other development partners:

  1. Civil Society and Local Authorities – The government highlighted decentralisation towards the local 'gewog' (geographical administrative unit in Bhutan) level as its priority under the 11th FYP with the ambition to ensure more substantial transfers from central to local budgets. Moreover, new elections for the local governments are foreseen to be held in 2016. The EU became a signatory to the 'Partnership for Good Governance' in 2011 and then started funding the Local Government Support Programme (LGSP). The programme was evaluated in 2013 as a ground-breaking flagship project supporting local governance through innovative practices for financial decentralisation, local administration development and service delivery.

Civil Society Organisations (CSOs) have only been emerging since 2008. Their ability to voice people’s opinions and influence policy making is still at a very early stage. Bhutan passed the CSO Act in 2009 and established the CSO Authority in 2010, a governmental body which registers CSOs and ensures communication and liaison between CSOs and state institutions. As of April 2013, about 31 CSOs were registered with the CSO Authority.

Development partners have contributed since 2010 to the CSO Funds Facility, a temporary mechanism aimed at enabling non-state actors (media, civil society and private sector) to contribute to Bhutan's democratisation and modernisation. In coordination with other development partners, EU assistance will support this mechanism, as well as dialogue between CSOs and public institutions at central and local levels. The support will also include efforts to strengthen public finance management in Bhutan.

  1. Sustainable agriculture and forestry – The Renewable Natural Resources (RNR) sector takes a prominent role in the 11th FYP.

Due to limited areas of land available for agriculture (about 2.9% of the land is used for agriculture and about 70.5% of the land area is covered by forests), Bhutan faces food security issues and is dependent on food imports from India. The vast majority of the Bhutanese population lives in rural areas where the sustainable use of natural resources is vital in view of its fragile environment (the slopes of the Himalayas are strongly affected by climate change).

There is a need to develop local agricultural production and commercial farming and to address national and household food security. The forestry sector is also vital to increase Bhutan's resilience to climate change. The EU is a major player in the renewable natural resource sector in Bhutan. EU support to this sector has represented the backbone of EU-Bhutan cooperation since the early 1980s.

In addition, Bhutan is benefitting from other cooperation programmes, namely:

  • SWITCH-Asia (a grants programme funded through the Development Co-operation Instrument (DCI) that promotes sustainable consumption and production among consumers, small and medium-sized enterprises and Asian policy-makers in 15 Asian countries) - one project on sustainable tourism for €1.08 million is ongoing since January 2013 for 3.5 years and one project on greening public procurement in Bhutan for an amount of €2.13 million started in January 2014 for 3.5 years.

  • The International Centre for Integrated Mountain Development (ICIMOD) project on rural livelihoods and climate change adaptation in the Himalaya, with an EU contribution of €10 million covering the region of the Himalayas.

Ongoing EU – Bhutan development cooperation

The majority of resources allocated to Bhutan are channelled through bilateral co-operation which is ruled by the DCI. The majority of the on-going projects were launched under the previous programming period from 2007-2013.

The total budget for the period 2007 to 2013 amounted to €14 million. The following sectors of cooperation were covered: 1. renewable natural resources and 2. good governance.

The “Capacity Development Strategy” (under the good governance programme) for staff of local government has been particularly successful; it was adopted by the end of 2012 and locally elected members were trained on policies, rules and regulations for Local Governments, oversight and transparency of Local Governments plans, budgets and expenditures.

Examples of other tangible results and impact of the EU development cooperation

Support to Livestock Sector Project (EU contribution €4.6 million, 2006-2011)

The overall objective of the project was to reduce rural poverty and enhance household and national food security by increasing the country’s self-sufficiency in livestock products and the contribution of livestock towards the whole farming system. The project had nation-wide coverage, with focus on districts where support to livestock development was minimal. It resulted for example in an increase in milk production and income earned from milk, thanks to training and marketing support to dairy groups funded under the project.

Agricultural Sector Support Project (EU contribution €5.0 million, 2006-2011)

The project aimed to increase agricultural output and contribute to poverty alleviation by providing support for agricultural production through enhanced sustainable/organic crop production methods by farmers of the most important cash crops (potatoes, maize citrus (Mandarins) and rice) at minimal economic and environmental cost. The project was implemented in 7 districts of Western Bhutan with main beneficiaries being primarily local administrations and the farming families. Some of the activities undertaken have been a great success in particular with regard to training at all level, potato and other crop production, new rice and maize variety introduction, the infrastructure development of farm roads and irrigation canals.

Medicinal Plants Project – (EU contribution €4.2 million, 2005-2009)

The overall objective of this project was to conserve natural resources, alleviate poverty, improve health and create economic opportunity through the sustainable development of the medicinal plants sector. The project had two components: medicinal plants conservation and cultivation and traditional medicine product marketing and commercialisation. The project contributed to the creation of cottage and small-scale enterprises, and, thus, impacted diversification of trade (product and area-wise).

For more information

IP/14/1169: EU increases development support to Nepal and Bhutan

Website of the European Commissioner for Development Andris Piebalgs:

http://ec.europa.eu/commission_2010-2014/piebalgs/index_en.htm

Website of the EU cooperation with Bhutan:

https://ec.europa.eu/europeaid/countries/bhutan_en


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