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Map: Bhutan

1.1 Denmark’s Development Policy

Poverty reduction is the overriding objective of Denmark’s development policy. Danish development cooperation is aimed at helping poor populations by ensuring critical investments in people and promoting sustainable development through poverty-oriented economic growth. Denmark will seek to underpin further progress in the field of democratisation. The participation of women in the development process, pursuit of sustainable environment and the promotion of human rights and democracy are important concerns for Danish development cooperation. The delivery of effective development cooperation through strategic, performance-oriented activities centred on sector programme support is a fundamental principle in Denmark’s development policy.

Denmark’s bilateral development cooperation is channelled primarily to a selected group of programme countries who have demonstrated the will and ability to promote long-term sustainable development. The countries that meet the conditions for receiving Danish development cooperation are challenged by severe poverty but at the same time live up to their responsibility to meet this challenge by formulating and effectuating long-term national poverty reduction strategies and working to consolidate democracy, respect for human rights and good governance.

Partnership is a cornerstone of Denmark’s development cooperation. Effective poverty reduction requires the establishment of partnerships on a broad front, both with national and international actors involved in the formulation, effectuation and monitoring of the programmes as well as with partners in the development cooperation and other actors who are affected by the activities - governments, the private sector, civil society, including poor and marginalised groups. Another fundamental principle of Denmark’s development policy is that this cooperation should be based on the programme country’s own strategies and policies.

This country strategy sets out the principles for Denmark’s development cooperation with Bhutan over a 5-year period aligned to Bhutan’s own 10th Five-Year Plan (FYP) July 2008 – June 2013 and at the same time constitutes the strategic framework for the long-term partnership with Bhutan.

1.2 Bhutan as a Programme Country.

Bhutan is a small (38,394 km²) landlocked kingdom in the Himalayas, bordering China (Tibet) to the North and India to the East, South and West. Bhutan has a population of 634,982 according to the 2005 Census of Bhutan.

Danish development cooperation with Bhutan was initiated in 1978, and in 1989 Bhutan was chosen as a Danish programme country. Assistance has focused on four areas of cooperation: Health, Education, Environment and Urban Development and Good Governance. The first country strategy was elaborated in 1997 covering the planning period 1998 – 2002. For a number of years Denmark has been one of the largest donors of development assistance to Bhutan.

In recent years, Bhutan has undergone a process of gradual modernisation and democratisation including extensive reforms of the public sector, greatly enhancing transparency and accountability of the administration. A draft Constitution, introducing a Democratic Constitutional Monarchy was published in 2005, and free and universal elections to Bhutan’s National Assembly were held in March 2008, and a parliamentary based Government was formed on 11 April 2008. The Parliament is to adopt a new Constitution based on Parliamentary democracy.

The economic outlook in the medium to long term is positive with an average annual expected GDP growth rate of 8%. It is expected that Bhutan will be able to finance the major part of its own development within the next decade. Historically, the economy has depended on agriculture which accounted for 18% of GDP in 2007, but in recent years the hydro power sector has experienced rapid growth, taking advantage of the country’s mountainous terrain.

Bhutan has made rapid progress in achieving the Millennium Development Goals especially in providing more than 84% of the population with access to safe drinking water, considerably increasing the net enrolment rate of basic education, improving gender equality in education at all levels, improving basic health care and integrating the principles of sustainable development in all policies and programmes. The average living age in Bhutan has been raised from 47 to 66 years over the period 1985-2005.

However, the country is still facing major social and economic challenges. Poverty, in particular in rural areas, remains the largest problem. Health and education services need further improvement, the democratic development and decentralisation processes must be continued, and efforts must be strengthened to diversify the economy in order to create conditions for broad based economic growth, and to ensure employment opportunities for a growing population.

Bhutan will continue to be a programme country for Danish development assistance. This decision is based on the country’s continued need for external assistance to overcome the development challenges, the demonstrated commitment and capacity of the government, the strong focus in domestic policies on poverty reduction, strong commitment to achieve the Millennium Development Goals, decisive strive towards democracy and the positive experiences from past Danish development assistance. However, based on the positive macroeconomic trend, it is expected that the Danish assistance will be gradually phased out after 2013.

This strategy is the result of a consultative process, based on Bhutan’s development priorities and Denmark’s development policies and covers the period July 2008 – June 2013. It coincides with Bhutan’s 10th Five Year Plan that is also Bhutan’s Poverty Reduction Strategy.

It is with the clear and unambigious aim of achieving equitable socio-economic development that the 10th Five Year Plan has adopted poverty reduction as the overarching theme and primary goal. The overall objective of the cooperation with Bhutan will remain poverty reduction through promotion of sustainable economic development and strengthening of the democratic processes with the view of enabling broad participation in all spheres of society. Denmark will continue to focus on the following priority sectors: Social Sector, Environment and Urban Development, and Good Governance. Major development challenges remain and with the aim of creating a more diversified economy, one of the strategic objectives of the next strategy period will be the strengthening of private sector development. The private sector will be strengthened through support in the focus sectors supplemented by activities financed under the Mixed Credit Programme, the Public-Private Partnership facility and the Business-to-Business Programme.

1.3 Experience from Previous Cooperation.

Denmark has provided development assistance to Bhutan since 1978. In the beginning assistance was channelled through multilateral organisations, but in 1985 the first bilateral programme was initiated and Bhutan was chosen as a programme country in 1989. In the past five years (2003-2007), the Danish development assistance has been targeted at health, education, environment and urban development, and good governance.

All Danish assistance is channelled through the Ministry of Finance and thus fully integrated into the national budget. The assistance, within the framework of the Public Finance Act of Bhutan, 2007, is subject to Bhutan’s financial rules and regulations for budgeting, accounting, cash management and procurement. All auditing is done by Royal Audit Authority, Bhutan’s state auditors. All assistance to Bhutan is implemented by the recipient, and all procurement is executed by the recipient thus benefitting Bhutan’s corporations and private sector.

The experiences from Danish support to Bhutan have been positive. As one of the largest donors, Danish development assistance to Bhutan has contributed to the important changes in the Bhutanese society, including a reduction in people living below the poverty line. The Danish assistance has been implemented in close cooperation with the Royal Government of Bhutan, and Bhutanese ownership and implementation have been key priorities within the development programmes. The Danish Auditor-General in his report of 2007 substantiated the satisfactory alignment of the Danish support to the Government procedures and systems.

The Danish assistance has had a positive impact and contributed to the positive development within the health sector; e.g. increased access to quality health services including access to safe drinking water, and improvements in the infant, child, and maternal mortality rate; within education, e.g. increased access to quality education, especially for the poor and increased overall literacy rate; within environment and urban development, e.g. maintenance of protected areas and forest cover, air quality monitoring, legislative strengthening and improved urban infrastructure; within good governance and public sector reform, e.g. draft constitution publicised, strengthening of judiciary, increased level of decentralisation, strengthening of the public financial management and procurement, civil service reform and increased quality of the media broadcasting thus playing a very important part in the ongoing democratisation of Bhutan and strengthening of quality of the public institutions. The Capacity Development Outcome Evaluation of 2006 found that Denmark through its assistance to six Bhutanese institutions (Royal Audit Authority, Department of Urban Development and Engineering Services, Policy and Planning Division (Ministry of Education), National Environment Commission Secretariat, Department of Revenue and Customs, and Punakha Dzongkhag (District)), had contributed substantially or to a large degree to their capacity development.

The partnership between Bhutan and Denmark is very strong. A number of reciprocal commitments have governed this partnership in the past strategy period. It is the assessment that both countries have met most of these commitments. The transition to a parliamentary democracy initiated by His Majesty the Fourth King is the most significant achievement. Decentralisation is progressing well and the target of 24% of government resources administered at the district and block level has been met. Progress has also been achieved in reducing poverty and meeting the Millennium Development Goals(MDGs).

Bhutan has experienced significant improvement with regard to freedom of press. This is witnessed in the appearance of the first two privately-owned newspapers and in an increase in the quality of the news broadcasting in Bhutan. This resulted in a rise from a ranking of 142 to 98 on the Worldwide Press Freedom Index, 2006. It has been one of the priorities of the Danish good governance programme to support media development and increase the quality of news broadcasting in Bhutan.

As part of strengthening governance and with a view to improving aid effectiveness by enabling donors to align with Government procedures, Bhutan has, with Danish support, strengthened public financial management including financial reporting, budgeting and data flow between district and national level. New procurement guidelines issued in 2007 have brought Government procurement up to international standards. The Danish development assistance to Bhutan is aligned with public systems on reporting, monitoring, procurement and auditing. With the “Roadmap towards universal reliance on Bhutan’s country system”, full donor alignment with the public financial management system is within reach. A substantial part of the Danish development assistance in the next strategy period will be given as sector budget support or general budget support. This also reflects the strength of the partnership between Bhutan and Denmark.

The Danish cooperation with Bhutan outside the sector programmes has also been positive. A number of projects within the Mixed Credit programme, the Public-Private Partnership programme and the Business-to-Business programme have been implemented. Support for these programmes is very important in particular with a view to strengthening private sector development. A number of different joint-venture projects between companies in Denmark and Bhutan are under preparation.

The monitoring and evaluation situation including statistical capacity for tracking development performance in the Millennium Development Goals still remains weak. Recent initiatives including the drafting of a National Results-Based Monitoring and Evaluation System – a stand-ardised system for assessing development performance expected to be operational from mid 2008, would improve future assessment of development performance.

The table on the next page, presents the development in the overall and specific objectives of the previous planning period (2003 – 2007).

Table 1. Developments in the Overall and Specific Objectives of the Previous Country Partnership Strategy 2003-2007

Objectives Status 2007
Poverty reduction through promotion of sustainable economic development and strengthening of the democratic process, including popular participation, good governance, gender equality and respect for human rights.
Contributed to:
(a) Reduction of poverty from 36.3% in 2000 to 23.2% in 2007 (defined as 0.9 USD/day). (b) Draft Constitution including fundamental human rights expected to be enacted in 2008; (c) Enactment of important legislation. (d) Establishment of Constitutional institutions: (e) Inclusion of gender issues and concerns made mandatory in the planning process.
Increase access to quality health services for all, in particular the poor and disadvantaged segments of the population.
90% have access to quality health services. Efforts underway to identify the unreached segments of the population using the population and housing census of Bhutan 2005.
Increase access to quality education for all, in particular the poor and disadvantaged segments of the population. 84% have access to Primary education. A commission is reviewing the quality aspects of education.
Promote sustainable and efficient management of natural resources as well as pollution abatement and mitigation. Maintainence of the 26% protected area and 72% forest cover through sustainable use of natural resources. The National Environment Protection Act will further enhance current efforts. Air quality monitoring being strengthened to mitigate air pollution. Monitoring and data collection of industrial emissions regularised.
Promote sustainable urban development and a framework for creation of employment opportunities. Basic infrastructure in five district towns under implementation. National sustainable urbanisation strategy under preparation. Basic infrastructure and the Labour and Employment Act, 2007, provides the key framework for creation of employment opportunities
Promote the rule of law, good governance, democracy and human rights, efficiency and professionalism in public administration and public participation in decision-making. The final version of the draft Constitution introducing a Democratic Constitutional Monarchy publicised August 2007. A Judicial Service Act enacted. ’Know the law to protect your rights’ education disseminated. Civil service reform through the introduction of Position Classification System enforced. National Council elections held. Following CEDAW and Convention on the Rights of the Child, a National Commission on Women and Children established.

Progress on general programme implementation and cross cutting issues in the Danish supported programmes 2003-2007 is included in annex 2.

This page forms part of the publication 'BHUTAN-DENMARK PARTNERSHIP' as chapter 1 of 8
Version 1.0. 08-03-2009
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