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Bhutan: World Bank Supports Rural Development

News Release No:2005/342/SAR


In Washington D.C.:

Benjamin Crow (202) 473-5105

Washington, D.C., March 1, 2005—The World Bank today approved a US$7 million credit to improve rural access and increase agricultural output for rural communities in the Kingdom of Bhutan. The Decentralized Rural Development Project aims to reduce the time needed for rural people to reach roads and increase food and cash crop production. Targeting selected communities, the project will finance small rural roads and bridges, irrigation infrastructure, agricultural extension, and sustainable management of natural resources.


The absence of roads is a major contributing factor to poverty in this landlocked Himalayan country, with only 40 percent of Bhutan’s population living within one hour’s walk from a road. Daniel Sellen, World Bank Senior Agricultural Economist said: “This project will increase access to education and health services that are severely limited. In addition, efforts to diversify into cash crops are not viable if markets are out of reach.” By supporting rural transport development, approximately 5,000 households will have the walk time to a road reduced by half.


Despite the mountainous terrain and extensive forest cover, Bhutan has many scattered areas of fertile soil and a good water supply. Agriculture is a mainstay of the economy and contributes the majority of income, employment, and food security for the majority of Bhutanese, particularly the poorest. Cash crops, particularly fruit and horticulture, are widespread and offer the potential to increase and diversify farm incomes, contributing not only to food security but also to meeting needs such schooling. However, increased levels of irrigation infrastructure and the strengthening of agricultural extension programs will ensure that farmers have knowledge of and access to new technologies and inputs. Under this project, food crop production is estimated to increase by 20 percent, and cash crops by 30 percent.


“In recent years, the Royal Government of Bhutanhas taken big steps toward the goal of empowering communities with the resources and decision-making powers so that they can take charge of their own development,”said Sellen.“Through local elections and a nation-wide participatory planning exercise, it is clear that most communities require access, food security, and greater incomes from their farms. These demands have created high expectations for both the Ministry of Agriculture and district governments, and we are pleased to support them in meeting the challenge.”


The project has three components:


  • Rural Infrastructure: Responding to high demand for access to markets and public services, approximately 89 km of new farm roads will be constructed and 114 km of mule tracks will be upgraded to permit passage of power tillers. Approximately 45 km of new irrigation channels and 231 km of rehabilitated channels will also be financed.
  • Renewable Natural Resources (RNR) Centers: Six RNR centers will be financed under the project. Through support to agricultural extension programs, an estimated 1,200 farmer households will receive training, joint experimentation, and farmer-to-farmer field visits to learn how to increase production in a sustainable manner and add value to farm produce.
  • Institutional Strengthening: The project will finance capacity-building to ensure timely submission of financial and physical reporting of project performance and ensure a smooth transfer of funds to the local level for project implementation. Particular emphasis will be given to environmental screening and assessment procedures for rural infrastructure.

The Decentralized Rural Development Project supports the goals of the government’s Ninth Five-Year Plan. This represents the country’s Poverty Reduction Strategy, which has as a central goal the achievement of higher rural incomes and employment, improved food security, and sustainable natural resource management. The US$7 million credit is from the International Development Association, the World Bank’s concessionary lending arm, and carries a 0.75 service fee and is payable in 40 years, including a 10-year grace period.


For more information, please visit the Projects website.

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