Bhutan Transport Sector

Landlocked Bhutan with a population of over 672,000 people faces unique development challenges and opportunities. While the creation and maintenance of physical infrastructure is critical in pursuing the Gross National Happiness, the country’s small and dispersed population, rough topography and formidable climate make it difficult to achieve the economy of scale in service delivery, and costly to build and maintain vital infrastructure, including motorable roads. Accessibility is the defining development issue in the country, be it access to opportunity, enterprise, markets, or services. Poor rural access is synonymous with rural isolation and poverty in Bhutan, while high external and domestic transport costs constrain the country’s economic and social development.

Roads. Road transport is the dominant mode of transportation for passengers and freight within the country and to the neighboring states of India. The country’s vehicle fleet has increased substantially from about 13,600 at the end of 1997 to over 33,000 at the end of 2006. The fatality rate in Bhutan is quite significant: it was reported at 21 deaths per 10,000 vehicles in 2006.

Air transportation. The country has one airport with a paved runway at Paro. Druk Air is the national carrier, linking Bhutan with Delhi, Kolkata, and Gaya in India, as well as Bangkok, Yangon, Dhaka, and Kathmandu. The carrier transports around 40,000 passengers a year, about two-thirds of whom are non-Bhutanese. No domestic air service is provided.

Challenges

• Poor access in rural areas. 21 percent of the Bhutanese rural households have to walk from one to four hours to the nearest all-season road, and another 21 percent have to spend more than half a day. To improve rural accessibility, the Royal Government of Bhutan (RGOB) plans to make roads accessible within half a day’s walk for 75% of the rural population by 2012. The strategy is elaborated in the country’s Ninth Five-Year Plan and a list of feeder roads to be constructed in the next two decades is prioritized in a "20-year Road Sector Master Plan".
• Limited access to regional and global markets. Bhutan’s trade suffers from the typical problems that affect all landlocked countries which require transit facilities through neighboring countries. These include excessive delays at ports, inefficiencies at land border crossings, limits on the routes allowed for transit cargo, and limits on the use of the landlocked country’s own transport companies. The competitiveness of Bhutan’s exports is further reduced by the high transportation costs within the country and unbalanced trade flows, reflected by a shortage of back loads. Bhutan’s international trade is solely reliant on the Kolkata Port in India, using the transit corridor on the Indo-Bhutan border at Phuentsholing. The development of the soft side of trade-related transport logistics, such as harmonization of documents and procedures, needs greater attention.
• Obsolete road construction technology and low labor productivity. Road building practices in Bhutan use mostly obsolete technology and follow the archaic practices of the mid-20th century. Road construction and maintenance is labor intensive and marked by low productivity and high costs. This results in poor quality roads that have high levels of roughness, poor serviceability, and a short life. The main issues are how to modernize construction and maintenance methods and how to shift from force account to contract works in a sustainable manner. The Department of Roads (DOR) employs a labor force of over 4,600 to maintain a 2,100 km road network. This is an excessively high labor deployment by any standard.
• Introducing environmentally friendly road construction. The Department of Roads, with technical assistance from the World Bank and Netherlands SNV, has introduced an environmentally friendly road construction (EFRC) method for all its new road construction programs. Initial investment cost using EFRC, though 25-30% higher as compared to traditional methods, is more economical on a life cycle cost basis. The application of the EFRC approach has been mainstreamed in the country and become mandatory in the construction and maintenance of all types of roads, including in the forest and agriculture sectors.
• High civil aviation costs. In spite of physical improvements to airport infrastructure in recent years, the airport operates only during the daytime and only in fair weather conditions due to the lack of instrument landing facilities, and its high-altitude location in the mountains. Bhutan has recently acquired two new Airbus aircraft. They have improved the country’s international air services though these came at a huge cost to the treasury.

Key Government Strategies

Bhutan has acknowledged the key role of the transport sector in improving its people’s income and quality of life, promoting rapid economic growth, and generating employment opportunities. The government’s development strategy for the transport sector, based on the country’s comprehensive vision statement—Bhutan 2020: A Vision of Peace, Prosperity and Happiness—has three broad objectives:

• Facilitating the balanced development of the country, supporting internal trade and commerce, and integrating the relatively isolated central and eastern regions with the rest of the country;
• Reducing the cost of international transport and improving the logistics of international trade and commerce;
• Improving rural accessibility in an environmentally sustainable and socially responsible manner.

To achieve the objectives, the government intends to undertake the following:

• Construct new roads and improve the existing road network to reduce travel time, road user costs, and transportation costs for goods and services;
• Prepare a civil aviation master plan to guide the development of air transport services, lay the foundation of a second airport, launch domestic air services, and build national institutional capacity to sustain air transportation activities;
• Develop road transport services to provide safe, reliable, efficient, and affordable passenger and freight services.

World Bank Support

The World Bank’s Rural Access Project supported the development of feeder roads in Bhutan.  The Bhutan Rural Access Project delivered a satisfactory outcome, with a low or negligible risk to development outcome. Both the Bank's and the Borrower's performances are satisfactory. The following lessons were learned: (a) development of the rural road network in Bhutan is an expensive, but unavoidable, undertaking needed to facilitate economic development and poverty reduction; (b) the Bank and development partners can play an effective catalytic role in mainstreaming environmentally sustainable road construction approaches if there is demonstrated commitment of government; (c) geotechnical surveys (hazard spots assessments) should be carried out prior to the start of construction; (d) a project should have a sufficient level of readiness for implementation before being negotiated; (e) quality assurance requires establishment of accountability mechanisms and empowerment for decision-making; (f) a vertically disintegrated system of contracting proved to be inefficient; and (g) project-related financial and accounting systems should strive to use country systems when feasible. The Implementation Completion Report (ICR) of the project can be visited here.

Recently, the Bank Second Rural Access Project has started its implementation to support the development of new link roads that residents of beneficiary Dzongkhags could utilize improved rural transport infrastructure and services.