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.
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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 Asian Development Bank AFD Administrative & Finance Division ARCS Audit Review and Compliance System ASCI Administrative Staff College of India BAS Budget and Accounting System BLSS Bhutan Living Standard Survey BLPR Land Pooling Rules of the Kingdom of Bhutan 2009 BNUS Bhutan’s National Urbanization Strategy BUDPI Bhutan Urban Development I Project BUDPII Bhutan Urban Development II Project CAS Country Assistance Strategy CFO Chief Financial Officer CIPS Chartered Institute of Purchasing & Supply CQS Selection based on Consultants’ Qualifications CS Country Systems CST College of Science and Technology DANIDA Danish International Development Agency DEC District Environment Committee DNB Department of National Budget DPA Department of Public Accounts DUDES Department of Urban Development and Engineering Services EA Environmental Assessment EAA Environment Assessment Act e-GP Electronic General Procurement EMP Environmental Management Plan ERR Economic Rate of Return EUSPS Environmental & Urban Sector Program Support FBS Selection under a Fixed Budget FIC Financing Item Code FM Financial Management FRR Financial Rules and Regulations GBFA Government Budget Fund Account GDP Gross Domestic Product
GNH Gross National Happiness GNHC Gross National Happiness Commission GRC Grievance Redressal Committee HH Household IBRD International Bank for Reconstruction and Development ICB International Competitive Bidding ICR Implementation Completion Report ICT Information Communication Technology IDA International Development Association LAP Local Area Plan LC Letter of Credit LCS Least Cost Selection LGA Local Government Act LIB Limited International Bidding LP Land Pooling M&E Monitoring and Evaluation MDG Millennium Development Goals MIS Management Information Systems MoF Ministry of Finance MoU Memorandum of Understanding MoWHS Ministry of Works & Human Settlement MYRB Multi-Year Rolling Budget NEC National Environment Commission NECS National Environmental Commission Secretariat NEPA National Environmental Protection Act NCB National Competitive Bidding NGO Non-Governmental Organization NIFM National Institute of Financial Management (India) NPV Net Present Value OECD-DAC Organization for Economic Cooperation and Development-Development
Assistance Committee OP Operational Policies PAD Project Appraisal Document PAF Project Affected Families PAP Project Affected People PAVA Property Assessment and Valuation Agency PEFA Public Expenditure and Financial Accountability PCC Phuentsholing City Corporation PDO Project Development Objective PEMS Public Expenditure Management System PFM Public Financial Management PLC Project Letter of Credit PLM Planning and Monitoring System PMU Project Management Unit PPD Policy and Planning Division QAP Quality Assurance Plan
QBS Quality Based Selection RAA Royal Audit Authority RAP Resettlement Action Plan RAPII Rural Access Project II RECOP Regulations for Environmental Clearance of Projects RFP Request for Proposal RGOB Royal Government of Bhutan RIM Royal Institute of Management SA Social Assessment SAI Supreme Audit Institution SBD Standard Bidding Document SDR Safeguard Diagnostic Review SDRC Social Development and Resettlement Cell SIL Specific Investment Loan SSS Single Source Selection TA Technical Assistance TOR Terms of Reference TCC Thimphu City Corporation
Vice President: Isabel M. Guerrero Country Manager/Director: Nicholas J. Krafft
Sector Manager: William D. Kingdom (Acting) Task Team Leader: Toshiaki Keicho
BHUTAN
SECOND URBAN DEVELOPMENT PROJECT
PROJECT APPRAISAL DOCUMENT
SOUTH ASIA
SASDU
Date: April 5, 2010 Team Leader: Toshiaki Keicho Country Director: Nicholas J. Krafft Sector Manager/Director: John Henry Stein
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 Total
BORROWER/RECIPIENT 0.7 0.00 0.7 International Development Association (IDA)
7.5 4.5 12.0
Total: 8.2 4.5 12.7 Borrower: The Royal Government of Bhutan Thimphu Bhutan Responsible Agency: Ministry of Works and Human Settlement, Thimphu City Corporation
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? [ ]Yes [X] No Does the project require any exceptions from Bank policies? Have these been approved by Bank management?
[ ]Yes [X] No [ ]Yes [ ] No
Is approval for any policy exception sought from the Board? [ ]Yes [X] No Does the project include any critical risks rated “substantial” or “high”? [ ]Yes [X] No Does the project meet the Regional criteria for readiness for implementation? [X]Yes [ ] No
Project development objective 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
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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 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. 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.
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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.
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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:
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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.
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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).
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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
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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.
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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 in-country 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.
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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
Technical Design Demand for serviced land may be lower than projected, resulting in underutilization of infrastructure systems.
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).
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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.
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
Financial Management Weak financial management capacity within the PPD resulting in weak accountabilities and oversight of project FM activities.
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
Procurement Weak procurement capacities within PPD and TCC resulting in delays in procurement.
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.
M
Social and Environmental Safeguards Compensation for involuntary resettlement and/or loss of assets/income
A RAP has already been prepared for Dechencholing, and is being prepared for Langjophakha. The RAP outlines the policy and procedures for acquisition of land
M
10
Description of risk Mitigation measures Rating of residual risk
may not be paid at the market rate.
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, driving poorer households out of the area.
RGOB has agreed to facilitate the increase in low-income housing units in some of the serviced plots generated 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.
S
L = Low; M = Moderate; S = Substantial 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
11
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.
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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
13
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.
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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.
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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 non-agricultural 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.
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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 Yes No
Environmental Assessment (OP/BP/GP 4.01) [X] [ ] Natural Habitats (OP/BP 4.04) [ ] [X] Pest Management (OP 4.09) [ ] [X] Cultural Property (OPN 11.03, being revised as OP 4.11) [ ] [X] Involuntary Resettlement (OP/BP 4.12) [X] [ ] Indigenous Peoples (OD 4.20, being revised as OP 4.10) [ ] [X] Forests (OP/BP 4.36) [ ] [X]
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Safety of Dams (OP/BP 4.37) [ ] [X] Projects in Disputed Areas (OP/BP/GP 7.60)* [ ] [X] Projects on International Waterways (OP/BP/GP 7.50) [ ] [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
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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 five-fold 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. 4 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).
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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
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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 environmentally-sensitive 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.
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Annex 2: Major Related Projects Financed by the Bank and/or other Agencies
BHUTAN: Second Urban Development Project
Sector Issue Project ICR Rating IEG Rating Bank Financed – closed
Balanced regional development and infrastructure service improvements in 10 secondary towns
(first) Bhutan Urban Development Project (Cr. 33100) –closed on 6/30/2006
Moderately Unsatisfactory Moderately Unsatisfactory
Other Development Agencies Donor Agency Sector Issue Project
ADB Review of housing related regulations aiming to increase low-income housing; Infrastructure development in extended areas in southern Thimphu
TA for Housing Sector Reform (2004) Urban Infrastructure Development Project (Ongoing)
DANIDA Environmentally sustainable urban management; Review of municipal finance policy and recommend future reforms
Environment and Urban Sector Program (2004-2008) Municipal Finance Policy Study (Ongoing)
Cities Alliance Formulation of strategies to deal with rapid urbanization
Bhutan National Urban Strategy (2008) Thimphu City Development Strategy (2008)
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Annex 3: Results Framework and Monitoring
BHUTAN: Second Urban Development Project
Results Framework
PDO Outcome Indicators Use of Outcome Information (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.
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 To ensure infrastructure systems are used
Intermediate Outcomes/Outputs
Intermediate Outcome/Output Indicators
Use of Intermediate Outcome/Output
Monitoring Improve municipal financial management systems
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
To verify satisfactory and timely progress of this activity
Improved access to infrastructure services
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
To verify satisfactory and timely progress of this activity
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Arrangements for results monitoring
Target Values Data Collection and Reporting
Outcome Indicators Baseline YR1 YR2 YR3 YR4 YR5 Frequency and Reports Data Collection Instruments
Responsibility for Data Collection
1. Local Revenue Collection (percentage increase) TCC PCC
Tbd1
Tbd1
tbd tbd
70% 70%
90% 90%
Annually starting from mid-term review
Local Revenue Database, Project Progress Reports
TCC and PCC finance department
2. Number of building permits issued for Dechencholing Langjophakha
30 45
30 45
35 50
40 55
75 65
100 75
Annually
GIS-system (baseline) and building permit database (annually)
TCC building permit unit
3. Number of households with new piped water2 and sewerage connections Dechencholing Langjophakha
0 0
0 0
100 0
150 100
200 250
250 350
At baseline, mid-term review and ICR stage
Household Survey (baseline) and TCC water unit database (mid-term review and ICR)
TCC water unit
Intermediate Outcome/Output Indicators
1. Number of property tax records computerized TCC PCC
0 0
0 0
0 0
4000 1000
4500 1500
5000 2000
Annually starting from mid-term review
Tax Database, Project Progress Reports
TCC and PCC finance department
2. Number of key policy makers trained on the principles of fiscal decentralization
0
0
0
10
20
30
ICR stage
MWHS
3. Number of staff within TCC and PCC trained TCC PCC
0 0
0 0
15 10
30 20
45 30
60 40
Annually
Project Progress Reports
TCC and PCC
4. Serviced land for construction (number of plots) Dechencholing Langjophakha
0 0
0 0
179 0
179 121
179 121
179 121
Annually
Project Progress Reports
TCC engineering department
24
5. Kilometers of internal roads constructed Dechencholing Langjophakha
0 0
0 0
0 0
6.3 0
6.3 5.8
6.3 5.8
Annually starting from mid-term review
Project Progress Reports and ICR
TCC engineering department
6. Frequency (per month) of solid waste collection services extended to areas Dechencholing Langjophakha
0 0
1 1
2 2
3 3
4 4
4 4
Annually Project Progress Reports and ICR
TCC waste collection unit
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.
25
Annex 4A: Detailed Project Description
BHUTAN: Second Urban Development Project 1. 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: 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. 3. 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: 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:
26
(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
27
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
28
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 citizen-friendly 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.
29
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 RGOB-approved 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 two-weeks 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
30
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.
31
Annex 4B: Land Pooling in Bhutan
BHUTAN: Second Urban Development Project
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 IDA-financed 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.
32
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
33
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.
34
Annex 5: Project Costs
BHUTAN: Second Urban Development Project
Project Cost By Component and/or Activity Local
US $million Foreign
US $million Total
US $million
1. Municipal Finance & Management
2. Thimphu Northern Area Development
3. Capacity Building
0.2
5.1
1.0
1.3
2.4
0.2
1.5
7.5
1.2
Total Baseline Cost 6.3 3.9 10.2 Physical Contingencies 0.6 0.3 0.9 Price Contingencies 0.6 0.3 0.9
Total Project Costs1 Interest during construction
Front-end Fee
Total Financing Required 7.5 4.5 12.0
1 These costs exclude resettlement-related compensation and any land acquisition necessary, which is estimated to be around US$ 0.7 million
and will be financed by RGOB.
35
Annex 6: Implementation Arrangements
BHUTAN: Second Urban Development Project 1. Steering Committee: A project steering committee will be formed and meet at least semi-annually to review implementation progress and to discuss key implementation issues. This committee will consist of representatives from MoWHS, MoF, TCC and PCC. 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.
36
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 policy-related 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.
37
Annex 7: Financial Management and Disbursement Arrangements
BHUTAN: Second Urban Development Project 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.
38
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
39
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 Risk
RatingRisk Mitigation Measures incorporated
into project design 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
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.
Irregular submission of bills for works completed by contractors leading to substantial disbursement lags
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.
Weak capacity leading to submission of incomplete documentation required for traditional SOE method of disbursement
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 Disbursements based on interim unaudited financial reports will allow the quantum of the advance to be responsive to fund requirements of the project.
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 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 Resolution Country Level
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Weakness Resolution 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.
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.
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.
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.
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.
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.
Project Level Internal audit mechanism is not effective
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.
Financial management capacities are noted to be weak. There is also a shortage of capable and experienced accountants in RGOB.
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
41
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.
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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.
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Bhutan: Second Urban Development Project Figure: Funds & Information Flow Arrangements
The World Bank
Department of Public Accounts (DPA)
Contractors, Suppliers, Consultants etc.
Designated Bank (DA)Account in Nu.
with Bank of Bhutan
Ministry of Finance
General Budget Fund Account
Ministry of Works & Human
Settlement (MoWHS)PLC Account
Initial Adv. and subsequent
replenishments
Advances from DA for project related expend as per requests
received from MoWHS
Funds
transferred
to PLC A/c
Payments
Fund Flow
Inform ation Flow
Withdrawal Applications
Invoices,
Progress
Reports etc.
Thimphu City Corporation (TCC)
PLC Account
Invoices,
Progress
Reports etc.P
ayments
Request fo r fund release
Month ly BAS reports
Quarterly fo recast o f
expenditures
Request fo r fund releases fo r MoWHS &
TCC expenditures
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.
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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 Audit Auditors Ministry of Works & Human Settlement and Department of Public Accounts, Ministry of Finance
Annual Project Financial Statements, including designated account
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.
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Annex 8: Procurement Arrangements
BHUTAN: Second Urban Development Project 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.
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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 Risks related to procurement and Mitigation Plan 9. The following table lists perceived procurement related risks and the mitigation plan.
Perceived Risk Action Completion
Mitigation measures
1. Documentation Maintenance 2. Probability of staff handling procurements being transferred 3. Capacity Building & training
1. During project implementation phase. 2. During project implementation phase. 3. During project implementation
1. At the beginning of the project a brief overview of the documents to be maintained and filed would be discussed with implementing agencies. Subsequently during project implementation, the record keeping and documentation regarding procurement will be monitored. 2. Agree with the implementing agencies that the trained procurement staff will normally not be transferred during the project period. 3. Joint project launch workshop which covers review of procurement plans and responsibilities.
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4. Contract Management 5. Establish a Complaint redressal mechanism.
phase. 4. Every quarter after the project is declared effective. 5. Every quarter after the project is declared effective.
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. A quarterly report of all the ongoing contracts a detailed status report including contract management issues such as delays, payment, etc. will be submitted to PPD and the Bank. 5. A quarterly report of all complaints received and action taken will be submitted to PPD and the 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 $0.3 million. Most of these in-country training courses will be administered under the MoU between the Ministry and the College of Science and Technology (CST), Royal University of Bhutan. It is envisaged that this will lead towards developing sustainable training programs that would contribute to the skills augmentation and professional development of engineering and other staff, and help serve the needs of urban local governments. 11. CST and RIM are dependent institutions of the Royal Government of Bhutan. Therefore, using them as training institutes under the project would trigger the provisions contained in para. 1.11 (b) and (c) of the Consultancy Guidelines, May 2004 as amended October
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2006. But there is no other training institute in the country which can conduct the types of training programs proposed under the project, and RGOB is not in a position to finance these training programs. Therefore, the Bank has decided to provide a waiver for the particular provisions of the Guidelines in selecting CST and RIM for the training purposes. C. Procurement Plan 12. The Borrower, at appraisal, developed a procurement plan for project implementation which provides the basis for the procurement methods. This plan has been agreed between the Borrower and the World Bank on December 18, 2009 and is available at Thimphu City Corporation (TCC) and the Policy and Planning Division. It will also be available in the project’s database and in the Bank’s external website. The Procurement Plan will be updated in agreement with the Bank annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.
D. Procurement Thresholds 13. Goods and Equipment - No ICB procurements are anticipated. However, contracts for goods and equipment above US$ 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
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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 Method of Procurement Threshold Prior review Threshold
1 ICB and LIB [Goods] More than USD 200,000 More than USD 200,000 2 ICB [Works] More than USD 1,000,000 More than USD 1,000,000 3 NCB [Goods] More than USD 30,000 and less
than USD 200,000 More than USD 100,000
4 NCB [Works] More than USD 30,000 and less than USD 1,000,000
More than USD 200,000
5 Shopping-Good & works Less than USD 30,000 All post review 6 Direct Contracting All prior review 7 Consulting firm More than USD 200,000 8 Individual Consultant More than USD 50,000 9 Sole Source Selection All Prior review
E. 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
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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.
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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
Package No.
Contract
(Description)
Procurement
Method
P-Q
Domestic
Preference (yes/no)
Review by Bank
(Prior / Post)
Expected
Bid-Opening Date
Comments
TCC/DECH/P1
Construction of Road, water distribution, sewerage, street lighting
ICB No Yes Prior September 15, 2010
TCC/DECH/P2
Construction of water treatment plant and sewerage treatment plant
ICB No Yes Prior July 1, 2011
TCC/LPHA/P3
Construction of roads, water distribution, sewerage, street lighting
ICB No Yes Prior December 15, 2011
(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 3 4 5 6
Ref. No.
Description of
Assignment
Selection Method
Review by Bank (Prior / Post)
Expected Proposals
Submission Date
Comments
1 Design review and construction supervision
Individual/ Firm
Prior July 1, 2010
2 Computerization of tax and nontax records and asset register at
QCBS Prior April 30, 2011
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TCC/PCC 3 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.
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Annex 9: Economic and Financial Analysis
BHUTAN: Second Urban Development Project
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-increasing 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.
Langjophakha
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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 cost-effectiveness 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
55
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.
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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
_cons 6.058247 .0693646 87.34 0.000 5.922135 6.194358 tarred_road .0227649 .065828 0.35 0.730 -.106407 .1519367flush_toilet .2721052 .050516 5.39 0.000 .1729795 .3712309 toilet_d .136235 .0477503 2.85 0.004 .0425363 .2299337 water_d .1761203 .0676877 2.60 0.009 .0432992 .3089414 window_d .3287197 .0621621 5.29 0.000 .2067412 .4506981 floor_d .0983834 .0367882 2.67 0.008 .0261952 .1705716 wall_d .2570077 .0569375 4.51 0.000 .1452813 .3687342 dist_bank -.0284113 .003959 -7.18 0.000 -.0361799 -.0206427 nrooms .2849134 .0142706 19.97 0.000 .2569106 .3129161 house .1362511 .0417361 3.26 0.001 .0543538 .2181483 lnrent Coef. Std. Err. t P>|t| [95% Conf. Interval]
Total 678.129173 1043 .650171786 Root MSE = .55048 Adj R-squared = 0.5339 Residual 313.030222 1033 .303030224 R-squared = 0.5384 Model 365.098951 10 36.5098951 Prob > F = 0.0000 F( 10, 1033) = 120.48 Source SS df MS Number of obs = 1044
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.
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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.
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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
02
04
06
0
0 20000 40000 60000 80000 0 20000 40000 60000 80000
Dechencholing Langjopakha
Fre
que
ncy
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
N=185 households N=231 households
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(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 28% 33% Base case NPV 46,707,107 42,257,580
Dechencholing Langjophakha Incremental Value of Serviced Housing (in Nu. per month)
1,050 1,450 1,611 1,520 2,120 2,351
min
imum
pl
ot s
ize
(dec
imal
s)
7 26% 43% 54% 7 34% 57% 65%
10 n/a 15% 28% 10 18% 26% 33%
13 n/a n/a n/a 13 n/a n/a 3%
num
ber
of
hous
ing
unit
s 1,356 n/a n/a n/a 776 n/a n/a 10%
1,525 n/a n/a 19% 873 n/a 15% 23%
1,694 n/a 15% 28% 970 n/a 26% 33%
1,864 n/a 23% 35% 1,067 8% 35% 42%
2,033 11% 30% 42% 1,164 18% 42% 50%
% o
f go
v la
nd
auct
ione
d
20% n/a 11% 25% 0% n/a 26% 33%
50% n/a 15% 28% 50% n/a 27% 34%
100% n/a 20% 32% 100% n/a 28% 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
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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. 26. 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. 27. Estimated rental increases (that capture renters’ willingness to pay for improved housing) 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.
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Table A-9.3: Computation of Economic and Financial (Shaded) Cost and Benefit by Stakeholder Cost Benefits Methodology/Assumptions A. RGoOB 1. Project cost 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.
B. TCC 1. Maintenance cost Estimated at annually 1 percent of the project cost for water, sewerage, roads and street lighting.
2. Incremental revenue from land tax
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
3. Incremental Revenue from service tax
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.
4. Incremental revenue from house tax
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)
5. Collection of tariffs for water supply and sewerage
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.
6. Auction of Public Land in LAPs
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.
C. Tenants 1. Increase in rental prices
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
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Cost Benefits Methodology/Assumptions 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.
2. Payment for water and sewerage consumption
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.
3. Avoided cost from fetching water
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
4. Avoided cost from boiling water
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.
D. Land-owners
1. Land contribution 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.
2. Incremental land tax Computed in the same way as under B.2. 3. Incremental service
tax Computed in the same way as under B.3.
4. Incremental house tax
Computed in the same way as under B.4.
5. Payment for water and sewerage consumption
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.
6. Incremental income As computed under C.1 for existing tenants.
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Cost Benefits Methodology/Assumptions from increased rent from existing tenants
7. Increased value of land
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.
8. Avoided cost from fetching water
As computed under C.3, but for existing land-owners.
9. Avoided cost from boiling water
As computed under C.4, but for existing land-owners.
1 1 decimal=0.01 acres=40.47 square meters=435.6 square feet 2 Tax level is smaller than full urban tax, since Langjophakha is not receiving full urban services 3 Tax is categorized into 4 classes depending on the type of dwelling, ranging from Nu. 6 to Nu. 15 per unit per month 4 Bhutan Poverty Monitoring Report (2007) 5 The minimum wage is Nu. 100 per day
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Annex 10: Safeguard Policy Issues
BHUTAN: Second Urban Development Project 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.
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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.
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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 Entitlement Unit Entitlement Responsibility Loss of structures (house, sheds, temporary structures, boundary walls etc)
Title holders and non-title holders (tenants)
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
TCC, and Community representatives
Loss of economic asset (fruit trees)
Title holders 1. Compensation at replacement cost based on the latest 2008 rates
2. Right to salvaged materials Loss of incomes/livelihood
Title holders and non-title holders (tenants)
1. Compensation at replacement cost based on the net revenue earned per month for 3 months to enable them to re-establish their livelihoods.
Loss of dwelling Title holders and non-title holders (tenants)
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).
Loss of dwelling 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.
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/-
Shifting/readjustment of plots
Title-holders 1. Consultations with PAPs will take place during demarcation of the plots to reduce negative impact
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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-the-job 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.
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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:
69
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
70
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
71
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
MoWHS, NEC, and TCC
72
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
73
Annex 11: Project Preparation and Supervision
BHUTAN: Second Urban Development Project Planned Actual PCN review April 16, 2008 April 16, 2008 Initial PID to PIC March 31, 2008 March 31, 2008 Initial ISDS to PIC Appraisal December 2009 December 2009 Negotiations February 3, 2010 February 3, 2010 Board/RVP approval April 29, 2010 Planned date of effectiveness June 2010 Planned date of mid-term review December 2012 Planned closing date December 2015 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 Title Unit Toshiaki Keicho Senior Urban Environment Specialist;
Task Team Leader SASSD
Kirsten Hommann Senior Economist SASSD Asta Oleson Senior Social Development Specialist SASDI Samantha Forusz Senior Social Development Specialist HRSAS Tashi Tenzing Surendra Govinda Joshi Mohi Uz Zaman Quazi Rama Krishnan Venkateswaran
Senior Sanitary Engineer Senior Transport Specialist Senior Transport Engineer Senior Financial Management (Municipal Finance) Specialist
SASSD SASSD SASSD SARFM
Manvinder Mamak Senior Financial Management Specialist
SARFM
Kumaraswamy Sankaravadivelu Rock Levesque Zahed Khan
Procurement Specialist Sr. Counsel Senior Urban Specialist
SARPS LEGES SASSD
Sita Ramakrishna Addepalli Environmental Specialist SASDI Lilian MacArthur Robin Rajack
Program Assistant Senior Urban Development Specialist
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)
74
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$120,000
75
Annex 12: Documents in the Project File
BHUTAN: Second Urban Development Project
Environmental Assessment Report
Safeguards Diagnostic Review Report
Social Assessment Report including Resettlement Action Plan for Dechencholing
Bhutan National Urbanization Strategy 2008
Thimphu City Development Strategy 2008
The Land Pooling Rules of the Kingdom of Bhutan 2009
Technical Design Documents and drawings
Procurement Guidance Note
Financial Management Assessment Note
76
Annex 13: Statement of Loans and Credits BHUTAN: Second Urban Development Project
Original Amount in US$ Millions
Difference between expected and actual
disbursements
Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev’d
P099126 2008 Instit. Cap. Bldg. Project for Proc. 0.00 1.50 0.00 0.00 0.00 1.40 0.33 0.00
P073458 2007 BT Private Sector Development 0.00 8.00 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
Total: 0.00 64.87 0.00 0.00 0.00 24.10 5.50 0.37
BHUTAN STATEMENT OF IFC’s
Held and Disbursed Portfolio In Millions of US Dollars
Committed Disbursed
IFC IFC
FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic.
2004 BRCL 9.41 0.00 0.00 0.00 9.41 0.00 0.00 0.00
Total portfolio: 9.41 0.00 0.00 0.00 9.41 0.00 0.00 0.00
Approvals Pending Commitment
FY Approval Company Loan Equity Quasi Partic.
Total pending commitment: 0.00 0.00 0.00 0.00
77
Annex 14: Country at a Glance
BHUTAN: Second Urban Development Project Lo wer-
P OVER T Y and SOC IA L So uth middle-B hutan A sia inco me
2007Population, mid-year (millions) 0.66 1,520 3,437GNI per capita (Atlas method, US$) 1,770 880 1,887GNI (Atlas method, US$ billions) 1.2 1,339 6,485
A verage annual gro wth, 2001-07
Population (%) 2.3 1.6 1.1Labor force (%) 6.3 2.1 1.5
M o st recent est imate ( latest year available, 2001-07)
Poverty (% of population below national poverty line) .. .. ..Urban population (% of to tal population) 33 29 42Life expectancy at birth (years) 65 64 69Infant mortality (per 1,000 live births) 63 62 41Child malnutrition (% of children under 5) .. 41 25Access to an improved water source (% of population) 81 87 88Literacy (% of population age 15+) 60 58 89Gross primary enro llment (% of school-age population) 102 108 111 M ale 103 111 112 Female 101 104 109
KEY EC ON OM IC R A T IOS and LON G-T ER M T R EN D S
1987 1997 2006 2007
GDP (US$ billions) 0.26 0.37 0.94 1.1
Gross capital formation/GDP 36.2 32.2 45.3 52.5Exports of goods and services/GDP 23.2 35.3 31.6 58.2Gross domestic savings/GDP 21.9 22.1 31.7 60.1Gross national savings/GDP .. 26.0 42.2 72.1
Current account balance/GDP -36.8 4.9 -3.9 11.5Interest payments/GDP 0.2 0.6 0.4 ..Total debt/GDP 15.6 32.1 75.7 ..Total debt service/exports 1.0 6.0 2.6 ..Present value of debt/GDP .. .. 74.6 ..Present value of debt/exports .. .. 184.1 ..
1987-97 1997-07 2006 2007 2007-11(average annual growth)GDP 4.9 8.2 8.5 19.1 6.4GDP per capita 5.4 5.5 6.5 17.5 0.0Exports of goods and services .. 25.0 1.1 118.8 14.6
ST R UC T UR E o f the EC ON OM Y
Bhutan
Lower-middle-income group
D evelo pment diamo nd*
Life expectancy
Access to improved water source
GNIpercapita
Grossprimary
enro llment
Bhutan
Lower-middle-income group
Eco no mic rat io s*
Trade
Indebtedness
Domesticsavings
Capital formation
1987 1997 2006 2007(% of GDP)Agriculture 37.7 32.5 22.3 20.9Industry 25.7 33.2 37.9 42.9 M anufacturing 5.7 10.0 7.4 5.1Services 36.6 34.4 39.8 36.3
Household final consumption expenditure 64.3 56.3 47.2 17.9General gov't final consumption expenditure 13.8 21.5 21.1 22.0Imports of goods and services 37.4 45.3 45.2 50.7
1987-97 1997-07 2006 2007(average annual growth)Agriculture 2.5 2.8 1.4 1.8Industry 11.3 8.3 63.0 4.0 M anufacturing 2.3 10.8 35.3 106.4Services 5.0 8.8 8.6 22.1
Household final consumption expenditure .. 2.9 6.6 -43.3General gov't final consumption expenditure .. 13.5 10.4 23.9Gross capital formation .. 11.8 0.8 37.7Imports of goods and services .. 13.5 -0.3 33.1
Note: 2007 data are preliminary estimates.
This table was produced from the Development Economics LDB database.
* The diamonds show four key indicators in the country (in bo ld) compared with its income-group average. If data are missing, the diamond will be incomplete.
-20
0
20
40
60
02 03 04 05 06 07
GCF GDP
Gro wth o f capital and GD P (%)
-50
0
50
100
150
02 03 04 05 06 07
Exports Imports
Gro wth o f expo rts and impo rts (%)
78
Bhutan
P R IC ES and GOVER N M EN T F IN A N C E1987 1997 2006 2007
D o mestic prices(% change)Consumer prices 6.4 6.5 5.0 5.2Implicit GDP deflator 0.7 13.0 4.4 -0.3
Go vernment f inance(% of GDP, includes current grants)Current revenue .. 34.4 32.5 34.8Current budget balance .. 17.1 16.4 18.2Overall surplus/deficit .. -2.2 -0.8 -2.4
T R A D E1987 1997 2006 2007
(US$ millions)Total exports (fob) 29 99 312 .. Agricultural products .. 13 .. .. Electricity .. 37 77 .. M anufactures .. .. .. ..Total imports (cif) 101 131 435 .. Food .. 45 .. .. Fuel and energy .. 19 .. .. Capital goods .. .. .. ..
Export price index (2000=100) .. .. .. ..Import price index (2000=100) .. .. .. ..Terms of trade (2000=100) .. .. .. ..
0
100
200
300
400
500
01 02 03 04 05 06 07
Exports Imports
Expo rt and impo rt levels (US$ mill.)
-2
0
2
4
6
8
02 03 04 05 06 07
GDP def lator CPI
Inf lat io n (%)
B A LA N C E o f P A YM EN T S1987 1997 2006 2007
(US$ millions)Exports o f goods and services 50 115 364 573Imports o f goods and services 144 143 499 558Resource balance -95 -28 -136 16
Net income 0 0 -7 3Net current transfers .. 46 106 108
Current account balance -95 18 -37 127
Financing items (net) 79 13 45 -148Changes in net reserves 16 -31 -8 21
M emo :Reserves including gold (US$ millions) 74 176 582 1,246Conversion rate (DEC, local/US$) 13.0 36.3 44.0 44.9
EXT ER N A L D EB T and R ESOUR C E F LOWS1987 1997 2006 2007
(US$ millions)Total debt outstanding and disbursed 40 120 713 .. IBRD 0 0 0 0 IDA 9 22 76 87
Total debt service 1 7 10 .. IBRD 0 0 0 0 IDA 0 0 1 1
Composition of net resource flows Official grants 15 36 58 .. Official creditors 16 14 39 .. Private creditors 0 -2 0 .. Foreign direct investment (net inflows) .. -1 6 .. Portfo lio equity (net inflows) 0 0 0 ..
World Bank program Commitments 0 0 0 0 Disbursements 5 1 10 9 Principal repayments 0 0 1 1 Net flows 5 1 10 8 Interest payments 0 0 1 1 Net transfers 5 1 9 7
Note: This table was produced from the Development Economics LDB database. 9/24/08
-40
-30
-20
-10
0
10
20
01 02 03 04 05 06 07
C urrent acco unt balance to GD P (%)
G: 16
D: 119
B: 76
E: 502
A - IBRDB - IDA C - IM F
D - Other mult ilateralE - BilateralF - PrivateG - Short-term
C o mpo sit io n o f 2006 debt (US$ mill.)
79
Annex 15: Map
BHUTAN: Second Urban Development Project
ShingkarapShingkarap
ThunkarThunkar
DaifamDaifam
WamrongWamrong
PanbangPanbangPankaPanka
YebilaptshaYebilaptsha
TangTang
KisonaKisona
TendruTendru
TangoTangoChariChari
KhasadrapchuKhasadrapchu
NganglamNganglam
MongarMongar
ParoParo
HaaHaa
SamtseSamtse
ChhukhaChhukha DagaDaga
DamphuDamphu
SarpangSarpang
ZhemgangZhemgang
TrashigangTrashigang
LhuentseLhuentse
JakarJakarTrongsaTrongsa
WangdueWangdue
PunakhaPunakha
GasaGasa
SamdrupSamdrupJongkhaJongkha
PemagatshelPemagatshel
LingmithangLingmithang
TrashiTrashi’Yangtse’Yangtse
G A S AG A S A
THIMPHUTHIMPHU
PUNAKHAPUNAKHA
PA R OPA R O
H A AH A A
S A M C H IS A M C H I
M O N G A RM O N G A R
PEMA-PEMA-GATSHELGATSHEL
SAMDRUPSAMDRUPJONGKHARJONGKHAR
B U M T H A N GB U M T H A N G
L H U E N T S EL H U E N T S E
C H H U K H AC H H U K H A
DAGANADAGANA
T R O N G S AT R O N G S A
T S I R A N G
Z H E M G A N G S A R PA N GS A R PA N G
WA N G D U EWA N G D U EP H O D R A N GP H O D R A N G
T R A S H I G A N GT R A S H I G A N G
TRASHITRASHI'YANGTSE'YANGTSE
THIMPHU
Pheuntsholing
Shingkarap
Thunkar
Daifam
Wamrong
PanbangPanka
Yebilaptsha
Tang
Kisona
Tendru
TangoChari
Khasadrapchu
Nganglam
Mongar
Paro
Haa
Samtse
Chhukha Daga
Damphu
Sarpang
Zhemgang
Trashigang
Lhuentse
JakarTrongsa
Wangdue
Punakha
Gasa
SamdrupJongkha
Pemagatshel
Lingmithang
Trashi’Yangtse
G A S A
THIMPHU
PUNAKHA
PA R O
H A A
S A M C H I
M O N G A R
PEMA-GATSHEL
SAMDRUPJONGKHAR
B U M T H A N G
L H U E N T S E
C H H U K H A
DAGANA
T R O N G S A
T S I R A N G
Z H E M G A N G S A R PA N G
WA N G D U EP H O D R A N G
T R A S H I G A N G
TRASHI'YANGTSE
Sankosh
Kur
u Chu
Paro Chu
Torsa
Haa Chu
Wang C
hu
Pho
Chu
Ma
ng
de
Bu
mtha
ng
Man
as
Tongsa Chu
Kulong C
hu
To Alipur Duar
To Goalpare
To Goalpare
To Gamba
To Cona
To Guahati
89°E 90°E 91°E
89°E 90°E 91°E
92°E
27°N
28°N
27°N
28°N
BHUTAN
Th is map was produced by the Map Des ign Uni t o f The Wor ld Bank. The boundar ies , co lo rs , denominat ions and any other in format ionshown on th is map do not imply, on the par t o f The Wor ld BankGroup, any judgment on the lega l s tatus of any te r r i to r y, o r anyendorsement or acceptance of such boundar ies .
IBRD 37549
JAN
UA
RY 2010
BHUTANSECOND URBAN
DEVELOPMENT PROJECTPROJECT CITIES
MAIN CITIES AND TOWNS
DZONGKHAG (DISTRICT) CAPITALS
NATIONAL CAPITAL
MAIN ROADS
DZONGKHAG (DISTRICT) BOUNDARIES
INTERNATIONAL BOUNDARIES
0 10 20 30
0 2010 30 Miles
40 Kilometers
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