Haoliang Xu: Statement at the 12th Round Table Meeting for Bhutan’s Development Partners

Dec 11, 2013

Your Excellency, Honourable Prime Minister, Lyonchhen Tshering Tobgay;
Your Excellency, Lyonpo Rinzin Dorji, Minister of Foreign Affairs and Co-Chair of the Round Table Meeting.
Excellencies, Distinguished Participants, Ladies and Gentlemen:

It is a pleasure and privilege to be in the Kingdom of Bhutan and to co-chair the 12th Round Table Meeting with H.E. Lyonpo Rinzin Dorji, Minister of Foreign Affairs.  I am deeply grateful to the Royal Government and People of Bhutan for the warm reception and gracious hospitality.

I am honored to address this important and timely Round Table Meeting to discuss the challenges and priorities under the 11th Five-Year Plan (2013-18).

Over the last three decades, Bhutan has experienced significant development, but dramatic change has come in the last 10 years, making Bhutan one of the world’s fastest growing economies. During this period, Bhutan’s annual per capita growth averaged about 10 per cent, resulting in income levels higher than most of its neighbours.

This impressive growth allowed the Government to pursue targeted poverty reduction and invest in human development, keeping Bhutan on track to achieve most MDG targets by 2015.   The national poverty headcount  ratio declined from 36.3 per cent to 12 per cent over the past 13 years, exceeding the 10th Five Year Plan target of 20 per cent. The Gross Primary Enrolment Ratio has reached 100 per cent.  According to a recent UN and WB study, Bhutan is one of 10 countries in the world to reduce maternal mortality by 75 per cent between 1990 and 2010.

Although still a young democracy, Bhutan is one of a few countries to enjoy relative peace and stability in South Asia.  The country’s democratic institutions have taken firm root and provide a solid foundation for ensuring inclusiveness, transparency, accountability, justice and the rule of law.  According to the 2012 Transparency International index, Bhutan ranks as the least corrupt country in South Asia, and 33rd least corrupt out of 176 nations.

While much progress has been made, significant challenges remain.  About 12 per cent of the population still lives in poverty.  Disparity in income and access to social services and infrastructure, between and within regions and districts, continues to be a persistent problem.   And there is need for better nutrition, and better quality and access to prenatal and antenatal services.  

In education, Bhutan has achieved the target for gender parity at primary and secondary levels, but the ratio of females to males in post-secondary education remains low and the literacy rate lags behind leading LDCs.  In politics, women’s participation in elected offices remains among the lowest in the region.
Bhutan also faces stark demographic opportunities and challenges in the coming decades. More than half the population is under 25 years of age and in the next three decades, Bhutan’s working-age population (those between 15 and 64 years of age) is expected to increase by over 40 per cent. Limited employment opportunities, high incidence of poverty in rural areas, and youth migration to urban areas, have all contributed to growing youth unemployment in cities. This could, over time, affect social stability.  

Similar to many other LDCs, Bhutan depends heavily on a single commodity and market for growth and revenue, increasing economic vulnerability.  In the last decade, hydropower has been the engine for growth, contributing about two-fifths of government revenues and export earnings, and a third of GDP.  Bhutan’s challenge is to diversify its economy to reduce dependence on this single sector and achieve more balanced and stable growth.  

Increasingly, climate change is affecting Bhutan.  Erratic precipitation and temperature patterns affect farmers and the hydropower sector.  Bhutan is also prone to natural disasters including earthquakes, forest fires, windstorms, landslides, and glacial lake outbursts.  These natural shocks most severely affect the poorest and can lead to losses in hard-earned development gains.  

Looking ahead and building on past efforts, Bhutan needs to:

First, continue investing in education and health.  While expenditure on public education increased from 5.8 to 7.2 per cent between 2000 and 2005, it declined to 4 per cent in 2010.  The share of public health expenditure in the total budget also declined from 12.2 per cent in 2000 to 10.5 percent in 2010.  Increasing funding for education, health and other productive sectors of the economy is critical to improve human assets and reduce economic vulnerabilities – two of the three criteria for graduation from the ranks of LDCs.

Second, step up efforts to address regional disparities through policies promoting rural development, which also reach remote communities.  Explore more diverse strategies and policies such as: targeting investments to link farms to markets…improving the supply and lowering the cost of credit to key sectors…applying innovation to create attractive livelihood opportunities and income generation schemes…improving micro-credit and business grants…and supporting more vocational training, targeting especially women and youth.

Third, improve resilience of communities through enhanced preparedness and response to natural disasters, in particular adverse-effects of climate change. This can be done by addressing risks and vulnerabilities through both adaptation and mitigation measures, and creating new national climate financing schemes.

Fourth, pursue South–South cooperation and explore economic relations with countries capable of purchasing exports and supplying needed imports. This could include linking with other graduating or recently graduated LDCs, to share experiences.

Fifth, leverage key strengths: a relatively well-educated workforce, reliable access to electricity, and a unique natural environment -- to diversify the economy into service sectors, such as tourism, ICT, education, and organic agricultural products.  Bhutan needs to further build its productive capacity by investing in productive resources, entrepreneurial capabilities, and upgrading technology.  

Sixth reap the ‘demographic dividend’ by 2040. Bhutan needs to invest in creating jobs for youth, at the same time it must prepare for an ageing society by improving social protection, health, and pension.  In Bhutan, 7 out of 10 persons are employed in vulnerable jobs.  To create decent, productive, well-paying jobs, Bhutan needs to expand its private sector and address the education and skills mismatch.

These challenges require considerable resources to ensure Bhutan’s smooth graduation from LDC status, while also maintaining Gross National Happiness.  Therefore Bhutan’s development partners, including, CSOs must continue supporting government efforts, including prototyping and pilot testing innovate approaches to scale up initiatives that reach the poorest. External assistance significantly finances the budget and while the country has begun to increase domestic resource mobilization, the need for external finance remains critical.  A sudden decrease in assistance would severely affect Bhutan’s efforts to address challenges.  The United Nations is committed to providing even stronger support for Bhutan to meet those challenges through the new One UN Programme for the next five years.

I would like to close by thanking all development partners for their assistance in helping bring about impressive gains in recent years.  I count on your continued support to help Bhutan meet its 11th Five-Year Plan objective of “Self-reliance and Inclusive Green Socio-Economic Development”.

Thank you and Tashi Delek