COUNTRY BACKGROUND - Gross National Happiness Commission

Aid Policy
9.20 Sector Ministries, Departments and specialised agencies of the Royal Government are not allowed
independently to solicit aid: only the Planning Commission, which operates in close coordination with the Ministry
of Finance, may do so, and, as noted earlier, the Planning Commission is the authorised contact point for aid
agencies in their official dealings with the Royal Government. However, it is recognised that, in the course of
preparing aid projects which have already been included in the RGOB development programme, and in their
subsequent implementation and monitoring, the external financing agency needs to have good contacts at technical
level with the implementing Ministry, department or agency. Such contacts are encouraged, but the Planning
Commission, the Ministry of Finance and the Royal Civil Service Commission should be kept fully informed of all
such contacts, and should be appropriately represented on aid agency/RGOB coordinating committees. Within
sector ministries, it is expected that the Policy and Planning Divisions (PPDs) which are now being strengthened
will be the main contact point for aid agencies. The PPDs in turn, will have strong working links with the Planning
Commission which will continue to exercise overall responsibility for aid coordination.
Aid Management IssuesAid Management Issues
Absorptive CapacityAbsorptive Capacity
9.21 During the 6FYP, some donors were concerned that Bhutan's capacity to absorb aid was limited by
bottlenecks in project preparation and implementation. During the 7FYP, the problem of absorptive capacity will be
addressed by:
· adopting realistic expenditure targets (see Chapter 7);
· strengthening planning and project preparation capacity, both in the Planning Commission and in
sector Ministries through the Policy and Planning Divisions;
· addressing constraints in the construction sector, by expanding the national Labour Force and relaxing
restrictions on the employment of non-nationals;
· emphasis on human resource development, so as to make Bhutan less dependent on external skills for
preparation and implementation of development programmes;
· increasing the role for the private sector in productive activities to leave RGOB to concentrate on
proper governmental concerns.
9.22 In the past much aid has been provided through turnkey projects. This can sidestep implementation capacity
constraints, but can fail to transfer skills that will make Bhutan less dependent in the long run. There may continue
to be a limited role for turnkey assistance, but the Royal Government will seek to ensure that there is always a
provision for the training of Bhutanese to undertake the operation and management of new facilities.
Aid CoordinationAid Coordination
9.23 The allocation of responsibilities within the Royal Government for aid management and coordination was
summarised in the previous section. RGOB recognises that there is a significant coordination problem, stemming
from the numbers of different agencies involved in assistance to Bhutan, and exacerbated by the fact that so few of
Bhutan's aid partners are permanently represented in the country. There is no absolute "cure" for problems of
coordination, but there are a number of measures that can be taken to minimise the problem.
· strengthening RGOB's own planning and monitoring procedures;
· continuing consultation between the RGOB and its aid partners through the periodic Round Table
meetings, and through sectoral meetings with donors to be held in Bhutan from time to time;
· encouraging donors to concentrate their aid on particular sectors and/or geographic regions;
· as far as possible, avoiding the involvement of several donors in a single project, since this can make
the management of the project much more complicated and time consuming.
Technical AssistanceTechnical Assistance
9.24 The Royal Government's aims in relation to Technical Assistance are (a) to limit dependence on TA, but (b)
to maximise its effectiveness. Effectiveness has to be considered both in terms of job performance by TA personnel
and in terms of the passing on of skills to Bhutanese. As these may be conflicting considerations, job descriptions
or Terms of Reference will include a clear description of the counterpart training to be provided. The requirements
will vary from case to case: in some cases the basic training requirement may be met by formal training of
Bhutanese, while in others, the passing on of skills to Bhutanese colleagues will be a major element of the TA role.
Where this is the case, both RGOB and the sponsoring aid agency will take account of the training requirement in
the selection of personnel.
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