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World Bank Document A W~ORLD BANK COUNTRY STUDY Public Disclosure Authorized BHUTAN Development in a Himalayan Kingdom Public Disclosure Authorized IY - 4',, Public Disclosure Authorized I, 7.~~ * I e' < ; Public Disclosure Authorized A WORLD BANK COUNTRY STUDY BHUTAN Development in a Himalayan Kingdom The World Bank Washington, D.C., U.S.A. Copyright © 1984 The International Bank for Reconstruction and Development/The World Bank 1818 H Street, N.W. Washington, D.C. 20433, U.S.A. First printing January 1984 All rights resen ed Manufactured in the United States of America World Bank Country Studies are reports originally prepared for internal use as part of the continuing analysis by the Bank of the economic and related conditions of its developing member coLntries and of its dialogues with the governments. Some of the reports are published informally with the least possible delay for the use of governments and the academic, business and financial, and development commu- nities. T'hus, the typescript has not been prepared in accordance with the proce- dures appropriate to formal printed texts, and the World Bank accepts no responsi- bility for errors. The publication is supplied at a token charge to defray part of the cost of manufacture and distribution. Any maps used have been prepared solely for the convenience of the readers; the denominations used and the boundaries shown do not imply, on the part of the World Bank and its affiliates, any judgment on the legal status of any territory or any endorsement or acceptance of such boundaries. The full range of World Bank publications is described in the Catalog of World Bank Publications;the continuing research program of the Bank is outlined in World Bank Research Program:Abstracts of Current Studies. Both booklets are updated annu- ally; the most recent edition of each is available without charge from World Bank Publications in either Washington or Paris (see the back cover for addresses). Library of Congress Cataloging in Publication Data Main entry under title: Bhutan,development in a Himalayan kingdom. (A World Bank country study) 1. Bhutan--Economic conditions. 2. Bhutan--Social conditions. 3. Bhutan--Politics and government. I. World Bank. II. Series. HC440.25.B48 1984 330.9549'8 83-25977 ISBN 0-8213-0306-6 Preface This is the first World Bank report on the Kingdom of Bhutan, which joined the institution in 1981. The report, therefore, is primarily intro- ductory in nature, providing an overview of the economy, its current stage of development, and the development strategy. While little has generally been known about Bhutan, basic economic conditions are relatively favorable, contradicting the very low per capita income. The ratio of population to land is relatively low and there is little landlessness. Literacy and public health remain poor, however. Development efforts began around 1960, and since then Bhutan has made much progress towards establishing basic economic and social infrastructure, despite difficult physical conditions and per- vasive shortages of trained manpower. Nevertheless, the gains are difficult to evaluate as the economic and social data base is very thin. Chapter I of this report focuses on the geographical and historical background to help explain the evolution of Bhutan's cautious development strategy. Chapter II provides an overview of the structure of the economy, the level of development, and the role of the country's economic institutions. Chapter III comprises more in-depth discussion of key economic sectors and can be read selectively without loss of overall continuity. Chapter IV focuses on Bhutan's human resources and on Goverament programs to improve education and health standards. Chapter V reviews the Fifth Plan, which represents an unprecedented development push that involves not only a sub-- stantial increase in investment but also changes in the development strategy. However, the manpower, physical, and financial constraints to development in Bhutan are significant. These constraints and the role external assistance can play in helping overcome them and in enabling an acceleration in develop- ment are discussed in Chapter VI. iv Pr6logo Este es el primer informe del Banco Mundial sobre el Reino de Bhut&n, que ingres6 a la instituci6n en 1981. Por lo tanto, constituye basicamente una introducci6n al pais, proporcionando una vision general de la economia y de su actual etapa y estrategia de desarrollo. Si bien se conoce poco acerca de Bhutan, las condiciones econ6micas basicas son relativamente favorables y con- tradicen el ingreso per capita muy bajo. La proporci6n entre la poblaci6n y la tierra es relativamente baja y existen pocas personas sin tierras. Sin embargo, el analfabetismo y la salud publica siguen siendo deficientes. Los esfuerzos de desarrollo comenzaron alrededor de 1960 y desde entonces Bhutan ha hecho muchos progresos para establecer una infraestructura econ6mica y social basica, no obs- tante condiciones fisicas dificiles y escasez generalizada de recursos humanos capacitados. Sin embargo, el progreso es dificil de evaluar dado que la base de datos econ6micos y sociales es muy limitada. El Capitulo I de este informe se centra en los antecedentes geogrAficos e hist6ricos que ayudan a explicar la evoluci6n de la cautelosa estrategia de desarrollo del pais. En el Capitulo II se ofrece una visi6n general de la estructura de la economia, el nivel de desa- rrollo y la funci6n de las instituciones econ6micas de BhutAn. El Capitulo III comprende un analisis mas profundo de los sectores econ6micos clave y puede leerse selectivamente sin perder la continuidad general. El Capitulo IV se cen- tra en los recursos humanos del pais y en los programas del Gobierno para mejo- rar los niveles de salud y educaci6n. En el Capitulo V se examina el Quinto Plan que representa un esfuerzo de desarrollo sin precedentes y que preve no s6lo un aumento considerable de las inversiones sino tambien cambios en la estrategia de desarrollo. Con todo, son considerables las restricciones finan- cieras, fisicas y de recursos humanos que afectan al desarrollo del pais. Estas restricciones y la funci6n que puede desempefiar la asistencia externa en ayudar a superarlas y permitir la aceleraci6n del proceso de desarrollo se analizan en el Capitulo VI. Ce rapport est le premier de la Banque mondiale sur le Royaume du Bhoutan qui est devenu membre de cette institution depuis 1981. Il st agit donc essentiellement d'un document d'introduction, qui donne un aperqu de la situa- tion economique du pays, de son stade actuel de developpement et de sa strategie de developpement. Bien que l'on ait en general tres peu de connaissances sur le Bhoutan, on sait que les conditions economiques y sont dans 11ensemble assez favorables, malgre un tres faible revenu par habitant. La densite de la popu- lation y est relativement faible et il y a peu de paysans sans terre. Toutefois, l'alphabetisation et la sante publique laissent encore beaucoup a desirer. Grfce A l'effort de d6veloppement amorce aux environs de 1960, le Bhoutan a fait des progr6s considerables dans l1'tablissement d'une infrastructure economique et sociale, malgre des difficultes materielles considerables et une absence quasi generale de personnel qualifie. Toutefois, faute de donn6es suffisantes, il est difficile d'evaluer les progres accomplis. Le Chapitre Premier decrit le cadre geographique et historique du pays pour aider a mieux cerner l'evolution v de sa prudente strat6gie de developpement. Le Chapitre II donne un apercu de sa structure 6conomique, de son niveau de developpement et du r6le de ses insti- tutions 6conomiques. Le Chapitre III, que l'on peut lire separement sans perdre le fil de l'analyse, pr6sente un examen plus approfcndi des principaux secteurs de l1'conomie. Le Chapitre IV traite essentiellement des ressources humaines du Bhoutan et des programmes entrepris par les pouvoirs publics en vue d'ame- liorer l'6ducatiun et la sante. Le Chapitre V est consacr6 A l'analyse du Cinquieme plan, qui repr6serite un effort de developpement sans precedent, impliquant non seulement une augmentation substantielle des investissements, mais aussi la modification de la strategie du developpement. Toutefois, le manque de ressources humaines et financieres et les contraintes mat6rielles entravent considerablement la progression du pays. Ces obstacles sont analyses au Chapitre VI, qui montre 6galement la facon dont l'aide ext6rieure peut con- tribuer A les surmonter A favoriser l'acc6leration du processus de developpement au Bhoutan. vi CURRENCY EQUIVALENTS a/ End-March Currency Unit 1977 US$1.00 Nu 8.80 Nu 1.00 = US$ 0.11 Nu 1 million = US$ 113,636 1978 US$1.00 Nu 8.43 Nu 1.00 = US$ 0.12 Nu 1 million US$ 118,624 1979 US$1.00 = Nu 8.15 Nu 1.00 = US$ 0.12 Nu 1 million = US$ 122,699 1980 US$1.00 = Nu 8.19 Nu 1.00 = US$ 0.12 Nu 1 million = US$ 122,100 1981 US$1.00 = Nu 8.19 Nu 1.00 US$ 0.12 Nu 1 million = US$ 122,100 1982 US$1.00 = Nu 9.35 Nu 1.00 = US$ 0.11 Nu 1 million US$ 106,952 Average Annual Exchange Rates 1976/77 US$1.00 = Nu 8.94 1977/'78 US$1.00 = Nu 8.56 1978/79 US$1.00 = Nu 8.21 1979/80 US$1.00 = Nu 8.08 1980/81 US$1.00 = Nu 7.89 1981/82 US$1.00 = Nu 8.93 a/ The Bhutan ngultrum is tied on a one-to-one basis to the Indian rupee. Average annual exchange rates relate to Bhutan fiscal years which run from April 1 to March 31. This report was prepared by a mission comprising Messrs. John Borthwick (Chief of Mission, World Bank), Jeremy Berkoff (Senior Economist, World Bank), John Eddison (Senior Project Engineer, Asian Development Bank), and Ms.
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