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National Statistics Bureau The World Bank Royal Government of Bhutan BHUTAN POVERTY ASSESSMENT 2014 Copyright © National Statistics Bureau, 2014 www.nsb.gov.bt ISBN 979-99936-28-26-2 Design by Loday Natshog Communications ([email protected]) Acknowledgements iv Foreword v Foreword vi Abbreviations and Acronyms vii Executive Summary viii CHAPTER 1: Introduction 01 CHAPTER 2: Evolution of Poverty, Shared Prosperity and Inequality in Bhutan 05 2.1. Consumption Poverty, Multidimensional Poverty and Happiness 05 2.1.1. Decline in Multidimensional poverty between 2007 and 2012 07 2.1.2. Shared Prosperity 09 2.1.3. Mobility in and out of Poverty between 2007 and 2012 09 2.1.4. Growth in Bhutan has been Pro-Poor 10 Contents 2.2. Stable Inequality 12 2.2.1. Uneven Poverty Reduction across Dzongkhags 13 CHAPTER 3: Changing Profiles of the Poor and Bottom 40 Percent of the Population 17 3.1. Welfare Indicators (Assets and Amenities) 17 3.2. Health and Nutrition 18 3.3. Gender and Poverty 22 3.3.1. Is Poverty in Bhutan Gender-Blind? 22 3.4. Land Ownership and Poverty 23 CHAPTER 4: Enlarging Opportunities for Children 27 4.1. Inequality of Opportunity in Bhutan 27 4.2. Social Outcomes for Children in Relation to Birth Circumstances 29 4.3. Measuring Inequality of Opportunity 35 4.4. Drivers of Change 42 CHAPTER 5: Key Drivers of Poverty Reduction in Bhutan 45 5.1. Trading Out of Poverty 47 5.2. Roads Out of Poverty 50 5.3. The Hydro Effect 53 5.4. Who were Better Able to Escape Poverty between 2007 and 2012? 53 5.5. The Main Drivers of Poverty Reduction from People’s Perspective 54 5.6. Better Returns on Individual’s Assets Underpin Faster Reduction in Poverty 55 5.7. Composition versus Structure 56 CHAPTER 6: Poverty Reduction in Bhutan: Sustainability, Vulnerability and Suggested Remediation 61 Annex A: Sources of Variation in Poverty Outcomes in Bhutan 68 Annex B: Poverty Dynamics with Synthetic Panels – Framework and Results 88 Annex C: Qualitative Assessment of Poverty 101 Bhutan Poverty Assessment 2014 iii Acknowledgements This report is the first poverty assessment for Tenzin Thinley (Dzongdag), Lhawang Dorji and Bhutan prepared by the World Bank jointly with Thinley Wangchuk (Gups) in Dagana, Karma the Royal Government of Bhutan through the Drukpa (Dzongdag), Tashi Rabten (GAO), National Statistics Bureau (NSB). It builds on Rinchen Lungten (Gup) in Zhemgang, Karma Bhutan Poverty Analysis 2012, published by the Wangdi (Dzongrab), Lepo and Chedup (Gups), NSB with technical assistance from the World Dawa Zangmo (GAO) in Pema Gatshel, Sonam Bank. Wangyel (Dzongdag), Karma and Tshering The study is led by Srinivasan Thirumalai Samdrup (Gups) and Kinley Phuntsho (GAO) (Senior Economist, SASEP) with team members in Lhuentse. Focus group participants shared drawn from the World Bank, NSB, and outside candid views and debated priority issues with consultants. The Bank team comprised of Peter endearing keenness. Lanjouw and Hai-Anh Dang (DECRG), Namgyel The team benefited from the comments of Wangchuk (SASEP), Minh Cong Nguyen peer reviewers Sabina Alkire, Vikram Nehru, (ECSP3), and Smriti Seth (DECWB). From the Dean Jolliffe, and Sonam Tobgyel at concept NSB’s Socio-Economic Analysis and Research stage and also at the final stage. We are Division, Lham Dorji (Dy. Chief Research grateful for comments by David Newhouse and Officer), Dorji Lethro (Senior Statistical Genevieve Boyreau for comments on an initial Officer), Sonam Gyeltshen (Research Officer), draft. We are thankful to the participants at and Cheku Dorji (Dy. Chief Statistical Officer, the final review meeting held in Washington Coordination and Information Division) D.C and a consultative group meeting held in worked closely with the World Bank team. Thimphu to discuss the findings of the report. Consultants who contributed to the study are Overall guidance for the study was provided Essama-Nssah, Nar Bahadur Chhetri, Krishna by Ernesto May, Director (SASEP), Kuenga Parajuli and Sanjana Dulal. Tshering, Director General (NSB), Vinaya We give special thanks to local officials and Swaroop (SASEP), Robert Saum (Country elected representatives (Gups) who facilitated Director) and Genevieve Boyreau (Resident focus group discussions and shared their Representative). views on development issues at the local level. In this regard, we wish to especially thank iv Bhutan Poverty Assessment 2014 Foreword The National Statistics Bureau is pleased to One of the factors contributing to poverty present the Bhutan Poverty Assessment 2014 reductions is due to the noble Royal Kidu Program report prepared in collaboration with the World where many landless households were able to Bank. This report is a complement to the earlier get land permanently registered in their names. Poverty Analysis Report (PAR) 2012 which The findings from the participatory assessments was prepared with the World Bank’s Technical listed small land holdings and landlessness as key Support. The PAR 2012 provides estimates constraints to achieving economies of scale in of consumption poverty, identified the trend agricultural production. and narrates the profile of the poor in terms This assessment report also shows that, of demographics and basic needs. Most of the among others, Bhutan’s poverty reduction has poverty reduction in Bhutan has occurred in the been rapid, broad-based and inclusive; in the rural areas with little change in urban poverty long-term, sustainable poverty reduction depends rates. Inequality has not changed significantly. on addressing persistent shocks, engendering Poverty reduction in dzongkhags have been found private sector led development and defining clear to be uneven. target groups for poverty reduction. The main This report identifies the key drivers of rapid drivers of prosperity in rural Bhutan appear to poverty reduction in Bhutan over the recent be increasing commercialization of agriculture, years, explaining why some dzongkhags are stuck an expanding rural road network and beneficial in poverty or reducing poverty is not significant spillovers from hydroelectric projects. while others prospered, and whether female I hope that this report becomes a headed households have a harder time reducing comprehensive source of information towards poverty. The exercise draws mainly on data from further reduction of poverty especially in sections the two rounds of Bhutan Living Standards and areas where the poverty still remains high. Survey (2007 and 2012) supplemented with focus Finally, I wish to sincerely thank the World group discussions carried out for the report in Bank for their continued support and would like select dzongkhags. to acknowledge the efforts of all officials and The report presents a more detailed analysis experts who were involved in this important of the evolution of poverty, its distributional exercise. characteristics including inequality, mobility estimates; changing profiles of the poor and bottom 40 percent of the population; issues in expanding opportunities for children. This report probes the vulnerabilities in spreading prosperity (Kuenga Tshering) in Bhutan and discusses the steps to be taken for Director General sustained poverty reduction in Bhutan. Bhutan Poverty Assessment 2014 v Foreword This report presents the first Poverty in our "Country Partnership Strategy 2014- Assessment carried out in Bhutan by the World 2019". The identified drivers of poverty reduction Bank in close collaboration with the National and recommendations have translated into : (i) Statistics Bureau, Bhutan. a focus on agriculture commercialization and Bhutan well known as a pioneer of the Gross marketization, and more broadly the sustainable National Happiness concept has a noteworthy contribution of green assets to socio-economic record in reducing poverty as well. Poverty development, (ii) supporting a social protection reduction in Bhutan, as the report finds, has been strategy, with targeted safety nets build rapid, broad-based and inclusive. Prosperity has household's resilience, (iii) a continued focus on been shared well in Bhutan with the bottom 40 the private sector development to create jobs percent enjoying faster growth than the rest. which improve living standards and are also a There are potentially useful lessons for other critical element of social cohesion, (iv) a renewed countries aspiring for poverty reduction with attention to transport and trade infrastructure, shared prosperity. recognizing its critical role in reducing poverty; Poverty reduction in Bhutan is well-founded (v) improving fiscal and spending efficiency in long-term economic development efforts of to enable the Royal Government to continue commercialization of agriculture, expanding improving the delivery of public services for the rural road networks and beneficial spillovers benefit of all. from hydroelectric projects. A good governance We - at the World Bank - are committed to infrastructure underpins the successes on support shared prosperity and the fight against poverty front. The pace of poverty reduction poverty throughout the world, and in Bhutan in appears sustainable if the emerging risks and particular, where we look forward to building on vulnerabilities are managed carefully. a strong partnership with the Royal Government Sustaining the examplary record of Bhutan's and all stakeholders. poverty reduction in the long-term would require mitigating risks from persistent shocks facing the agricultural sector, increasing reliance on private sector led development and building formal
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