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Royal Government of Bhutan Royal Government of Bhutan 1 TABLE OF CONTENTS FOREWORD 6 OVERVIEW 8 1 Gross National Happiness and Human Development 14 Sustainable and Equitable Socio-economic Development 14 Conservation of the Environment 16 Preservation and Promotion of Cultural Heritage 16 Good Governance 17 Policy Implications and Considerations 17 2 Trends in Economic Growth and Human Development 22 Growth Performance 23 Progress in Social Development 26 Achievements in Education 26 Achievements in Health 28 Ensuring Environmental Sustainability 29 Promoting Good Governance 30 3 The State of Human Development 34 Life Expectancy 34 Lifestyle Diseases 36 HALE: Health - Adjusted Life Expectancy 39 Education and Literacy 40 School Enrollment at Primary, Secondary and Tertiary Levels 42 Adult Literacy 42 Income 44 Per-capita Income 44 Household Income 45 Bhutan’s Human Development Index 46 Trends in HDI 47 Bhutan’s Human Poverty Index 48 Income Poverty 48 4 Addressing Key Human Development Challenges 52 Poverty 52 Rural-Urban Disparities 54 Employment 56 Policy Implications and Considerations 56 2 5 Youth Employment 60 Bhutan’s Employment Patterns and Recent Trends 62 A Profile of the Youth Employment Situation in Bhutan 65 Female Youth Unemployment 66 Factors Affecting Youth Employment and Unemployment 66 Youthful Demographic Profile 66 Expansion of School Enrollment 67 Capital-Intensive Economic Growth 67 Limited Employment Absorption Capacity in the Public Sector 68 Small and Underdeveloped Private Sector 68 Rural-Urban Migration 69 Skills and Expectations Mismatch 70 The Potential Consequences of Youth Unemployment 70 6 Employment for Youth in the Private Sector 74 A Profile of the Private Sector in Bhutan 74 Manufacturing 76 Construction 77 Services 77 Promoting Sustainable Employment Growth in the Private Sector 78 Policy Environment 79 Fiscal Policy Incentives 80 Financial Sector Reforms 80 Infrastructure Development 81 Industrial Sector Development 81 Promoting Tourism 81 Domestic Trade Policy Reforms 82 Promoting Foreign Direct Investment 82 Promoting Small-scale Business and Self-employment Ventures 83 Youth Entrepreneurship 83 7 Enhancing Youth Employability through Education and Vocational Training 90 Education 91 Improving the Quality of Education 91 Reducing the Numbers of Early School Leavers 93 Life Skills Development and Career Education 94 Vocational Education and Training 96 Strengthening the Institutional Framework for VET 96 Increasing Access to VET 97 Improving the Quality of VET 98 3 Apprenticeship Training 99 Village Skills Development 100 8 Sustainable Livelihoods for Youth in the RNR Sector 104 A Profile of the Renewable Natural Resources Sector 105 Agriculture Production 105 Livestock Production 107 Forest Production 107 Promoting Sustainable Livelihood for Youth in the RNR Sector 108 Raising Rural Livelihoods through Agricultural Productivity and Diversification 108 High Value Niche Products 111 Promoting RNR based Education and Vocational Training for Youth 113 Improving the Quality of Life for Rural Farming Communities 113 9 Future Prospects and Imperatives 116 Employment Creation in Development, Macro-economic and Employment Policy 117 Enhancing the Employability of Youth through Education and Vocational Training 118 Employment in the Private Sector 120 Promoting Sustainable Youth Livelihoods in the RNR Sector and Off-farm Rural Enterprises 122 Youth Employment Programmes 123 Labour Market Information System and Research 123 Conclusion 125 List of Tables Table 2.1: Measures of Macro-economic Performance 23 Table 3.1: Life Expectancy and Related Health Indicators 36 Table 3.2: Life Expectancy 39 Table 3.3: Human Development Indicators for Bhutan 2003 46 Table 3.4: Components of the Human Development Index for Bhutan 2003 46 Table 3.5: Components of the Human Poverty Index for Bhutan 2003 48 Table 4.1: Poverty Analysis Report 2004 53 Table 4.2: Education Indicators 55 Table 5.1: Trends in LFPR and Unemployment Rates 62 Table 5.2: Unemployment Rates by Region and Sex 63 Table 5.3: Youth LFPR and Unemployment Trends 65 Table 6.1: Licensed Business Establishments in Bhutan 75 Table 8.1: Agricultural Production 105 4 List of Figures Figure 2.1: HD and GDP Index 22 Figure 2.2: GDP Aggregates 24 Figure 2.3 Government Finances 1990/91-2002/03 25 Figure 2.4: Expansion of Educational Infrastructure 1998-2003 27 Figure 3.1: Life Expectancy in Select Regions/Groups 37 Figure 3.2 Combined Gross Enrollment Ratios for South Asia and Selected Groups, 2002 42 Figure 3.3 Adult Literacy in South Asia and Selected Group/Regions 42 Figure 3.4: GDP Per Capita (in actual and PPP terms) in South Asia 45 Figure 3.5: HDI Values for South Asia and Selected Groups 2003 47 Figure 3.6: HDI Values for Bhutan 1984-2003 47 Figure 3.7: Income Poverty Levels in South Asia 49 Figure 6.1: International Tourism Arrivals and Revenue 78 Figure 8.1: Rural Household Income Distribution in Bhutan by Source 109 List of Boxes Box 1.1: Gross National Happiness 15 Box 1.2: Dimensions of Human Development 19 Box 1.3: On Constructing an Index for GNH 20 Box 3.1: Millennium Development Goals (MDGs) 34 Box 3.2: Move for Health Campaign 37 Box 3.3 Bhutan’s Tobacco-Free Initiatives 38 Box 3.4: The Link Between Education and Poverty 41 Box 3.5: Literacy Through Non-Formal Education 43 Box 3.6: Human Poverty - Going Beyond Income Poverty 49 Box 4.1: Pro-Poor Growth 57 Box 6.1: Ngawang Choden’s Story 84 Box 6.2: The Credit Guarantee Scheme 85 Box 6.3: The Basic Entrepreneurship Course 87 Box 7.1: The School-Based Vocational Club Programme 95 Box 7.2: YDF’s Carpentry Skills Training Programme 101 Box 8.1: A Small Scale Dairy Farming Success Story 111 Box 8.2: Cordyceps Sinensis 112 Technical Appendix 1 Computing the Human Development Index for Bhutan 126 Technical Appendix 2 The Human Poverty Index for Developing Countries 129 ABBREVIATIONS 130 REFERENCES 132 5 FOREWORD In Bhutan, we have long viewed development in terms far beyond the mere growth of income. In keeping with our core development philosophy of maximising Gross National Happiness (GNH), the Royal Government has steadfastly pursued a path of sustainable socio-economic development to improve the quality of people’s lives and their well-being as a whole. Such a people-centred approach, we understand, is akin to the essence of the human development concept. As the introductory chapter of this report notes, a remarkable compatibility exists between the two development paradigms of Gross National Happiness and human development. We have no doubt that efforts directed at furthering human development in the country will simultaneously contribute enormously toward favourable prospects for maximising happiness for our people. In 2000 Bhutan published its first National Human Development Report, Gross National Happiness and Human Development -– Searching for Common Ground’. The report measured and reported on human development progress in the country for the first time and traced the rapid socioeconomic achievements attained since the inception of planned development in 1961. This is our second National Human Development Report. The current report updates the assessment of human development and particularly deals with the key challenge of ensuring gainful employment for our dynamic youth. As the report portrays, Bhutan continues to enjoy significant progress in furthering the state of human development. This is reflected in notable improvements in its Human Development Index (HDI) and its relative position in the HDI ranking of countries. However, there remain some critical areas in which the country still has a lot to achieve, principally with regard to the low levels of adult literacy prevailing in the country. We fully recognise the immense, widespread development and social benefits that accrue with improved literacy levels, particularly for women. Attaching great importance to the need to improve literacy in Bhutan, we will continue to address this as a high priority. The country also faces other considerable development challenges that may have a significant bearing on human development and GNH outcomes. Among those highlighted are the closely interconnected and emerging issues of poverty, rural-urban disparities and youth employment. Appropriately, the challenge of youth employment constitutes the key theme of this report, in view of its immense relevance not only for our times but, perhaps even more, for the future. As His Majesty the King has strongly emphasised, the youth represent our country’s great hope and 6 are its most valuable asset. His Majesty’s vision and expectations are that the youth of Bhutan will participate actively and play a vital role in all aspects of nation-building and socio-economic development and that, through their vital contributions, they will positively shape our nation’s destiny. This would, however, be extremely hard to realise without the full and spirited participation of youth in the national economy and their gainful employment. As our own and others’ past experiences show, a growing economy alone is not sufficient to generate adequate jobs and the kind of quality employment to which our youths aspire. Our economic growth must translate effectively into a direct expansion of desirable, dignified employment opportunities and increased productivity levels. We are hopeful that our concerted efforts in this direction will empower our youth, lessen their vulnerabilities, harness their productivity, energy and talents, and ensure their integration with ease into adult society and the workplace. As we reflect on how best this can be done, this report analyses diverse aspects of the issue and suggests possible arenas for action. We are confident that the relevant assessments made will contribute to the ongoing debate and wider discussions on youth employment, strengthen its prioritisation on the national development agenda, augment our ongoing activities and programmes, and help promote an enabling policy environment for more effective action. Finally, we would like to extend our deep appreciation to the United Nations Development Programme and its Country Office in Bhutan for the extensive assistance and cooperation provided in the preparation and publication of this report.
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