Chapter 5

Potential and Development Concepts

Chapter 5 Potential and Development Concepts

5-1 Summary of Food Self-Sufficiency Rate and Food Security The World Food Summit in 1996 has defined food security as；

“The situation where all people at all times have access to sufficient, safe and nutritious food to meet their dietary needs and food preferences for an active and healthy life.”

Since then several definitions have been put forward by different organizations but common to most definitions of food security are the elements of availability, access (physical and economic), utilization and stability or sustainability. Based on the definition above, the Bhutanese government has created the Food and Nutrition Security Policy of the Kingdom of Bhutan, 2010.

(1) Food Availability As mentioned in Chapter 4, grain supply has increased in Bhutan along with growth in domestic products. Domestic self-sufficiency rate has increased from 40% in 1999 to 60% in 2008. Thanks to the increase in productivity, amongst all grain demands1, supply of rice also increased from 40% in 1999 to 60% in 2008. Domestic grown rice caters 50% of the country’s rice demands. Grain production cost is relatively high compared to other countries, which makes the agricultural production less competitive economically. The comparative production costs for 1 Mt of rice, maize and potato are shown in the graph, as these are the Bhutanese stable foods. The production costs are higher than its neighboring countries. Especially important, the production cost gap for rice is widening every year.

1 As explained in Chapter 2: Trend of Food Consumption and Distribution, the published self-sufficiency rate in Bhutan is inconsistent between publications and government documents. This is because the Department of Custom does not have standard calculation methods such as an 8 digits based HS code, and thus different methods for the calculations are employed by each concerned personnel. This report uses a self-sufficiency rate for grain products as 60% (rice 50%), stockbreeding products (meats and daily products) as 70% and vegetable products as 60%, except as discussions in Chapter 2.

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Source: FAO STAT Fig. 5-1 Comparizon of Production Cost for Major Grains

In addition to high production costs, Bhutanese agricultural production has low yield per digit of land. Graphs below compare yields of main grain production in Bhutan with its neighboring countries.

It is clear that the grain yields compared to other countries are low in Bhutan. As mentioned in Chapter 4, availability of the land and cultivation methods are the main factors for this discrepancy. Considering 30% of the whole production is lost against wildlife and 20-40% is lost in post-harvest, improvements in yields are certainly possible.

Source: FAO STAT Fig. 5-2 Comparizon of Yeild for Major Grains

As mentioned in Chapter 2, domestic supply for milk, butter, cheese and eggs is possible in recent years. Although demands for sources of protein such as beef, pork, chicken and fish have increased rapidly in recent years, these items have less than 30% self-sufficiency rates, and thus domestic supply cannot meet the demand. In 2008, an influence of bird flu outbreak, strict enforcement of quarantines, a hike of food and fuel, and a financial crisis decreased demands of protein. As a result, domestic self-sufficiency

5-2 rates for each product increased nominally. As for vegetables, about 90% of total demand could be supplied by the increase of domestic production in 2010; however 60% of cauliflower and 40% of cabbage are still imported. The Food Cooperation of Bhutan (FCB) manages food items (rice, oil and sugar) through the National Food Security Reserves (NFSR). The NFSR is distributed to the FCB’s deposit facilities which are placed in 20 Dzongkhags, where products are sold and 1,700 tons of food items are stored. Apart from NFSR, FCB manages two separate food security reserves, those are; SAAC Food Security Reserves which has storage capacity of up to 200 tons and the SAARC Food bank. Some regions store food items in storage facilities at the community level, while food items are also stored in traditional methods at the household level.

(2) Food Accessibility Food access is ensured when households and all individuals within those households have adequate resources to obtain appropriate foods for a nutritious diet. Access to adequate food depends upon income available to household and food prices. It also depends on land holding patterns, income distribution and employment opportunities. Access to food may also depend on infrastructures, transport, connectivity and food policy adopted by the government. It is therefore said that food insecurity is more of distribution issue than a production problem. Food insecurity has its root to poverty that leads to poor health, low productivity, low income, food shortage and hunger. Domestic products in Bhutan are sold in various kinds of markets. As mentioned in the marketing section in Chapter 4, main domestic product sold the most is horticultural products. Although breakdown of the products is apple 70%, orange 63%, and other fruits 30%, apple and orange products are mostly exported, and thus local markets provide more of peach, pear, plum, mango and bitter nuts. The next common item in market is meat products. These products are pork 59%, beef and yak 45%, chicken 48% and fish 47%. Common daily products sold are butter 56%, cheese 60%, hens' eggs 57% and milk 8%. The least products in the markets are the grain products where only 5% of rice and 1% of other products of its production are sold.

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Table 5-1 Usage of Major Food Items

Domestic Self Sales to Production Export (Mt) ％ consumption ％ domestic ％ (Mt) (Mt) market (Mt) Rice 49,204 376 1% 46,252 94% 2,576 5% Other cereals 50,727 7 0% 50,220 99% 500 1% Apple 17,367 7,061 41% 5,036 29% 5,270 30% Orange 52,629 22,484 43% 19,473 37% 10,672 20% Other fruits （Peach, Pear, 2,107 145 7% 1,475 70% 487 23% Mango, Plum, Bitter nuts） Potato 51,977 14,787 28% 8,061 16% 29,129 56% Chili 6,692 8 0% 6,631 99% 53 1% Vegetables 90,939 854 1% 67,809 75% 22,276 24% Beans 4,852 1,108 23% 3,407 70% 337 7% Egg('000pc) 1,993 0 0% 857 43% 1,136 57% Milk 15,645 0 0% 14,393 92% 1,252 8% Butter 1,262 0 0% 555 44% 707 56% Cheese 2,820 0 0% 1,128 40% 1,692 60% Pork 427 0 0% 175 41% 252 59% Beef 749 0 0% 412 55% 337 45% Chicken 257 0 0% 134 52% 123 48% Fish 23 0 0% 12 53% 11 47% Source）JICA Study Team, prepared from various sources

The biggest obstacle for accessing food in Bhutan is geographical and infrastructural limitations. As a result, big gap is created between documented self-sufficiency rate and the actual food distribution rate despite the fact that domestic production is sufficient enough. The Bhutan government aims to providing income security for fruits, vegetable and domestic animals in order to support lack of domestic agricultural products. Also, the government provides income security for art, craft and tourism sectors for the stabilization of farmer’s income. Even mushrooms contribute increasing in income in farm levels to improve access to food. In urban centers, employment in government and/ or private sectors contributes income generation for the residents, which enables them to purchase more variety of food items. Food variation in Bhutan is achieved thanks to seasonal availability of wild food such as herbs, medical plants, mountain vegetables (mushrooms, bamboo shoot, asparagus, wild fruits, root crops and so forth). Mountain vegetables provide not only income for purchasing commodities but also reserves in case of inefficiency of food.

(3) Food Utilization Food utilization is commonly understood as the nutritional status of an individual. It is also the proper biological use of food with sufficient energy and nutrient intake by individuals having good feeding practices, food preparation and dietary diversity. Effective food utilization also takes into account of the knowledge of food processing, storage, safety and health care. This aspect of food

5-4 security is given less importance since adequacy of food as calorie intake is taken guarantee of both food and nutrition security. The gap also exist because of that food utilization is having less to do with agriculture and food production in most developing countries. As mentioned in Chapter 2, nutrient intake factor among children under 5 years of age in Bhutan is greatly improved and thus, Ateliosis rate due to malnutrition has decreased from 56% in 1988 to 37% in 20082. This improvement is noticeable especially in the eastern region of the country. The main cause of the Ateliosis is due to lack of sufficient food intake for long periods of time and inappropriate care with food for new-born baby. Anemia due to malnutrition is the main cause of health issues which can see in 80% of baby between 6 to 60 months old. Also, the symptom can be seen in 55% women and 28% men3. It is advisable to create kitchen gardens in and/ or outside house to improve food variation, consume by them, and sell left-over to purchase more variation of food products for family members. In addition, it is necessary to bring change in food habits among citizens through promotion of kitchen garden and healthy food products. Iodine deficiency4 amplifies abnormal thyroid which was a great thread to the citizens’ health as it appeared to be more than 64% in early 1960s. Government had conducted researches to improve the situation, and thus interactions has been taken by Ministry of Agriculture and Forests, BAFRA, customs office, FCB and BSE. As a result, abnormal thyroid rate in Bhutan has dramatically decreased. Iodine deficiency has also reduced, and along with introduction of iodized salt up to 95% contributed to reduce abnormal thyroid rate to 5% in 2003. Purchasing iodized salt is now natural demand among consumers. The Bhutan government has been making much effort to improve Vitamin A intake among children under 5 years of age and students which is resulting in reduction of deficiency rate to 2.6% in the whole population in 2000. Feeding methods employed by mothers and nursing mothers are not appropriate which could cause posterior malnutrition and non-infectious disease. Mothers and nursing mothers in the rural areas need more attention to improve their feeding methods.

(4) Food Stability Stability refers to the temporal dimension of food security. As the economy of Bhutan is predominated by agriculture the performances of which in turn dependent on weather and climate factors. Climate induced instability in agricultural production is considered to be the main source of food insecurity although political upheavals have also affected food production and distribution significantly. The major determinant of agricultural growth is rainfall which fluctuates year to year and according to which the growth rate of agricultural gross domestic production has also been affected. In Bhutan, the annual rainfall increased from 644.4mm in 2000 to 1,120mm in 2010. Records

2 2008 National Nutrition Survey and IYCF Survey 3 2002 National Anemia Survey 4 The iodine deficiency disease is rare in the area where iodized salt is used, but one can see worldwide. According to Wikipedia, iodine deficiency disease happens when absorption of an iodated thing is less than 20 μg/a day.

5-5 with the Meteorology Section of the Hydro-met Service Division, Department of Energy in Thimphu showed that the average rainfall in a day in Thimphu was 1.6mm in 2000. Last year it was 3.17mm. This shows that rainfall has been increasing over the past decade even though there was some decrease in rainfall in some particular years. The temperature has also increased over the past decade. Bhutan is experiencing an average of 2 degree Celsius increase in temperature every year5. The monsoon is the determining factor of the summer crop calendar in terraced cultivation. The winter cropping calendar is determined by temperature differences, and both the length and severity of winter. The number of sunny days after the cutting of vegetation determines the cropping calendar in tsheri land. If it rains just before burning, it is postponed, resulting in delay for the whole calendar of operation. Farmers are still using the same crop rotation that has evolved out of limited experience. According to FAO6 no evidence exists that the farmers are making an effort for the development of crop rotation as a means of spreading labor, maintaining fertility, reducing the risk of buildup of specific crop pests and diseases, and reducing erosion hazards. For example, paddy rice is grown universally throughout the country as a summer crop in almost all the valley cultivation irrespective of soil suitability. It is widely known that wheat is one of suitable winter crops in Bhutan. Potato cultivation has become popular as well. However, for various reasons, land remains fallow in most places in winter.

Fig. 5-3 Cropping Calendar of Major Crops in Bhutan

As a consequence, stable food supply system has not been established. It is usual the case that shortage of crops occurs prior to two to three months of harvest season. Although reports in Bhutan show effect on crop production due to flooding and global warming, its causal relationship cannot be verified without continuous researches. Also, figures on human and wildlife conflict cannot be confirmed as no further prevention methods have been employed to improve the situation though the Tenth Five Year Plan reports that the wildlife damage is

5 http://bhutanandclimatechange.blogspot.com/2011_03_01_archive.html 6 Shifting Cultivation in Bhutan: A Gradual Approach to Modifying Land Use Patterns

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30% of the whole crop production. This issue will be integrated in to the Eleventh Five Year Plan as a main subject in agriculture.

5-2 Situation on food supply basis for food security Among main diets, 60% of crops, 70% of livestock (meats and daily products), and 60% of vegetable are supplied within the country and majority of the rests are imported from India. Graphs below denotes how the Bhutan is dependent on rice to other countries (mainly to India). The first graph depicts trade balance on weight base for each food item (deducting importing quantity in tons from exporting quantity in tons). The second graph depicts trade balance on amount base (deducting importing value from exporting value).

Source: FAO STAT Fig. 5-4 Comparizon of Trade Balance of Major Crops

As shown in the graphs above, most of the food items are chronically lacking in quantity and trade balance. Except for main export item apple, most of food items show a trade deficit, among which rice trade indicates outstanding figures. In the midst of Rupee crunch, the voices insisting in increase of self-sufficiency rate is getting louder along with improvement in domestic financial systems. In common view, Rupee appreciation is not a temporal phenomenon but constant and steady progress. Rupee appreciation will definitely continue and therefore Bhutan will face a pressure on reduction of Ngultrum value against Rupee although Rupee and Ngultrum had maintained equal exchange rate. During research period, some market exchange rate appeared to be Rupee : Ngultrum = 1 : 0.8.

Discussion in this chapter is curried out based on the environment surrounding agricultural products in Bhutan as mentioned below. And later part of this chapter discusses the direction of the food security based on analysis from Chapter 2 to Chapter 4 of this report. a. Rice Bhutan has imported Nu. 11 billion worth rice in 2011 which is the biggest expenditure among food import. It was believed that most of the imported rice from India was consumed by foreign workers in

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Bhutan7, however, some redundant still remain even if each of 55 thousand foreign workers in Bhutan (April 2012) consumes 135kg of rice per year. This phenomenon tells that the imported rice is consumed largely by Bhutanese citizens. Through interviews with local residents, consumers being particular with Bhutanese traditional red rice are only from Thimphu. Paro, Punakha and Wangdue Phodrang, and no preferences for kinds of rice consumption are recorded in rest of the regions. The younger generations in urban centers and Indian or Nepali Bhutanese residing Indian border towns tend to prefer Indian rice because of exposure to multinational food habits. It is believed that Bhutanese food self-sufficiency rate can be increased from present rate of 50% to more than 70% through proper irrigation development8. The self-sufficiency rate at the end of the Tenth Five Year Plan (2012) is set at 50%, and thus the government aims at 65-70% sufficiency rate during the Eleventh Five Year Plan9. One of the development goals during the Eleventh Five Year Plan will be development of farmers’ organization through installation of power tillers and other cultivation machineries in the areas where installation of tractors are impossible due to topographical constrains and implementation of proper town plans10. However, there are only 5-8% arable land and 23,000ha (58,000acres) of paddy areas only. On the top of this fact, there is a circumstance that paddy areas have been shrinking due to expansion of towns and roads development in arable lands in recent years which is hampering an increase in self-sufficiency rate. Farm lands are now transformed in to non-agricultural land and/ or horticultural land since rice cultivation is less profitable compared to other commercial products as shown in Chapter 4. Considering the above discussed facts, it is deemed that going for 100% rice sufficiency would not be "economically in Bhutan's favor".

b. Meat products (chicken, fish, beef, pork and mutton) and daily products Provided that Bhutanese do not have a religious belief that killing animal is sinful, complete meat supply could have been achieved within the country. Due to this belief, import of meat products in Bhutan is the third highest following the rice and daily products. As mentioned in Chapter 2, level of import for meat products in Bhutan was Nu. 630 million in 2011. It is not known well how dry beef and pork fats in the markets used for making traditional Bhutanese dishes along with cheese are processed and prepared. Due to the religious belief, introducing animal slotting place will be almost impossible in Bhutan even if investors for butchering industry come forward. Recently, freshwater fish cultivation with warm water has started in Sarpang area; however, there are so much complaining and criticism from the people. On the other hand, level of import for fish in 2011 was Nu.160

7 KUENSEL, Apr.18, 2012, pp5 8 One of the causes of stagnation of self-sufficiency rate is attributed by elimination of irrigation engineer in 1990s by the government. 9 Basically, the target of self-sufficiency of rice in the Tenth Five Year Plan was also set at 65%. 10 Prospection as of the beginning of May 2012.

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million which is Nu. 21 million more than the previous year. Level of import for the daily products is one the highest products that had Nu. 670 million worth import where self-sufficiency rate for the products has reached 50% in 2011.

c. Vegetables By taking the advantage of Rupee crunch situation, Bhutanese government aims at 100% self-sufficiency of the vegetable products by the summer 2014. Free distribution of seeds and fertilizer has already started by May 2012, and distributors are engaging to encourage farmers to produce more products. In Bhutan, 200g of vegetable is categorized as Recommended Dietary Allowance (RDA), which is less than 60% of its Japanese standard of 350g. Allowing for current Bhutanese eating habits, it is considered that almost 60% of the vegetable is supplied within the country11. Level of import for vegetable in 2011 was Nu.286 million, and potatoes are the only vegetable which is self-sufficiency in Bhutan. Ministry of Agriculture and Forests aspires to substitute the imported vegetables which is 50-60% of the sold products in the Centenary Farmer’s Market (CFM) in Thimphu12 with domestic products. There are 14 wholesalers and 25 retailers as registered venders at present at the CFM. It is said that the venders’ weekly level of import is Nu.200 thousand for wholesalers and Nu.10,000-20,000 for retailers where most of the venders deal with Indian exporters. The substitute vegetable products will be potatoes, cabbages, cauliflowers and beans which can be produced within the country and refrigerated at high altitude with low temperature such as Pele-La, Dochu-La, and/or Phobjikha, and supplied to the local markets in times of insufficient vegetable production. A strong commitment from FCB is required to support this program, whereas their capacity and manpower will be difficult to meet the demand. This substitute program13 initiated by Ministry of Agriculture and Forests intends to create the markets with only locally produced vegetable through joint projects with hydropower projects and School Agriculture Program. Farmers in some regions such as Punakha, Wangdue Phodrang and Tsirang have already signed contracts with Punatshang-chu Hydropower Project as a part of the local contribution project as social responsibilities to supply 1,000 tons of vegetables. Similar cooperation phenomenon exists during religious ceremonies in Jakar, Bumthang and Gyalpoizhing. Such phenomenon is expected to take place with monastic-bodies and military forces.

11 The proof of 60% is not come from survey result on actual consumption activities, but from the estimate that 60% of Vegetable RDA (200g/day) is produced in Bhutan. 12 Self-sufficiency is achieved from Jun to November but relying to import for the remaining months. MoAF’s policy is to produce winter vegetable in the southern and a part of the central Dzongkhag and summer vegetable for Punakha, Haa, Thimphu, Trongsa, Trashi Yangtse and so on. For recent years, Bhutan’s vegetable import volume shows no big increase compared to its amount. For example, 2009-2010 vegetable imports increased by 1% of volume and 7% of amount, respectively. 13 RMA decided not to finance to the vegetable import business from India (may 2012)

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d. Fruits According to the ministry of Agriculture and Forests master-plan, the main horticultural production centers are located in six Dzongkhags in the Eastern region of the country. Apples and oranges are the main export products to provide limited profits in agriculture sect in the country. In 2010, 7,000 Mt of apples, 22,000 Mt of oranges and 500 Mt of cardamom are exported. Export of bitter nuts has increased in recent years, and thus 1,300 Mt was exported in 2010.

Table 5-2 Supply, Consumption and Export/Import for Major Food

Consumption (Export + Seed + Utilization Supply (Production + Import)（Mt) Feed/Wastage + Self consumption) Export （Mt) Import （Mt) for last 3 （Mt) years （％） 2,008 2,009 2,010 2,008 2,009 2,010 2,008 2,009 2,010 2,008 2,009 2,010 Rice 103,980 98,527 100,007 97,640 92,128 93,879 1 90 119 376 52,180 53,473 52,010 Wheat 11,957 16,055 9,291 10,880 13,146 8,477 1 128 0 0 1,806 5,221 2,410 Wheat Flour 0 1,756 469 6,377 6,976 4,876 Other cereals 31 30 7 4,922 5,317 4,272 Apple 5,449 6,562 17,418 194 2,219 9,487 0 4,982 7,016 7,061 39 39 51 Orange 38,203 44,328 52,660 15,946 13,982 27,543 0 20,346 28,130 22,484 9 33 31 Other fruits 19 123 145 2,291 2,148 1,707 Bitter nuts 802 514 1,288 0 282 296 Potato 39,720 52,186 52,160 7,184 17,328 22,848 0 14,950 24,584 14,787 3,673 2,841 183 Chili 8,019 10,336 6,989 6,623 9,796 6,639 1 26 24 8 1,380 1,362 1,317 Vegetables 6 285 854 5,837 5,832 8,182 Beans 587 1,575 4,852 461 1,350 4,515 1 1,526 1,443 1,108 200 2,162 1,585 Mushroom 233 7 15 212 2 4 21 5 11 Cardamom 695 548 476 695 548 476 0 0 0 Edible oil 415 1,481 1,652 394 1,407 1,569 1 0 0 0 6,625 6,860 6,478 Egg('000pc) 4,979 1,298 2,507 4,730 1,233 2,382 1 0 0 0 374 920 476 Milk 14,723 1,401 18,693 14,024 1,331 17,805 1 0 0 0 1,084 2,798 3,048 Butter 1,615 1,941 1,613 0 0 0 267 209 351 Cheese 5,009 2,866 3,764 0 0 0 546 674 944 Sugar 0 0 0 7,193 8,536 7,095 Pork 1,408 1,505 1,850 1,337 1,430 1,758 1 0 0 0 1,183 1,172 1,423 Beef 2,759 3,363 3,712 2,621 3,195 3,527 1 0 0 0 2,340 2,720 2,964 Chicken 174 476 641 165 452 609 1 0 0 0 81 321 384 Fish 649 791 854 616 752 811 1 0 0 0 1,632 1,759 1,824 Mutton 132 104 103 125 99 98 1 0 0 0 98 28 24 Note/Blank space means NA Source） Bhutan RNR Statistic 2011

Renewable natural Resources centre (RNR) is the core agency for the improvement of horticulture production, and the main RNR centre is located in Mongar where Japanese technical support is provided.

It was reported in Bhutanese newspapers that domestic production of eggs was enough to meet the demand because in 2011, only two million pieces of eggs were imported due to imposed limitation on import14, however on the hand, 22 million pieces of eggs were produced domestically and it was observed the eggs glut in some domestic market though the price of eggs was still high. Therefore, government high officials have a perspective that egg, vegetable and daily products can attain complete self-sufficiency at the end of the Eleventh Five Year Plan. In this context, even in

14 KUENSEL, Apr.18,2 012, pp5

5-10 terms of grain products, a certain levels of attainment of self-sufficiency (70-75% in terms of rice) would be expected. Judgments on attainment of such self-sufficiency rate are made based on existing Bhutanese food-habits. However, the concept which stood on the present food-habits by Bhutanese seems not meaningful. In terms of food security in Bhutan, some discussions have been made based on the domestic demand that is rooted in existing food-habits; whereas, few discussions have been made on the relationship among food self-sufficiency, food-habits and health of Bhutan who practice Gross National Happiness for her people. Bhutanese life expectancy is at 67 years old that is 16 years younger than the world most longevity of Japanese life expectancy of 83 years old. It is a high time to reconsider about the true sense of food self-sufficiency and food security apart from the thinking, which just satisfy hunger with a volume of food.

Source: UNDP, Human Development Report 2011 Fig. 5-5 Comparison of Average Life Expectancy

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Box. Japan's Food Control System

The shortage of rice was still common in the mid 1950s when postwar food shortage was easing in Japan, and the price of rice and rice distribution were still put under the direct control of the government by Food Control Law. An adjustment of supply and demand of rice was performed by controlling method that the Food Agency buys rice from farmer under delivery quota system and distribute to consumer under the rationing system, respectively. Import of rice was also put under the direct management of the Food Agency. As for distribution channel of rice, the produced rice was collected except consumables at his house by the first collector - Agricultural Cooperatives, and then gathered by the second collector, - Financial Federation of Agricultural Cooperative, and finally, sold to Food Agency through national level cargo group, - Federation of Agricultural Cooperative Unions15. As favorable move of food circumstances with economic development, economic and social condition surrounding rice has also changed. Thus, Food Control System has been corrected and has also improved practical use according to the real movement of the surrounding environment. As for major change, delivery of rice was converted to preliminary sale application system from delivery quota system with the bumper of rice as a backdrop. Second, in the context of income disparity of agriculture and industry, the calculation system of producer's rice price was changed to "the production cost plus income indemnity system" from “parity system". The feature of this producer's rice price calculation system was that family working hour put in rice production fitted to the equal to the wages by the urban wage earners. In 1960s, since the wages of urban laborer rose every year, the producer's rice price rose rapidly after the production cost plus income indemnity system was adopted.

Fig. 5-6 Japan’s Food Self–sufficiency Ratio

The self-sufficiency rate of rice (Japanese staple food) was lengthily maintaining at 100% or more except in 1993 lean year when the government made emergency import and the self-sufficiency rate plunged to 75%. But Japan was going to admit minimum access (MA) by the Uruguay Round agreement of GATT, predecessor of WTO, and the rate fall below 100% from 1997. Taking into

15 For a long time after the war, the Food Agency was distributing bought rice through the Food Delivery Corporation, but after it was dismissed in 1951, the Food Agency sold it to consumers by way of designated wholesaler and then via designated retailer.

5-12 consideration the influence to the producers, MA rice is being utilized for processing and oversea aid, so that as far as rice production for principal food concern, 100% of self-sufficiency rate is still being maintained mostly.

5-3 Issues Related to Improving Bhutan’s Food Security and Self-Sufficiency (1) Macro Issues Related to Food Security a. Concerns about Slowing Economic Growth At the ESCAP (Economic and Social Commission for Asia and the Pacific) meeting held in May 2012, quite optimistic figures for Bhutan’s economic growth—from 8.3% in 2011 to 9.8% in 2012—were announced. Under current conditions, the rupee crunch is beginning to impact the country’s import-led economic structure, and given the goods shortages due to inflation caused by linkage with India’s economy, few experts support ESCAP’s figures. Even so, strong eagerness to buy among urbanites is being channeled into new housing construction and purchases of consumer durables, and although the economy may not expand by 9.8% as it did last year, figures are unlikely to skew sharply and change the growth momentum. The rupee crunch presents a good opportunity to reevaluate Bhutan’s economic structure, heretofore dependent on India, raise its food self-sufficiency ratio, and consider introducing a social security scheme for the poor and the disadvantaged. b. Tight Public Finances According to the Royal Monetary Authority (RMA), Bhutan’s central bank, current expenditures in the government’s 11th 5-Year Plan are expected to rise by 75% compared to now. Additionally, 65% of resources in the 11th 5-Year Plan are expected to be allotted to current expenditure. This is because the cost of cumulative maintenance and operation of infrastructure the government has invested in so far needs to be paid for out of the 11th 5-Year Plan. According to estimates, while the amount of capital expenditure needed to achieve the 11th 5-Year Plan (Nu. 73 billion) is about the same as that of the Tenth Five Year Plan, current expenditure, which was Nu. 75 billion in the Tenth Five Year Plan, will increase to Nu. 130.9 billion in the Eleventh Five Year Plan. The resource gap, i.e. the difference between foreign aid and domestic savings, which was Nu. 9.5 billion in the Tenth Five Year Plan, will increase to Nu. 13.3 billion in the Eleventh Five Year Plan. This is because, attempting to move away from LDC (Least Developed Country) status, Bhutan has announced that some foreign aid organizations will be leaving the country. Consequently, foreign grant aid will decline from Nu. 50.2 billion to Nu. 47.3 billion.

5-13 c. Future appreciation of rupee/Weak financial system The balance of payment problem started since 2003 when the government borrowed Rs.100 million from the government of India line of credit. By 2004, it increased to Rs. 250 million. In 1999, RMA liquidated around Rs. 250 million, but by 2003, the risks start growing. In 2007, the first candidacy elections started; there was a shortage of Nu. 4 billion. Therefore, RMA sold US$25 million. By 2009, RMA borrowed another Rs. 3 billion. Then in 2010, it again borrowed Rs. 5billion. In 2011, RMA had to borrow four times - 6 billion, 7 billion and 8 billion. Then it had to sell US$ 200 million.

According to RMA, credit from financial institutions fuelled private consumption amounting to Rs. 48.5 billion. These are urgent and short-term debts. In 1998, RMA had to take an overdraft of Rs. 800 million at an interest rate of 10% to finance private consumption. According to the annual RMA report, the concentration of private sector lending in consumer-driven and non-productive sectors coupled with the high asset-liability mismatch in the banking system fueled external imbalances through private consumption. It further contributed to upward inflationary pressures through the trade account, thereby exposing the financial sector to risks of illiquidity. In the last five years, Bhutan's growth in credit has more than doubled the nominal GDP.

40,000 80 ％ 35,000 70 Debt Outstanding （Rp. Mil.） 30,000 60 Annual repayment （Rp.Mil） 25,000 50 Debt Service Ratio （％） 20,000 40

Rp.Million 15,000 30

10,000 20

5,000 10

0 0 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11

2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 Debt Outstanding （Rp. Mil.） 7,848 10,964 14,222 16,604 18,400 18,370 18,948 21,401 22,778 34,062 Debt from Hydropower Project 7,848 10,964 14,222 16,604 18,400 18,370 17,320 17,483 18,278 24,648 Other than Hydropower Project 0 0 0 0 0 0 1,628 3,918 4,500 9,414 Annual repayment （Rp.Mil） 117 113 108 492 488 484 4,276 7,742 7,481 16,523 Principal 88 88 88 274 274 274 2,647 6,144 5,795 14,697 Interest 30 25 21 218 214 210 1,549 1,598 1,686 1,826 Debt Service Ratio （％） 2.2 2.5 2.4 9.4 5.5 2.3 19.2 32.7 31.4 69.4 Principal 6.0 0.5 0.3 2.4 1.9 1.0 7.0 6.8 7.1 7.0 Interest 1.8 1.7 1.3 3.1 2.5 1.3 12.2 26 24.3 56.5 Debt/GDP（％） 34.8 42.2 50.0 53.1 51.0 45.2 38.3 39.1 37.2 47.0 Source: Annual RMA Report Fig. 5-7 Rupee Deficit by RMA

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The Bhutanese economy grew by around 8 percent between 2010 and 2011. But the growth was mainly import-driven and since the export does not grow, the situation worsened. According to the National Accounts Statistics of 2010, the level of private household final consumption expenditure rose to Nu. 30 billion in 2010 from Nu. 23 billion in 2009, or 24% increase. Additionally, these risks increase because Bhutan's financial sector model permits both banks and non-banking financial institutions, including pension fund and insurance companies to engage in lending. There are no such examples in other companies16. According to the announcement of RMA on April 2012, Bhutan is a poor country with rich people and the RMA has been borrowing rupee by availing itself of overdraft facilities not to pay off government loans or to fund government expenditures, but to bail out increasing private consumption. In this case, private consumption does not mean the consumption by private sector, but the individual consumption for non-productive purposes. The Central Bank of Bhutan has been taking overdrafts at 10% to bail out private consumption17.

Box. Influence of Rupee Crunch

(1) Construction worker and residence construction Since RMA restricted withdrawal of rupee, payment of salary to Indian workers got tight. Construction is active in Bhutan and most of labors are from India. As of April 2012, the number of Indian workers related to construction in Bhutan is around 55 thousand18. According to the annual RMA report, import of huge amount of labor from India is considered as one of the cause of rupee outflow. In 2011, construction and engineering services imported from India increased to Nu. 2.2 billion from Nu. 1.0 billion in previous year. Approx. 23% of import is for hydropower services and remaining 76% is for residential development for private sector. The residential development includes construction of private house, hotel and rent house. In the provinces, villagers have been constructing their residence applying traditional mutual help system. However, recently, modern houses which can not apply traditional method are preferred by villagers. Then, a new type of building work that is not replaced with traditional system is required and the services provided by Indian are getting popular. Because of this factor, Indian construction workers are requested to work even for individual house construction. Likewise, a huge volume of rupee outflow occurred not only by public projects but also by private sector transaction (most of which are thought as "individual") is accelerating rupee crunch.

(2) Hydropower project Although it was planned that hydropower projects can generate 10,000MW by 2020, recent study by Department of Electric Power revealed that only 6,700MW or 2/3 would be available then. The government is prospecting that the balance of payment issue is solved at that stage but there are several worries on this expectation; viz. i) it is not sure that income obtained in 2020 is good enough for Bhutanese people assuming that they continue present lifestyle, which increasingly needs high cost and expenses. and ii) people needs day-to-day consumption and they cannot wait until year 2020. However, revenue from hydropower is still counted as the last resort to rupee crunch and a basis of optimism.

16 By June 2014, non-banking financial institutions will have to reorganize themselves. Insurance companies can then only do insurance business and pension companies cannot lend as there will be fund management companies by then. 17 According to the Deputy Governor of RMA, the officers of RMA firstly notice extraordinary rupee deficit around 2008, but they ware under the government autonomy having no independency at that time and could not take any defense measures. 18 The government is planning to gradually replace present foreign employee to Bhutanese. Although it is said that Bhutanese does not want work at tough and dirty job, the government is requesting cooperation to employers and encourage them to pay higher salary to attract Bhutanese worker.

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d. Deficiencies in Agricultural Finance The government had previously encouraged consumption and adopted a low interest rate policy—10-12% for auto purchase loans, 10% for building loans. Meanwhile, borrowers who needed money to invest to expand farming businesses or businesses in the food and beverage sector were charged high interest. The government’s monetary policy also could not foresee the rupee crunch, and most financial products went to expand personal consumption instead of promoting industry. The Bhutan Development Financial Corporation (BDFC) offers loans promoting farming and livestock raising for agricultural development. Farming loans offered by BDFC in 2009 were for exporters of citrus fruits and apples, and for importers of farm products and machinery. Loans to promote livestock raising were for livestock, beekeeping, poultry farming and fish farming. Both types were 5-year loans extended at 15% annual interest (lowered to 13% as of May 2012), but basically, farmers forced to live hand-to-mouth have no access to such financial products. By contrast, BDFC offers loans at 12% interest for mining, tourism, transport and hotel businesses, and with these financial products borrowers have the upper hand. As the above describes, Bhutan offered low-interest financial products to promote imports, but interest rates on loans for exporting farm products like citrus fruits or apples were very high. In other words, there were no financial products to encourage the local population to produce food. Now all eyes are on the introduction of microfinance. As of April 2012, several proposals for entering into microfinance projects have been submitted to the RMA. The Bhutan government is currently taking a positive approach to evaluating these proposals and is working to create a Financial Inclusion Policy.

Box. Micro Finance

Introduction of microfinance is noteworthy movement at present. There are many proposals being submitted to RMA by various entities as of April, 2012. They are aiming entering into micro finance operation in Bhutan. RMA is favorably investigating the proposal at present and preparing Financial Inclusion Policy (FIP) for the future operation. It is thought that microfinance will take effect to agricultural sector, which accounts for 17% of GDP (2010), and 60% of total employment. The Bhutan government together with Would Bank is hosting preparatory discussion for the introduction of microfinance. According to the discussion so far, credit ceiling will be at Nu. 30-50 thousand and interest of planned microfinance is 5-15%/month. Putting microfinance premises to the area where financial institution is not available is important. Bhutan has lesser availability of financial premises compared to other SAARC member countries that only three financial institutions are available as per 10,000 km of road. On the other hand, adult population is way up on the top level. This is reason why the placement of microfinance at inaccessible location by the government is thought as essential.

5-16 e. Lack of Topographical Maps on which to Base Various Plans Topographical maps used for development are basically at 1:50,000 or 1:25,000 scales. In many countries, map information which can be used for devising national strategy policies is often considered secret and handled in military facilities, but in Bhutan, maps are overseen by the National Land Commission (NLC). Since Bhutan’s topography is prone to change due to landslides or soil erosion, map information must be updated frequently to prevent errors in major plans: the current topographical maps are from 1994. Based on this information, Land Cover Maps were created in 2002 and 2012. The lack of maps at 1:50,000 and 1:25,000 scale also causes much confusion at the regional level. In some cases there is more than twice the difference in the area of gewog (village blocks) on maps held by the national government and those of the dzongkhag (districts), creating major obstacles to instituting policies for land use. JICA in cooperation with JAXA has been providing ALOS satellite data for a number of years now but personnel who can utilize the data is not trained yet in NLC. f. Complexity of Plans for Regional Administrative Support Because of its complex topography and lack of convenient access, farmers living in remote areas require a full range of administrative services. Therefore, residents of village blocks depend on the local administrative office, but these offices handle almost no applications for various services. They function mainly as referral centers, and therefore their job is to refer people in village blocks to the district administration. To residents for whom the district is more than a day’s walk away, centralization of services means inconvenience in every aspect of their lives. Various bodies are working to improve administrative services, but as experts with the Royal Regional Administration Project say, achieving vertical and horizontal linkage among administrative bodies is difficult and results in duplication and waste at the planning and execution stages. Rather than conflicts between districts and between village blocks, this appears to be the result of duplications of various ministries’ policies. For example, attempts to support village blocks, centralize administrative functions and provide one-stop administrative services at the village block level include the Interior and Culture Ministry’s Community Information Centers and the Agriculture and Forestry Ministry’s One Stop Shop, which all offer very similar content. Right now, there is no administrative function working to get an overall idea of these plans and assign appropriate roles and functions.

5-17 g. Restrictions on Land Use Where land use is concerned, it is likely that many permits are being granted to convert farmland into residential land. One of the problems in this area is that the NLC has no complete picture of permissions granted or applications submitted for land use changes in the whole country. In other words, since it has no data based on documents for how much of the area of each district has been converted to residential land, it lacks information on urbanization trends. A second land use issue is restriction on the right to cultivate land. Land use rules are unable to deal flexibly with existing customs in farming areas. Namely, even though interested parties attached to the land may want to expand the amount of land under cultivation when farmland has been abandoned, nationwide custom is that the landowner receives 50% of the crop, so this prevents land from being transferred smoothly. The existing administrative apparatus shows little commitment to measures for using land effectively, so land is abandoned and can set off natural disasters. h. Lack of FDI Principles and Incentives As part of food security strategies, national governments often devise strategies that involve courting foreign investment and establishing food clusters. Bhutan, however, has no legal framework for accepting foreign investment, and therefore it cannot attract any useful foreign direct investment (FDI). The Ministry of Economic Affairs is currently studying the situation19, but there are no detailed written rules concerning incentives20, and incentives are decided ad hoc in individual negotiations. This means that even if a company invests, there is plenty of potential for trouble with the authorities after the investment has been made. The lack of clear-cut rules can also work to Bhutan’s disadvantage. For example, in a hydroelectric power generation project underway right now, Bhutan is responsible for building access roads and for conducting an environmental assessment, so it is quite possible that, due to the lack of regulations, Bhutan could be burdened with unfavorable conditions.

19 The FDI Bureau of the Ministry of Economic Affairs is currently preparing regulations concerning FDI. As of now, 11 proposals have been received from India, 4 from Singapore and 3 from the U.S. Total amount of FDI proposed to Bhutan as of April 2012 was NU.15.4 billion. The biggest FDI so far is Dagachu Hydropower project with initial investment amount at Nu. 8 billion. The biggest number of employment creation is planned by the G4S Securities Service at 450. According to RMA, Bhutan accepted the least FDI among SAARC region; FDI at US$74 million in 2006-2007 dropped to US$16 million in 2010-2011 (2007-2008: US$3 million, 2008-2009: US$7 million, 2009-2010: US$19 million). Thus, FDI is small but big fluctuation can be observed. It is affected by the investment from India, most of which comes from hydropower project. 20 See Foreign Direct Investment Rules and Regulations 2005 and Foreign Direct Investment (FDI) Policy, 2010.

5-18 i. Inadequate Measures against Farm Products Imported from India The value of vegetable production out of total value of production for the farming sector is now at the lowest level in five years. For reference, in 2009, rice accounted for 50% of farm production value and vegetables slightly more than 0.9%. Further, the trade deficit for vegetables are negligible compared to rice and has hardly been affected by lessening of the rupee crunch. The government announced that it aimed to make the country completely self-sufficient in vegetables in two years, by 2013. To reach this goal, crop yield must be doubled and yearly production boosted to 55,000Mt. As for the high price of vegetables, if production increases the market mechanism will kick in and prices are likely to drop, but the government intends to support prices to some extent so that prices are not lower than the product cost envisioned by the Agriculture and Forestry Ministry. But considering the operational burden involved if this is carried out, it must be said that that it is doubtful whether making 100% self-sufficiency in vegetables, whose prices are barely affected by the lessening of the rupee crunch, the first priority for food security really means sustainable food security. What is different about the plan this time is the government’s determination to carry it out. This is probably because the government believes that realistically speaking, compared to grain and meat, only for vegetables is it possible to replace imports completely with domestic production. Basically, to lessen the impact of the rupee crunch, more important issues, such as establishing self-sufficiency in rice21 and reducing spending by individuals need to be tackled. j. Damage to Citizens’ Health Average life expectancy in Bhutan rose from 45.6 years in 1984 to 66.1 years in 2003. The over-65 population, which numbered 30,000 in 2005, is likely to increase to 58,000 in 2030. Among causes of death, ALD (Alcohol Liver Diseases) accounts for 10-13%. At just one of Thimphu’s private referral hospitals, between 2005 and 2009 there were 185 deaths due to ALD. ALD is caused by prolonged, excessive alcohol intake. In 2003, the number of patients was slightly over 900, a figure which had grown to 1,600 in 2009. The NSB’s “Alcohol Use and Abuse in Bhutan (2012)” states that health care costs for treating ALD from 2005 to 2009 totaled Nu. 64 million, and that Nu. 13 million is budgeted for this yearly. One reason for the increase in ALD is the government’s liberalization of the manufacture and sale of alcoholic beverages. In 2010 alone, there were over 3,000 bars operating in Bhutan22.

21 Farm households, which make up 69% of the population, are dependent on rice from India. In 2009, rice ranked fourth among imported products, with Rp. 721 million budgeted for imports. 22 At present, there are nine companies which have a license on alcohol distilling in Bhutan, and out of nine licenses 5 are under AWP. Out of nine, only five are operational; two are under AWP and other three are private companies. There are other

5-19 k. Lack of Private Sector Companies Where food security is concerned, it is the private sector’s role to identify latent investment possibilities. Investment by private sector companies boosts the added value of farm products, while development of various types of food products improves year-round access to food, and functional foods can be developed which promote absorption of nutrients. Bhutan has only three food-processing companies, all government-owned, and all have nearly identical product lines. Further, since the products are made exclusively from fruit, this does not increase demand for vegetables or meat products as ingredients.

(2) Issues and Potential for Agricultural Production ① Issues in the Production Sector  Inadequate road/irrigation systems Under its 20-year plan for 2007-2027, the Ministry of Works and Human Settlement plans to build 132 branch roads covering 2,650km, directly benefiting approximately 21,000 households. Road construction has not been able to keep up with the needs of the population, thinly spread out over mountainous terrain. Road-building also has the negative effect of acting as a conduit funneling the population into urban areas, and thus it is not necessarily beneficial to farming. Fig. 5-8 Planned branch road-building map Meanwhile, irrigation systems are in Source: Road Sector Masterplan 2007-2027 place over 27,100ha (66,976 acres) registered as wetlands, which account for 17% of the country’s farming land23. In elevated areas, water sources are scarce and irrigation facilities tend to be small-scale. Facilities are also prone to damage from wind and rain, and farmers often lack the necessary skills to repair the systems.

seven companies which are applying for license but the government is reluctant to do so and having intention to reduce the number of operators because it is not fit with the philosophy of GNH if alcohol prevails over the nation. Further, new policy entails centralize licensing power to Dzongkhag authority from the regional trade and industry office. In this case, the government is aiming to get rid of operational right of bar and restaurant, etc., once they failed to do a renewal procedure by due date. 23 Strategy for Production of Agricultural Areas, Dec. 2010, p. 5. Wetlands 27,100ha (66,976 acres or 17%), dry land 118,900ha (293,789 acres, 77％), orchards 6,800ha (16,789 acres, 6%). Total: 114,700ha (283,440 acres).

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 Potential In our field study, it is noted that most irrigation facilities are small-scale, and in most cases repairs would not be a major undertaking. In the case of a broken-down irrigation system in Chuzagang, Sarpang district, it was pointed out that if routine maintenance had been carried out properly, breakdowns could have been avoided. If farmers were trained in repairs and could repair the damaged facilities themselves, irrigation systems could be restored to a certain extent.

A damaged water channel by landslide A water intake (the hose is prone to being displaced by rain or wind) Thus, forming irrigator’s association24 and teaching the groups how to keep irrigation facilities in good working order would reduce expenses for irrigation system maintenance, which the government has paid for so far, and could help bring farmers together and wean them from dependence on the government.

 Uneven extension services leading to low yields Two separate issues need to be discussed here: issues related to the RNR research center, and issues related to the personnel providing extension services. Bajo, where the research center for rice is located, is becoming more urbanized and dwellings surround the fields: conflicts with the residents are sure to arise over the composting and spraying carried out in the fields. Farmers who visit the research center on inspection tours also find it strange to see fields in the middle of a residential area. Therefore, in addition to the fact that the research center has been encroached on by urbanization and is running out of space, this is also causing problems in testing and research and extension activities.

24 The Government is planning to grasp profile of farmers group in charge of irrigation water management from now, so that neither the number of irrigator's association (IA) nor membership of each IA is available at present. Incidentally, Sarpang Dzongkhag where JICA Study Team worked in, there are about 300 irrigable areas, out of which 79 have more than 5ha of catchment area with more than 10 beneficial farm households.

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Next, there are substantial differences in the abilities of the extension agents in charge of village blocks. In the three districts visited in our field survey— Teshigang, Zhemgang and Sarpang—we saw some very hard-working extension officers doing all they could for farmers, and others who waited for orders from their superiors and did only what they were instructed to do. Naturally, this sometimes reflects differences in extension officers’ personalities or abilities, but more fundamentally this is an issue of deficiencies in the system for evaluating extension officers. Officers are paid the same, regardless of how much or how little they work. This inefficiency in extension activities at the lowest level means that farming skills are not transmitted reliably to farmers, resulting not just in low yields for rice and cash crops but also lack of uniformity in growing methods and harvesting times within the same district, which hinders group purchasing or selling. This is what makes it difficult for farmers to establish farming groups.

 Potential The research center at Bajo has more or less reached the end of its useful life, and it is probably time to think of transferring its functions to a new location. The Mongar RNR covers the six districts in the eastern part of the country and also serves as the base for horticulture for the entire country, and the functions of an RNR center for the western part of the country should be strengthened and RNR centers of equal quality should be established in the east and west. For the improvement of variety of crop, Bhutan is run short of proper technology and institutional setup. As for the introduction of good variety of crops, it will take a long time even though the government organizes the project and start development. Therefore it will not be economically feasible and it is much faster and cheaper to bring in good variety from Nepal and northern India. According to the Japanese Expert in Mongar RNR Center, Japan’s ban against bringing out developed variety to abroad expire in 25 years but such expired variety is still fruitful in Bhutan. In reality, a lot of perennial crops planted in Mongar RNR Center are Japan's expired varieties. Therefore, it is not necessary for the GOJ to setup special project for improvement of crop variety and the Bhutan government can introduce such improved varieties from adjacent countries by their own effort.

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Research center and extension services in eastern Bhutan are provided mainly through the Mongar RNR center, which is supported by Japan. In the western part of the country, better functions for an RNR center could be provided by Mitthen, an RNR development sub-center for the RNR at Bajo, which is becoming less effective now due to changes in the local RNR Sub center in Mitthen environment. Mitthen covers an area of 14.8ha (36.5acres) vs. 25.5ha (62acres) for Bajo and has 7 trainees—3 in field crops, 2 in horticulture, 1 in livestock raising and 1 in IPM. Bajo, on the other hand, has 42 personnel, including management staff. Right now, a total of 300-400 in farmer groups visit the center yearly on trips organized by the districts. Together with transferring the functions of Bajo to Mitthen, putting more effort into research center and extension activities could help create a core center for testing, research and extension that would serve the south-central and southwest portions of the western part of the country.

 Damage caused by wildlife One target of the Tenth Five Year Plan was to reduce damage caused by wildlife from 40% of production to 20%. But according to the bureau in charge at the Agriculture and Forestry Ministry, although electrified fences installed in some parts of the country have been effective, officials feel that overall, it will be impossible to meet the target. Electrified fences installed in the central and eastern parts of the country where there is a lot of small wildlife have been effective and the RNR Center at Morgan has verified this. But in areas in the south where there are elephants, it is doubtful that efforts to prevent damage have worked, despite the government’s repeated efforts. The following table shows the amount the government has spent on mitigation measures for the prevention of human-elephant conflict. The amount is actual costs incurred in setting up electric fences and does not include the cost of training, awareness programs and other activities.

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Table 5-3 Government spending on elephant mitigation measures

In Chuzagang, Sarpang, where fieldwork was conducted, elephants have been appearing regularly throughout the year25, and damage is frequent, especially in the case of poor farmers who own only land where encroachment occurs.

Box. Interview to Mr. B who lives in Sarpang Dzongkhag, Chuzagang Gewog, Zonbebe Yue As for the damage by wildlife, it is reported that there are a big difference by location of farm; for example, Shawapang Yue, just two kilometer distance from Barthang Yue has no damage at all, while Barthang, about 80% of crop field are destroyed by elephant. Especially, Zonbebe which is locating southern edge of Chuzagang, the border to India, facing each other across 1km wide of forest belt, has a big damage of elephant every year on the harvest season of corn, from September to November. A herd of elephant observed recently was numbered at 45 at the maximum. Mr. B who has 5 acres along with forestry belt nearby the border is planting paddy and maize has been attacked by elephant and he has lost his house two times, and damaged more than 80% of crops. He has explained the circumstances as follows;  Many project donors have tried a variety of measures, but at last, solar powered electrified fence was not effective because elephant learned its weak point soon. Elephant knows how to destroy fence by lifting a log.  (In case of Mr. B) he owns 5 acres of land along with forest belt. Other villagers also own land beside him, but they make it fallow, because they have another land inside village which is locating far from elephant prone area. Only Mr. B does not have such land and he is obliged to plant crop there. As the result, elephant concentrates his land and this is mechanism of his involved in vicious cycle.  Most efficient way to enlighten damage of elephant is to gather many people nearby elephant's pass. Elephant tend to avoid passing nearby gathered peoples.

 Potential In fieldwork at Sarpang, it was discovered that some fields within a 2-km radius of each other have been damaged while others suffer no damage at all. Elephants appear near human

25 Crop damage caused by elephants has been recorded in the Samtse, Sarpang and S/Jongkhar districts. According to RNR Statistics 2011, elephants were responsible for 17% of crop loss in Sarpang in 2008, the second-highest rate after the 20% recorded in Samtse.

5-24 settlements for about 3 weeks beginning in mid-September, which coincides with the corn harvest. Our study proposed the methods below, but none was a real solution to the problem; all these methods which are part of Japanese aid lack know-how and an established track record.

1. Electrified fence According to the interview conducted in a sample site, electrified fence is effective 1-2 times, however elephant's learning capability is too high and if they are accustomed to electrified fence, they will find the best way to destroy all fence. Besides the many case of failure, there are several technical weakness on electrified fence, viz. i) electrified fence is costly, ii) it reacts to plant and trees touching surface, iii) sometimes peoples are damaged by electricity.

2. Gathering people It is known that elephant does not appear in the place where human population density is high. Extension worker in Chuzagang is proposing that preparing warning system noticing elephant's approach and villagers with torches gather and let elephant feel the sign of human being if warning system alerts. Effectiveness of this proposal is not verified yet.

3. Construction of dip to prevent elephant's access This is the plan to construct dip that is difficult for elephant to climb up once it has slipped down. There are already effective precedents in India and other countries, but application to Bhutan needs some consideration in terms of i) high cost is needed for construction, ii) emotional mercy may oppose to the plan because most elephant in the dip will die.

But Japanese know-how regarding solar-powered electrified fences can be used to keep smaller wildlife away. Meaningful measures for keeping monkeys and boars away from crops, especially in central Bhutan where there are no elephants or tigers, could be provided with Japanese support. Japanese experts currently dispatched to Bhutan on an agriculture mechanization project could be flexible about the “farm machinery” currently being provided under KRII and should switch to fertilizer or electrified fencing as needed.

 Government-dependent farm operations In Bhutan, direct agricultural subsidy such as price guarantee is small compared to other countries. Toward this issue, MoAF has an intention to support farmers by subsidizing to agricultural inputs but not through price guarantee of agricultural products. Over the years, the Agriculture and Forestry Ministry has offered extensive support to farmers—distributing free seed, offering financial

5-25 help for purchasing fertilizer and other inputs for farm production, supporting transportation costs, and supporting training (including study trips). Subsidies offered by the Ministry to farmers today come not from the government’s current budget for subsidies, but are paid out as “commissions to dealers” at the discretion of the ministry from its internal budget. Strong support for farmers, who grow food under difficult conditions, has been understandable, but the result has been that they are now becoming unable to grow crops with their own thinking. The Ministry of Finance, which approves the subsidies, and other ministries are also saying that farmers are getting too much help. It is observed that strong government’s initiative is mobilized when selecting product of "One Gewog Three Products", forming agricultural cooperative, and developing market. There is a possibility of lessening strategic thinking by farmers.

 Potential Other donors’ projects also basically assume more government spending, but no donors have emerged who are determined to change farmers’ attitudes. This is because, with Bhutan about to emerge from its status as LDC, many donors tend to select projects that have the best potential to yield short-term results. Meanwhile, the Samdrup Jongkhar Initiative, based in Dewathang, Samdrup Jongkhar, is a farmers’ group that could be a pioneering project. The group’s website describes its policies as follows: “The Samdrup Jongkhar Inititiative is a project of The Lhomon Society, a civil society organization which aims to improve the living standards in Samdrup Jongkhar and beyond by establishing food security and self-sufficiency, protecting and enhancing the natural environment, strengthening communities, stemming the rural-urban tide, and fostering a cooperative, productive, entrepreneurial, and self-reliant spirit.” This group, although operating on marginal land, does not depend on the government and is trying to achieve food security and self-sufficiency through its own efforts. If it could serve as a model and its activities expanded to other parts of the country, the number of farmers relying on their own efforts rather than on the government could be increased.

② Issues at the Distribution Stage  Lack of farmers’ cooperatives As of 2011, there were 754 farm cooperatives (including farmers’ groups) registered with the Ministry of Agriculture and Forestry’s Marketing and Cooperative Department. Given that Bhutan’s first farm cooperative law was only enacted in 2001, both the government and farmers are still feeling

5-26 their way as far as activities and methods of supporting cooperatives are concerned. As the example of Chuzagang mentioned below shows, in some areas cooperatives procure all of their equipment and assets from the government, but if the rice milling machine, the key piece of equipment for the operation, breaks down, the cooperative’s activities will almost certainly come to a standstill. Further, given that all the elements—the extension workers, the co-op structure and so forth—are “supplied” from the outside, and that farmers who can only grow enough rice for their own consumption have no real connection to the co-op, cooperatives’ activities are simply ignored. If the ideal cooperative is one that doesn’t rely on the government, as described at the beginning of this chapter, right now the situation does not even begin to approach this.

Box. The case of a farming cooperative in Chuzagang, Sarpang district

This district has a farming co-op called the Chuzagang Agricultural Farmers Cooperative (CAFCO),which was introduced by the Ministry of Agriculture and Forestry’s Department of Marketing and Cooperatives as one of Bhutan’s best. The co-op currently has 209 members in and around Chuzagang. Its main business lines are: 1) rice processing and group selling (also group selling for maize); 2) lending farm machinery; 3) transporting products; 4) training young farmers; 5) operating a one-stop shop, etc. The co-op has an Indian-manufactured rice huller, Kubota tractors provided by Japan under KRII, and so forth.

The head of CAFCO with the co-op’s rice huller, and co-op rules (right).

The rice huller from India was originally bought with project funds from the Ministry of Agriculture and Forestry and is still the property of the national government. CAFCO has the use of the machine for free and due to lack of funds has not yet met the government’s request that it buy the machine for Nu. 2,000. The KRII farm machinery was also provided free of charge as part of

5-27 government measures to promote farm cooperatives. The co-op also receives the following support from the government:  Introduction to buyers for rice and maize (Dept. of Marketing and Cooperatives)  Participation in trade shows (Ministry of Economic Affairs) and expenses for participating (MOAF) The co-op, meanwhile, lends out farm machinery at low rates, offers interest-free loans up to Nu. 5,000, and exempted members from paying the membership fee due to being in the black one year (fiscal 2011). On the other hand, unless farmers produce a surplus of rice or maize, there is no advantage to them in joining the co-op and because activities are politician-led and there is no governance for the farmers, many farmers hesitate to join. Some experts have even commented negatively on the co-op. As for the co-op’s financial status, capital build-up is stuck at Nu. 200,000, and if the rice huller the co-op is using should break down for some reason, its activities could come to a standstill.

In an interview with the Marketing and Cooperative Department, officials there stated that in the end, one of the aims of forming cooperatives is to pool the members’ land together so as to increase productivity. Many things need to be done to achieve this aim.

 Potential Building up a farming cooperative organizational structure is an area where Japan can put its strengths to work. Japan has already provided know-how modeled on Japan’s system of farming cooperatives as ODA to many countries. Many farmers’ groups in Bhutan are also likely to be motivated. For example, the group described below most likely has the resources to build a strong cooperative.

Box. A successful small poultry farming operation

In the 3-year period between 2009 and 2011, 1,030 poultry farms were set up, which earned Nu. 244 million from the sale of eggs (IMS、DoL: 2010). As of 2010, Bhutan imported 64% of its chicken meat. According to the Bhutan Observer, Vol I, Issue 17 (May 10, 2012), small poultry farmers with fewer than 1,000 chickens in Pemagatshel have been successful in setting up businesses. One poultry farmer has expanded to bring in net profits of Nu. 100,000 with 378 laying hens. Since demand for eggs is strong, markets are easy to find, and the farmers can obtain a producer price of Nu. 8 for eggs in bulk and a farmyard price of Nu. 9 per mature eggs in box. The district runs a program commissioning farmers to raise chicks into laying hens, which takes 45 days. In other words, the district sells chicks to

5-28 the farmers for Nu. 40 and buys them back for Nu. 150 when they have grown into laying hens. The only issue is what to do with the roosters, as farmers still have a mental struggle with this.

Unlike rice- or vegetable-based farming cooperatives involving land and costly equipment, many livestock raising farm co-ops are successful. Group selling of milk and cheese, especially near heavily populated areas, has plenty of potential for success as there is no need to look for markets. In the sample survey area, one example is a livestock raising co-op formed in Paro that is likely to be successful.

 Lack of storage capacity for grains/vegetables Among the undertakings to raise the food self-sufficiency ratio, there are strong expectations of the Food Corporation of Bhutan (FCB), which is in charge of food stockpiling. FCB is a government corporation employing 140 people, and its shares are 100% owned by the Ministry of Finance. It is engaged in stockpiling foodstuffs (rice, sugar, etc.) and contributes to food security26. Current storage facility capacity for grains is 1,700Mt, a 3-month supply, but the prime minister has requested that capacity be expanded to handle a 12-month supply. Partly because of the rupee crunch, FCB handles mainly grains and sugar right now, but the government has requested that it consider stockpiling vegetables. This may be asking too much of FCB, given its current staff levels and size. There is a 630Mt-capacity refrigerated storage facility in Bhutan, but it can only store a 3-month supply (the biggest facility is at Mongar, with 300Mt capacity). The cold-chain storage facility is dated and uses CFCs and is probably not capable of stockpiling one year’s supply of vegetables. FCB plays an important role in the country’s food stockpiling for emergencies27. According to FCB’s CEO, since the company has stockpiled mainly dry goods such as rice or sugar to date, it doesn’t have the knowhow to operate cold storage or store refrigerated food products.

 Potential Stockpiling strategies are an area that will be important for Bhutan in the future, and there is plenty of room for improvement here from the storage viewpoint, ranging from national-level companies like FCB to individual households. Making use of climactic conditions, the government is considering storing vegetables especially in natural-freeze warehouses in high-altitude cold regions to tide the country over winter, but although it has chosen three areas as possible locations, details are

26 FCB also supports domestic management of domestic product marketing by holding auctions, adding value and so forth. 27 This company has not received support from JICA or other aid organizations yet.

5-29 still being studied. The climate in Bhutan offers strong potential for natural stockpiling, but Bhutan would strongly welcome input from Japan on knowhow for storing farm products. However, existing facilities most likely lack the capacity to stockpile one year’s worth of rice and vegetables.

 Post-harvest loss Interviews with farmers revealed that they estimated post-harvest loss at around 20 to 40%. This coincides with FAO figures for the same28. Food loss, during production, harvest, post-harvest and processing, is a very serious issue in Bhutan, and the loss rate is compounded by issues such as poor infrastructure and lack of skills.

Sand from the ground containing unhulled rice Removing debris from milled rice using an and mung beans (co-op at Chuzagang) electric fan

 Potential While the loss rate is quite high, many people believe that spoiled crops can be used as livestock feed, thus increasing milk production. On the other hand, many farmers intentionally avoid using machinery such as Indian-made rice hullers or threshing machines because they work so poorly, preferring to do the work by hand instead because the loss rate can be kept lower. When considering aid from Japan, since it is important to have farmers’ groups procure equipment with their own funds, resolution of the post-harvest loss issue needs to be considered from the same perspective as farm operation dependent on government and the lack of farming cooperatives.

 Underdeveloped agricultural product processing In Bhutan, the agricultural product processing sector and also the industrial sector other than farming, are very underdeveloped. Except for beverage makers, there are no private sector food processing companies.

28 Bhutan Observer Vol. II Issue 13, p.4.

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Existing agricultural product processed goods include alcoholic drinks, dairy products, popcorn and corn flakes. But due to market size, transportation costs and lack of skills, these products are still usually made at home. Since Bhutan allows production of alcoholic drinks if they are for home consumption, most of the Ara and Bangchang, drinks made from farm crop ingredients, produced is made at home. On the other hand, beer, which has recently become popular, is sold mainly in urban areas.

Ara is a traditional distilled alcoholic drink. Since each family makes it using different ingredients—rice, wheat, millet, etc.—the flavor of the drink changes depending on the household. It’s often the case that 10-20% of Agricultural product processor’s product line grain harvested goes for ara production. 10-12 bottles (760ml each) of ara can be produced from 10kg of rice.

Specialty products like jam and canned fruit juices made from apples and oranges are produced mainly by Bhutan Fruit Products (BFPL), Bhutan Agro Industries (BAIL), and Bhutan Dairy and Agro Products (BDL), all three offering only very restricted product lines. There are no genuine private sector companies on the scene yet.

 Potential One processed food product imported by Bhutan which could be produced domestically is cooking oil. Imports of cooking oil are expected to increase in the future29. Cooking oil consumption is expected to rise because of concerns about health problems caused by over-consumption of butter. Meanwhile, Bhutan can increase production of cooking oil ingredients rapeseed and soybeans and mustard, particularly in the central and eastern districts of the country. Additionally, Bhutan used to

29 Finding from interview with traders in Gelephu (May 2012).

5-31 produce its own cooking oil at one time, and traditional oil extraction skills are still alive in farming areas. Also, Matsutake mushroom for Japanese and Korean tourists are promising. Canned and dried Matsutake are already very famous among them and expected as souvenir of travel from Bhutan.

Articles about the MHV hazelnut project

In the past few years, Hong Kong company Mountain Hazelnut Venture (MHV) announced a plan to grow 10 million hazelnut trees. The company plans to export and process all production to China and Europe, but production exceeding planned shipments, 40,000Mt by 2020, will be shipped to global markets. The Ministry of Agriculture and Forestry estimates that 10,000-15,000 households, equivalent to 15% of Bhutan’s farming population, will benefit from this project

③ Issues at the market stage  Unbalanced diet This study was not able to ascertain whether any farm households actually have no food and are battling hunger. The Education and the Health ministries are working together30 on measures to improve nutrition for schoolchildren. There have been many reports that excessive consumption of chili and alcohol are damaging the health of the Bhutanese. Traditional foods consist of chili and potatoes stewed in cheese (datsui); a characteristic of Bhutanese cuisine is its very limited repertoire of other dishes. In a survey of farm villages in this study, teachers in the communities’ schools, pupils and parents alike showed adequate

30 In light of two student's death of vitamin shortage at Orong High school in Samdrup Jongkhar, Ministry of Education (MOE) is tackling with nutrition improvement of dormitory school. In reality, MOE is planning to request to the Government that per head meal support of Nu.700/month at present should increase to Nu.1,100/month. MOE in cooperation with MOH will provide fresh vegetable and fruit to all dormitory schools and let all school to measure and record the nutrition intake of student and prepare a chart. Schools can procure vegetable and fruit with rich nutrition from local production site. Also, MOE is requesting to MOH to implement regular health check of all students and deliver vitamin table to them. The cause of death on malnutrition at Orong High School was proofed as the lack of Thiamin, so to speak the shortage of Vitamin B1.

5-32 understanding of the importance of eating 3 meals a day and of eating green and yellow vegetables and root vegetables. But even though they are told that these points are important, there are so few food preparation methods that even teachers do not know how to cook anything but datsui, and accordingly nutrition education simply becomes an empty rallying cry. Even though parents are told about the need to eat a varied diet, given that children dislike vegetables and that many parents only know how to prepare datsui, this has very limited impact on the daily diet. Unbalanced nutrition intake may relate to cause of death and it is indirectly connecting to medical expense of national account. The following figures show the number of incidents of cancer per 100 thousand of population surveyed by World Life Expectancy of USA. "World Rank" in the figure is ranking among 192 surveyed countries.

Source: http://www.worldlifeexpectancy.com/country-health-profile/bhutan Fig. 5-9 Ranking of incident of cancer of Bhutan

This figure shows Bhutan has a high rate of incident of cancer, for example oral cancer (2nd in the world), skin cancer (3rd as do), and stomach cancer (7th as do). Incident of oral and stomach cancer is said as tobacco, alcohol, and hot and simulative food. Although it is not proved scientifically, it is considered that the result may have a causal relationship with Bhutanese food habit. It is already proofed that incident of skin cancer has strong relationship with ultraviolet light and it is proofed that vegetable and fruit are effective to preventive measure of skin cancer, especially effectiveness of garlic, carrot, cabbage etc is already confirmed. Having mentioned, toward 200g/day of recommended dietary allowance of vegetable in Bhutan, it is estimated that 139g/day of consumption is made. However, this figure is not based on actual nutrition survey, which is not conducted yet. As for the calculation of 139g/day of consumption, a disposal (generally 1/3 of vegetable weight is disposed) and distribution loss are not considered; accordingly, it is deemed that actual consumption amount is much lesser than it.

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Box. Alcohol intake by Bhutanese

Per head alcohol intake by Bhutanese once showed a downtrend during the period of 2004 and 2007, it turns to an uptrend after that. According to the MOH data, annual alcohol consumption accounts for 12 million liters, out of which 1.7million liters or 16% is consumption of industrial products. Predominant consuming Dzongkhag is eastern part, like Trashigang and Mongar, while Haa and Paro are least consumer. Consumption of local produce (Bangchang) is big in Pemagatsuel and Samtse, while that of industrial produce (beer) is major in four Dzongkhag, namely, Thimphu, Chukha, Sarpang, and Samtse. According to "Alcohol Use and Abuse in Bhutan" (NSB), 22% of frequent drinker starts drinking from more or less 18 years old which are not allowed legally. Rate of alcohol drinker is 24.5% for male and 15.1% for female, respectively, but the frequency of drinking is high for female compared to that of male. Consumed beverages in 2003 were 4.45 million liters of Ara, and 5.68 million liters of Bangchang, respectively. Beer consumption on same year indicates 1.41million liters. Ara sold in bars and restaurants in 2003 and 2007 was 680 and 720 thousand liters, respectively. Volume of alcohol used to all kinds of beverages in 2010 is estimated at 408 thousand liters. Recently, it is said that Ara consumers are shifting to beer. The Bhutan Brewery which is famous for "Druk 11000" increased beer production by 5.4 million liters during the period of 2008 and 2010. On the other hand, increase of demand in local market during same period accounts for 5.5 million liters, which outnumbered increased production. Other breweries namely, Gelephu Distillery and Samtse Distillery have a production capacity at 365 thousand and 10 million cases, respectively. AWP, the biggest producer in Bhutan produced 6.9 million liters of beer, out of which 6.7 million liters or 97% were consumed in domestic market. Alcohol prone diseases are considered as one of biggest social issues in Bhutan, but tax amount paid by alcohol distillers are reducing from Nu. 153 million in 2008 to Nu.140 million in 2009. Likewise, the environment surrounding alcohol generates no winner at all. According to "Family Income and Expenditure Survey of Bhutan 2007" (NSB), average Bhutan household is spending 4% of alcohol related expenses out of total food expenses. On the other hand, alcohol related health problems are mushrooming recently. In the public health facilities in Bhutan, the cause of death by alcohol related disease is ranked within top 5 causes and more than 90 patients dies by ALD (alcohol liver disease). Most of 614 dead by ALD during 2005-2009 were farmers including husband and wife. According to "National Year Book 2010"(NSB), 122 cases or 24% of total traffic accident occurred in 2009 are attributed to the cause of alcohol intake. Revenues from alcohol tax in 2009 were at Nu.19 million, while health expenditures paid by the government for the remedy of alcohol addiction at same year was at Nu. 20 million. Annual Health Bulletin 2011 indicates that ALD patients increase from 1,600 cases in 2009 to 1,900 cases in 2010. Among major cause of death in Bhutan, non-communicable diseases take up 6 out of top 10 causes. ALD is counted as one of six causes. Further, this report indicates that the cause of death on 27% of total hospitalized patients and 58% of immediate hospitalization is attributable to ALD.

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Source: WHO Fig. 5-10 Comparison of Expenditure on public health

To reduce alcohol addiction and improve trade deficit structure with India, the government is trying not to increase the number of alcohol production companies in Bhutan and to impose more tax to imported alcohol (mostly beer). For example, sales tax for imported beer will be raised from 5% at present to 10%, the charge of import license application at Nu. 150 (there is no difference between truck and container) now to Nu. 30 per case (each case must be less than 12 liters). Newly introduced bland tax at Nu.20,000/bland will be levied also.

 Potential The WFP is also aware of this issue, and expectations of implementation through Japan’s ODA were strong. Generally speaking, it is difficult to change adults’ eating habits, but change is possible if introduced at school age. Further, some people in the southern areas and around Thimphu are also moving away from traditional eating habits. Also, MOH formulated "Bhutan 2011 Food Based Dietary Guidelines" and is aiming to distribute to all schools and NEUs31 of the country. This guideline indicates food pyramid and recommended intake amount by nutrition. It is possible for MOH to covey more practical message like a varieties of Bhutanese recipe and so on, to the people based on this guideline. In interviews for this study in Chuzagang, Sarpang district, which adjoins the border with India, a change in the type of grains generally preferred by Bhutanese was also observed. The majority of the residents there are immigrants who originally lived in the central highlands. In other words,

31 Nutrition education unit is set in three regional hospitals in Bhutan and doing nutrition counseling on every Thursday and Saturday.

5-35 some of them preferred red rice to white rice, and if supplies of red rice were short, they would supplement this with maize or wheat. They also consume vegetables grown in their own kitchen gardens rather than vegetables from India, as they believe their own vegetables are safer. Living near the Indian border in Chuzagang now, these people’s eating habits have changed. The table below sums up trends observed based on a survey of farmers (N=23) in farming communities.

 There is no preference for either red rice or IR (white) rice. Since they are used to eating IR rice, younger residents tend to prefer IR rice. This is mainly because Indian rice is so much less expensive, but once they get used to eating it, it tastes satisfactory to them.  Only a handful of farmers try to grow red rice themselves, and they do so to grow rice used for special occasions. Red rice is considered the rice suitable for special occasions, and the majority of households do not eat it ordinarily.  Most of the farmers surveyed do not have kitchen gardens. In the dry season, especially, there is not enough water (actually, water is not that scarce but the people are not interested in making an effort to get it) and they feel that it’s much cheaper, in terms of time and effort, to buy vegetables at the market.  However, they are always concerned about whether vegetables from India are safe, as they believe that those vegetables may be grown using large amounts of agrochemicals.

Market survey being conducted among vendors Vegetables from India sold at the market in Gelephu

Allowing for transportation cost, rice and vegetable from India are the cheapest at border area. According to the market and vendor survey conducted at border district, Indian vegetable will meet slack season from June to October. Bhutanese produce will replace it until October but it is more expensive than Indian produce. Some farmers who do not cultivate vegetables at their farm cannot recognize seasonality of vegetable, so that they cannot distinguish the origin of vegetable. Likewise, new attitude and behavior are emerging at the border area where the residents need to face the wave of globalization fastest among the nations. It is thought that this is common directivity and it will prevail to whole Bhutanese consumers even though it takes a certain period of time.

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 Concerns about the safety of vegetables In 2009, the Bhutan Agriculture and Food Regulatory Authority (BAFRA) issued a directive requiring all registered importers to use English on all labels for imported foods. However, the markets are still full of foods labeled in Chinese or Thai. The first notification which was issued by BAFRA in 2008 said that selling food without label indicated either in Dzongkha or English is not allowed and it violates Food Act of Bhutan, 2005. Also Food Rules and regulations of Bhutan 2007 indicate that information on food safety is provided to consumers through proper labeling. Since BAFRA acknowledges that importers are voluntarily reporting this issue to BCCI and Department of Trade, meanwhile, they have no intention to accuse or take away foods with illegal label. Importers of Thai foods usually buy direct from markets in Thailand rather than from exporters, because demand in the Bhutan market is for small quantities of a large variety of products. BAFRA states that importers are required to answer if consumers ask retailers about what is in the products, indicating a stance on the side of the importers. In the market survey among vendors in Gelephu, Indian traders answered that “it’s true that pesticides and agrochemicals are used on vegetables for the Bhutan market, but that’s done to meet the needs of consumers in Bhutan, who want cheap vegetables32.” But Bhutan does not have any food safety or testing standards yet, and no steps have been taken to set up a testing system for pesticides and agrochemicals which are increasingly used throughout the world33.

 Potential In its 2008 DPT Manifesto, the Druk Phuensum Tshogpa (Harmony Party) claims that Bhutan is the first country in the world to be producing only organically-grown crops. To curb unnecessary imports, the Bhutan government is currently taking steps to speed up development of crops that can replace imports34. It is also conducting a campaign to interest consumers in domestically grown vegetables, in order to curb unnecessary consumption. In addition, it is strongly urging vegetable producers to put domestically grown vegetables on the market from this coming winter. However, this is not being done from the viewpoint of product safety but as part of measures to stimulate domestic demand in view of the rupee crunch. Recent newspaper articles and TV programs have begun to report on food safety. BAFRA has also sent personnel to India to conduct surveys in growing areas (although results of this have not been reported). People are gradually becoming more aware of safe foods, and as a result of the current

32 This refers to chemicals, etc. sprayed on vegetables being grown, 2-3 weeks before they are shipped to market. 33 WFP is planning to provide laboratory equipment for food inspection to MoAF. 34 Total value of vegetable imports to Bhutan in 2010 was Nu. 278 million, beer Nu. 314 million and meat Nu. 470 million.

5-37 campaign to achieve complete self-sufficiency in vegetables, growing vegetables in kitchen gardens is expected to become more widespread.

Kitchen garden at a school (Gonpasingma Organically-grown maize being milled using a Lower Secondary School, Pemagatshel) traditional hand-operated mill (a woman at work in Zhemgang)

Of course, it is important to work to establish food sanitation standards and a testing system. At the same time, consumer awareness must be boosted and information provided so that they can choose safe vegetables themselves. Effective ways of providing information include going through the media and also holding public seminars and workshops.

5-4 Direction of Development on Food Self-sufficiency and Food Security of Bhutan (1) Scenario Planning In order to examine a direction of Japan’s assistance to Bhutan, the optional range of food security policy was investigated. It is general case that the government's food security policy is planned based on the performance of advanced countries and the trend of world's power balance. But as for the method to catch the future as the extension of the past and the current situations, it is impossible to take a proper action if a discrete environmental change has happened. Therefore, scenario planning is the method that decision makers can work out for countermeasures beforehand (including mental preparedness) and corresponds for an uncertainty without overlooking a tip of predictor. It will be virtually experienced by a form of "planned scenario" of the future, which has a possibility to happen. A scenario is usually prepared as an aggregate made up of two to three stories, since it is not only one which draws the future. It is not a forecast, so the probability to each scenario is not labeled as well. The area where a decision maker should consider measure and strategy is clarified, if "the range of the future fluctuation" becomes clear by picking up extremes over the phenomenon which can happen. In the scenario planning, "External environment" and "Strategy “are considered separately, and external environment is described objectively, so that a scenario does not usually include Bhutanese strategy (measure). The basic procedure of scenario planning is to; make a scenario at

5-38 first, grasp and recognize a situation at second, and then, consider the strategy which can cope with each scenario at last. This section foresees the environmental change of Bhutan, which corresponds to envisioned scenario. Based on this analysis, the direction of Japan’s assistance to Bhutan is discussed in succeeding Chapter 6.

Fig. 5-11 Procedure of Scenario Planning

There are several procedures of scenario planning proposed by disputant or by academy, but for the most part, it is as follows. (1) Deciding the Goal (the problem to be taken up and/or the target to decide) and the View period. (2) Collecting the information which can affect to the policy and decide the Crisis Scenario (scenario driver). (3) Choosing the Driving Force which has high importance and uncertainty in particular. (4) Forming scenario.

This section presents a scenario formation by a deductive method along with this procedure35.

(i) Goal Royal Government of Bhutan achieves "food security" by 2022, after 10 years time.

(ii) Crisis Scenario (scenario driver) The three scenario drivers are taken up, which connect three strategies indicated in Chapter 1, as follows;

35 Abstraction of driving factors and making of scenarios are generally done through a workshop which is conducted gathering related stakeholders. However, in the interest of time, a series of work on scenario planning was conducted by the discussion of JICA Study Team (simplified method).

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a. Bhutan, which increases "the self-sufficiency of cereal" (the first strategy indicated in Chapter 1) b. Bhutan, where risk hedge is done by diversification of import source (the second strategy indicated in Chapter 1) c. Bhutan, which relays on market (or farmer's will) (the third strategy indicated in Chapter 1)

(iii) Driving Force Based on a series of analysis of this Study, the next eleven factors were selected as the driving forces from the viewpoint of high importance and uncertainty in particular, and those have a big influence on decision-making of food security.

Table 5-4 Selection of Driving Force Reason Driving Force Other factors included Currency Future situation of India, Foreign debt (1) Closely related to Correspondence Food Import Diplomacy, Domestic politics, Rice reserve of the government

Expansion of Legal setup, Labor force in rural area farmland (2) Closely related to Non-rice crop production, International price of cereals Crop cultivation Food Production and commercial crops, Price of agro input Paddy production area, Irrigable area, Price support Land use policy of the government

(3) Closely related to Food Custom, Tariff, Trend of rice consumption, Rite of passage Food Consumption diversification Food price Price of rice, Price of food (except rice)

Food poverty rate, Status of infrastructure setup, Poverty (4) Closely related to Situation of nutrition intake Public View Crop export Import of vegetables and fruits, Farm income to buy rice Formulation Self-sufficiency of Yield, Production, Consumption, Foreign dependence of food rice

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Table 5-5 Characteristics of Driving Force applied in Scenario Planning Driving Force Difficulty Importance Note level of （Other relating factor, etc.） Control Currency － － Small Self-sufficiency of rice ± Big Yield, Acreage, and Consumption Diversification of food － － Big intake Size expansion of farmland ＋ Legal setup, and Brewing of farmers’ Big incentive Cultivated crop ＋＋ Small Land use ＋ Small Export of crop ± Legal setup, Upgrading of Small infrastructure, etc Food price － Except the supported price under Small agricultural support policy36. Poverty gap ± Upgrading of infrastructure, and Big commitment of the government. Correspondence by the － － The highest uncertainty and important Big government risk factor. Note）++（Very easy to control）, +（Controllable）, ±（High Compatibility to other factors）, -（Difficult to control）, --（Very difficult to control）

Among these, the driving force "Correspondence by the government" has the highest uncertainty and importance.

(iv) Forming scenario - Three Future Pictures related to Food Security - The following three planned scenarios were formed. a. Bhutan, which increases "the self-sufficiency of cereal" (the first strategy indicated in Chapter 1) Price of food imported from India increases, and the price of domestic production meet market needs. Thus, interest to domestic agriculture grows, and self-sufficiency rate increases, but simultaneously, hike of food price endangers life of the peoples, especially for urban poor.

Traders who are importing foods from India always count the depreciation of Ngultrum, so that they try to pass it onto retail price. Thus food price increases as international Rupee price rises. It is expected that the appreciation of Rupee will continue as India’s economy continuously grows and the demand of Rupee keeps strong. On the other hand, food export of vegetable and fruits such as apple and pear to India will increase, especially during the period of production-shortage on Indian

36 To be discussed in the next section.

5-41 summer. Since the Bhutan government needs to cope with Rupee crunch, and encourage farmers to produce more cereals, the self sufficiency rate will increase. The government needs to maintain expanding rice production, so that a lot of subsidy will be spent for procuring of agricultural inputs. Rice will be distributed as usual, while still many agricultural products like vegetables and meats need to be imported because the subsidy from the government cannot cover all crops. Accordingly, food procurement for urban wage earners will get tougher. b. Bhutan, where risk hedge is done by diversification of import source (the second strategy indicated in Chapter 1) Diversification of food intake in urban area will be accelerated in the midst of Rupee appreciation, and agriculture in sub-urban area will be specialized in high-valued fresh products. Import source will also be diversified from India alone, and the government will usually balance the import source by checking international situation. Although domestic cereal production will be decayed and they lean most requisite for import, development of commercial crop will advance, and a few large-scaled farming could be seen for high-valued agricultural product. Agriculture production varies by area, but the areas without locality will be weakened.

The picture above depicts the image that Bhutan gave up domestic production for self sufficiency, and diversified the source of import. While depending on overseas suppliers for cereals, land operation per HH increases and competitive commercial crop production can be realized. One of the examples are fresh vegetables and fruits for export, which will be produced nearby urban area. By the diversification of import source and construction of road network, many commodities will be gathered to capital region, and food diversification will also be accelerated. Private sector (or market) will take an initiative to select production item. On the other hand, even in same Dzongkhag, the economic differentials between “to have and to have not” will expand and the number of poverty pocket will increase. c. Bhutan, which relays on market (or farmer's will) (the third strategy indicated in Chapter 1) c. By the income from hydro power saleable to India, the conversion rate of Ngultrum to Indian Rupee will be kept constant at 1:1, and food import from India will be accelerated more than now. A variety of recipe and food diversification will be prevailed from urban area, and simultaneously, an import of new foods will be preceded. As the result, the food self-sufficiency rate will decrease. Also food import increases as food intake diversifies.

The border price of Indian Rupee will raise but trade balance will be almost balanced. The profit of hydro power export will boost construction of infrastructure; especially road network will be strengthened. However, a straw effect will be brought about as the result of development, and the concentration of population in urban area will be accelerated. In rural area, agriculture will face to

5-42 critical situation. The diversification of food intake will emerge centering around youth living urban area and it will be transferred through road/communication network. One of the examples is a shift from red rice IR rice. As the result, food self-sufficiency will decrease and a variety of food items from India will be imported based on the stable relationship between two countries. Agricultural production will not show a big change from now and import of food will be preceded based on market situation. In the rural area, fallow land will increase at once and subsequently, some farmers will expand land size by the support of the Government.

Above three pictures are summarized in the table as shown in the next page.

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Table 5-6 The summery of three scenarios Crisis Scenario 1. Crisis Scenario 2. Crisis Scenario 3. Bhutan, which increases "the Bhutan, where risk hedge is done by Bhutan, which relays on market (or self-sufficiency of cereal" diversification of import source farmer's will) Currency Rupee appreciation continues Rupee appreciation continues Rupee price moderates (1:1 exchange rate can maintain) Self-sufficiency of Increase Decrease Decrease rice Food diversification No progress due to respect of domestic Big progress due to increase of import source Slow progress due to population product of food concentration to urban areas by road network Expansion of Boosted Boosted only for commercialized crops with No big change compared with present farmland high profitability. situation Crop cultivation Rice will be the main crop and planting of Commercialized crop will be predominant in As is (farmers plant rice only for self commercialized crop will also increase the area with good land conditions consumption) Land use Fallow lands decrease by the government’s Fallow lands increase, while the farms with Fallow lands increase subsidy big scale land holding will be come out. Crop export Export of commercialized crops gradually Increase in commercialized crops As is decreases due to an increase of incentive on rice production Food price Rice is distributed in cheap price because of Price shows down trend by the competition As is the government’s price support. Vegetable caused by the increasing participation of price shows a big increase. private sector Poverty Severe poverty in urban labors, while rural Area with special locality is activated and the Rural area becomes poorer by the straw area is activated by the government’s area where does not becomes poorer. effect. subsidy. Correspondence by No choice to apply price-support policy by India as the sole origin of import is Persuading the present situation (relying on the government the subsidy, but the subsidy concentrates on diversified while giving up the market for food demand and supply) (Base driving force rice. self-sufficiency. on scenario preparation) Source ）JICA Study Team

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(2) Japan’s strategy on assisting Bhutan The range of "Food security policy" to be adopted by Kingdom of Bhutan has been considered. It seems that there is a possibility to cause several serious environmental changes (shown in orange color of Table 5-6) as a result of those policy implementation. Bhutan has to recognize the factors of environmental change and their risk as well, that would be caused by the future government's policy as was indicated by scenario planning. Also, it is necessary for Japanese ODA support to consider such environmental changes..

While allowing for above risks, the strategy of the Japanese side needs the following consideration. i) Bhutan, which increases "the self-sufficiency of cereal" The government of Bhutan, being affected by rupee crunch, seems to follow this scenario for now. To realize the scenario, implementation of i) increase self-sufficiency, ii) expansion of farmland, and iii) correction of poverty differential is needed. These are the factors of "Controllable" and "Important for achievement of food security". Thus, if Kingdom of Bhutan follows this scenario, the Japanese government should support in these fields (so-called "as ever"). ii) Bhutan, where risk hedge is done by diversification of import source When the Bhutanese government chooses this scenario, it is considered that cultivation size of the commercial crop for export expands but not with rice. Although it is "Controllable" factor, but development initiative of commercial crop is the private sector rather than the government. As the poverty differentials between the farmers with locality and those who without emerge, the support strategy of Japanese government should be placed to i) support of the development of locally produced item (eg. One Gewog Three Products), and ii) comprehensive community development which minimizes expansion of poverty deferential (eg. The model Gewog development project). iii) Bhutan, which relays on market (or farmer's will) Through pursuing this scenario, concentration of population to urban area is accelerated and an increase of poor bracket in rural area is emerged. To make them slow down, the Government of Japan should provide the support which creates employment and income through a new industrial development of non-agricultural field in rural area. For example, it is deemed that the higher priority should be given to secondary and tertiary industry such as tourism and agro-processing.

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Box. Simulation of self-sufficiency rate of rice The following simulation model was adopted for the sensitivity check of self-sufficiency rate of rice.

Paddy based Planted Area Conversion to Yield （Mt/ha） Production Loss rate (%) rice base (ha) （Mt） （Mt(×0.67）） 22,832 3.14 71,692 15% 40,829

Indicators related to "Domestic Production" Self-sufficiency rate（％）＝ 45.3% Indicators related to "Domestic Directed Consumption"

Rice Paddy Population Per head annual rice consumption requirement requirement （'000） (kg) （Mt) （Mt) 668 135 90,180 134,597

(1) Preconditions of the Formula: Preconditions are set as follows based on 2010 as the base year.  Rice planted area（Bhutan RNR Statistics 2011）： 22,832ha （2010）  Yield （Bhutan RNR Statistics 2011）：3.14Mt/ha （2010）  Loss rate （referred the result of Field Survey and Bhutan RNR Statistics 2011）：１5% as estimated）  Standard weight conversion rate（WB： weight conversion from Paddy to Rice, case applicable to Thai rice 5% broken）：0.67  Population （Population & Housing Census of Bhutan 2005, population increase rate at the medium level （1.7%/yr）, or at the high level （1.8%/yr））： 668,000 （2010: applied the medium rate）  Annual rice consumption per head （Bhutan RNR Statistics 2011）：135kg/yr  Ceiling of annual rice consumption per head （Volume defined during the period of national isolation of Japan that was used during Edo shogunate era for more than 300 years ago）：150kg/yr

(2) Self-sufficiency Rate of Rice in 2010 （the base year） Self-sufficiency rate of rice in 2010 accounts for 45%, which verifies the statement by MoAF, saying that “about 50% of rice is self-sustained at present”.

(3) Case Study The case study shown in “5-4 Direction of Development related to Food self-sufficiency and Food Security” of this volume sets preconditions as i) application of nitrogen fertilizer increases yield by 20% and ii) utilization of fallow land increases planted area by 2%. When applied this precondition together with the medium level population increase rate at 1.7%/yr, the self-sufficiency rate of rice in 2020 is calculated at approx. 45%.

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Paddy based Planted Area Conversion to Yield （Mt/ha） Production Loss rate (%) rice base (ha) （Mt） （Mt(×0.67）） 23,289 3.77 87,800 15% 50,002

Indicators related to "Domestic Production" Self-sufficiency rate（％）＝ 45.3% Indicators related to "Domestic Directed Consumption"

Rice Paddy Population Per head annual rice consumption requirement requirement （'000） (kg) （Mt) （Mt) 818 135 110,430 164,821

Assuming that yield and planned area do not change from 2010 level and the population increases by the medium rate at 1.7%/yr, the self-sufficiency rate of rice will be calculated at 37% in 2020.

(4) Sensitivity Test Applying this simulation model, the sensitivity test was conducted assuming the following conditions. The supposed year is 2020. ① Population increases at the medium rate and loss rate decreases by 5% (41%) ② Population increases at the high rate, per head rice consumption increases at 150kg/yr, and other conditions are the same (33%) ③ Population increases at the medium rate, yield increases by 20% due to nitrogen fertilizer application, utilization of fallow land increases planted area by 2%, loss rate decreases to 5%, and per head rice consumption peaks out to 125kg/yr (55%) ④ Population increases at the high rate and per head rice consumption peaks out to 125kg/yr (40%) ⑤ Population increases at the medium rate, planted area reduces by 10% due to increase of fallow land, and other conditions are same (40%)

(3) Possibility to Application of Similar Model to Japan's Food Control System The Bhutan Government is investigating a various measures for food security. The below introduces Japan's food control system which has been continued more or less for 50 years. The risk analysis in case the similar system was applied to Bhutan was also tried out.

Before the World War II, rice price of Japan was determined by market drive. The price will increase when the production was small and demand is high, and vice versa, when big production and low demand (same as present situation of Bhutan) ↓ The Government enacted Food Control Law in 1942 and regulate rice price, because they are scared the hike of rice price by decreasing farm population caused by the assembling farmers for the war. The Rice Price council established by the Government determined the purchasing price of rice. The price was determined allowing for the objective at that time, but basically, it was the form of "production cost plus profit".

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↓ The Food Control System denotes that the Government buys all surplus of house consumption and then, sells to urban consumers at fixed price. At the beginning stage, purchasing price of rice by the Government was cheaper than selling price to consumer and often black market of rice appeared. Actually, it has functioned ideally as the mean of impartial distribution of food among citizens of the state. ↓ After World War II, the Food Control System did a 180 and it was adopted as the mean of selling rice at high price to urban dwellers in order to secure income of rural farmers, i.e. a big increase of government’s purchasing price was necessary in order to balance the income of rural farmer and urban labor.

The followings are the discussion assuming that same system was introduced to Bhutan.

Inflow of low price rice from India will be partially restricted. For the production increase, farmers will apply nitrogen fertilizer and reuse fallow land, and consequently, production will increase. Assuming that 20% and 2% increases are occurred by the application of nitrogen fertilizer and reuse of fallow land, self-sufficiency rate of rice will be constant at 45% in 2020, allowing for population increase at the medium rate during the period. Compared to the present situation, same volume of distribution will be secured and farm income will increase, so that the improvement of nutrition intake in the rural area is also expected.

a. To increase food self sufficiency, increase rice production is needed, and to do so, it is necessary to create the situation that farmer can become profitable. It means that the government's purchasing price of rice must be higher than the market price. In reality, the government needs to secure production cost of rice at the minimum level. As shown in Fig.5-1 in previous page, crop production cost in Bhutan is generally high. This is attributed to low productivity caused by small size of land and the government needs to promote expansion of farm land per farmer at the same time, otherwise the difference between rice purchasing and selling prices is getting bigger and bigger. b. There exists the way to introduce the Food Control System not in uniform manner throughout the nation, but in area-limited and in season-limited manner. Although there is an advantage to reduce financial burden of the government in this case, a disadvantage that creates the economic differentials between the areas “to have system and to have not” are considered as much more severe. The bland image will be established once the system is applied to specific area and it

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will help producing bland rice, however the production cost of rice in this area will increase because farmers apply much fertilizer and labor, finally, it generates a risk like Japan has experienced, that price of rice becomes high compared to international market. c. In case the government’s endeavor to expand farm land per farmer, as shown in “a.” above, will not take effect, the government's financial cost increase as labor cost increases, or as purchasing volume increases. It will be a big financial burden by the Government. Also, it is so difficult to find the time of the system termination (for example, the time when self-sufficiency rate of rice exceeds certain %, or the image of domestic bland rice takes root in market), and it is most probably true that the opposition elements will emerge at this time.

Allowing for the result of the study above, the next chapter proposes the contents of Japan’s contribution to Bhutan.

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Chapter 6

Proposals

Chapter 6 Proposals

6-1 Necessary actions for food security (1) Need to start serious discussions on food security As mentioned earlier, the basic ideas on food security have not been incorporated in the legal frameworks. The Bhutan government declares the improvement of food self-sufficiency rate as an important policy while Bhutan depends on the import from India for its food supply. Under the current situation of Rupee crunch, this policy should be appropriate. However, the problem of Rupee Crunch is expected to be solved in the future by the sales of electricity, even though the long-term forecast electric power supply has been modified downwards (see Chapter 5 for the detail). In the meantime, it is important n to revitalize the discussion on the food security in the long-term view for the future of Bhutan, and it is the best timing to call for the Bhutanese people to participate the discussion on food security as they pay attention to the problem of Rupee crunch. The arguments for the food security can be summarized into the three scenarios listed in Chapter 1, and it is the Bhutan government itself who decide the strategy. The rest of this section describes the pessimistic and optimistic views on the food security in Bhutan.

This view supports the “raise the grain self-sufficiency ratio” among the three scenarios in Chapter 1. The pessimistic views on the Rupee crisis and heavy dependency on the food import from India can be summarized as follows;

1. Deterioration of trade account Bhutan is importing large volume of food from India. If this continues in the future, the current one to one exchange rate with Indian Rupee cannot be sustained, and Bhutan is likely to be pressed to buy the Indian food with higher prices. Also, if the import of food is restricted, it will damage the food security of the Bhutanese people.

2. Fear for the safety of food As stated in Chapter 5, large volumes of chemical and fertilizers are used for the exporting food in India. As to the safety of imported food, Japan has also experienced a big scandal which was caused by the detection of poisons in the processed food imported from China, as mentioned in Chapter 1. People tend to feel strong fear for the dependency of crop supply to foreign countries and tend to have delusion that the dependency leads to health damage.

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3. Loss of traditional scenery of Bhutan There is a sense of emergency among the people that a reason for the decrease in food self-sufficiency rate is the increase in fallow land and it will lead to the loss of traditional culture and scenery of villages in Bhutan and this change in the minds of the Bhutanese.

4. Fear that the sovereignty being weakened As the dependency to India increases, Bhutan faces increasing pressure to cooperate with India in the international arena. This is the weakening of sovereignty and threatens the independency of Bhutan. Too much dependence to one country is likely to increase the vulnerability of the security when it faces the stop of food import due to the transportation problem or the ban on food export.

This view is consistent with the strategies of “importing by diversifying risk to stabilize food prices” and “respect the free will of farmers” among the three scenarios in Chapter 1. Based on this view, there are following 5 cases1 where Bhutan cannot import food but all of these 5 cases are actually impossible to happen.

1. World food crisis outbreaks and Bhutan cannot import food they need Food production has caught up with the increase in the food demand even when the population grew rapidly in the 20th century due to the utilization of fertilizer and others. Based on this fact, it would not be very difficult for crop production to keep up with the population increase in the future, and world food crisis is unlikely to happen.

2. Food exporting countries experience food shortage and do not sell food to Bhutan as they prioritize to supply food domestically India is not a major exporter of cereals. The quantity of cereal export to Bhutan is minimal compared to the world total production, and it is thus difficult to imagine that the cereal export to Bhutan would be threatened. Even if India will not export their food, there are many countries which are capable to supply enough food to the country with only 700,000 of population. Especially, China is willing to provide aid on food to foreign countries using diplomatic means even if it faces small hardship on food supply domestically.

3. Food exporting countries reject exporting food to Bhutan or press Bhutan political concessions threatening the ban on the food export India fears that Bhutan turns to China. India also knows that threatening on food to Bhutan,

1 H. Kawashima, "Trap of Food Self-sufficiency", 2010, Asahi Newspaper Press, pp74-94

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an Achilles' tendon for Bhutan, as a means of political bargaining is likely to direct Bhutan in the way India does not want. For any countries, supplying food to the country with 700,000 people in exchange of one vote in the international arena would be a good bargain. With regards to the ban on food export, the U.S experienced negative impacts of it after they banned the export of soy beans in 1973. These negative impacts include the decrease in income of its soy bean farmers and loss of credibility at the international market. The lesson of this case remains in the international societies, and there is a consensus that the ban on the food export is difficult.

4. The economy of Bhutan impoverished and the financial situation does not allow to import food it needs Total value of export of food excluding livestock commodities is only 4% of the total value of import in Bhutan. Also, nonessential goods like beers are included in this food import. The total value of the food imported that is necessary for living accounts for only 2-3% of the total value of import. This fact ensures that Bhutan will be capable of buying food from other countries except for the case it will become significantly impoverished. Bhutan will not have difficulty to buy required amount of vegetables whose imported value is mere 1% of total value of import unless it becomes as poor as the sub-Saharan countries. It is hard to imagine that Bhutan falls into that kind of situation.

5. Roads are blocked due to war and Bhutan cannot import food Even though this situation can be possible, yet its possibility is very small, and diplomacy can avoid this to happen. The only cases that make this happen is when Bhutan infuriates India, and this is only possible when Bhutan choose to resort to war with India or to be isolated in the international societies like the case of North Korea.

(2) Improvement on the legal framework on food self-sufficiency and food security The improvement of food self-sufficiency and the maintenance of food security are important, and these two elements have been emphasized in some Five Years Plans so far. However, as stated in Chapter 3, the engagement of the Bhutan Government to form the legal frameworks in these matters has not been adequate. Table 6-1 summarizes the propositions on the legal areas, which are derived from the comparison between the legal frameworks which promote food security and those restrict it.

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Table 6-1 Proposition on the legal frameworks for food security Name of Recommendations Legislation Constitution of The Constitutions does not provide for food security directly but is implied in its Bhutan, 2008 provision related to the fundamental rights of a citizen and the principles of state policy. However, to further emphasize there is a need to provide food security as a basic right for every Bhutanese citizen or provide for provision of food security by the government under the principles of state policy. Food Act of The Food Act of Bhutan is the single most important act in terms of food security, Bhutan, 2005 although it provides for protection of human health and to regulate and facilitate the import, export and trade of food in the preamble, it does not make specific reference to food security. Hence, recommend explicit mention of right to food security and need to make the Act more comprehensive by incorporating provisions on entitlements of special persons, subsidies for small and marginal farmers, food security reserves etc. Land Act of Considering Bhutan is an agrarian society land Act reform would be crucial to food Bhutan, 2007 security. The current land ceiling needs to be reviewed as the maximum land holding of 25 acres may not encourage mechanized farming. There is also a need to review utilization of GRF land as once a land is declared Government Reserve Forest, the land remains unutilized in terms of agricultural activity. There is need to review the provision allowing conversion of 50 decimal of wet land to residential land by Thram owners inheriting only wet land. National The requirement of 60 percent forest cover though rooted in the conservation policy of Environment the Government impinges on the already scarce availability of arable land. The Protection Act, percentage may therefore be reviewed. 2007 The Child Care Bhutan has ratified Convention on the Rights of the Child (CRC) (Article 24 and 27) and Protection which provides the right of every child to adequate food and nutrition. However, the Act of Bhutan Child Care Act does not provide for such aspects and the act is limited to a child in 2011 conflict with the laws. Further, the government policy of midday meal in remote schools may be given legal backing by incorporating it in the Act. The CSO Act, The CSO Act does not provide for entrance of CSOs in the microfinance sector thereby 2007 limiting the availability of credit to farmers in rural areas. Moveable and The regulatory framework is not conducive for the development of microfinance in the Immovable country. Currently, an interest rate of 13 % per annum is charged for agricultural sector, Property Act of which is more than the interest rates charged on construction loan. There is a need for The Kingdom provisions providing for preferential treatment to the agricultural sector. of Bhutan, 1999

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Name of Recommendations Legislation Local Mobilization of labor from the community often keeps farmers in the rural areas away Government from their farms to support the developmental activities of their community. There is a Act of Bhutan, need to review the use of these powers. 2009 Nature and Bhutan has a stringent policy for protection of wildlife. In most instances farmers in the Forest rural areas lose their harvest to wild life. There is a need to take a more pro farmer Conservation approach in the case of human wild life conflict. Rules, 2006

(3) Development of agricultural production with the mitigation of the regional gap in agricultural production As stated in Chapter 4, there are significant gaps in the agricultural production and productivities, and government engagements to develop agricultural production are reflected by these facts. These development engagements include the enhancement of extension system through the support to RNR Centers and various supports on inputs of agriculture and on post-harvest stages.

Table 6-2 Areal differential of yield on rice and maize

These activities should be continued and improved in the future; especially the monitoring system of the extension should be reinforced. The most important way of thinking is to analyze the advantage and the weak point of the area and develop it utilizing its characteristics in correction of the differential between areas. The following development potential is found by this JICA Study.

 "Model Gewog development projects" is expected in the Dzongkhags where food poverty ratio is high and having a lot of poverty pockets (eg. Zhemgang, Trashigang, Samdrup Jongkhar).  Irrigation development project at the southern Dzongkhags where the government is expecting them as the core of rice production in the future (eg. Sarpang, Samtse, Samdrup Jongkhar).

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 Expansion of upland rice in the mountainous area where irrigation facility is difficult to construct.

Table 6-3 Establishment of farmers’ organization by (continued) Dzongkhag  Potato and potato seed production on October to November, which is the non-production period of potato in India (eg. mountainous areas of Eastern Bhutan, such as Trashigang and Mongar)  Establishing farmers' cooperative at poverty area2 (eg. the Dzongkhags with color shown in Table 6-3)  Development of commercial crops (especially fruits) in the Western Bhutan

Source: RNR Census 2011

(4) Present a development model for the improvement of food self-sufficiency As stated in Chapter 3 and 5, the governments has played leading roles in the selection of crops to be developed and market promotions of agricultural products, even though the level of financial supports has not been large. On the other hand, one can notice the emergence of communities which try to realize food self-sufficiency without government help, and Samdrup Jongkhar Initiative is an example of it. In an uproar of the Rupee crunch, the financial burden of the government is expected to be increase, and it would not be possible to maintain the current situation. It is, thus, imperative to promote the formation of farmer’s groups who possess strategic minds. As it is desirable to cover all the aspects of the lives such as agricultural production, income generation, and nutrition improvement to promote the formation of this kind of farmer’s groups, the development and extension model that are regional (Gewog) based should be implemented, rather than implementing the conventional development strategy which are limited to agricultural production, It is also important to make good use of the Japanese experiences for a next step of the agriculture production of Bhutan.

2 There is a regional shade in forming farmers' organization, and a poor area tends to have a low organization rate.

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(5) Nutrition improvement for the Bhutanese people As indicated in Chapter 4 and 5, health problems in Bhutan are closely related to the eating habits. The Bhutan government has concentrated on the quantity aspects of the food security so far, but it is now important to pay more attention to the quality aspects of safe consumption of food. These two aspects coincide with the enumerator and the denominator for the calculation of food self-sufficiency rate (=domestic production of food/domestic consumption of food). The donors have mainly contributed to the supply side of the food which extend from production to the distribution and also provide some support on the consumption aspect by providing meals at schools and promoting the recognition of the importance of nutrition intake. As a next step, it is imperative to extend nutrition improvement to the consumers by practical exercises. The Ministry of Health has already settled on the food based dietary guidelines, but an important issue is to extend the guidelines with more practical applications.

Examples of potential projects  Extension of the food based dietary guidelines  Development of public relation strategy by a dispatch of expert  Extension of the guidelines through the mass media  Development and extension of new recipe based on the guidelines and traditional Bhutanese dishes  Utilization of the model Gewog project as a pilot project for recipe development  Enhancement of nutrition management system  Support to produce double-fortified salts with iron and iodine for decreasing high prevalence of anemia  Support on the nutrition survey at the national level to capture the nutrition intake situation of the Bhutanese people  Community development for health  Support to apply a curriculum on nutritional visual education in the royal institute of health sciences

6-2 Contents of Japan’s contribution With Bhutan on the verge of emerging from its status as an LDC, the WFP, etc. are trying to effect a soft landing for support for Bhutan, and some of their programs will be implemented soon. As noted above, partly due to this, the Bhutan government’s resource gap risks are widening, and it is actively approaching foreign donors to obtain new funds.

Japan is currently revising its future strategies now. As far as this study is concerned, the basic policies derived from study findings are as follows.

6-7 a. Rather than goods, provide more know-how Aid from Japan, which began with Dasho Keiji Nishioka’s contributions to Bhutan’s agriculture, is considered highly reliable in comparison to other donors’ ODA. Other Asian nations often ask for Japanese aid in the form of goods, but many in Bhutan hope to receive know-how (and demonstrated results) rather than material goods. Up to now, Japan has responded to Bhutan’s requests through technical cooperation project schemes, dispatching experts and sending volunteers. Japanese aid has been highly appreciated, but many experts have commented that even though a project might have clear results, once the project ends, its results and accumulated know-how are rarely carried over. In light of the need to change farmers’ attitudes noted above, these comments are quite understandable. This study has identified the following areas which appear especially promising, such as business management and provision of know-how in technical fields (particularly dispatch of experts envisaged by Bhutan): i) Greenhouse crops (Horticultural Division, Agriculture Dept., MoAF) ii) Strategic advisers for farm product storage strategies (BFC) iii) Nutritional management advisers (Ministry of Education) iv) Experimental rice growing and extension experts (Agriculture Dept., MoAF) b. Loan projects are quite limited As the current resource gap also makes clear, the state of the country’s finances makes it difficult to start projects entailing large loans. Although projects such as making finance available in remote areas and providing farm loans to promote independent farming using two-step loan projects are usually very effective, special attention to financial conditions is needed in light of the state of public finances. The first issue that needs to be considered is the source of funds for repayment. Repayment will be difficult if yen loans are used as they have been up to now as part of the government’s subsidy policy. On the other hand, if the main purpose is lending to groups with strong solvency, new yen loans can certainly be assumed. Generally speaking, Bhutan has no private enterprises with high solvency, and since there are sectors where financial institutions already provide products, such as import and export financing, the most appropriate recipients for two-step loans from Japan would be farming cooperatives.

6-8 c. Japanese technical projects as wide-area core projects Horticulture Research and Development Project now underway at Mongar serves as a core project bringing together six districts in the eastern part of the country. This project is having excellent spinoff effects and farmers themselves express the wish to come to the research center (their travel expenses, etc. are often borne by the districts) to acquire horticultural skills. Japan’s technical project will soon be ending but it has successfully trained many people. Many who trained under the program are working not just at Mongar but also as senior officials in the government’s Horticulture Division, Department of Agriculture or as researchers at the main research centers, and it is fair to say that they will pass on the development philosophy and extension skills left by Japan through their own efforts. This example of success in the east to demonstrate Japan’s contribution in the western part of the country will make it possible for senior officials to commit to a policy for the research center and the extension field, and it is hoped that Bhutan and Japan can build a firm relationship in these areas. The study team believes that Japan should continue to support on these fields by the dispatch of experts and supporting to enhance the capacities of RNR Centers and should call attention of its support to the Bhutanese and Japanese peoples. As shown in Chapter 5, strengthening of function of RNR Center of Mitthon Sub-Center, which should be shifted from Bajo RNR Center, is raised as the promising project in the future. d. Having volunteers serve as extension officers is effective for meeting ODA targets Volunteers from Japan are very active in Bhutan, partly because of trust felt toward Japanese and relatively good public order. Bhutan is also an exception because of the large number of senior volunteers who are active there. In the eyes of Bhutanese, Japanese are specialists who act as missionaries to spread Japan’s advanced technology locally. Although diverging somewhat from volunteering in the true sense, it is clear that planning for projects in Bhutan should include volunteer projects as part of the strategic scheme, and this direction is expected to also be effective in the future. It is obvious that Kingdom of Bhutan is placing a big importance to Japanese volunteer scheme. e. Changing farmers’ attitudes Because of the need for national governance of the kingdom, the government has carried out agricultural development for a long time. But subsidies provided by the

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government are still small. Agricultural subsidy at Nu.23.7 million in 2010 was less than 1% of total domestic agricultural production at Nu. 12,128 million and it is lesser percentage compared to nearby countries. For example, India's percentage of subsidy toward total domestic agricultural production accounts for 6%, and other neighbors, Bangladesh and Nepal hold more or less 2%3.

Box. Example of a Farming Community in Sarpang The irrigation system in Chuzagang, Sarpang district, likely needs only minor repairs, but the villagers themselves filled in the irrigation reservoir supplying water during the dry season as part of measures to combat malaria. In other words, they sacrificed productivity thanks to irrigation for the sake of anti-malaria measures. Now some of them feel that they should re-excavate the filled-in reservoir and restore the irrigation system. This kind of thing often happens, when facilities are provided unilaterally by the government. Unless local residents take the initiative to carry out minor repairs and maintain small irrigation systems and feel a sense of ownership toward the facilities, the facilities could easily go to waste again no matter how often Japan carries out repairs. In other words, unless people are given the skills to design, repair and maintain facilities themselves and feel a sense of ownership at the village block level, facilities will simply be scrapped when it is felt to be expedient to do so.

MoAF is aiming to support farmers not by manipulation of custom or by guarantee of selling price but by subsidy to agricultural input. On the other hand, farmers perceive the subsidy as a right and not as opportunity to develop (MoAF McKinsey Report). It can be understood that the support to farmers through subsidy is not enough yet, however Bhutan government should also need to brew "famers with strategic thinking" to change farmer's attitude. This kind of capacity development should be done starting in less privileged areas where government support did not reach up to now, and promulgate its activities to nationwide. Japan, in the run-up to other donors, should conduct this capacity development to brew farmers with "Strategic Brain".

Examples of potential projects  Model villages (Gewog) project  Target region: Zhemgang  Implemented as technical project and the dispatch of JOCV  Components of support

3 For comparison, Japan provides 55% of subsidy towards total domestic agricultural production.

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- Introduction of rice production technique - Technical training on the autonomous maintenance of irrigation system - Enhancement of the function of farmer’s groups or cooperatives - Improvement of the nutrition of the meals at schools (development of recipes and extension of school farming)  Application of Grassroots Grant Aid  Support of Samdrup Jongkhar Initiative as a development mirror

With the rupee crunch now, the Bhutan government is trying to adopt a new agricultural development paradigm for increasing its food self-sufficiency ratio. But for Japan, and for the sake of reaffirming the Bhutan-Japan diplomatic relationship, Japan should propose aid policies that differ from those of other donors.

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Appendices

1. Results of rural survey (Sarpang, Zhemgang, Trashigang) 2. Structure of Stakeholders on Food Security 3. Budget Appropriations by Program for 2011/12, Ministry of Agriculture and Forests 4. Structure of Stakeholders on Trade

Results of rural survey in Sarpang Dzongkhag

1. Surveyed Gewog: Chuzagang 2. Survey Period: May 7th, 2012 – May 10th, 2012 3. Basic Information: (1) Summary Chuzagang Gewog has an arean of 21 km2. The Gewog is located in the middle of three other Gewogs; Gelephu, Sershong and Umling, and sharing its Southern border with India. It consists of five (5) Chiwogs with the total population of 2,426 inhabitants and 483 households (Population and Housing Census of Bhutan 2005). The major crops grown in the Gewog are paddy, millet, maize and bitter nut.

Figure 1 Location of Chuzagang Gewog

The Gewog centre is located at Shawapang, and total of nine (9) villages exists within five (5) Chiwog. Forest cover is 80%, and whole Gewog is situated on plain land between 235 – 265 m above sea level. The location is on a part of Mao riverbed, and thus the land is not feasible to cultivate due to large number of stones in the ground. 342 households out of the total of 483 households in the Gewog are occupied by migrants.

Appendix1-1

The Gewog has a Basic Health Unit (BHU) and a Community Primary School (CPS) which is accommodating approximately 350 students. Also there are 4 Non-Formal Education Centres (NFEC) which are accommodating approximately 80 students. On the top of these, The Gewog has an RNR centre, 19km long irrigation system, 16.5km stretch of farm road and 100% electrification rate.

In terms of land use, whole Gewog consists of 1,021 acres of Wetland, 1,322 acres of Dryland and 5 acres of orange orchards. Main crop cultivation figures are as follows.

Table 1 Production of Major Crops (2009) Table 2 Livestock Population by Type (2010) Crops Harvested Area (acres) Production(M ton) Livestock Total Paddy 462 424 Local Cattle 824 Maize 570 410 Improved Cattle 390 Millet 112 50 Buffalo 35 Goat 152 Sheep 31 Poultry Local 827 Poultry Improved 1,601 Pig 29 Source: Fact Sheet of Chuzagang

Also livestock production is as mentioned above. During the survey period, it is confirmed that butter and cheese export to outside of the Gewog has become stimulated in recent years that must have raised the number of cattle rapidly. On the other hand, the figure above on number of poultry may not be accurate as consumers prefer purchasing eggs from market than feeding egg laying hens. Chicken is not considered as poultry as Bhutanese do not kill chickens by themselves. The same fact applies to pigs, and thus pigs were not seen anywhere during the survey period.

4. Summary of the Rural Survey (1) Implementation Guideline Two (2) Chopas out of 5 Chiwogs were interviewed for the purpose of investigation. The first one was a female Chopa who manages three (3) villages situated at South-West of Chuzagang, Barthang, Zombabe and Tshojan (Barthang village henceforth). And the second one was a male Chopa who manages two (2) villages where Gewog centre is situated, Shawapang and Nimiling (Shawapang village henceforth). The former deals with 123 households, and the latter deals with 36 households. Several rural surveys were also conducted such as interviews for two (2) typical farmhouses in each Chiwogs, nutritional

Appendix1-2

education implementation survey for community school principal and teachers, interviews for disseminators, sales destinations for farmers, procurement traders at Gelephu bazaar for daily food and beverages, and venders. (2) General Situations in the surveyed villages According to GPS observation, Gewog public cooperation in Shawapang is located at 26’51’38’0 Northing and 090’31’02’5 Easting at approximately 265m above sea level. Both Chiwogs is electrified enabling daily use of mobile phones and also water supply is fully provided through a pipeline from water head in nearby mountain. During the dry season, Mao River can be crossed on foot enabling adults to reach in markets in Gelephu within 45 minutes, and thus markets in Gelephu are considered as essential place for sale of products and purchase of consumption products.

Figure 2. Map and Village Population in Gewog

Although the distance between two Chiwogs is less than 2 km, Shawapang is functioning as Gewog centre as a Gewog civil service office is located at Shawapang. Therefore, three (3) disseminators visit the office frequently. Shawapang experiences almost no irrigation system problems or human-wildlife conflicts which makes its farmers’ life much more comfortable and easier than other Chiwogs in the same Gewog.

(3) Present condition of land-ownership As there is no accurate topographical map in Bhutan, agricultural areas told by each respondent cannot be verified, however, more than 50% out of approximately 900 acres in Barthang village and approximately 400 acres in Shawapang village are categorized as wetland. However, numerical reports show that irrigated areas in former is more than its

Appendix1-3

wetland area and in latter is a half of its wetland area, and areas without irrigation system in latter are kept as abandoned areas. Rest of the areas are categorized as dryland, however, approximately 10% of the dryland is also kept as abandoned areas.

(4) Agricultural production Most of the farmers in the region produce rice. Some of the existing irrigation systems need to be repaired and not all the irrigation systems receive enough water supply. Having said so, the region is suitable for rice production even though the yield is low because irrigation water is available in the dryland at South of Barthang village. The region produces rice and maize where maize is commonly used as emergency or alcohol production purposes. The interim crop in wetland is potatoes, wheat and oat although such phenomenon is practiced by farmers without proper irrigation systems, whereas farmers with proper irrigation systems prefer rice production as their second crop. Ginger, asparagus, chili, apples and the like are produced as the main cash crops, and yet bitter nuts (betel nuts) are already commonly produced. The nuts are used as an ingredient for chewing tobacco. Most the famers produce the nuts because production is relatively easy and trade price is high. Except for apples and bitter nuts, main markets for the products are in and around Gelephu. In terms of apples, India traders come to orchards directly with 5 ton-truck to purchase and sell them in West Bengal. Trading price on the spot is approximately 430 Ngultrum per box (18-20 kg) and yet it is sold approximately 1,500 Rupees in India. A planting calendar for main crops is as follows.

Table 3. A typical planting calender in Chuzagang Gewog

Although a statistical report on Chuzagang Gewog published by the Dzongkhag states that orange is the specialty in the Gewog, the reality is that oranges are not cultivated

Appendix1-4

much as the region does not have a suitable climate for orange production. In case of potatoes, if climate does not favor during the harvesting period and not enough results are produced, it is often used as maneuver for the land. Many traders exist for bitter nuts trade who compete for procurement, and thus the traders directly come to villages with trucks to purchase the nuts. In case of ginger, buyers are limited for Barthang village, and thus sellers have to go to markets in Gelephu to seek buyers.

Although disseminators predict that lychee production will pick up in the future, there is no space for introducing lychee production as most of the drylands are occupied by butter nuts. An agricultural corporative associate exists in the villages, not does everybody belong to the associate. The reasons behind of not belonging to the associate are; already engaged in other positions such as Chopa, or the corporative deals with only rice in dryland, and thus farmers producing rice for their own consumption have less merit.

(5) Production methods Lay-me system, practiced in the past as a collaboration and volunteer work among villagers in the community, has been replaced by compensation work today. In Chuzagang, the payment including meals for labor for annual farming work (farming work labors are hired especially during rice planting, weeding, and harvesting periods) is 120 Ngultrum per day. However, ridge construction during rice planting period is considered as a heavy labor, and thus most of the cases the payment is 200 Ngultrum including meals.

In terms of farming machineries, although some farmers possess own large tractor, most of the farmers hire tools from the agricultural corporative. Hiring charges for farming machineries from the corporative are; for instance, 325 Ngultrum per hour for tractor, 225 Ngultrum for harvester, and 100 Ngultrum per day for threshing machine. Except for a few Japanese made, most of the tractors are Indian made which is not good in quality, and thus many famers hesitate to hire the tractors from the corporative as manual labor creates less loss during cultivation. Also, some farmers intentionally do not hire the machine since all the machinery originally belongs to the government and yet some profits are given to specific associates only.

(6) Wildlife damages against agricultural production In regards to crop damage caused by wildlife, there is a huge difference in reports that Shawapang village has experienced only a few damages so far, whereas Barthang village has experienced 80% crops damage caused by wild elephants though these villages have

Appendix1-5

less than 2 km distance in a straight line. Especially Zombabe village situated on South most part of Chuzagang sharing border with India experiences attacks from elephant through 1 km wide forests along the Indian border between September to November every year. These elephants come in a group as many as 45 heads. Mr. A who owns paddy fields and corn fields located nearest to Indian border has got his house destroyed twice and more than 80% of products are damaged by elephants shared some of his stories as follows.  Although many supporting agencies have tried many ways to prevent elephants’ attacks, all in vain as elephants soon got to know about electric fencing generated through solar panels and therefore started destroying the fencing with trees  Mr. A owns 5 acres of land along forests with Indian border, and some other farmers also own such. Yet, they also own farms inside the village where no experiences with elephant damages, and thus they have abandoned their farming land along forests with Indian border. On the other hands, Mr. A has no alternative lands rather than the one by the border where he has to engage in farming. In this regards, elephants are more attracted to Mr. A’s farm. This is a vicious cycle for him  The best solution to prevent elephant attacks is to gather people as elephants do not come closer to the place where people are gathered.

(7) Distribution and consumption of Agricultural products Farmers in Chuzagang do not have customs to store food products as a whole community since the past; instead each household uses jute bags (25kg in capacity) to store maize and rice to preserve for themselves. These bags are usually kept in a kitchen. Affluent households tend to build storages separately, yet the storage is not for sharing storage but just for their own usage. During summer time, most of the vegetables and fruits are commonly purchased from markets in Gelephu, and saved products are only those which will not get spoiled easily such as onions and garlic. During winter time, kitchen garden in backyard functions as saving storages.

(8) Livestock possessions and social taboo More than 80% of the farmers commonly possess cows for milking purposes to produce butter and cheese. 50 % of the famers possess pigs and goat, and 20% of the famers possess water buffalo. Chickens are owned by almost all farmers for the purpose of collecting eggs.

Appendix1-6

The water buffalo produces amount of milk next to Jersey species1. The water buffalo is particularly resistant against humidity and disease, and yet the species is traded in high price as Nepali residents consume the meat2. Slaughtering pigs and chickens are avoided traditionally, yet it is said in one way that slaughtering such animals are still carried out in private manner. Through interviewing with farmers, they expressed no hesitation on consumption of animals if any third party carries out the slaughtering processing. Slaughter will receive a part of slaughtered pig as a reward instead of money. Part of the meat offered for the slaughter differs in region wise, however, chest part (5-10kg) are commonly offered in Chuzagang. Slaughtered pork is sold for 150 Ngultrum per kg. Yet, it is sold 140 Ngultrum within Chuzagang. Those who are involved in slaughtering process are the same Buddhist yet belongs to the lower socioeconomic classes.

(9) Off-farming income Off-farming incomes in the region are becoming civil servants, engaging in agricultural work, being construction labors, sewing traditional dress and so forth, yet demand for carpentry work and traditional painting for construction of the traditional housing is providing more income. Payment for the painting work is made in lump-sum, and thus the sum sometimes reaches 1,000,000 Ngultrum for a house. Therefore, number of carpenters and painters in a village is in large number and thus, in many cases more than 10 carpenters and painters exist in one Chiwog3. Farmers tend to judge others’ degree of wealth based on in-and-out side house appearance, which is as important as owning vehicle.

(10) Farmers’ Organization Rice in Chuzagang is sold by Chuzagang Agricultural Farmers Cooperative (CAFCO) in partnership manner (details will be discussed later). The main product sold as cooperative sale is rice, and thus 2-3 people join the membership from each village though farms who cannot afford more rice sales do not join (averagely 5-10 people in one Chiwog). There are water supply cooperative and Fishery Group as common farmers’ organization in the two Chiwogs. There are two separate organizations at upper and lower part of gravitational irrigation passage (approximately 70 people at upper part at Samdrup Chyour and approximately 350 people at lower part at Phunsum Chuyour) in the water supply cooperative, and farmers who are irrigation beneficiaries join the organization. Some people naturally belong to both the cooperatives, yet there is no synergic activities carried out between the cooperatives. The Fishery Group was initiated in recent year by a

Appendix1-7

disseminator looking after livestock, and they cultivate species of catfish in a nearby river. This activity has just started, and thus it is a seasonal one as of now. The cooperative purchases rice with husks. The rice’s sales price is 10-19 Ngultrums depending on its species, and it is based on the price after buffing the rice. Weight conversion factor from rice with husks to buffed rice will be predicted that the yield being as low as approximately 40-50% since Bhutanese rice is sold for 35-42 Ngultrums per kg in the markets.

Table 4. Paddy Purchasing Price at CAFCO

Comparing to the weight conversion factors with Thai rice (5% crushed) from rice with husks to buffed rice being approximately 60-66% as its basis, the yield being low is understandable. As a matter of fact, a head of the cooperative raised an issue that Indian made rice polishing machine create huge loss.

(11) Food Security The two Chiwogs has already stopped accepting any further migrants coming in. The numbers of household have increased through natural population growth in the last 5 to 10 years. Even so, they face seriously lack of labor during busy farming season as young generation leave for outside of the region for better job opportunities. Rending and borrowing of rice and maize with neighbors within the villages are commonly done. There is no charge or credit up on the rending or borrowing process as the process frequently happens during the time when crop storage finishes between July and September which creates food security in micro-levels.

Appendix1-8

(12) Health The common diseases in both villages are alcoholics, DB, gastrointestinal diseases and many suffer from swallow feet from unknown causes. The common causes of death are alcoholics, poisonous snake bites, and gastrointestinal dysfunction, which can be prevented through improvement of eating habits.

(13) Eating Habits Daily eating habits are quite simple as the main dish is with Datsi. Although Ministry of Education and teachers at regional community schools instruct students and the community on essentiality of green vegetable intake, lack of cooking variation for even teachers know how to cook with Dasti only makes the nutritional education in vain. There will be no influence on trying to change their eating habits through instruction on essentiality of nutritional vegetable intake for they only know how to cook with Datsi or children dislike vegetables. Villagers have consumed rice traditionally yet they have no preference over any kinds of rice like phenomenon shown in Thimphu and Paro preferring red rice. Also they have no preference over Bhutanese rice. Thus, justification on nutritional diet intake is possible through improvements on cooking methods.

1. Jersey →water buffalo →local species; shows hierarchy on amount of milk produced in local belief

2. Nepali-Bhutanese do not eat beef too, yet water buffalo is exception

3. There are 10 carpenters and 5 painters within 47 households in Shawapang, one of the survived Chiwogs, and

there is an average of one month house construction work for them in other regions.

5. Vender and Trader Survey The main vegetables placed on a market in Gelephu were about 40 kinds according to the investigation on the middle of May, 2012. Indian vegetable begins to be imported from the beginning of October when vegetable produced in Bhutan gets in slack season and meats at its peak (which shows highest price) in December and January. In turn, Indian hot and pluvial season comes from around June, that is when Bhutanese production season starts again, and vegetables from India become diminished until October. The price for main vegetables at the present is as follows. Fluctuation range of a value is shown to in the parenthesis.

Appendix1-9

Table5. Price of vegetable in Gelephu Bazaar

Price (Per Kg) （May 12, 2012） Price range Tomato 20 （20-30) Potato 20 （20-30) Carrot 40 （10-80) Cabbage 20 NA Source: Interview survey at Gelephu Bazaar, joint survey with JICA’s Data Collection Survey on Strategic Agricultural

Water Supply and Management in Southern Bhutan, Sanyu Consultants Inc.

According to the hearing, cabbage is procured from Kolkata and the potato from northern Bengal, respectively and chili is from traders of Falkata. Before arriving to Gelephu bazaar, the following supply chain is mobilized; viz. i) Farmer's in India --> ii) Local trader (sometimes plural) --> iii) Traders who handle India - Bhutan business --> iv) Vendors in Bhutan. The profit margin of iii) above is about 2-3%. On the other hand, the profit rate of vendor who handles fresh items is assumed with 13-18% because they have to shoulder inventory and perishable risks. This is the general numerical value. The transport costs at 5 ton track from Bengal are around Rp.7,000 but nothing is loaded to the track on their way back except for specific season of the year. A season for exemption comes with a harvest of bitter nuts (March) and a harvest of ginger (September). At peak season, the traders bring goods three times a week, but at the season like the end of May when vegetables produced in India end by and by, once a week of transportation is enough for fulfilling market demand. It was said that a transportation rout of fruit export (apple, pear, and persimmon) to India is not via Gelephu but via Phuntsholing. It was asked to a trader about spraying of agricultural chemicals to fruits and vegetables of India and he replied that "It is a natural thing." as a

correspondence to needs in Bhutan market.

Bank settlement system is used for the dealing of vendor and trader, a vendor in Bhutan side can pay in Ngultrum to correspondent bank, and a trader in India side can receive Rupee in India. In this case, the risk of rupee crunch is being taken by intervening bank. However, according to talk on the vender side, the vegetables produced in India are showing about 20 % of rise in price already, at some places near the border (where the procurement and sales are conducted by cash).

Next, the JICA Study Team called on the trader who imports cereal and processed food from India. Import items were cereals like rice, dull and millet (from May to June, sold as feed of cow), and additionally they were dealing with import of the artifact like biscuit etc. This also

Appendix1-10 has a connection with more or less ten Indian traders through an Indian broker. The whole import volume is showing an annual increase at 10-15%. The profit rate is about 3-4 % because they are dealing with the products which last longer compared with vegetables and fruits with shorter expiration period. Also transportation cost is cheaper than vegetable at Nu. 1,000 per ton since they can use 20 ton track.

They are handling a various kind of rice, out of which 95% is Indian rice. The major Indian rice price is; basmati rice at Nu.40/kg, boiled basmati at Nu.19/kg, broken basmati rice (Aijin Quality: Nu.10-15/kg) and IR8 at Nu. 15/kg, which is rather cheap compared to Bhutanese red rice at Nu. 42-60/kg. The 95% of sales is Indian rice. As for maize, they procure it during the period of October and January at Rp.9 from India, and sell it at Nu.13/kg during other period. Since they are paying US dollar to the bank for the settlement of a deal, they are shouldering a part of exchange risk of the rupee crunch. They are expecting increase of edible oil import since they think an excess intake of butter will become a health problem in Bhutan in the future.

The one visited at last was a toiletry shop. They were selling daily foods (the food which does not go bad) in addition to sugar and rice. Oil and sugar are procured in Bhutan at fixed price so that there is no influence of rupee crunch, but the daily foods purchased from India by cash are getting tougher to procure. Therefore, the number of commodities which was being handled before and is impossible to procure at present, are increasing. According to them, the margin of the business is 8-10%.

6. Students' Nutritional Situation According to the Teachers at Chuzagang CPS Chuzagang CPS is not qualified as a target of school lunch provision project, which does not fulfill the condition of i) far from market road, ii) far distance of students' commuting to school, iii) poor in student's family, etc. Therefore students go to school with a box lunch from home. The School Educational Program was implemented here too. This is a program that the students divided into four groups grow favorite crop, but in many cases, the students choose ginger and do not challenge a new crop because their presents usually grow ginger as a commercial crop. Moreover, despite that teachers are trying to explain to students and their guardian the importance of intake of green and yellow vegetables, it is rather difficult to improve the situation easily.

Appendix1-11

The teachers who stay nearest to the student feel a worry about nutrition problem. According to an interview to the principal and the teacher of CPS, which is only one in the Gewog, growing of green and yellow vegetables and root crops is gradually increasing but a majority of famers do not have an interest. One of the reasons of no interest is that they are going to grow commercial crop such as ginger and millet for their bettering life. It is also counted as a reason that heavy rain during summertime makes difficult of vegetable production. A teacher who is interviewed came from Mongar, the eastern part of Bhutan, revealed that the lesser percentages of people in this area obviously do not cultivate kitchen garden compared with his home town. In his home town, Mongar, he had a more opportunity to eat wild vegetable and mushroom in addition to the vegetables which grew in kitchen garden. Generally speaking, a home with lot of household members has problem on nutrition intake of children. In particular, they say that there are offspring in such household who are taking lesser protein and their physique is obviously different. Some students with a lot of children in the house bring a lunch box containing rice with topping of salt only. There was an intention by the school that development of demonstrative kitchen garden in non-used land of school, which accounts for 30% of total school area at 10 acres. Using this demonstration farm, the school would like to educate both student and parents. It is considered that the plan will take effect because a site at school is not damaged by wildlife as it is enclosed by a fence, also because parents usually hear the sayings of teacher. But, in reality, the school is on the way to develop a 4 acres' football coat, so that the land actually available is quite limited. However, it is still considered that demonstration effect toward student and guardian is big and by combining with recipe development and extension service, it can be generate a project with high spillover effect at lower budget.

7. Interview Survey to Chuzagang BHU

In Chuzagang, only one BHU exists and its main function is to introduce suitable medical facilities (referral function) to the person who visits there. In particular, nutritional education to a pregnant woman is

Appendix1-12 important role for them, and they say that almost all of pregnant women who visit BHU do not know the way of enough nutrition intake and baby feeding. Three staffs are always working. The infant's nutritional position until 60 months is as shown in the left figure. It is observed that underweight brought from the loose bowels and dystrophy is improving in 2011 (rightmost column) compared with 2010 (the column which is the 2nd from the right), but it is found that the number of overweight is aggravated, which tends to happen by early feeding before milking period (6 months). The BHU assumes, as a major cause of these numbers, that the farmers are difficult to find time to take care for their children by the hectic farming activities.

The serious problem of surrounding Chuzagang is that the patients with alcohol dependence syndrome exceed 10 percent of total population. According to a study conducted by BHU, out of entire population of Chuzagang at 1,779, the patients with alcohol dependence syndrome (the person who has visited BHU because of excess alcohol intake) reach 190. Among the cause of death, alcohol dependence syndrome is ranked as the top every year, which is numbered around 5 annually. For comparison, the dead cause secondly ranked is a death by poisonous snake (1-2 peoples die every year in June-July). According to the BHU, scientifically the relationship between nutrition intake and disease are not completely proofed, but farmers can cultivate kitchen garden in summer season, unlike winter season with little rainfall water. The BHU points out that despite of this situation, farmers are buying the Indian vegetables which are being applied a lot of agricultural chemicals.

8. Rural Society The followings are the information obtained through interview to four farmers. Before these interviews, Chopa was requested to choose both rich and poor farmers, but Chopa had a sort of resistance to choose "poor" farmer, so that there were several cases that interviewee was not thought as poor. Since it tends to cause a wrong judgment that one ascertains the situation of whole Chiwog merely from an interview survey to farmers, one should keep it in his mind that the result of interview only have a referential meaning. In particular, the figures relating to day-to-day matter of farmer's life, which do not have an important meaning and regarded just as a reference. Below indicates the farmer's way of thinking and the structure of rural society. Although these are fragmentary, they are useful and giving information for the discussion of food security.

Appendix1-13

(1) Custom of Lochoe and Rimdo as the food security of rural area

There are almost no books and studies that introduced about the custom of Lochoe (performed every year) and Rimdo (conducted 2-3 times a year). Lochoe possesses similar way of thinking to Japanese Bon and it is performed to hold a memorial service for ancestors and for prayer to Buddha. It is believed that unhappiness comes, if people neglect this holding. Usually, a sponsored household decides the date for this event which is hold when relatives scattered in distant place can gather together. Since the event is carried out without separation of rich and poor, the poor family is obliged to ask a donation or a debt to their relatives. The host farmer who holds Lochoe has to serve meal and Ara to the visitors coming from nearby villages. A visitor has to bring rice and Ara as a feast celebration, but in turn, the host farmer needs to provide 10-15kg of rice as a souvenir to the visitor who came from a distant place. A rich interviewee met in the field survey confessed that in the Lochoe, more than 400 peoples visit every year and they spend more than 400 kg of rice.

Rimdo is the event performed by a family circle praying safe and healing of sickness. For example it is hold before a big operation or a oversea trip by the family member. People do not gather from village like Lochoe, but adjacent households and close relatives are invited. Generally, Rimdo is also held at 2-3 times a year, and 15-20 people are invited then, so that more or less 100kg of rice is consumed. A cordial donation is given to the priest in particular.

Both Lochoe and Rimdo are the system that an abundant rice and Ara are supplied from rich household. As for Lochoe, it has the mechanism that food is supplied to the whole village in particular. Thus, though the traditional events in such area are forming a regional food security system, while these are combining with the original religious outlook.

(2) Situation of labor insufficiency

As Chuzagang is one of Gewog established by settlers, the land area per person is fixed at 5 acres which was provided by the government. However, (it does not come out to the surface though) the cases of land sale for financing of construction of a house and purchase of a car are increasing. On the other hand, the buyer of such land is often the person with political power. There are also cases that they helplessly make their farm land fallow because the lack of labor force. Lacking in labor in the area occurs in particular, at the time of the rice planting (May-June), the time of weeding of maize and millet (May-June) and harvest time of ginger and millet (September). Except a furrow construction for rice growing, the prevailing wage of

Appendix1-14

agricultural labor is more or less than Nu.120/day, but it is still difficult to gather enough labor force on time.

There are only a few successors of young people in the area, but it was observed that some of them have a capability to tow agriculture in this area. They can harvest overwhelming yield of rice and ginger compared to other farmers, and their high-quality farm produces are being sold at higher price than those by other farmers. It is observed that the characteristics of these young successors are that i) basic method and activity to increase yield are taken such as applying an additional fertilizer to base manure, ii) they are keeping a high motivation toward income generation, iii) they shows a high commitment toward packaging and quality upgrading, and iv) they are interested not only in agriculture but in overall living aspects such as nutrition improvement and new recipes development.

(3) Government-dependent farm operations

In Bhutan, direct agricultural subsidy such as price guarantee is small compared to other countries. Toward this issue, MoAF has an intention to support farmers by subsidizing to agricultural inputs but not through price guarantee of agricultural products. Over the years, the Agriculture and Forestry Ministry has offered extensive support to farmers—distributing free seed, offering financial help for purchasing fertilizer and other inputs for farm production, supporting transportation costs, and supporting training (including study trips). Subsidies offered by the Ministry to farmers today come not from the government’s current budget for subsidies, but are paid out as “commissions to dealers” at the discretion of the ministry from its internal budget. Strong support for farmers, who grow food under difficult conditions, has been understandable, but the result has been that they are now becoming unable to grow crops with their own thinking. The Ministry of Finance, which approves the subsidies and other ministries are also saying that farmers are getting too much help.

It is observed that strong government’s initiative is mobilized when selecting product of "One Gewog Three Products", forming agricultural cooperative, and developing market. There is a possibility of lessening strategic thinking by farmers.

Box. The case of a farming cooperative in Chuzagang, Sarpang district

This district has a farming co-op called the Chuzagang Agricultural Farmers Cooperative (CAFCO),which was introduced by the Ministry of Agriculture and Forestry’s Department of Marketing and Cooperatives as one of Bhutan’s best. The co-op currently has 209 members in and around Chuzagang. Its main business lines are: 1) rice processing and group selling (also group selling for maize); 2) lending farm machinery; 3) transporting products; 4) training young farmers; 5)

Appendix1-15 operating a one-stop shop, etc. The co-op has an Indian-manufactured rice huller, Kubota tractors provided by Japan under KRII, and so forth.

The head of CAFCO with the co-op’s rice huller, and co- op rules (right).

The rice huller from India was originally bought with project funds from the Ministry of Agriculture and Forestry and is still the property of the national government. CAFCO has the use of the machine for free and due to lack of funds has not yet met the government’s request that it buy the machine for Nu. 2,000. The KRII farm machinery was also provided free of charge as part of government measures to promote farm cooperatives. The co-op also receives the following support from the government:  Introduction to buyers for rice and maize (Dept. of Marketing and Cooperatives)  Participation in trade shows (Ministry of Economic Affairs) and expenses for participating (MOAF) The co-op, meanwhile, lends out farm machinery at low rates, offers interest-free loans up to Nu. 5,000, and exempted members from paying the membership fee due to being in the black one year (fiscal 2011). On the other hand, unless farmers produce a surplus of rice or maize, there is no advantage to them in joining the co-op and because activities are politician-led and there is no governance for the farmers, many farmers hesitate to join. Some experts have even commented negatively on the co-op. As for the co-op’s financial status, capital build-up is stuck at Nu. 200,000, and if the rice huller the co-op is using should break down for some reason, its activities could come to a standstill.

In an interview with the Marketing and Cooperative Department, officials there stated that in the end, one of the aims of forming cooperatives is to pool the members’ land together so as to increase productivity. Many things need to be done to achieve this aim.

(4) Damage caused by wildlife

In fieldwork at Sarpang, it was discovered that some fields within a 2-km radius of each other have been damaged while others suffer no damage at all. Elephants appear near human settlements for about 3 weeks beginning in mid-September, which coincides with the corn harvest. Our study proposed the methods below, but none was a real solution to the problem;

Appendix1-16

all these methods which are part of Japanese aid lack know-how and an established track record.

1. Electrified fence According to the interview conducted in a sample site, electrified fence is effective 1-2 times, however elephant's learning capability is too high and if they are accustomed to electrified fence, they will find the best way to destroy all fence. Besides the many case of failure, there are several technical weakness on electrified fence, viz. i) electrified fence is costly, ii) it reacts to plant and trees touching surface, iii) sometimes peoples are damaged by electricity.

2. Gathering people It is known that elephant does not appear in the place where human population density is high. Extension worker in Chuzagang is proposing that preparing warning system noticing elephant's approach and villagers with torches gather and let elephant feel the sign of human being if warning system alerts. Effectiveness of this proposal is not verified yet.

3. Construction of dip to prevent elephant's access This is the plan to construct dip that is difficult for elephant to climb up once it has slipped down. There are already effective precedents in India and other countries, but application to Bhutan needs some consideration in terms of i) high cost is needed for construction, ii) emotional mercy may oppose to the plan because most elephant in the dip will die.

But Japanese know-how regarding solar-powered electrified fences can be used to keep smaller wildlife away. Meaningful measures for keeping monkeys and boars away from crops, especially in central Bhutan where there are no elephants or tigers, could be provided with Japanese support. Japanese experts currently dispatched to Bhutan on an agriculture mechanization project could be flexible about the “farm machinery” currently being provided under KRII and should switch to fertilizer or electrified fencing as needed.

(5) Direction of nutrition improvement

In interviews for this study in Chuzagang, Sarpang district, which adjoins the border with India, a change in the type of grains generally preferred by Bhutanese was also observed. The majority of the residents there are immigrants who originally lived in the central highlands. In other words, some of them preferred red rice to white rice, and if supplies of red rice were short, they would supplement this with maize or wheat. They also consume vegetables grown in their own kitchen gardens rather than vegetables from India, as they believe their own vegetables are safer.

Appendix1-17

Living near the Indian border in Chuzagang now, these people’s eating habits have changed. The table below sums up trends observed based on a survey of farmers (N=23) in farming communities.

 There is no preference for either red rice or IR (white) rice. Since they are used to eating IR rice, younger residents tend to prefer IR rice. This is mainly because Indian rice is so much less expensive, but once they get used to eating it, it tastes satisfactory to them.  Only a handful of farmers try to grow red rice themselves, and they do so to grow rice used for special occasions. Red rice is considered the rice suitable for special occasions, and the majority of households do not eat it ordinarily.  Most of the farmers surveyed do not have kitchen gardens. In the dry season, especially, there is not enough water (actually, water is not that scarce but the people are not interested in making an effort to get it) and they feel that it’s much cheaper, in terms of time and effort, to buy vegetables at the market.  However, they are always concerned about whether vegetables from India are safe, as they believe that those vegetables may be grown using large amounts of agrochemicals.

Market survey being conducted among vendors Vegetables from India sold at the market in Gelephu

Allowing for transportation cost, rice and vegetable from India are the cheapest at border area. According to the market and vendor survey conducted at border district, Indian vegetable will meet slack season from June to October. Bhutanese produce will replace it until October but it is more expensive than Indian produce. Some farmers who do not cultivate vegetables at their farm cannot recognize seasonality of vegetable, so that they cannot distinguish the origin of vegetable. Likewise, new attitude and behavior are emerging at the border area where the residents need to face the wave of globalization fastest among the nations. It is thought that this is common directivity and it will prevail to whole Bhutanese consumers even though it takes a certain period of time.

Appendix1-18

Results of rural survey in Zhemgang Dzongkhag

1. Surveyed Area： Trong Gewog 2. Survey Period： May 7th 2012-May 10th 2012 (10 Days) 3. Basic Information on the Surveyed Area： （１）Summary The area of Zhemgang Dzongkhag is 2421.74 Sq. km, and its population is 19,797（2010）. There are 8 Gewogs and the outlines of each Gewog are as follows.

Outlines of each Gewog in Zhemgang Dzongkag （2010） Area Number of Number of Gewog Population （sq. km.) Chiwogs households Trong 358 5 597 2,825 Nangkor 494 5 492 2332 Shingkar 309 5 325 1,300 Bardo 210 5 373 1,846 Phangkhar 248 5 220 1,370 Goshing 99 5 298 1,443 Ngangla 216 5 368 1,942 Bjoka 195 6 155 954

Source: Preliminary assessment of the potential agricultural areas for protection

Zhemgang Zongkhag is regarded as one of the most underdeveloped areas in Bhutan,1 and the poverty ratio is relatively high. Yet, as can be seen in the figure below, the poverty ratios for Trong and Nangkor Gewogs are relatively lower compared to other Gewogs in hemgang Zonkhag.

Source: National Statistics Bureau and The World Bank, “Draft Poverty Maps of Bhutan: Key findings ” (2010), p.7

1 Annual Zongkhag Statistics 2010.

Appendix1-19

Gewog center in Trong Gewog is located in Tintibi. In Tintibi, there are also a RNR Extension Center, Yebilaptsa hospital which is the only hospital in Zhemgang Zhongkag.

As for the farm land utilization, 219 acres of Wet Land, 839 acreas of Dry Land, 163 acres of OrangeOrchard in Trong Gewog. The table below shows the crop productions and livestock population of Trong Gewog in 2008.

Major Crop Production (2008) Livestock Population (2008) Paddy 584 Cattle 1,640 Maize 494 Horse 25 Wheat/Barley 13 Pig 55 Buckwheat 13 Poultry 987

Potato 222 Mandarin 19,007

Source: Preliminary assessment of the potential agricultural areas for protection

Location of Trong Gewog

The table below shows the outlines of each village in Trong Gewog.

Number of households and population of each village in Trong Gewog (2011) Number of Population Village Population (female) Total population Household (male) Trong 67 326 320 646 Dhangkhar 51 271 258 529

Appendix1-20

Gomphu 66 332 317 649 Subrang 18 83 87 170 Zurphey 31 144 149 293 Tshanlajong 33 149 161 310 Bertey 23 100 87 187 Tama/Tintibi 62 265 231 496 Total 351 1,670 1,610 3,280 Source: Provided by an extension officer in Tintibi

4. Summary of the Rural Survey （1）Implementation Guideline Interviewｓ were conducted with two Chopas in Trong Gewog. First one is the Chopa ofZhurpehy and Tshanlajong which are located in the central Trong. The second one is the Chopa is Subrang which is located in the southern Trong. There are 65 households in the former Chiwag and the 8 households in the later. Interviews are also conducted with several farmers, school masters and extension officers in the Gewog.

（2）General Information on the Surveyed Villages There are 7 households in the three surveyed Chiwags who do not have access to electricity. Mobile phone and piped water is available for all these Chiwags. There are feeder roads in Zhurpehy and Tshanlajong villages, and the road is linked to the highway to Tintibi. It takes about 2 hours from Tintibi to these villages by car. There is, however, no motorable road in Subrang, and one has to walk for 2 to 3 hours to get to the village from the highway. One feeder road to Subrang is under construction, but the time of completion is not certain.

There are several dangerous points on the way to Subrang

Trong Gewog is one of the wealthiest Gewog in Zhemgang. Yet the living standard of the households seem to differ depending on the access to the roads. Zhurpehy and Tshanlajong which have easy

Appendix1-21 access to the motorable road appear to be much wealthier than Subrang where there is no road.

Typical farm household in Zhurpehy Typical farmer in Subrang

（3）Land holding The table below shows the landholding status of each village in Trong Gewog. For the 3 surveyed villages (Zhurphey, shanglajong, Subrang), each household owns more than 2 Ha of wet land on average. Yet about half of their dry lands are left fallow. The main reasons for leaving the land fallow are the lack of labor power and the distance to the lands.

Harvested Areas for each village in Trong Gewog Wet Land Village Dry Land (Ha) (Ha) Gongphu 113.94 408.60 Surbrang 42.80 97.18 Zurphey 89.97 244.06 Tshanglajong 65.26 169.54 Bertey 74.01 197.16 Tama 61.53 207.24 Tingtibi 28.02 19.13 Source: Provided by an extension officer in Tintibi

（4）Agricultural production Most of the farmers in the surveyed villages grow paddy. The soils of these areas are generally fertile and suitable for paddy production. Irrigations are available, but many of them are not managed well and require rehabilitation. Irrigation Laws stipulate that the farmers are required to supply labor for the management of irrigation. However, it is quite difficult to mobilize the farmer for the irrigation management as the irrigation channels are quite long and it requires a lot of man power.

Appendix1-22

Irrigation channels in Trong Gewog

The table below shows the yield of paddy for the households who are interviews during this survey. It indicates that the yield of paddy for Zhurphey and Subrang is quite low compared to that in Paro (the data are adjusted to the damage by wild animal) . The reasons for the low yield are thought to be inadequate availability of irrigation and machinery. The paddy production in Wet Land is conducted only one season in a year.

Production and yield of paddy for the surveyed farmers Harvested Production Farmer Areas Yield（Kg/Ha） （Kg） （Ha） Paro 2,400 0.48 5,000 Zurphey 1 400 0.40 1,053 Zurphey 2 429 0.40 1,071 Subrang 1 400 1.00 400 Subrang 2 421 0.40 1,053 Source: Field survey by the JICA study team

Maize is also harvested extensively in these areas, and it is usually processed into Kharan Tengma, and Ara. The major cash crop is orange, and usually traders came to farmers to buy these. Also, some vegetables such as potato, radish, are mustard are harvested, but they are mostly for self-consumption. There are only few household who sell these vegetables. According to the DAO, the department is trying to increase the vegetable production in Trong, but it is very hard to realize due to the lack of water in the dry season (winter) because of inadequate irrigation system. Also, most of the farmers in the surveyed villages own cattle, and process milk into cheese and butter. Many of them own only one or two cattle, and in this case these cheese and butter are for

Appendix1-23 self-consumption. The households who own more than two milking cows often sell them to neighbors or at the market. The selling price of butter is Nu.200-280/K and that of cheese is 100-150/Kg. One farmer who own 5 cows in Zurphey obtain Nu. 25,000 per year by selling cheese and butter. Further, many farmers own chickens, and some of them sell their eggs if they have surplus eggs. The selling price of egg is Nu.50-80/egg. Many farmers show interest in growing cardamom, but there is no farmers who actually grow it in these villages.

The table below shows the crop calendar of major crops in these villages. Crop Sowing Period Harvesting Period Paddy June-July Oct-Nov Dryland rice May Sep Maize May Feb Mustard Sep Jan-Feb Buckwheat Sep Jan-Feb

（5）Means of production In the 3 surveyed villages, the traditional custom of lay-me system, where farmers collectively conduct farming activity, still exist. For the households who cannot supply labor, other farmers provide man power and get a portion of harvested crop in return. However, in Gloing village in Nanagkor Gewog, which is one hour distance from Zurphey by car, lay-me system is not exercised. Yet farmers there hire labor for Nu. 120/day. There are 3 households who own tractor in Zhurphey, but no farmers own it in other two villages. Many farmers use bulls to plough, but some rent tractor. The rent of the tractor is Nu. 250/hour.

（6）Damage by wild animals There are many wild animals such as bear, bulls, monkey, and dear live in all over Zhemgang, and the farmers face significant damages of crops by wild animals. The damages to maize production appear to be especially profound. According to the interviews with the farmers, the only effective counter-measure for the wild animals is to make big sound all over the night. There are a few farmers who set the “electric fences”, but these fences do not give any electric pain but only make big sound. This type of fences has been provided by AMC in the last couple of years in these areas. The house owner told that this fence has been effective to drive the wild animals out, but DOA told that this will be effective only for a couple of years as animals get used to the sound.

（7）Production and consumption of agricultural goods The farmers in Trong have not done collective storage of foods, but they have stored their foods on an

Appendix1-24 individual household basis. Most of them store maize in the floor or hang on the ceiling. Many farmers in the surveyed villages do not produce enough rice for self-consumption, so they have to go to the shops in the neighboring places to buy Indian rice. The villagers in Subrang have to walk to the shop on the highway and walk back carrying 50Kg of rice for 5 or 6 hours. Most of the farmers do not produce enough vegetable for their consumption, so they often buy vegetable imported from India.

（8）Livestock rearing and censure on slaughtering As indicated in (4), most of the households in the surveyed villages own cattle or chicken, and there are several households who own pigs. There is general sentiment of censure of slaughtering animals among the Bhutanese people, so slaughtering is rare. Yet the degree of the sentiments differs village by village, and some people do slaughtering animals; villagers ask them to slaughter their animals. According to the interviewees, slaughtering animal was common in 20 years ago, but the sentiment of censure for slaughtering animals have increased in the last 10 years as the Buddist monk extend that idea among the villagers. Accordingly, the number of farmers who keep pig has been decreased significantly.

（9）Non-farming income Those who graduate high school generally find jobs in the public sector and live in the cities. 20 years ago, there are very few non-farming jobs available in these areas, so they had to go to other Zhongkag to find job during the winter (mostly construction related day-jobs). Yet recently as re are several road construction projects going on in these areas, farmers can find construction jobs near their villages. The day wage for the construction is Nu.300 which is twice as much as that for agricultural works.

（10）Farmer’s groups Threre 2 registered and 13 unregistered farmer’s groups (all of them are livelihood farming groups) in Zhemgang Dzongkhak. Several of the groups were formed within the Rural Livelihood Project conducted by Helvetas, Swiss aid agency. Seven of these groups are monitored by a livestock extension officer in the Tintibi Extension Center. According to this extension officer, a major problem faced by the chicken farming groups is the poor road condition in these areas, which hinder the timely supply of feeds. There is no agricultural related farmer’s groups in Zhemgang. Even though there have been some attempts to from such groups, but all of them failed mainly due to the lack of sound management system. Also, the agricultural department is interested in the formation of user’s groups for feeder roads although there is no such group at present. Monthly report on the farmer’s groups made by a livestock extension officer

Appendix1-25

(11) Food Security There are a few households who tend to get short of food in each village in the surveyed areas. These households typically lack the man-power for farming activities due to the death or illness of the male members. Villagers often provide labor to farm the lands of these poor households and get some portion of the crops in return. In Subrang, Zongkhak government provided livestock (chicken or cows) to the two poor households, and they are making their livings by selling milk or eggs.

(12) Health There are relatively high rate of incidents of alcoholic and stomach related diseased in the surveyed areas. There are also many cases of beriberi due to the lack of Vitamin B. Also, accorigng to the department of health, there are relatively large number of underweight children in the southern part of Zhemgang such as Bardo, Ngangla, and Bjoka Gewogs.

（13） Dietary Habits The menu of the meals is quite simple, and mostly people eat only rice and one dish which is generally dachi with one vegetable. The vegetable used for dachi dish is mainly potato or mushroom. Generally, they eat egg or meat once a day or two days.

（14）Other Household in Trong is generally matrilineal family as in the cases of many of eastern Bhutan regions. However, male line family is common in other Gewogs in Zhemgang.

(15) Situation on the Nutrition of Student (based on the interview with school dean of Yebilaptsa Middle Secondary School) There are 380 students going to this school, and 301 of them are boarding students. The students come from not only Trong Gewog but also Nhangkor or Bardo Gewog. School s 3 meals to the boarding students and lunch for other students. The sources of these meals come is the ration from WFP (see the table below for the detail of ration) and subsidy from the department of education.

Ration to grade 7 and 8 students per day by WFP

Appendix1-26

per child 139 students (Kg) Rice 275g 38.23 Chick peas 20g 2.78 Peas 20g 2.78 Oil 20g 2.78

The table below shows the menu of the meal of the school in the month of survey. It does not change a lot during the year, but they provide egg and meat once a month.

Breakfast Fried rice, chana, sugar tea Lunch Rice, vegetable curry, dal Dinner Rice, vegetable curry, dal

One can see from the menu that it does not contain enough protein for the students of 13-16 years old, which school dean is aware. He also states that it is hard to obtain enough amount of vegetables during the month of survey as the amounts and variety of vegetable are very small in this time. Also, the menu of the meals does not change a lot during the year, and variety of dishes is limited.

Lunch provided by school School lunch on the day of survey

Appendix1-27

Results of rural survey in Trashigang Dzongkhag

1. Surveyed Gewog：Khaling 2. Survey Period： From May 4, 2012 to May 7, 2012 3. Basic Information：  Total Area :156 sqkm  Agriculture Area: 2.7% （Kamzhing 1,022 acres）  Altitude Ranges <1800 62%, 1800-3600 38%  Number of Chiwog: 6  Number of Household: 655  Population: 2,959  Number of RNR center: 1  Volume of Main Crops（Ton）

Potato paddy maize buckwheat apple Mandarin

973 139 461 11 58 177

 Livestock holding

Cattle horse sheep Pig Poultry 2,033 382 229 49 1,444

Source: Preliminary Assessment of the Potential Agricultural Areas for Protection

Dauzor Village in Khaling：Field of Potato and Maize

4. Summary of the Rural Survey (1) Method of Survey The survey was implemented by informal interviews with following persons: Officers of Khaling gewog Mr. Ugyen Tshering (Agriculture Extension Officer) Mr. C.B.Bhuijel（Livestock Extension Officer）

Appendix1-28

Mr. Loday Tshering（Forest Extension Officer） Ms. Kinley Bhuthi（GAO：Gewog Administrative Officer）  Village Leaders (Tsuopha) Mr. Pema（Dauzor village） Mr.Karma Dorji（Jiri village）  Farmers Ms. Cheki Wangmo（Dauzor village, female67） Ms. Pema Chuki（Dauzor village, female40） Mr. Tshewang Gyeltshen（Jiri village, male53） Mr. Singye Dorji（Jiri village, male28）  School Teachers Mr.Ngawang Jigme（Khaling Lower Secondary School） Mr. Jigme Tenzin（Jiri Community Primary School）  BHU staff Ms. Kezany Lhadon（Health Assistant）  Famers’ group ”Khaling Vegetable Marketing Group”

(2) General Situations in the surveyed villages Khaling gewog is located about four hours away by vehicle from the center of Trashigang district. The main agricultural products are potato and maize. Potato is produced as cash crop, and maize is used mainly for self-consumption. Every village in the gewog was connected with farm roads last year, although it is still hard for normal vehicles except 4WD to pass through to villages due to poor conditions of the roads. Such condition hampers the villages located in remote area from engaging actively in production and sales of potato. According to interviews, villagers rarely had experienced starvation. Currently, there is no specific season of food shortage, though about 10 years back, village used to face food scarcity in April and May. The average income per month is estimated to be around Nu. 2,000 according to the agriculture extension officer.

MOAF is supporting Khaling gewog as one of target areas to produce and sell seeds of potato because of good environment in high altitude, and providing cold storages to many farmers through Bhutan Potato Development Project. Among development plans, Khaling gewog prioritizes rural water supply (for drinking) and management of farm roads

(3) Present condition of land-ownership Most of the arable land is dry land. The data in 2010 shows the total area of dry land is 1,022

Appendix1-29

acres. According to interviews, about 20-30% of the arable land is left as fallow land. The area of wet land is very limited.

(4) Agricultural Production Maize and Potato are produced by inter-cropping. Additional crops are chili and small variety of vegetables. There are hardly farmers who engage in production of rice and fruit. Although area of rice production is limited, upland rice has been seen since around 2003. According to agriculture officer, the upland rice is positively accepted by farmers as it has the same taste as paddy, and easy cultivation. The price of Nu.50/kg is around the same range as paddy. About 90% of household have their kitchen gardens. Main crops grown in the kitchen garden are green leaves, radish, asparagus, cucumber, chili, beans, and onion. The volume of production from kitchen garden is not enough to meet households’ demand, therefore most people purchase additionally vegetables such as chili and onion from retailers. Comparing relatively wealthy family with the poor, the number of items produced by the poor is very limited. During agricultural off-season, villagers normally visited to children and relatives living in towns, or make a pilgrimage. In past days, many villagers lived on transhumance, however, currently there are only three or four households continuing the conventional way of living inside the gewog. The reason of vanishing custom is the government’s policy to make people settle so that they could rear crossbred cattle properly, and expanding availability of ready- made feeding stuff also made it possible to make people get feeds more easily at one place.

Typical Cropping Calendar in Khaling Plantation Harvest Maize Feb to April Sep to Oct Potato Feb June to July Chili May to June Sep to Oct

(5) Production Methods The conventional methods of cultivation are utilization of draft animal (cattle) and compost (cow dung and dry grass), and about 70% of farmers still use composts. The practice of exchanging labor is still generally carried on, which is mainly seen in a period of plantation and weeding. One example shows that a farmer uses 20-30 labors in exchange together with 10 hired labors. The normal rate for hired labor is Nu.150/day for male and Nu.100/day for female. Both labors in exchange and hired labors are served lunch and Ala. The agricultural machines are still not used widely as there is only one famer who holds a power tiller in the central village. The power tiller is lent out to others at the rate of Nu.350/hour under operation by the owner. (The rental fee of draft cattle is Nu.200/day.)

Appendix1-30

(6) Issues on agricultural production Officers and farmers pointed out several agricultural issues as follows:  Damage by wild animals Around 30% of agricultural land is damaged by wild animals. The main attackers are boar, deer and monkey. The damages are mainly seen in the fields of maize and potato, and the number of cases is increasing year by year. Especially fields front onto forests are easily subject to attack. The extension officer supposes that the reason of the increase would be deforestation in surrounding area. Farmers usually take countermeasures such as night guard with ringing bell or bottle, putting a straw man, surrounding the fields with fence of wire, bamboo or brush. Electrical fences have not yet been introduced in this area.

Fence of wire Straw man

 Labor Shortage Migration of young generation causes decreasing number of labor force for agricultural production. Especially the number of migration of young male who completed basic education is outstanding according to interviews. Their main destinations are Thimphu and Puntsholing. As a result of their migrations, the trend that the old generation is left in rural village is becoming to be commonly seen.  Increasing Fallow Land The area of fallow land is increasing because of wild life damage and labor shortage. It was said about 20-30% of the arable land is fallow land.  Damage by Natural Calamity Strong wing (called “helstone”) causes crop damage every year. It happens around March to May. The officers said that there was no effective countermeasure implemented so far.

(7) Distribution and Consumption of Agricultural Products Most of potato is transported by individual farmer down to the auction center of FCB located in Samdrup Jongkar, border area to India. The transportation fee is Nu.50/bag (50-60kg of potato). The availability of trucks for transportation is not secured, and farmers have no ways but to look

Appendix1-31

for empty trucks on the highway without assurance, therefore it is likely happened that potato start to perish missing a timing to be transported. Farmers rarely do collective transportation because each farmer has enough volume of potato to make the cargo full. One villager also added that it was difficult for farmers to manage collective activity as a group because they understand the purpose or rules of group differently, which causes dismantlement of activities. The selling price at the auction center of FCB is around Nu.12/kg at minimum to Nu.20/kg at maximum. However, in the off-season from August to December, Bhutan buy back potato from India at higher rate of Nu.25-30/kg. Some farmers mentioned an issue on insufficient capacity of the FCB storage at the auction center. When emergency situation such as strike is occurred in India, Indian buyers stop coming into Bhutan for trade, which enforce Bhutanese farmers to stand by at the center. But, the duration they can keep potato inside the FCB storage is limited to only three days for each farmer due to lack of capability. After three days pass, there are no ways but bringing them out from storage and waiting for going rotten.

(8) Barter of Agricultural Products Villagers in Khaling barter maize for dairy products such as butter and cheese with nomadic people called “nomet” who move from north area rearing yak and stay in Khaling only during winter (from October to June). Bartering with nomet is one of important source to get dairy products, as the size of livestock holdings in Khaling is relatively small1. They continue this custom for long time in the same manner, but the rates to exchange items are changing. As shown in the below table, the value of maize is declining. The dairy products they got from nomet are consumed inside the households as well as dedicated to temples at the time of annual festival.

Changing exchange rate 2-3 years ago Present Butter and Maize Butter 1Kg: Maize 20Kg Butter 1Kg：Maize 30Kg Cheese and Maize Cheese 1Kg：Maize 9Kg Cheese 1Kg：Maize 15Kg

Example of Barter Item Exchange Rate Place Butter and Maize 1kg：30kg Khaling Cheese and Maize 1kg：15kg Khaling Rice and Beans 1kg：1kg Khaling

1 Almost half of households hold cattle. The average size of livestock holding is three per household.

Appendix1-32

(9) Off-farming income Many male engage in construction labor in neighboring towns. Some reach up to Zhemgang or Bumgtan. Average range of annual income is from Nu.10,000 to Nu. 30,000. Compared to the past few years, opportunities of off-farm income as well as the income amount from those sources are increasing.

(10) Farmers’ organization There are two farmers’ groups in the Dauzor village which is a central area of Khaling gewog. Any cooperative has not yet been established. An example of one group is shown in the below box.

Box1．Farmers’ group of agricultural processing The “Khaling Vegetable Marketing Group”, a farmers’ group in the Dauzor village was established by ten women in 2008 as a group to promote vegetable production and marketing. In 2011, the group was provided a milling machine of maize and a popcorn machine from the government, and they started production and sale of popcorn, and rental service of milling machine in the village. Currently five members engage in these activities after other members dropped out because they could not join in construction of the group house in which the machines were installed. The current capital of the group is Nu. 73,500 as a result of sale profit of popcorn. There are surplus of maize in members, therefore each member can easily provide them in 120kg respectively. They have not yet faced any competition because they are managing only one machine in this area, however group members care about risk in future and hold distributing profit between them. The female members feel reluctant to operation of the machines, even though they got short-time training at the AMC, which resulted in depending on men’s support to operate and maintain machines. Considering their limited capability of production and management, it seems that the group activities hardly can generate profits more than supplemental support to household.

Popcorn Machine Group’s house for processing

Appendix1-33

(11) Food Security In case of emergency, some villagers borrow maize from neighbors as a custom, which constitutes one of social systems to ensure food security especially for the poor. One example shows that a farmer who lost all of his harvest because of landslide in rainy season, borrowed maize from a neighbor, and then paid back by providing labor in lender’s field for a period of two years. The normal mode of repayment is provision of actual goods (maize), however the vulnerable famers who cannot secure enough harvest usually make repayment by providing labor. One of lenders said that more than half of borrowers could not pay back by goods, which resulted in engaging in agricultural labor in his field.

(12) Health（BHU） A staff of the BHU in Khaling, who worked in Wangdue Phodrang before, recognized that villagers in Khaling consumed relatively less variety and volume of vegetables than Wangdue Phodrang, and they depended on intake of potato. She mentioned that as for status of malnutrition among young children, there was no significant difference between two areas (ten out of 50 children show figures of malnutrition). She pointed out the reason of their malnutrition was poor practice of exclusive breastfeeding. The prevalent disease is anemia especially among the old. Alcohol-induced disease (liver disease and mental disorder) also seen among the old generation. The cases of high blood tension are increasing. Diabetes is not seen in this area. There are five ORC (outreach clinic) under the Khaling BHU. The remotest one is about three hours away from the BHU by foot. Staff of BHU visits to Non Formal Education Center for lecture on health (at least two times in one year), and schools for health check (two time in one year).

(13) Eating Habits Villagers in Khaling frequently eat karan (crushed maize) mixed with rice. Previously they used to eat flour of maize that is currently utilized for feeding stuff only. On the contrary, the volume of rice consumption is increasing. People interviewed said that varieties of vegetables were being diversified, however still were not enough as shown in the below example of meals. Comparing meals of relatively wealthy household with the poor, the wealthy consume much various vegetables, on the other hand the poor more frequently eat wild vegetables such as fern which are available free of cost.

Example of Meals in one day Wealthy1 Wealthy2 Poor1 Poor2 Breakfast Rice and Karan Rice and Karan Rice and Karan Rice and Karan Fish Chili Green leaf Tomato Cheese Chili Onion Onion Cheese Tea Onion Lunch White rice White rice Rice and Karan White rice

Appendix1-34

Dry Pumpkin Potato Potato Pork Chili Pork Chili Onion Cheese Cabbage Cheese Chili Beef Chili Garlic Cheese Cheese Onion Dinner White rice Red rice Rice and Karan Rice and Karan Asparagus Pork Fern Potato broccoli Chili Chili Mushroom Chili Garlic Garlic Chili Cheese Ala

＜Comparison of Kitchen＞ Comparing kitchens of the wealthy and the poor, the wealthy families hold gas range, on the other hand, the poor use conventional stove of stones. The difference is also seen in type of firewood, in that the wealthy purchase solid firewood cut for the purpose of heating, and the poor collect branches free of cost from surrounding forests for cooking.

Poor family（1）

Kitchen stove with three stones outside of the house Almost all family have rice cocker Poor family（2）

Kitchen stove with two ranges inside of the house Fern (wild vegetable)

Appendix1-35

Wealthy family（1）

Gas range Cooking equipment neat in rack

(14) School Meal The Jiri community primary school is located three hours away by foot from the highway, and totally six hours away from the central town in Khaling gewog. This school has been supported by WFP food programme since 2008, being provided rice, beans, and edible oil three times in a year. Vegetables are procured locally by collecting money from parents. The amount had been Nu.20 per student before 2008, but increased to Nu.50 currently because it is not sufficient to purchase vegetables which prices have been rising in inflation. A shortage of vegetable, which usually happen from February to June, leads to soaring prices of them, and make it much more difficult for the school to purchase enough volume for students. The school has two cooks (both are male), one of which was trained for one week by Ministry of Education at the early period of the food programme. According to the cook, 61 participants jointed the training, among which there was only one female cook. The cook showed his hope to diversify varieties of vegetable, and increase opportunities to take meat and fish. He also expressed his interest in learning on new recipes. At the same time, the Jiri School carries on a school garden to cultivate various crops such as chili, radish, potato, ginger, eggplants, bean, banana, pram and apricot, although the harvests are not enough to meet school’s demands. The garden is divided to four plots in which a teacher called “house master” give guidance to member students. The students engage in field work every Saturday under a leader called “house captain”.

Appendix1-36

School garden (about 0.25acre） School kitchen (materials supported by WFP, and constructed by villagers）

Example of School Meals Breakfast Fried rice (with beans) or Rice porridge Lunch White rice and potato curry or White rice and bean soup

Additionally: Vegetable (if available, frequency of 40%) Beef or Fish (one or two times in a month) Source: hearing at Jiri community primary school

(15) Positive Farmers The gewog officers and village leaders recognize and define the wealthy farmers based on their attitudes on how much they actively engage in agricultural activities, not only their size of land holding. They understand their positive way of working lead to more production than other farmers.

Box2．A farmer who cultivate mustard for extracting oil A farmer in the Jiri village, who was selected by the agricultural officer as one of wealthy farmers, produces relatively many kinds of crops such as maize, potato, mustard, bean, chili, nut, and upland rice. He cultivates mustard in the field of 1.5 acres, planting in September and harvesting in November. In the last season, he harvested mustard seeds of 180kg, and extracted oil of 38 liter. Among 38 liter, 11 liter was utilized for livestock feeding, and 27 liter for self-consumption. One of his challenges is an availability of machine to extract oil. He has to bring his seeds to a nearby village because there is no availability of the machine in his village.

Appendix1-37

Box3．A farmer who tries cultivation of new crops A female farmer in the Dauzor village has started cultivation of new crops. One of them is fruit cultivation. She planted 40 seedlings of pear, peach and pram after joining in a training of JICA project at RNR center. The training was the first time for her to lean in the center, but she said there was no difficulty to understand with enough practical guidance. She plans to sell fruits on the nearby highway upon the first harvest that will be four years after. Another challenge is cultivation of hazelnut. She has planted seedlings of 140 provided by the “Mountain Hazelnut Venter”. The company held a demonstration on the site at the beginning of introduction. She, a single mother, works hard to take care of new fields as well as staple crops and six livestock in cooperation with her father and children. We could say that it is a key to success for a project to involve farmers with high motivation like her.

A female famer in her new filed of fruits Seedling of Peach planted in the last year

Appendix1-38

Structure of Stakeholders on Food Security

1. Ministry of Agriculture and Forest

Organogram of Ministry of Agriculture and Forest

Source: Homepage of MOAF

Department of Agriculture Mandate  To ensure food security and increase income through improved management of arable, horticulture crops and medicinal plants. Access to markets, farm inputs, construction of farm roads and selection of improved technologies  To deploy Dzongkhag Agriculture Officers (DAO), Assistant Dzongkhag Officers (ADAO), and Extension Officers in the 20 Dzongkhag (Districts).  To take administrative and technical responsibilities of the Research and Development Centres (RDC) Human Resource  Headquarter: 65

Appendix2-1

 Districts, extension officer: 257  Related centers: 107 Budget Nu. 751.955 million (2011/12) Department of Livestock Mandate  To develop sound policies, strategies and guidelines, to ensure efficient delivery of livestock services.  To develop capacity of all programs and agencies including human resource.  To mobilize resources for livestock development.  To plan, co-ordinate, monitor, and evaluate the overall livestock development.  To liaise with international and national stakeholders in areas of livestock. Human Resource  Headquarter: 20  Hospital/centers: 240  Districts, extension officer: 450 Budget Nu. 492.028 million (2011/12) Department of Agriculture Marketing and Cooperatives Mandate  To improve economic efficiency and viability of agriculture production through organization of cooperatives for production, processing and marketing and also through market research and development;  To support the economic and social empowerment of the farmers through the development of sustainable farmers’ groups/cooperatives;  To develop group management and leadership skills and empower the farmers to articulate their interest and thus promote good local governance; and  To support sustainable and effective management and production of RNR products Human Resource  Total: 35 Budget Nu. 77.412 million (2011/12) Council for RNR research of Bhutan Mandate  To direct and guide RNR Research within and outside RNR sector.  To formulate RNR research policies, strategies and plans.  To coordinate and promote RNR Research and information.  To coordinate School Agriculture Programme (SAP). Human Resource  Headquarter: 19  RNR centers: 142 Budget Nu. 40.571 million (2011/12)

Appendix2-2

BAFRA Mandate  To implement RNR related legal instruments such as the Plant Quarantine Act, Seed Act, Pesticide Act, Livestock Act, Food Act, National Biosafety Framework, Forest and Nature Conservation Act, Biodiversity Act.  To implement sanitary and phytosanitary measures effectively to protect the health and life of humans, plants and animals.  To function as the National Food Quality and Safety Control agency to ensure foods are of good quality and safe for human consumption.  To regulate and promote the quality of agriculture inputs and products to facilitate trade and increase market access in the global market. Human Resource  Head office: 44  Plant Inspector: 57  Livestock Inspector: 45  Food Inspector: 28 Budget Nu. 128.732 million (2011/12)

Appendix2-3

2. Ministry of Health

Organogram of Ministry of Health

Source: Homepage of MOH

Department of Public Health (*It is the “Nutrition Section” in the department of Public Health that involves in the policy making on food security with MOAF as a representative of MOH) Mandate  To ensure the delivery of timely and quality public health services.  To assure and protect the health of the people through promotive, preventive and rehabilitative services. Human Resource  Non-Communicable Disease Division: 10 (“Nutrition Section”: 1)  Communicable Disease Division: 12  Public Health Laboratory: 23  Public Health Engineering Division: 10  Information & Communication Bureau: 5 Budget Nu. 19 million annually only for “Nutrition Section”

Appendix2-4

3. Food Corporation of Bhutan

Organogram of FCB

Board of Directors

Managing Director

Internal Audit

Cash Crop Division Food Grain Division Regional Offices P & A Finance

Computer Central Personnel Procureme Distributio WFP Auction yard Transit Export

Depots Bulk Cold store

Source: Made by FCB upon request from the study team

Food Corporation of Bhutan (FCB) Mandate  To procure, secure and maintain adequate flow of essential food reserves for meeting emergencies, the import of food items for marketing at controlled prices, the storage and distribution, and auctioning of cash crops assisting the farmers  Currently (in 2012 July), FCB maintains a stock of 1,658 metric tons comprising 1,400 metric tons of rice, 200 metric tons of sugar and 58 metric tons of edible oil. The national food reserve is distributed through the 20 regional depots managed by FCB.

National Food Security Reserves maintained in regional depots in metric tons Food Item P/Ling Thimphu Trongsa S/Jongkar Khangma T/Gang Mongar Total Rice 220 300 80 350 225 25 200 1400 Sugar 30 80 10 40 20 5 15 200 Oil 20 14 4 10 5 1 4 58 Total 270 394 94 400 250 31 219 1658 SAARC Food Reserve Rice 180 180 SAARC Food Bank Rice 180 180

Appendix2-5

FCB  Chairman: Chief Planning Officer, Planning and Policy Division, Ministry of Board Agriculture and Forests Member  Director: Director, Department of Agriculture Marketing and Cooperatives  Director: Chief Trade Officer, Department of Trade, Ministry of Economic Affairs  Director: Commissioner, Department of Revenue and Customs, Ministry of Finance  Director: Dungpa, Phuentsholing Dungkhag Administration, Chhukha Dzongkhag  Member Secretary: Chief Executive Officer, FCB, Phuentsholing Human  Cash Crop division: 18 Resource  Food Grain division: 22  Personnel and Administration Division: 30  Finance Division: 10  FCB secretariat: 3  Internal Audit Unit: 2  Computer/ IT unit: 5  FCB Gelephu region: 34  FCB Samdrup Jongkhar: 36  FCB Thimphu region: 15  FCB Smatse: 8  Total: 183 (Among 183, the personnel who have educational background over diploma are 13) Budget Nu. 35.5 million for 2011 fiscal year (Budget for National Food Reserve and SAARC food reserve and food bank)

Appendix2-6

Budget Appropriations by Program for 2011/12, Ministry of Agriculture and Forests (as of July 2012)

1. Department of Agriculture Department of Agriculture Appropriations Total (Nu. In Million) (1)AGRICULTURAL SERVICES Direction Services 133.673 Decentralized Rural Development Project 14.258 Agriculture Sector Support Project 13.621 Constructin Under SDP (Small Development Project) 124.376 Farm Roads to Support Poor Farmers's Livelihood Project 59.241 Organic Farming 1.335 Rice Productivity （SARPANG, SAMTSE SANDRUPJONGKNAR, PUNAKNA AND WANDGIPHODRANG) 23.729 (1)Total 370.233 (2)AGRICULTURE MACHINERY CENTRE, PARO Crop Production Services 60.675 (2)Total 60.675 (3)REGIONAL AGRICULTURE MACHINERY CENTRE, WANGDUE Crop Production Services 5.032 (3)Total 5.032 (4)REGIONAL AGRICULTURE MACHINERY CENTRE, TRASHIGANG Crop Production Services 9.411 (4)Total 9.411 (5)REGIONAL AGRICULTURE MACHINERY CENTRE, GELEPHU Crop Production Services 16.868 (5)Total 16.868 (6)NATIONAL PLANT PROTECTION CENTRE, SIMTOKHA Agriculture Support Services 33.111 (6)Total 33.111 (7)NATIONAL POST HARVEST CENTRE, PARO Direction Services 35.598 (7)Total 35.598 (8)NATIONAL MUSHROOM CENTRE, SIMTOKHA Direction Services 13.441 (8)Total 13.441 (9)CENTRAL MACHINERY CENTRE, BUMTHANG Direction Services 71.236 Regional Office, KHANGMA 1.214 Regional Office, GELEPHU 2.548 (9)Total 74.998 (10)NATIONAL SOIL SERVICE CENTRE, SIMTOKHA Direction Services 18.576 SLMP Component 48.844 (10)Total 67.420 (11)RENEWABLE NATURAL RESOURCES-RESEARCH DEVELOPMENT CENTRE, WENGKHAR Direction Services 26.246 RNR RDSC KHANGMA 6.227 RNR RDSC LINGMITHANG 4.647 (11)Total 37.120 (12)RENEWABLE NATURAL RESOURCES-RESEARCH DEVELOPMENT CENTRE, BAJO Direction Services 25.654 Direction Services (RNR TSIRANG) 2.394 (12)Total 28.048 Department Grand Total 751.955

Appendix3-1

2. Department of Livestock

Department of Livestock Appropriations Total (Nu. In Million) (1)LIVESTOCK SERVICES Direction Services 38.524 Direction Service (CENTRAL STORE PHUENTSHOLING) 3.765 Project Management Unit (GOI) 66.439 EU Livestock Program Management 10.595 (1)Total 119.323 (2)NATIONAL JERSEY BREEDING CENTRE Direction Services 11.047 Fodder Conservation Programme 0.310 Renovation of Attendent quarter 0.120 (2)Total 11.477 (3)BROWN SWISS CATTLE FARM, BUMTHANG Direction Services (BROWN SWISS FARM) 8.732 Direction Services (CATTLE BREEDING PROGRAM) 1.830 (3)Total 10.562 (4)NATIONAL SHEEP BREEDING CENTRE, BUMTHANG Direction Services 6.686 (4)Total 6.686 (5)NATIONAL PIG BREEDING CENTRE, W/TABA Direction Services 10.612 (5)Total 10.612 (6)REGIONAL MITHUN BREEDING CENTRE, ZHEMGANG Direction Services 4.371 (6)Total 4.371 (7)REGIONAL POULTRY BREEDING CENTRE, PARO Direction Services 7.178 (7)Total 7.178 (8)NATIONAL POULTRY BREEDING CENTRE, SARPANG Direction Services 33.078 (8)Total 33.078 (9)REGIONAL PIG AND POULTRY BREEDING CENTRE, LINGMITHANG Direction Services 12.610 (9)Total 12.610 (10)NATIONAL FEED AND FODDER DEVELOPMENT PROGRAMME Direction Services 28.493 (10)Total 28.493 (11)NATIONAL LIVESTOCK BREEDING PROGRAMME Direction Services 22.833 (11)Total 22.833 (12)NATIONAL HORSE AND CATTLE BREEDING PROGRAMME, BUMTHANG Direction Services 7.194 (12)Total 7.194 (13)REGIONAL PIG AND POULTRY BREEDING CENTRE, GELEPHU Direction Services 12.358 (13)Total 12.358 (14)NATIONAL WARM WATER FISH CULTURE CENTRE, GELEPHU Direction Services 11.861 (14)Total 11.861 (15)COLD WATER FISH CULTURE CENTRE, HAA Direction Services 11.938 (15)Total 11.938 (16)CALF REARING CENTRE, WANGKHA Direction Services 8.615 (16)Total 8.615 (17)REGIONAL MITHUN BREEDING CENTRE, ARONG Direction Services 6.073 (17)Total 6.073

Appendix3-2

(18)NATIONAL NUBLANG BREEDING FARM, TASHIYANGPHU Direction Services 8.057 (18)Total 8.057 (19)NATIONAL CENTRE FOR ANIMAL HEALTH Direction Services 63.630 Direction Services (VPU) 4.375 (19)Total 68.005 (20)VETERINARY HOSPITAL, THIMPHU Direction Services 6.788 (20)Total 6.788 (21)REGIONAL LIVESTOCK DEVELOPMENT CENTRE, TSIMASHAM Direction Services 13.520 (21)Total 13.520 (22)REGIONAL LIVESTOCK DEVELOPMENT CENTRE, KANGLUNG Direction Services 15.319 (22)Total 15.319 (23)REGIONAL LIVESTOCK DEVELOPMENT CENTRE, ZHEMGANG Direction Services 9.137 Infrastructure Development 0.439 (23)Total 9.576 (24)REGIONAL LIVESTOCK DEVELOPMENT CENTRE, WANGDUE Direction Services 13.749 (24)Total 13.749 (25)RENEWABLE NATURAL RESOURCES & RESEARCH DEVELOPMENT CENTRE Direction Services 25.474 Direction Services (RNR-RDSC, TINGTIBI, ZHEMGANG) 0.006 (25)Total 25.480 (26)REGIONAL FISH PRODUCTION CENTER, SAMDRUP JONGKHAR Direction Services 6.272 (26)Total 6.272 Department Grand Total 492.028 3. Department of Agriculture Marketing and Cooperatives

Department of Agriculture Marketing and Cooperatives Appropriations Total (Nu. In Million) (1)AGRICULTURE MARKETING AND COOPERATIVE SERVICES Direction Services 37.620 Marketing Program 10.515 Cooperative Development Program 7.235 (1)Total 55.370 (2)REGIONAL AGRICULTURE MARKETING AND COOPERATIVE SERVICES (Gyelposhing) Direction Services 22.042 (2)Total 22.042 Department Grand Total 77.412

4. Council for Renewable Natural Resource Research of Bhutan

Council for Renewable Natural Resource Research of Bhutan Appropriations Total (Nu. In Million) (1)RENEWABLE NATURAL RESOURCE RESEARCH SERVICES Direction Services 40.571 (1)Total 40.571 Department Grand Total 40.571

5. BAFRA BAFRA (Bhutan Agriculture & Food Regulatory Authority) Appropriations Total (Nu. In Million) (1)AGRICULTURE AND FOOD REGULATORY SERVICES Direction Services 98.914 (1)Total 98.914 (2)Management and Supplement Service Implementation of National Biosafety Framework 29.818 (2)Total 29.818 Department Grand Total 128.732

Appendix3-3

Structure of Stakeholders on Trade

1. Department of Trade, Ministry of Economic Affairs

Organogram of Department of Trade

Source: Diagnostic Trade Integration Study 2012

Source: Homepage of MOEA

Appendix4-1

Department of Trade, Ministry of Economic Affairs Mandate  To establish an enabling legal framework through formulation and amendment of laws, simplification of administrative and licensing procedures and greater service orientation in the sector;  To strengthen long-term trade relations with principal trading partners and negotiate preferential trade treaties with new and potential trading partners;  To pursue trade liberalization through regional and multi-lateral frameworks;  To encourage trade in services including knowledge based and cultural industries;  To diversify export products and export markets through market studies and appropriate branding initiatives;  To develop industrial parks, dry ports, trade centers and business incubators to promote manufacture value added export base;  To collaborate with financial institutions to make export finance available;  To develop trade infrastructure and networking opportunities through access to e-commerce and web based information exchange facilities;  To facilitate the flow of trade through a trade facilitation mechanism;  To enhance skills and knowledge of the private sector in international trade through training courses, seminars and workshops;  To promote liberalization of the import regime; and  To ensure competitive market conditions through streamlining of the distribution sector. Human Resource  Trade Regulation & Monitoring Division: 11  Trade Negotiation Division: 8  Export Promotion Division: 7  Overseas offices (Geneva, Dhaka, Delhi and Bangkok): 4 Budget Uninvestigated

Appendix4-2

2. Department of Revenue & Customs, Ministry of Finance

Organogram of Revenue & Customs

Source: Homepage of MOF

Department of Revenue & Customs, Ministry of Finance Mandate (Customs and Excise Division)  To regulate the flow of import and export goods.  To control and prevent trade in restricted or prohibited goods.  To record import, export and transit data, including excise refund.  To assess and levy Customs duty and Sales tax on third country origin goods.  To assess and levy Sales Tax on imports from India.  To assess and levy export taxes, if applicable. Human Resource Uninvestigated Budget Uninvestigated

3. BAFRA Please refer to the Appendix3.

Appendix4-3