70
Document of The World Bank Report No: ICR2850 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-H3070) ON A GRANT IN THE AMOUNT OF SDR 5.3 MILLION (US$ 8.0 MILLION EQUIVALENT) TO THE KINGDOM OF BHUTAN FOR A PRIVATE SECTOR DEVELOPMENT PROJECT December 31, 2013 Finance and Private Sector Development Unit South Asia Region Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized

World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

  • Upload
    others

  • View
    6

  • Download
    0

Embed Size (px)

Citation preview

Page 1: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

Document of The World Bank

Report No: ICR2850

IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-H3070)

ON A

GRANT

IN THE AMOUNT OF SDR 5.3 MILLION (US$ 8.0 MILLION EQUIVALENT)

TO THE

KINGDOM OF BHUTAN

FOR A

PRIVATE SECTOR DEVELOPMENT PROJECT

December 31, 2013

Finance and Private Sector Development Unit South Asia Region

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Page 2: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

CURRENCY EQUIVALENTS

(Exchange Rate Effective June 30, 2013)

Currency Unit = Ngultrums (Nu) 1.00 = US$ [0.017] US$ 1.00 = [59.7]

FISCAL YEAR July 1 – June 30

ABBREVIATIONS AND ACRONYMS

AS Analytical Skills ATM ATS

Automated Teller Machines Automated Trading System

BBO BBS

Broker’s Back Office Bhutan Business Solutions

BCCI Bhutan Chamber of Commerce & Industry BICMA Bhutan InfoComm and Media Authority BICTTA Bhutan ICT & Training Association BITC Bhutan Innovation and Technology Center BOB Bank of Bhutan BPC Bhutan Power Corporation BPO Business Process Outsourcing BT Bhutan CAS Country Assistance Strategy CBS Core Banking Solution CPS CSS

Country Partnership Strategy Clearing and Settlement System

DBFOOT Design, Build, Finance, Own, Operate and Transfer DHI Druk Holding and Investments DITT Department of Information Technology & Telecom DO Development Objective DPA Department of Public Accounts EA Environmental Assessment EDS Electronic Depository System EFT Electronic Fund Transfer EFTCS Electronic Fund Transfer Clearing System EMP Environment Management Plan ETP Employment Training Program FA Financing Agreement FDI Foreign Direct Investment

Page 3: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

FLP Financial Literacy Program FIs Financial Institutions FIP FRSD

Financial Inclusion Policy Financial Regulation and Supervision Department

FM Financial Management FY Fiscal Year GDP GDM

Gross Domestic Product Green Dragon Media

GSE Global Skills Enhancement GTP Graduate Training Program HV High Voltage IA Implementation Agency ICT Information and Communication Technology IDA IPO

International Development Association Initial Public Offering

IFC International Finance Corporation IMF International Monetary Fund IO Intermediate Outcome IP Implementation Progress IPO Initial Public Offering IRR Internal Rate of Return ISR Implementation Status and Results Report IT Information Technology ITES Information Technology Enabled Services LE Language Enhancement M&E Monitoring and Evaluation LEED Leadership in Energy and Environmental Design MFI Microfinance Institution MOEA Ministry of Economic Affairs MOF Ministry of Finance MOIC Ministry of Information and Communications MOLHR Ministry of Labor and Human Resources MOU MSS

Memorandum of Understanding Market Surveillance System

MTR Midterm Review NPV Net Present Value PAD Project Appraisal Document PPP Private Public Partnership PIA Project Implementation Agency PDO Project Development Objective PSC Program Steering Committee PSD Private Sector Development RBI Reserve Bank of India RGOB Royal Government of Bhutan RMA Royal Monetary Authority of Bhutan RSEBL Royal Securities Exchange of Bhutan Limited RUB Royal University of Bhutan SEDF South Asia Enterprise Development Facility SEIA Socio Economic Impact Assessment TTPL Thimphu Tech Park Pvt Ltd VC Video Conferencing

Page 4: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

VLE/CMS Virtual Learning Environment/Course Management System WB World Bank

Vice President: Philippe H. Le Houerou Country Director: Robert Saum Sector Manager: Henry K. Bagazonzya Project Team Leader: Cecile Thioro Niang ICR Team Leader: Suhail Kassim ICR Primary Author: Mihasonirina Andrianaivo

Page 5: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

BHUTAN Private Sector Development Project

CONTENTS

Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph

1. Project Context, Development Objectives and Design .......................................... 1 2. Key Factors Affecting Implementation and Outcomes ......................................... 4 3. Assessment of Outcomes .......................................................................................... 9 4. Assessment of Risk to Development Outcome ..................................................... 15 5. Assessment of Bank and Borrower Performance ................................................ 16 6. Lessons Learned ...................................................................................................... 18 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners ... 20 Annex 1. Project Costs and Financing ...................................................................... 21 Annex 2. Outputs by Component .............................................................................. 22 Annex 3. Economic and Financial Analysis .............................................................. 32 Annex 4. Bank Lending and Implementation Support/Supervision Processes ..... 36 Annex 5. Beneficiary Survey Results ........................................................................ 38 Annex 6. Stakeholder Workshop Report and Results ............................................. 47 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ............. 49 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ............... 54 Annex 9. List of Supporting Documents ................................................................... 55 MAP ............................................................................................................................. 56

Page 6: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory
Page 7: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

A. Basic Information

Country: Bhutan Project Name: Bhutan Private Sector Development

Project ID: P073458 L/C/TF Number(s): IDA-H3070 ICR Date: 12/24/2013 ICR Type: Core ICR

Lending Instrument: SIL Borrower: KINGDOM OF BHUTAN

Original Total Commitment:

XDR 5.30M Disbursed Amount: XDR 5.25M

Revised Amount: XDR 5.25M Environmental Category: B Implementing Agencies: Ministry of Information and Communications Cofinanciers and Other External Partners: B. Key Dates

Process Date Process Original Date Revised / Actual Date(s)

Concept Review: 12/14/2006 Effectiveness: 06/22/2007 06/22/2007

Appraisal: 04/02/2007 Restructuring(s): 12/21/2010 06/21/2012

Approval: 06/20/2007 Mid-term Review: 06/10/2010 10/20/2010 Closing: 06/30/2012 06/30/2013 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Satisfactory Risk to Development Outcome: Moderate Bank Performance: Satisfactory Borrower Performance: Satisfactory

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings

Quality at Entry: Satisfactory Government: Satisfactory

Quality of Supervision: Satisfactory Implementing Agency/Agencies: Satisfactory

Overall Bank Performance: Satisfactory Overall Borrower

Performance: Satisfactory

Page 8: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

C.3 Quality at Entry and Implementation Performance Indicators Implementation

Performance Indicators QAG Assessments (if any) Rating

Potential Problem Project at any time (Yes/No):

No Quality at Entry (QEA):

None

Problem Project at any time (Yes/No):

No Quality of Supervision (QSA):

None

DO rating before Closing/Inactive status:

Satisfactory

D. Sector and Theme Codes

Original Actual Sector Code (as % of total Bank financing) Central government administration 13 13 General education sector 25 25 General finance sector 12 12 General industry and trade sector 15 15 Information technology 35 35

Theme Code (as % of total Bank financing) Education for the knowledge economy 20 20 Improving labor markets 20 20 Infrastructure services for private sector development 40 40 Other Private Sector Development 20 20 E. Bank Staff

Positions At ICR At Approval Vice President: Philippe H. Le Houerou Praful C. Patel Country Director: Robert J. Saum Alastair J. McKechnie Sector Manager: Henry K Bagazonzya Simon C. Bell Project Team Leader: Cecile Thioro Niang Asya Akhlaque ICR Team Leader: Suhail Kassim ICR Primary Author: Mihasonirina Andrianaivo

Page 9: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The objective of the project is to increase productive employment in Bhutan through promotion of enterprise development in the IT/ITES sector, enhanced IT skills, and improved access to finance. Revised Project Development Objectives (as approved by original approving authority) No change (a) PDO Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised

Target Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 : Cumulative job creation in the IT/ITES sector supported by the project.

Value quantitative or Qualitative)

0 700

PDO outcome indicator revised to “Cumulative job creation in the IT/ITES Sector in the IT Park and related activities” – Target remained unchanged

1015

Date achieved 06/30/2007 06/30/2012 06/30/2013 09/30/2013 Comments (incl. % achievement)

Target value exceeded by 45 percent.

(b) Intermediate Outcome Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised Target

Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 : Cumulative leads generated for new investments in the IT Park Value (quantitative or Qualitative)

0 200 200 255

Date achieved 06/30/2007 06/30/2012 06/30/2012 06/30/2012 Comments (incl. % achievement)

Target value exceeded by 27.5 percent

Page 10: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

Indicator 2 : Number of companies successfully incubated in the IT Park Value (quantitative or Qualitative)

0 5 5 13

Date achieved 06/30/2007 06/30/2012 06/30/2012 06/30/2013 Comments (incl. % achievement)

Target value exceeded by 160 percent

Indicator 3 : Percentage of lettable space leased out Value (quantitative or Qualitative)

0 100% 100% 25%

Date achieved 06/30/2007 06/30/2012 06/30/2012 06/30/2013 Comments (incl. % achievement)

25 percent of target value met

Indicator 4 : Percent of students clearing ITES industry competency assessment that is widely recognized

Value (quantitative or Qualitative)

0% 35% 35% 56%

Date achieved 06/30/2007 06/30/2012 06/30/2012 09/30/2013 Comments (incl. % achievement)

Target value exceeded by 60%

Indicator 5 : Percentage of students trained are successfully employed by the private sector Value (quantitative or Qualitative)

0% 50% 50% 63.63%

Date achieved 06/30/2007 06/30/2012 06/30/2012 09/30/2013 Comments (incl. % achievement)

Target value exceeded by 27.26%

Indicator 6 : Number of financial transactions by using ATMs per year

Value (quantitative or Qualitative)

40,000 50,000

IO indicator revised to “Number of ATM financial transactions at Bank of Bhutan per year, following the 2010 restructuring of the project”- Target value was revised to 900,000

1,418,494

Page 11: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

Date achieved 06/30/2007 06/30/2012 06/30/2013 06/30/2013 Comments (incl. % achievement)

Between July 2012 and June 2013, the number of ATM financial transactions at Bank of Bhutan were 1,418,494.The revised target value was exceeded by 57.6 %.

Indicator 7 : Value of financial transactions by using ATMs per year

Value (quantitative or Qualitative)

Nu 150m Nu 188m

IO indicator was removed following the 2010 restructuring of the projec

Nu. 1,644.24m

Date achieved 06/30/2007 06/30/2012 06/30/2012 06/30/2010 Comments (incl. % achievement)

Target exceeded by more than 774 percent as of June 2010

Indicator 8 : Volume of fund transfer transactions among banks channeled through the EFTCS system

Value (quantitative or Qualitative)

0 40,000

IO indicator was removed following the 2010 restructuring of the project

0

Date achieved 12/31/2010 06/30/2012 06/30/2012 06/30/2010 Comments (incl. % achievement)

The IO indicator was removed in 2010 because the implementation of a national payment system (EFTCS system) was henceforth conducted outside the project

Indicator 9 : Per cent of district coverage for financial literacy campaign

Value (quantitative or Qualitative)

0% N/A

IO indicator with target value of 100% was added following the 2010 restructuring of the project

100%

Date achieved 06/30/2010 06/30/2012 06/30/2012 06/30/2013 Comments (incl. % achievement)

Target was achieved by September 2012.

Indicator 10 : Percentage automation of stock exchange trading, settlement, and delivery with straight through processing

Value (quantitative or Qualitative)

0% N/A

IO indicator with target value of 100% was added following the 2010 restructuring of

100%

Page 12: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

the project Date achieved 06/30/2010 06/30/2012 06/30/2012 06/30/2012 Comments (incl. % achievement)

Target was achieved by April 2012

G. Ratings of Project Performance in ISRs

No. Date ISR Archived DO IP Actual Disbursements

(USD millions) 1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory Satisfactory 1.24 5 02/05/2010 Satisfactory Satisfactory 2.03 6 12/11/2010 Satisfactory Satisfactory 2.54 7 07/09/2011 Satisfactory Moderately Satisfactory 3.88 8 01/08/2012 Satisfactory Satisfactory 7.34 9 11/20/2012 Satisfactory Satisfactory 7.79

10 06/26/2013 Satisfactory Satisfactory 8.09 H. Restructuring (if any)

Restructuring Date(s)

Board Approved PDO

Change

ISR Ratings at Restructuring

Amount Disbursed at

Restructuring in USD millions

Reason for Restructuring & Key Changes Made DO IP

12/21/2010 N S S 2.54

Level 2 restructuring. The main reason was to accommodate the financial inclusion agenda under the project. In addition, bilateral assistance from the Reserve Bank of India (RBI) was secured for the establishment of an inter-bank electronic fund transfer clearing system (EFTCS - component 3) and therefore was being implemented separately from the project. The initial Nu 29.8m (US$500,000) funds earmarked for the EFTCS was reallocated to financial inclusion and upgrading of the IT infrastructure of the Royal Security Exchange of Bhutan. IO indicators were also changed accordingly. To fund the Nu. 26.9m (US$450,000)

Page 13: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

Restructuring Date(s)

Board Approved PDO

Change

ISR Ratings at Restructuring

Amount Disbursed at

Restructuring in USD millions

Reason for Restructuring & Key Changes Made DO IP

undergrounding of a high voltage transmission line over the IT Park, Nu. 17.9m (US$300,000) of component 3’s funds was reallocated to component 1 (Development of the IT/ITES Sector), while leaving the overall Grant Allocation unchanged (the difference in funds was matched within component 1). In addition, the Project Development Objective (PDO) outcome indicator was revised to take into account value-added jobs created in all sectors of the economy.

06/21/2012 N S S 7.75

One year closing date extension. Even though the project had achieved its PDO in March 2012 exceeding its final target regarding the outcome indicator (the number of Bhutanese graduates hired under the project was 778 as of June 2012), the main reason for closing date extension was to complete the undergrounding of a high voltage transmission line in the IT Park. Technical and coordination challenges led to several delays and the undergrounding was not completed by end May 2012 as initially planned. The implementation of some activities also benefited from the closing date extension (such as the activities in the Financial Literacy Program –FLP- including comic book advance version drawing and the TV soap operas). In addition, using project savings and savings from exchange rate differentials, RGOB expanded its incentive programs to include potential tenants with an employment incentive program covering a fixed amount of the training costs of the tenants'

Page 14: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

Restructuring Date(s)

Board Approved PDO

Change

ISR Ratings at Restructuring

Amount Disbursed at

Restructuring in USD millions

Reason for Restructuring & Key Changes Made DO IP

employees and a matching grant program for commercial tenancy of the IT Park. Cofunding support for Private Sector Development (PSD)-related activities of the National ICT Master Plan also benefitted from the extension and savings

I. Disbursement Profile

Page 15: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

1

1. Project Context, Development Objectives and Design 1.1 Context at Appraisal Country and sector background 1.1.1. Bhutan is a small landlocked economy with growth driven by hydropower and donor support. Annual per capita gross domestic product (GDP) was Nu 42, 983.6 (US$720) in 2004. 1.1.2. The public sector (the preferred employer in Bhutan) could not absorb the increasing number of graduates and school dropouts entering the labor market every year. Private sector, considered the “engine for growth”, played a limited role in the economy with nascent entrepreneurship and several constraints faced by private investors. The Royal Government of Bhutan (RGOB) embarked on a two-pronged strategy for private sector development (PSD): (i) improving the investment climate through policy and institutional reform (ii) encouraging “niche” sectors as sources of growth and employment generation. 1.1.3. Information and communications technology (ICT) was considered one such “niche” sector. ICT could provide areas of new business and employment opportunities for all Bhutanese through a multiplier effect on employment generation. Bhutan was also considered as a potential Information Technology/Information Technology Enabled Services (IT/ITES) location considering (i) Bhutan’s close ties with India – one of the biggest country players in the offshoring of IT/ITES globally, (ii) Bhutan’s attractiveness (stability, security, scenery) and (iii) anticipated growth of local businesses. 1.1.4. Weak financial sector was also identified as a constraint to PSD. Bhutan’s financial sector was highly liquid with limited private investment and high interest rate spread. The payment system was characterized by heavy use of cash and paper-based instruments which decoupled transaction costs in a mountainous country with limited transportation infrastructure. Underdeveloped IT infrastructure and unbalanced IT development in financial institutions constrained commercial and financial transactions. The financial sector was at a rudimentary stage of electronic-payment services. Rationale for Bank assistance 1.1.5. RGOB approached the World Bank to assist its strategy of private sector-led economic growth. One pillar of the Bank’s Country Assistance Strategy (CAS 2006-2009) was “promoting private sector development and employment”. The Bank’s value-added in the proposed project was based on: (i) its global experience in the ICT sector, including in development of IT Parks, and in financial sector

development, which allowed the Bank to share best practices from other countries and projects (ii) its ability to catalyze interest from international players through its involvement in the project, which

could facilitate the development of the proposed IT Park (iii) its complementary operations in supporting Bhutan’s private sector such as the Development Policy

Grant dialogue in the area of investment climate and PSD growth. 1.1.6. The project responded to the priorities highlighted in the RGOB’s Ninth Five-Year Development Plan (2002-2008), and the Bhutan CAS: “creating employment opportunities through PSD”. 1.2 Original Project Development Objectives (PDO) and Key Indicators

Page 16: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

2

1.2.1. The objective of the project was to increase productive employment in Bhutan through the following intermediate results: promotion of enterprise development in the IT and ITES sector, enhanced IT skills, and improved access to finance. Key indicators 1.2.2. The PDO outcome indicator as stated in the Project Appraisal Document (PAD) was “Cumulative job creation in the IT/ITES Sector supported by the project” with an end target of 700. 1.3 Revised PDO (as approved by original approving authority) and Key Indicators

1.3.1. The PDO remained unchanged throughout the project. The scope of the PDO outcome indicator was revised to “Cumulative job creation in the IT/ITES Sector in the IT Park and related activities” following a Level 2 restructuring of the project in December 2010. This was because the Mid-Term Review (MTR) mission showed that the project had generated jobs across sectors directly as a result of training supported through the project. The target values remained unchanged. 1.4 Main Beneficiaries 1.4.1 The PAD did not explicitly define the beneficiaries. Based on the outcome indicators, it is inferred that the main beneficiaries include: firms, especially tenants and incubatees of the IT Park; IT/ITES sector employees; IT/ITES students; banks; and users of ATMs. Also the overall economy would benefit from financial infrastructure development and policy reforms. 1.5 Original Components (as approved) 1.5.1 The project had three components: (i) Development of IT/ITES Sector; (ii) Development of IT/ITES Skills Program; (iii) Strengthening the Financial Sector through IT use. 1.5.2 Table 1 provides a descriptive summary of the original components and activities, intermediate outcome (IO) indicators, and a breakdown of the costs. See Table 2 in Annex 2 for further details.

Table 1 – Original components, intermediate outcome indicators and breakdown of costs

Activities by component

Costs

% of total costs

Original Intermediate outcome indicators

IDA US

$000

Counterpart Funds

US $ 000

Total US

$ 000

Component 1- Development of IT/ITES Sector

(i) Carrying out of infrastructure for an IT Park 4,000 4,000

(i) Cumulative leads generated for new investments in the IT Park, (ii) Number of companies successfully incubated in the IT Park, (iii) Per cent of lettable space leased out

(ii) IT Promotional activities 1,000 1,000

SUB TOTAL Component 1 5,000 5,000 48%

Component 2 - Development of IT Skills Program (i) General preparatory work including technical assistance , M&E and Advocacy

50 50 (i) Per cent of students clearing ITES industry competency assessment that is widely

Page 17: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

3

(ii) Generic skills training for the IT/ITES sector 980 980

recognized, (ii) Per cent of students trained are successfully employed by the private sector (iii) Distance learning facilities and

course management systems for IT skills development

325 325

(iv) IT Entrepreneurship Development program 645 645

SUB TOTAL Component 2 2,000 2,000 19%

Component 3 - Strengthening Financial Development through IT use

(i) Modernization of Bank of Bhutan through IT system upgrade 200 1,800

(BOB) 2,000 (i) Number of financial transactions by using ATMs per year, (ii) Value of financial transactions by using ATMs per year, (iii) Volume of fund transfer transactions among banks channeled through the EFT system per year

(ii) Developing ‘Financial sector IT development strategic plan’ 50

100 (IFC/SE

DF) 150

(iii) Establishing an Inter-bank Electronic Fund Transfer Clearing System (EFTCS)

750 450 (RMA) 1,200

SUB TOTAL Component 3 1,000 2,430 3,430 33%

TOTAL 8,000 2,430 10,430 100%

in % 77% 23% 100% Note: currency Exchange Rate: 1US=Nu.44.45 as of November 3, 2010. Except where mentioned otherwise, the rest of the document uses the exchange rate at closing date1US$=Nu. 59.7 (Source: International Monetary Fund). 1.6 Revised Components 2010 Restructuring: 1.6.1. Following a restructuring request by RGOB in December 2010 (after the MTR mission), component 3 was restructured to accommodate the financial inclusion agenda under the project. Nu 29.8m (US$ 500,000) of available component 3 funds was reallocated to fund two new activities: (i) Upgrading of the IT infrastructure of the Royal Securities Exchange of Bhutan Limited (RSEBL); (ii) Financial inclusion to support the Royal Monetary Authority (RMA) in providing an enabling regulatory framework and promoting financial literacy (see Table 2 in Annex 2). 1.6.2. The following activities were implemented outside the project: (i) technical assistance to develop a financial sector IT development strategic plan, co-funded by the International Finance Corporation (IFC), was completed in January 2009; (ii) inter-bank electronic fund transfer clearing system (EFTCS), was implemented separately with bilateral assistance from the Reserve Bank of India (RBI). 1.6.3. Though the overall grant allocation remained unchanged, Nu. 17.9m (US$300,000) was reallocated from component 3 to component 1 to contribute to funding the Nu 26.9m (US$450,000) undergrounding of one kilometer of a high voltage (HV) overhead transmission line over the IT Park. The power line was identified as a hazard. Also, rerouting was necessary as the power line passed by the edge of the IT building, and rerouting helped comply with Bhutanese regulations that do not allow residential or commercial buildings in an 18-meter wide right of way below the lines. 1.6.4. IO indicators of component 3 were revised as follows: (i) “Number of financial transactions by using ATMs per year” was changed to “Number of financial transactions by using ATMs at Bank of Bhutan per year”; (ii) “Value of financial transactions by using ATMs per year” and “Volume of fund transfer transactions among banks channeled through the EFT system per year” were removed because

Page 18: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

4

national payment system was implemented outside the project with RBI ; (iii) Two new IO indicators were introduced: “Percentage of district coverage for financial literacy campaign” and “Percentage automation of stock exchange trading, settlement, and delivery with straight through processing”. 2012 Closing Date Extension: 1.6.5. In June 2012, the project extended its closing date to complete the undergrounding of the HV transmission line. Initially planned to be completed by May 2012, it suffered delays due to technical and coordination challenges.1 The implementation of some activities (e.g. Financial Literacy Program) benefited from closing date extension. In addition, using project and foreign exchange savings,2 RGOB expanded its incentive programs to first mover tenants of the IT Park. Cofunding support for PSD-related activities of the National ICT Master Plan also benefitted from the extension. 1.7 Other significant changes 1.7.1. Changes in component 3 and a request from RGOB to simplify implementation arrangements led to the following institutional modifications: (i) Removal of three covenants of the Financing Agreement related to the financial sector IT task force, the IT technical working group, and the IT task force on IT skills development; (ii) Change in the staff composition of the implementation agency of component 3. 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry 2.1.1. At design, the Bank team drew lessons from the CAS evaluation report of 2005. IFC-SEDF (South Asia Enterprise Development Facility) also contributed to design by financing two feasibility studies: (i) Industrial Estates and (ii) IT Park and Distance Learning Centers. 2.1.2. Project components were designed to facilitate the achievement of the development objective of increasing productive employment. The proposed interventions were complementary and maximized synergies. Component 2 focused on development of skills (in collaboration with international and private organizations) to ensure availability of a stream of trained IT manpower as a pre-requisite for the success and sustainability of the proposed IT Park. The design team proposed the development of the IT Park under component 1 (despite cautionary assessments in the IT Park and Distance Learning Centers’ feasibility study) because it was aligned with national priorities, emerged from stakeholder consultations, took into account international experiences with IT Parks, and aimed at approaching IT/ITES sector development in a dynamic and flexible manner thereby leading to increased efficiencies in other domestic industries. Also component 3 was designed to solve the operational inefficiencies that hampered PSD in the country through ICT development in the financial sector. In a nutshell, project activities targeted both the supply side (through components 2 and 3) and the demand side (through component 1). 2.1.3. The design team undertook a thorough risk assessment. The PAD rated risks to project success as substantial. Skills gap was identified as a moderate risk at design stage. During implementation, the Ministry of Labor and Human Resources (MOLHR) stepped in to provide employees with the specialized training required by private firms (including tenants).3 Another risk identified in the PAD was internet 1 This was the first undergrounding undertaken by Bhutan Power Corporation (BPC). BPC faced challenges in meeting international safety and safeguard measures. In addition an unforeseen landslide in early 2012 required the construction of a retaining wall and adversely impacted the timelines. Parallel road expansion works financed by RGOB also impacted the works. 2 In June 2012, project’s savings were about Nu. 26m (US$ 437,865). Savings from exchange rate differentials were about Nu. 17m (US$284,322). 3 Initial industry assessments (with Genpact and Infosys) revealed that few students had the skills needed in the IT/ITES sector. The first occupant of the IT Park stopped its operations in November 2012 due to factors that included skills gaps of employees.

Page 19: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

5

connectivity infrastructure not being up to international standards. Domestic and international competition was expected to bring down connectivity costs and RGOB committed to bearing the differential cost between the leased line rates for IT Park tenants and prevailing regional rates through the “Letter of Sector Policy” in April 2007. Though this demonstrated RGOB’s commitment to the success of the project, it did not solve the underlying issue. Internet connectivity to date remains a risk to the long term success of the project. Today RGOB is providing subsidies to the IT Park occupants (see Annex 2, Box 3), for an initial period of 3 years, and concerted efforts to reduce connectivity costs continue.4 2.1.4. Apart from the connectivity issue, mitigating measures identified at design stage helped overcome most challenges faced during implementation: (i) The potential failure to attract reputable IT infrastructure developers to Bhutan (evaluated as high risk). Indeed, during implementation, only one eligible bid from a private developer (Thimphu Tech Park Ltd – TTPL) was received for the IT Park. Mitigating actions proposed at design stage, such as IT promotion activities led by RGOB and allotment of appropriate land, helped seal the deal with the private developer; (ii) The cross sectorial nature of the project, and the unsatisfactory IT system upgrade and usage leading to operational inefficiency in financial institutions, were considered as moderate risks though they did not materialize. The various task forces, coordination committees and investment promotion activities that involved several government agencies and stakeholders mitigated these risks. They helped attract stakeholders’ interests and obtain their commitment to project success. 2.2 Implementation 2.2.1. Project implementation was rated satisfactory since effectiveness, except for a one time downgrade to moderately satisfactory due to a disbursement lag in June 2011. Components did not progress at the same speed due to (largely unanticipated) implementation and institutional challenges. The global financial crisis affected the outlook for component 1 2.2.2. The 2008 financial crisis adversely affected private participation in infrastructure and enclave projects globally. Several potential investors became reluctant to participate in the tender for the IT Park. Nonetheless, the IT/ITES investment promotion activities led to successful contract signing with TTPL. 2.2.3. Despite signing MOUs to locate in Bhutan in 2009 and 2011, as a second wave of global economic slowdown affected IT firms in 2011, Genpact and Wipro put in abeyance their plans to locate in Bhutan. They were losing voice based business to the Philippines and existing clients were reducing their IT spending. This led to inventory of unutilized spaces in these firms’ offshore facilities and their employees were being laid off. In this scenario, they became less enthusiastic to expand into Bhutan. Internet connectivity adversely impacted results of component 1 2.2.4. Internet connectivity issues (lack of redundancy of the communications networks and high bandwidth prices) led a large foreign investor to decide against starting operations in Bhutan. RGOB deployed efforts throughout the project to reduce connectivity prices and increase quality (see Annex 2, Box 2). But even after start of operations in 2012, quality of connectivity has continued to affect occupants of the IT Park. Shaun Communication (the first occupant) temporarily stopped its operations in the IT Park and later changed its telecom operator due to quality issues. By project’s closing date, prices have reduced significantly in 2013 but are still not at par with the region. RGOB pays the price difference to IT Park occupants.

4 Telecom subsidy was provided for an initial 3 years in 2011 but this timeline commenced when IT park occupants started operations in 2012-13. According to RGOB, the draft telecom and broadband policy could lead to further liberalization of the sector; and the third international gateway (currently underway) will improve telecom infrastructure and provide redundancy.

Page 20: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

6

Innovative skills development partnerships for component 2 2.2.5. Component 2 accelerated after a program manager was appointed in August 2008. Implementation revealed that Royal University of Bhutan (RUB) alone might not be the natural champion for the employment program, especially since MOLHR had been given this mandate following the 2008 elections. After an agreement signed in October 2009 between RUB and MOLHR, implementation of the employment programs under the project - Graduate Training Program (GTP) and Employment Training Program (ETP) - progressed well. The inclusion of MOLHR as an implementation agency proved judicious, as the pool of Class X and Class XII (high school graduates) unemployed Bhutanese turned out to be even bigger than tertiary educated graduates. MTR triggered a level-2 restructuring with change in scope of component 3 2.2.6. The Level 2 restructuring proved instrumental to project’s successes. The beneficiaries of the training were absorbed by various sectors of the economy and by ITES companies outside Bhutan.5 The supply side was built up while the demand side was affected by the delayed construction of the IT Park. The restructuring ensured that the project achieved its development objective by appropriately capturing all jobs generated through the project whether in the IT/ITES sector or in other sectors. Closing date extension 2.2.7. Completion of the IT Park took more time than expected mainly because of: (i) Delays in the undergrounding of the HV (66kV) power lines (see paragraph 1.6.5). As a result some advances earmarked for this activity remained unused and triggered audit qualifications in 2011/2012.6 (ii) Operational challenges. Additional infrastructure services (water supply requirements and access road expansion) were required. In addition, investment climate challenges (access to construction materials, labor, specialized skills, construction machinery), force majeure events (exceptionally difficult ground conditions and inclement weather) and project management challenges7 led the private developer to request an extension for the completion of construction from September 2011 to April 2012. 2.2.8. Due to these implementation delays, the project’s closing date was extended from June 2012 to June 2013. Several activities benefitted from this change in closing date (see paragraph 1.6.5). 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 2.3.1. The PDO Outcome Indicator aimed to measure evidence of employment generation in the IT/ITES sector through the project and was clearly linked to the PDO.8 After MTR, it was appropriately revised to include jobs across sectors, which were created directly as a result of the project’s training

5 There were some clear linkages that worked well between project components, e.g. the investment promotion activities of component 1 generated the industry linkage programs with Infosys, Genpact and Wipro of component 2. Towards the end of the project, employment incentive program of component 2 was offered as an incentive for future IT Park tenants (see Annex 2). 6 All related outstanding payments were eventually settled before June 2013. 7 Because of the need to import all material, actual costs of construction were higher than India by about 50 percent. Labor issues included difficulty to obtain labor permits, labor unrest, thefts, vandalism, delays of transportation of material due to road conditions, weather and strikes, delays in clearance of material and equipment for imports, vendor refusals to supply equipment. Difficult terrain, inclement weather conditions, unfavorable geological conditions, led to midway redesign of construction. All these challenges reportedly created cost overruns for the private partner of 25 percent against initial budget. 8 The initial PDO Outcome Indicator had two definitions in the PAD: (i) the key performance indicator and results framework defined the job creation in the IT/ITES sector supported by the project without restriction to the IT Park; (ii) the arrangements for results monitoring in PAD Annex 3 restricted the measure to cumulative job creation in the IT/ITES sector in the IT Park. The task team clarified that the latter was an oversight, and the task team and the Government always used the former definition.

Page 21: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

7

programs: “Cumulative job creation in the IT/ITES Sector in the IT Park and related activities”.9 Despite the broadened scope of the PDO outcome indicator, the end-target of 700 jobs remained unchanged (see paragraph 1.3.1). The revised PDO outcome indicator was achieved before the IT Park was completed. 2.3.2. All three components were interrelated to achieve the PDO (see paragraph 2.1.2) and had defined outputs with a set of specific IO indicators related to each component. Each IO indicator had baseline values and quantitative targets established. Most IO indicators were clearly defined.10 2.3.3. Most IO indicators were directly linked to the achievement of the PDO outcome indicator of employment generation. The three IO indicators of component 1 stimulated the demand side through investment leads; firm incubation; and IT park occupancy. The IO indicators of component 2 and component 3 promoted the supply side. In component 2, competency assessments and conversion rate from training to employment monitored the efficiency of the training provided and adequacy of skills developed for employment. The IO indicators of component 3 were less directly linked to employment generation; nonetheless increased ATM transactions and automation of the stock exchange indicated improved efficiency of financial infrastructure for private sector operations; while higher financial literacy captured improved awareness and capability to efficiently use the financial sector for PSD. 2.3.4. The Project Implementation Agency (PIA) had dedicated full-time staff responsible for M&E. Data was regularly collected from the various Implementation Agencies (IAs) including RUB, MOLHR and RMA. All IAs coordinated well on M&E. The implementation support missions conducted regular M&E of the results and intermediate indicators.

2.4 Safeguard and Fiduciary Compliance Social and Environment 2.4.1. The project was classified as a Category B project at appraisal. The safeguard policy on Environmental Assessment (OP/BP/GP 4.01) was triggered. Nonetheless, unlike the typical process followed in OP 4.01, the Environmental Assessment (EA) and Environmental Management Plan (EMP) for the IT Park was expected to be completed after Board approval of the project when the private developer would be selected and the layout and design of the IT Park infrastructure would be completed. 2.4.2. In compliance with this exceptional decision relating to the application of OP/BP/GP 4.01, a comprehensive EA and EMP was prepared by the private developer and approved by the National Environment Commission of Bhutan and the Bank in late 2009. The EA confirmed that negative environmental and social impacts of the IT facility were to be very small, and such impacts would largely be limited to the construction phase of the IT Park. The EMP defined measures to reduce and manage potential construction and operational phase related impacts through noise and traffic management, labor management, solid waste and soil erosion management, management of occupation health and safety related impacts. Implementation of EMP was adequately monitored during the project. 2.4.3. At MTR, with the undergrounding of the 66kV HV transmission line, the project’s safeguards category remained Category B. New enabling works were not expected to cause significant

9 The PDO indicator was measured by counting all new jobs created as a result of project’s activities and which would not have been created otherwise. For jobs created through the training programs and recruitment drives, employment was tracked within 6 months post-training and changes such as attrition/mobility in employment were not tracked. 10 The IO indicator on “Number of companies successfully incubated in the IT Park” was initially misinterpreted to represent the number of incubatees graduating from the IT Park’s incubation center. The IO indicator actually represented the number of incubatees in the incubation center of the IT Park and this clarification was provided during implementation support missions.

Page 22: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

8

environmental or social impacts. The EMP for the undergrounding specified actions for management of environmental impacts. Its implementation was adequately monitored during the construction period by the National Environment Commission and Bank missions. 2.4.4. The project performance on environmental and social safeguards is rated Satisfactory. The project adequately complied with OP/BP/GP 4.01 and safeguard policies of RGOB. RGOB’s EA policies were compatible with OP/BP/GP 4.0 and satisfactorily applied international standards. Procurement 2.4.5. Most of the issues and risks concerning the procurement component for implementation of the project were assessed at the time of appraisal and the complex procurement issues covering the IT Park, under a Public-Private Partnership (PPP) model, was planned to be closely monitored during implementation. The procurement capacity assessment at appraisal concluded that the knowledge gap of the dedicated project staff responsible for procurement was small and could be bridged by training. 2.4.6. The procurement procedure complied with Bank’s Procurement and Consultant Guidelines. No major procurement issues occurred during project implementation. Procurement post reviews did not highlight any major deviations from agreed procedures for the project. Procurements were conducted in a timely manner except for undergrounding of HV transmission line, which was slightly delayed by BPC. 2.4.7. The procurement capacity and PIA performance was Satisfactory throughout the project. Record Keeping/Filing of procurement records was identified as an area that needed to be strengthened. Financial management 2.4.8. The Financial Management (FM) performance was Satisfactory throughout the project. 2.4.9. Designated Account advances based on six months expenditure forecast provided required funds for the project. The funds from the Designated Account were distributed to various implementing agencies to incur expenditure for their respective activities. 2.4.10. The involvement of several IAs occasionally posed challenge in obtaining project information and resolving open items. The PIA ultimately satisfactorily resolved all FM issues. The submission of the quarterly IUFRs was mostly on time. Currently there are no overdue audit reports under the project. The next audit report for the financial year 2012-13 will become due on December 31, 2013. 2.4.11. Use of country financial management systems worked well. As the country’s public FM systems are being strengthened (through Bank support and others), the FM capacity is also improving. 2.5 Post-completion Operation/Next Phase 2.5.1. RGOB set up several continuity arrangements for each component of the project to ensure sustainability of project activities: (i) the PIA was embedded in Ministry of Information and Communications (MOIC) as the PSD Section under Department of Information Technology & Telecom (DITT); (ii) new courses developed under the project (academic skills, analytical skills, entrepreneurship) were mainstreamed and institutionalized by RUB within the college system; (iii) the Human Resource Development Division of MOLHR took forward the skills development initiatives under the project as a part of MOLHR’s skills development program 11 in sectors such as ICT, health, arts and craft, and 11 The programs are now “placement oriented” rather than “training oriented”.

Page 23: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

9

hospitality; (iv) recruitment drives under the project were carried out by the Department of Employment of MOLHR; (v) Financial Inclusion Policy and financial literacy implementation were assigned to three RMA staff under the Financial Regulation and Supervision Department; (vi) automation of RSEBL and of Bank of Bhutan (BOB) operations is mainstreamed within RSEBL and BOB respectively. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation 3.1.1. With the economy still reliant on the hydropower sector and donor grants, PSD remains a priority in Bhutan’s Eleventh Five Year Plan (11FYP) for 2013-2018. As part of its focus on green accelerated economic development, the 11FYP aims to diversify the economy to non-hydro sectors for import-substitution and export promotion, and create employment opportunities in particular for the youth. 3.1.2. The project’s objectives were relevant at inception and remain relevant today. The 11FYP highlights RGOB’s focus on resolving underemployment and quality of employment. Youth unemployment was estimated as 7.3 percent in 2012 and RGOB’s target is to reduce it to 2.5 percent in 2018. The PDO is also well related to the current (FY 2011-14) Country Partnership Strategy (CPS). The PSD project responds to the country’s development objectives of (i) leveraging private sector participation for strategic infrastructure and (ii) improved efficiency of and access to financial services. Hence the relevance of objectives, design, and implementation is High. 3.1.3. The components of the project remain relevant to the country’s development priorities today. Availability of a stream of trained IT manpower is critical to develop communication infrastructure in Bhutan. Use of IT for enhanced financial sector efficiency and financial inclusion are important considering RGOB’s concern to provide access to finance to some sectors through priority sector lending. The newly elected Prime Minister appears committed to the IT Park. His first business visit was to Hyderabad where he met officials of Infosys and Microsoft to discuss possibilities of collaboration and where he emphasized the value that Bhutan offers to global IT companies’ critical operations.12 Choice of ICT sector: 3.1.4. At design stage, ICT and more particularly the ITES sector was selected as focus area due to its potential for employment, innovations, higher learning elasticities, and positive externalities. This was a joint decision made by RGOB, the Bank and other stakeholders, and took into account feasibility studies. 3.1.5. The project’s focus on PSD and ITES sector was in hindsight a step in the right direction with RGOB’s commitment to enhance the use of ICT, including mobile technology, to reduce bureaucratic processes and turn-around-time for public service delivery. The project also piloted innovations relevant to non-ICT sectors (e.g. PPPs, private sector-led training and employment, incubation center). 3.1.6. Today the ICT sector is prominently mentioned in the 11FYP in developing the communications infrastructure, including fiber optic network, national data center, and government intranet system. The Economic Development Policy (2010) identified ICT as a priority: “The transformation of the traditional Bhutanese society into a knowledge based society and the development of high end service industry shall be enabled by ICT. In so doing, the Royal Government shall endeavor to make Bhutan an attractive destination for FDI in R&D, data processing and high end BPOs through a highly skilled talent pool.”

12 See media coverage at: http://www.kuenselonline.com/bhutan-is-open-to-business-pm/

Page 24: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

10

3.1.7. To achieve its full job creation potential, the ICT sector requires good internet connectivity and availability of a critical mass of technically qualified talent pool, which remain two areas for improvement as evidenced during project implementation. Inclusion of Financial Sector Component: 3.1.8. The financial sector activities under component 3 were included in a project titled “Private Sector Development” whose objective is productive employment. A strong financial sector is essential to improve the “horizontal” investment climate, which benefits all private sector firms, and in turn supports productive employment. Also, it is common in small land-locked country projects (and small IDA envelopes) to combine private sector and financial sector activities into one project, thus reducing the transaction cost to the country. Given these aspects, inclusion of financial sector component in the project is deemed appropriate. Through this component, the financial sector payment infrastructure was modernized to service increased number of transactions, stock market efficiency increased, and draft regulations on access to finance provided regulatory framework to fund private sector investments. 3.2 Achievement of Project Development Objectives 3.2.1. The PDO was to increase productive employment in Bhutan through the following intermediate results: promotion of enterprise development in the IT and ITES sector, enhanced IT skills, and improved access to finance. The PDO was largely achieved and its efficacy rating is High. Through the training and infrastructure provided under the project, 1,015 value added jobs (exceeding the target of 700) were created for young Bhutanese, of which 205 (20 percent) were located in the IT Park as of September 2013. On a national scale, this represents almost 15 percent of the total unemployed in Bhutan in 2012, and almost 21 percent of the unemployed who attended a school or institute in 2007 (at the start of the project).13 Most of those employed were between 19 to 24 years old, with equal representation between young men and women from across Bhutan’s 20 districts, and the jobs created by the project represent 29 percent of total youth unemployment.14 3.2.2. Expectation mismatch: There was some negative press about the project in the media during the latter stages of project implementation;15 even though the project’s outcome indicator and all intermediate outcome targets (except one related to IT Park occupancy) were met or exceeded. IT promotional activities (roadshows) carried out under the project set high expectations of IT Park, which (being the visible infrastructure part of the project) was incorrectly equated to being the whole project. The roadshows highlighted Bhutan as an emerging ICT destination and MOUs were signed between global IT companies and RGOB; however, external factors (including the global economic slowdown) made these IT companies revisit their plans to locate in the IT Park as (anchor) tenants. This created unmet expectations reflected in the press. 3.2.3. The achievements of the intermediate outcomes directly affected the PDO as they were designed to lead to creation of productive employment (see paragraph 2.3.3). They were as follows: (i) Development of the IT/ITES sector in Bhutan through attracting IT/ITES firms in the IT Park, and increase in the private investment in the IT/ITES sector. This intermediate objective was partially achieved as of closing date. The IT Park is the first economic zone in Bhutan built with public/private investments and fully operated by the private sector. As of September 2013, it hosts one international tenant occupying 25 percent of the commercial space of the Park and employing 170 young Bhutanese of whom 57 percent are women. 75 percent of the space of the Park remains empty though advanced

13 Data sources: Ministry of Labor and Human Resources, 2012 Labor Force Survey and 2007 Labor Force Survey. 14 Total jobs facilitated through the project represents 59 percent of unemployed youth (age 15 to 24) in urban areas in 2012. 15 For instance, there were occasional media references to the IT Park as being a “white elephant”.

Page 25: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

11

discussions are ongoing with potential tenants. Among them is Shaun Communication, currently renting out space in the BITC for its 27 employees, which has committed to occupy 25 percent of the commercial space through signature of a tenancy contract in early 2013. The IT Park also hosts the first incubation center in Bhutan to promote micro and small enterprise development/innovation through the Bhutan Innovation and Technology Center (BITC). Three ventures out of thirteen (five physical, eight virtual) have graduated from BITC; not all are in the IT/ITES sector as BITC targets a larger set of entrepreneurs. BITC also has a shared technology center and a datacenter currently hosting three local clients. (ii) Availability of a stream of trained IT manpower to support the development of the IT/ITES Sector. This intermediate objective was achieved. The project pioneered private sector-relevant skills development programs leading to the creation of new jobs. These training and employment programs directly undertaken by potential investors who paid part of the training costs, decreased the cost to RGOB of employment generation and allowed skills development customized to industry needs. 873 new jobs (of whom 428 male and 445 female) were created following the training of 1372 Bhutanese under the programs and this cost RGOB around Nu 65.7k (US$1,100) per job, which is reportedly four times below regional averages (see Annex 2). This successful model is now being replicated by MOLHR to implement training programs in other sectors. In addition, the investment promotion activities of the project generated interest from global IT/ITES industry players beyond the IT Park. The industry linkage program and recruitment drives pioneered with Infosys, Genpact and Wipro led to the employment of more than 100 Bhutanese, and was initiated as a result of the promotional activities aimed at attracting Foreign Direct Investments (FDI) into Bhutan. RUB also embedded three core curriculum courses (analytical and technical skills, language enhancement, and entrepreneurship development) at all its 10 colleges, which were provided under the project and designed in consultation with global ITES firms. In addition, distance learning facilities were provided with the establishment of the Virtual Learning Environment (VLE) at RUB colleges, providing a richer learning environment for students and also benefitting lecturers. The set-up of the project’s video conferencing (VC) centers in 5 locations saved costs and time for staff who would otherwise travel for a week to attend a day’s meeting in Thimphu. (iii) Gradual growth in IT use by the financial sector to achieve greater efficiency. This intermediate objective was achieved. The co-financing of financial infrastructure under the Project, combined with the liberalization of the financial sector, led to an increase in ATM transactions at BOB - which holds about 46 percent of banks ‘assets in 2013 - from 200,000 ATM transactions in 2009 to about 1,360,000 ATM transactions in 2012. With the IT system upgrade of BOB, BOB’s procedures were modernized and positioned BOB to fully benefit from the EFTCS. The installation of the Core Banking Solution (CBS) by the BOB reduced the maximum waiting time for BOB’s clients by 90 percent.16 A next step for further modernization of the financial infrastructure in Bhutan is to increase the efficiency of the Bhutan financial switch (launched after the EFTCS) and improve its integration with the global system. (iv) Upgrading of the IT infrastructure of the stock exchange RSEBL. This intermediate objective was achieved. RSEBL IT system was launched in April 2012. It has completely integrated six systems which helped significantly reduce time to process shares, benefiting brokers and investors. Automation led to a marked increase in transactions in the secondary market for all listed companies (currently numbering 21) within a month. Automation of the stock exchange improved risk management, market surveillance, transparency, system robustness, interest from brokers and number of trading days. (v) Financial inclusion: This intermediate objective was achieved. Increasing awareness, promoting financial literacy and providing an enabling regulatory framework are building blocks to improve access to finance and ultimately support entrepreneurship and PSD. The project supported the drafting of the Financial Inclusion Policy (FIP), and of accompanying regulations (microfinance, e-money) which were 16 Sources: Royal Monetary Authority (June 2013) and Socio Economic Impact Assessment report of the project (July 2013).

Page 26: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

12

enriched by two outreach missions to Philippines and Kenya in 2012. It contributed to a national financial literacy campaign using innovative channels (radio and TV) (see Annex 2). 3.3 Efficiency 3.3.1. The PAD included a financial and economic analysis which identified the project’s money inflows and outflows to and from RGOB (not the private sector developer) for component 1 (IT Park) only. This analysis indicated that though the project was not financially viable, it was economically viable to generate employment and increase net exports, yielding an economic net present value (NPV) of US$30.6 million with an economic internal rate of return (IRR) of 125.2% for a period spanning 20 years. 3.3.2. The economic and financial analysis done at design stage has been updated. The analysis was carried out for the IT Park from the perspective of RGOB + TTPL combined. To facilitate a like-to-like comparison with the PAD, the updated analysis also looks at just RGOB. 3.3.3. The updated financial analysis based on a discount rate of 10% over 20 years indicates that the IT Park generates a financial IRR of -0.60% for RGOB + TTPL (and -8.28% for just RGOB) (original PAD estimated +6.76%). The updated economic analysis indicates that the IT Park yields an economic NPV of $39.7 million with an economic IRR of 35.20% for RGOB + TTPL (and an economic NPV of US$16.8 million with an economic IRR of 32.43% for just RGOB). This reinforces the conclusion that the project is economically viable to generate employment and increase net exports. 3.3.4. In conclusion, while the IT Park is marginally financially unattractive at present capacity utilization rates, it has upside potential should tenancy improve. Also, the project is economically viable as confirmed by positive economic cost benefit analysis (see Annex 3). Hence the efficacy rating is High. 3.4 Justification of Overall Outcome Rating Rating: Satisfactory 3.4.1. The project has achieved its intended outcomes and exceeded most of its targets. Over 1,000 jobs were created, new infrastructure for the IT/ITES sector was built, IT skills corresponding to business needs were developed, financial infrastructure was modernized, and financial inclusion was promoted through the development of the regulatory environment. 3.4.2. The remaining challenges beyond closing date relate to the IT Park which represents one part of component 1. This component was hit by implementation challenges including external factors (see section 2.2). Key remaining issues include weak internet connectivity and occupancy in the recently completed IT Park. There is also a lack of critical mass of technically qualified talent pool due to limited scale up potential, small size of workforce, skills mismatches, and high labor costs in Bhutan. Several of these were identified as potential risks at design stage. 3.4.3. In balance, the overall project is rated Satisfactory. This is based on the following: On the demand side of the PDO (i) The efforts and progress towards reaching full occupancy of the IT Park, the only IO indicator not met by closing date. Contractually, the timeline for TTPL to fill up the IT Park is within three years of start of operations, which is in line with industry standards in economic zones globally. Because of unexpected delays in the construction of the IT Park, this timeline extends until 2015 (i.e. beyond project’s closing date). At present occupancy rate (25 percent), the IT Park may still be able to achieve 100 percent occupancy in line with the contract. Higher IT Park occupancy will increase project’s viability as

Page 27: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

13

demonstrated in the economic analysis. In addition the socio economic impact assessment (SEIA) estimates several anticipated positive impacts for the community (see Annex 5). The efforts to fill the IT Park are continuing, targeting also medium-sized ITES firms. Tenancy deals with domestic firms are also under discussion and if they materialize they would provide a more sustainable mix of tenants to the IT Park - since domestic firms are expected to be less exposed to global turmoil in the industry. (ii) The commitment and support from RGOB and several stakeholders: RGOB remains committed to the project as evidenced consistently throughout the project and even after its closing date. RGOB’s financial contribution leveraged significant investment from the private sector, notably for the IT Park, with Nu 300m (US$5m) investment from TTPL. The IT association has also expressed full support to the IT Park. (iii) The efforts and progress in resolving connectivity issues: RGOB continues efforts to provide connectivity at par with the region, while providing subsidies to IT Park occupants in the meantime. As of June 2013, prices of international bandwidth have fallen by 70 percent, due to negotiations (largely triggered by the project) between Bhutanese and Indian telecom operators. The second international connectivity gateway at the Indian border, in Gelephu, was completed in April 2011. (iv) The success of BITC and its potential for further growth: BITC has considerable growth potential in a country where 57 percent of industries were classified as cottage in 2011.17 Following the considerable interest generated by the microwork workshop provided under the project, BITC expects to incubate a number of future microwork entrepreneurs in its premises or virtually. Over time, BITC intends to become a hub of entrepreneurship and innovation in Bhutan (see Annex 2). On the supply side of the PDO (v) The skills developed under the project that would be useful for an IT/ITES firm but also for any business in Bhutan (local or foreign): Even though scale remains a challenge in Bhutan, the majority of youth that benefitted from the project’s trainings expressed that they gained significant professional skills - beyond IT skills - with the trainings. These included communication, analytical and presentation skills; and their confidence and self-esteem have also considerably improved (see Annex 5).These youth trained through public private partnerships included tertiary as well as class X and XII graduates. On the overarching outcomes of the project and its positive spillovers (vi) The project generated several positive spillovers as detailed in the next section. 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 3.5.1. As noted in the PAD, the impact of the ICT sector is gender-sensitive. As of September 2013, 1372 secondary education (class X and class XII) graduates were trained, of whom 52 percent were female. 873 candidates – of whom 50 percent were female – obtained a job in ITES companies and in various sectors of the Bhutanese economy (see Annex 2). Most Bhutanese employed with support from the project are between 19 and 24 years old and come from across Bhutan’s 20 districts. 3.5.2. A socio economic impact assessment (SEIA) was carried out in two phases during project implementation, in accordance with the Financing Agreement. For the impact assessment a survey of a sample of respondents from each beneficiary category was conducted. A summary of the social development impacts of the project is provided in section 3.6 and in Annex 5.

17 Cottage industries are firms with an investment of less than Nu.1 million (US$16,750.6) and engaging up to 4 people. Source: National Statistics Bureau, RGOB Statistical Yearbook of Bhutan, 2012.

Page 28: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

14

(b) Institutional Change/Strengthening 3.5.3. The broader mandate of the project (beyond the PDO) was to develop the country’s private sector.18 The project has contributed to this higher level objective in several ways: (i) Trigger for policy reforms: Several investment climate reforms were triggered by the IT Park tender process and by the project including: (i) amended FDI policy, (ii) economic development policy, (iii) draft PPP policy, (iv) draft telecom policy, (v) draft FIP and related regulations on access to finance (such as e-money issuers regulation, and deposit taking microfinance institutions regulations), (vi) National ICT masterplan and related regulations on ICT. The fast-tracking of the clearances and the establishment of the single window agency for the IT Park also started to instill the one stop shop culture to improve business environment. These reforms in business environment would help alleviate some reported negative perceptions of foreign investors in Bhutan notably on distance, scale, and talent pool. (ii) Capacity building in PPPs: As the first PPP in Bhutan, the IT Park helped develop in-country capacity on PPP arrangements. It also provided several lessons learned such as on the use of the tendering documentation and process, which would be useful for similar projects, such as the RGOB’s forthcoming Education City project. This first experience has enhanced RGOB’s experience in attracting private investments (both foreign and local) in serviced land and strategic infrastructure projects in Bhutan. (iii) New private sector-led training models: The training provided by MOLHR was the first to directly link academia and business in Bhutan. It has changed the strategic direction of vocational training adopted by RGOB in other sectors (e.g. tourism, construction). (iv) Capacity development of local IT private sector (including local IT training firms) (see Annex 2, Box 4): Consultations with local firms and the chamber of commerce throughout the project helped build private sector capacity. Domestic firms were encouraged to form joint-ventures with foreign bidders.19 Feedback from the IT private sector association (BICTTA) on their non-participation as IT Park tenants included the high rental costs and their requests to obtain the special incentives which only export-oriented tenants in the IT Park receive. BICTTA was however encouraged to evolve to play a similar role to that played by the Indian IT association in the meteoric development of the Indian IT/ITES industry. (v) Coordination mechanism between Government, private sector and academia: The project initiated and sustained national and international relationships between Government, private sector and academia. Bhutanese government agencies and private sector participated in the project with external companies (such as Infosys and Genpact) and the University of Colombo in Sri Lanka (for the VLE). Coordination between government agencies was seamless during the project (see paragraph 5.2.2). (c) Other Unintended Outcomes and Impacts (positive or negative) 3.5.4. The implementation of the project generated several positive spillovers in the ICT sector. The project kick started the “ICT mindset” among Bhutanese firms and entrepreneurs. It helped change Bhutanese mindsets towards FDI, through demonstration. Investment promotion and skills development programs highlighted Bhutan’s value proposition as an IT services investment location including its “green” brand name, reliable/low cost access to power, stable environment, English language skills of Bhutanese graduates and low attrition rates of Bhutanese manpower.

18 Although this cannot be attributed solely to the project, the number of industrial establishments in the private sector has increased in absolute value from 26,261 in 2007 to 34,692 in 2011. Source: RGOB Statistical Yearbook of Bhutan, 2012 19 Out of 7474 firms, only 22 were joint-ventures between foreigners and Bhutanese (2010 Establishment Census by MOLHR).

Page 29: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

15

3.5.5. In addition, new concepts in employment creation are being explored through the project’s activities. These include the entrepreneurship training program, BITC, and microwork. Self-employment and entrepreneurship are now increasingly considered as viable alternatives to public sector jobs. 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 3.6.1. Under the SEIA, a survey using a structured questionnaire to collect mostly quantitative data was conducted with a sample of respondents from each beneficiary category. Semi-structured questionnaires and open-ended discussions with the key stakeholders were also conducted. 3.6.2. Key results of the beneficiaries’ survey finalized in June 2013 along with a summary of the key socio economic benefits and impacts of the project are provided in Annex 5. The SEIA also pointed out that some impacts will take time to emerge since activities have just been completed. It anticipated several positive impacts for the community in the future. 4. Assessment of Risk to Development Outcome Rating: Moderate 4.1. Risks to the PDO outcome indicator are moderate. A number of factors are expected to contribute to consolidating and furthering the gains achieved under the project. Most notably RGOB’s commitment to youth employment and its continued support to PSD, communication infrastructure and the IT Park as highlighted in the 11FYP. These factors should help maintain and grow the new levels of productive employment created under the project. 4.2. Because the IT Park accounts for about 48 percent of original project’s costs and is the visible infrastructure part of the project, success of the project is frequently linked to success of the IT Park. Filling up the remaining empty space and retaining the two occupants of the IT Park would be crucial for the long term success of the project.20 An exit by either would send a negative signal to prospective tenants and IT/ITES investors, and could also influence the PPP models playing out in Bhutan. (i) Scan Café: the first tenant of the IT Park operates in the image editing segment and intends to progressively move its Bangalore operations to Bhutan. (ii) Shaun Communication: operates in the voice Business Process Outsourcing (BPO) segment. It did not benefit from support for building its fit outs, and has indicated its difficulty in making the additional investments needed to move over to the commercial space of the IT Park. This remains a concern. 4.3. One challenge that continues to affect the IT Park is the internet connectivity issue (see paragraph 2.2.4). This could jeopardize current tenancy deals in both IT Park commercial space and BITC. Negotiations are underway to identify a long term solution for pricing (such as opening the market for foreign investments and partnerships with an Indian operator at the border). 4.4. Under the PPP model, TTPL has a contractual obligation to fill the IT Park within three years of IT park’s operations (see paragraph 3.4.3). Some tenancy deals appear to be in the pipeline with domestic firms. Attracting more firms to BITC and making it financially viable is another objective. Nonetheless, all actors’ financial positions have weakened due to overruns in cost and time. An objective of TTPL now

20 Neither occupant agreed to a lock-in period on their lease period in their initial tenancy contracts signed in early 2013. Nonetheless, as per the FDI policy, FDI companies are constrained to a lock in period of 3 years.

Page 30: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

16

appears to reach a cash flow breakeven position while also servicing its debt. A clear risk to avoid is for RGOB to be left running the IT Park, as this could signal failure of Bhutan’s first PPP experiment. Enforcement of the contractual obligations of TTPL could mitigate this risk. 4.5. For component 3 (automation of stock exchange), sustainability might be an issue as this initiative would need to secure funding in order to operate (see Annex 2). 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Satisfactory 5.1.1. The project was designed after several rounds of discussions with RGOB dating back to the 2002 Private Sector Survey. The feasibility studies financed by IFC through SEDF, as well as the lessons learned from earlier operations, were essential for the design of the project. The design team also held several consultations with RGOB and other stakeholders (including the private sector) during preparation. 5.1.2. In line with RGOB’s priority to solve youth unemployment and promote the private sector as the “engine for growth”, ICT and in particular IT/ITES emerged as the “niche” sector that would generate maximum employment in landlocked Bhutan. 5.1.3. Despite the minor shortcomings mentioned elsewhere (see sections 2.1, 2.2.2 and 2.2.4), the need for relevant IT infrastructure, IT skills and modernized financial infrastructure was well established at design stage. Hence the “Satisfactory” rating for the overall project quality at entry. (b) Quality of Supervision Rating: Satisfactory 5.1.4. The World Bank team included experienced staff with expertise in relevant areas, including in developing IT Parks in other countries; ICT; PPP; and financial sector development. There was also adequate continuity in the World Bank project team, with a core team member being part of the project from design to closing date. The TTL changed once, soon after effectiveness. 5.1.5. The World Bank team conducted regular supervision of the project through: (a) regular supervision missions from Washington and Delhi; (b) an MTR in 2010; and (c) monthly conference calls between the PIA, IAs and the World Bank. These calls, set up early in project implementation, were used to resolve outstanding issues, monitor and assist implementation. They have proven an effective project monitoring tool and their effectiveness was commended by both RGOB and Bank management. 5.1.6. The World Bank team provided support to the PIA and IAs through the project life. Based on feedback from RGOB, the team was very responsive and the quality of support provided by the team was above RGOB’s expectations. The team proactively leveraged other parts of the World Bank Group throughout the project; including (e.g.) from Global Information and Communication Technologies (GICT) unit for ICT regulation issues and from the payment unit and financial literacy experts for component 3. The team also ensured that local private firms were involved through the project. Implementation support missions always met with the IT association and the chamber of commerce and also provided advice as solicited which at times went beyond the project’s scope.

Page 31: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

17

5.1.7. Nonetheless, given the lack of experience of RGOB in areas like IT Parks, PPP projects, and contracting with global investors and tenants, the team could have explored creative ways to do more in: (i) encouraging transfer of skills and technology from foreign firms to local firms and staff through activities like networking and training, and (ii) advising the government on a conservative media strategy so as to better manage the expectations of the public. Some of these activities could have been undertaken through complementary technical assistance or in coordination with other donors (including IFC). 5.1.8. The team provided timely responses (with occasional delays) to approval requests, e.g. during the organization of the roadshows and outreach missions which involved several bookings to be made in advance and required at the same time clearances from several agencies including the Bank. The Aide-Memoires and Implementation Status and Results Report (ISRs) provide detailed recommendations on measures to accelerate and improve project implementation. Ratings are well substantiated in all ISRs for all components. This is endorsed by the IEG “Quality Assessment of ISRs” published in 2013, which assessed the project and concluded: “The Aide Memoire and the ISRs reflect very well organized and focused supervision, excellent reporting, and above all, a proactive approach towards challenging aspects of the operation (…) Reporting is very candid, showing which are the challenges despite the excellent performance of the project, and the actions that are being pursued to overcome them.” 5.1.9. RGOB’s requests for restructuring and project extension were processed on time and largely contributed to the project’s successes. Final disbursement ratio was estimated at 99.15 percent. Hence the “Satisfactory” rating for the overall project quality of supervision. (c) Justification of Rating for Overall Bank Performance Rating: Satisfactory 5.1.10. The project was well prepared and included a cost benefit analysis for the IT Park. It responded to the country’s request and benefitted from strong commitment from RGOB. The design was based on feasibility studies, lessons learnt from earlier operations and active participation from various stakeholders. More concrete actions to mitigate the connectivity issue could have been provided at design stage. Bank performance in ensuring quality at entry is therefore rated Satisfactory. The team provided sound advice and implementation support to the counterparts throughout the life of the project, performing beyond expectations as expressed in client feedback. There was proactive identification of opportunities and issues facilitated by the monthly conference calls between the team and all IAs. Reporting was also of excellent quality. Quality of supervision is therefore rated Satisfactory. The overall rating of Bank Performance is rated Satisfactory. 5.2 Borrower Performance (a) Government Performance Rating: Satisfactory 5.2.1. The performance of RGOB is rated Satisfactory. Even though the project was the first experience of RGOB in PPP, clean governance, commitment and enthusiasm compensated for any shortcomings. RGOB provided strong support during the project appraisal and design stages, offered incentives to stimulate demand, and proactively introduced supportive reforms from project’s effectiveness and throughout the project cycle (see Annex 2, Box1). 5.2.2. The project was given considerable importance by the RGOB ministries and agencies in charge of its implementation. Collaboration between ministries during the project was notable. As a result, several

Page 32: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

18

key policy reforms were undertaken and cross-ministerial issues such as land were addressed in a timely manner. The Ministry of Finance provided timely support for necessary disbursements under the project. 5.2.3. As accurately assessed at appraisal stage, the project required a large number of processes to be expedited. Committees were formed to ensure rapid processes. The Empowered Task force (ETF) was established in 2009 via a Cabinet directive to resolve any road blocks for smooth implementation of the project. The ETF was crucial in resolving issues including those on the ancillary facilities such as delayed provision of power. Larger issues were raised at the Cabinet and this occurred three times during project implementation for: decision on land lease duration, tax holiday, and keeping provision for the cost sharing of training programs. The Program Steering Committee (PSC), established in 2007, met regularly with the PIA to give necessary policy guidance, review progress and assess performance. An Advisory Council was set up in 2008 and was instrumental in guiding the IT Park PPP as well as other sector PPPs. 5.2.4. IEG “Quality Assessment of ISRs” in February 2013 concluded: “(…) It also reflects very strong commitment on the side of the Government, which is evidenced not only by financial resources provided for the project, but also on proactivity in terms of addressing challenging issues (…)”. (b) Implementing Agency or Agencies Performance Rating: Satisfactory 5.2.5. The performance of MOIC/DITT is rated Satisfactory. Experience with Bank projects was low at the start of the project. However, this issue resolved over time. The PIA actions, including IT promotion activities and support to IT/ITES firms, were crucial for successful accomplishment of project objectives. 5.2.6. Coordination of IAs was complex. The PIA was diligent in providing high quality Quarterly Progress Reports and organizing the monthly conference calls. 5.2.7. Some components also suffered from staffing shortages at various periods of implementation. The RUB component picked up after the Vice Chancellor appointed a project manager. The RMA/BOB component was managed by RMA staff instead of a dedicated project management team. Nonetheless all outcomes of component 2 and component 3 were achieved and IO targets were exceeded. 5.2.8. The PIA suffered from lack of business analysis expertise at the start of the project but later benefited from the support of the Bank team and the consultants hired by the project. External communications to the media could have also been handled more proactively (see paragraph 3.2.2). (c) Justification of Rating for Overall Borrower Performance Rating: Satisfactory 5.2.9. The overall performance of the Borrower is rated Satisfactory. This is based on RGOB strong commitment to the project as evidenced since the beginning of the project and on the considerable efforts of coordination between ministries and within the IAs for the common goal of project success. 6. Lessons Learned 6.1. Project Design 6.1.1. Evidence based policy making:

Page 33: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

19

- A fine distinction needs to be drawn between “picking winners” by government, and identifying “promising strategic bets” based on extensive input from the private sector and experiences of comparable countries. Robust feasibility studies can support such decisions. - Equally important is how this decision is implemented: is there room for flexibility and mid-course corrections? This project “picked” the IT/ITES sector. However, there was flexibility inbuilt in the design: today, a mix of firms (domestic and international, small and medium-sized, voice and data based) occupies the IT Park, as well as some non-ICT startups (in the BITC). Similarly, many of the graduates of the training programs have found employment in non-ICT sectors. Such flexibility has helped create a more level playing field and has encouraged the participation of larger sections of Bhutan’s private sector. Given that IT/ITES remains a priority services sector for RGOB even today, it can be concluded that flexible implementation played a major role in validating this “choice” of sector. - Availability of a strong fact base is important at design stage, both as a baseline and to measure impact. For example in component 3, supply-side and demand-side evidence on access to finance across Bhutan were collected through two surveys (quantitative and qualitative) for the elaboration of the draft FIP. 6.1.2. Taking “baby steps” first: In a situation of limited experience and training, it could be claimed that major physical works warrant less focus until the “software” (e.g. conducive policy frameworks, strong investment climate, innovation mindset and skills) is more in place. An interim step could include creating a virtual center based on training rather than a physical structure. 6.1.3. “Small is beautiful”: Successful achievement of project objectives does not always require considerable funding. Simple projects designed with few components requiring adequate amounts of funding can be as, if not more, successful than larger sized and overly ambitious projects. 6.1.4. Measuring impacts: As impacts often take time to materialize, a system to track the progress of medium-term impacts of the project’s activities should be put in place during the design stage. For instance, the SEIA did not benefit from baseline data, which in turn did not allow robust impact evaluation analysis. Another example of results that could have been better assessed is regarding the RUB component; even though employment of RUB university graduates cannot be solely attributed to specific courses and modules, going forward it would be interesting to explore ways to measure the impacts of these new curricula in students’ overall performance at RUB and their subsequent career success. 6.2. Project Implementation 6.2.1. Effective project coordination is critical: especially when several government agencies are involved. High level committees can be helpful to solve roadblocks along implementation while at the same time a leading agency must take clear ownership for overall progress. 6.2.2. Marketing efforts and importance of managing expectations: with prospective investors as well as the media and the public. While IT promotional activities were useful to showcase Bhutan as an investment destination, awareness campaigns targeting the public (e.g. on the time required for strategic infrastructure to show impact) are often a good way to build the right expectations. A coordinated focus on external relations and communications is important. 6.2.3. Creating short-term market distortions could sometimes be beneficial in the long term: A good example of this is provided by RGOB’s incentives and subsidies to the private sector developer and occupants. Such actions could be deemed essential to build up a new industry from scratch. However, unlike the “infant industry” approach of traditional industrial policies, care should be taken to phase out such market distortions and ensure crowding-in of private sector in a level playing field.

Page 34: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

20

6.2.4. World Bank implementation support: Regular planned communications, through the monthly conference calls between the Bank team and all IAs, were instrumental for implementation progress. This could be considered as “best practice” in implementation support. 6.3. Public Private Partnerships 6.3.1. In order to successfully implement PPP projects, adequate capacity of the government is important to negotiate PPP arrangements and fully benefit from the PPP. World Bank’s project preparation advances can be used to help build borrower capacity even before the project starts. Going forward, PPP guidance notes could be provided to borrowers and task teams for both design and implementation. 6.3.2. Domestic private sector capacity often needs further strengthening to allow local firms to also participate in PPP deals in lieu of, or in active partnership with, foreign private sector. 6.3.3. A lesson from the various joint –ventures and partnerships between foreign firms and local firms is the need to ensure full inclusion and active participation of all partners, better commitment and equal risk sharing, transfer of knowledge and local capacity building, especially in countries where local capacity is a priori weak and such partnerships are relatively uncommon. 6.3.4. In countries where domestic private sector capacity is weak, infrastructure is basic, and PPPs are at a pioneer stage, the government’s financial contribution is often higher than planned (for instance in providing public infrastructure, and offering incentives to investors). This is particularly valid in the case of the IT/ITES sector and international PPPs (including IT Parks), to mitigate new location costs and risks to investors. PPP ventures could be economically viable but might be financially unattractive from the government’s point of view. Based on the experience of other IT Parks and zones globally (e.g. Cyberabad technology hub in Hyderabad), such initial investments at start-up phase are essential for future success. On a related note, the government should enter at its own peril if it relies on the private sector to provide the key missing links (such as major ancillary infrastructure or public works). 6.4. Skills development and Employment 6.4.1. In countries like Bhutan where skills mismatches and quality of employment-ready manpower are areas of concern, the shift from government training to private sector-led training might be a sensible approach. In addition, considering the number of secondary graduates employed through the project, governments could target both tertiary graduates and secondary graduates in their employment and training programs – as the latter can also develop skills that respond to firms’ needs. 6.5. Building an international country brand 6.5.1. Bhutan’s value proposition as an investment destination includes its “green” brand name, reliable and low cost access to power, political stability, and low attrition rate. Bhutan could meet medium-sized ICT companies’ needs and in particular creative BPO as Bhutanese relate to western cultures naturally, which is an essential requirement for IT/ITES and sub-sectors like Creative Process Outsourcing. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies The Borrower’s ICR has been received by the World Bank and a summary is attached as Annex 7. (b) Cofinanciers None. (c) Other partners and stakeholders None.

Page 35: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

21

Annex 1. Project Costs and Financing (a) Project Cost by Component (in US$ Million equivalent)

Components Appraisal Estimate Actual /Latest

Estimate Percentage of Appraisal

(US$ million) (US$ million)

1. Development of the IT/ITES Sector 5 6.81 136%

2. Development of the Skills Development Program 2 1.76 88%

3. Strengthening Financial development through IT use 3.43 4.15 121%

Total Baseline Cost 10.43 12.72 122% Physical Contingencies Price Contingencies

Total Project Costs 10.43 12.72 122% Project Preparation Facility (PPF) Front-end fee (IBRD only) Other financing sources

ADB 0.075 IFC/SEDF 0.14 0.14 100%

Counter fund from the RMA 0.45 0.04 9% Counter fund from MOIC/RUB 0.92

Counter fund from BOB 1.84 3.17 172% Total Financing Required 8 8.38 105%

Note: currency Exchange Rate: 1US$=Nu.46.19, which is the average conversion rate used by RGOB for the whole project duration.

(b) Financing

Source of Funds Type of Financing Appraisal Estimate

(US$ million)

Actual/Latest Estimate

(US$ million)

Percentage of Appraisal

[Government] [IBRD/IDA or GEF] 8 8.38 105% [Donor A] [WB-administered TF] [Donor B] [Parallel financing]

Page 36: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

22

Annex 2. Outputs by Component Table 2 summarizes all the project components and Table 3 analyzes the outputs by components with an emphasis on the sustainability of each result. Table 2 – Summary of project's activities by component

Outputs Activities as agreed in the PAD and Restructuring Papers Component 1- Development of IT/ITES Sector – Implementing Agency: MOIC/DITT Development of the IT/ITES sector in Bhutan through attracting IT/ITES firms in the IT Park, and increase in the private investment in the IT/ITES sector

(i) Infrastructure - Establishment of the IT Park with four elements: - plug and play office infrastructure for IT/ITES companies; - shared technology center; - incubation center; - space for data center. (ii) IT Promotion- Establishment of an IT/ITES Promotion and Program Implementation Agency (PIA)

Component 2 – Development of IT Skills Program – Implementing Agency: RUB and MOLHR Availability of a stream of trained IT manpower to support the development of the IT/ITES Sector

(i) Generic Skills for IT enabled services and support the following activities - introduction and implementation of an ‘assessment of competency’ test which assesses candidates on key IT/ITES skills through a standard assessment; - training of teachers in institutions under the RUB; - introduction of remedial training for students in government/private institutions; - conducting Just-in-Time training for potential candidates for employment with identified investors (ii) Development of skilled IT Professionals through Distance learning facilities/ Course Management System (CMS) - setting up of distance learning infrastructure in selected institutions imparting higher-level IT/ITES skills training; - adoption of CMS to facilitate a better VLE for students (iii) IT entrepreneurship development program - short academic component and - corporate attachment

Component 3 – Strengthening Financial Development through IT use – Implementing Agency: RMA Gradual growth in IT use by the financial sector to achieve greater efficiency

(i) IT system up-gradation in the Bank of Bhutan; (ii) Financial sector IT development strategic plan (PLAN) - policy framework for the electronic financial transactions; - technical framework for development of e-payment system. (iii) Inter-Bank Electronic Fund Transfer Clearing System (EFTCS) at the RMA in different phases guided by the PLAN (removed)

Page 37: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

23

Automation of stock exchange and Financial inclusion (added)

(i) Upgrading of the IT infrastructure of the RSEBL (ii) Establishment and drafting of the FIP (iii) Creation of an enabling regulatory and supervisory framework for MFIs and branchless banking (iv) Organization of an outreach mission in selected neighboring countries to meet with regulators and practitioners (v) Promotion of financial literacy throughout the country through workshops, education, and the media (vi) Training to RMA supervisors and other stakeholders on microfinance and financial inclusion.

Table 3 – Outputs by component

Agreed performance indicator at approval

Revised performance

indicator

Achievement at end of

project date

Comments and Sustainability

PDO: increase productive employment in Bhutan through promotion of enterprise development in the IT and ITES sector, enhanced IT skills, and improved access to finance. Cumulative job creation in the IT/ITES Sector supported by the project

Following restructuring in 2010, IO indicator was revised to: Cumulative job creation in the IT/ITES Sector in the IT Park and related activities. Target value of 700 was unchanged

Target value exceeded by 45 percent

Through the training and infrastructure provided under the project, 1015 value added jobs were created for young Bhutanese, most of whom between 19 to 24 years old and from across the 20 districts. On a national scale, this represents almost 15 percent of the total unemployed in Bhutan in 2012 and almost 21 percent of the unemployed, who attended a school or institute in 2007 (at the start of the project). It represents 29 percent of total youth unemployment (in urban and rural areas) and 59 percent of unemployed youth in urban areas in 2012. Jobs were created in the ICT/BPO sector but also in other sectors of the economy such as trade, hospitality and education. Among those who found employments after training in the GTP and ETP programs, 51 percent were female (see charts below). Under all training programs, firms were responsible for mobilizing candidates and required to employ the trained individuals, while being provided a matching grant for employment rates. Thanks to the participation of the private sector, the cost to the Government was estimated at Nu.65.67k (US$1,100) per job. This successful model is being replicated by MOLHR to implement training programs in other sectors.

Component 1- Development of IT/ITES Sector Cumulative leads generated for new investments in the IT Park

IO indicator not revised

Target value exceeded by 27.5 percent

Promotion of ITES and the IT Park by the PIA aimed to attract FDI and large IT/ITES companies to Bhutan. The PIA reached out to more than 200 such companies, mostly in India, through NASSCOM. MOUs were signed with Wipro (the third largest IT Services company in India ) and Genpact (an independent entity of GE for IT/ITES) for locating offshore BPO centers in Bhutan in the IT Park and additionally with Genpact to conduct “Train the Trainer” programs creating a pipeline of master trainers in Bhutan. These promotional activities (roadshows) also generated interest from global ITES/BPO industry players beyond the IT Park leading to the industry linkage program pioneered

Page 38: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

24

with Infosys, Genpact and Wipro of component 2. Local IT companies, typically very small (with less than 10 employees) were also targeted. A few of them who accompanied the PIA on road shows reported to have gained exposure and established business linkages with companies outside the country. The IT promotional activities also enhanced awareness among the public about the IT and BPO industry.

Number of companies successfully incubated in the IT Park

IO indicator not revised

Target value exceeded by 160 percent

The incubation center is part of the BITC which is also composed by the datacenter and a shared technology center (comprising a conference room, CISCO VC facility, training room and cafeteria). BITC and its incubation center are considered one of the main successes of the project, though few resources have been put into the BITC. Three ventures out of thirteen have graduated out of the incubation center (five located in BITC, eight virtual). In the future, the incubation center expects to attract more small businesses and potentially some entrepreneurs interested in undertaking microwork. A tie-up with the Druk Holding and Investments (DHI) BEGIN program (providing a training program, seed fund and mentoring, for start-ups, existing small businesses and new subsidiaries of existing companies) is also expected to take place in the near future. The BITC intends to become a hub of entrepreneurship and innovation in Bhutan, coordinating existing efforts to promote entrepreneurship in Bhutan (including a number of donor-led efforts to fund and develop small businesses in Bhutan) and serve as a strong platform for lobbying to bring a more friendly business environment for enterprises in Bhutan.

Percentage of lettable space leased out

IO indicator not revised

25 percent of target value met

Talks with two local BPO firms (Green Dragon Media, GDM and Bhutan Business Solutions, BBS) to locate in the IT park were at an advanced stage during implementation, until the firms finally opted for an independent space, mainly because of delayed construction of the IT Park. Two international BPOs companies, Scan Café and Shaun Communication, conducted pilot operations from the BITC in end-2012. In early 2013, both companies signed tenancy agreements for 10,000sqf with commitment to move operations to the commercial space of the IT Park as soon as the latter was ready (fit outs and plug and play) and by May 2013. Scan Café moved to the commercial space as planned and is, as of date, renting 25 percent of the lettable space. However, as of September 2013, Shaun Communication’ timelines to move to the commercial space remained unknown, even though the limited space in BITC premises does not suit their outbound calls activities. Other potential tenancy deals appear to be in the pipeline with advanced stage of discussions between TTPL and a domestic firm while some foreign firms are conducting exploratory visits to Bhutan.

Component 2 - Development of IT Skills Program Percent of students clearing ITES industry competency assessment

IO indicator not revised

Target value exceeded by 60%

MOLHR carried out two assessments with assistance from AMCAD and Net Ambit. These assessments were carried out to assess the Bhutanese talent pool suitability for the BPO/ITES sector and to help local training providers in designing courses for employment for the BPO/ITES sector. The AMCAT Assessment was conducted for graduates class XII and job seekers in April 2011. The Net Ambit Assessment was conducted online for class XII fresh candidates in June 2011. 208 out of 375 candidates reportedly cleared these assessments. With the Employment Incentive Program in 2013; an additional 170 out of 300 candidates cleared the assessment with Scan Café for subsequent

Page 39: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

25

that is widely recognized

employment. In total 56 percent of students cleared the ITES industry competency assessment. Note that when Infosys carried out its first recruitment drive in August 2009, only 2 candidates out of 100 cleared their assessment.

Percentage of students trained are successfully employed by the private sector

IO indicator not revised

Target value exceeded by 27.26%

Almost 64 percent of students trained successfully have been employed by private sector. RGOB provided output based matching grants to private sector (training) firms - subsidy commensurate to the percentage employment of trained candidates: (i) Following the GTP, 65 percent found employment mostly in the trade sector (25 percent), BPO sector (23 percent) and in education (19 percent). 12 percent went into civil service and 6.7 percent became self-employed; (ii) 67 percent of those trained under the ETP found employment of which 64% worked in BPOs, 12% in the hospitality sector, 7.6 percent in civil service and 7 percent in trade (see charts below). Through the Industry Linkage Training and Employment Programs, a total of 194 graduates have been employed outside Bhutan by BPO giants such as Wipro, Genpact and Infosys. The graduates were trained in India at the companies’ own cost, with financial support to the candidates from the project. The companies also conducted recruitment drives in Bhutan leading to the creation of 106 jobs. An international training of trainer program was provided to build capacity among the local training private sector and was conducted at Genpact in Hyderabad. The program was an important element for implementation of the GTP as the GTP was implemented by 4 selected local training firms which were Genpact certified trainers The Employment Incentive Program (EIP) provided by RGOB covered a fixed amount of the training costs of the tenants’ employees and provided employment with Scan Café to more than 50 percent of candidates. The private sector-led training approaches pioneered by the PSD project in Bhutan have been successful in changing the overall vocational training strategies adopted by the Government in other sectors (tourism, construction etc.). RUB also provided training programs and institutionalized the three modules provided under the project -namely academic skills, analytical skills and entrepreneurship- in the RUB curriculum -in addition to modernization of training infrastructure through the videoconferences and the VLE. While the module on academic skills is mandatory, the other two are optional and used in various colleges as enrichment learning. Even though employment of RUB university graduates will never be solely attributable to specific courses and modules, it would have been interesting to measure the impacts of these curriculum in students’ overall performance and success at RUB (unfortunately RUB does not track these data nor employment data following university).

Component 3 - Strengthening Financial Development through IT use Number of financial transactions by using

IO indicator revised to Number of ATM financial

For the period covering July 2012 to

The number of ATM financial transactions at BOB steadily increased since 2009 reaching 1,359,944 transactions in 2012 (and a cumulative number of about 4.2m transactions between 2009 and 2012). Between July 2012 to June 2013, 1,418,494 ATM transactions took place in BOB, which exceeded the project’s target by 57.6 percent. This contributed to a reduction in waiting time at banks by 90

Page 40: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

26

ATMs per year

transactions at Bank of Bhutan per year, following the 2010 restructuring of the project- Target value was revised to 900,000

June 2013, the revised target value was exceeded by 57.6 %.

percent (see SEIA). The IT system upgrade of the BOB was also completed with the roll out of the Core Banking Solution at BOB in 12 branches (against a target of 10) and 3 training sessions on the CBS, i.e., two programs for the end users, and one for the graduates.

Value of financial transactions by using ATMs per year,

IO indicator was removed following the 2010 restructuring of the project

The target exceeded by more than 145 percent as of June 2010

Data prior to the MTR mission and the 2010 restructuring of the project, which removed this IO indicator, showed that the value of financial transactions by using ATMS per year amounted to Nu. 1,644.24 m (US$27.5m), as of June 2010. The target was exceeded by more than 774 percent.

Volume of fund transfer transactions among banks channeled through the EFT system per year

IO indicator was removed following the 2010 restructuring of the project

Implementation of the EFT system was henceforth conducted outside the project

The project supported the development of a roadmap for the implementation of a national EFTCS. The Financial sector IT development strategic plan prepared by an international consultancy firm was finalized in January 2009. With advice from a South Asia Payments and Securities Settlement Initiative mission, RMA appropriately chose to concentrate on developing an EFTCS with fully automated settlement system (instead of three payment systems). After bilateral assistance from the Reserve Bank of India, implementation of the EFTCS was carried out outside the project and the interbank EFTCS was inaugurated in June 2010. As of May 2013, Nu. 41.51million (US$ 695.3k) worth of transactions were processed monthly through the EFTCS. Having successfully implemented National Electronic Clearing System for bulk debit and credit, the RMA on December 2, 2011 launched the Bhutan Financial Switch facilitating the inter-operability of ATMs. It allows bank customers to withdraw money from the ATMs of other banks and facilitates bank customers’ use of the Point of Sales terminals of other banks for payments of goods.

Per cent of district coverage for financial literacy campaign

IO indicator was added following the 2010 restructuring of the project

Target was achieved by June 2012

During the first phase of the FLP, the RMA and all financial institutions visited every Dzongkhag (district), to raise awareness about various financial services through presentations (public awareness program). The target audience was mainly the business community and high school students. A financial literacy strategy was drafted following feedbacks from the first phase and interventions were then designed towards specific targets, using innovative channels: for instance soap operas for the youth and comic books for children. Advance and basic versions of the comic books for children were completed in the first week of June 2012. One private school in an urban area was visited as part of a pilot to implement the strategy. Evaluation of the program included a small quiz undertaken by children after the visit. The script for the 12 episodes of the TV drama, one video program on fake currency and the radio program and music video were completed in May 2012 and aired in Thimphu

Page 41: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

27

through local cable networks in 2013. By end June 2012, 17 out of 26 weekly publications of Financial Literacy Articles in K2 Magazine of Kuensel were completed. Prizes (royal wedding note album) to individuals who took part in the quiz competition after every four weeks were offered. All the educational materials developed through the project were officially launched on March 21st 2013. Considering limitation of funding, the FLP conducted under the project can be considered only as a first step of a more important nationwide effort to increase financial education. Anecdotal evidence from the SEIA indeed shows limited impact of the FLP suggesting that more needs to be done (such as for instance the transmission of financial awareness and literacy campaigns over the national television channel: Bhutan Broadcasting System).

Percentage automation of stock exchange trading, settlement, and delivery with straight through processing

IO indicator was added following the 2010 restructuring of the project

Target was achieved by June 2012

The automation of RSEBL was co-financed by World Bank (70 per cent), ADB (20 per cent) and RMA (10 percent). It integrated 6 systems: ATS (Automated Trading System), EDS (Electronic Depository System), CSS (Clearing and Settlement System), MSS (Market Surveillance System), BBO (Broker’s Back Office), and IPO Engine (Initial Public Offering).Following automation, the number of trading days increased from 2 to 3 a week. Investors’ access to the secondary market was facilitated and risk of settlement failure reduced with the CSS. Risk management improved with the EDS. Availability and access to quick and reliable data from the securities ‘exchange also facilitated the supervision of RSEBL by the RMA. Within a month, transactions for all listed companies increased. In the second half of 2013 a total of 661,756 shares were traded in the secondary market amounting to Nu.189.7 m (US$11,326.8m) compared to a total of 91,939 shares worth Nu.28.2 m (US$ 1,685.3m) traded during the same period before automation. In addition market capitalization reportedly increased by 41.71 percent. One challenge for RSEBL is to support the Annual Maintenance Contract with its own funds (Nu.3.6m -US$60,000- per annum for the following 5 years after the warranty period of 1 year), due the low amount of revenues currently generated by the stock exchange (with its small size and limited potential to scale up). Currently the stock exchange financially depends on RMA and is looking for ways to increase its revenues.

Sources: project documents (PAD, Restructuring Papers, ISRs, Aide Memoires, Socio Economic Impact Assessment reports and so forth) and ICR mission consultations.

Page 42: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

28

Training Programs and Employment under the project The charts below describe the type of jobs facilitated by the project’s training programs.21 The trainings conducted under the project were the GTP, the ETP, the training of three batches of candidates on IT and BPO in India, with support from Infosys, and the training provided within the EIP. The RUB also coordinated a number of trainings such as Global Skills Education on Language Enhancement and Analytical Skills for faculty, VLE, Training for System Administrators and faculty, Industry and Academia Workshops on Entrepreneurship for faculty as well as Training for established entrepreneurs in Business Improvement and Growth.

21 Additional jobs were created through the recruitment drives, Shaun Communication employment figures and the jobs created at the IT Park but were not included in the charts.

Trading 25%

BPO/ICT 23%

Education 19%

Civil Service

12%

Self Employed

7%

Employment by sector after GTP

Trading BPO/ICTEducation Civil ServiceSelf Employed Financemedia hospitality

BPO/ICT 64%

hospitality 12%

Civil Service

7%

Trading 7%

Employment by sector after ETP

BPO/ICT hospitality Civil ServiceTrading Education mediacorporation Self Employed construction

Page 43: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

29

63.6%

36.4%

Employment of trained candidates

employed unemployed

73.8% 67.2% 64.4% 50.3%

26.2% 32.8% 35.6% 49.7%

0%10%20%30%40%50%60%70%80%90%

100%

BPOTraining,Infosys

EmploymentTrainingProgram

(ETP)

GraduateTrainingProgram

(GTP)

EmploymentIncentiveProgram

(EIP)

employed unemployed

51.0% 49.0%

Gender distribution of employment after training

programs

Female Male

57.1% 52.5% 51.5% 42.8%

42.9% 47.5% 48.5% 57.2%

0%10%20%30%40%50%60%70%80%90%

100%

GraduateTrainingProgram

(GTP)

EmploymentIncentiveProgram

(EIP)

EmploymentTrainingProgram

(ETP)

BPOTraining,Infosys

Female Male

Page 44: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

30

Snapshots on Implementation of the PSD Project

Box 1- IT Park: the First Public Private Partnership (PPP) in Bhutan Following continuous efforts post the global financial crisis, the International Competitive Bidding process to secure a private investor to Design, Build, Finance, Own, Operate and Transfer (DBFOOT) an IT park in Bhutan attracted one bidder (non-participation of Bhutanese private sector appeared to come from lack of capacity). This was a joint venture between the Singapore subsidiary of Assetz Property Group Pte Ltd, a global Special Economic Zone developer (74 percent), and Bhutan's national holding company: DHI Ltd, a domestic equity partner (26 percent). The first PPP in Bhutan was signed between the MOIC/DITT and TTPL on 4 September 2009. Government contribution leveraged about Nu 300m (US$5m) from TTPL. RGOB commitment to the IT Park PPP included: (i) The signing of the “Letter of ICT sector policy for the Bhutan PSD project” in 2007 in an attempt to solve the competitive issue related to connectivity costs (ii) The approval by the Cabinet in 2008 of the incentives for the IT Park developer and ICT companies registering in Bhutan including among others: (a) tax holidays of 15 years to the IT Park developer and 10 years to IT/ITES businesses operating within the IT Park and exporting 80 percent of their products/services; (b) Exemption of custom’s duty on imported capital goods; (c) 100 percent foreign equity participation allowed to the IT Park developer and IT/ITES companies in the Park (iii) The Cabinet’s approval in 2008 of the extension of the land lease terms for the IT Park to 30 years with two automatic renewals (and the complex transfer of the ownership of the land between ministries). This decision provided a total of 90 years lease term, in line with international standards, and was instrumental in attracting FDI in the IT Park. It also set a precedent for reforming the Land Act to facilitate FDI in any sector (iv) The Government contribution of US$2 million for the IT Park, legally committed to the private sector investor in September 2009 to ensure a fixed annual revenue stream for the private developer. It was provided as a lease-in for RGOB of the 10,000sft shared space of the IT Park for 90 years. (v) The provision of ancillary facilities, including strategic infrastructure investments into the park (such as roads, power supply, sewage and water treatment) as per PAD and additional counterpart funding (road expansion) (vi) Incentive programs for first mover tenants (vii) Additional contributions to the PPP from outside the project such as the financing of IT park commercial space’s warm shell and subsidies for connectivity costs and training support (viii) Active participation in the promotion efforts. On numerous occasions, delegations were led by the Honorable Minister and Secretary MOIC and on one occasion by the Honorable Prime Minister (ix) Project management supervision through MOIC, MOLHR, RUB and RMA Box 2 -Internet connectivity during project implementation Around the period of the global financial crisis, lack of redundancy of the communications networks and high bandwidth prices led a large foreign investor to decide against starting operations in Bhutan. The project team recommended agreeing on a reasonable cost plus pricing of wholesale tariffs by BPC at par with international standards. The project team also liaised with the GICT group of the World Bank to provide technical assistance to the RGOB for strengthening telecom regulation and competition in these price negotiations. In June 2009, the ICT and the Bhutan InfoComm and Media Authority (BICMA) issued a new tariff order placing a price cap on wholesale bandwidth tariffs. The tariff order by BICMA had, however, been pending as Bhutan is landlocked and BICMA has no jurisdiction over the international tariffs charged by Indian operators near the border. Only high level discussions between RGOB and the government of India to secure a negotiated price from Indian operators to Bhutanese operators would allow a revised international tariff order, which would benefit the IT Park, the private sector at large and the whole country. RGOB was in discussion with the Telecom Regulatory Authority of India and the Government of India-owned provider to reduce costing at the international gateway. On the redundancy issue, RGOB held negotiations with the parties concerned to pursue a completely independent fiber link through Cox’s Bazaar in Bangladesh to Gelephu (Bhutan) via Tripura (India). In addition, there were expectations that as the volumes in the IT Park and the rest of the country would increase (when the Park occupancy crosses the 500 seat mark estimated by RGOB) volume based pricing would also have ultimately a positive effect on bandwidth pricing. Success in these negotiations would release the RGOB from its commitment to bear the differential rates with the region as per the 2007 Letter of ICT Sector Policy.

Page 45: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

31

Box 3- International occupants of the IT Park Tenancy agreements were signed in late 2012 and early 2013 with two international firms. Scan Café is a US based company working on digitizing, editing, repairing photos and videos using software. Scan Cafe piloted its operations in Bhutan in the BITC in end- 2012 while the IT Park was being completed (with warm shell and later on with fit outs). Scan Café is now occupying 25 percent of the commercial space of the IT Park and benefitted from both RGOB additional incentive programs. Shaun Communication is a voice-based BPO mainly doing market research and survey for the UK market. Shaun communications started their operations in 2012. It is part of GB Solz, a company into web development technologies, mobile application development and others. Shaun Communication was the first firm to start operations in the IT Park with 90 people in August 2012 before stopping operations in November 2012 and considerably scaling down. Among the reasons for scaling down were connectivity issues, lack of talent pool with the required communication skills and transportation challenges for their night shifts. Shaun did not meet the criteria to benefit from the incentive programs of the project but MOLHR is supporting part of the training costs of its employees through a scheme. With this additional training support from MOLHR, Shaun resumed operations in February 2013 with 27 staff and changed its Internet Service Provider. Even though Shaun Communication signed a tenancy contract for 10,000 sqf in February 2013 and committed to move to the commercial space of the IT Park by May 2013, Shaun is still operating from the BITC as of September 2013.

Box 4 - Impact of the project on local companies Local companies had complained about the lack of access to markets in the context of a small domestic market. Through roadshows, domestic IT firms were taken to India to network and get exposure to Indian entrepreneurs and to other locations. Prior to the GTP, Genpact supported part of the training of local IT training firms. The ETP also supported five private local firms including Link2Support, Athang, GDM, BBS and Bhutan Center of Excellence (BCE). BBS is currently employing those that were trained by MOLHR program as was expected. In addition, Athang and GDM are currently employing full operational production units in animation. GDM won a national award on animation which was undertaken by the candidates of ETP. Athang which became the local partner of the first tenant (Scan Café), and which was also an active member of BICTTA since 2006, has grown with the training contract it obtained with MOLHR. Athang recruited several people that it trained. Athang is also now participating in national bids such as the bid for the National Land Commission land registration electronic system. In fact by the end of the project the number of local IT companies (including IT training firms) registered in the IT association has reportedly increased to about 90 companies (from 50 companies in 2011). While this increase in number of firms cannot be solely attributed to the project, the BICTTA believes that the fate of the IT industry is tied to the IT Park. Other domestic private sector was also involved during the pre-construction stage of the IT Park. Evidence from the SEIA reports that contract works amounting to at least around Nu 20 million (US$355k) were taken up by local contractors for the IT Park.

Page 46: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

32

Annex 3. Economic and Financial Analysis Introduction 1. The economic analysis in the original PAD has been updated based on the following two principles:

i. Principle of consistency: where applicable, the same facts and assumptions have been retained from the original PAD, in order to facilitate a like-to-like comparison;

ii. Principle of conservatism: where applicable, assumptions have been made to neither over-report nor under-report the true outcomes.

2. The updated analysis has been carried out from the perspective of RGOB + TTPL combined (to

provide a more complete picture of the project). Since the original PAD carried out this analysis from the lens of RGOB only, a second economic analysis is presented here from the point of view of RGOB only (to facilitate a like-to-like comparison with the PAD).

Assumptions 3. The following assumptions converge with the original PAD:

i. Component 1 focus: Economic analysis has been undertaken only for the IT Park; ii. Exchange rate: is assumed same as the original PAD (US$1 = Nu 43.01) except for revenue

projections starting 2013 where the exchange rate used is US$1 = Nu 60; iii. Financial benefits: remain the same: (i) rental of incubation center; (ii) rental of shared

technology center; (iii) rental of data center; and (iv) tax revenues generated from the IT Park. Caveat: both 100% rentals, as well as RGOB’s share of rentals (i.e. DHI’s share of 26%) are presented here (original PAD considered full 100%);

iv. Financial costs: the following categories remain the same: (i) provision of the land as an equity contribution; (ii) cost of leasing-in space; (iii) ancillary infrastructure including water, power, internet connectivity; (iv) primary infrastructure including shared technology center; (v) incubation center; and (vi) labor cost;

v. Economic benefits: remain the same: (i) employment generation inside the IT Park; (ii) employment generation outside the IT park; and (iii) net increase in exports;

vi. Constant prices: All the data in the financial projections are based on constant prices. Impact of inflation has not been taken into consideration in the projections;

vii. Time horizon: The analysis is undertaken for a time horizon of 20 years. Caveat: development period and operation period have been changed from original PAD to reflect actual progress;

viii. Discount rate: In the analysis, discount rate has been set at 10%, the interest rate at which the government can borrow from local commercial banks for 20 years;

ix. Depreciation: Fixed assets are depreciated using the straight-line method over the 40 year period;

x. Land: Provision of the land as an equity contribution is also considered a capital expenditure to be amortized over 40 years;

xi. Dividend to the government: While the government provides the land for the IT Park as an equity contribution, the analysis assumes that the government will not receive dividend income (which is true so far);

xii. Tax revenues: Tax revenues generated through the IT Park include sales tax, income tax from labor employed in the IT Park and the supplier industries, and corporate tax on the industries in the IT Park. As in the PAD, tax revenues are assumed to be US$0.04 per US$1.00 value of total production;

xiii. Tax exemption and relief: It is assumed that taxes are exempted for initial 3 years and reduced by 50% for the following 3 years;

Page 47: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

33

xiv. Revenue generation per person: The original PAD used the NASSCOM-McKinsey Report (2002) to estimate revenue generation per seat in the business process outsourcing (BPO) services sector in India at between US$17,000 - US$24,000. As in the PAD, revenue generation per person in the IT Park in Bhutan is assumed to be US$17,000;

xv. Employment generation outside the Park: The original PAD used empirical studies to show that each new position in the BPO/IT industries’ generates 3 further jobs in the rest of the economy. This multiplier has been used in the ICR as well;

xvi. Net increase in exports: It is assumed that 80% of the total production will target export markets. The value of net increase in export excludes the value of imported materials, labor cost and other operational expenses;

xvii. Production capacity: Total value of production at full capacity is maintained; xviii. Exports: Ratio of export to total production is maintained;

xix. Imports: Average ratio of imported material and other expenses is maintained;

4. The following assumptions diverge from the original PAD: i. Financial costs: the following categories are now included under capital investment: (i)

development of ancillary infrastructure including undergrounding of high voltage power line, sewage treatment plant; and (ii) development of primary infrastructure including data center and fit-out support to tenants;

ii. TTPL investment: Following the principle of conservatism, TTPL’s total investment of US$5.9 million has been accounted in the first two years of operation (10% in year 1 and 90% in year 2), while in reality this will be spread out over more years;

iii. Production: Value of production (actual and forecasted) tracks total rentals per year (actual and forecasted);

iv. Rentals: Total per year (based on actual numbers) of which 26% share accrues to the RGOB through DHI’s equity share in the IT Park;

v. Speed to full capacity: The original PAD assumed that on average the IT Park will have an average capacity utilization of 25% each year, consequently reaching full capacity in the fourth year after commencing production. The ICR documents actual capacity utilization until the present, and then tracks value of production;

5. The following numbers are based on actual values and converge with the original PAD:

i. Equity contribution of the RGOB: in the form of provision of 5 acres of land; ii. Total area: of leasing-in space;

iii. Employment generation inside the Park: An area of approximately 50,000 SFT is developed for the building spaces with a space for one person being about 50 SFT. Considering corridors and common facilities, the IT Park can generate 700 jobs at full capacity;

iv. Annual salaries: of IT Park jobs (tenants, management and staff) as well as non-IT Park jobs are maintained since these are in line with actual estimates based on the ICR team’s field interviews.

6. The following numbers are based on actual values and diverge from the original PAD: i. Cost of leasing-in space: this is now incurred upfront in year 3;

ii. Costs of primary infrastructure: capital investment for shared technology center, data center, incubation center, fit-out support to tenants;

iii. Costs of ancillary infrastructure: capital investment for water, power, internet connectivity, undergrounding of high voltage power line, sewage treatment plant, access road to site;

iv. Taxes: Actual values till date of 2%, 3% and 5% taxes paid as applicable by the IT Park and BITC till date have been included in the ICR calculations;

v. Staffing: Numbers of senior and junior staff are based on actuals till date.

Page 48: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

34

Summary of results 7. Financial analysis: The analysis, which is based on a discount rate of 10%, indicates that the IT Park

generates a financial IRR of -0.60% for both RGOB + TTPL, and -8.28% for just RGOB (original PAD estimated +6.76%).

Financial benefits and costs (Unit: US$ Thousand)

8. Economic analysis: The economic analysis indicates that the IT Park yields an economic NPV of

US$39.7 million with an economic IRR of 35.2% for RGOB + TTPL. If just RGOB is considered, economic NPV is US$16.8 million and economic IRR is 32.43%. This reinforces the conclusion that the project is economically viable to generate employment and increase net exports.

Y1 Y2 Y3-Y8 Y9-Y14 Y15-Y20 Total

Cash InflowTotal rentals per year (% share of RGoB) 1,051,366 2,400,000 2,400,000 5,851,366

Tax Revenue from the business in the IT Park 0 0 1,557 1,086,569 1,446,683 2,534,809

Total 0 0 1,052,923 3,486,569 3,846,683 8,386,175

Cash OutflowProvision of the land (Equity contribution) 25,000 25,000 150,000 150,000 150,000 500,000

Ancillary infrastructure 182,309 1,640,784 1,823,093

Primary infrastructure (shared technology cente 101,142 910,279 1,011,421

Incubation Center 30,003 270,024 300,027

TTPL Funding 588,006 5,292,055 5,880,061

Leasing-in the space 2,000,000 0 0 2,000,000

Labor Cost 1,500 3,000 0 0 4,500

Total 926,460 8,139,642 2,153,000 150,000 150,000 11,519,102

Net Financial cash flow (926,460) (8,139,642) (1,100,077) 3,336,569 3,696,683Cumulative Financial cash flow (926,460) (9,066,102) (10,166,179) (6,829,610) (3,132,927)

Present Value (926,460) (7,399,674)

IRR -0.60%NPV (7,488,262.84)

Page 49: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

35

Economic benefits and costs (Unit: US$ Thousand)

9. Comparison with original PAD: The table below demonstrates that, while the IT Park is almost

financially breakeven at present capacity utilization rates, it has upside potential should tenancy improve. Also, the project is economically viable as confirmed by positive economic cost benefit analysis.

Financial analysis

PAD ICR NPV (’000) IRR NPV (’000) IRR

(612.0) 6.76% (7,488.3) (0.60%) Economic analysis

PAD ICR NPV (’000) IRR NPV (’000) IRR

30,599.1 125.2% 39,659.54 35.20%

Y1 Y2 Y3-Y8 Y9-Y14 Y15-Y20 Total

Economic BenefitsFinancial Benefit 0 0 1,052,923 3,486,569 3,846,683 8,386,175

Employment generation (Inside the zone) 0 0 6,595,960 21,233,941 21,233,941 49,063,842

Employment generation (Outside the zone) 0 0 8,244,951 26,542,426 26,542,426 61,329,802

Net Increase in exports 0 0 4,617,172 14,863,758 14,863,758 34,344,6890

Total 0 0 20,511,006 66,126,694 66,486,808 153,124,5080

Economic Costs 0

Capital Expenditure 926,460 8,138,142 150,000 150,000 150,000 9,514,602

Operating Expenses 0 1,500 2,003,000 0 0 2,004,500Total 926,460 8,139,642 2,153,000 150,000 150,000 11,519,102

Net Economic cash flow (926,460) (8,139,642) 18,358,006 65,976,694 66,336,808Cumulative Economic cash flow (926,460) (9,066,102) 9,291,904 75,268,598 141,605,406

Present Value (926,460) (7,399,674)

EIRR 35.20%ENPV 39,659,540

Page 50: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

36

Annex 4. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members

Names Title Unit Responsibility/ Specialty

Lending Asya Akhlaque Senior Economist, Task Team Leader AFTFE Philip Beauregard Senior Human Resources Officer HRSCO Debabrata Chakraborti Senior Procurement Specialist SARPS Kashmira Daruwalla Senior Procurement Specialist ECSO2 Syed Abul Kamal Md Abdul Hye Senior Program Assistant AFCTZ Malcolm A. B. Jansen Consultant SASDI Zarafshan H. Khawaja Lead Social Development Specialist AFTCS Manvinder Mamak Sr Financial Management Specialist SARFM Kyoo-Won Oh Underwriter MIGOP Randeep Sudan Sector Manager TWICT Bharatha Manju S. Haththotuwa Senior Private Sector Development Spec SASFP Afshan H. Khawaja Senior Social Scientist SASES Sudhakar G. Kaveeshwar Manager ISGEA Tenzin Dolma Norbhu Senior ICT Policy Specialist CITPO Jose Antonio Garcia Garcia Luna Financial Sector Specialist CGFPS Karma Senior Financial Markets Specialist IFC/SEDF Wendy Werner Business Enabling Environment IFC/SEDF

Supervision/ICR Cecile Thioro Niang Senior Economist, Task Team Leader SASFP Savinay Grover Financial Management Specialist SARFM Joseph Shine Consultant SARPS A.K.Kalesh Kumar Senior Procurement Specialist SARPS Chinam Kali Veeresh Consultant SASFP Arun Manuja Senior Financial Management Specialist SARFM Kashmira Daruwalla Senior Procurement Specialist ECSO2 Samantha L. Forusz Program Manager HRSOP Bharatha Manju S. Haththotuwa Senior Private Sector Development Spec SASFP Syed Abul Kamal Md Abdul Hye Senior Program Assistant AFCTZ Malcolm A. B. Jansen Senior Environmental Specialist, Consultant, SASDI Karma Karma Operations Officer CSASF Roch Levesque Senior Counsel LEGAM Manvinder Mamak Sr Financial Management Specialist SARFM Zakiullah Sayeed Munshi Operations Officer CSASB Kyoo-Won Oh Underwriter MIGOP Thyra A. Riley Sector Coordinator SASFP SASFP Kumaraswamy Sankaravadivelu Senior Procurement Specialist SARPS Varun Singh Senior Social Development Specialist SASDS John F. Speakman Lead Private Sector Development Spec AFTFW Suhail Kassim ICR Team Leader FCDKP Mihasonirina Andrianaivo ICT Primary Author SASFP

Page 51: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

37

(b) Staff Time and Cost

Stage of Project Cycle Staff Time and Cost (Bank Budget Only)

No. of staff weeks US Thousands (including travel and consultant costs)

Lending FY02 0.00 FY03 5.53 102.33 FY04 1.03 1.80 FY05 6.38 30.91 FY06 10.19 38.43 FY07 40.14 225.21 FY08 0.00

Total: 63.27 398.68 Supervision/ICR FY02 0.00 FY03 0.00 FY04 0.00 FY05 0.00 FY06 0.00 FY07 0.00 FY08 41.11 228.19 FY09 31.23 164.19 FY10 18.03 87.47 FY11 24.49 132.03 FY12 17.32 98.547 FY13 27.99 139.22 FY14 10.86 62.87

Total: 171.03 912.51

Page 52: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

38

Annex 5. Beneficiary Survey Results In compliance with the Financing Agreement of the project, a SEIA was commissioned. The objectives were to identify and measure the socio-economic benefits and impacts of the project. The SEIA was done primarily using a structured questionnaire administered on a sample of purposively selected respondent groups. The sample for the survey was selected in close consultation and agreement with the PIA. Four categories of end-beneficiaries were interviewed: (i) local communities in the vicinity of the IT Park; (ii) people who were trained under RUB and MOLHR training programs including those employed, a small sample of unemployed, lecturers and trainers from private training institutes; (iii) Bank of Bhutan customers; and (iv) general public (business persons, villagers) from 6 districts to assess the impact of the FLP. In total, 174 respondents who underwent training responded to the questionnaires used in the survey in 2012 and 20 respondents in 2013. In addition, 60 customers of BOB, 50 participants of the FLP of RMA and from the institutes under RUB, 30 students using VLE, 10 System Administrators and 28 lecturers involved in the Global Skill Enhancement courses, VLE and EDP were also interviewed in 2012. In a competitive process, RGOB recruited an individual consultant to undertake the SEIA. The impact evaluation constructed outcome indicators, and available “impact” indicators, that went beyond the intermediate outcome indicators of the project. They were suggested to DITT and to stakeholders and agreed on by all stakeholders before data collection. They were used as the basis for formulating questions. The SEIA of the project was carried out in two phases – in mid-2012 and mid-2013. The Key Socio-economic Benefits and Impacts of the project as reported in the SEIA in June 2013 and a summary of the results of the SEIA are reported below. Table 4 summarizes selected results of the survey finalized in June 2013. Note that the SEIA figures provided below are as of June 2013 while the ICR figures are as of the end of the grace period. Key Socio-economic Benefits and Impacts 1. Promotion of enterprise development in the IT/ITES sector (i) For the first time in Bhutan, with the implementation of the TTP under the project using the PPP and FDI mechanisms has been executed. The exercise with many valuable experiences and lessons learned provides precedence to similar projects in the country. (ii) The Bhutan Innovation and Technology Center, a center of excellence for incubation of small businesses has been instrumental in incubating thirteen new businesses. The three who have graduated have started operations and have created further employment. The shared technology center and data center is also part of the BITC and Data center is currently hosting 3 local clients. (iii) Due to the project, Bhutan is now firmly on the map as an option offering conditions for IT investments such as its “green” brand, low cost access to power, stable political environment and high English language skills of its graduates. (iv) The project initiated and sustained national and international relationships between Government, private sector and academia. This was evident in the coming together of Bhutanese agencies participating in the project and external companies such as Infosys and Genpact in India and University of Colombo in Sri Lanka.

Page 53: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

39

2. Enhanced IT skills (i) Cumulative job creation in the IT/ITES sector. As of early June 2012, 1,372 secondary education (Class XII) graduates and college graduates had been trained and 778 candidates employed (389 male and 389 female) in global ITES companies1 and in various sectors of the Bhutanese economy. By June 2013, the numbers employed increased to 964. Most Bhutanese employed with support from the project are between 19 and 24 years old, with equal representation between young men and women from across Bhutan’s 20 districts. The cost to the government per job created under the Project is estimated in the range of Nu.65.7k.(US$ 1,100), which is highly satisfactory as per regional and global standards. (ii) Of the total 451 trained under the ETP, 303 were employed of which 64% found jobs in BPOs, 12% in hospitality, 7% each in government and trading and smaller percentages in assorted professions such in education, media and 7 corporations. Similarly from among those 320 persons trained under the GTP, 192 were employed of which trading took in 25%, BPOs employed 23%, education employed 19%, the civil service took in 12% and the rest in professions such as media, hospitality, finance and some were self-employed. This shows that the trainings have enhanced employability to the extent that people have found jobs beyond the IT sector. (iii) Given that the number of jobs created by 2013 is 964 for youth in the age range between 18 to 24 years by 2013 and if the total number of unemployed in Bhutan in 2012 was 6,904 and the number of youth in the age range 19-24 years comprised 3,476, the project has therefore contributed to addressing 14% of the overall unemployed in 2012. Moreover, the project contributed to reducing youth unemployment by 28%. (iv) Ninety percent of respondents gained more usable knowledge and skills while 66% said that they gained more self-confidence. These seem to be the two most important social impacts, besides securing a job for a livelihood experienced by respondents as a direct effect of the training and the job they have been able to secure after the training. (v) Seventy eight percent of students trained successfully have been employed by private sector. The private sector-led skills development programs have been highly successful, both in terms of percentage of trainees employed (74%) and cost per job created. Fifty five percent students cleared the ITES industry competency assessment. (vi) For trainees from the business development trainings, they have increased profit margins in their businesses, reinvested in their business. As a direct outcome of the training, one person could expand the current business by investing more money, 3 could expand their business by investing more equipment, 7 introduced a better accounting system, 5 could more effectively market their products and services and 1 could establish new clients and suppliers. Those trained have been able to effect changes in their businesses and to grow by improving organizational capacity as well as generating additional incomes for disposal, reinvestment in businesses and deposits in bank for future investments. Therefore, the training has contributed to enhancing the knowledge and skills, which are the important attributes of social capital. (vii) Income for local construction contractors/sub-contractors, at least contract works amounting to around Nu. 20 m (US$340k) taken up by local contractors.

Page 54: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

40

3. Improved access to finance (i) Huge increase in ATM transactions which has led to reduction in visits to banks and waiting time at banks has been reduced by 90%. Time save has been used by customers for various productive and social activities. (ii) Enhanced awareness of financial products and processes to access them from the nation-wide dissemination campaign done last year and the public awareness program through the media currently being initiated. (iii) Owing to automation of the RSEBL there has been a marked increase in transactions for all listed companies indicating a rapidly growing use of the system even within a month of operation of the new automated system. 4. Other Anticipated Impacts (i) At least 40% of the employment at TTP will be created for Bhutanese citizens: There will also be substantial indirect job creation in engineering, gardening, catering and cleaning services. Owing to the large number of expatriates working at the TTP, indirect income earning opportunities for the local community will also proliferate such as transportation, residential rentals, housekeeping, grocery and other supplies to name a few. It is expected that the ratio of expatriates to local employees will be around 1:4 in the first five years and 1:6 thereafter. (ii) Increased Opportunities for local residents for income generation: Most people living near the TTP reported that they had either set up small shops, started business, constructed houses for rental. Many residents have started constructing buildings in anticipation of an adequate customer base for residential units. (iii) Positive Community Perception: All respondents said they were proud to have the TTP located in their neighborhood. The reasons mentioned are: better outlook now where slums used to exist; easy access to needs due to the town; easy availability of jobs and proximity; easy availability of jobs for children; better income for the whole community; more products can be sold to the people; rapid development will take place; students from the near-by schools can be absorbed here and they can now run a business. While many of these reasons can be seen as anticipation of economic incentives for the community, others are convenience to residents from better amenities being available in expectation of urban development being triggered by the TTP. (iv) Changes in community demographics: The number of people living in the neighborhood is bound to increase from year-to-year. This is because while some will relocate to live near the TTP for convenience of working at the Park, others would re-locate with their businesses further increasing the population in the area. This could lead to increase in congestion of housing and people in the area. Socio-economic impact assessment It is evident that some impacts will take time to emerge since activities have just been completed, or in a few cases such as the Financial Literacy through the media is still ongoing. Construction of the Tech Park has offset changes in the local economy in Wangchutaba such as increase in construction of buildings and land prices. Among those trained under the project and employed, though people earn less owing to the short duration in employment, youth still have secured a means of livelihood and possess skills thereby enhancing their

Page 55: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

41

confidence and self-esteem. Business persons and trainers from private training institutes trained have used the knowledge and skills from the training to improve their business and generate income for their business units. Customers of the Bank of Bhutan using ATMs have cut down visit to banks and now spend much less time than before on bank transactions. Participants in dzongkhags attending the financial outreach programs are much more aware than before on financial products and services but are yet to produce economic outcomes. Many youth trained under the project have secured employment and a means of livelihood. Integration of courses in curricula has not only introduced an element of sustainability but students are made ready for the job market essential to enhance their employability. Use of IT for the VLE in colleges has added a new dimension to learning ensuring “anytime, anywhere” learning for students and teachers facilitating the courses. The financial strengthening component encompassing the upgrading the BOB CBS has had immense benefits to customers throughout the country providing convenience and saving time for users through introduction of ATMs and SMS and on-line banking. The financial literacy and outreach program has created the necessary awareness but economic outcomes are anticipated over time. The automation of the RSEBL will permit trading of shares from any part of the country with connectivity and the FIP will have far-reaching impacts for rural Bhutanese in future.

Page 56: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

42

Table 4 – Selected results of the Socio Economic Impact Assessment Indicator in the SEIA Results as of June 2013 Thimphu Tech Park (TTP) [also called IT park] Infrastructure Enhanced number of people employed (by type) and nationality at the TTP associated with TTP operations

As of June 2013, the TTP employed three persons in the office. Other support staffs employed are a driver, a gardener and one for maintenance. Security has been outsourced to a company which fields 5 persons on a regular basis and cleaning services has also been outsourced to a company which has assigned two persons with the TTP. Scan Café in the period between October 2012 and June 2013 employed 125 Bhutanese youth and two Indian nationals while Shaun Communication employed 16 youth and two Indian nationals.

Enhanced income for local construction contractors/sub-contractors

Work in developing the TTP was taken up by people from India. However, the management also outsourced some of the work to local contractors. It is reported that contract works amounting to around Nu. 20 m (US$340k) was sub-contracted to local contractors.

Enhanced income for TTPL and for companies leasing space

The TTP earned Nu. 1,714,755 (US$28,723.1) from leasing space in BITC in June 2013. As of June 2013, Shaun Communication and Scan Café invested approximately Nu. 9.8 m and Nu. 3.7 m (US$ 164,2k and US$ 62k) respectively. On the income side Shaun Communication expects to make Nu. 0.6m to Nu 0.7 m (US$0.01m) per month after all expenses, Scan Café indicated that this information was not available.

Enhanced income for utility service providers (telecom, power, water and sewerage)

In June 2013, the TTP expenses for a year amounted to Nu. 5,660,400 (US$94,814.9). A proportion of this was spent on payment for services such as power, telecommunications and water and sewerage.

Enhanced income for National employees of companies based in TTP

In 2013, employees working at TTP earned between Nu. 6,000 (US$100.5) (Scan Café) to Nu. 8,000 (US$134) per month (Shaun Communication) as startup pay. The salary of some staff in Shaun Communication however has gone up to Nu. 14,000 (US$234.5). These companies also indicated that bonus packages were also offered to staff based on their performance.

Enhanced income of community members living near TTP by source

Community members living around the TTP did not earn any income directly from the TTP but it was noted in mid-2012 that a few obtained rental income from leasing housing units to people working at the TTP. In Bhutan for every direct job created, 1.2 more indirect jobs will be generated so it is expected that jobs in the TTP will have multiplier effects.

IT Promotion (PIA) Increase in number of local IT/ITES companies implementing new ventures, products and procedures on return from international events facilitated by PIA

Under the project, the road shows have been useful since even local IT companies participated in these. They gained exposure and few have established linkages with a few companies outside Bhutan but are reported to be in an early stage of business development.

For IT Park neighbors Enhanced incomes and employment as a result of TTP

Since construction on the TTP commenced many residents have started constructing buildings in anticipation of an adequate customer base for residential units.

Page 57: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

43

The price of land in the locality also escalated. The median land prices per decimal before the construction were Nu. 200,000 (US$3,550.1) while soon after the TTP construction started, land prices escalated and now the median price quoted per decimal is Nu. 475,000 (US$ 7,956.5). This is an increase by 138%. TTP has been in operation for a relatively short period of time so impacts are not so obvious yet. Only a few expected any employment in the TTP for their children if they could not continue for further studies after they were trained in IT.

Reduction in number of interest groups So far there has not been any news or information from any source opposing the TTP. This implies that there is general societal acceptance to the facility. All those interviewed had positive feedback on the TTP.

Number of views representing community attitudes if generally supportive of the kind of development that is being proposed, or consistent opposition to development;

All respondents living near the TTP said they were proud to have the TTP located in their neighborhood. Many were anticipating the economic incentives for the community and the better amenities in expectation of urban development being triggered by the TTP. The reasons mentioned were: better outlook now where slums used to exist; easy access to needs due to the town; easy availability of jobs and proximity; easy availability of jobs for children; better income for the whole community; more products can be sold to the people; rapid development will take place; students from the near-by schools can be absorbed here and they can now run a business.

Development of IT Skills Enhanced earnings of trained employees per month as compared to before training and employment.

Median salary received by trainees now employed was Nu. 8,000 (US$134) in June 2013. The median expenditure per month was Nu. 6,000 (US$100.5) while the median amount saved was Nu. 875 (US$14.66). Entry level salaries offered by the tenants were lower and roughly half of civil service salaries in comparable professions. In June 2013, the entry pay for youth working at Scan Café at the TTP was fixed at Nu. 6,000 (US$100.5) per month. and Nu. 8,000 (US$134) a month at Shaun Communication. These companies provided however bonuses based on performance.

Enhanced employee satisfaction and self-esteem

As a result of the training, 90% of a total of 174 respondents gained useful knowledge and skills while 66% gained more self-confidence. These seem to be the two most important social impacts. The job obtained after training secured their livelihood, by providing them a regular salary, enabled some of them to contribute to the family income and to pay their rents. Most mentioned it increased their financial autonomy.

Trainers from Bhutanese Private Training Institutes Enhanced business opportunities after the training

Trainers have been able to apply the knowledge to their work as 7 out of 8 respondents conducted similar courses for their institutes on their return.

Enhanced employee satisfaction and self-esteem

As a direct outcome of the training, all respondents said that they gained more knowledge and skills and also self-confidence.

Training of Institutes staff and students under RUB Number of faculty designing courses on Global Skills Training (GST)

All faculties who attended the Global Skills Training (GST) Program reported conducting the GST modules with students studying in the 1st year.

Enhanced knowledge and skills of students taught GST modules by trained

As a result of GST, there was a marked improvement in the students’ speaking and writing skills. They were better organized and focused and able to plan and present their work. Their research skills improved

Page 58: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

44

lecturers and they are more confident and are better behaved. Students who studied analytical skill modules found the lectures very useful. They learnt the techniques to deal with complex problems, became more confident in preparing for interviews and in analyzing problems. Students interviewed on academic skills found the module very useful. They learnt: note taking, American Psychological Association referencing style, quoting texts, writing essays, and thesis and better communicate.

Enhanced performance of System Administrators (Virtual Learning System (VLE) and Course Management System (CMS)

According to the System Administrators, the VLE system established in the Colleges makes it possible for students to learn from anywhere by accessing materials uploaded to the system, interacting in the Forum, submitting assignments and exams on-line and getting feedback from Faculty on-line too. Having VLE along with face-to-face class room teaching occasionally is cost effective for teachers and students.

Trained lecturers in Virtual Learning System (VLE) and Course Management System (CMS) quoting benefits of the training and system

Lecturers trained in VLE personally benefited as they post quizzes, announcements, assignments on-line, which can be easily accessed by students. It has instituted a culture of self-directed learning and independence as students must submit assignments by the deadline. Students became more time conscious, improved their computing skills and lecturer-student interaction increased online. Use of VLE system cut down paper use and saved a lot of time for assignments, lecturer feedback, group discussions and evaluation of assignments. Students also are more active online than they would be in the classroom. The use of multi-media has made teaching and learning interesting.

Enhanced experience of trainees that have completed the distance course (convenience, learning difficulties, limited face-to-face contact)

Students seem to do well in the anonymity offered by VLE. Grades are posted by Lecturers on the website which serves as a notice board for students. Students share views on studies in the discussion forums. They communicate among themselves but also with the Lecturer on a real-time basis. The VLE cut down the risks of cheating as students submit assignments that are tutor-marked.

Training of businesspersons for improvement of businesses and growth Cumulative increase in income of businesses employing trainees

Those trained have been able to effect changes in their businesses, grow by improving organizational capacity as well as generating additional incomes for disposal, reinvestment in businesses and deposits in bank for future investments. Of 11 respondents, 9 mentioned that their profit margins were higher than before, 4 of them reinvested in the business, 1 deposited the money in the bank and 4 spent the money.

Enhanced employee satisfaction and self-esteem

Most respondents felt that trainers were competent and that the course was relevant to their business. Most also could apply the learning from their course to their business.

Training of Class XII school leavers and graduates 174 respondents were contacted for interviews of which half were Class XII graduates, 44% with Bachelor

degrees and 6 persons were post-graduate. Among them, 44% studied commerce, 28% studied Arts and about 12% studied science and IT. Over half of trainees ranked the trainers mostly as “very good” and 60% mentioned that the course was “highly relevant” of which 83% could apply the knowledge and skills in their work. More than half of the trainees who found jobs were trained in BPO operations. Two were trained in animation and one in IT. The training played a significant role in securing their jobs according to them. They found the training very useful as they acquired communication skills and confidence. The training also gave them good exposure, knowledge, new skills.

Page 59: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

45

A small sample of unemployed who were interview mentioned the tough competition in the job market. Some also mentioned low salaries or dissatisfaction with their previous jobs. The number of jobs they applied for after their training ranged from 2 to a maximum of 16 jobs. Some of the jobs were in banks, hydropower projects, newspapers, IT jobs, government, private companies, corporations and travel agencies. Some also applied for fieldwork such as household surveys. The type of temporary jobs taken up till now by the youth are designing birthday cards, tour guides, cell phone operation, supervisors, photo editors in IT park and also supervisors of construction projects.

IT system up-gradation in the Bank of Bhutan Reduced time against increased money value in lieu of bank visit

For indicative purposes if a day’s national wage is Nu. 160 (US$2.68) for 8 hours work, the 3.5 hours wait before using CBS is Nu. 70 (US$1.17) worth in monetary terms. Time reduction from 3.5 hours to 20 minutes wait with the CBS (see above) translates to a reduction from Nu. 70 (US$ 1.17) to Nu. 6 (US$0.1). So, assuming that 50,000 persons across the country use the services in 1 day, Nu. 3,170,000 (US$53,099.3) is saved in a day and in a month of 25 working days, the savings goes up to Nu. 79,250,000 (US$ 1.3m).

Waiting time at banks before and after – money value for time savings

If we take 3.5 hours as the maximum waiting time before the CBS and 20 minutes after introduction of CBS and use of services, the waiting time has therefore been reduced by 90%. People living in the border areas also mentioned the added advantage of being able to withdraw Indian currency in the border towns. People said that they did not have to carry lots of cash, at the risk of theft or loss, and could conveniently withdraw money from ATMs in the dzongkhags while travelling. Some respondents also felt that using ATM forced them to save.

Creation of awareness on financial aspects (financial literacy) Enhancement of awareness about bank’s services and products;

Most participants stated that the presentation of the various loan schemes, interest rates, procedures to apply and other terms and conditions was useful. Many also indicated that government policies vis-à-vis financial lending, policy and regulations on soiled and counterfeit currency were useful. The various insurance schemes were also good information for people to understand to insure lives and property for future security. Under the school education program, sensitization was done in a few schools in Thimphu with banks. This induced BNB to start the “piggy-bank saving scheme” for school children. The survey carried out in June 2013 in 6 districts revealed that although radio programs were being aired in Kuzoo FM in Dzongkha and through the Etho Metho Local TV channel, the survey team which visited the districts of Trongsa, Wangdue, Punakha, Thimphu, Paro and Chukha could not identify people who had heard or watched these on radio and TV respectively largely because youth listen to Kuzoo radio and music is preferred over other programs. Even those listening to Dzongkha programs on Kuzoo prefer the music program. Cable TV operators have only local reach. The transmission of financial awareness and literacy over the Bhutan Broadcasting System will have substantial impact in creating awareness.

Increase in number of persons reacting after the awareness sessions

Several people interviewed applied for group loans and received quick service. Several other people also applied for loans to build houses or to invest in businesses after the campaign and fulfilled their credit needs. Many noted that they can now identify counterfeit notes and this is useful for their businesses.

Page 60: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

46

Participants who attended the meeting sessions in the Dzongkhags could not understand all that was discussed. Many forgot what was discussed. Also, a few mentioned that they didn’t speak and understand the language the presentations were made in. A few mentioned since they were cramped in the venue, presentations made were not always audible.

RSEB automation Increase in number of shares traded after automation

There was a marked increase in transactions for all listed companies indicating a rapidly growing use of the system even within a month of operation of the new automated system. Volume of shares traded before automation was 19,343 and it increased to 741,382 by the end of 2012. This also represents a 97% increase from the volume of shares traded in 2011 of 375,652. The value of the shares traded since automation increased by 65%. However, the capacity of the system is still underutilized. This is mainly because there are limitations on the supply-side as more companies need to enlist in the stock exchange to divest. Nonetheless, market capitalization for the listed 20 companies has also increased by 42% as compared to the interim period of 2011.

Reduced time to process shares Time spent to process the shares after automation has been reduced from 2 months to a month. 39 persons have been issued on-line terminals for access to trade shares online but only 3 were reported to be active. Automation increased the number of technicians and IT staff working at the RSEBL to manage the systems. It has also led to higher efficiency in work processes. Some emerging preliminary impacts observed on a day-to-day basis were as follows: (i) The primary effect of the depository system is easy and efficient dissemination of securities reports to investors. It keeps track of every trading movement, replacing the previous manual mode (ii) Brokers are more comfortable with the new brokerage system, which allows them to maintain both security account and the trading account of an investor. Access to the online trading facility is facilitated. (iii) The Clearing system now provides the edge to carry out settlement within the exact settlement date. The system has somehow instigated brokerage firms and the RSEBL to initiate a settlement bank, which helps the settlement process as per the designated timeline. (iv) The RSEBL has also increased the trading day to three times a week and has moved from spot trading to the continuous trading system. Investors have now the platform to trade for long duration and also the facility to determine price in pre-open session. Trade is now visible throughout Bhutan. (v) The IPO system provides an edge to carry out the initial public offering as per international standards. The system provides facility of both fixed price and book building methodologies. Tracking of investors and subscription is automated and this will increase efficiency and transparency. (vi) Investors will now have a dedicated and permanent securities account to record their securities. Automation of the RSEB has made share trading easier for citizens and is expected to further develop the capital market.

Page 61: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

47

Annex 6. Stakeholder Workshop Report and Results Not Applicable as this is not an intensive learning ICR. However the Bank ICR team comprising Suhail Kassim (Senior Private Sector Development Specialist) and Mihasonirina Andrianaivo (Financial Sector Specialist) conducted an ICR mission from September 12 – 21, 2013 in Thimphu. During the mission, the ICR team met with the officials from RGOB, and all major stakeholders including the TTPL, BICTTA, BCCI, Bhutan Telecom, Tashi InfoComm, local BPO firms and a number of beneficiaries. A list of people met in Thimphu during the ICR mission follows:

MINISTRY OF INFORMATION AND COMMUNICATIONS (MOIC) Dasho Kinley Dorji, Secretary Mr. Phuntsho Tobgay, Director, DITT Mr. Bhimlal Suberi, CPO, Policy and Planning Division Ms. Dorji Wangmo, DCPO, Policy and Planning Division Mr. Chencho, Head, Promotion Division, DITT Ms. Deepika Rai, Project Coordinator, PIA/DITT MINISTRY OF FINANCE (MOF) Mr. Nim Dorji, Joint Secretary, DPA Mr. Choiten Wangchuk, Director General, DPA Ms. Chuni Dorji, Program Officer, DPA MINISTRY OF LABOUR AND HUMAN RESOURCES (MOLHR) Ms. Norbu Dema, Offtg. CPO, HRDD Mr. Kinga Wangdi, HR Specialist, HRDD Ms. Tenzin Choden, PSD Project Focal Officer, DHR ROYAL MONETARY AUTHORITY (RMA) Mr. Dorji Phuntsho, CEO, RSEBL Mr. Sangay Dorji, Focal Officer for FLP Ms. Dechen Choden, Focal Officer for FIP ROYAL UNIVERSITY OF BHUTAN (RUB) Mr. Yangka, Director, Academic Affairs Mr. Sonam Penjor, Manager, Education Technology DRUK HOLDING AND INVESTMENTS (DHI) Mr. Karma Yonten, Chief Executive Officer Ms. Karma Sonam Dorji, Sr. Analyst

TTPL Mr. Mike Holland, Chief Executive Officer via teleconference Mr. Tshering Cigay Dorji, Chief Operating Officer Ms. Sonam Choden, Office Manager BHUTAN TELECOM LTD (BT) Mr. Nidup Dorji, Chief Executive officer Mr. Tshering Norbu, General Manager TASHI INFOCOMM (TASHICELL) Mr. Tashi Tshering, Managing Director Mr. Ganga R. Sharma, Chief Technical Officer BITC INCUBATEES Mr. Varun Singh, Bhutan IT Mr. Kinga Sithup, Green Dragon Media Mr. Sonam Dorji, Mawongpa Water Solutions Mr. Hari Kafley, iTechnologies BENEFICARIES OF VLE and GSE PROGRAM via videoconferencing, RUB Mr. Tsheten Dorji , Head of Department, College of Science and Technology, VLE Mr. Yeshi Wangchuk (VLE Coordinator) with 9 CST students GRADUATES- BENEFICARIES OF TRAINING AND EMPLOYMENT PROGRAM Mr. Tashi Tobgay, Animation with GDM Ms. Sonam Deki, Animation with GDM Mr. Tharchen (Infosys 2nd batch) Ms. Pema Zam, BBS in medical transcription Mr. Puran Pradhan, BBS in medical transcription Mr. Sonam Wangdi , Animation with Athang Ms. Sangay Wangmo, Animation with Athang Ms. Sonam Choki, Woezer Event

Page 62: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

48

Ms. Rinzin Wangmo Mr. Namgay, Druk PNB Bank OTHERS Mr. Prabito Mukherjee, Operation Manager, Shaun Communication Bhutan Pvt. Ltd Ms. Susmita Rai, Asst. Manager, Scan Cafe Mr. Lhendup, Bhutan Business Solution Mr. Tshoni Tiakar, Bhutan Business Solution Mr. Bhim Nepal, Bhutan Business Solution Mr. Karma Dhendup, Chief Executive Officer, Athang Training Academy Mr. Sonam Wangdi, Athang Training Academy Ms. Sangay Wangmo, Athang Training Academy Mr. Ken Dobruskin, CIMAS Bhutan Mr., Tshering Penjor, CIMAS Bhutan Mr. Basant Raj Chhetri, Bhutan Professional Services, Mr. Phub Tshering, General Secretary, BCCI Mr. Tandin Wangdi, President, Bhutan ICT and Training Association (BICTTA) Mr. Dorji Wangdi, Lorig Enterprise, Executive member of BICTTA

Mr. Phub Gyeltshen, Yangkhor IT Solution, Executive member of BICTTA Mr. Rinchen Wangchuk. Drasindra Technology, Executive member of BICTTA Mr. Tashi Wangchuk, Chief Executive officer, Dzongkha Language Institute, Executive member of BICTTA Mr. Kiran Parajuli, General Secretary, Bhutan ICT and Training Association Mr. Tashi Tobgay, Chief Operating Officer, Data Center Services Mr. Lungten, Data Center Services Mr. Santa Bir Gurung, Photo Designer, Scan café employee Mr. Dorji Tshering, Photo Editor, Scan Café employee Mr. Shiraj Dhital, Team Leader, Shaun Communication employee Mr. Phub Tshering, Team Leader, Shaun Communication employee Capt. Veeresh, Ex. Consultant of the PSDP (by audio) Mr. Kezang , Ex. Consultant of the PSDP Mr. Rinzin Namgay Dorji. Ex. Consultant of the PSDP

Page 63: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

49

Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR The RGOB sent its draft implementation completion results report (31 pages) to the World Bank on October 11, 2013. A summary of RGOB ICR was also received from RGOB on November 15, 2013 (18 pages) and is shortened below:

The Royal Government of Bhutan (RGOB) received a grant from the World Bank for implementation of the Private Sector Development (PSD) Project focused on some of the key enablers that will help enhance Bhutan’s ICT competitiveness and position the country as a regional ICT hub. The PSD Project, in particular, supported development of IT/ITES sector, using an integrated approach that includes: (i) establishment of the IT Park and related infrastructure and IT promotion services (ii) Development of IT/ITES skills and (iii) improved access to finance. During the preparation of the project, Bhutan was in the process of transitioning into a democratic constitutional monarchy. The project took into account the country’s need and the development and use of the IT/ITES sector was felt to be an effective tool to enhance good governance; and generate employment through the growth of private sector and IT/ITES industries. The Government showed its commitment by prioritizing ICT and the project was identified as a national flagship project. The promotion of IT investment will benefit Bhutan’s industrial development by locating globally experienced IT companies in Bhutan and setting high industry standards for local companies. Component 1 The development of IT Park was undertaken in a PPP model. The obligation of private partner was to develop an IT park infrastructure in a DBFOOT model and generate 700 jobs by May 2015. The operation of BITC was contracted to TTPL under management contract for 5 years. For the successful design and implementation of the project, coordination with different government agencies and with the private sector is a key imperative. Towards this end, this sub-component supported MOIC to establish an IT/ITES Promotion & Program Implementation Agency (PIA). The PIA promoted and facilitated the development of IT/ITES industry in Bhutan and coordinated and supported the implementing agencies (project components). Through this project, advisory council was formed comprising of CEO of MNCs who advised RGOB on the ICT development in Bhutan; a private sector focus group where communication line was created between government and private sector; and an empowered task force who assisted and supported in fast tracking and resolving issues. Component 2 Development of IT-ITES skills program at the following three levels: i) Generic Skills for the IT/ITES Sector; Through this component, 1015 Bhutanese has been provided productive employment. 1372 secondary and tertiary graduates were trained under the project from all districts of Bhutan. Due to the delayed completion of the IT Park, candidates were employed in various sectors of the economy, including education, trade, hospitality and self-employment. The cost to the Government is 4 times below regional averages, thanks to private sector participation. The Project supported the launch by MOLHR of several programs described below. Under the local programs, firms were responsible for mobilizing candidates and required to employ at least 50% of the trained individuals, while being provided a larger matching grant for higher employment rates:

Page 64: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

50

1) a graduate training program (GTP): A total of 320 graduates have completed training under GTP out of which 192 (60%) are employed in the private sector. 2) an employment training program (ETP): A total of 451 candidates have completed a 6 months to 1 year training in animation, medical transcription, graphic design and call center training, out of which 303 (67%) have been employed. 3) Industry Linkage Training and Employment Programs: A total of 194 graduates have been employed outside Bhutan by BPO giants Wipro, Genpact and Infosys. 4) Employment incentive program (EIP): A total of 170 candidates have been employed as of date. 5) Global skills enhancement program: In collaboration with Infosys, analytical and Academic module was developed and is introduced in the colleges under RUB.

ii) Distance learning facilities/CMS for IT Skills development; With the implementation of VLE, capacities of the colleges were also built through this project for effective delivery of e-learning. Beside video conferencing facilities in 4 colleges were also provided for facilitating distance learning initiatives. iii) IT Entrepreneurship Development Program. This sub component established entrepreneurship development center in 5 colleges under RUB. The EDC coordinators and faculty were trained besides providing capacity building for 26 local entrepreneurs. Component 3 Strengthening the financial sector through IT use, comprising the following activities: i) IT system up-gradation in the Bank of Bhutan (BOB); Networking for Core Banking Solution (CBS) was the sole activity supported with IDA funding on implementation of CBS in BOB. The entire hardware and software component including capacity building were funded by BOB. Project funds have contributed to the rapid modernization of BOB’s procedures and positioned BOB to benefit from the inter-bank Electronic Fund Transfer and Clearing System (EFTCS). ii) Developing a Financial sector IT development strategic plan The TA to develop a financial sector IT development strategic plan was implemented by RMA. Following the completion of the ‘Financial sector IT development strategic plan’ commissioned by RMA with Project and IFC support, RMA started implementation of the EFTCS with support from RBI. iii) Establishing the Inter-bank Electronic Fund Transfer Clearing System (EFTCS) at the RMA iv) Up gradation of the IT infrastructure of the Royal Stock Exchange of Bhutan The upgradation facilitated the Bhutanese to use the services of the RSEBL in terms of trading, clearing and depository of securities through the use of friendly IT system which was nonexistent before. Doing so not only developed the capital market but also ensured transparency, disclosure and efficient functioning of the system. v) Financial Inclusion Policy and financial literacy program Under this component financial inclusion policy has been drafted to improve financial services penetration and inclusive growth. The Literacy program was conducted in all 20 Dzongkhags. Project Restructuring 1. During the Mid Term Review, it was understood that the Project facilitated jobs creation in IT/IES sector and other value added sectors of the economy. The scope of the outcome indicator was expanded to

Page 65: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

51

include the cumulative job creation in the IT/ITES sector, as initially planned, as well as jobs created in other sectors directly as a result of training supported through the Project. 2. The component 3 under RMA, “establishment of an inter-bank electronic fund transfer clearing system (EFTCS - Component)” was being implemented separately from the project after securing bilateral assistance from the Reserve Bank of India. Hence, Component 3c was replaced with two new sub-components, as below: i) New Component 3c. Upgradation of the IT infrastructure of the Royal Security Exchange of Bhutan ii) Financial Inclusion and Financial Literacy Results Indicators The Project Development Objective was to generate “Cumulative job creation in the IT/ITES Sector in the IT Park and related activities” with target as 700. By the project closure, the target was exceeded and achieved 1015 job creation in IT/ITES and related activities. a. Component One: 1. The indicator on “Cumulative leads generated for new investments in the IT Park with target as 200” was achieved and exceeded to create 255 leads. 2. The indicator on the “number of companies successfully incubated in the IT Park” with target of 5 was measured as number of companies incubating at the IT Park. Since the Bhutan Innovation and Technology Center was operational from 1st May 2012, over a short period of time 3 incubatees out of 13 have graduated and are operating successfully in the market. 3. The indicator on “Percentage of lettable space leased out” was achieved to 50% against target of 100%. Since the 2 international occupants have signed the tenancy agreement. However one occupant is yet to move into the commercial space and hence the ICR agreed to reduce the space leased to 25%. Prospects for filling the remaining space are promising, as Bhutanese companies as well as international companies have expressed interest in locating at TTP. RGOB has mitigated this risk in several ways: (i) contractually, TTPL has an obligation to host at least 700 employees in the Park by May 2015, (ii) RGOB has been helping to build a pipeline of prospective domestic and international tenants in the IT Park, (iii) RGOB has worked on providing an enabling investment climate for tenants. b. Component Two: 1. Per cent of students clearing ITES industry competency assessment that is widely recognized with target as 35% This indicator was based on the competency assessment carried out by Infosys , Wipro and Genpact after providing the training. This indicator is based on the number of candidates successfully passed the assessment and was offered employment by the companies. By June 2013, the target of 35% was achieved and exceeded to achieve 56%. 2. Per cent of students trained are successfully employed by the private sector with target as 50% This indicator is related to the number of Bhutanese that were trained under the project and is employed as of date irrespective of employed in or outside Bhutan and trained by national or international companies. The target has been achieved and exceeded to achieve 63.63%. A total of 1372 were trained and as of date a total of 1015 has been employed in IT/ITES sector.

c. Component Three: 1. Number of financial transactions by using ATMs at BOB per year with the target as 900,000 The target of 900,000 was achieved and exceeded to achieve transaction of 1,418,494. 2. Percentage of district coverage for financial literacy campaign with target as 100% The main objective of FLC was to educate the Bhutanese especially the under banked and unbanked on current and future financial services that will enable them to be financially disciplined.

Page 66: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

52

The target was 100% achieved and in addition RMA is considering programs through better innovative ideas targeting groups especially the youth and farmers. 3. Percentage automation of stock exchange trading, settlement, and delivery with straight through processing with target as 100% The integrated system now allows online trading and generates more accurate and real time information - a leap from the manual system established more than two decades ago. It was 100 % completed with users even from USA. Also the number of shareholders in the RSEBL has increased and as of December 2012 it was 48,077 against 12,852 in 2008 and market capitalization is Nu. 17.63 billion.

Extension of Project Closing Date The project closing date of 30 June 2012 was extended to 30 June 2013 due to delay in completion of the undergrounding of high voltage power line at IT Park implemented by Bhutan Power Corporation. The delay did not impact any change in the PDO and performance indicators. 1.The implementation of the project was kept in line with the Government’s priorities and strategy. The Project maintained its relevance throughout implementation by expanding the development objective and the key outcome indicators (restructuring, Dec 2010) in line with the Government’s emerging strategies. 2.Resources were reallocated in a timely fashion to address the government’s emerging priorities like the support for undergrounding of the High voltage power line , development of the national ICT master plan that directly contributed towards the ICT industry development beside building the in-house capacity, implementing matching grant program and employment incentive program for attracting first anchor tenant and support for implementing microwork that has the potential for huge employment and contribution to GDP. 3.The project implementation triggered investment climate reforms like FDI policy 2010, EDP 2010 including fiscal incentives for the IT Park and ICT industry, revision of Information Communication and Media Act, formation of Single Window Agency for FDI investment, and trigger for development of telecom policy. 4. High telecom tariff is an issue. Through the project, the telecom tariff reduction has taken place from as high as 300% for 50 mbps to almost 80% reduction compared to the region by project closure. 5. The successful implementation of PPP model using DBFOOT model had triggered usage of similar model for other projects, international level collaboration, innovative private sector led skills development programs leading to jobs, testing Bhutan’s value propositions as an investment destination and new IT and financial infrastructure like establishment of 2nd international telecom gateway. Assessment of Risks The risk that the developments outcomes will not be sustainable is low for the following reasons: 1) The youths employed through this project are already working and have not only enhanced their

employability skills but has also gained experience that most of them will find jobs or can start their own business given the environment that has been created.

2) The risk of losing commercial international tenants is also low since government has prioritized private sector development and creation of conducive environment. Hence in the 11th FYP, to further support private sector development, an ICT industry development roadmap will be implemented , for the first time e-gov master plan has been developed that will project the domestic market for the industry that will be implemented in the 11th FYP, an ICT advisory panel has been proposed where private sector is part of the design and implementation of not only the projects but also guiding the government in terms of talent pool requirement (addressing the gap between the demand and supply in the market)

3) Promotion of microwork. Government is creating this environment for youth to take up microwork that will provide employment and earnings in foreign currency.

4) Telecom Policy will be in place to address the telecom tariff issue.

Page 67: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

53

Bank Performance The preparation of the project had included adequate consultations and analytical work and was done in the context of the Government’s and the Bank’s strategy. The supervision from the Bank was excellent hence the project had a smooth implementation. Though there has been time when the response has been delayed from the Bank while seeking approvals to carry out activities but it did not have major impact since the delays has always been useful to complete all due diligences required from both the side. Borrower Performance 1. RGOB was fully supportive of this project and had prioritized this project as a national flagship

project. The commitment was there from the highest level of the government. 2. All the agencies were very supportive and forthcoming during the implementation. 3. PIA and IAs had a very strong dedicated team and unlike the trend of high attrition of civil servants,

this project team from civil service was in the project till the end. 4. Sustainability of the project activity has been fully addressed by integrating with the agencies plans

and has not been taken as a onetime project.

Annex - BHUTAN IT/ITES ADVISORY COUNCIL 1. HE Lyonpo Nandalal Rai, Minister, Ministry of Information & Communications – Chairperson 2. Mr. Pramod Bhasin, Non-Executive Vice Chairman (Past President & CEO), Genpact – Member 3. Mr. Som Mittal, President, NASSCOM – Member 4. Dr. Ganesh Natarajan, Vice Chairman and CEO, Zensar – Member 5. Mr. Kiran Karnik, Past President, NASSCOM – Member 6. Mr. S. (Kris) Gopalakrishnan, CEO and MD, Infosys Technologies – Member 7. Mr. Ajai Chowdhry, Chairman & CEO, HCL Infosystems – Member 8. Mr. Avinash Vashistha, Chairman & MD, Accenture India – Member 9. Mr. Rajendra S. Pawar, Chairman, NIIT – Member 10. Mr. Ravi Venkatesan, Independent Director, Infosys (Past Chairman, Microsoft India) – Member 11. Mr. Nadathur S. Raghavan, Patron/Chairman Advisory Council, NSRCEL-IIMB (co-founder and

former Joint MD, Infosys) – Member 12. Dasho Kinley Dorji, Secretary, Ministry of Information & Communications – Member Secretary

Page 68: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

54

Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders Not applicable.

Page 69: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

55

Annex 9. List of Supporting Documents 1. Project Appraisal Document, June 2007 2. Restructuring paper, December 2010 3. Restructuring paper, June 2012 4. Financing agreement, June 2007 5. ISR sequence 1 to 10 6. Aide Memoires of Bhutan Private Sector Development Project (PSDP)- Implementation Support

missions, World Bank documents 7. PSDP Mid Term Review December 2010- Aide Memoire and Management Letter- World Bank

document 8. PSDP Quarterly Progress Reports, January 2012 to March 2013 9. PSDP Report on review of undergrounding of 66kV line at IT Park – Thimphu Thromde- January

2013 10. PSDP Completion report for undergrounding of 66kV line at IT Park 11. Nathan Associates (April 2006) “Bhutan IT Park and Distance Learning Center Feasibility Study”

Executive report 12. Bhutan Private Sector Survey (2002) 13. Ministry of Labor and Human Resources, Royal Government of Bhutan, Labor Force Survey 2012 14. Ministry of Labor and Human Resources, Royal Government of Bhutan, Establishment Census 2010 15. National Statistics Bureau, Statistical Yearbook of Bhutan 2007 and 2012 16. Ministry of Finance, Royal Government of Bhutan, Notification August 2008 : Fiscal Incentives for

IT Park developer and IT/ITES companies at Wangchhu Taba 17. Bhutan. Investment Climate Assessment Report “Vitalizing the Private Sector, Creating Jobs.

VOLUME II.” The World Bank, September 2010 18. Bhutan Country Assistance Strategy 2006-2009 19. Bhutan Country Assistance Strategy (CAS) evaluation report - 2005 Bhutan Country Partnership

Strategy 2011-2014 20. Bhutan Country Partnership Strategy progress report of 2012 21. Bhutan Eleventh Five Year Plan 2013-2018 22. Economic Development Policy of Bhutan, 2010 Socio Economic Impact Assessment report of the

Bhutan PSD project (July 2013). 23. Thimphu Tech Park Ltd (TTPL), Bhutan Innovation and Technology Center Strategic Plan 2012-

2016 24. PSDP Generic Skills Development Report (2013) 25. License Agreement between TTPL and Shaun Communication, August 2012 26. Leave and License Agreement between TTPL and Shaun Communication, February 2013 27. Leave and License Agreement between TTPL and Scan Cafe, December 2012.

Page 70: World Bank Document...1 11/16/2007 Satisfactory Satisfactory 0.15 2 06/06/2008 Satisfactory Satisfactory 0.15 3 12/23/2008 Satisfactory Satisfactory 1.24 4 06/26/2009 Satisfactory

G A S A

THIMPHUPUNAKHA

P A R O

H A A

S A M T S E

M O N G G A R

PEMAGATSHEL

SAMDRUPJONGKHAR

B U M T H A N G

L H U E N T S E

C H H U K H A

DAGANA

T R O N G S A

T SI R

AN

G

Z H E M G A N G S A R PA N G

WANGDUEPHODRANG

T R A S H I G A N G

TRASHI'YANGTSE

Shingkarap

Thunkar

Daifam

Wamrong

Panbang

Panka

Yebilaptsha

Tang

Kisona

Tendru

TangoChari

Khasadrapchu

Lobesa

Nganglam

Monggar

Pheuntsholing

Paro

Haa

Samtse

Chhukha Daga

Damphu

Sarpang

Zhemgang

Trashigang

Lhuentse

JakarTrongsa

Wangdue

Punakha

Gasa

SamdrupJongkhar

Pema Gatshel

Lingmithang

Trashi’Yangtse

THIMPHU

Sankosh

Kuru

Chu

Paro Chu

Haa Chu

Wang Chu

Pho C

hu

Man

gde

Bumthang

Man

as

Tongsa Chu

Kulong Chu

H i m a l a y a M o u n t a i n s

G A S A

THIMPHUPUNAKHA

P A R O

H A A

S A M T S E

M O N G G A R

PEMAGATSHEL

SAMDRUPJONGKHAR

B U M T H A N G

L H U E N T S E

C H H U K H A

DAGANA

T R O N G S A

T SI R

AN

G

Z H E M G A N G S A R PA N G

WANGDUEPHODRANG

T R A S H I G A N G

TRASHI'YANGTSE

Shingkarap

Thunkar

Daifam

Wamrong

Panbang

Panka

Yebilaptsha

Tang

Kisona

Tendru

TangoChari

Khasadrapchu

Lobesa

Nganglam

Monggar

Pheuntsholing

Paro

Haa

Samtse

Chhukha Daga

Damphu

Sarpang

Zhemgang

Trashigang

Lhuentse

JakarTrongsa

Wangdue

Punakha

Gasa

SamdrupJongkhar

Pema Gatshel

Lingmithang

Trashi’Yangtse

THIMPHU

Sankosh

Kuru

Chu

Paro Chu

Torsa

Haa Chu

Wang Chu

Pho C

hu

Man

gde

Bumthang

Man

as

Tongsa Chu

Kulong Chu

To Alipur Duar

To Goalpare

To Goalpare

To Gamba

To Gorumara

To Cona

To Guahati

To Guahati

To Guahati

H i m a l a y a M o u n t a i n s

89°E 90°E 91°E

90°E 91°E 92°E

92°E

27°N

28°N

27°N

28°N

BHUTAN

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other informationshown on this map do not imply, on the part of The World BankGroup, any judgment on the legal status of any territory, or anyendorsement or acceptance of such boundaries.

0 10 20 30

0 2010 30 Miles

40 Kilometers

APRIL 2012

BHUTANSELECTED CITIES AND TOWNS

DZONGKHAG (DISTRICT) CAPITALS

NATIONAL CAPITAL

RIVERS

MAIN ROADS

RAILROADS

GEWOG (SUB-DISTRICT) BOUNDARIES

DZONGKHAG (DISTRICT) BOUNDARIES

INTERNATIONAL BOUNDARIES

IBRD 33373R2