The Bhutanese Leading the way.
The World Bank (WB) in an important move approved USD 300 mn financing for the Accelerating Transport and Trade Connectivity in Eastern South Asia (ACCESS) Phase 2 project.
Of the USD 300 mn USD 154 mn is in the form of grants.
The WB’s indicative lending envelope for FY 2025–29 could range from USD 175 mn which would be on a Performance Based Allocation (PBA) to an ambitious US$1 billion, if large infrastructure projects materialize.
The estimated PBA of US$175 million (approximately US$35 million per year) could be significantly increased by leveraging access to available Internation Development Association (IDA) windows. In IDA this is expected to include the Scale-Up Window and the Global and Regional Opportunity Window (GROW) for projects that address climate adaptation and mitigation and/or address global challenges while contributing to cross-border externalities.
International Finance Corporation (IFC) investments including from the Private Sector Window, and International Bank for Reconstruction and Development (IBRD) scale-up and enclave financing over the CPF period could further increase the available envelope.
Over the CPF period, IFC’s direct investments and mobilization can reach USD 100 mn or more, subject to government addressing key binding constraints that would enable IFC to invest/finance. Multilateral Investment Guarantee Agency’s (MIGA) potential guarantees through the WB Guarantee Platform could complement the lending envelope. This would be the first time that the WB seeks to deploy such a broad suite of instruments in Bhutan.
The USD 300 mn funding has three components. Under Component 1 which is Digital Systems for Trade, the project will support the implementation of the National Single Window; strengthening digital enablers; enhance cybersecurity; and improve digital connectivity and data resilience.
Under Component 2 which is Green and Resilient Infrastructure, the project will support improving road connectivity including supporting road construction of Gelephu-Tareythang Road, a missing link on Southern East-West Highway, implementation of the biodiversity management plan, preparation of feasibility studies, and upgrading of the Road Asset Management System (RAMS), piloting of performance based contracting, and road safety; and improving multimodal connectivity.
Under Component 3 which is Institutional and Policy Strengthening, the project will provide support to project implementing agencies, support for technical capacity building; policy/regulatory support; and infrastructure planning.
The approval of the USD 300 mn is part of the WB approved Country Partnership Framework (CPF), aligned with the Royal Kingdom of Bhutan’s 13th Five Year Plan, which focuses on creating more and better jobs and accelerating economic growth while safeguarding Bhutan’s unique cultural and natural heritage.
It will help increase private investment, enhance climate resilience, and build resilient infrastructure for better connectivity. All these efforts will help create more and better jobs for the citizens, particularly for women, youth and disadvantaged groups.
It focuses on improving the investment climate in job-rich sectors such as renewable natural resources, agribusiness, tourism, digital and creative industries. It also aims to facilitate access to finance and payment systems to further expand the market potential of these sectors. The strategy will also support health, education and skills development, which are preconditions for job creation.
It proposes a considerable increase in support to infrastructure financing to improve transport and digital connectivity, urban infrastructure, and support to the government’s ambitious plans to increase hydropower and other forms of renewable energy generation.
The new CPF envisions a substantial increase in support to match the government’s development and growth ambitions, including reaching upper-middle-income country by 2029.
