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World Bank - Bhutan 2nd Urban Development Project


Washington, D.C., March 7, 2006—The World Bank today signed a Letter Agreement to act as the administrator of a US$700,000 grant from the Government of Japan. The objective of the grant is to provide funding to prepare the Bhutan Second Urban Development Project, which aims to support sustainable management of urban growth and to increase the availability of serviced land in selected urban areas.

The grant will fund four components related to the preparation of the project:

• Feasibility studies and engineering designs for priority infrastructure investments in Thimphu and selected regional towns.

• Environmental and social analysis of potential negative impacts of the proposed project with recommendations on mitigation measures and management plans.

• Training and operating costs for stakeholders and project staff at the central and local government levels.

• Other studies and analytical work which may be required over the course of project preparation.

“In the past few years, Bhutan has experienced very rapid rates of urbanization with only a limited amount of livable land available,” said Alastair McKechnie, World Bank Country Director for Bhutan. “Urbanization is inevitable in Bhutan given its very low population density and the need to create productive jobs in the private sector. Developing capacity to respond to this growth has become a focal point of the government’s attention. It has studied the approaches used in a number of countries and modified them for Bhutanese circumstances.”

The proposed Second Urban Development Project, which will be prepared with funding from this grant, will support the Royal Government of Bhutan’s aim to provide infrastructure services to all people in the country while ensuring sound urban environmental management and long-term sustainability of service provision. This will be achieved through construction of critical infrastructure systems such as water supply, drainage, and access roads in currently underserved areas and through strengthening capacity of central and local institutions to manage urban growth and to deliver infrastructure services.

“The Bank is currently supporting infrastructure development in 10 secondary towns in Bhutan under the First Urban Development Project,” said Toshiaki Keicho, Senior Urban Environment Specialist and Task Leader for Second Urban Development Project. “The Bank’s continued engagement in the proposed Second Urban Development Project reflects the current excellent partnership with the Royal Government of Bhutan under the first project and our strong support for the government’s commitment to environmentally sound and culturally appropriate urban development.”

The Policy and Human Resource Development (PHRD) grant funds are provided by the Government of Japan and administered by the World Bank. The PHRD Fund, established in 1990, is one of the World Bank’s largest sources of grant funds available to borrower countries.

For more information on World Bank activities in Bhutan, please visit:

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