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Press Releases

June 23, 2011

Signing of Japanese ODA Loan with Kingdom of Bhutan
—Supporting Economic Development and Poverty Reduction through Electrical Distribution Network Infrastructure in Remote Locations—

PhotoSigning Ceremony

1. On June 23, the Japan International Cooperation Agency (JICA) signed a Japanese ODA loan agreement with the Government of the Kingdom of Bhutan in the capital city of Thimphu to provide a loan of up to 2.187 billion yen for assistance for the Rural Electrification Project (Phase 2).

2. With its bountiful water resources, Bhutan has generated 6.897 GWh of hydroelectric power annually (2009). Much of the generated power is exported to India, however, as its principal source of foreign currency, while domestic power consumption only amounts to 1.372 GWh (2009). 70 percent of the total population and 98 percent of the poor reside in the rural villages scattered in mountainous areas, but merely 54 percent of those rural households have been electrified as of 2008. This lack of access to electricity has been an obstacle to economic activities and improving their livelihood. Additionally, people have faced the problems of adverse health effects and greenhouse gas generation due to the use of fossil fuels and firewood for cooking and heating. Given these circumstances, according to the JICA’s Development Study “The Integrated Master Plan Study for Dzongkhag-wise Electrification in Bhutan” in 2005, improving the household electrification rate was raised as the most pressing development needs, to enable the use of farm equipment to improve agricultural productivity and nighttime domestic industry.

3. Under the Rural Electrification Project (Phase 2), access to electricity for un-electrified households and other facilities will be provided by constructing distribution lines and related facilities in the rural areas of Bhutan, thereby improving living standard of local residents including the poor, promoting economic and social development, and mitigation of climate change in the concerned areas.

4. JICA has a history of supporting rural electrification in Bhutan, including the above-mentioned Development Study, the First Phase of the Japanese ODA Loan for Rural Electrification Project started in 2007, and the related technical cooperation project “Improvement of Efficiency for Rural Power Supply” from 2008 to 2011. The First Phase in particular progressed more quickly than initially planned, accelerating rural electrification. The Phase 2 will continue that effort, contributing to the rural household electrification scheduled in the above-mentioned Master Plan, and will provide the construction of a distribution network that will serve approximately 3,700 households. It is expected that all households in Bhutan will be electrified through this project as well as assistance from the Asian Development Bank and others. The loan funds will be mainly allocated for the construction of low- and medium-voltage distribution lines, the installation of transformers, public works and consulting services.

5. The Government of Bhutan promotes a unique development policy, the objective of which is the realization of an equal, happy society without an undue focus on raising the gross national product and other economic indexes, along the lines of the basic principle of gross national happiness (GNH) proposed by the fourth King Jigme Singye Wangchuck. That policy was inherited by the current constitutional monarchy after the transition from an absolute monarchy in 2008. It is believed that the present project will contribute to “sustainable and equal socioeconomic development” and “environmental conservation,” major important policies of GNH. In addition, the electrification for all the households in Bhutan is a manifesto of the new government launched in the process of democratization of 2008, and the implementation of the present project will contribute to the development and establishment of democracy in Bhutan.

6. As electrification will also reduce the use of kerosene and other fossil fuels as well as firewood, it is predicted that the present project will lead to a decrease in deforestation and greenhouse gas emissions, positive results from the perspective of environmental preservation and fighting climate change. JICA is currently implementing the study on CDM[1] capacity development for the rural electrification of Bhutan and provides assistance to Bhutan for utilizing the CDM, an international framework for fighting climate change.

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Reference

1. Terms and Amounts of Loan

Project titleAmount (million yen)Annual interest rate (%)Repayment period (years)Grace period (years)Procurement terms
ProjectConsulting services
Rural Electrification Project (phase 2) 2,1870.20*0.014010General untied

* Climate Change Japanese ODA Loan

2. Executing Agency

Bhutan Power Corporation, Ltd.
Address: Thimphu, Bhutan (P.O. Box 580)
Phone: +975 (2) 325-095

3. Planned Implementation Schedule

  • (i) Completion of project: June 2013 – with completion of the construction work
  • (ii) Issuing of letters of invitation for consulting services (including construction monitoring): June 2011
  • (iii) Tender announcement of initial procurement package for international competitive bidding on project construction: June 2011

Note

  • [1] Clean Development Mechanism

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