The Context

Bhutan is a small landlocked kingdom on the southern slopes of the Eastern Himalayas. Its terrain is mostly mountainous, and 60 per cent of its territory is preserved in perpetuity as forest. The country is famous for its unique philosophy of Gross National Happiness (GNH), a metric that helps balance its development aspirations with the preservation of its cultural traditions and breathtaking natural environment.

Bhutan has achieved strong economic growth over the past three decades, and the number of people living in poverty has declined by over 50 per cent between 2007 and 2021. Nevertheless, poverty persists, with over 90 per cent of the country’s poor located in rural areas. The eastern region of Bhutan is more remote than the rest of the country, and as a result, IFAD has prioritized its in-country work there over the past 40 years.

Bhutan has one of the youngest populations in the world, with about 60 per cent under the age of 25. This both creates certain challenges for the country and also holds huge potential for development. With high rates of education (youth literacy is at 93 per cent) and near-ubiquitous access to the Internet and social media, the country’s youth tend to find urban occupations more enticing. This, combined with the lack of attractive job opportunities in rural areas, is leading to significant outmigration. (As of 2020, 57 per cent of Bhutan’s population lived in rural areas, down from 64 per cent in 2011.) As a result of these migration patterns, Bhutan is experiencing both overcrowding of its main cities and “brain drain” as its youth seek lucrative employment abroad.

Agriculture in Bhutan is practiced on scattered plots of land. Arable land is scarce, amounting to less than 8 per cent of the country’s territory. Nevertheless, the agriculture sector is the primary contributor to the national economy, employing 55.78 per cent of the population. Its contribution to GDP has increased, rising from 14.78 per cent in 2010 to 19.23 per cent in 2020. Regardless, most agricultural activity remains at subsistence level.

The country’s agricultural production faces many challenges, including climate change, natural disasters, declining farm productivity, human-wildlife conflict, water scarcity, labour shortages, limited post-harvest management and market access barriers. Furthermore, a lack of access to technology and the absence of an enabling environment for private sector investments, business development services, fair markets, and affordable credit place major constraints on rural agro-enterprise development. The effects of climate change – altered water availability, increasing temperatures during both day- and nighttime, extreme weather events such as cold snaps and giant hailstones, and shifts in the agroecological zones – are already impacting Bhutan’s agricultural productivity. Given the nation’s socio-economic dependence on agriculture, water resources and forests, the effects of climate change are proving to be a grave threat to the nation’s development efforts.

The Strategy

The Country Strategy Note 2022–2023 (CSN) defines IFAD's strategic engagement with the Kingdom of Bhutan for the purpose of assisting the Royal Government of Bhutan (RGoB) in achieving its development objectives. As such, the CSN is fully aligned with the RGoB’s 12th 5-Year Plan (2019–2023), the national Renewable Natural Resources (RNR) Strategy 2040, Bhutan’s Food Systems Pathways (as submitted to the UN Food Systems Summit), and the United Nations Sustainable Development Partnership Framework (UNSDPF 2019–2023) – all of which directly contribute to achieving the nation’s key development priorities for the agriculture and rural development sector.

The CSN contains two strategic objectives that guide IFAD operations in the country:

• SO1: Foster transformation of small-scale agricultural production into inclusive, equitable, diverse and resilient agri-food systems
• SO2: Create an enabling environment for private sector enterprise development in the agri-food sector, particularly to engage youth in lucrative commercial ventures

IFAD investments will seek to empower poor rural people to achieve greater food and nutrition security and higher incomes, while ensuring environmental sustainability. IFAD will continue to focus its efforts on smallholder farmers, women, and youth under this CSN. In particular, it will explore innovative opportunities for engaging youth in farming (crop, poultry and livestock). The menu of options will also be expanded to include off-farm activities as additional avenues for engaging youth within the sector.

Support for business development will be provided, specifically for aggregation and collection, storage and cold chains, packaging and branding, value-added processing, transportation and distribution, wholesaling, retailing and export. Furthermore, youth will be offered the skill-building and training necessary to work in the support services sector, namely renewable energy technologies, organic inputs (soil stimulants, bio-compost, bio-pesticides), infrastructure maintenance, the sale and rental of labour-saving equipment, financial and digital agri-services, and the provision of technical advice to farmers. These options will help create an enabling ecosystem that supports lucrative agroecological farming systems while attracting youth into entrepreneurial activities, capitalizing on their interest in digital technologies and offering real possibilities for a decent income.

The work of the CSN 2022–2023 will build on the ongoing efforts of the CARLEP programme and further advance the commercialization of vegetable and dairy value chains embedded in agroecological farming systems. CARLEP is currently engaged in the following key intervention areas:

• Undertaking participatory planning for establishing climate-smart villages
• Promoting permaculture and climate-smart agriculture
• Building capacity for the delivery of community agriculture extension
• Offering nutritional education through home gardening programmes
• Establishing multi-stakeholder platforms for facilitating marketing and enterprise development
• Building rural infrastructure – farm roads, irrigation, cold storage, electric fencing, sustainable land management
• Making rural financial services accessible
• Fostering improvements in management and coordination