1.1 Introduction

The Kingdom of Bhutan was formed through a formal Indo-Bhutanese accord in 1949 where areas of Bhutan were returned by the British and India's responsibilities in defense and foreign relations were defined. There are over 100,000 Bhutanese refugees in Nepal which are housed in seven United Nations Office of the High Commissioner for Refugees camps.

1.2 Geography

Bhutan has a total area of 47,000 square kilometers and is landlocked between China and India and controls key Himalayan mountain passes to its north bordering China covering 470 kilometers

Source: Ministry of Foreign Affairs, Kingdom of Thailand

1.3 Socio-economic Profile

Demographics

Bhutan is primarily comprised of the ethnic group, Bhote 50% and ethnic Nepalese 35% and indigenous or migrant tribes comprising 15% of the population. The national language is Dzongkha with various Tibetan and Nepalese dialects.

Lamaistic Buddhism accounts for approximately 75% of religious beliefs while Nepalese influenced Hindu comprises the remaining 25% of beliefs.

Population

In 1999, Bhutan's population was 657,548 according to the Planning Commission of the Royal Government of Bhutan. There are reported to be 125,000 Bhutanese refugees living in Nepal and India, 105,000 in Nepal and another 20,000 in India. Thus, the total population of Bhutan was estimated at 782,548 (657,548 + 125,000). The World Bank's population figure for the year 2000 was 782,000.

Other estimates have placed the population level lower. In 2003, the National Statistical Bureau estimated the population at 734,340 based on a 2.5% growth rate applied to the National Health Survey conducted in 2000. The figure does not include refugees.

Population Estimates by Age and Sex 2003

Age	Male	%	Female	%	Total	%
0-4	56,855	15.3	56,603	15.6	113,458	15.5
5-9	52,813	14.2	53,549	14.7	106,362	14.5
10-14	45,061	12.2	43,915	12.1	88,976	12.1
15-19	33,491	9.0	32,536	8.9	66,027	9.0
20-24	28,966	7.8	29,337	8.1	58,303	7
25-29	25,033	6.8	25,012	6.9	50,045	6.8
30-34	22,660	6.1	22,248	6.1	44,908	6.1
35-39	21,253	5.7	19,886	5.5	41,139	5.6
40-44	17,876	4.8	16,796	4.6	34,672	4.7
45-49	14,464	3.9	13,414	3.7	27,878	3.8
50-54	13,612	3.7	12,832	3.5	26,444	76.6
55-59	12,092	3.3	11,306	3.1	23,398	3.2
60-64	11,090	3.0	10,397	2.9	21,487	2.9
65-69	6,379	1.7	6,580	1.8	12,959	1.8
70-74	4,414	1.2	4,398	1.2	8,812	1.2
75+	4,746	1.3	4,726	1.3	9,472	1.3
Total	370,805	100.0	363,535	100.0	734,340	100.0
Gender Mix	50.5%		49.5%

Labor Force

Based on the 2001 Population Census, there was a significant decrease in the total number of economically active laborers from over 57,000 in 1991 to almost 53,000 people in 2001 representing a drop of 7.25% over the 10 year period. Unemployment for the total population stood at 6% of the total active labor force in 2001. It should be noted that 54% of the total number of male unemployed persons were between the age of 15 and 24 years old, while 64% of the total number of females fell into the same age group.

Percentage Distribution of Employed Persons by Age, Sex and Area 1999

	Employed			Unemployed
	Urban	Rural	Total	Urban	rural	Total
Male	7.7	46.8	54.5	10.4	36.7	47.1
Female	3.3	42.2	45.5	15.8	37.1	52.9
Total	11.0	89.0	100.0	26.2	73.8	100.0

Poverty Levels:

According to the United Nations Development Programme (UNDP), in September 2000, Bhutan agreed to measurable goals and targets under the Millennium Development Goals. The first goal was to eradicate extreme poverty and hunger by 2015. The target established was to decrease the proportion of people whose income is less than US$1 per day by 50% between 1990 and 2015. According to the UNDP, the standard of living has improved dramatically since planned development began in the 1960s. However, it is estimated that 31.7% of the current population lives under the national poverty line which has been established at Nu740.36 per capita per month. Of the 31.7% under the national poverty line, it is estimated that only 4.2% of the urban population is poor, against 38.3% of the rural population, which makes poverty in Bhutan essentially a rural phenomenon. Inequalities are relatively high, with the richest 20% of the population consuming almost eight times more than the poorest 20%.

Economic Indicators

Budget

The total budgeted outlay in the 9th Five Year Plan is Nu70 billion (US$1.5 billion). According to the 9th Five Year Plan, the Ministries of Health and Education comprise 10.7% of the total budget outlay and allocation during the 9th Five Year Plan. The Ministry of Health comprises 6.4% of the overall budget, while the Ministry of Education comprises 3.7%. Total outlays are budgeted at Nu.4.5 billion (US$94 million) and Nu.2.6 billion (US$54 million) for the Ministries of Health and Education, respectively.

Financial Outlays for the 9th Five Year Plan (2002 - 2007)
(in millions)

Organization	In Nu	In US$	%
Autonomous Agencies	9,621.8	200.7	13.7
Ministry of Agriculture	4,548.4	94.9	6.5
Ministry of Finance	1,612.1	33.6	2.3
Ministry of Foreign Affairs	1,454.9	30.4	2.1
Ministries of Health and Education
Secretariat	129.1	2.7	0.2
Ministry of Health	4,505.8	94.0	6.4
Ministry of Education	2,597.0	54.2	3.7
Department of Employment and Labour	242.6	5.1	0.3
Total Ministry of Health and Education	7,474.5	155.9	10.7
Ministry of Home Affairs	617.0	12.9	0.9
Ministry of Trade and Industry	8,561.5	178.6	12.2
Other	8,606.0	179.6	12.3
Dzongkhags / Gewogs	17,120.8	357.2	24.5
Total Plan Outlay	70,000.0	1,460.5	100.0

1.4 Government

The Chief of State is King Jigme Singye Wanchuck. The Head of Government is the Chairman of the Council of Ministers which has been Lyonpo Yeshey Zimbo since August 2004. The Council of Ministers is nominated by the Monarch and approved by the National Assembly. Members serve a fixed five-year term.

The National Assembly (Tshogdu) holds 150 seats of which 105 are elected from village constituencies, 10 represent religious bodies and 35 are designated by the Monarch to represent the government. Members of the Tshogdu serve three-year terms.

1.5 National Social Welfare System

National Pension and Provident Fund

On March 30, 2000, the Royal Government created the National Pension and Provident Fund (NPPF) of Bhutan as an autonomous organization responsible for the management and administration of the Civil and the Armed Forces old age retirement plans in Bhutan. It functions under the direction and supervision of the National Pension Board consisting of members representing various stakeholders. Independent Committees such the Government Working Committee and the Investment Advisory Management Committee support the National Pension Board for providing supervision, guidance and advices on the operations of the National Pension and Provident Fund.

After taking over the Government Employee's Provident Fund, which had been in effect since 1976 administered by the Royal Insurance Corporation of Bhutan, it was restructured and replaced by the National Pension and Provident Fund Plan. It constitutes a two-tiered old age protection plan with the objective to provide monthly income as well as lump sum payment to the members on retirement.

Tier 1 covers the National Pension Plan, which is a partially funded Pay-As-You-Go system defined benefit scheme. It is an old age security protection scheme that obtains contributions during the working period and provides benefits after retirement to its members and their spouses.

Tier 2 covers the National Provident Fund Plan, which is a fully funded defined contribution scheme. Under the scheme, members receive lump sum payments of accumulated balances upon retirement.

Currently, the members of the National Pension and Provident Fund Plan are civil servants, employees of Government owned corporations and joint-sector companies. In addition, the armed forces of the Kingdom are covered under a separate scheme. There are plans for the old age retirement schemes to be gradually expanded to include sectors other than the civil servants and the corporations.

Members contribute to the NPPFP a minimum of 8% of his/her monthly salary. The employer, on behalf of an employee, makes matching contribution to the NPPFP.

1.6 Education Profile

Education System:

The development of a comprehensive education system in Bhutan was initiated in 1961. Prior to that time, there were virtually no modern education facilities apart from the traditional education given in monasteries. The present formal educational structure consists of one-year pre-primary, six years of primary, two years of lower secondary, two years middle secondary, two years higher secondary school and a three year degree program.

According to the 9th Five Year Plan (2002 - 2007), the gross primary enrolment ratio was estimated to be 72% in 2001, and enrolment is increasing annually at a rate of 6-7%. According to the National Statistical Bureau, the gross primary enrolment rate increased to an estimated level of 81% in 2003.

Female students constitute 46% of enrolment and in 2000, there were 110,000 students being provided free education, spread over 382 schools and institutes. In addition, there were 5,000 students enrolled in the formal monastic order supported by the Government while an estimated 10,000 were enrolled in village temples as private students. Another 3,000 students were enrolled within the vocational and other training institutions run by various government agencies.

Adult literacy programs, initiated in 1993, provide literary courses to those who have not taken part in the system of formal education as well as early school dropouts. Approximately 10,000 adults attained literacy courses.

Currently, only 69% of those entering primary school complete the seven years of primary education, 54% complete class 8 and 39% reach class 10. In addition, 12-13% of students repeat their grades every year. Students in Bhutan are subject to national examinations at the end of grades 8, 10, and 12. The education structure is a steep pyramid with students leaving the system at every stage. Less than 1% of total enrolment is in higher education (degree level in college and above).

According to the Ministry of Education, in order to make education accessible to everyone, free tuition, textbooks, sports items, meals and boarding facilities are provided by the government. The Government also provides free stationary to its rural schools. This is supported by appropriate contributions from parents to make education services possible and to also engender a sense of participation amongst the communities at large. Rural communities contribute to the building and maintenance of their schools.

According to the 9th Five Year Plan, students who leave schools are increasingly encouraged to enter vocational training. However, the present vocational education system is both inadequate and inefficient and is an unpopular option for most students due to poor working conditions, and social misperceptions of blue-collar jobs and working in the private sector.

Enrolment Ratios:

The gross primary enrolment rate in 2003 was estimated at 8.1%. There were 145,249 students enrolled in 426 schools/institutions and 365 non-formal education centers. Of the 426 schools and institutions only 18 were privately run while the remaining are government operated. In 2003, there were 90 community primary schools catering to small and rural villages. Community primary schools are the basic level in the primary school system, which caters to a specific community, village or a cluster of defined villages. The number of non-formal education centers expanded from 6 in 1992 with 300 students to 365 centers with 128,838 students in 2003. The non-formal education centers provide only basic literacy courses of reading and writing.

Public Expenditure on Education

According to the 9th Five Year Plan, the total outlay for the education sector is budgeted at Nu.10,209.4 million (US$213 million) of which, Nu.2,597.0 million (3.7% of the total budget) is for the central programs, Nu.7,264.2 million (10.4% of the total budget) for Dzongkhags, and Nu.348.277 million (0.5% of the total budget) for Gewogs.

Literacy Rates

According to the UNDP, the overall literacy rate of Bhutan is approximately 43% with literacy in urban areas significantly higher at approximately 70% and rural areas significantly lower at approximately 36%. Females had a significantly lower literacy rate as compared to males in both urban and rural areas as noted below:

Literacy Rates of the Surveyed Population 6 years and older by Area and Sex

Area	Male	Female	Total
Urban	81.7	59.9	70.4
Rural	47.3	26.5	36.5
Total	53.9	32.8	42.9

1.7 Health Profile

The Ministry of Health oversees a widespread network of health facilities across Bhutan covering approximately 90% of the population. Healthcare is delivered in an integrated system through an organized structure at the National, Regional and District level. Hospitals serve as referral centers followed by Basic Health Units (BHUs) at the community level. Extended health centers (outreach clinics) and mobile health units support the Basic Health Units.

As of 2002, there were 29 hospitals, 166 Basic Health Units and over 455 outreach clinics. According to the Department of Health, there were 122 doctors and 1,023 hospital beds, 27 district health supervisory officers, 173 health assistants, 175 basic health workers and 500 nurses.

1.8 Information Communication Technology

According to the Central Intelligence Agency of the United States, there were over 25,000 main land lines in use as of 2003 with 8,000 cellular phone subscribers. The number of Internet hosts in 2003 totaled 985, while there were an estimated 15,000 Internet users. The Internet code for Bhutan is .bt.