In Bhutan, there has been a positive move towards further decentralization and with the transition to constitutional democracy in 2008, the Constitution as well as the newly approved Local Government Act of Bhutan 2007 provide for further power and authority to be given to decentralized bodies and elected representatives at local level.

Through the Local Governance Support Programme (LGSP), harmonized support to Royal Government of Bhutan (RGoB) will be provided to support the establishment of a fully fledged and effective local governance system in Bhutan. The programme will begin by July 2008 and operate till June 2013, coinciding with the 10^th Five Year Plan (FYP) period, and will support the objectives and goals of the 10^th FYP.

The LGSP will contribute towards improved service delivery for poverty reduction and realization of the MDGs. Support will be provided to reach the following five strategic outputs:

1. Effective and transparent financing mechanism for local government service delivery in place and well functioning.

2. Inclusive, efficient and accountable public expenditure management procedures for local government established and being used.

3. Effective national support/training mechanism for local government personnel and elected people in place.

4. Central governments policy, regulatory, support and supervision functions strengthened.

5. Effective models for integrated public service and information delivery at local levels piloted.

More specifically, the support provided through the LGSP will:

• Assist to strengthen and widen the block grant mechanism and provide budget support to capitalize the Gewog capital grants. The resources will not be targeted to certain Gewogs but be pooled as local government budget support and become fungible with RGoB resources.

• Further improve the overall public expenditure management procedures of planning, programming, budgeting, procurement, implementation, reporting, asset management, and monitoring and evaluation

• Further improve overall capacity development and training for local governments.

• Continue to build capacity in accountability and transparency.

• Develop and pilot a block grant facility in at least 2 districts.

• Help to enhance policy support for local government

• Effective models for integrated public service and information delivery at local levels.

The LGSP builds upon the achievements and lessons learned from previous programmes in support of decentralization and local governance in Bhutan, and takes into account recommendations from the Good Governance Plus and other more recent exercises with relevance to local governance and decentralization.

The LGSP will also provide a strategic platform for government to leverage financial support for improving local level infrastructure and services and build up mechanisms into which other, larger funding partners can pool funds, through budget support to finance local government grants nationally and coordinate and program other inputs to support decentralization in Bhutan such as capacity development, logistics, technical cooperation and M&E support. Support will be provided to explore possibilities and further develop a mechanism for DPs to pool resources for the funds which sit outside the budget support for Gewog capital grants.

• The new Constitution and new Local Government Act provide a strong framework for decentralisation. Government also very keen for continued UNCDF support, and appreciative of past support.

• A draft 10th Five Year Plan was launched at the beginning of February 2008 in connection with the Bhutan Round Table Meeting. It is expected that the draft 10^th FYP will approved by the new parliament in its entirety by July 2008. Chapter 5 of the 10^th FYP¹ describes cross cutting development themes which are critical to the attainment of national development objectives. These are: decentralized governance, employment, women in development, information and communications technology, environment and HIV/AIDS.

• UNCDF and UNDP have been actively engaged in supporting the RGoB's decentralization process since 1997 with support for piloting block grant funding and improved planning and budgeting under the Gewog Development Facilitating Activities (GDFA) in 10 Gewogs. This was later expanded under the Decentralisation Support Programme (DSP) in 2003-06 to 32 Gewogs in 5 districts. The UNDP/UNCDF DSP programme was also supported by SNV and co-financed by Danida - was subject to a mid-term evaluation at the end of 2005 with a view to closure by mid 2007. The evaluation highlighted the strengths and achievements of the programme as well as a number of challenges which any future support should consider.

• Development partners working in the area of decentralization and local governance, including UNDP, UNCDF, Danida, SNV, SDC, Helvetas and JICA are taking initiative towards greater harmonization and alignment to support this very positive but challenging move towards greater decentralization.

• The responsibility of implementation of the progamme rests with the Local Development Division of the Gross National Happiness Commission (GNHC). To oversee overall programme activities, a LGSP outcome board/steering committee will be formed.

National coverage - with some local piloting

External monitoring review and evaluation activities will be comprised of the following:

• Gewog annual capital grant facility: Annual assessments of the local governments' attainment of the minimum conditions of access to the grant will be undertaken each year by GNHC.

• Annual Joint Supervision missions: These missions will be represented by all DPs and can take a specific issue focus as well as provide short term technical backstopping as and if required on specific issues.

• Mid-term evaluation: A mid term evaluation will be undertaken 24 months after project start-up. The evaluation will:

  • Assess overall project progress to date;

  • Evaluate the procedures for local level planning, programming, budgeting, and implementation extended by the LGSP to local governments;

  • Evaluate the effectiveness of the Gewog annual capital grant facility as a fiscal transfer system and as an incentive to improve performance of the local governments; and

  • Examine project management and institutional arrangements to ensure that they are adequate for and consistent with the attainment of expected LGSP results and the implementation of agreed project activities.

• Final Evaluation: A final evaluation of the LGSP will take place some months prior to the expected completion of the first stage of program. In order to secure a smooth transition to a second phase of the programme, it is envisioned that SIG and donor negotiations for this would take place during year four of LGSP implementation and if agreed, a design mission would take place in early 2012.

• Approval of prodoc.

• Resource Mobilization.