The European Union-Bhutan cooperation started with a development project in 1982 focusing on renewable natural resource. In 1985, diplomatic relations between the Royal Government of Bhutan and EU were established. This relationship was further cemented in 2004, when the EU and Bhutan held their first biennial consultation, covering all aspects of bilateral relations, regional and international developments, as well as discussions on subjects of mutual interest.

The 8th Biennial consultation took place on 5 November, 2019 in Paro. During the consultations, the two sides exchanged views on a wide array of topics and agreed that EU-Bhutan relations have gained political momentum with several meetings held at the highest levels in recent years.

EU relations with Bhutan are grounded on a longstanding and robust friendship. We work together to safeguard women and children's rights, promote gender equality, good governance and democratic values, combating climate change, reducing poverty and fostering cooperation with civil society organisations.

The EU Ambassador and Head of Delegation of the EU to India , based in New Delhi is concurrently accredited to Bhutan. Bhutan has an Embassy in Brussels, accredited to the EU and to several EU Member States. Regular visits of the EU Ambassador to Bhutan, often jointly with Ambassadors of EU Member States, provide opportunities for in-depth discussions to further strengthen the EU-Bhutan partnership.

In 2015, the closing year for the Millenium Development Goals, the Prime Minister of Bhutan, Mr Tshering Tobgay, was the first ever Bhutanese Head of Government to visit Brussels. In June 2019, the newly elected Prime Minister Dr Lotay Tshering also visited Brussels. At the invitation of the President of the then European Commission, Mr Jean-Claude Juncker, the dignitaries participated at European Development Days (EDDs) in 2015 and 2019 respectively.

The successful September/ October 2018 elections (third since 2008) confirmed the country's peaceful transition from absolute monarchy to democracy. During the 2018 vote the EU steered a 'DiploWatch' mission of 11 countries in a visitors' programme arranged by the Bhutanese Election Commission, witnessing the polls in 7 districts.

Robust EU-Bhutan relations are also reflected in Parliamentary ties. In October 2017, a Parliamentary delegation led by the Bhutanese Speaker of the National Assembly visited Brussels followed by a visit of the EP to Thimphu in May 2019, led by the chair of the European Parliament Delegation for South Asia. In addition, through an EU Global Project to strengthen the capacity of Parliaments called 'Parliaments in Partnership', the Bhutanese National Assembly and the National Council of Bhutan are developing links with EU Member State Parliaments. Parliaments currently engaged in the project with Bhutan include those from Hungary, Greece and Denmark.

The Kingdom of Bhutan is expected to graduate from the Least Developed Country group in a not too distant future. The EU is committed to continue its support to Bhutan during the transition and beyond the country's graduation. In this context, new and innovative tools will be developed for the financing of development activities, adopted to the evolving circumstances.

Further, the Royal Government of Bhutan and the European Investment Bank (EIB) are working towards a possible Framework Agreement, which once ratified by the Parliament of Bhutan, would enable the EIB to provide sustainable finance for physical and social infrastructure, at the request of the Bhutanese government and relevant private sector counterparts.

In Bhutan, EU's Official Development Assistance has made a substantial contribution to the national development agenda, helping to meet some of the costs of the country's economic growth, expansion of its infrastructure, the advancement of local government and rural development systems and ambitious programmes to fight poverty and inequality.

Cooperation between the EU and Bhutan began in 1982. Since then EU's actions have focused on intensive support towards poverty reduction, food security and, most recently, democratisation. Since Bhutan's economy is predominantly rural, the foremost challenge has been to bring health and education, higher agricultural productivity and rural development to small, far-flung habitations, due to poor access to roads, markets and modern communications.

Bhutan is currently implementing its 12th Five Year Plan(FYP) 2019-2023. It will cover the last mile before Bhutan's graduation from the Least Developed Countries (LDC) group in 2023. The existing EU assistance includes € 42 million under the Multi-annual Indicative Programme( MIP) 2014-2020. The current EU MIP 2014-2020 was launched in Bhutan by the former European Commissioner for Development, Mr Andris Pielbalgs. Two focal sectors have been identified for support in MIP

• Sustainable Agriculture and Forestry and Climate Change
• Local Government and Civil Society

To support climate change and export diversification of agricultural and handicrafts related products, an additional € 9 million has been provided to the thematic and regional programs. In 2019, a top-up of € 7.3 million was confirmed for contribution to Bhutan's decentralisation efforts and improving the government's financial space to implement the 12th FYP. This would entail establishment of a National search and rescue center and wider access to safe and drinking water. Through a technical cooperation project with the Ministry of Agriculture and Forests, the EU is providing assistance of € 4.6 million from 2016 to 2020, included as part of the previous MIP.

The EU's support to Bhutan is very successful as a result of robust political ties and excellent on the ground collaboration with the Bhutanese authorities. EU cooperation covers key aspects of Bhutan's development in alignment with the 11th and now the 12th FYP.

Key Sectors for the EU in Bhutan

1. Sustainable Agriculture, Forestry and Climate Change

2. Local Government & Civil Society

3. Trade related technical assistance

4. Sustainable consumption and production (Switch Asia)

5. Higher Education( ERASMUS)

6. Other Areas

Overall, the portfolio of Bhutan including the MIP, thematic and regional envelope for the period 2014-2020 is around € 72 million

Good Governance and acccountability are key points of convergence between the EU and Bhutan development cooperation. The EU has provided support to local government reforms in Bhutan since 2013, and in 2017 renewed the support to this sector once again. The EU's support to local authorities takes shape through the programme, 'Capacity Development for Local Government and Fiscal Decentralisation' in Bhutan, which began work in 2017.

With a duration of almost 5.5 years, the programme aims to support the following objectives:

a) Improve the financial capability of the government to implement the local government reforms

b) Promote decentralisation and local government reform

c) Improve service delivery at local levels

d) Improve governance in particular at local level and more specifically public finance management

Some of the key achievements in the Local Government (LG) sector include :

1. All 225 Local Governments have undertaken:

- disseminating budgets and plans, and their implementation status

-using integrated national M&E system as a system for planning, budgeting and reporting

2.  31 business initiatives commenced through green economic development

3. 50 Local Governments have been supported through the performance based grants

4. Over 1000 LG functionaries trained

5. Women representation in LG's have increased

The support provided by the EU to this sector will improve transparency and accountability towards the citizens as well as promote green economic development creating jobs and economic opportunities. Capacity development of local governments will incorporate gender, environment, climate change and poverty alleviation schemes. Additionally, capacity development of female LG functionaries will augment women's participation in local governance, learing to direct and tangible impact on the lives of people, especially in remote areas.

Support to the Local Governments and fiscal decentralisation thus remains a significant component of the EU support to Bhutan. During the period of 2017-22, approximately €27.3 million will be disbursed for this sector, including EUR 4 million for the water flagship programme and € 3.3 million for the National training centre for search and rescue. In response to the needs arising due to Covid 19, €4 million was released in March 2020 to support the Local Government sector. Another release of €5.7 million is expected in the latter part of 2020.

Public Finance Management

The EU, together with Austria, supports the Royal Government of Bhutan's current reforms in the area of public finance management through a multi-donor initiative (EUR 3 million) administered by the World Bank. The project started in 2017 and the major reforms undertaken include

• Introduction of electronic payment system (ePEMS)
• Upscaling of electronic Government Procurement Systems(e-GP) and the revision of the Procurement Rules and Regulations
• Budgets to Gewogs as Annual Grants and improving the budget documentation and reporting

Other ongoing key PFM reforms include the implementation of the Goods and Services Tax(GST); of cash-basis International Public Sector Accounting Standards (IPSAS); moving towards an Integrated Financial Management Information System (IFMIS) and Competency Framework for Finance Personnel.

Civil Society Organisations

In Bhutan, officially recognised civil society organisations (CSOs) have only emerged since 2008. Bhutan passed the CSO Act in 2007 and there are approximately 50 CSOs currently registered with the CSO Authority.

Since 2017, EU assistance of €2.5 million, through a programme implemented by Swiss CSO Helvetas supports a CSO funding mechanism and a dialogue between CSOs and public institutions at central and local level. Under the programme, there are twenty ongoing projects that promote good governance- e.g civic engagement, transparency, socio-economic development and women's empowerment.

A comprehensive Capacity Development Plan for civil society has also been prepared as a result of EU's support to civil society organisations in Bhutan. This plan was developed in collaboration with the relevant stakeholders and is expected to build capacities of CSOs as active development actors, capable of contributing to Bhutan's inclusive and sustainable economic development.

An additional € 1.5 million has been allocated for 2020 in support of civil society organisations and the Parliament besides the aforementioned €2.5 million. In response to Covid-19, this assistance will also take into account the medium-term needs that are emerging as result of the pandemic.

Trade Related Support

The EU-Bhutan Trade Support project aims at economic diversification and export promotion. The project related activities support improving of the national trade and investment regulatory framework, contributing to increased exports of horticulture products (ginger, turmeric, mushrooms) and textile handicrafts ( home decor pieces, shawls, stoles). The project mainly seeks to increase incomes along the two value chains and contribute to economic growth and poverty reduction.

Project activities include trade capacity building and technical assistance, with a strong focus on training and skills development. The EU expects to reinvigorate the Brand Bhutan initiative by strengthening national skills for formulating and implementing trade and investment policies, developing integrated and market-led value chains and building supply-side capacities to export products. The project integrates crosscutting issues, particularly women and youth, gender equality and protection of the environment, into the design and implementation of the activities, in line with Bhutan's policies and priorities. The EU provides a support of €4 million as trade assistance to not only help increase and diversify Bhutanese exports but also to respond to the expected economic blows in the sector and further boost the economy. In response to Covid-19, an additional amount of  €1 million will be mobilised in order to provide further assistance to the trade sector building on the ongoing work.

The European Union has in the past supported sustainable tourism in Bhutan with a grant from its SWITCH Asia programme.

In the current context, through a multi-country project aimed at promoting sustainable consumption and production, a project implemented by Fairtrade, involving the Bhutan Chamber of Commerce Industry (BCCI) was commenced in 2018. BCCI has initiated discussions with various Small and Medium Enterprises to explore the development of sustainable value chains and add sustainable products to the existing trade in agri-products happening between Bhutan and India.

In mid-2020, two new projects of a total value of approximately € 3.4 million will be implemented in support of the tourism sector and promoting sustainable production and consumption. The implementing partners of these two initiatives are Association of Bhutanese Tour Operators and the German organisation Gruppe zur Förderung der Angepassten Technologie (GRAT). These two projects, expected to commence in 2020, will be vital in promoting local economy and tourism, and will be instrumental in supporting the country to address COVID 19 challenges to the sector.

The support to Rural Livelihoods and Climate Change Adaptation in the Himalaya initiative aimed to assist vulnerable mountain communities in the Hindu Kush Himalaya (HKH) to mitigate and adapt to climate change. The five-year regional programme which also targeted Bhutan among other countries, started in 2013, with the goal of using natural resources in a more sustainable way thereby protecting the environment.

Other Areas

Migrating EU Expertise(MIEUX): Under the MIEUX programme-aimed at enhancing capacities of public authorities of partner countries to better manage migration and mobility- the EU through its Member States is providing technical expertise in border management and document security to the Department of Immigration, Bhutan.

Asi@Connect: The EU co-funded multi-country Asi@Connect project provides a dedicated, regional high capacity and high quality Internet network, Trans-Eurasia Information Network(TEIN), for research and education communities across Asia and Europe. It leverages e-infrastructure developed for public service. The project currently assists in connecting all 9 colleges under Royal University of Bhutan including the office Office of Vice Chancellor and 10 hospitals located around the country, and provides eduroam service (a secure, world-wide roaming access service developed for the international research and education community allowing students, researchers and staff from participating institutions to obtain internet connectivity across campus and when visiting other participating institutions by simply opening their laptop)

South Asia Regional Training and Technical Assistance Centre (SARTTAC): SARTTAC's goal is to help its member countries including Bhutan, strengthen their institutional and human capacity to design and implement macroeconomic and financial policies that promote growth and reduce poverty. The EU contributes with €10 million to this collaborative venture between the IMF and member countries.

South Asia Food and Nutrition Security Initiative (SAFANSI): The EU contributed with €13 million to the multi-country SAFANSI programme that was created to advance the food and nutrition agenda and foster inter sectoral action in the countries of the South Asia region. Bhutan benefitted from this regional programme, through two projects of which one aimed at improving dietary diversity and care practices of pregnant and nursing women in remote rural areas. The second initiative was to support knowledge sharing and capacity building of Bhutan's Ministry of Agriculture and Forests, and learn from community based, market-driven approaches in Nepal and Pakistan.

The European Union-South Asia Capacity Building for Disaster Risk Management Programme (EU-SAR DRM Programme): The five-year multi-country programme, launched in 2015 with a budget of €10 million, aims at building weather and climate-related disasters resilience in South Asia. This is done by strengthening disaster risk management and hydro-meteorological (hydromet) service capacity. It focuses on enhancing capacity among regional bodies, national agencies, and other counterparts in member states of the South Asia Association for Regional Cooperation(SAARC). The programme supports projects in the region.

INTER PARES

Bhutan also benefits from the recently launched INTER PARES programme of the EU aiming to strengthen capacities of Parliaments in partner countries. The multi-country programme is being implemented by the International Institute of Democracy and Electoral Assistance (International IDEA) with the expertise of EU Member state parliaments. The support will focus mainly on enhancing legislative and oversight capacities of the Parliament of Bhutan, establishing and strengthening institutional linkages with other parliaments and implementing e-parliament initiatives in Bhutan. The programme will lay emphasis on both elected Members of Parliaments(MPs), particularly in their capacity as members of parliamentary committees, and on the staff of parliaments' secretariats. Currently, three EU Member State Parliaments i.e Hungary, Denmark and Greece have partnered with the project in support of the National Assembly and the National Council of Bhutan

Multi-annual Indicative Programme (MIP) 2014-2020, Bhutan

Thematic and regional programmes