Country Partnership Strategy for Bhutan: Managing Corruption Risks

A. Corruption Risks in Bhutan

Corruption poses significant challenges in Bhutan, impacting the effectiveness of public financial management (PFM), procurement processes, and efforts to combat corruption.

Public Financial Management (PFM) Weaknesses

• Lack of skills in PFM at national and local levels
• Limited internal control and audit capability
• Fiscal risks of State-Owned Enterprises (SOEs) not well-monitored

Procurement Weaknesses

• Lack of procurement-related skills
• Little procurement planning and audit in public agencies
• Inadequate monitoring and quality assurance

Combating Corruption Risks

• Gaps in institutional capacity, particularly at the Anti-Corruption Commission (ACC)
• Corruption risks from political and electoral processes

B. Risk Assessment and Risk Management Plan

The Asian Development Bank (ADB) report uses a risk matrix to assess these corruption risks and proposes a comprehensive risk management plan to address them.

C. Proposed Risk Management Plan

To mitigate the identified corruption risks, the proposed risk management plan includes:

• Strengthening capacity in PFM areas through training and macroeconomic management
• Addressing procurement weaknesses through capacity-building plans and professionalization of the procurement cadre
• Improving monitoring and quality assurance in public agencies
• Enhancing the institutional capacity and independence of the Anti-Corruption Commission (ACC)

D. Conclusion

The report emphasizes that strengthening capacity in PFM and procurement areas is crucial to address corruption risks, particularly with an ambitious public investment program planned during the Country Partnership Strategy period. Risks to macroeconomic and fiscal resilience have heightened since the 2011 assessment and need to be a focus of investments in capability building and country monitoring.