Despite its small absolute size andpopulation, Bhutan is the most rapidly urbanizing country inSouth Asia. This urbanization has coincided with strongeconomic growth as the country shifts toward an economybased on contributions from manufacturing and servicesclustered in and around cities. Across the country, therehas also been remarkable convergence in terms ofinfrastructure coverage, however the quality of services, aswell as poverty and happiness levels vary widely betweenurban and rural areas. As detailed in the 12 Five Year Plan,Bhutan aims to balance sustainable development withdecentralization for greater administrative authority tolocal governments. Yet there remain significant challengesto local governments in managing urban expansion, forces ofcongestion and pollution and ensuring affordability ofhousing and equity of access to services. Each of thesefactors can reduce the livability, resilience and potentialfor economic competitiveness in Bhutan's growingcities. Based on consultations with the government, thepolicy notes provide a current assessment of and policy andinvestment recommendations for four critical areas: i)regional development, ii) municipal governance and finance,iii) urban resilience and iv) affordable housing.
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