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Programme Period: Jan 2014 – Dec 2015 Atlas Award ID: Project ID: PIMS # Start date: 1 Jan 2014 End Date 31 Dec 2015 Management Arrangements NIM

PAC Meeting Date

United Nations Development Programme

Country: BHUTAN

PROJECT DOCUMENT

Project Title: Scaling up of income generation through traditional crafts and textiles production and marketing

UNDAF/One Programme (2014 – 2018) Outcome 1 on Sustainable Development: By 2018, sustainable and green

economic growth that is equitable, inclusive, climate and disaster resilient and promotes poverty reduction,

UNDP Strategic Plan Environment and Sustainable Development

UNDAF/One Programme Output 1.3: Increased domestic and external trade and industry opportunities

that are pro-poor and gender responsive.

Executing Agency:United Nations Development Programme(UNDP)Bhutan

Implementing Partner:Ministry of Economic Affairs, Royal Government of Bhutan

Total resources required (incl. 8% GMS) USD 456,840 Total allocated resources: USD 456,840

Regular USD 108,000 Other: USD 348,840

o Government ________________

Brief Description

Bhutan remains on the UN’s list of 48 Least Developed Countries (LDC). The 2009 UN Committee for Development Policy rated Bhutan’s economic vulnerability at 52.9%, taking into account such key factors as exposure to natural shocks/ disasters and structural constraints inherent to the country. It places the country in the mid-range of all LDCs suggesting a high degree of vulnerability. The economy is still very much dominated by agriculture, livestock-raising and forestry for many rural communities. This translates into subsistence living close to the poverty line and vulnerability to external shocks and changes.

While overall unemployment in the country is low at 2.1 per cent in 2012, youth unemployment stands at 7.3 per cent. Among those who are regularly employed, 17.2% earns less than Nu 1,000 (approximately USD 20) a month. 95% of those underemployed is engaged in the agricultural sector.

Within this context, the overall objective of this project is to scale up income generation activities in both urban and rural areas to address underemployment and youth unemployment, which is a priority area for the draft 11th Five Year Plan of the Royal Government (July 2013 – June 2018), as well as in the One Programme/UNDAF (2014 – 2018). Based on a value chain analysis to be carried out by UNDP at 3rd Quarter 2013, this project will support 1) strengthening production capacity; 2) advocacy and strategic marketing; 3)enhancement of quality standards and product diversification catered to market needs; and 4) access to credit facilities for sustained business development and income generation.

Furthermore, advisory capacity and monitoring system of the Agency for Promotion of Indigenous Crafts (APIC) to track income generating activities and employment created by art and textile sector with disaggregated information on gender, age, geographic location and venerable population will be further strengthened with a view to paying a foundation as our exit strategy.

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Agreed by (Government-GNHC): Mr. Thinley Namgyel, Director

Date/Month/Year

Agreed by (UNDP): Ms. Hideko Hadzialic, UNDP Resident Representative a.i.

Date/Month/Year

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Table of Contents

Subject Page

1. Situation Analysis 5

2. Strategy 6

3. Justification for scaling up 6-7

4. Good practices and lessons learned 7

5. Project objectives and outcomes 7

6. Implementation arrangements 8

7. Results Framework 9-11

8. Budget outlay 12

9. Work-plan 13

10. Management arrangements 14

11. Terms of Reference for Value Chain Analysis 15-18

12. Visibility & outreach under the partnership project 19

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ACRONYMS

UNDAF: United Nations Development Assistance Framework

UNDP: United Nations Development Programme

JICA: Japan International Cooperation Agency

LDC: Least Developed Countries

UN: United Nations

APIC: Agency for Promotion of Indigenous Crafts

MoEA: Ministry of Economic Affairs

GNHC: Gross National Happiness Commission

SQE: Seal of Quality and Excellence

SO: Seal of Origin

SE: Seal of Excellence

SQ: Seal of Quality

PLaMS: Planning and Monitoring System

DTIS: Diagnostic Trade Integration Study

NES: National Export Strategy

SMEs: Small Micro Enterprises

JETRO: Japan External Trade Organization

UNIDO: United Nations Industrial Development Organization

ILO: International Labor Organization

MoLHR: Ministry of Labor and Human Resources

TCB: Tourism Council of Bhutan

MoAF: Ministry of Agriculture and Forestry

HAB: Handicraft Association of Bhutan

NIM: National Implementation Modality

FACE: Funding Authorization and Certificate Expenditures

SOP: Standard Operating Procedure

EIMS: Environment Information Management System

NIF: National Forest Inventory

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1. SITUATION ANALYSIS

1. BACKGROUND/SITUATION ANALYSIS

Economic vulnerability and prevailing underemployment

Bhutan remains on the UN‟s list of 48 Least Developed Countries (LDC). The 2009 UN Committee for

Development Policy rated Bhutan‟s economic vulnerability at 52.9%. It places the country in the mid-range

of all LDCs suggesting a high degree of vulnerability. The economy is still very much dominated by

agriculture, livestock-raising and forestry for many rural communities. This translates into subsistence

living close to the poverty line and vulnerability to external shocks and changes.

While overall unemployment in the country is low at 2.1 per cent in 2012, youth unemployment is

significantly higher at 7.3 per cent and over 11 per cent in urban areas. Furthermore, among those who are

regularly employed, 17.2% earns less than Nu 1,000 (approximately USD 20) a month. 95% of those

underemployed is engaged in the agricultural sector concentrated in rural areas.1

Underemployment refers to a lack of adequate work while being employed. Generally, extremely low

wages, menial, part-time and seasonal work are used as examples of underemployment. In Bhutan a

significant portion of the labor force is self-employed and works in the rural economy especially the

agricultural sector. With low productivity in subsistence conditions, the income generated through it on an

annual basis tends to be low.

Need for scaling up income generation opportunities

In order to address economic vulnerability and ensure human security, it is necessary to increase alternative

income generation opportunities. In the context of Bhutan, the production of indigenous arts and crafts has a

high potential as off-farm income generation activities.

According to the Diagnostic Trade Integration Study (2012) and the National Export Strategy (2012),

handicraft and textile are identified as priority areas for job creation which has direct impact on increasing

the income level of local producers and artists.

Furthermore, the Royal Government is also firmly committed under 10th and 11th Five Year Plan (2014 –

2018) to reducing poverty as well as promoting cultural industries as a means to alleviate poverty. After a

series of consultation with the Royal Government and civil society, this has become one of the main outputs

of new UN Development Assistance Framework/One Programme (2014 – 2018).

Challenges

Some initiatives to promote local cultural products with the objective of improving their livelihood have

been undertaken. However, the sector faces the followingchallenges:

1) Limited production capacity and ensuring constant raw material supply;

2) Underexplored marketing opportunities;

3) Technical constraints for product diversification and quality control; and

4) Limited access to and availability of financial and networking support.

Such challenges have been manifested against the background of geographical conditions of the country -

that income generation activities tend to be scattered across villages.

1Labor Force Survey (2012), Ministry of Labor and Human Resources, Royal Government of Bhutan.

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2. STRATEGY

The strategy of this project has four dimensions, which are complementary to each other to address four

challenges mentioned above. All the interventions will be made against the background of recent policies

and government initiatives.

For example, the Royal Government has established a system of award of Seal of Quality and Excellence

(SQE) and Seal of Origin (SO) under the overall Brand Bhutan framework with the aim of generating

overall income and promotion of domestic products by enhancing both domestic and international markets.

This would not only enable quality authentication of products for better marketing competitiveness, but also

provide sustainable opportunity for income generation. As per the feedback from the producers/artisans, the

quality marks have helped marketing within Bhutan targeting tourists as well in the international markets

such as India, Thailand, Singapore and China. Building on our learning experiences from supporting the

launch of SQE and SO since 2008 and 2012 respectively, the following actions need to be taken as a scaling

up opportunity for greater development results.

1) Raw materials supply and production capacity: In order to ensure material supply in adequate quantity

and in a timely manner, raw material banks2will be up-scaled along with necessary technical training. It will

be done so by maintaining well organized networking structures of the existing artisans and community

based self-help groups. The establishment of raw material banks at different regions will not only address

the raw material shortages but will also address the sustainability issues as the banks will be able to

generate adequate revenue in future through the rolling seed money. Furthermore, advocacy and marketing

activities will be supported

2) Effective marketing: UNDP will conduct a value chain analysis targeting handicrafts and textiles in the

third quarter of 2013. The aim of such a value chain analysis to have a better picture of market opportunities

where optimizing income generation opportunities can be optimized. It will also facilitate understanding of

clearer operational linkages between the promotion of SQE and SO on the one hand, and income generation

activities on the other.

3) Quality and designing:Refinement of designs based on market needs will be supported. Building on

artisans existing skills and ideas, further ideas will be sought from potential buyers and targeted consumer

focus groups. At the same time, capacity for quality control at local level will be supported.

4) Access to technical and financial support:Building on existing knowledge and enhance accessibility of

business support services among the artisans and the self-help groups, especially in poorer communities on

design (diversification) and quality standards; product pricing; and credit facilities for sustained income

generation. To date, with limited access to credit facilities and no capital of their own, artisans tend to

bedependent on traders for raw materials and other requirements. In general, traders charge exorbitant rates

for anything purchased on credit. This inhibits local artisans to either forego production or produce limited

products on their own and leaving them at the mercy of the local traders. By providing credit facilities, the

project will encourage artisans to start up related income generating opportunities and for existing artisans

the opportunity to expand production and scaling up.

2APIC has established a raw material bank for metal products in Pemagatshel in 2012. The raw material bank at Pemagatshel is

being managed by a committee comprising of local artisans. The income generated from the sale of materials is being used as seed

money to procure additional raw materials. APIC has a plan to set up similar raw material banks for cane and bamboosand textile in

other districts to ensure that local producers have increased accessibility to raw materials and capitals.

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3. OPPORTUNITIES FOR SCALING UP INCOME GENERATION ACTIVITIES

1)Support for market opportunities: During the course of project implementation, UNDP in consultation

with relevant partners will explore the opportunity to link with Japanese private sector. Potential sales

outlets which are keen to promote corporate social responsibility by selling Bhutanese products will be

identified. This can be done through among others trading companies and market experts based in Japan.

Once done, pro bono advertisement for Bhutanese products will be further explored in view of high-public

visibility, such as Japan Railways (JR), subway systems, municipality offices and magazines, FM radio

Tokyo, etc. In addition, such marketing missions could be organized by partnering with JETRO New Delhi

office, chamber of commerce and Japanese trading companies. As appropriate, the Country Office will seek

partnership facilitation support from the UNDP Tokyo Office.

2)Policy framework:Under the Economic Development Policy, promotion of culture-based industry is one

of the priorities. According to the Diagnostic Trade Integration Study (2012) and the National Export

Strategy (2012), handicraft and textile are identified as priorities to yield jobs as well as increasing the

income level of local producers and artisans.

3) Institutional framework: The Royal Government is also firmly committed the 11th Five Year Plan (2014

– 2018) to reducing poverty as well as promoting cultural industries as a means to alleviate poverty. To this

end, the Royal Government has undertaken organizational re-structuring such as the establishment of

Department of Cottage and Small Industry and the APIC to provide focused support to this sector. These

newly established organizations in collaboration with the Department of Trade are key implementing

partners of the proposal. Further, promoting rural based cottage and small industries in the 11 Five Year

Plan through product development training and marketing supports is one of the key performance indicators

under the industries/SMEs and investment sector, as reflected in the sectoral key result framework (SKRA).

4) Branding:Introduction of SQE and SO has resulted in greater awareness on benefits of quality products,

skills enhancement and better marketing opportunities. In two rounds of quality awards organized by the

Department of Trade under the Ministry of Economic Affairs, there has been increasing participation from

the artisans/producers. Advocacy, education and training programmes need to reach different parts of the

country and expand to all the arts and craft products and beyond.

5) Collaboration with JICA:

The bilateral relationship between Japan and Bhutan has been increasingly visible and stronger through

development cooperation. One of the signature programmes JICA Bhutan provides is to dispatch

professional volunteers across the country as well as to receive Japanese experts in a broad spectrum of

areas, ranging from social services, local economic development, local governance to agricultural

productions. Regarding this project, UNDP and JICA will hold meetings, where possible, to share

information on progress, challenges and potential opportunities, for improving each other‟s support. During

the implementation of the project, UNDP also seeks guidance and advisory support from JICA Bhutan,

where possible, in view of optimizing synergies between JICA and the project support. UNDP will also

facilitate that JICA‟s ongoing and/or future technical support could be linked with the government‟s effort

to upscale SoQE products where opportunities arise.

4. GOOD PRACTICES AND LESSONS LEARNED FROM SIMILAR EXPERIENCES

In order to optimize results of the project, relevant experiences from the region can be taken into

consideration in planning and implementation. For instance, “Pelagandong Project” implemented jointly by

the Government of Indonesia, UNIDO and ILO, offers good practices. Followings are some of the relevant

experiences:

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To help cooperatives and village groups produce value-added products by applying improved

technology and craft skills.

To support local communities to identify and maximize their economic potential leading to

employment creation.

To assist beneficiary groups in accessing markets with improved and diversified products.

To hold participatory meetings with community leaders to identify resources available in the village

for value addition and income generation.

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5. PROJECT OBJECTIVES AND OUTCOMES

The objective of this project is „underemployed and unemployed have access to income generation

opportunities through quality branding of handicraft products. This will be achieved through a focus on

following six outputs.

1) Brand Bhutan Strategy refined and finalized to promote SQE and SO products

2) Key stakeholders have better understanding of market dynamics and opportunities for optimal income

generation

3) Local producers will have increased accessibility to raw materials and capitals

4) Increased number of awards for SQE and SO with expanded markets

5) Local producers have increased capacity to produce high-quality, marketable and diversified products.

6) APIC and the Ministry of Economic Affairs will strengthen their capacity in monitoring income

generation activities in conjunction with the expansion of SQE and SO. This will be done so with

disaggregated information on gender, age and geographic location. Such information management

mechanism should be integrated into the PLaMS (Planning and Monitoring System), the Royal

Government‟s planning and monitoring portal.

6. IMPLEMENTATION ARRANGEMENTS

The Agency for Promotion of Indigenous Crafts (APIC) and the Department of Trade, under the overall

leadership and guidance of its Board and the Ministry of Economic Affairs will be the two main

implementing agencies. The APIC‟s Board members comprises the Ministry of Home and Cultural Affairs,

Ministry of Economic Affairs, Ministry of Labor and Human Resources, Tourism Council of Bhutan

(TCB), Ministry of Agriculture & Forestry, and Handicraft Association of Bhutan (HAB). This existing

Board arrangement3 can yield greater advantage in coordinating among the stakeholders, as many of the arts

and crafts related initiatives are currently undertaken by different agencies and remain largely isolated. The

artisans, located in different parts of the country which also remain disconnected can be better organized,

enabling the arts and craft businesses to take off to its full potential as vibrant businesses.

The Gross National Happiness Commission (GNHC), as the central coordination and planning body will

sign the project document and all project revisions with financial implications thereafter. The project will be

managed in accordance with standard UNDP procedures under the National Implementation Modality

(NIM), through the annual work plan and using the FACE form on quarterly reporting basis. The JICA

Office in Thimphu will be updated on the implementation progress through quarterly progress report.

3 Currently, the Director General of the Department of Culture, Ministry of Home & Cultural Affairs is the Chairman. The Board of

Directors meets every after a quarter.

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7. PROJECT RESULTS FRAMEWORK

Expected Outcome: Underemployed and unemployed have access to income generation opportunities through SQE and SO

INTENDED OUTPUTS OUTPUT TARGETS INDICATIVE

ACTIVITIES

Partnership Fund UNDP Bhutan

Regular Resources

Poli

cy F

ram

ework

Output 1: Brand Bhutan

Strategy refined and

finalizedto promote Brand

Bhutan

Indicator: number of quality

branding of creative/culture

products developed

Baseline: Draft Strategy

formulated

Revised Brand Bhutan

Strategy in place

TA/consultation workshop USD 20,000 (Brand

Bhutan Strategy

finalization: 2014)

USD 15,000 (Brand

Bhutan Strategy

finalization: 2014)

Valu

e ch

ain

an

aly

sis

Output 2: Key stakeholders

have better understanding of

market dynamics and

opportunities for optimal

income generation

Indicator: # business plans

with a focus on optimizing

income generation activities

utilizing a comprehensive

value chain analysis.

Baseline: 0

Target: 3 (2013)

Target: 6 (2014)

Technical consultancy

Training of trainers on

business plan development

based on the value chain

analysis

USD 20,000

(TA) for business plan

development

USD 10,000 (Value-

chain analysis: 2013)

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Pro

du

ctio

n c

ap

aci

ty a

nd

acc

ess

to r

esou

rces

Output 3: Local producers

will have increased

accessibility to raw materials

and capitals

Indicator: # of raw material

bank locations with sufficient

stocks

Baseline: 1 Handicraft

Association of Bhutan (HAB)

with textile materials in

Thimphu; and another metal

hub in Pemagatshel in Eastern

Bhutan

Indicator: # of producers

have access to micro-credit

Baseline: 0

Target: 2 raw material

banks for textile,

covering East and

Central regions.4 (2013)

Target: Increased stock

capacity in HAB (2013)

Target: 1 raw material

bank for cane, bamboo

and other necessary

materials established,

covering two other

Regions. (2014)

Target: 100 producers

have access to micro-

credits. (2014)

Create seed money for raw

material banks, upgrade

tools and implements,

building on existing local

institutions such as HAB

and cane and bamboo

groups.

Provide resources to a local

microcredit institution,

Bhutan Development Bank,

Ltd, which has extension

offices in each Region.

USD 90,000

(micro-credit/grant)

USD 40,000

(raw material banks,

and upgrading)

USD 32,000

(2014/15)

4 Bhutan consists of 4 main regions, which are East, West, South and Central. Thimphu, the capital of Bhutan is located in the Western region.

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Mark

etin

g

Output 4: Increased number

of awards for SQE and SO

with expanded markets

Indicator: Increased number

of awards for SQE and SO

Baseline: 34 with SOEQ and

80 producers/artisans with

SEAL of Origin (2012)

Indicator: # of trade bazar

organized and participating in

trade bazar outside Thimphu.

Baseline: One craft bazaar in

Thimphu

Indicator: # of artisans who

receive increased salary

Baseline: N/A

Target: at least 10 new

products received

SQE/SO (2013)

Target: at least 10

additional/new products

received SQE/SO (2014)

Target: 1 craft bazaar in

another region in the

country and 1

participation in a trade

fair abroad (2014/15)

Target: 300 artisans who

receive increased

income (2014)

Advocacy and marketing

on SEALs and related

advisory support

Establish marketing outlets

at strategic locations

Support organization of

trade fair at selected

locations; organize

exhibition of Bhutanese

products in Tokyo in

partnership with Japan-

Bhutan Friendship

Association or the Chamber

of Commerce. Support strengthening the

system of awarding.

USD 50,000

(Advocacy materials,

travel, TA,

procurement)

USD 45,000

(travel of 2 officials

and 5 producers to

Tokyofor marketing

the SOEQ products)

USD 10,000

(Marketing and

Advertisement: 2013)

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Des

ign

ing a

nd

sk

ills

Output 5: Local producers

have increased capacity to

produce high-quality,

marketable and diversified

products.

Indicator: No. of producers

fully capable of quality

production in the selected

craft.

Indicator: # of producers

with better knowledge and

skills to produce marketable

products.

Baseline: 110

artisans/producers

Target: 200

artisans/producers

(2013)

Target: 300

artisans/producers

(2014)

Identified skills and

product development gaps

Conduct survey and carry

out a consolidated review

of the existing skills and

product development gaps

Provide artisan training

including South-South

Exchange.

Capacity development of

the potential enterprises/

community groups/ artisans

in selected arts and crafts

USD 30,000

(Technical assistance

and training)

USD 16,000

(Artisan training:

20135)

USD 25,000

(Designing support:

20136)

Mon

itori

ng c

ap

aci

ty f

or

scali

ng u

p

& P

roje

ct M

an

agem

ent

Output 6: APIC and Ministry

of Economic Affairs have

improved capacity in

monitoring income generation

activities in conjunction with

the expansion of SQE and

SO.

Indicator: APIC and MoEA

has set up a joint monitoring

system for income generation

activities

Baseline: zero

Target: Joint monitoring

mechanism, including a

standard operating

procedure (SOP) in

place in coordination

among APIC, MoEA,

GNHC and District

Planning Officers (2013)

Target: Tracking and

integrating results into

PLaMs7 (2014)

Design viable SOP to

connect field monitoring on

income generation level

and scaling up in

conjunction with SQE and

SO with technical

guidance.

Training for the integration

of SQE/SO and associated

income generation

opportunities tracking into

the PLaMS.

USD 10,000

(Field level training)

USD 18,000

(National Project

Management

personnel)

USD 323,000

+ GMS 25,840

Total: 348,840

USD 108,000

5 Artisan training on product diversification for wood, metal and cane and bamboo products

6 Provision for hiring 4 design experts for wood and metal products

7PLaMs is Planning and Monitoring System of the Royal Government used by all Government agencies since 2009

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8. TOTAL BUDGET OUTLAY

Programme Title: Scaling up of income generation through traditional crafts and textiles production and marketing - Bhutan

Project Title: Scaling up of income generation through traditional crafts and textiles production and marketing Country Name: Bhutan

Implementing Partner Ministry of Economic Affairs, Royal Government of Bhutan

Executing Agency: United Nations Development Programme (UNDP) Bhutan

UNDAF/One

Programme (2014 –

2018) Outcome

/Implementi

ng Agent

Donor

Name

Output Budget Description Amount (USD)

Year 1

Amount (USD)

Year 2

Total

(USD)

Outcome 1: By 2018,

sustainable and green

economic growth that

is equitable,

inclusive, climate and

disaster resilient and

promotes poverty

reduction.

UNDP

Bhutan/JIC

A/MOEA

Japan

Govern

ment

Revise Brand Bhutan Strategy International or National

Consultant/Consultation workshop

20,000 (OR)

15,000 (RR)

35,000

Conduct value chain analysis Local consultant 10,000 (RR) 10,000

TA and TOT on business plan

development

Consultant/Travel/training 20,000 (OR) 20,000

Establishment of 3 raw materials

bank

Seed money for raw material

banks, upgrade tools and

implements, resources to a local

bank for micro credit grants

130,000

(RR - 7000)

(OR -123,000)

32,000(OR) 162,000

Advocacy and marketing on the

SEQ/SO and related advisory

support

Advocacy materials, travel, TA

and procurement

10,000 (RR) 50,000

12,000 (OR)

38,000 (RR)

60,000

Travel of 2 officials and 5

producers to Tokyo in fall 2015 to

showcase their products under the

SOEQ concept

45,000 (OR)

45,000

Capacity building of local

producers/artisans including

South-South exchange

TA, training and procurement 41,000 (OR) 30,000 (OR) 71,000

Capacity building of relevant

officials and recruit national

project management personnel

Hiring, travel and training 28,000 (RR) 28,000

PROJECT TOTAL

254,000 177,000

431,000

UNDP RR 108,000

UNDP OR 323,000

UNDP General Management Support (GMS) 8% Fee of OR

14,720 11,120 25,840

GRAND TOTAL (with GMS) 268,720 188,120 456,840

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13. WORK-PLAN

Year 1 Year 2

Outcomes/Activities Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Implementation arrangements and project inception

1. Finalization of the Project Document

2. Approval of the Project Document

4. Finalization of Project Implementation and Institutional Arrangements and M&E Plan

5. Project Staffing and Operational Procedures

Outcome 1: By 2018, sustainable and green economic growth that is equitable, inclusive, climate and disaster resilient and promotes poverty reduction,

UNDP Strategic Plan Environment and Sustainable Development

1.1 Revise Brand Bhutan Strategy

1.2 Conduct value chain analysis

1.3 TA and TOT on business plan development

1.4 Establishment of 3 raw materials bank

1.5 Advocacy and marketing on the SEQ/SO and related advisory support

1.6 Capacity building of local producers/artisans including South-South exchange

1.7 Capacity building of relevant officials and national project management personnel

Project Management including M&E

1.Recruit the National Project Management Personnel

2. Carry out regular Implementation/Periodic Monitoring

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10. MANAGEMENT ARRANGEMENTS

The management/organizational structure for implementation of the Japan Partnership Project in Bhutan will be as shown in Fig. 1 below.

Figure 1: Management Arrangements for Implementing the Project

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11. TERMS OF REFERENCE

Terms of Reference for a Value Chain Analysis on handicraft products, that was awarded Seal of Quality

and Excellence

1. Background

The rural artisans of Bhutan face critical challenges in terms ofquality, designing, raw materials supply,

production capacity, packaging, pricing, marketing, and access to technical and financial support. Furthermore,

micro-scale income generation activities around arts and crafts tend to be inherently scattered across spots of

villages due to geographic conditions of the country. It has also been a challenge to form a sustainable market

network to scale up income generation activities.

With a view to address some of these concerns, under UN Support to Development of MSMEs and Employment

Generation in Bhutan, the Department of Trade, Ministry of Economic Affairs (MoEA) introduced Seal of

Excellence and Seal of Quality in 2008 to promote and enhance the quality of craft products and services. The

objective was to establish a quality benchmark for Bhutanese handicraft products and textile, with the aim of

generating increased income and promotion of domestic products by enhancing both domestic and international

markets.This would not only enable quality authentication of products for better marketing competitiveness, but

also provide sustainable opportunity for income generation and preservation of culture and tradition. The first

round of awards was held in 2009. Twenty three products qualified for the Bhutan SEAL, out of which one was

awarded the Seal of Excellence and remaining twenty two with the Seal of Quality. In 2012, three Seal of

Excellence and eight Seal of Quality were awarded to 5 female and 4 male artisans.

The Agency for Promotion of Indigenous Crafts (APIC) also introduced Seal of Origin 2012.The objective of the

award system is to establish a quality benchmark for Bhutanese handicraft products and ensure authentication of

products, so that these quality products can be exported to other countries and gain market access. It is also

aimed at preserving the traditional craft knowledge and skills and making it more relevant and sustainable.

Despite the above initiatives, the challenges of rural artisans continue to exist, preventing them from fulfilling

their true potential.

2. Purpose

UNDP is looking for a consultant to carry out a value chain analysis on the handicrafts products including textile

that were awarded the Seal of Excellency and Quality to identify constraints and opportunities with the

orientation towards market based solutions. The consultant will also explore products that would qualify for

similar awards.

The value chain study should analyze the nature and determinants of competitiveness, the links between

artisans, producers and marketing channels and the distribution of benefits along the whole chain of

artisans, producers, processors, service deliverers and buyers. The analysis should scrutinize interactions

and synergies among actors and the business as well as the policy environment.

The study will also analyze the value chain economic performance of various artisans. This entails

measuring of economic factors (production costs, margins, and added-value) as well as benchmarking in

order to position the chain vis-à-vis alternatives or competitors. This would identify strategic and non-

strategic activities of raising awareness among chain actors and value addition possibilities. It also

reveals leverage points for action at policy, institutional and enterprise level.

The study should assess the value chain production system and tools; evaluate their technical

performance; and determine the principal technical actions that need to be done to upgrade individual

products within the chain and to enhance their competitiveness. Among the elements that are assessed

are the utilization of inputs, human resources and technical capacities; the technology and processes

used; the production management methods; and environmental aspects.

The consultant needs to do a mapping of value chains to obtain a clear understanding of the sequence of

activities and key actors and relationships involved in the value chain from pre-production to marketing.

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Focus should also be given on the size and scale of main actors, production volume, sales and export

destinations.

This study will outline a framework and come up with strategies and recommendations for formulating

appropriate development programmes and policies for future interventions. The value chain analysis

should provide justifications to invest more resources in the arts and crafts industry for up-scaling of the

programme.

The specific objectives of the analysis are to provide answers to the following key questions:

i) What are the income and employment generating opportunities in the handicraft sector?

ii) What are the government policies on promoting cottage and small industry?

iii) What kinds of products are likely to participate in the award competition?

iv) What is the potential domestic and international demand for a particular product?

v) What are the prospects for attracting public/and or private investments?

vi) Are the resources available in line with the number of operators involved in the value chain?

vii) What is the potential for local cottage and small industry (including informal suppliers) to be

integrated in the regional and internationals markets?

viii) What is the situation with regard to existing infrastructure, financial and non-financial business

services, availability and accessibility of raw materials and other inputs?

ix) What is the level of skills of the labour force and management in the sector?

x) Are there complementarities with other projects in the region/country?

xi) What are the main issues to take into account to promote CSI?

xii) What kinds of support are available and what needs to be done more?

3. Outputs of the Assignment

1. Develop a value chain map and identify the major players and their functions and relationships in the

handicrafts value chain.

2. Identify the constraints faced by all actors and identify opportunities to improve the contribution of

specific actors and the overall performance of the chain.

3. Estimate number of poor and disadvantaged people involved in/affected by the value chain.

4. Find out the competitive advantages/disadvantages including market access, technology/ product

development, management/organization, input supply (raw materials), finance, policy and operating

environment/infrastructure.

5. An overview of main bottlenecks along the value chain and opportunities that would help removes the

bottlenecks, develop the relevant value chains, and lead to significant export growth.

6. To find out the existing service providers and assess what they are providing and their relationship with

artisans and clients.

7. Identify further potential service providers and assess their ability and willingness to provide the

needed/missing services.

8. The study should provide interventions required in the value chain outlining specific roles and

responsibilities of all actors and agencies involved.

9. Provide an overview of environmental issues, labour rights, and fair operating practices.

10. Identify potential to generate income and employment from such creative industry, including baseline.

4. Scope of Work

The study may be conducted in consultation with relevant stake holders throughout the value chain, i.e. the

artisans, producers, distributers, wholesalers/retailers and relevant government, non-government organizations

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and development partners. The study should focus on the products that are already awarded with the various

Seals of Excellence and Seal of Quality. The consultant should also explore additional arts and crafts products

for eligibility of the awards.

5. Tasks and deliverables of the consultant

Under the supervision of the acting Head of the Poverty and MDGs unit and overall guidance of the DRR, the

consultant will be responsible for managing and coordinating all stages of the value chain analysis and ensure its

overall quality and coherence. The consultant will coordinate inputs from MoEA, APIC, MOAF, NGOs, UNDP

and other relevant organizations, and work in close cooperation whose collaborative inputs will inform the

preparations of the study. The consultant will be in regular contact with UNDP for sharing drafts and ensuring

that the process is on track.

The consultant will be responsible for the completion of all activities and submission of a final Report endorsed

by UNDP.

The consultant will also organize a workshop to validate the findings with relevant government agencies, CSOs

and development partners.

6. Methodology

The consultant is expected to apply the following approaches for data collection and analysis:

Desk review of relevant documents, policies and programmes;

Discussion with MOEA, APIC, relevant government agencies and UNDP and other development partners

Field works and interviews:

Identification of and interviews with relevant value chain actors;

Stakeholders and relevant projects‟ staff;

In-person interviews and focal group discussion with local authorities, artisans and target

communities; a well-structured questionnaire should be prepared, and mutually agreed upon by

the relevant government agencies as well as UNDP, after the desk review and initial

consultations. The questionnaire should be appropriately designed to collect both qualitative

and quantitative data, and should be replicable to facilitate future comparative assessments.

7. Duration of study, duty stations and expected places of travel

The duration of the consultancy is for 30 working days spread over 2.5 months from the award of the contract.

The consultant and his/her team will operate in and from their office, and for interviews and data collection in

the field, the team is expected to travel to Dzongkhags.

8. Provision of monitoring and progress controls

The UNDP in consultation with Government agencies will ensure day-to-day supervision, as appropriate.

9. Minimum qualification requirement

The consultant is required to have the following qualifications and experience:

Advanced University degree in economics, public/business administration, development studies or any

other social science related field;

At least 3-5 years of professional consultancy experience in conducting evaluations and report writing

with Government agencies and/or international organizations in the area of socio-economic

development;

Familiarity of the Government policies on promotion of MSMEs with UN policies and procedures, as

well as participatory and result-based monitoring and evaluation methodologies and approaches

essential;

Flexibility and ability to work under pressure and interact with a wide range of people;

Knowledge of local language(s) is an advantage;

Demonstrable experience in the market survey and Value chain analysis;

Excellent communication, report writing and facilitation skills;

Strong analytical and critical thinking skills; and

Abreast knowledge of local market trends.

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10. PAYMENT TERMS OF CONTRACT

The consultant will be paid in two instalments –

i. 15% of the contract amount will be paid upon signing of contract, and

ii. The remaining 85% will be paid upon satisfactory completion and submission of final Report.

UNDP payment certification is required and the currency of payment is in Bhutanese Ngultrum.

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12. VISIBILITY & OUTREACH UNDER THE PARTNERSHIP PROJECT

Context

The Scaling up of income generation through traditional crafts and textiles production and

marketing project is considered a much needed and timely programme focusing more on up-scaling,

enhancing product quality and diversification, and improving increased access to markets not only in

the country but also outside.

The rural artisans of Bhutan face critical challenges in terms ofquality, designing, raw materials

supply, production capacity, packaging, pricing, marketing, and access to technical and financial

support. Furthermore, micro-scale income generation activities around arts and crafts tend to be

inherently scattered across spots of villages due to geographic conditions of the country. It has also

been a challenge to form a sustainable market network to scale up income generation activities.

The awarding of the SEQ and SO to handicraft products provides credibility and ensures high quality

products with increased visibility and enhanced market access in the region. The products that have

been awarded the SEQ and SO have already featured in various newspapers and in-flight publications.

Required Visibility Products

The Brand Bhutan Strategy and SEQ and SO have established a quality benchmark for Bhutanese

handicraft products so that quality products could be exported to other countries and gain market

access. Given the small size of the domestic market, the Export Promotion Division (EPD) under the

MoEA has been making rigorous attempts to promote local handicrafts and other products through

different advocacy methods. The project will work with the EPD to promote export through

disseminating related information and other outreach tools to various markets.

Lesson Learned/Best Practices Document

The value chain analysis of handicraft products conducted at the beginning of the project will

determine the type of quality of support needed throughout the value chain and its various actors.

Based on the recommendations of the analysis implemented and at the end of the project, the National

Project Management Personnel is expected to produce a lessons learned/best practices document to

showcase their results, impacts and transformational change. Further this best practice documents will

also be used as guidance for up-scaling other handicraft products‟ production and marketing.

Recommended Visibility Products

The National Project Management Personnel in collaboration with the DOT and APIC will, at regular

intervals or as and when, update, post and advertise the new handicraft products that have been

awarded the quality seals on relevant websites and in magazines, newspapers and relevant publications.

They are also requested to liaise with and share media reports with the communications focal points in

the UNDP Country Office regarding any media produced by or about the project.

Donor Visibility

The project will take all appropriate measures to publicize the initiatives by the Japan partnership in supporting

economic development in Bhutan. Appropriate publications for visibility will be produced. In addition,

information given to the press and project beneficiaries, all related publicity materials, official notices reports

and publications, shall acknowledge that the project was carried out with funding from the Government of Japan

through UNDP.