Bhutan for Life; preserving the last Shangri-La
By Laura Mackay
Famous for measuring national wellbeing in terms of gross national happiness rather than GDP, and for its breathtaking mountains and valleys dotted with orange monks, it comes as no surprise that Bhutan has been labelled the ‘last Shangri-La.’ Moreover, since its decision to embrace the rest of the world, Bhutan has lived up to its moniker in more ways that one. The launch of Bhutan for Life, in partnership with the World Wildlife Fund (WWF), involves a realistic and practical acknowledgment of the importance of maintaining Bhutan’s pristine environment but Bhutan’s current financial inability to do so. Bhutan has calculated it needs approximately US$40 million over the next fifteen years in order to implement an effective conservation strategy, which is money it simply does not have. Rather than entering a competitive market for foreign aid, Bhutan for Life has instead utilised an innovative Kickstarter-like model modified for both the need for long-term funding and the anticipation of a growing economy.
For a country whose GDP barely scrapes $2 billion a year, Bhutan has been uncompromisingly opposed to exploiting its environment for economic gain. The constitution states that at least 60% of Bhutan’s land mass must remain under forest cover. Currently, Bhutan’s forests sequester more than six million tons of carbon dioxide annually, which is four times more than what Bhutan emits, making it one of the few carbon negative countries in the world. Further, given Bhutan only lifted the ban on television in 1999, it has been extraordinarily quick to embrace new technology to protect its environment; including the subsidy of LED lights and promotion of electric cars.
However, at a recent TEDx talk, Bhutan’s Prime Minister Tshering Tobgay made it clear “right off the bat, we are not Shangri-La. My country is not one big monastery populated with happy monks.” Rather, Bhutan must take ona wealth of issues. Low economic diversity is causing high unemployment which in turn is increasing human-wildlife conflict. Poaching is also on the rise, and Bhutan lacks the enforcement capacity to effectively curb it. Concurrently, donor aid to Bhutan is decreasing as it reaches the status of a middle income country. Tobgay candidly acknowledged that Bhutan cannot currently provide the resources needed to maintain Bhutan’s pristine environment. “When we run the numbers, it looks like it will take us at least fifteen years before we can fully finance all our conservation efforts. But we in Bhutan and all the rest of the world can’t afford to spend fifteen years going backwards.”
In response, Bhutan initiated a search for innovative solutions. The result been ‘Bhutan for Life’, a collaboration between Bhutan and the WWF designed to bridge the funding gap Bhutan faces before it can fully finance its own conservation efforts. Bhutan for Life is what is known as a project finance for permanence (PFP) deal. It resembles a Kickstarter model, with a single closing, where donors give money to the cause, but the deal is not done until the full amount needed is raised (US$40 million in this case). Bhutan for Life has modified this model to suit its own particular needs. Conservation cannot be completed with a single payment; rather it needs ongoing and consistent funding.
Thus, in addition to the single closing, Bhutan for Life also uses a transition fund. When the full US$40 million is raised, it is placed into the transition fund that makes annual payments as the government instigates specific conservation projects. The transition fund also anticipates the growth of Bhutan’s economy through sustainable eco-tourism over the coming years. The $40 million target has been specifically calculated to bridge a funding gap of fifteen years between today and when Bhutan predicts it will be able to independently finance its own conservation. Therefore, every year the amount released by the transition fund will decrease, while the amount contributed by the Bhutan government will increase, until, after fifteen years, Bhutan has full financial responsibility for its environment.
Presently, Bhutan for Life has reached 40% of its target, mostly from a combination of corporates, foundations and wealthy individual donors such as Michael Phillips, Chairmain of Reykjavik Geothermal, Ltd, and also the managing partner of Ambata Capital Partners. The project is in active negotiation with other organisations for a further 30%. Unlike the Kickstarter model, Bhutan for Life is donation based, and donors receive no specific reward for their contribution. However, the single closing model, combined with the transition fund means donors are assured of both results and permanence. Donors’ contributions will only be put to use when the deal closes at the necessary amount to achieve its goal, and they are also able to clearly see the Bhutanese government achieve milestones one after another.
Bhutan for Life is not an entirely new concept. It is modelled after ARPA, a $215 million PFP deal to protect the Brazilian rain forest that closed in 2014. ARPA fell under the auspices of WWF, but was supported by organisations such as the World Bank, UN Global Environment Facility, the Inter-American Development Bank, the German Government and the Moore Foundation. As Guillermo Castilleja, Chief Environment Officer of the Moore Foundation stated in a recent Forbes article the structure of ARPA, and subsequently that of Bhutan for Life, gives people, for the first time the ability to think big and deliver big in an environmental project. A similar project is underway in Peru, called the Peru PFP, with a $100 million goal. Find out more about these projects here.
Despite Bhutan’s much smaller scale, both in terms of money and land mass, Bhutan for Life is as important to the rest of the world as its more sizeable predecessors. Its rivers are part of a network that provides water for a fifth of the world’s population, and its carbon negative status make it vital to the surrounding region. Moreover, Bhutan sets an example. Despite its isolation, size and financial limitations, Bhutan is punching above it’s weight when it comes to commitment to the environment. While much of the world bemoans the coming effects of the climate crisis and their apparent economic inability to address them, Bhutan has stepped forward with an unconventional approach to playing its part. And this is all part of the plan. As Tobgay say, Bhutan for Life is not only about bridging Bhutan’s funding gap, but also about the world’s overarching responsibility to protect the environment. If Bhutan can demonstrate it works, then this type of funding can be used globally. Or as Tobgay so eloquently puts it, Bhutan for Life “opens up the floodgates of possibilities throughout the world.”