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Bhutan is a small landlocked country marked by both significant political transition and economic development. In 2008, Bhutan officially transitioned from an absolute to a constitutional monarchy. Economically, Bhutan has close trade ties to India, Singapore, Japan, Thailand and China. The economy of Bhutan is largely dependent on hydropower generation. In August 2011, Bhutan National Bank (BNB), which has participated in ADB's TFP program since 2010, issued a EUR 3,060,000 letter of credit for the import of hydraulic equipment by the Mangdechhu Hydroelectric Project Authority. The Authority was set up by the Royal Government of Bhutan to provide engineering services for construction of a 720 MW Mangdechhu Hydroelectric Project located in the Trongsa Dzongkhag (District) of Central Bhutan. The transaction was supported with a guarantee issued by the TFP and confirmed by Swedish Skandinaviska Enskilda Banken AB.

Mangdechhu Hydroelectric Project is part of the Framework Agreement signed between the Royal Government of Bhutan and the Government of India for cooperation in the field of hydropower sector. Under the agreement, the Government of India has agreed to a minimum import of 5,000 MW of electricity from Bhutan by the year 2020. The equipment imported under the TFP guaranteed L/C is critical to the whole project.

"The project will have a huge impact on the overall economic development of the country and the well-being of its people", said BNB's Chief Executive Officer Mr. Kipchu Tshering. "The revenue earned from the export of electricity is a significant contributor to the overall revenues of the Kingdom. There is great potential for increasing such export and consequently earn significant additional revenues."