Document of The World Bank Report No: 19801-MAG PROJECT APPRAISAL DOCUMENT ONA PROPOSED CREDIT IN THE AMOUNT OFSDR 29 MILLION (US$40.0 MILLION EQUIVALENT) TO THE REPUBLIC OF MADAGASCAR FORA SECOND HEALTH SECTOR SUPPORT PROJECT November 4, 1999 Human Development IV Country Department 8 Africa Region (Exchang(e Rate Effective) Currency Unit =FMG 1 FMG' US$ 0.000176 US$ 1 = 5687 FMG FISCAL YEAR January l - December 31 ABBREVIATIONS AND ACRONYMS AfDB African Development Bank MOH/MINSAN Ministry of Health/Ministere de la santd AIDS Acquired Immune Deficiency Syndrome MIS/SIG Management Infornation Systeme/Systeme d'Inforrnation pour la Gestion APL Adjustable Programn Lending MMR Maternal MortaIity Rate ARI Acute Respiratory Irnfections MOH Ministry of Health BHA Better Health in Africa MSF M6decins sans fronti6res CAS Country Assistance Strategy NCB National Competitive Bidding CDC Centers for Disease Prevention and Control NGO Non-Governmental Organizatior CRESAN Health Sector Improvement Project (Credit Sant6) PAIGEP Public Management Capacity Btilkling Project PA Project Account CRESE,D Education Sector Reinforcement Project (Credit PAM Programme Alimentaire Mondia. Education) CRS Catholic Relief Services PCU Project Coordination Unit CSBI Health center category I (Centre de sante de base 1) PER Public Expenditures Review PIM Project Implementation Manual CSB2 Health center category 2 (Centre de sante de base 2) PPF Project Preparatiion Facility DALY Disability Adjusted Life Year PNLS Programxne National de Lutte contre le SIDA/MST/VIH DHS Demographic and Health Survey PTA Plan de Travail Annuel DIRDS Directions Inter-Regionales de Developpement RH Regional Hospital Sanitaires EPI Extended Program olF Imnunizations Salama Centrale d'Achal; de Medicamene; Essentiels EU European Union SECALINE Food Security and Nutrition ProJ -cl: FAO Food and Agriculture Organization SEECALINE Community Nutrition II Project FID Regional Development Fund (Fonds dintervention SBD Standard Bidding Documents pour le developpement) FP Family Planning SIL Structural Investment Loan GAIN Groupe d'Action Intersectorielle de Nutrition SMP Severely Malnourished Children Program GDP Gross Dornestic Product SOE Staternent of Expenditures GTZ Germnan Agency for Technical Cooperation STD Sexually Transmiitted Diseases HIV Human Immuno-deficiency Virus TB Tuberculoses HSDP Health Sector Development Plan (Plan Directeur) UNDP United Nations Development Program IAPSO United Nations Inter-Agency Procurement Services tJNFPA United Nations Fund for Population Activities IBRD International Bank for Reconstruction and UNICEF United Nations Children's Fund Development UNIPAC United Nations Plrocurement & Assembly Cen:.r ICB International Competitive Bidding USAID United States Agency for Interna ional DevelopirLent ICR Implementation Completion Report UNV United Nations Volunteer IDA International Development Agency WDR World development Report IEC Information, Education and Communication WFP World Food Program IMCI Integrated Management of Childhood Illness WHO World Health Organization IMR Infant Mortality Rate Vice President: Callisto Madavo Country Director: Michael N. Sarris Sector Manager: Arvil Van Adams Task Team Leader: loan S. Luculescu MADAGASCAR SECOND HEALTH SECTOR SUPPORT PROJECT CONTENTS A. Project Development Objective Page 1. Project development objective 3 2. Key performance indicators 3 B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project 3 2. Main sector issues and Government strategy 4 3. Sector issues to be addressed by the project and strategic choices 11 C. Project Description Summary 1. Project components 15 2. Key policy and institutional reforms supported by the project 15 3. Benefits and target population 16 4. Institutional and implementation arrangements 17 D. Project Rationale 1. Project alternatives considered and reasons for rejection 18 2. Major related projects financed by the Bank and other development agencies 22 3. Lessons learned and reflected in proposed project design 24 4. Indications of borrower commitment and ownership 25 5. Value added of Bank support in this project 25 E. Summary Project Analyses 1. Economic 26 2. Financial 26 3. Technical 28 4. Institutional 28 5. Social 29 6. Environmental assessment 29 7. Participatory approach 30 F. Sustainability and Risks 1. Sustainability 31 2. Critical risks 31 3. Possible controversial aspects 33 G. MainLoanconditions 1. Effectiveness conditions 33 2. Other 33 H. Readiness for Implementation 34 I. Compliance with Bank Policies 35 Annexes Annex 1: Project Design Summary 36 Annex 2: Detailed Project Description 43 Annex 3: Estimated Project Costs 51 Annex 4: Economic Analysis 52 Annex, 5: Financial Summary for Revenue-Earning Project Entities, or Financial Summary 69 Annex 6: Procurement and Disbursement Arrangements 70 Annex 7: Project Processing Schedule 78 Annex 8: Documents in Project File 79 Annex. 9: Statement of Loans and Credits 80 Annex 10: Country at a Glance 82 Annex 11: Annex 12: Annex I - Attachment 1: Letter of Sector Policy - Annex 6 - Attachment 1: Procurement Capacity Assessment MAP(S) MADAGASCAR Second Health Sector Support Project Project Appraisal Document Africa Regional Office Africa Region, Human Development 4 Date: November 4, 1999 Team Leader: loan S. Luculescu Country Manager/Director Michael N. Sarris Sector Manager/Director Arvil Van Adams ProjectLM P051741 Sector(s): HT - Targeted Health Lending Instrument: Specific Investment Loan (SIL) Theme(s): Poverty Targeted Intervention N Project Financing Data O Loan N Credit O Grant El Guarantee O Other (Specify) For Loans/CreditslOthers: Amount (US$m)US$40.0 million Proposed Terms: O To be defined 1S Multicurrency O Single currency 1 Standard Variablet] Fixed E LIBOR-based Grace period (years): 10 Years to maturity: 40 Commitment fee 0 Service charge 0.75% Government 4.38 0.00 4.38 IBRD IDA 13.81 26.19 40.00 Total: 18.19 26.19 44.38 Borrower: GOVERNMENT Guarantor: NA Responsible agency MOH Other Agency(ies): Ministry of Health Address: UGP Projet CRESAN, Ex-Ecole de Medicine, Befelataninana, Antananarivo, Madagascar Contact Person: Dr. Paur-Richard Ralainirina, Coordinateur du projet CRESAN & Dr. Dieudonne Robert Rabeson, Directeur des Etudes et de la Planification, Ministere de la sante, Antananarivo, Madagascar Tel: 261-20-22-32-544/261-222-32-524 Fax: 261-20-22-32-524/261-20-22-32-524 Email: ugpcresan@simicro.mg Estimated disbursements( Bank FYIUS$M): Annual¶ 0.8 7.2 8.0 8.0 8.0 4.0 4.0 Cumulative 0.8 8.0 16.0 24.0 32.0 36.0 40.0 Project implementation period 6 years Expected effectiveness date 06/01/2000 Expected closing date 12/31/2006 CS PAD) Fo.m: Odchr , 1N6G A: Project Development Objective 1. Project development objective: (see Annex 1) The project's overall development objective is to contribute to the improvement of the health status of the population through more accessible and better quality health services. Specific development objectives are to: (i) improve quality of, and access to primary health care services with a focus on rural areas; (ii) support priority health programs with emphasis on endemic infectious diseases, reproductive health (including family planning, sexually transmitted diseases and HlIV/AIDS) and nutrition; and (iii) strengthen sector management and administrative capacity within the Ministry of Health, and at provincial and district levels, to enable successful decentralization and sector reform. While the project's main focus is on primary health services and malaria reduction (which will benefit of about 65% of the proceeds of the credit), the project will also contribute to reproductive health and nutrition activities, and to the strengthening of health sector capacity. By supporting the implementation of the health sector's Policy and Development Plan (i.e., "Plan directeur"') the project will also contribute to the ongoing health sector reform process. 2. Key performance indicators: (see Annex I) (1) Increased accessibility to health facilities (primary health care facility within a 5 Km radius) from 65% to 85% by 2006. (2) Increased outpatient health facility utilization rates from 0.2 contacts per year to 0.6 contacts per year by 2006. (3) Increased district hospital utilization rates from 50% to 80% by 2006. (4) Increased contraceptive prevalence rates from 9.7% to 17% by 2006. (5) Increased child immunization rates from 40% to 75% by 2006. (6) Reduced hospital fatality rate in malnourished children hospitalized for nutrition rehabilitation from 20% to 10% by 2006. (7) Maintain the lIV prevalence rate in pregnant women below 0.25 per 100. B: Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1) Document number: 16249-MAG Date of latest CAS discussion: 02/18/97 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project (see Annex 1): CAS document number: 16249-MAG Date of latest CAS Board discussion: February 18, 1997 Poverty reduction is at the center of the Bank's CAS. The key challenge in this regard is to ensure that the 9.5 million poor of the country (i.e., 70% of the total population, with over 85% of the poor living in rural areas) will be better off with their living conditions improved. The project will support this overarching goal by focusing on improving access to better quality primary health services for the entire population and especially the rural poor. Three key CAS objectives are particularly relevant for this project: (i) development of human capital through primary education, basic health care and rural infrastructure; (ii) strengthening of the public sector to improve its ability to deliver quality services; and (iii) creation of a favorable economic environment to allow full development of public and private sectors. The CAS specifies indicators and monitorable actions as follows: improved quality of health services in 111 health - 3 - districts; finalized and implement health policy and master plan; reduced morbidity and mortality rates due to malaria and tuberculosis; improved drug availability and affordability (in at least 85% of facilities); introduced cost-recovery for drugs in 75% of communities; and avoid an increase of the HIV/AIDS epideemic. 2. Main sector issues and Government strategy: A) Public health issues. 2.1 Low access to health services and poor quaiity of care. The puablic health delivery system of Madagascar is relatively well developed: the country has about 2100 basic hiealth facilities (of which 200 are private facilities), 86 first referral hospitals (of which 12 are private hospitals) and, at tertiary level, 4 regional and 2 university hospitals (totaling over 4,150 secondary and tertiary care beds). In spite of this situation, only about 65% of the population has access to a health center located at less than 5 kilometers from where they live. Moreover, quality of care is precarious: drugs are rarely available, laboratories and clinical facilities are inadequately equipped, buildings are old and lack maintenance. More importantly, the situation of the health personnel compares poorly witlh the situation in countries at similar income levels (table 1) and (table 2) it is compounded by geographical distribution problems (concerning doctors but, especially, mid-wifes and nurses). Health providers are not properly trained and supervised, nor are there incentives to reward good performance. Tabtle 1. Human resources in Madagascar, in Sub-Saharan African countries and in developing countries. Madagascar Sub-Saharan All developing countries (in 1992) (in 1996) Africa (mi 1992) Population per doctor 12,000 10,800 1,400 Population per nurse 4,000 2,100 1,700 Nurses per doctor 3.0 5.0 1.2 Table 2. Health personnel in public health centers in 9 communes of Madagascar. Source: Enquete sur I 'evaluation de l'enseignementprimaire et de la sante de base, Madagascar 1998. Communes Population per doctor Population per nurse ANTSIRABE I 9,697 9,697 AMBOSITRA 5,357 3,061 FENERVICE EST 13,569 2,714 RAMENA 966 483 BRICKAVILLE 4,092 8,183 AMPARAFARAVOLA 15,109 7,555 ST AUGUSTIN 6,101 6,101 VOHPENO 3,592 3,592 ANTSLAFABOSITRA - 1,729 -4- As a consequence, quality of care in the public sector is poor and health facility utilization rates are low: in outpatient services there are not more that 0.2 contacts/inhabitant/year, while in inpatient services 50% of beds are, on an average, empty. The immunization cold chain is operating in only about 50% of facilities, immunization rates are low, while maternal mortality, infant mortality and under five mortality rates are particularly high (488/1000,000, 96/1000 and 159/1000 live births respectively) and comparable with Sub-Saharan Africa (table 3). Table 3. Health status indicators in Madagascar and in some Sub-Saharan African (SSA) countries in 1990-1996. Madagascar data are for the latest available year (1996). Other countries' and the SSA's data are 1990-1996 averages. Country Life Infant mortality Under-five Maternal Total Vaccination Child expectancy (per 1000 live mortality mortality fertility rates (% of Malnutrition at birth births) (per 1000 (per rate DPT (years) live births) 100,000 live immunized) births) Madagascar 58 96 162 600 6.0 40 50 Guinea 46 122 210 880 5.7 73 24 Mauritania 53 94 155 800 5.1 50 48 Mali 50 120 220 580 6.7 46 31 SSA 52 91 147 NA 5.6 55 NA 2.2 Low demand for and utilization of reproductive health and STD/H1V/AIDS services. The population of Madagascar is growing at 2,8% per year (data extrapolated from the 1993 Census). At this rate of growth, the population will double in less than 25 years. The Malagasy population is also very young, with 44% under age 15. Although the country is vast and the population density is still low at 24 persons per square kilometer (26 for total sub-Saharan Africa), the very fast rate of population growth makes it very difficult for the Government to provide essential social services. The Government, aware of this issue and also concerned with the problem of high maternal mortality (488 maternal deaths per 100,000 live births according to the 1997 Demographic and Health Survey), has adopted, in 1990, a National Population Policy. The rapid rate of growth has been caused by a decline in mortality, especially in infant and childhood mortality, whereas fertility has remained at very high levels. The total fertility rate is 6.0 children per woman (1997 DHS) and has remained constant in the 1990s. The Malagasy women marry at an early age, want large families, and have their children at even younger ages than before. However, during the last years the demand for birth spacing and birth limiting services has been increasing, mostly in the urban areas. This has increased the use of modern contraception (in 1997, the contraceptive prevalence rate among married women was 9.7%). Nevertheless, such levels of contraceptive use as yet had no significant impact on the total fertility rate. The main challenge, therefore, remains to expand the provision of good quality reproductive health services, especially in the under-served areas. Recently, the Government has stepped up its efforts in the provision of reproductive health services, including access to modern contraceptives. However, the progress (shown in the results of the 1997 DHS) has been most noticeable in the province (faritany) of Antananarivo, which has benefited from considerable assistance from USAID, and in the provinces of Antsiranana and Toamasina. The progress in three larger provinces (having about half of the total population of the country, i.e., Fianarantsoa, Mahajanga -in spite of GTZ - 5 - assistance- and Toliary) has been much less rapid. In addition to problems with accessibility, the quality of reproductive health services also needs to be considerably improved. The prevalence of the human immuno-deficiency virus (HIV) is still very low in Madagascar. Sentinel data and figures from epidemiological surveys (conducted in 1995 and 1996 in the country's six major cities) suggest that 5,000 people were IRV-infected at that time. Currently, about 10,000 people across the country are estimated to be IRV-infected. This represents a HlV/AIDS prevalence rate of 0.13% among the adult population (above age 15). These figures compare very favorably with prevalence rates in Southern and Eastern parts of continental Africa. However, several factors could trigger an explosion of the HIV/Al[DS epidemic in the very near future. Among these are: very high prevalence rates of STD (16% of pregnant urban women had active syphilis in 1995-96); behavior and mores which encourage multiple sex partners;wide spread prostitution in cities (and its strong link to poverty); and, last but not least, high geographical mobility. In addition, HIV infection being asymptomatic during early stages increases the transmission (as infected people ignore their situation and continue to spread the virus). The Government is concerned about the challenges posed by the HIV/AIDS infections and the severcl socio-economic consequences of an AIDS, full-blown, epidemic, and it is committed to contain its expansion. To that effect, several steps have already been taken. First, a National AIDS control propram was launched in 1988, three years before the first case of AIDS was reported. Second, the country has already a sero-suveillance system (data are collected from 15 "sentinel" centers) which is operational but needs to be strengthened. Third, high-level advocacy activities as well as a public IEC (information, education and communication) campaigns have raised the level of awareness among decision-makers and in the general public about the HIV/AIDS infection (as documented in the 1997 DHS). Fourth, a study was completed in 1997 to establish protocols for a syndromic algorithm to assist the treatment of STD (still to be implemented throughout the country and requiring for a successful application the training of medical personnel as well as an effective provision of drugs). Last, the social marketing of condoms started in 1996 in major, cities and it is expanding. Notwithstanding these initial and useful steps, much more needs to be done in order to strengthen IRV and STD preventive interventions country-wide, as well as to integrate them into the provision of reproductive health services. In addition, under a strengthened leadership of the National program on STD/HIV/AIDS, strategies ought to be better defined and expanded to include 11l societal sectors. 2.3 Public health problems dominated by "avoidable" causes of morbidity and mortality Madagascar's population is burdened by many comnmunicable diseases, including malaria, tuberculosis, plague, schistosomiasis, and very recently cholera. These diseases continue to affect the productivity and well-being of people in spite of the fact that cost effective interventions are available world-wide. Malaria: While in recent years, in the highlands of the country the Malaria epidemic has significantly been reduced through indoor insecticide spraying and the establishment of an epidemic alert system, in the coastal regions, the disease is endemic and continues to be a major determinant of morbidity and mortility. To maintain the results achieved in the highlands, the national malaria program is now planning targel ecl spraying of highland/lowland border areas, the extension of the epidemic alert system to the entire higllaEnd zone and early measures to control outbreaks (indoor spraying and treatment of cases). For the rest of7 the island, early household treatment with chloroquine made available at the community level, and increased promotion and use of impregnated bed-nets will replace the heretofore limited efforts made, in a few districts, by Government and local NGOs. Overall, prevention of malaria in pregnant women is poor (it encompasses not more than 15% of pregnant women) and efforts to increase coverage and compliance with a simpler and more efficient scheme will be pursued. Tuberculosis: This disease continues to be a public health threat. The National tuberculosis program is effective countrywide and has succeeded in increasing steadily the number of new cases detected and, subsequently, treated. Recently, fnancial resource constrains have hindered the program's ability to timely purchase sufficient stocks of TB drugs, precluding the systematic delivery of the modem short treatment recommended by CDC-Atlanta and WHO (hence forcing the program to reverse to the old long scheme which increases the risk of poor compliance and incomplete treatment). Plague: The disease is still endemic in the rural areas and there have been periodic outbreaks in Antananarivo and Majunga. The program relies on epidemiological surveillance combined with operational research to detect the emergence of bacteria resistant to antibiotics and fleas resistant to insecticide. Treatment of cases still relies on streptomycin injections, even though a more effective and easier to apply oral alternative is available. The control of plague epidemic seems hindered by poverty and lack of sanitation, the fact that agricultural produce started to be stored in houses (traditionally this was done in special storage shelters outside the house) with the consequence of attracting the rats indoors, by the high reproduction rates of the rat population and the difficulty of killing simultaneously the rat and its flees (so that the flees do not migrate to humans). As mentioned, there are problems with cost, resistance and toxicity of ratticides, antibiotics and insecticides, and this constitutes a solid rationale for continuing operational research in this area. Schistosomiasis (urinary and intestinal): This infectious disease is on the raise and has become widely endemic throughout the island. The national program has just started to implement mass treatments with praziquantel in hyperendemic villages. Due to the existence of cost effective interventions and to the heavy impact on the well-being of the population of the affected areas, activities to curb schistosomiasis epidemic are a public health priority. Emerzing diseases such as AIDS, or relatively well known diseases for which there is growing awareness (like rabies, hepatitis B and cysticercosis) have recently been included (generally when mass prevention or cure became available and affordable) among the priority health problems in many countries. In Madagascar, the number of cases of rabies has recently increased. Regarding hepatitis B, a few studies have shown that: (i) overall, hepatitis B is highly prevalent in Madagascar (20.5% of the population has the HBsAg); (ii) compared to urban areas, rural areas have a rate which is approximately 5 time higher; and (iii) infection takes place predominantly in early infancy. In both cases, means to control the epidemic have become available providing the rationale for their inclusion among the health problems of the country. 2.4 High malnutrition rates and weak institutional capacity. Madagascar has one of the highest rates of chronic and severe malnutrition in Africa. According to a recent DHS (1997) and to a 1998 nationwide anthropometry survey, acute malnutrition (wasting) affects 7% of children (this is more than three times the reference level for low-income countries), and 40% of children under 3 years are underweight for their age. Moreover, 48% of the 0-3 age group are stunted (low hight for age). In some regions and age groups these figures are substantially higher, reaching 12% for wasting and nearly 65% for stunting. Since 1992, nationally these rates have not been improving and probably have worsened. Micronutrient deficiency prevalence is common, particularly iron, vitamin A. In addition, the public health sector has not been able to effectively lead and direct nutrition policy development or satisfactorily performn its functions because of limited institutional capacity to plan, design, and supervise nutrition activities which are in the purview of the Ministry of Health (which in Madagascar is the lead ministry for nutrition as identified in the 1997 approved National Action Plan for Nutrition). - 7 - There is an aggressive and substantial program to improve nutritional status in the most disadvantaged areas through preventive programs and responses to moderate malnutrition at community level under the $42.0 rnillion SEECALINE Project, financed by IDA and WFP, and supported by UNICEF. Other., bilateral and non-goverm-nental community based programs also contribute to improved nutritional status. However, there has only been extremely limited effort to address the severely malnourished child, which is seen as the responsibility of the Ministry of Health. A comprehensive effort to better deal with severely malnourished children, referred by community programs for nutrition rehabilitation to health facilities, is needed. B) Manafement and financial issues. 2.5 Insuifficient financial resources for the health sector. During the last years (1996 to 1998), the health secltor budget accounted for only US$ 3.7 per capita (which represented almost 10% of the total public budget and 1.3 percent of the GDP). This very lowv level of funding (table 4) was compounded by: (a) poor budget execution [in 1996-1998 the budget execution was 78%, 67% and 69% respectively, and, it should be noted that these figures reflect the situation o f the funds ccommitted by the MOH ("credits mandates") and not actual expenditures paid by the treasury I, (b) centralized spending (in 1998 as much as about 50% of the budget was allocated to the central administration, although part of the money spent centrally was for the direct benefit of the districts) and (c) allocation problems. Inadequate management at all levels also generate waste of scarce financial resources. Studies show (table 5) that the population is not fully using public facilities and that spending for health is distributed among: (i) services delivered by the private sector; (ii) services and drugs delivered by the public sector (cost-recovery); (iii) traditional health providers; and (v) self-medication. Nonetheless, total health expenditures are still smaller than the reference level for low-income African countries of US$9-13 ("annual, per capita, indicative cost for a district-based health care system") mentioned in the "Better Health in Africa" report (amount which does not include the cost of health care and of health care administration beyond the district level). Table 4. Health sector budget allocations and budget execution in Madagascar. (1996: IUS$ = 4,061 FMG; 1997: 1US$ =5,091 FMG; 1998: 1US$ 5,533 FMG) 1996 1997 `1998 GDP (millions FMG) 16,852,400 19,122,600 20,007,736 Population (millions) 13.5 13.9 14.3 Total Government Budget (millions FMG) 2,079,618 2,756,805 3,257,553 Health Budget Allocation (millions FMG) 225,006 251,321 261,515 Health Budget Execution (millions FMG) 174,685 168,962 180,445 Execution/Allocation (%) 78% 67% 69°,1, Public Health Budget per capita (US$) 4.11 3.56 3.31 Public Health Expenditure per capita (USS) 3.19 2.39 __2.2'. 2.6 Poor institutional capacity and overcentralization. Until 1995, Madagascar had neither sector strategies, nor a health policy framework and tended to dilu 'e its effort and scarce resources across all levels of the health system. In addition, resources were not being used efficiently because of weak institutional capacity, combined with an overcentralized decision making - 8 - process and pattern of resource allocation. Although, the MOH has taken major steps to elaborate a sound policy framework, decentralize the decision making, and deconcentrate health service delivery, much remains to be done to: (a) adjust the institutional and legal framework to the new roles and responsibilities of the different administrative levels (central, provincial, district and municipal), (b) further decentralize decision making and (c) strengthen the capabilities of the 6 DIRDSs (Directions Inter-Regionales de Developpement Sanitaires) and the newly established 111 health districts (Services de sante de district or Districts sanitaires) to properly manage human, financial and other categories of resources. Table 5. The choice of the health care provider. Source. "Enqu6te sur lNivaluation de l'enseignementprimaire et de la sante de base" Madagascar, 1998. Hospital or a better Traditional Self medication Area Private Communes equipped health healer % health facility % Others % center % "gu6risseur" % center % Antsirabe I 14.5 3.8 21.5 56.5 12.4 2.2 Ambositra 1.2 2.4 11.9 45.2 28.6 10.7 Fen6rive Est 1.8 3.6 16.1 76.8 0.0 1.8 Ramena 0.0 3.6 13.0 66.7 0.0 14.8 Brickaville 1.5 1.5 16.4 43.3 34.3 3.0 Ampara-farav. 0.0 2.0 9.3 73.6 11.3 3.8 Saint Augustin 3.5 1.8 7.0 87.7 0.0 0.0 Vohipeno 6.7 2.0 9.1 37.8 44.4 0.0 Antsiafabositra 1.7 10.0 35.0 53.3 0.0 0.0 Total 5.4 3.3 14.1 58.8 14.5 3.9 Government strategy. The Government has made considerable progress over the last four years in addressing key sector issues. First, following a two-year participatory process involving all stakeholders, a comprehensive health policy framework and plan have been defined. The National Health Policy, and the Health Development Plan: (1) put the decentralization of sector management and the development of the private sector at the center of sector strategies, (2) base the improvement in service delivery on the: i) upgrading of prirnary care and the delivery of an essential package of services, and ii) development of norms and standards, and (3) considerably strengthen donor coordination. Second, key reforms have been initiated with support from donors: (a) Institutional capacity has been strengthened in areas such as health management and planning, information system and personnel management. A national information, education and communication (IEC) program was launched along with similar programs to deal with all priority health problems; these various priority programs, to guide the sector activities, have developed national strategies in -9- their respective problem areas (malaria, nutrition, AIDS, reproductive health, etc.). (b) Decentralization became effective with the creation, in 1995, of 111 health districts (health districts have been gradually strengthened and are receiving increased direct budgetary allocations from the MOH); (c) Capacity building activities have been implemented to help district health teams to assess health needs and elaborate district development plans; (d) Cost-sharing arrangements and community involvement in the management of district health services have been introduced, and, in January 1998, cost-recovery was generalized to primary liealth care services nationwide; (e) Management autonomy and cost recovery have been introduced in three of the six regional hospitals; (f) In January 1997, a private, non-profit, drug procurement unit (Salama) was created to supply essential drugs at low cost to public and non-profit private health providers. The Government is now in the process of defining other key sector reforms with regards to: (Ii) pharmaceuticals (registration, quality control, pricing policy); (ii) in-service training; (iii) redeployment of health personnel; (iv) restructuring of the MOH following an audit carried out in the context of civil service reform; (v) health infrastrucure development; (vi) private sector (with emphases on contracting services with confessional NGOs); etc.. With respect to population and reproductive health issues, the Government adopted in 1990 a National Population Policy which calls for the exten,sion of reproductive health services (although it is less specific on fertility reduction). More recently, the Ministry of Health has defined its reproductive health strategy, in the form of a Declaration de Politique nationale en Sante de la Reproduction formally adopted in 1999. This document offers a reproductive health policy as well as the normis and standards needed for its implementation. Its five key principles are: decentralization of services; integration of reproductive health services within the minimum package of activities at the district level; enhancement of the quality of services; involvement of communities; and strengthening of national and international partnerships. The main implementation strategies are: advocacy on reproductive health; mobilization and empowerment of communities; promotion of behavior conducive to the use of reproductive health services; equitable access to health services; training of health workers and strengthening of health centers; and strengthening of data collection and research activities. Regarding the STD/HIV/AIDS nascent epidemnic, several major steps have already been taketi to prevent the spread of the infection. These included the creation, in 1988, of PNLS (National AIDS coat-ol program or Programme National de Lutte contre les SIDA/MST/VIH), the establishment of a national sero-sunreillance system, the launching of an IEC campaign on HiV/AIDS, as well as, in the major ci ies, the start of social marketing activities for condoms. In addition, the Ministry of Health adopted in 1997 protocols (based on a syndromic algorithm) for the treatment of most common STD. However, more work is still needed to strengthen the leadership of the PNLS and to sharpen strategies to contain the epidenr ic through the adoption of multi-sectoral interventions. In this respect, the Government is currently implementing the analytical framework proposed by ULJNAIDS, i.e., analysis of the situation, analysis of the response, strategic planning effort and mobilization of resources. The Government will also update it; national strategy on STDAHIV/AIDS for the years 1996-2000 as well as its 1996 Politique nationale de lutte contre les maladies sexuellement transmissibles. In 1997 a National Action Plan for Nutrition was elaborated by a multisectoral group made ul) of representatives from the Prime Minister's Office (Priinature) and several line ministries, including hea Lth, with support from international agencies (UNICEF, WHO, FAO, USAID) and local and international - 10 - NGOs. The plan reconunended a multisectoral approach to address the many determinants of malnutrition. Also in 1997, a National Food Security Strategy, which has the objective of improving food consumption, was also elaborated by Government. In the context of this multipronged strategy, the health sector's main responsibility is to provide technical oversight, monitor the nutrition status and provide nutrition rehabilitation services to severely malnourished children, while most prevention and nutrition education activities will be delivered at community level. 3. Sector issues to be addressed by the project and strategic choices: The project is designed to support, in close collaboration with other donors, the implementation of the Govermnent's Health Policy and National Health Development plan. Potential areas for project support have been identified within this overall sector policy framework taking into account that IDA should remain a last resort financier whose funding should be complementary to other donor assistance. The project will address the following sector issues and will be based on the following specific strategic choices: 3.1 Access to and gualitv of primarv health care services. The project will continue to support, along with other donors, especially the European Union, the upgrading and extension of district health services, consisting of: (a) health centers (Centres de sante de base I staffed with paramedical personnel and Centres de sante de base II staffed with a doctor and paramedical personnel), which are the first point of contact of the patient with the public health service, and (b) district hospitals which are the first referral health facilities (Centres Hospitaliers de District I and II, the latter category having also a Plateau technique. surgical theater, laboratory, X-ray.). The project will complement funding from Government, donors and communities, and will contribute to the financing of primary health facilities and first referral hospitals, to expand their coverage, raise the quality of services and to provide a cost-effective package of essential care. The project will also continue to support of cost recovery at district health facilities. Several strategic choices have been made. Firstly, the decision to focus on district health services as opposed to secondary and tertiary services is based on: (i) cost-effectiveness, since the package of essential health services delivered at the district level could address an important proportion of the country's burden of disease, in a cost effective manner and at the lowest cost, and (ii) equity, since these services are mostly used by the poor. Secondly, the choice to focus on public sector delivery, as opposed to private delivery, was made because: (i) public primary care services are predominant in rural areas and account for around 80% of total health care delivery; they also discharge an appropriate mix of preventive and curative basic health services, while (ii) at least at present, private services are mostly curative (do not tackle preventive or public health services) and their prices are prohibitive for the poor. Nonetheless, contracting of and support to private services will be made possible and it is specifically mentioned in the sector's policy. Contracting will include: (a) clinical services (as are for instance the Government's intention to offer incentives to unemployed doctors to practice in remote geographical areas and the use of NGOs to deliver specialized services such as eye surgery), (b) public health services (Salama, for drug procurement, but also religious NGOs to manage district drug storage facilities) and (c) technical services (such as maintenance of vehicles, buildings and equipments). 3.2 Access to, and quality of reproductive health and STD/HIV/AIDS services. The project will: (i) help improve the access to reproductive health services with a focus on the three underserved provinces of Fianarantsoa, Mahajanga, and Toliary (representing about half of the total Malagasy population); (ii) set up higher quality standards for the provision of reproductive health and safe motherhood services (including screening of pregnancies at risk and targeting of risk groups) throughout - 1 1 - the country; (iii) fnance the purchase of contraceptives (starting in 2002, when it is expected that the demand in contraception will exceed Government's and donors' funding capacity; and (iv) promote child survival as an incentive to birth spacing. The strategic choices made were to: (a) complement current efforts in the area of reproductive health in the three other provinces in order to offer reproductive health services on a truly nationwide basis as opposed to en intervention limited geographically; (b) integrate reproductive health services with other health interventions, especially child survival and safe motherhood vs. act vertically; and (c) help implement higher quality standards in training and in the provision of reproductive health services as opposed to preferentially improve service coverage. These strategic choices are in line with the recent reproductive health policy and norms prepared by the Ministry of Health ( ,ee Government strategy above). The classic approach based on vertical programs for reproductive hea:th was deemed neither sustainable nor cost-effective in the case of Madagascar. Furthermore, only the integration of reproductive health (including interventions against STD/HIV/AlDS) within the general health services will ensure synergy between reproductive health, child mortality reduction, and safe motherhood (materniti sans risques). The implementation strategies will focus on: (i) meeting and raising (through IEC and eiforts at the outreach) the emerging demand for reproductive health services as illustrated in the 1997 DHS survey; and (ii) highlighting the other health benefits and outcomes linked to the use of such services, especially for, but not limited to, mortality child reduction and safe motherhood. The program against the emerging HIV/AIDS epidemic will stress: (a) safe blood transfusions and sero-surveillance; (b) STD/H:[IV screening; (c) capacity building (laboratories and national AIDS control program); (d) reduction of STD through training in STD syndromic algorithm management; (e) raising STD patients' demand for services; (f) prevention campaigns, and other specific activities among prostitutes, and other groups at risk (including IEC activities). These activities will be coordinated under the reinforced "Programme lVational de Lutte contre le SIDAI/MST/VIJ' (PNLS). These activities will help: strengthen the current Government's strategy to address the STD/HIV/AIDS epidemic nationwide while the- epidemic is still nascent; and to control one of the key co-factors of the epidemic, namely the very high prevalence of STD, through the implementation of the syndromic algorithm approach. 3.3 Addressing health sector resonsibilities in dealing with malnutrition. The objective of this sub-component is to support the Government's multisectoral long-term effort to significantly reduce nutrition-related infant morbidity and mortality. The Government recognizes thaI nutrition plays an important role in over half of infant deaths, and that it has substantial impact on thi,: well-being of infants, their educability and future productivity. While agriculture, education, water, sanitation, and transportation are key factors affecting nutrition outcomes (and community and school nutrition programs will significantly reduce malnutrition through nutrition education, supplemental fei d;ng, provision of micronutrients and antihelminths) the Ministry of Health, as the lead Goveniment agency, has also a crucial role to play in an effective nationwide effort. Two aspects, in particular, are weak and require strengthening, namely effective clinical care of severely malnourished children, and the institucio nal capacity to provide policy leadership, coordination, and quality assurance. In March 1999, the Government approved the "Protocole sur la Prise en Charge des Enfants Severement Malnutris". T'iliis protocol is based on the work of a Technical Committee (which includes WHO, UNICEF, WFP, the 1ked Cross and SEECALINE) and it will serve as the basic reference for this project's suppolt to the Severlly Malnourished Children Program (SMP) of the Minisiry of health. The Technical Committee will contirinue to provide technical advice and support in carrying oult the SMP. The Government's capacity to deal i,th the severely malnourished children referred to its nationwide health facilities will be developed througih the strengthening of the referral system's capacity to provide nutrition rehabilitation with properly equipped and trained staff at referral centers provisioned with the necessary specialized food rations. The SIP will look principally to SEECALINE and other non-gouvernmental programs to provide for the transporta tion - 12 - and feeding of mothers attending to the malnourished children. MOH capacity to supervise and monitor the treatment of severely malnourished children will also be strengthened. The project will also address policy development, planning, monitoring and evaluation capacity of the Ministry through support for nutrition planning, training, improved information and coordination among the many partners in Madagascar. With respect to the latter, the Groupe d'Action Intersectorielle de Nutrition (GAIN) has proven to be an effective tool in information and program coordination between the major partners and NGOs. Initiated by USAID, one of GAIN's strengths has been that it is an E5 OCT. 7929 <.,,. oZ s DIUAkARIVO Tant-i4 Annex I Attchment 1 LISTE DES INDICATEURS 2000 2001 2002 2003 2004 2005 2006 INDICATEURS GENERAUX: Population totalc Taux de croissance demographique Revenu par habitant ( S EU) Taux de croissa=ce du PIB Pourcentaao de la population totale aynt accft ;i 1'eau potable- INDICATEURS D_ETAT DE SAN E LA POPULATION: Esperance de vie A la naissance Taux de miortaJite infantile Taux de mortalitz infnto-juveinile Taux de monalitd inatcmc11e Indice sytuh6tique dc f6condi4d Taux de prdvalence de la malnutrition proldino-calorique chez Ics enfants de moins de 5 ans INDICATEUIRS DE DISPONIDILTE DES RESSOURCES POUR LE SECTICUR: Budget de foncdionnement alloud par I'ETat au sectreur (MInSan+PF}U+Etablisscments autonomes) Montant En pourcentage du budget de fonctionnement de l'Etat Pourcentage du budget de fonctionncmnent du MINSAN aff=c6 aux depense noa salariales Pourcentage du budgt de fonctionnement alloue aux uiveaux prmaires et secondaires Poufcentage du budget de fonctionnement alloues aux DIRDS Montant des recettes provenant dui recouvrement des cous par niveau: 1)-CSB/CHD 1 2)- 2/CVICJCHU Montant des fnancements allouds par les partenaires exteunes Nomnbre d'infiasructres sanitaires des fonctionne8les par typ et par niveaux Pourcentagc d'dquipements en ban ctat Nombre d'agents de sante et r4par.ition par categories professionnelles et par niveau Ratio midein / habitants Ratto paramedical / habitants Taux de disponibilite des mdicaments essentiels Taux de disponibiWlt6 des vaccins -Effectifs des porsonnels existants et 6carS par rapport aux normes d'allocation per nivcau: - pdriph6riques - intermddiaircs - centrales Annex 1 Attchment :. LISTE DES INDICATEURS 2000 2001 2002 2003 2004 2005 2006 INDICATEURS DE PERFORMANCE DU SECTE1VR (au 30 Septembre de chaque annee) -Te.ux de recouvmetnt des rapports du SISG: RM. RMSD -Nombre dejour de supervision lhors du chlf lieu de la Rgion par Eqtiipe DIRDS -Taux d'utilisation dcs services de consultations externes (par hab. par an) -Pourcentage de la population totale ayant acc s a une formation sanjitaire a moins de; krm du domicilc -Taux de satisfaction des malades -Taux de couverture vaccinate des enfants dc 0-11 mois par antigine BCO, Polio oxal, Aiii-rougeoleux -Pourcentage d'enfants oompletraent vaccincs par les vaccins du PEV -Pourcentagc de femines en iigc dc procreer vaccinecs contre Ie idtanios (VAT2) -Tax; de couvemure prenatale (numimum 3 CPN/fimmc.) -Taux de couvermre postnatale (miaiinwum I CPN/femme) -Nornbre total d'accouchements enregistres dans les ibrnations sanitaires -Tauix de prival2ce V1H/SI)A chcz les feaunes enceintes -Taux do couveurn des accouchements asisids -Nmobre de naissances vivantes -Pourcentage des nouveau-nes de poids de nalssance est infirieur a 2,5 Kg -Pourentage de dic~s p6rinataux -Taux d'utilisation des mrthodes contraceptives modcrnes -Ta=K de prevaIence conuracepEive au niveau national -Pow centage des enfants de noins de 3 ans dont le poids est inf6i.cur A la moye (2 dcajts type) -Taux de mortalite bospitali6re des enLfants s6vtremcnt rinalnutris admis dans les hopitaux pour rdhabilitation nutritionnelle -Pourcentage de ia population ayant accEs aux nidicaments essenLicls -Cout moyen du traitement par R&gion et par niveau; CSB; CID Utilisation des serces curatifs: - Taux d'utilisrtion des sewrices curatift par nivean - Taux d'occupation moyea des ]ius des HMpihaux ((MICR?JCH - Dur&e moyenne de sijour idans les H8pitaux - Nombre d'interventios clUnrugicales par Region - Non*re de cesarienucs (pourcentage) Pourcentage de consultants rhfirs du niveau pnuiaire vers le niveau secondaire Annex I Attchmnent 1 NDICAThURS D'ACEEVEMNT DES ACTrIVATS 2000 2001 2002 2003 2004 2005 2006 PLANHlUEFS (Au 30 Septembre de chague annie) - - DEVELOPPEMENT DES DISTRICTSSANITAIRES -Nombre de Districts Sanitaires audit6s (%/.) -Nombre de sorties equapes DDDS par supervision (%) -Noombre de bureaux SSD coustuuits -Nombre de CSB/CEID construits -Nombre de CSB/CHD rQabilit6s -Nombre dc CSB 6quipes -Nomubro do CHID oquips -Nomnbre de strucLurcs dentaircs cr6dcs -Nombre de structurcs dentaires 6quipes -Nambre DS 6quipes d'outillages de maintenance -Nombre d'agents de maintenance fonn6s ASSALNISSEMENT Nombre de puits equipds de pompes nanuelles construits Nombre d'mnexatcurs de dechets hospitaliers construits PALUDISMfE Nombre de pcrsonnels paraw6dicaux - Nombre de mdecidn formes i la PEC des cas * Nombrc de MN vendus - Nornbre de Districts Sanitaires couverts par le PMNF * Nombre de population couvert par les caxnpagnes d'aspersion d'insecticide - Nombre d'alerre Paludisme * dans ks Hautns Terres Centrales . dans le Sud BILHARZ7OSE - Nombre d'agents recycls pour le d6pistage et l traitement de - Nombre de communes d6clar6es hyper-end&niques - Nombre de communes touch6es par le traitement de masse - Norubre d'enquetes dpid6miologiques en Bilharziose effeauees PESTE - Nombre de cas d6clards -Nombre de cas con±rtimis -Nombre de d6ois - Taux de lhaliit -Nombre d'agemrs de sante fornms en PEC des cas -Nombre d-agents dce santE formns en Surveullance - Nombre d'alerre TUBERCULOSE -Nombre d'Agents formns a la prise en charge des cas -Nombre de laborantins for__s Annex 1 Attchment 1 -Nombre de CDT supezris6;_ -Nombre de CDT fonaionnant selon ls nornes -Nombre de cas diclar6s -Nombre de cas confinnes -Nombre de deces -Taux de 16thaiir6 -Nombre agents form6s en Planification nuuitionnelle - Nombre de fonnrteurs en dictiUque formes - Nombre de personnels formns - Nombre de CRENI r4habilits - Noimbre d'agents du CSB formn6s en MSR - Nombre d'agerns des CHD formss en MSR - Noimbre de CHD I tra=sforinds en Centres Laparo-c6satieane - Nomnbre de CHD/CSB2 quip6s en niatrriel dc srEdilisaicm, - Nornbre de SBC mis en placc - Evaluation anrnLelle du SBC - Nombre d'agenrs forimds enl PCDr - Nonibre de Centres d'accueils SRA crds. MATEFRITE SANS RISQUE .S7J5IDA - Norrbre de pril6vcments et d6pistage chez les femmas encentes - Normbre de cas positfs chez les femres enceintes - Nombre de prcvements HIV - Nombrc de cas positifs - Nombre de pr646vements HES - Nombre dc cas positifs - Nombre de pr6levements Syphilis - Nombre de cas positifs - Nomibre de CRTS r6habilit6s Execution du budget de fonctioiment du secwur: - Montants d6caissas - Taux d'exdcution dtx budget (extapolation sur les 12 mnois de 'arwce) Intastruures sanitaires: - Nombre d'infastrucws construites ou rdhabilit6ws par fypc - Talix de rtalisation par zappon aux pr6visIons Equipements: - Nomibre d'equipements insltads par type de Formnatior1s Sanit ires - Taux de realisation par rapport aux pr6visions Personmel: - Normbre de personnel formes par caidgoxies professioneDes - TauLx de realisadion par rapport aux prMisions ____._______e2 g ;P s* %_ - _-_ _________________________________= =____=___=__-- - - - - Annex 2: Project Description MADAGASCAR: Second Health Sector Support Project By Component: Project Component I - US$17.80 million (1) Development of District Health Services. The objective of this component is to help develop primary health care and first referral level services in districts, to improve the geographical accessibility to services and to foster the quality of care. The project will finance civil works (rehabilitation and construction) for health centers and district hospitals on the basis of a Health Infrastructure Development Plan, taking into consideration criteria such as the accessibility to a public or private health facility, the degree of isolation/condition of roads of the respective geographical area, the commitment of the respective community to contribute towards the cost of operating the health facility and the utilization rates of the existing infrastructure. IDA will fmance such works in those districts without fmancial support from other sources, and, if necessary, it will also contribute to the re-equipping of the newly constructed or rehabilitated health facilities. Furthermore, IDA funds will be used to carry out studies, to train the personnel, to provide medicines, to support supervision activities, etc. Moreover, this component will support decentralized health administrations by constructing and equipping them (DIRDS and SSD), will support sanitation activities in health facilities (wells and incinerators will be made available), and will pay due attention to maintenance of buildings, equipment and vehicles. Important contributions to district based activities will also come from the other components dealing with the most important public health problems of the sector (nutrition, infectious diseases, reproductive health) and from the investment already made which led to the set up of the central facility for the procurement of essential drugs (Salama) and to the generalization of cost recovery. Project Component 2 - US$15.90 million (2) Infectious disease reduction 2.1 Malaria (about 27% of the total project cost): a) Highlands: The objective of the project is to maintain the reduction in malaria transmission which has been achieved with support from the first IDA project. During the next 9 years the project will finance transport and other logistic expenditures, equipment and the (pyrethroid) insecticides to be used for spraying campaigns on the margins of the highlands as well as in some villages which had not been properly protected during previous spraying campaigns. Environmental safe insecticides for targeted, intra-domicilary, spraying and drugs for chemotherapy of malaria cases will also be made available in villages where the alert system identifies outbreaks. While the malaria alert and surveillance system will continue to be financed by the Italian cooperation, additional funding for transport and equipment needed to complete the coverage of the entire area at-risk will be funded by the project. b) Lowlands: The project will support Government strategy aiming at reducing morbidity and mortality associated with malaria without compromising the building up of immunity by inappropriate interventions. The main target groups are the children and pregnant women for which a more effective chemo-prevention scheme will be applied. Over the next 6 years, the project will finance: (i) training of the health personnel, at different levels of the health delivery system, to improve the treatment of simple, as well as complicated, malaria cases; (ii) a revolving stock of bed-nets to be sold to the population and the provision of pyrethroid -43 - insecticides for their re-impregnation; (iii) supplies of drugs (at present chloroquine) for the first line treatment of malaria cases, to be sold at community level by the village health worker cr in village small shops; (iv) IEC, through posters and radio, to: a) inform on appropriate use of auto-medication with chloroquine as a drug for frst line treatment; and b) promote the use of bed nets; and (v) studies to monitor the use of bed-nets and self-medication, and to identify best ways to impiove them. Training of health personnel as well as the IEC activities will be executed by the respective DIRDS with the assistance of the nationail malaria program. Sale of bed-nets and their re-impregnation, as well a.s the supply of drugs (for the first line treatment of malaria cases) to health workers and shopkeepers will be subcontracted with local N(JOs. Cost-recovery for bed-nets seems to pose no problem as they are well accepted by the population. However, for several reasons, introducing cost-recovery for re-impregnation seems less accepted. Consequently, based on results of studies on acceptability and long-term compliance, re-impregnation could be fully or partly subsidized from the credit. Cost-recovery will be applied fir the drugs prescribed by village health workers and sold by shopkeepers. Studies on the effectiveness ard risks of auto-medication will be conducted at mid-term in order to validate the approach in the local contexct. While the technical expertise will continue to be provided by the "Malaria scientific network", strategic decisions on spraying, bed net policy, choice of drugs, etc., will be taken with support from the Roll back malaria committee (at presenrt in its making) to be chaired by the MOH and to include all important players in malaria control. 2.2 Tuberculosis (about 3% of the total project cost) The aim of this component is to: (i) improve the accessibility to TB diagnosis, prevention and treatmernt; (ii) reduce the number of patients discontinuing TB treatment (drop-outs); (iii) monitor effectiveness and efficien,cy of TB drug therapy; and (iv) decentralize and strengthen supervision. The project will support: Government supervision activities (e.g., transport, vehicles, maintenance), case detection and treatment of cases and the purchasing of specific drugs, should public health funds not suffice. In addition to the costs of supervision teams, the project will finance the training of the DIRDS teams by the national TB program in order to decentralize the supervision. As most DIRDS lack the technical skills to supervise TB acaivities, the transfer of tasks and responsibilities will be progressive. The project will also finance TB culture,s and anatomo-pathological examitnations, where appropriate. Financial support to the central laboratory i'. also foreseen to allow periodical assessment of sensitivity to drugs of mycobacterium tuberculosis. While purchasing of TB drugs will be financed from the public budget, the project will secure funds to covyr any failure of the public finance system that may occur. It is expected that the continuous availability of TB3 drugs for the short regimen will increase general compliance to treatment and will reduce the number o:f drop-outs. 2.3 Plague (about 3% of the total project cost) The objectives are: (i) improvement of case detection and management; and (ii) prevention and control of outbreaks in rural and urban settings. Detection of plague cases has recently been greatly improved after the introduction of a new dipstick test which allows health personnel to confirm suspected cases in ti f ield. The project will support the local manufacturing of this rapid diagnostic tool. Currently, suspected ai id confirmed plague cases are treated with streptomycin injections, although the WHO recommended di 1, is doxicycline (a generic drug, orally administered). The project will fund a feasibility study to replace ;he current scheme with a new olne consisting of early administration of injectable streptomycin followed by, after 48 hours, an oral antibiotic. In rural areas, the project will support the spraying with insecticidrr (pyrethroid) around the house of newly detected cases. In urban settings, the project will finance the setting - 44 - up of a surveillance system to monitor selected indicators in order to timely detect epidemic outbreaks. Moreover, the project will help the MOH to advocate measures to improve sanitation in the most affected neighborhoods of Antananarivo and Mahajanga. The project will also fund laboratory surveillance to monitor the sensitivity of the bacteria (yersinia pestis) to currently used antibiotics as well as the sensitivity of rat fleas to environmental safe insecticides. Control of flea and rat populations in urban areas will be attempted through the use of methods which will not contaminate the environment i.e., Kartmann boxes (containing insecticides and ratticides proven efficacious in Madagascar). More importantly, the project will fund a comprehensive review of the strategy for plague control using recent developments in the study of the dynamic of epidemics and its indicators, the vulnerability of the bacteria and the fleas, and recent advances in diagnosis and treatment. Due to its highly specialized nature, the epidemiological surveillance and laboratory activities, as well as the clinical trials, will be sub-contracted with the Pasteur Institute of Madagascar. 2.4 Schistosomiasis (about 2% of the total project cost) The aim of this program is to contain the progression of the schistosomiasis epidemic. In the geographical areas where the disease is widely spread, the project will fund campaigns (transport, equipment and other expenditures) to identify the villages most severely affected. In these villages, the project will also support the administration of treatment (free-of-charge to the person) with an effective drug (praziquantel). Depending upon the form of the disease (intestinal or urinary) the interventions will vary, i.e., *Intestinal Schistosomiasis: the screening for hyper-endemic villages will rely on the use of a rapid assessment method based on the presence of parasite eggs in stools at microscopy in a small sample of school-age children. *Urinary Schistosomiasis: the project will fnance a study to develop a rapid assessment method to screen hyperendemic villages in a similar way to the one developed for intestinal schistosomiasis. However, the diagnostic of infection may be done through the use of a simple questionnaire or of a dipstick test to identify the presence of blood in urine. The concerned DIRDS and districts will be closely associated in this work to enable them to, later on, carry out surveillance and mass treatment activities. In the non-hyperendemic areas, both urinary and intestinal schistosomiasis cases will be diagnosed in patients complaining of suggestive symptoms on the basis of a positive microscopic examination, of a positive dipstick test, or on the basis of answers to a specific questionnaire. In this case, the cost of the treatment will be supported by the patient. Moreover, the project will also fund epidemiological field work and studies (to be subcontracted with the Pasteur Institute of Madagascar), technical assistance, drugs and insecticides, equipment and will also support recurrent expenditures. Project Component 3 - US$ 6.40 million (3) Family Planning and Reproductive Health (including STDIHIV/AIDS) The component will: (a) help improve the access to services pertaining to reproductive health (RH) in the six provinces but with a special emphasis on three undeserved provinces (Fianarantsoa, Mahajanga, and Toliary); (b) set up higher quality standards for the provision of RH and safe motherhood services in the six provinces throughout the country; (c) help improve the access to services pertaining to sexually transmitted diseases, the human immuno-deficiency virus, and the acquired immune deficiency syndrome (STD/HIV/AIDS) in the six provinces throughout the country; and (d) set up higher quality standards for the provision of STD/HlV/AIDS services on a nation-wide basis. RH service delivery will be supported by Information, Education, and Communication (IEC) efforts -45 - tailored to specific target groups. RH services will also be integrated with other health interventions, especially child survival and[ safe motherhood. Higher quality standards will be implemented through better training in the provision of RH services and more effective, client-oriented service delivery, STD/HIV/AIDS services will focus on the reinforcement of FIV/AIDS screening and sero-surveillance and the reduction of the level of STD through the nation-wide implementation of the syndromic algorithms for the treatment of STD. These activities will be supported by the organization of prevention campaigns and specific IEC activities among prostitutes and other groups at risk. Financing: The sub-component on RH services will complement funding of the RH service delivery activities of the Ministry of Health. It will specifically fund investment and recurrent costs in the main following areas: strengthening of central services of Maternal and Clhild Care and Family Planning (MCH/FP); definition of a national action plan for risk-free maternity (safe motherhood); improvement of case management for high risk pregnancies and complicated deliveries in health centers and/or district hospitals (levels 1 & 2); increase in FP service delivery, including the provision of modern contraceptives starting in 2002; integration of case management activities for children's diseases in 35 Health Districts (HD); and promotion of a campaign on adolescent sexuality with minimum risk. The sub-component on STD/HIV/AIDS service delivery will complement funding of the activities of the Programnme National de Lutte contre le SIDA/MSITWH (PNLS) at the Ministry of Health. It will specifically fund investment and recurrent costs in the main following areas: strengthening of central capacity of Ministry of Health; reinforcement of laboratory and testing capabilities; strengthening of the national sero-surveillance systern; case management activities for STD- and HIV-infected patients; and IEC activities for STD control. Implementation arrangements: The RH service delivery activities will be coordinated by the PHC/FP Unit of the Ministry of Health and the STD/HIV/AIDS activities will be coordinated under the reinforced Programme National de Lutte contre le SIDA1/MSTVIH (PNLS). The RH and STD/HIV/AIDS activities funded through the component will comnplement the activities listed in the National Health Plan (Plan Directeur). To help develop the above mentioned activities the project will finance equipment, HIV diagnostic kits, commodities, training, consultant support, studies and surveys, and civil works to strengthen family planning and maternal care services as well as STD/`IHV/AIDS prevention activities. Project Component 4 - US$1.50 million (4) Nutrition Madagascar has one of the highest rates of chronic and severe malnutrition in Africa. According to a 1997 Demographic and Health Survey, acute malnutrition affects 7% of children under 3 years of age which is three times the desired level (nearly 1% are severely wasted, having a weight for height score that is below 3 standard deviations), 40% of these children are underweight, and 48% are chronically malnourished . In some regions and age groups these figures are substantially higher, reaching 12% of wasting and near ly 65% of stunting. Since 1992 these rates have not improved on a national basis, and probably have worsened. Based on WHO analysis, 54% of infant rmortality under 5 years of age is related to malnutrition, which translates into 85 deaths per 1,000 live births, with both mild, moderate and seve: e malnutrition affecting infant rnortality rates. Maternal education in terms of knowledge of good feedinig practices are low, particularly in the rural areas. The Government has increasingly recognized the problem and sought to take remnedial action. An expinded community based nutrition efifort is just getting underway with IDA, WFP, and UNICEF support. Th is -46 - $41.0 million program (SEECALINE), is the principal intervention by the Govermnent in nutrition. It takes preventive and educational action at the community level in the most malnourished areas, which are chosen based on a 1998 anthropometry survey. Its community and school based programs will expand to cover all provinces by 2003 when the project ends. The SEECALINE program does not extend to curative or the medical treatment of severely malnourished children. Indeed, the management of severely malnourished children has been an area poorly dealt with in the past, without any institution taking clear responsibility, or there being any coordinated effort. This situation has now been resolved and the Ministry of Health will take charge of this problem on a national basis, launching an intensive effort to do so in a comprehensive manner. With respect to this Severely Malnourished Child Treatment sub-component, a protocol has been developed by a technical body comprised of leading technical experts in Government, from pediatric institutions, NGOs, and UN agencies. Approved in 1999, the MOH is ready to implement this effort if it able to obtain resources to fulfill its program requirements. UNICEF has provided training, medical support, equipment for technical advice, and is prepared to continue to do so on a limited basis. SEECAL1NE and other community based organizations also have already contributed, and will contribute in the future, by furnishing equipment, making and assisting in financing referrals, supporting mothers in bringing severely malnourished children for treatment, and in post treatment counseling. The Second Health Sector Support Project will provide a package of institutional strengthening and child treatment support to enable the MOH, on an increasing basis, to handle severely malnourished children in all 111 Districts in Madagascar. The Government, recognizing the importance of this program and its complexity will designate an individual responsible for its execution. In all likelihood this person will be attached to the Service de la Nutrition of the Direction de la Medecine Preventive and will work closely with the Technical Committee that prepared the approved Protocol on "La prise en charge des enfants severement mal nouris ". The MOH will assure appointment of the SMP Coordinator, SMP administrative support, and will provide an annual program progress report which will include quantified indicators. The key performance indicators as well as the number of severely malnourished children treated in health facilities and of infant deaths will be reported by the management information system and/or DHS surveys. Project financing will include training of District health staff, refurbishing health centers to handle severely malnourished children, providing specialized rations for severely malnourished children, assuring adequate supervision and program monitoring. Regarding Knowledge Management, in recent years there has been a greater willingness on the part of the Ministry of Health to work with others in tackling national malnutrition problems, particularly those related to children. Nutrition policies, programs and protocols have been, and will be developed and implemented with the extensive cooperation and support of other organizations which work in nutrition. The clinical technical capacity of the MOH has been improving with growing competency in the Direction de la Medecine Preventive, Service de la Nutrition (SNUJT), However, because of operational demands and limited staff, there remains a significant gap in nutrition planning and public health nutrition skills, and nutrition skills at the Province level to provide decentralized feedback and customized implementation of nutrition activities. Further, there is no effective operational intersectoral mechanism to follow what is being done in addressing nutrition deficiencies, by who, where, and with what irnpact. (While the Programme National de Surveillance Alimentaire et Nutritionnelle (PNSAN), principally financed by UNICEF, exists under the Ministry of Research, it is basically a statistical and research oriented effort with little relation to interventions.) With respect to the mobilization of resources and collaboration, the Second Health Support Project will support the active joint sponsoring by MOH of efforts which enhance the effectiveness of nutrition programs in Madagascar. Resources will be made available to the Direction of Preventive Medicine to - 47 - support workshops and operational studies which lead to common protocols and procedures. One instrument which will help in sorting out such priorities is the Group d'Action Intersectorielle de Nutrition (GAIN). GAIN has emerged over the last year as an extremely effective tool for information and program exchange between the major partners, other sectors, NGOs, and universities. Initiated by USAID and chaired by the MOH, this informal body now has some 75 participants, and has become a forum for exchange, consensus, networking, and identification of joint efforts. GAIN's success has been largely due to its informal nature, and increasing awareness of the importance of nutrition in the country. The criteria by which the Second Health Support Project will make resources available to the MOH to engage in such operational research or operational training, will be: there be another an active contributing partner or partners, and the activity will demonstrably contributed to improvement of nutrition programs which bear on chikl or maternal nutrition. The project will also support the development of a multi-sectoral (principally health, agriculture, edX cation, infrastructure, planning) operational nutrition infonnation system (NIS). NIS will work together wilh the existing PNSAN unit, which includes specialists in agronomy, economics, and computer science. By bringing nutrition information into the operational arena on a sustained basis under the auspices of tlhe MOH, combined with training in nutrition planning (which is virtually non-existent in Madagascar), it would become a very potent instrument for decision makers to assess the effectiveness of resource allocations directed at solving the immense nutrition problem in Madagascar. Technical assistance, training, and office equipment would be fnanced under this elernent. Finally, the MOH recognizes that nutrition prograrns developed at the national level need feedback from the Provinces, to tailor them to local conditions. Short term training for two non-medical professionals of each of the six provinces (in Africa) in nutrition, will be iFinanced to strengthen the capacity in the regions to address infant and maternal nutrition needs. Project Component 5 - US$2.80 million (5) Institutional Strengthentin2 The institutional strengtheninlg component of the project will be complementary to the substantial sul:: port received by the sector from other external partners such as EU, French Cooperation, WHO, AfDB, etc. and it will contribute to the improvement of sector resource management and increase program implemernat:ion capacities in three ways by: (a) reinforcing ongoing reform efforts at central level and improving the allocation and effectiverin ss of health sector resources at all levels; (b) largeting resources wthin the other project components to increase program implementation capabilities at both central and peripheral levels; and (c) providing resources to maintain the Ministry's current project management structure. Approximately US$ 5.9 million have been budgeted to strengthen institutional capacity both directly i'2.8 million) and indirectly (3.1 million). The latter category includes capacity building activities to be finmnced under the other components of the project (as explained under (b) above). (a) Sector reform and resou[rce management (IJSS 1.4 million). Following on the achievements oi the first IDA credit to the sector, the project will support the reform process as well as the improved managernent of sector resources. i(a. 1) Sector reform process. By combining credit conditionalities and planned activities, the project will contribute to the ongoing sector reform process. Specifically, the project will finance reforrn efforts inl the areas of: -48 - * improved sector coordination through the organization of semi-annual and annual meetings between the Ministry and its partners (including donors) to review progress in the implementation of the National Plan for Health Development and sector's actual performance; * increased service coverage by relating financial resources with staff development and redeployment and with the overall Plan for health infrastructure development; * financial access and equity by strengthening analysis of the sources and uses of health sector financial resources in general, and by monitoring the implementation of the cost recovery process in particular; and * increased efficienocy and effectiveness through the development of policies and plans for maintenance, the promotion of private sector activities, etc. In addition, the project will provide support to the Ministry's Legislative Service which has the responsibility of ensuring that the various legislative and regulatory texts are up to date and consistent. (a.2) Sector resource management. The project will strengthen the performance of key sector management functions at all levels, and specifically: * planning and budgeting: The project will provide equipment, training, and operational support to monitor progress and update the 5-Year Sector Development Plan as well as to produce an annual Public Expenditure Program. The project will also promote initiatives to inventory and prioritize research in the sector and to link the various planning documents produced at central, provincial and district levels. Funds have been included to update periodically the Health Infrastructure Development Plan to be produced prior to the implementation of the project. * human resource development: Following on the computerization of personnel files fmanced by the first project, this new project will finance decentralization of the system to the provincial level and use the information to prepare a human resource development plan, comprising future personnel requirements (quantitative and qualitative), annual staff redeployment based on existing norms, and projected training needs. In addition, the project will support operations of the Intersectoral Commnittee on Training, which is responsible for implementing the recently adopted National Training Policy for both initial and in-service training. The project will also finance rehabilitation, teaching equipment and materials, and curriculum development for schools at central, provincial, and district levels. fimancial management and accounting: In support of the Ministry's efforts to strengthen financial management and control, the project will finance training of central and provincial staff in budget preparation techniques and in the use of the Ministry's computer program for monitoring budget execution, BUDSAN. District level training would focus on financial management for the district medical inspectors and on physical accounting for the district accountant. The project would also finance periodic internal audits. Limited additional equipment will be provided to the financial service (recurrent budget preparation) and to the investment service (investment budget preparation). * physical accounting and maintenance: Procedures, introduced by the Government to ensure accurate inventories of equipment purchased by the Ministry, will be reinforced. Based on a preliminary analysis of infrastructure and equipment maintenance practices, the project will finance a study to recommend improvements in the organization and financing of the Ministry's maintenance policy. Future project interventions will be based on the findings of the study. * monitoring and evaluation: the project will continue to finance the reform of the Ministry's management information system begun under the first project. The project will support additional training for statistical staff at central and provincial levels and purchase computers for central level and selected health districts. Existing data collection formats for the health district will be revised and formats for the regional and university hospitals will be elaborated; manuals for completing the -49 - formats will be produced, and the project will provide operating funds to support frequent supervision by MO)H to ensure data quality and timely reporting. The project will also finance printing of the annual statistical digest for two years and an analysis of utilization patterns at health center and district hospital levels. The project will also provide limited support for the International Relations Service to strengthen donor and NGO coordination. (b) Program implementation (US$ 3.0 million). To improve implementation of the project's other components, the project will provide resources to strengthen the capabilities of those central directc rates responsible for providing technical guidance and slupport, specifically: (a) the District Developmenil: Directorate (DDDS) and the Health Facilities Directorate (DES) for the development of health districts; and (b) the Preventive Medicine Directorate (DMP), the Pharmacy and Laboratories Directorate (DP,L), and the IEC Service for the transmissible diseases and family health components. For the DDDS, the project will provide some office equipment a vehicle, short-term training., and operating funds to pursue the district planning and annual audit activities. The project will also fund the pre and post-project beneficiary assessment to be carried out by this directorate. For the infectious d[iseases and family health components, the project will furnish limited office equipment and vehicles to the central directorates, finance short-term training and participation at international conferences, support strategy development and annual program reviews (for malaria and tuberculosis), and provide resources for epidemiological surveillance and research as well as evaluaicon. In the case of the IE,C Service, the project will finance limited audio-visual equipment to thi service; the financial resources to produce and distribute IEC materials have been included in the budgfets of the specific technical interventions to ensure the pertinence of the materials to be produced. (c) Project management (US$ 1.5 million). Project management capabilities in the areas of planning, procurement, financial management, and reporting were developed under the first project and will be maintained to ensure smooth imnplementation of the new IDA project. The same project unit will also be used for the management of the recently negotiated AfDB project (Projet Sante II). It is expected that, gradually, this unit, which is already part and parcel of the MOH structure, will handle other donors' budgets as well as the investment budget of the MOH. IDA will: (a) finance limited rehabilitation of office space and purchase of office equipment; (b) strengthen existing personnel through the recruitment of' additional procurement (for civil works) and accounting staff; and (c) provide consultant services for the annual audit and mid-term review. AfDB will also contribute to the extension of office space and share in fmancing the operating costs. - 50 - Annex 3: Estimated Project Costs MADAGASCAR: Second Health Sector Support Project Development of Health Districts 7.27 7.83 15.10 Infectious Diseases 4.04 9.50 13.54 Reproductive Health 1.41 4.03 5.44 Nutrition 0.53 0.73 1.26 Institutional Strengthening 1.82 0.56 2.38 Toltal Baseline Cost 15.07 22.65 37.72 Physical Contingencies 1.50 1.69 3.19 Puice Contingencies 1.62 1.85 3.47 Total Project Costs 18.19 26.19 44.38 Total Financing Required 18.19 26.19 44.38 Goods 0.98 16.99 17.97 Works 8.32 7.79 16.11 Services 1.29 0.49 1.78 Training 0.94 0.85 1.79 Operating Costs 6.66 0.07 6.73 Total Project Costs 18.19 26.19 44.38 Total Financing Required 18.19 26.19 44.38 Other: Operating Costs Services: Technical Assistance and Studies - 51 - Annex 4 MADAGASCAR: Second Health Sector Support Project Economic Analysis I. Introduction I . An economic analysis of the Second Health Sector Support Project in Madagascar, and of the environment in which it will operate, has been undertaken during the course of project preparation. The following discussion spells out the economic justification of this project, focusing on aspects such as: (i) econornic and sectoral contiext; (ii) health sector expenditures and financing; (iii) cost-effectiveness; (iv) equity; (v) risks and (vi) sector capacity. The findings show that the Second Health Sector Support Project as an intervention that: (a) has a convincing economic rationale; (b) does not crowd out the private sector; (c) ensures financial affordability and sustainability; (d) supports cost-jeffective interventions; (e) contribiutes to poverty alleviation and to the reaching of justified social goals, and (f) adds net benefits to the national economy. 2. The Govermment's National Health Policy and its Health Sector Development Plan (Plan Directeur) main thrust is to provide access to better quality primary health services for the entire population and especially for the rural poor. The Second Health Sector Support Project supports this strategy and will provide fimancial support to: (i) strengthen sector management and administrative capacity, and decentralized decision making; (ii) support priority health programs with emphasis on endemic infectious diseases, nutrition and reproductive health (including FP, STD and AIDS); and (iii) improve quality of and access to district health care services. 3. The analysis is based on data and information from Politique nationale de sante (Ministere de la sante, April 1996, Plan directeur santi (1998-2000), Plan de Financement (Ministere de la sante, June 30, 1998); Documents prdparatoires de la table ronde du secteur sante (Ministere de la sante, Mars 1998); Discours progamme prisentJ par Monsieur Tantely Andrianarivo (Premier Ministre chef du Gouvernement, August 1998); Examen des depenses publiques secteur sante (European Union - W'orld Bank, 1996); Audit de restructuration du Ministere de la Sante (European Union - World Bank, September 1998); Etude du secteur sante (CREDES, December 1995); Measuring the Burden of Dt sease and the Cost-Effectiveness of Health Interventions (Jha, Ranson, Bobadilla, 1996); CAS for Madaga scar (World Bank report #16249-MAG), draft Public Expenditures Review for Madagascar (1999), drafl Policy Framework Paper (IS199-2001); draft MOP for the Madagascar Structural Adjustment Credil (SACII, 1999), World Development Report 1993: Investing in Health (table B.6 and B.7, pp 222-223): Better Health in Africa: Experience and lessons learned by R.P.Shaw and E.Elnendorf; The World IF,ank 1994; Wtorld Development Indicators 1998. HI. Economic and Sectoral Context 4. Recent performance. Since 1995, as a result of stabilization measures undertaken by the Government, economic conditions begun to improve. Growth during 1990-98 averaged 1.3 percent. Inflation declined to 6.2% in late 1998 (from a peak of 49% in 1995). Also, fiscal management improved, with the fiscal deficit (excluding grants) at 7.4% of GDP in 1998 (compared to 11.4% in 1994). Investment was also slowly expanding, with private investment surpassing public investment in 1998r, for the first time since 1990. For the second year in a row, in 1998, GDP growth exceeded the populaticil growth. In parallel, a package of structural reforms was developed in collaboration with the private sector - 52 - which considerably changed the termns of trade in favor of the rural sector. Although sustained growth has remained elusive, progress on adjustment has been gaining momentum, and other elements of an improved business climate have begun falling into place. Areas of progress have included macroeconomic stability, fnancial sector reforms, and actions to encourage competition and open the country to foreign investment and tourism. 5. Just as economic growth has been fundamental to general health gains, the converse also incr easingly appears to be true. There is a growing body of evidence that health gains in Madagascar have contributed to development and, particularly, to economic enrichment of the lowest income groups. Strengthening and further developing the Madagascar's health care system are, therefore, important to support a progressive economic reform. 6. Links to CAS and to Economic Sector Work. Poverty reduction is at the center of the Bank's Country Assistance Strategy, which was presented to Board in February 1997. The key challenge ideintified is to ensure that the 10.7 million poor people of the country (i.e., 70% of the total population, with over 85% of the poor living in rural areas) become better off and that their living conditions improve. 7. The project will support this overarching goal by focusing on improving access to better quality health services for the entire population and especially the rural poor. Three key CAS objectives are particularly relevant for this project: (i) human capital development, which focuses on primary education, basic health care and rural infrastructure; (ii) public sector strengthening and the development of its ability to deliver quality services; and (iii) the creation of a favorable economic environment allowing full development of public and private sectors. The CAS specifically mentions indicators and monitorable actions such as: improvement of quality of health services in the 111 health districts of the country, finalization and implementation of the health sector policy and development plan, reduced malaria and tuberculosis morbidity and mortality rates, improved drug availability and affordability, the set up of cost recovery for drugs and the containment of HIV/AIDS epidemic. 8. Moreover, a multidonor Public Expenditures Review (PER) has been initiated in the health and education sectors with the main objective to help Madagascar in establishing a transparent mechanism to allocate public resources for health in a manner that promotes economic growth and helps reduce poverty. The challenge is to concentrate public resources on compensating for market failures and to efficiently finance services that will particularly benefit the poor. 9. Rationale for Public Intervention and Financing. The characteristics of the health care market generally, but in Madagascar specifically, make it unlikely for private providers to render all, or the majority, of services needed by the population as for many services there are market failures (1). In M[adagascar, public interventions in the health sector are warranted because of: (i) the geographic maldistribution of services (in rural areas, public services account for about 80% of total health service delivery, and this ratio sharply increases in the remotest areas) and persistent problems with accessibility and affordability of health services. (ii) the fact that public services provide a mix of preventive and curative basic health services (while private providers tend to preferentially deliver curative services to the better off population groups); (iii) the population's low awareness and demand for preventive services and for public health goods; and (iv) the strong seasonality of revenues and low income of the rural population. TIhe public sector's goals, ((a) improvement of health outcomes with a focus on maternal and child care, and infectious diseases; and (b) development of a system that can deliver affordable quality primary - 53 - services to the entire population) are, therefore, timnely and relevant. 10. Nevertheless, it should be noted that public sector health services in Madagascar are being increasingly funded with contributions from non-public sources e.g. through cost recovery (which operates at all levels of the health delivery system). Further, users of health services and local administrations are involved in decision making in health, as part of management committees ("Comite de gestion") of various health facilities. The Government decentralization policy has also led to gradually allocating more discretionary funds to regional and district health administrations and to delegating decision making away from the central authority. 11. The private sector: the rationale and sco7e of its intervention. Compared with many otli er African countries, the private sector is somewhat better developed in Madagascar (see Box 1 belowl. There are indications (see paragraph 16) that, at present, users of health services are spending more money in the private than in the public sector (US$3.50 vTrsus US$2.30 per capita (1998)). The rationale for increased private sector development in Madagascar is strong and is based on the good performance of private facilities (such as NiGOs and confessional services) and budget lirnitations in the public sector (which will remain severely under-funded during the next ten years, if not beyond). NGes nd.ofsinlfaiiis.nprallwt h srnteigo the rol oSta~te". Among th ,~~~~~~~~~~~n c i1l il i mesues~ enviaged tofst.teeeopetofterv.tscorae i~~~~~~~~~~~~~~~~~~Te ar IsaU Xal .E In : ! m~~~~~~~l*r rnpb faiJ| tie|s I a) development of regulations to foster the development of the private sector, to, assure the de..ivery - 54 - of quality care and to maintain its affordability. b) provision of incentives to private doctors to practice in remote geographical areas in which public health facilities are not available or do not fully meet the demand in services of the population. c) development of new outreach public services taking into account the accessibility to both public and private facilities (thus, saving public resources). d) contracting out with private providers the delivery of care (including of tasks traditionally not carry out by the private sector, such as preventive activities and the provision of services to the indigent population), and expanding the use of NGOs and confessional services. , e) contracting with private providers public sector's non-clinical activities, such as maintenance of medical equipment, catering, and management/administrative tasks. f) development of regulation and quality control measures to ensure quality of drugs in private pharmacies and to allow private pharmacies to purchase essential drugs using the services of the central drug procurement unit (Salama). 13 At some future point, when prepayment arrangements are in place (mutualites and/or insurance schemes) a more radical change of the entire health system could be envisaged with the MINSAN ma,intaining its policy and coordinating role, while most clinical services will be provided by non-public facilities. 14. While the proposed project does not contain many activities with regard to the development of the private sector, sector work has been proposed to analyze the present role and potential of the private sector in Madagascar, to determine the proper private/public mix of services taking into account the comparative advantage of each of the sub-sectors and, also, their limitations. III. Health Sector Expenditures / Health Sector Development Plan / Health Sector Support Project 15';. This part of the economic analysis aims at assessing the situation in three inter-related areas: (A) health sector's overall expenditures, (B) the health sector development plan (for the years 1998-2000 and its projections) which contains measures to implement the Government's policy for the sector but it is narrower in scope as the proposed actions encompass exclusively areas characterized by high cost-effectiveness ratios such as primary health care, prevention, infectious diseases, institutional strengthening for efficiency gains, and (C) the proposed IDA financed part of this plan referred to in the text as the " Second Health Sector Support Project". A. Health Sector Expenditures; Trends and Structure 16. As a first step in the assessment of affordability of the Health Sector Development Plan, an analysis of the MOH budget and expenditures was carried out and projections were made based on trends out to 2005 (see Annex A). 17. Table 1 below presents a summary of the budget allocations and expenditures for the years 1996 to 1998. In 1998, the relatively high share of the public budget allocated to health (close to 10% of the public budget and about 1.3% of the GDP) contrasts with strikingly low actual expenditures of about US$2.30 per capita, of which donor contributions were estimated at about US$0.70 per capita. This was the result - 55 - of two main factors: the modest size of the public budget overall, and, low expenditure rates in the health sector (about 69% of estinumted expenditures for 1998). A study (2) suggests that about US$3.50 was also spent for health in the private sector (this includes the "prevoyance sociale", for-profit and not-for-profit private providers, and traditional health providers). The total per capita annual expenditure for health was therefore about US$5.80. Notwithstanding this figure, health expenditures are low and insufficient to finance a minimum package of health care (3) estimated by the Bank to cost between US$9 and 12 per capita and per year, in low-income countries. Table 1. Health sector budget allocations and budget execution in Madagascar. (1996: 1US$-= 4,061 FMG; 1997: IUS$ = 5,091 FMG; 1998: IUS$ = 5,533 FMG) 1996 1997 1998 GDP (millions FMG) 16,852,40( 19.122.600 20.90LZ3 Population (millions) . .5 _19______________ _ __ 14. Total Government Budget (millions FMG) _ 2,079.61 . 2,756.80r 3.57,55 Health Budget Allocation (millions FMG) 225.00f 251.321 261 .515 Health IBudget Execution (millions FMG) 17468 168.96 ' 80A44 Execution/Allocation (%) 78% 67% - 69% Public Health Budget per capita (US$) 4.11 3.56. 3.31 Public Health Expenditure oer capita (US$) 3.1 2.391 2.29 18. Salaries and wages accounted for a relatively small proportion of recurrent health expenditures (about 51%) and compared favorably to other African countries. Nevertheless, the nearly 50% of budget available for recurrent non-salary budget was insufficient to adequately cover sector requirements. Thus in 1997, FMG52 billion was expended for recurrent non-salary expenditures from the public budget, and about FMG14 billion more vvas added by funds generated from cost recovery. This total amount wa; riot sufficient to support the health care delivery system and translates into poor maintenance, lack of equipmemit, and -- ultimately -- in poor quality care. 19. While part of the solution to the insufficient non-salary recurrent budget seems to lay in the expanding cost recovery scheme, recently generalized and made mandatory (January 1998), projectic is indicate that cost recovery contributions to the non-salary recurrent budget will grow, but will remaini relatively modest (about 27%/o in 1999 and 29% in 2005). Other contributions to the recurrent budget. also come from donors as recurrenlt expenditures "hidden" in the investment budget (see paragraph 21). 20. The situation of the recurrent budget is particularly worrisome, because the sector policy emphasizes the improvement of accessibility to primary health care and to first referral facilities, and as its priority, outreach services, rehabilitation and re-equipping of existing health facilities. This calls not mnly for an increased recurrent budget allocation (recurrent expenditures as share of total public spending on health are projected to increase from 63% in 1997, to 69% in 2005), but also for: (a) planned investniants in accorcdance with both recurrent and investment budget projections, hence a need to develop an infrastructure planning (Carte sanitaire); (b) measures to foster efficiency gains, such as increased use of private providers; and (c) further development of cost recovery schemes (which, depending upon user willingness to pay could, in thie future, sell drugs at a higher price and encompass more services, thereby recovering a greater share of the costs of public health services). (4) 21. The investment budget and expenditures are only known in part, since some donors do not chaf nrnel all of their funds through the public sector and also because of problems with PIP data reporting. In I.997, the investment expenditures accounted for 36.5% of the total public spending in the sector, of which donors - 56 - contributed 80%. Nonetheless, considering that: (a) the recurrent budget limitations oblige donors to pay for some recurrent expenditures (in many African countries recurrent expenditures, "hidden" in the investment budget, represent up to 40% of donor expenditures), and (b) donor activities not channeled through the public system rarely include large investment expenditures, it can be inferred that investment expenditures are actually significantly smaller. 22. Health expenditures analyses also show that the public sector budget was used significantly to deliver services for the benefit of the poor and the rural population, and to develop primary health care. One study (5) indicates that of the health expenditures in 1998 alnost 39% of the recurrent non-salary buiget was allocated to district health facilities (CSB-1, CSB-2, CHD-1, CHD-2), while only about 10% was allocated to secondary and tertiary hospitals (CHR and CHU) (see table 2 below). As a consequence of the new orientation of the National Health Policy, there has been an increasing trend in the recurrent budget allocated to districts; for example, in 1998 on average FMG268 million was allocated per district which is three times as much as in 1995. The share of the budget reserved for central administration was large (48%), however, 2/3 of the central level recurrent budget is for technical goods (fournitures techniques) including drugs, which are then distributed to the districts, as well as for various personnel (6) expenses. (About 4% of the budget is also allocated to provincial administration.) Table 2: Functional Composition of Recurrent Expenditure in 1998 A.E u i g X ~~~~~~~~~~~~~~~~10 9 S S 5~W__ 4 1 i 39 23. Cost Recovery. In January 1998, cost recovery for drugs became mandatory for all public primary health facilities. Cost recovery for services, following different schemes, has been also applied in many public and private hospitals for many years. Cost recovery raised an estimated FMG22 billion in 1998 and it is expected to make an increasingly important contribution to the sector's recurrent expenditures reaching FMG38.3 billion in 2001. At present, cost recovery schemes in operation, for example the FIB scheme, developed with UNICEF support, is a lump sum payment program covering both drugs and services; in Mahajanga arrangements, set up with GTZ support, services are either pre-paid by means of an annual contribution or paid when delivered, and drugs are paid when prescribed; to community pharmacies (PHACOM), supported by Swiss cooperation, families made annual contributions and receive free of charge drugs. These arrangements currently co-exist with the newly set up scheme of the Government (PHAGECOM) which covers about 75% of the health centers and consists of payment for drugs using a profit margin of 35% above the drug price at the central drug procurement unit (Salama) (7). As mentioned, projections indicate that cost recovery contributions to the non-salary recurrent budget will grow, but will remain relatively modest (about 27% in 1999, and 29% in 2005). 24. During the 1998 PER exercise the following issues were identified: a) Information on cost recovery is incomplete (8) and probably underestimates the actual proceeds of the system. Development of a financial monitoring system able to provide accurate data is essential. Moreover, regulation of the use of funds generated by cost recovery for financing drug procurement by Salama, should be reviewed and strengthened. b) Various cost recovery arrangements have been operating simultaneously in the country; these should now be evaluated and a coherent approach developed. - 57 - c) Management committees (Comites de gestion), set up in health centers and in district hospitals, which administer cost recovery funds, operate without adequate guidance. Therefore, the finalization of documents on rules and procedures for cost recovery in health centers and hospitals should take place as soon as possible. d) A standardized format for monthly financial reports to be submitted by health centers management committees should also be finalized and adopted. e) Since cost recovery funds are to be used to replenish drug stocks and for discretionary expenditures by the health facilities (supplementing the recurrent non-wage budget allocations) there is need to develop sufficient accounting and financial management capacity at the perilhery and also to make possible adequate auditing. 25. Conclusion. In the period 1996-1998, the health sector budget accounted in average for onl;y US$3.70 per capita (which represented almost 10% of the total public budget and 1.3% of the GDP) This low level of funding was compounded by poor budget execution, efficiency problems and a centralized spending pattern. To improve the financial resources situation, the health sector should implement sweeping reforms in the years to come: (i) Recognizing the development of the health sector as a national priority, the Government sliould increase the total health expenditures as a share of the GDP from 1.3% in 1997 to 1.95% in 2005. (ii) Taking into account that salaries and wages accounted in the past for only 50% of the rec;urrent health expenditures aand that, even with this favorable budget breakdown, the non-salary recurrent budget was insufficient, the Government should address the non-wage recurrent budget shortage. To ensure sustainability, current health expenditures are assumed to increase (from 50% of t:tal health expenditures in 1999 to 70% in 2005), while current salary expenditures, as a share of total current health expenditures, will remain stable at about 50%. The latter would translate into an increase that would still allow (a) the hiring of 1000 health personnel in 1999; (b) the implementation of the action plan for staff redeployment; and (c) a modest salary raise. Nonetheless, the non-wage recurrent expenditures will increase from FMG102 billion in 1999 to FMG239 billion in 2005; (iii) Assuring that proceeds from mandatory cost recovery schemes will increase, and donor contributions continue at about the same levels as in the past. Both the draft Public Expenditures Review for Madagascar (1999) and the draft MOP for the Madag. scar Structural Adjustment Credit (1999), demonstrate that these measures are feasible. B. Health Sector Development Plan; Cost and Financing 26. The total cost of the three-year slice (1998-2000) of the plan was estimated by Government at about US$70 million. An amount of US$4.5 million will be covered from the MOH budget, and the remainder (US$65.5 million) by donors. A detailed break-down of the cost of each objective and its fimancing source (MOH or donors) is presented in table 3. Moreover, the table indicates that about 12. 5%/o of the total cost are recurrent costs, while 87.5% are investment costs. Over 90% of the donors and 4?'% of the MOH contributions are designated investment costs. - 58 - Table 3: Estimated current and investment cost of the Health Sector Master Plan (1998-2000) b obective and source of financina in US$) 1,650,059 92,840 0 115,500 1,441,719 607,615 of 1I3' n _20,644,725 590,000 0 577,380 19,477,345 7,910,746 9,535,423 717 824 1 742 125 45,200 7,030,274 5,923254 i lV~ 1,948,385 99,350 125,000 0 1,724,035 547,965 1,105,405 96,870 0 450,000 558,535 966,195 5,192,610 267,450 100,000 400,000 4,425,160 2,677,240 vir 10,639,722 138,600 0 1,264,500 9,236,622 6,566,483 ~ 19,688,687 395,497 133,800 3,502,953 15,656,437 5,309,173 70,405,016 2,398,431 2,100,925 6,355,533 59,550,127 30,508,671 General objective I Adapter le cadre juridique et institutionnel du systeme de sante auxpriorites de la politique sanitaire national General objective II Developper des services de sante de qualite au niveau des districts sanitaires General objective III Developper le systeme hospitalier de reference General objective IV Adapter le developpement des ressources humaines aux besoins du systeme de santk General objective V Optimiser l'utilisation de lensemble des ressourcesfinancieres du secteur General objective VI Augmenter la disponibilite en medicaments essentiels gendriques et de produits sanguins de qualite General objective VII Developper la lutte contre les maladies transmissibles prioritaires General objective VIII Ameliorer le bien-tre de lafamille 2-7. The affordability of the extended Plan de Developpement (2000-2006). The affordability of the extended plan was determined on the basis of estirnated projected financial resources and estimated costs, using the following assumptions: (i) projections in nominal GDP were calculated on the basis of an 8% annual growth throughout the period 1999-2005; (ii) total health expenditures as a share of GDP (%) would increase at a reasonable rate (e.g. by 0.2 percentage from 1998 to 1999; by 0.1 ifrom 1999 to 2000; by 0.1 from 2000 to 2001; and by 0.05 yearly from 2001 to 2005). This implies that total health expenditures as a share of GDP, which was 1.31% in 1998, would increase steadily to reach 1.95% in 2005, which is generally consistent with other African country experience (see table 4 below); rahe 4. Publ S luares a s1 e llar 1.64 1.69 1.56 1.61 1.39 , = , ~~~~1.23 1.22 1.11 1.18 , g * ~~~~1.68 1.55 1.86 --L: _ _1.42 _ 0.99 1.14 23. ~~~~1.11 1.13 1.17 1.50 1.82 --W --i 2.42 2.46 -- - 59 - (iii) current health expenditures as a share of total health expenditures would be expected to increase from 50% in 1999 to 70% in 2005, while current salary expenditures as a share of current health expenditures would remain stable at about 50% throughout the period. The latter would translate into an increase in nominal terms that would still allow: (a) hiring of 1,000 health personnel in 1999; (b) the implementation of the action plan for staff redeployment; and (c) a modest salary raise; (iv) costs throughout the period would increase annually by 10% to compensate for inflation (5%) and for under estimated unit costs (9) (5%); (v) donor contributions to investments in the HSDP would remain stable (80% of total investment, while the Government would contribute the remaining 20%); (vi) based on the discussions with donors and the analysis of their current expenditures HSDP donors would fnance recurrent costs amounting to about 10% of their investments; (vii) Government contributions to HSDP recurrent expenditures during 1998 to 2000, would account for, on average, 8.5% of the public non-salary recurrent health expenditures. For the years 2001 to 2005, Government contributions to HSDP recurrent expenditures would increase in nominal terms, but each year they would represent a lower share of total Government recurrentn non-salary expenditures for health. In other words, non-salary recurrent expenditures for health for the operation of the health delivery system would increase relatively more than the recurrent expenditures of the HSDP. (viii) Projections for the year 2006 regarding expenditures and the cost of the HSDP, were made on the basis of the average increase in the respective values during the three preceeding years. Based oln these assumptions, financing availabilities were estimated, i.e. the difference between the projected cost of the extendecl HSDP and the projected available resources for the period 2000-2006. These are set forth in Table 5 below. T'able 5: The fnancing of the Health Sector .Development Plan (2000-2006) (millions FMG) 94,810 101,127 107,537 119,971 133,270 143,579 154,477 165,825 178,209 Investment Government 23,703 25,282 26,884 29,993 33,318 35,895 38,619 41,458 44,552 Total investment 118,513 126,409 134,421 149,964 166,588 179,474 193,096 207,281 222,761 Recurrent Donors 9,481 10,113 10,754 11,997 13,327 14,358 15,448 '16,582 17,821 Recurrent government (HSMP) 8,000 8,250 8,650 8,656 9,213 9,438 9,562 9,560 S,622 Total recurrent 17,481 18,363 19,404 20,653 22,540 23,796 25,010 26,142 27,443 Total HSMlP (FMG) 135,994 144,772 153,825 170,617 189,128 203,270 218,106 213,423 250,204 Total HSM1P (USD) 24,578,717 25,636,926 26,864,247 29,734,597 32,823,332 35,107,067 37,378,865 39,6111,121 42,2:1,4,253 Cost of HSMP (USD) 23,468,339 23,468,339 23,468,339 25,815,173 28,396,690 31,236,359 34,359,985 37 795,994 41,5r6,593 Difference (USD) 1,110,378 2,168,587 3,395,908 3,919,424 4,426,642 3,870,708 3,018,870 1 8S5,127 :318,660 28. Conclusion From table 5 it appears that the extended Health Sector Development Plan can be fully funcled throughout the period under consideration (2000-2006) (the plan's total cost during this period is about US$223 million while potentially resources available for its implementation are about US$244 million). C. Financing of the Second Health Sector Support Project 29. The Second Health Sector Support Project is defned as these elements of the extended DevelopmLent Plan that are to be financed by IDA and to which Government will also contribute funds. An IDA credit of US$40 million is proposed to support the project whose total cost is estimaited at US$ 44.4 -60 - million. The foreign exchange component is estimated at US$ 26.2 million (or 59% of total costs). Base costs amount to US$ 37.7 million equivalent (85% of total costs) of which about 80% are investment costs. The project costs by component and by expenditure category are summarized in Annex 3 while the project's financing plan is presented in Annex 5. 30. Conclusion. As shown in the following sections (C I and C2) the Second Health Sector Support Project would be fnancially sustainable and affordable and would support cost effective interventions. C. I Fiscal Impact, Cost Recovery and Financial Sustainability 31. During project implementation, Government contributions on average will amount to about USS650,000 or not more than 1.0 % of the total 1999 health budget. After project completion, Government will have to carry the recurrent costs induced by the project. Extrapolating from the figures of the eleven months preceding the project closing in 2006 (see recurrent cost figures in Annex 5), this will mean Government financing of about US$650,000 annually. This can be achieved, if the health budget allccation is increased by less than 3.0 % throughout the project period of 5 years. If these projections are correct and the health budget increases by 10% yearly, this goal will be (more than) achieved. Table 6 below summarizes: (a) the required annual Government contributions to the project, (b) the fiscal implications thereafter, as well as (c) budget increases necessary to meet additional demands, and (d) the budget amounts corresponding to a 3.0% annual growth. The table shows that the recurrent cost implications of the project can be easily accommodated in the low-case scenario of a 3.0% annual budget increase which can be obtained even if the total health expenditures as a share of GDP remains at the 1998 level of 1.31% (in fact, less than a 1 % annual growth in the health budget would suffice). Tabe : isal moictinsof tbe Smeod eas t Sector. SuDot oect/S n urn r*cs Sb.~~~~~~~~~~~- u~~~~~~~~ oT o 61,163.804 _ 61 163.8-04- a i soo.oool so°.°°°0,00 61.6-63.804 0.82 61.775.442 : l F 8~~~100 ,000 200,000 621,63,804 0. 342 63,017 128 2 ~~~~~1.000.000 0 62.163,804 0.00 63.647.300 2 ~~~~~500.000 -500.000 61.663.804 -0.80 64.283.773 ~~~~~500,000 0 61,663.804 0.00 64.926.610 t!kXW04Bi 100.000 -400.000 61.263.804 -0.65 65.575.877 4 4 650,000 550,000 61,813,804 0.90 66,231,635 3,2. Prospects for financial sustainability of the Second Health Sector Support Project are positive. The project will not pose a large fiscal burden on the country during the project life, or after project completion, nor will it alter tax policy. However, beneficiary contributions towards the cost of the program wvill be more important, but within an affordable range for most people. Cost recovery for drugs will continue along the lines of the present arrangement which proved to function well, and to provide good quality drugs at affordable prices. The indigent population will also continue to be protected. Affordability of services and consumer's willingness to pay will be constantly monitored, with the objective of making under-served groups the main gainers of this ptogram. At the end of the five year program, it is - 61 - expected that the Government will better manage donor inputs (which are to remain inportant), and beneficiaries will increasingly be involved in both decision-making in, and financial support to, the sector. Decentralization will also play a substantial role in efficiency gains and in a more rational sector development. C.2 Cost-Effectiveness Analysis 33. While public fnancing is fully justified, it is necessary to focus on those health services with high returns and impact on the health status (and avoid spending scarce public resources on services characterized by low cost effectiveness ratios (11). To this end, an examination of cost-effectivenes:s ratios of the interventions included, in the Second Health Sector Support Project was carried out. In the ab&;ence of empirical data from Madagascar, this consisted of analyzing the interventions foreseen in the project based on cost-effectiveness ratios for health interventions in various studies in low-income countries available in literature. In parallel, the coherence of the proposed project activities with BHA and 1993 WDR vvas also checked. 34. The results of the analysis are presented in table 7. The table is limited in that it does not pr vide a quantitaLtive analytical basis for interventions not included in the basic package of health care, and th-, 50 interventions studied in the WDR 1993. It does show, however, that interventions proposed for IDA fnancing are highly cost-effective and consistent with the BHA and 1993 WDR recommendations. - 62 - Table 7.Cost-Effectiveness of Health Interventions and their coherence with Better health in Africa and 1993WDR ~~~~ F90~~~~~~~I 1. Development of primary health services to deliver an essential package of health care 16.3 --- Y Y 100 Child immunizations 12-17 (children and Pre and post natal care 30-50 pregnant women Assisted delivery 100 >50) Diarrhea 5-8 Respiratory infections 3-130 2. Infectious disease control: 18.1 ---- Y Y 80 Malaria 8-25 Impregnated net- beds 43 Schistosomiasis Tuberculosis 2.8 3-5 Plague 3. Reproductive health 1.4 35-50 Y Y 60 Family planning 20-30 HIV/AIDS prevention 5-12 STD 1-3/60-63 4. Nutrition 15-20 Rehabilitation of severe malnourished 40-50 Y Y 2 children 5 Institutional strengthening Y Y Human resources management Y Y Improved budget and planning performance Y Y Develop a health information system Y Y Develop regulation and incentives for NA NA private sector WV. Equity Analysis 35. The sector policy main thrust is the provision of affordable health outreach services. The project will provide extensive coverage in under-served urban and rural areas and, as such will make a substantial contribution to improved equity and poverty alleviation. 36(. The reduction of major public health problems (such as malaria, tuberculosis, STD/HIV/AIDS, schistosomiasis and plague which affect disproportionately the poor populations in rural areas and urban slams) will also contribute to equity and poverty alleviation. 37. By applying cost recovery across the board in the health delivery system, and by setting up tariffs in.troducing incentives for making use of primary health care facilities, the better off population (which in Africa tends to be the user of tertiary services) will pay more. Conversely, the access of the poor to affordable and good quality services will increase. Coupled with the availability of good quality essential drugs in the outreach facilities, the project will contribute to greater equity balance. Further, the poor will substantially benefit from the extensive prevention focus. Health and nutrition prevention programs, family planning and other activities with large externalities will continue to be free of charge at the delivery point, or be made available at low cost. Moreover, the affordability of fees and drug prices for the poor - 63 - population will be monitored and measures taken to protect the indigent population. 38. The potential to convert cost recovery into pre-payment arrangements is also worth mentioning, since it will make possible risk sharing and it will introduce incentives for health providers (public but also private) to carry out more, and better, prevention and health promotion activities. 39. Reduced fertility rates will stimulate economic growth and will increase the role of women in economic development and in society. Additionally, the health status of women and children will be enhanoed (resulting in lower maternal and child mortality and morbidity). Children will receive the beenefits of a higher investment in human capital per capita, and more care in their families, which will enabl'- better school performance and work prospects. V. Sensitivity analysis linked to major risk factors 40. Annex 4B presents a detailed list of identified risks and proposed risk mitigation measures. Vhile all important, the following four seem critical: (a) Political stability and ownership of the project The Government has embarked upon a process of democratization, decentralization and, very recently, of economic renewal to redefine the role of the public sector, and, to foster a supply response from the private sector. While the country seems to have passed the point of no-return of this reform process, the potential for reversals and political instability cannot be ignored. Slower growth will exacerbate wealth and income distribution issues. With regard to the ownership of the project, project preparation work has been carried out in clos;e collaboration with Government, donors and NGOs. All have strong commitment to the process, including the highest leve.ls of Government. To a large extent, good project perfornance will contribute to reinforcing ownership and commitment to the health sector policy, and in turn will ultimately enhance political stability. (b) Future economic performance may not improve as projected, and therefore may not provide adeqluate funding, hindering the implementation of the sector policy. Modest growth and fluctuations in economic performance show the degree to which the economy remains vulnerable to exogenous factors. While the CAS clearly spells out the poverty alleviation and growth program should economic growth be less than anticipated, the sector policy will need to be downsized and sharper priorities set. The health sector can deal with such eventualities because it operates on the bases of a three-year rolling plan and of an Annual operational working plan (PTA) which offer tlie possibility to yearly adjusting operations to variations in financial resources or to changes in the ]r iealth situation of the country. Donor commitment and financial contributions to the sector policy are a [so regularly monitored with opportunity of Round table discussions on sector performance and sector annual plans. Other important contributions to sector financing (i.e., from donors and users of services) have been stable and increasing. This is because the MOH has pursued a transparent relat:ion with donors and NGOs, and the success of cost recovery is one of the sector's priorities. Lastly, expected efficiency gains are to be obtained from the development and greater reliance on the privat- sector, contributing to overall sector performance. Efficiency gains will also contribute, in an indirect mamner, to health sector financing as donors and the private sector in general feel more confident iheir investment in health brings convincing returns. (c) Sector capacity may remain weak and may delay the occurrence of efficiency gains. Beti -r use of existing resources is part and parcel of the Govermnent policy for the country, and at the core cf lhe CAS.. Furthermore, it is one of the thrusts of the health sector policy. Important support, not only - 64 - from the proposed credit but also from donors such as the EU, French cooperation, and the WHO, aims at irnproving the system performance. Five essential aspects are being pursued in this regard with financial support form the project: (i) the strengthening of the administrative, financial management and program management capacity of the Ministry of health; (ii) the decentralization of the decision-making from the central level to regions and districts health administrations, and the empowerment of health facilities to take decisions on their budgets (which will lead, in the case of more important health facilities, to semi-autonomous or autonomous status); (iii) the use of most cost-effective interventions, which has been analyzed in the previous section; (iv) the development of the private sector and more reliance on its services, as described above; and (v) the emphasis on improving the quality of health services (through disseminating examples of best practice; rewarding providers for the quality of services rendered rather than for their quantity; developing competition between providers, monitoring performance based on well chosen quality indicators and by ensuring the availability of essential drugs). (d) Donor support may not be sustained at anticipated levels. Donor participation in both policy dialogue and in planning and management of health programs will be intensified. Donor coordination through MEDAC and MOH will be strengthened. - 65 - Annex 4A: Public Sector Budg et and Expenditures on Health 1996 1997 1998 1999 2000 i 2001 _2002 Millions FMG Allocated Executed Allocated Executed Programm Proj. Proj. Proj. Pr'4. Cunrent hea,lth (a) 101,100 65,600 120,140 107,240 143,002 197,716 238,97 1 278,504 323,377 Salaries (b.), (b.2). 50,000 n.e. 61400 55,000 70.995 95,299 116,1 134,239 155,86 Non-salaries (c) 51,100 n.a. 58,740 52,240 72,006 102,417 123,787K 144,265 1&t1,509 Investrnent health (e) 123,906 109,085 131,181 61,722 118,51 126.409 134,421 149,964 1'1 3,588 Total Pubilic Health 225,008 174,665 251,321 168,962 261,515 324,125 373,392 428,468 .419,965 Cost recovery (d) n.a. n.a. n.a. 14,000 22,000 27,600 33,380 38,300 413,902 Cost recovery as share of current non-salary expenditures (%) 27 31 27 27 27 28 Total Public Health plus Cost Recovery 226,006 174,685 251,321 1t2,962 283,515 351,725 405,752 466,768 611;,S67 . , l - - Population (l) 13,493,851 13,4193,851 13,871,679 13,871,679 14,258,699 14,656,517 16,065,433 15,449,602 15,143,567 Exchange rate (1987:1,069.21 FMG I US$) (f) 4,061 4,061 5,091 5,091 5,533 5,647 5,726 5,738 _ _,762 GDP deflator (1987=1 00) 602 802 646 648 881 707 729 750 _ 773 GDP deflator (1994=100) 178 178 191 191 201 209 216 _ 222 229 GDP nominal 16,852,400 16,852,400 19,122,600 19,122,600 20,007,736 21,608,354 23,337,023 25 203,985 27,220,303 Growth In GOP 23 23 13 13 5 8. _ 8 __ 8 8 GOP per capita in SUS 292 292 251 251 258 268 280 294 _ S1 Total health exp./GDP (%) 1.34 1.04 1.31 0.68 1.31 1.50 1.60 1.70 1.80 Current health fTotal Public Health (%) 44.93 37.55 47.80 63.47 54.68 61.00 64.00 65.00 63.00 Growth in Total public health 4 24 15 15 14 Growth rate current health 18.83 63.48 19.03 38.26 20.87 16.54 It;.11 Growth rate iivestment health 5.87 -43.42 -9.68 6.86 6.34 11.58 11.09 Growth rate current salaries .. ...... 22.80 n.a. 15.63 34.23 20.87 16.54 116t.11 Growth rate current non-salaries 14.95 n.a. 22,58 42.23 20.87 16.54 1r.11 Health exp. per capita (nominal) FMG 16,674.68 12,i45.55 18,117.58 12,180.33 18,340.72 22,114.76 24,784.71 27,733.25 30.25.20 Health exp. per capita (nominal) US$ 4.11 3.19 3.56 2.39 3.31 3.92 4.33 4.83 5.37 Health exp. Per calpta (real) USS 4.11 3.10 3.40 2.30 3.40 3.60 3.90 4.20 4.70 Health exp. par capita (real) FMG (Base year 1987) 2,770.20 2,150.67 2,802.53 1,884.12 2,694.25 3,126.71 3,402.14 3,696.00 4,IIDI 35 Health exp. per capita (real) FMG (Base year 1994) 9,362.79 7,268.89 9,472.04 6,367.99 9,106.08 10,567.73 11,498.63 12,491.82 13,!,Z3 85 GDP projections are calculated on the base of a 5% annual growrth in the period 1999-2002 and a 6% annual growth in thi-. period 2003-2005 Growth in total health expenditures as share of GDP (%) is assumed to increase by 0.2 percentage point from 1998 to 199! ; by 0. I percentage point from 1999 to 2000; by 0. I percentage points from 2000 to 2001; and by 0.05 percentage points yearly from 2001 to 2005. The current health exp as share of total health exp is assumed to increase from 50% in 1999 to 70% in 2005 The current salary exp as share of current health exp is assumed to remain stable at 0.482 % during the whole period (a) 1996 and 1997: Execution = Authorized budget (ordonnanace) / Source Operations Globales du Tresor). (b. 1) 1999: Hiring of 1,000 agents i(postes budgetaires); From 2000 to 2005: implementation of action plan for staff redeployment at the prir- [b.2] 1998 = 12,330 agents; 2001 = 14,250 agents (c) 1997: Execution = Authorized budget (ordonnance). (d) European Union: Cost recovery on Medical consultations: FMG 14 billions in 1997 (refer to A.Ortiz : "Le prix de lh sante A Madagasca then El 1O % indexation a year. (e) 1998 to 2007: World Population Projections (1994-95 Edition), The World Bank. (f) Source for exchange rate and GDP deflator: World Bank Development data 1998. -66f - Annex 4B: Detailed List of Identified Risks and Proposed Risk Mitigation Measures Risks JRisk minimization measure Inputs 1Financing available from the different sources will be insuffidient -Macro-econonic performance does not meet projections thereby -Government continues to pursue its current macro-econorric policies. requiring reductions in Government's budget allocations to health Contingency plans w ill be prepared so that any decision to reduce the scope of activities w ill sti safeguard pyiority activities. Implementation of cost recovery nreasures is slow and/or -Government w ill closely monitor cost recovery performance and ensure perforrrence of cost recovery systems isless than anticipated drug availability. -Donor support is not sustained at anticipated levels -Donor participation in both policy dialogue and in planning and managenient of health programs w ill be intensified. Donor coordination throuigh MEDAC and MOH w ill be strengthened. 2-Allocation of financial resources is insufficient to cover recurrent -Annual review s w ill establish acceptable recurrent and investment costs budget allocations Maintenance capabilities do not keep pace w ith the expansion of -Annual review w ill closely monitor the proposed development of ifatutr,equipment and transport maintenance capabilities at central and decentralized levels. 3 -Proposed facility staffing norrns prove difficult to meet -Studies of staffing norms w Ill be conducted and utilization of personnel _______ ______ _______ ______ _______ ______ ______ will be monitored to ensure feasibility. -Recurrent expenditures for salaries and w ages are greater than -The irriplementation of the Health resources policy and its costs w ill be anticipated closely monitored. 1Process 4 -Decentralization of health administration responsibilities is slow and -A review of MOH, province and district structures w ill be carried out to the roles of MOH, provinces and districts remains unclear. propose specific policy organizational and capacity building measures.- l5 orgarnizafton of health services is more difficult than anticpated -Integration of appropriate services in the primary health care units -Training for health staff and IEC for the population w ill emnphasize the (PHCU) and development of referral procedures takes longer than issues of health services supply and demanidat the PHCU level. anticipated. Developrrent of referral guidelines w ill be an immediate priority. Supervision w ill be emphasized. 6 Implementation of the civil w orksleguipment program s delayed _____________________ -Agreement on facility design and standards is difficult. -Recruitment of qualified technical personnel w ill be enivisioned and w ork w ill be closely monitored by MOH. r -Procurement capabilities are inadequate. -Recruitment of qualified technical personnel w ill be envisionied. -- -oca costrctio/reabiitaion apaitis ae indeqateB26 StandardJization of documentation and procedures will be encouraged. -Locl cnstucfinlrhablitbon apaite ar inaequte.326 -Procurement plannfing will appropriately package contracts. 7T Training programs do not respond adequately to sector needs r -Training capacity is insufficient -The quality of traininig of persnnel is inadequate____________________________ 8 -Esential drugs and medical supplies are not regularly available -Annual review w ill closely monitor the amounts and proportion of government allocation to drugs. Implementation of thie cost recovery policy should Increase funds available for drug procurement. -rocurement and distributfion of drugs is inadequate -Salamna will be supported and the recomnendations (of this year) of the- independent auditor report on Salama implerrented. FZOOTNOTES (1) Imperfect information, limnited access to services, problems with affordability, and the consumer's lack of knowledge in health matters contribute to market failures. This is generally the case of services of benefit to the - 67 - commuunity as a whole (i.e., public goods, such as safe drinking water and sanitation) and of services with significant externalities for wlich there is low consumer demand and high price elasticity. Disease prevention is an example of such latter service. For example, inmunizations against infectious illnesses protect the immunized persons but also decrease transmission of infectious diseases to the remaining population. The demand for such services is generally low, especially in low-income countries. As a result, the private sector usually does not provide immunization services; the public sector does it, and because of consumer's little willingness to pay, such services are excluded from cost recovery. Consequent to this situation, the private sector's role in the provision of clinical services, in many developing countries, including Madagascar, is limited to the provision of curative care to the better off urban populatiion. In sub-Saharan Africa, strong solidarity among the members of large families, palliate this situation, as-in many cases-a relative will pay for the sick person's treatment. However, this applies, more often than not, to curative care. The public sector, therefore, has, for the time being, an important role to play in providing basic health care and, especially, preventive services, to the needy. (2) CRE:DES, December 1995 (3) The JS$9 to 12 estimated in both the WDR 1993 and in "Better health and Africa" are not inclusive of tie cost of the secondary and tertiary care services, and of the central and regional health administrations. As in Africa expenditjres at primary health care level represent about 30% of total expenditures in the public sector, one can infer that a system spending US$10 for the minimum package would probably spend, in total, about US$30 per capita and per year. (4) Drugs are currently sold at 140% of their procuremnent price, which is less than in many drug schemes in. Africa. (5) Audit de restructuration du Minist&re de la Sante, EU/WB, September 1998 (6) i.e., for personnel other than civil servants (7) Salama own profit margin is 17% (8) A survey conducted in 1998 in 9 communes in Madagascar showed that household contributions through cost recovery (for health services and drugs) were important and varied from US$0.8 to as much as US$2.7 (during the same year total health expenditures per capita were US$2.4). (9) Cost estimates were verified during project preparation and found underestimated. (10) Figures calculated on basis of Annex 5 - Government contribution to project: figures for 2005 contains additional $900,000 to include recurrent costs for six months of 2005 after project closing; figures after 2003 consist of recurrent costs brought about by the project. (11) The 1993 World Development Report states that in a comparison of costs required for different interventiors to achieve one additional year of healthy life, outcomes can be expressed in terms of disability-adjusted life years ( DALYs). The ratio of cost and effect, or the unit cost of a DALY, is defined as the cost-effectiveness of the intervention. A DALY is calculated as the present value of the future years of disability-free life that are lost as the result of the premature deaths, disease or injury occurring in a particular year. The lower the unit cost to gain one DALY, the greater the value for money offered by the intervention.) (12)The bigger figure is for treatment in health centers; the smaller is for prevention. - 68 - Annex 5: Financial Summary MADAGASCAR: Second Health Sector Support Project Years Ending December 31 .. ... . . .. . . IYear 1 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Total Financing Required Project Costs Investment Costs 1.1 6.8 7.7 7.7 7.2 3.8 3.5 Recurrent Costs 0.2 1.2 1.4 1.4 1.3 0.7 0.6 Total Project Costs 1.3_ 8.0 9.1 9.1 8.5 4.5 4.1 Total Financing 1.3 8.0 9.1 9.1 8.5 4.5 4.1 Financing IBFtDIDA 0.8 7.2 8.0 8.0 8.0 4.0 4.0 Government 0.5 0.8 1.0 1.0 0.5 0.5 0.1 Central 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Provincial 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Co-financiers 0.0 0.0 0.0 0.0 0.0 0.0 0.0 User FeeslBeneficiaries 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Others 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Project Financing 1.3 8.0 9.0 9.0 8.5 4.5 4.1 ............. .... ...... ..... ..... . . ....'. J Year1 I Year 2 | Year 3 | Year 4 | Year 5 Year 6 | Year 7 Total Financing Required Project Costs Investment Costs 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Rocurrent Costs 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Project Costs 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Financing 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Financing 1EIRDIIDA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Government 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Central 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Provincial 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Co-financiers 0.0 0.0 0.0 0.0 0.0 0.0 0.0 User Fees/Beneficiaries 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Others 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Project Financing 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Main assumptions: - 69 - Annex 6: Procurement and Disbursement Arrangements MADAGASCAR: Second Health Sector Support Project Procurement No special exceptions, permits or licenses need to be specified in the Credit documents for International Competitive Bidding (ICB), since Madagascar's procurement practices allow IDA procedures to take precedence over any contraty provisions and local regulations. Procurement of works, goods, and consultant services financed by the IDA credit will be carried out in accordance with the Guidelines: Procurement for IBRD Loans and IDA Credits (January 1995, revised in January and August 1996, September 1997 and January 1999) and Guidelines for the Selection of Consultants by the World Bank Borrowers published in January 1997 and revised in September 1997 and January 1999. National Competitive Bidding (NCB) advertised locally would be carried out in accordance with Madagascar' s procurement laws and regulations which are acceptable to IDA. Procedures include local advertising, public bid opening, clarity in evaluation criteria, award to the evaluated bidder, non-exclusion of foreaign bidders,, and no preference in bid evaluation for domestic contractors. A General Procurement Noticev was discussed and agreed upon during negotiations and will be published in Development Business. The project implementation plan, comprising a procurement and a disbursement plan, was agreed with IDA. This plan will be reviewed prior to the start of each project year. Civil Works estimated to cost US$16.0 million dollars (IDA fnancing US$14.2 million) are for the construction and rehabilitation of health centers and district hospitals, in health districts nationwide. They are estirmated to cost less than US$200,000 per contract, up to an aggregate amount of US$10 million, and will be procured through NCB procedures. Contract for small works estimated to cost less than US$75,000 per contract, up ito an aggregate of US$6.0 million, may be procured under lump-sum i.e., fixed price contracts awardedl on the basis of quotations obtained from three qualified domestic contractors invited in writing to bid. The invitation shall include a detailed description of the works, including basic specifications, the required completion date, basic form of agreement acceptable to IDA and relevant drawings where applicable. The awards would be made to the contractors who offer the lowest price quotation for the required work, provided they demonstrate they have the experience and resources to complete the contract successfully. These contracts would be mostly for works relating to small constructions such as the rehabilitation of health facilities in rural areas. Goods (excluding pharmaceuticals and insecticides) estimated to cost US$4.7 million (of which US$ .3 million financed by IDA), include medical equipment: for district hospitals and health centers, furnitur D ior district hospitals and health centers, equipment and supplies, training and audiovisual equipment and supplies, vehicles, and other supplies. Goods will be grouped, where feasible, into packages valued al least US$100,000 and it will be procured through ICB. Procurement of office firniture and supplies estim.ated to cost less than US$100,000, up to an aggregate of US$2 million, will be procured through NCB. The project will also require the purchase of relatively small, mainly consumable items, for MOH's decentralized district structures, such as vehicle spare parts, which would be difficult and impractical -:o package and procure following NCB procedures. These goods are estimated to cost less than US$50,000 equivalent per contract and, up to an aggregate of US$300,000, may be procured through prudent national shopping (for items available locally) or, up to US$450,000, through international shopping (for those~ goods not available on the national market) on the basis of quotations obtained from at least three qualified suppliers, or through IAPSO (Inter-Agency Procurement Services Offices of the UNDP). Spare parts, operating expenditures, minor off-the shelf items, pharmaceuticals and other proprietary items costing less than US$5,000 per contract, up to an aggregate of US$150,000 equivalent, may be procured directly from - 70 - manufacturers and authorized local distributors. Pharmaceuticals and Insecticides totaling US$11.5 million will be procured through LIB procedures up to an aggregate of US$3.5 million through Salama (the local agency specialized in drug purchasing and distribution) or from non-governmental organizations which specialize in drug supply. These agencies can ensure the quality of drugs at all levels of the supply cycle and have due authorization from primary drug manufacturers to upply their products. Salama's procedures, have been reviewed without objection by IDA. The procurement is based on the establishment of a list of prequalified suppliers. This list is to be updated every two years through the launching of widely advertised pre-qualification notice. It was agreed that to use Banks's standard bidding documents for the procurement of Pharmaceuticals and vaccines contraceptives might be procured fromUNFPA, while toxic or potentially toxic products, like insecticides for malaria and plague control, will be procured through UNIPAC or IAPSO for an aggregate amount of US$8.0 million, because these products must conform to norms of and get clearance from WHO (on dosage, modalities of application and protection of users and health workers handling them) to ensure that they will not be harrnful to humans and to environment. Specialized infant formula for severely malnourished: Nutriset, the specialized infant formula for severely malnourished, or similar products, will be procured through UNICEF. While the total value for all such procurement would be around $670,000, procurement would be carry out in smaller amounts, depending on program needs and product's shelf life, such as once very 3-6 months. Conisultant Services, training and studies financed by IDA would be for: (i) preparation of documents, feasibility studies, supervision of works, data collection, accounting and financial management, audits and impact analysis; (ii) short-term consultancies on specific technical matters such as nutrition, family planning, procurement, financial management, public health, health economics and statistics, and the design of training courses; (iii) training abroad and locally of health facility and MOH staff, and (iv) services related to behavioral change and communication including the design, production and distribution/broadcasting of messages and information campaigns. Consultants financed by IDA, totaling US$1.8 million would be hired in accordance with the Bank's Guidelines for the Selection and Employment of C'onsultants by World Bank Borrowers dated January 1997 and revised in September 1997 and January 1999. Selection of consultants will be done through competition among qualified short-listed firms in which the selection will be based on Quality and Cost Based Selection (QCBS) by evaluating the quality of the proposal before comparing the cost of the services to be provided. For audits the Least-Cost Selection (i) will be the most appropriate method, i.e., the firm with the lowest price will be selected, provided its technical proposal received the minimum mark required. Single Source Selection (SSS) will be exceptionally used for the training of health services providers, IEC related services, implementation (including expenditures related to training, surveys and supervision) of the Infectious Diseases Program (malaria, plague and schistosomiasis) by WHO, and implementation of the Operational Research Program to identify plague intervention strategies by Institute Pasteur of Madagascar. Services for short-term and ad hoc consultancies, lectures and small studies which can be delivered by Individual consultants will be selected through comparison of qualifications against job description requirements among those expressing interest in the assignment, or approached directly by the Borrower. For training abroad and in-country, the program, containing names of candidates, cost estimates, content of the courses, periods of training, institution selection would be reviewed annually. To ensure that priority is given to the identification of suitable and qualified national individual consultants, short-lists for contracts estimated to cost less than US$100,000 may be comprised entirely of national - 71 - consultants, if a sufficient number of qualified firms (at least three) are available at competitive costs. The Standard Request for Proposal (SRFP) forms as developed by the Bank will be used for the appointment of consultants. Simplified ccintracts will be used for short-term assignments, simple missions of standard nature (and not exceeding 6 months) carried out by individual consultants or frms. The Government will be briefed during negotiations about the special features of the new guidelines, in particular with regards to advertisemnent and public bid opening. Procurement for the Project will be handled by MOH's Unite de Gestion du Projet CRESAN whic: 1was responsible for all procureiment matters of the first IDA financed health project. This unit will be strengthened by addition of on architect who will be in charge of overseeing the implementation of 1:he civil works component. It will also be able to handle operations of other donors (AfDB) and will become a, Unite de coordination des projeits (PCU) as, besides procurement and financial management tasks, its otlier tasks will consist of coordinating MOH departments and services involved in project implementation. Its tasks will comprise: (a) maintaining a register of all interested bidders; (b) maintaining a detailed list of technical specifications of goods and services to be financedl by the project; (c) preparation of the procurement plan and calendar; (d) preparation and/or finalization of bidding documents and requests for proposals; (e) bid evaluation and preparation of evaluation reports; (f) contract approval process; (g) receipt of goods and services and dispatching; aind (h) processing international and local price quotations. Staff in the unit have been formally trained in proxurement and have also benefited from on-the-job training over the past 3 years. In addition, local consulting firms will be asked to support the team in the preparation of detailed architectural designs and other technical matters (including supervision of works) for the rehabilitation of health centers, district hospitals, and MOH's decentralized health districts. Decentralized health districts will play an importartt role as they will be responsible for the overall activity planning in their respective districts, including the preparation of equipment lists, and any other infcrmation needed by the MOH and PCU to prepare bidding documents for the procurement of goods, or terms of reference for the selection of consultants as well as the evaluation of their performance from the tectmnical point of view. All technical specifications for medical equipment, drugs, insecticides will be preparod by a specialized consulting firm and will be submitted to IDA for review. Procurement methods (Table A) Table A: Project Costs by Procurement Arrangements (US$ million equivalent) 1. -Woirki 0.00 10.00 6.00 0.00 16.00 (0.00) (9.00) (5.20) (0.00) (14.20) 2. Goods 3.50 2.00 12.40 0.00 17.901 __(3.50) (1.60) (11.40) (0.00) (16.5')) 3. Sentices 0.00 0 .00 1.80 0.00 1.8C' (0.00) (0.00) (1.60) (0.00) (I.6C) 4. Training 0.00 0.00 1.80 0.00 1.8c (0.00) (0.00) (1.70) (0.00) (I.7C - 72 - 5. Operating Expenses 0.00 0.00 6.90 0.00 6.90 (0.00) (0.00) (6.00) (0.00) (6.00) Total 3.50 12.00 28.90 0.00 44.40 (3.50) (10.60) (25.90) (0.00) (40.00) 1 Figures in parenthesis are the amounts to be fnanced by the Bank Loan. All costs include contingencies 2 Includes civil works and goods to be procured through LIB, UN agencies, national and international shopping, consulting services, services of contracted staff of the project management office, training, technical assistance services, and incremental operating costs related to managing the project. - 73 - Prior review thresholds tlable B) IDA Review. All contracts for construction of civil works and purchase of goods above the threshold value of US$100,000 will be subject to IDA's prior review procedures. The use of IDA's standard bidding docurnents would considerably expedite the prior review process as IDA review would primarily fxcus on invitations to bid, bid data sheets, contract data, technical specifications, bill of quantities/scheduk of requirement and other contract specific items. The review process would cover over 50 percent of the total value of the amount contracted for goods and about 40 percent of the amount contracted for civil works. Selective post review of contracts awarded below the threshold levels will apply to one in three con tracts. Draft standard bidding documents for NCB were reviewed and agreed upon with IDA during Negctiations. For consultant services, prior review will include the review of budgets, short-lists, selections procedures, terms of reference, letters of invitation, proposals, evaluation reports and draft contracts. Prior IDA review will not apply to contracts for the recruitment of consulting firms and individuals estimated to cost less than US$100,000 and US$50,000 equivalent respectively. However, IDA prior review will apply to the Terms of Reference of such contracts, regardless of value, to single-source hiring, to assigtnents of a crit cal nature as determined by IDA (PCU staff, financial audits, etc.) or to amendments of contracts raisi [g the contract value above the prior review threshold. For consultant contracts estimated above the US$200,000 opening the financial envelopes will not take place prior to receiving the Bank's no-objection to the technical evaluation. For contracts estimated to cost less than US$200,000 and more than US$100I00Q the borrower will notify IDA of the results of the technical evaluation prior to opening the financial proposals. Documents related to procurement below the prior review thresholds will be maintained by the borr o,wer for ex-post review by auditors and by IDA supervision missions. The PCU will be required to maintain all relevant procurement docurnentation for subsequent review by IDA. The PCU will submit to IDA periodic procurement schedules detailing each procurement package in progress and completed as part of the normal project reporting exercise. Table B: Thresholds for Procurement Methods and Prior Review' 1. Works >200 ICB "'ES >75 and <200 NCB YES ; )r >$ 1 00 Aggreg. US$10.0 million <75 Other Post Review Aggreg. US$6.0 million ___ 2. Goods >100 ICB ' ES LIB -ES Aggreg. US$3.5 million UNIPAC/IAPSO 7 ES Aggreg. US$8.0 million >50 and <100 NCB Post (eview Aggreg. US$2.0 million Other Post teview <50 Aggreg. US$0.9 million __ _ - 74 - 3. Services >200 QCBS YES, 2-step review >100<200 QBCS YES, 1-step review <100 QCBS Post Review Least Cost Post Review 4. Miscellaneous >50 Individual All US$0.2 million <50 Post Review Total value of contracts subject to prior review: US$19,7 million Overall Procurement Risk Assessment Low Frequency of procurement supervision missions proposed: One every 6 months (includes special procurement supervision for post-review/audits) Thresholds generally differ by country and project. Consult OD 11.04 "Review of Procurement Documentation" and contact the Regional Procurement Adviser for guidance. - 76 - Disbursement Allocation of loan proceedls (Table C) Method of Disbursement It is envisaged that based upon the outcome of the financial management assessment, disbursements will be transaction-based (traditional mode) as they were done under the National Health Sector Project (Cr.225 1 MAG) in accordance with procedures outlined in the Bank's Disbursement Handbook. LACI type disbursements could be introduced on a pilot basis eighteen months after credit effectiveness. The Elaitik will follow up on an Activity plan to strenghten financial management to enable the use of LACI procecures which will be develop and executed by the PCU). Allocation of loan proceeds (Table C) Table C indicates the disbursement schedule, the amounts (in US$) for each expenditure category andi the disbursement percentage applicable to each. The disbursement percentages have been calculated ort a tax-inclusive basis such that, when applied to invoices denominated in local currency, the percentage not financed by the Bank be sufficient to cover Government counterpart contributions and eliminate an:,r Bank financing of local taxes and duties. The credit closing date is forecast for December 31, 2006, about six months after the end of the disbursement period. Category 5 (operating expenses for MOITs Unite de Coordination des Proj 'ts) includes expenditures for materials, equipment maintenance, contractual level support staff, fuel, spare parts, End vehicle insurance, utility and conmmunications expenses, special account banking charges and per diems to travel to the field. Table C: Allocation of Loan Proceeds 1. Works 13.50 80% of local and 100%, of foreign _____________________________ _______________ _ _expenditur _ _ 2. Goods 4.50 80% of local and 100'. 'O of foreigr _____________________________ expenditure, 3. Drugs and insecticides 10.10 80% of local and 100%i'D of foreign _________________________________ .___________.______ expenditurs ___ _ 4. Technical Assistance, Training, 1.80 100% of local and 100%',o of foreign Studies expenditure _ _ 5. Operating Expenditures 6.10 85% 6. Unallocated 4.00 Total Project Costs 40.00 Total 40.00 Use of istatements of expenditures (SOEs): The PCIJ will use SOE procedures in which expenditures are summarized by category. The documei tation for withdrawals of SOEs would be retained by MOH's Unite de Coordination des Projets for reviei', by IDA staff during supervision missions and for annual audits. SOEs will be used for payments of cowracts of less than US$100,000 for goods and works and consultant contracts of less than US$100,000 and US$50,000 for firms and individuals respectively. SOEs will likewise be utilized for all training and - 76- operating costs. Speicial account: The special account will be opened in a commercial bank acceptable to IDA and receive an advance of US$1.5 million to cover IDA's share of 4 months of estimated expenditures. Upon effectiveness, an amount of US$750,000 will be advanced to the special account with the balance of the initial deposit. Audlit An independent auditor acceptable to IDA will be recruited to perform the first 3 annual audits for this project. The auditor will audit the use of all IDA funds, including the special account, statements of expenditure, and the systems of internal controls. - 77 - Annex 6 Attachment 1 1 of 4 REPUBLIC OF MADAGASCAR SECOND HEALTH SECTOR SUPPORT PROJECT Procurement Capacity Assessment Summary of Findings and Actions Assessment a Risk Assessment Item Assessed l Satis- Major Weaknesses I I 1 Actions Proposed NuWll Poor Fair factory Low Ave. High Proposed Completion Date (a) Legal Aspects X X (i) Laws & X Cumbersome set of X Streamlining of In process Regulations regulations regulations (ii) NCB Procedures X X (iii) Internal codes and X X manuals (b) Proc. Cycle Mgmt. _ X . X . (i) General handling X X (ii) Procurement X X planning . ._ (iii) Preparation of X Lack of specialized X Provide technical continuous documents staff (re. Drugs/Cw) support (consultants, Salama for drugs) (iv) Management of X X Add qualified staff to by effectiveness process PCU (v) Bid evaluation X __X X __ __ (vi) Contract award X x (vii)Preparation and X Lengthy approval X See (a) (i) above signing of procedures contracts l (viii) Contract X management I I I I_I (c) Organization and | X Functions I_I___._.__ Afl _ _ _ _A _ __-v_ _ . _ _ _ Annex 6 Attachment 1 2of4 Assessment Risk Assessment Item Assessed Satis- Major Weaknesses Actions Proposed Null Poor Fair factory Low Ave. High Proposed Completion Date (i) Organization of X Lack of support staff X Add support staff to By effectiveness unit and functions PCU (ii) Internal manuals X X and instructions (d) Support and X X Control Systems (i) Auditing X X (ii) Legal assistance X X (iii) Technical and X X administrative controls (iv) Code of ethics X X (v) Anticorruption N.R. initiatives . (e) Record keeping X X (i) Public notices X X (ii) Bidding X X documents (iii) Bid opening X X information (iv) Bid evaluation X X reports (v) Formal appeals x x and outcomes (vi) Signed contract x x documents (vii)Claims and X X dispute resolution records (viii) Comprehensive x x disbursement data (f) Staffing = X See (b) (iii) X ._ See (b) (iii) & (c) (i) C:\TEMP\4000595S8.doc Annex 6 Attachment 1 3 of 4 [ } Assessment Risk Assessment | item Assessed r r r Satis- Major Weaknesses Actions Proposed Null Poor Fair factory Low Ave. High Proposed Completion Date (g) General X X Procurement Environment (i) Promoting a X X culture of accountability . . (ii) Reputation of X X procurement corps _ . _ (iii) Salary structure X X _______ (iv) Freedom from X X political interference (v) Existence of X See (b) (iii) X experienced and capable staff (vi) Clear written X Responsibilities not X Project operation By effectiveness and standards and clearly defined manual to address this continuously thereafter delegation of issue authority I I (vii)Sound X X budgetlfmancial systems l_l (h) Private Sector X X Assessment (i) General efficiency X X and predictability _ _ _____ (ii) Transparency x X _ i (iii) Quality of contract X X See (a) (i) mgmt. I I (iv) General reputation_ x = X __X_|__. C:\TEMP\UOJO959R df c Annex 6 Attachment 1 4 of 4 Prior Review Thresholds Proposed Overall Risk Assessment Goods US$ 100,000 (equivalent) High Works US$ 1 00,000(equivalent) Average Consulting US$ 100,000 and 50,000 (equivalent) for firms and individuals respectively Low Post Review Ratio: One in 3 contracts Frequency of procurement supervision missions proposed: One every 6 months (includes special Form prepared by: S. Ben-Halima procurement supervision for post-review/audits) (Procurement Specialist/Accredited staff assigned to the project) Signature: Date: November 3rd, 1999 Comments: This is a follow up project which will use the capacity already created with the opportunity of the first credit to the health sector. This first credit, after adequate measures were taken at mid-term review, was executed satisfactorily from a procurement and financial management standpoint. In addition the PCU will further be strengthened to allow it to properly handle the management of both IDA and AfDB credits to the health sector. C:\TEMP\-0005958.doc Annex 7: Project Processing Schedule MADAGASCAR: Second Health Sector Support Project Time taken to prepare the project (months) First Bank mission (identiFication) Appraisal mission departure 06/15/99 06/15/99 Negotiations 10/13/99 10/07/99 _ __ Planned Date of Effectiveness 04/15/99 ._ _ __ Prepared by: Ministry of Health Preparation assistance: The Belgium Trust Fund supported the work carried out by John May and Jean-Pierre Manshande. A PHRI) grant was used to prepare the community based nutrition project SEECALINE and the remaining about $200,000 is being used to finance the Infrastructure Development Plan and the project Implemnentation Manual. Bank staff who worked on the project included: . 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