Report and Recommendation of the President to the Board of Directors

Project Number: 41376-02 October 2009

Proposed Sector Development Program and Project Asian Development Fund Grants Lao People's Democratic Republic: Health Sector Development Program

CURRENCY EQUIVALENTS (as of 5 October 2009)

Currency Unit – kip (KN)

KN1.00 = $0.0001174743

$1.00 = KN8,512.50

ABBREVIATIONS

ADB – Asian Development Bank CDTA – capacity development technical assistance DPF – Department of Planning and Finance EA – executing agency EU – European Union GDP – gross domestic product HRH – human resources for health HSDP – Health Sector Development Program IEE – initial environmental examination JFPR – Japan Fund for Poverty Reduction JICA – Japan International Cooperation Agency Lao PDR – Lao People’s Democratic Republic LARF – land acquisition and resettlement framework LARP – land acquisition and resettlement plan MDG – Millennium Development Goal MICS – multiple indicator cluster survey MNCH – maternal, newborn, and child health MOF – Ministry of Finance MOH – Ministry of Health NCB – national competitive bidding NSEDP – national socio-economic development plan NT2 – Nam Theun 2 PCU – project coordination unit PHC – primary health care PHO – provincial health office PRSO – Poverty Reduction Strategic Operations UNFPA – United Nations Population Fund UNICEF – United Nations Children’s Fund VHV – village health volunteer WHO – World Health Organization

NOTES

(i) The fiscal year (FY) of the Government ends on 30 September. FY before a

calendar year denotes the year in which the fiscal year ends, e.g., FY2009 ends on 30 September 2009.

(ii) In this report, “$” refers to US dollars.

Vice-President C. Lawrence Greenwood, Jr., Operations 2 Director General A. Thapan, Southeast Asia Department (SERD) Director S. Lateef, Social Sectors Division, SERD Team leader V. de Wit, Principal Health Specialist, SERD Team members I. Ahsan, Counsel, Office of the General Counsel R. Butler, Social Development Specialist (Resettlement), SERD S. Ekelund, Senior Portfolio Management Specialist, Lao Resident

Mission (LRM), SERD C. Holmemo, Poverty Reduction Specialist, SERD

H. K. Win, Social Sector Specialist, LRM, SERD In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS

Page

GRANT AND PROGRAM SUMMARY i MAP

I. THE PROPOSAL 1

II. THE SECTOR: PERFORMANCE, PROBLEMS, AND OPPORTUNITIES 1 A. Performance Indicators and Analysis 1 B. Analysis of Key Issues and Opportunities 5 C. External Assistance 9

III. THE PROPOSED SECTOR DEVELOPMENT PROGRAM 12 A. Impact and Outcome 12 B. Special Features 12 C. Program Outputs 12 D. Project Outputs 14

E. Investment Plan 16 F. Financing Plan 17 G. Implementation Arrangements 17

IV. PROGRAM BENEFITS, IMPACTS, ASSUMPTIONS, AND RISKS 22 A. Benefits and Impacts 22

B. Assumptions and Risks 24

V. ASSURANCES 25 A. Specific Assurances 25 B. Condition for Grant Effectiveness and Disbursements 26

VI. RECOMMENDATION 27 APPENDIXES 1. Design and Monitoring Framework 28 2. Sector Analysis 31 3. Summary of External Assistance and Coordination 41 4. Development Policy Letter and Policy Matrix 46 5. List of Ineligible Items 51 6. Cost Estimates and Financing Plan 52 7. Implementation Schedule 53 8. Procurement Plan 54 9. Summary Poverty Reduction and Social Strategy 59 10. Summary Gender and Ethnic Group Action Plan 63 11. Summary Land Acquisition and Resettlement Framework 67 12. Summary Initial Environmental Examination 73 SUPPLEMENTARY APPENDIXES (available on request) A. Economic and Financial Analysis B. Full Resettlement Framework and Plan C. Initial Environmental Examination

GRANT AND PROGRAM SUMMARY Beneficiary Lao People’s Democratic Republic (Lao PDR) Classification Targeting classification: Targeted intervention (TI-M)

Sector (subsector): Health and social protection (health systems) Themes (subthemes): Social development (human development), gender equity (human capabilities), governance (public administration [national, decentralized, and regional]) Location Impact: Rural (high), urban (low), national (high)

Environment Assessment

Category B

Program Description

The Health Sector Development Program (the HSDP), consisting of a program grant for policy reforms and an accompanying project grant, will support the Government's 7th Health Sector Development Plan, 2011–2015, to improve primary health care (PHC) to achieve the Millennium Development Goals (MDGs). This first-time program support to Lao PDR's health sector will help the Ministry of Health move toward a sector program approach. The combined outputs are (i) strengthened planning and financing; (ii) increased access to maternal, newborn, and child health (MNCH) care; and (iii) improved quality of human resources for health (HRH).

Rationale Starting from a low base, the country’s health indicators still lag behind

those of most other countries in Asia and the Pacific. Challenges include widespread poverty, isolated populations, limited public sector capacity, and low public financing. The sector will remain dependent on external funding until domestic revenues from Nam Theun 2 and other sources become substantial, around 2020. A PHC network has been put in place, and access to basic health care has been substantially improved through a network of district hospitals, health centers, and village health volunteers with drug revolving funds. However, health services are seriously underfunded and often lack skilled personnel, high out-of-pocket fees deter the poor from using services, and appropriate services for women and some ethnic groups are often lacking. The Government is committed to reducing poverty and achieving MDGs, and has identified the health sector as one of four priority sectors. The 7th Health Sector Development Plan is to be supported by a results-based sector program approach and will focus on eight priority areas, including the model healthy village, safe motherhood, child survival, nutrition and emerging diseases, HRH, management, financing, and aid coordination. In line with the Lao PDR country partnership strategy, the Program consolidates ADB’s past investments in PHC in eight northern provinces and provincial health management countrywide, and

ii

responds to the Government's efforts and ADB's commitment to implement the Vientiane Declaration on Aid Effectiveness. The Program will provide a platform for the sector program approach for support from other partners. The sector development program modality provides support for policy reforms and technical and financial resources to implement reforms. In addition, ADB will provide capacity building technical assistance for financial management in the health sector to help implement the sector program approach. In public administration, ADB will also continue to support the preparation of Lao PDR's medium-term expenditure framework and public expenditure management.

Impact and Outcome

The impact of the HSDP will be reduced maternal and child mortality and malnutrition by 2015. The outcome will be improved use of PHC, in particular for the poor, women and children, and ethnic groups.

Program Grant The program grant supports reforms for (i) strengthened provincial

planning and financing, including an increase in nonsalary recurrent budget, standards and guidelines for hospitals, a national health information system, and rolling out health equity funds; (ii) increased access to MNCH care through a national MNCH strategy, and rolling out mother- and child-friendly health services and model healthy villages; and (iii) improved quality of personnel through a national HRH policy and skilled birth attendance plan. The Government is committed to releasing the equivalent of program funds to the provinces for nonsalary recurrent budget support for operation and maintenance; outreach; staff improvement; and for rolling out mother- and child-friendly health services, model healthy villages, and health equity funds.

Grant Amount, Terms, and Tranching

ADB will provide a program grant of $10 million from its Special Funds resources to be released in two tranches ($5 million each), subject to compliance with grant conditions as provided in the policy matrix, with the first tranche to be released upon grant effectiveness and a second tranche within 24 months post-effectiveness.

Counterpart Funds The size of the program grant is based on the medium-term costs of

proposed policy actions with an estimated adjustment cost of $15 million for the reforms. The Government will pass on the equivalent of the program funds from the Ministry of Finance to the provinces using a program fund mechanism.

Program Period 1 January 2010–30 June 2012.

Procurement The program grant proceeds will be used to finance the foreign exchange cost of items produced and procured in ADB member countries, excluding items included on a list of ineligible items and imports financed by other bilateral and multilateral sources. The grant

iii

recipient will certify that the volume of eligible imports exceeds the amount of ADB's projected disbursements under the program grant in a given period. ADB will have the right to audit the use of grant proceeds and to verify the accuracy of the recipient's certification.

Project Grant The project grant will support the program outputs through specific

investments and assistance for the implementation of the reforms. The Project will help strengthen provincial planning and budgeting for results-based program support; increase access to MNCH services by improving four hospitals and 45 health centers; increase in-service training especially for skilled birth attendants; upgrade training programs for PHC workers; improve pre-service training; and help roll out priority programs for mother and child-friendly services, model healthy villages, and provincial health equity funds.

Cost Estimates The project cost is estimated at $10.8 million, including physical and

price contingencies, duties, and taxes. Financing Plan ADB will provide a grant of $10.0 million from its Special Funds

resources to cover 93% of the project cost. The Government will contribute $0.8 million for taxes, duties, and in-kind services.

Financing Plan

($ million) Source Amount

Asian Development Banka 10.0 Government 0.8 Total 10.8 a Asian Development Fund grant. Source: Asian Development Bank estimates.

Period of Utilization

1 January 2010–30 June 2014

Estimated Project Completion Date

31 December 2013

Implementation Arrangements

The Executing Agency will be the Ministry of Health, through its Department of Planning and Finance. Within the ministry, program implementation will be delegated to concerned departments acting as national implementing agencies, including the departments of Curative, Food and Drugs, and Organization and Personnel, and the MNCH Hospital. Provincial health offices, through the provincial PHC coordination units, will act as provincial implementing agencies. A Ministry of Health steering committee will provide overall guidance in project implementation. A sector-wide coordination mechanism is in place with the support of the World Health Organization and the Japan International Cooperation Agency.

Procurement All ADB-financed procurement will be done according to ADB’s

Procurement Guidelines (2007, as amended from time to time). Works, goods, and services totaling $100,000 and above will be

iv

procured through national competitive bidding. Minor works, goods, and services costing less than $100,000 may be procured through shopping. Vehicles may be procured through the United Nations Office for Project Services, as its procurement procedures are acceptable to ADB.

Consulting Services

The HSDP will require five international consultants for a total of 39 person-months, six national consultants for a total of 71 person-months, and two national firms for architecture and accounting. The international experts in program management (20 person-months), MNCH (3 person-months), medical education development (7 person-months), gender (6 person-months), and health equity funds (3 person-months) will be hired as individual consultants, with advance action for engaging the planning and financing expert. Accounting and architecture firms will be hired using biodata technical proposal and consultant qualification selection. Other national consultants will be hired as individual consultants. All consultants will be recruited in accordance with ADB’s Guidelines on the Use of Consultants (2007, as amended from time to time).

Program Benefits and Beneficiaries

The Program will have significant impacts on the health of the poor, women and children, and ethnic groups, as it will address core issues in operationalizing the PHC system that has been put in place. In the short term, recurrent budget support will improve the effectiveness and efficiency of service delivery, increasing coverage and impact. In the medium to long term, better access to affordable quality services and improved village health will have a major impact on progress towards the MDGs, life expectancy, and public health.

Risks and Assumptions

Very low, nonsalary recurrent expenditure in the health sector seriously affects the performance of health services and outreach. While increasing Government revenue from Nam Theun 2 and other sources will improve health sector financing in the long term, bridge funding is needed for the coming 10 years. The Government has committed to provide the equivalent of program support to the provinces for nonsalary recurrent budget support. Expected technical efficiency gains from increased capacity in planning and financial management will position the Ministry of Health for approval of Nam Theun 2 proposals for future recurrent funding for health sector operational expenses. The program funding modality and fund-flow mechanism for the health sector have been endorsed by the Government, but the funding mechanism still needs to be put in place. ADB will provide capacity building technical assistance to develop the fund-flow mechanism and to strengthen financial management capacity of the provinces developed through previous projects.

Mekong River

Mek

ong

River

Gulf of Tonkin

Kenethao

XanakhamBoten

Paklay

Thongmixai

Phiang

Xaignabouli

Beng

Houn

Pakbeng

Viangphoukha

Houayxay

MeungBanMom

Namthouam

Non Hai

Tonpheung

Hongsa

Phonxai

Viangkham

Xai

Namo

Phongsali

Samphan

Mai

Khoua

Boun Tai

Boun Nua

Gnot-Ou

Louang-Namtha

Sing

Long

Nga

Nale

La

NgoyNambak

PakxengPak-Ou

Louangphrabang

Kasi

Vangvieng

Xaisomboun

VIENTIANE

Hom

PhonhongThoulakhom

Keo-Oudom

Thathom

Bolikhan

PakxanPakkading Khamkeut

Viangthong

Hinboun Nakay

Thakhek

Gnommalat

Kaysone Phomvihane Xonbouri

Songkhon

Thapangthong

Phin

XeponPhalanxai

Outhoumphon

Champhon

Toumlan

Vapi

Ta-Oy

SaLavan

Pakxong

Champasak

Soukhouma

Khong

Mounlapamok

Phouvong

Sanxai

XaisetthaSamakkhixai

Kalum

Lamam Dakchung

Thateng

Pakxe

Sanasomboun

Bachiangchaleunsouk

Phonthong

Khongxedon

Sanamxai

Samouay

Nong

Vilabouly

Mahaxai

Xaibouathong

Boualapha

Xaibouly

XebangfaiNongbok

Atsaphon

Pek

Phoukout

Kham

Nonghet

Phaxai

Viengxai

Sopbao

Et

Et Xiangkho

Xam-Nua

Houa-Muang

Viengthong

Xam-Tai

NanPhoukhoun

KhopXianghon

Ngeun

Lakhonpheng

Pha-Oudom

PakthaChomphet

Xiang-Ngeun

Thaphabat

Sangthong

Sikhottabong

XaisetthaChanthabouli

Naxaythong

Hatxayfong

Fuang

Mok-Mai

Khoun

Lao-Ngam

Pathoumphon

Met

Atsaphangthong

Xaiphouthong

Mai Pak-Ngum

Xaithani

Sisattanak

PHONGSALI

HOUAPHAN

ATTAPEUCHAMPASAK

LOUANG-NAMTHA

BOKEOOUDOMXAI

LOUANGPHRABANG

XIANGKHOUANG

BOLIKHAMXAI

VIENTIANE

XAIGNABOULI

VIENTIANECAPITAL

KHAMMOUAN

SAVANNAKHET

SALAVAN XEKONG

PEOPLE'S REPUBLIC OF

CHINA

VIET NAM

THAILAND

MYA

NM

AR

CAMBODIA

National Capital

Provincial Capital

City/Town

National Road

Paved Provincial Road

River

District Boundary

Provincial Boundary

International Boundary

Boundaries are not necessarily authoritative.

LAO PEOPLE'S DEMOCRATIC REPUBLICHEALTH SECTOR DEVELOPMENT PROGRAM

500

Kilometers

100

N

09-2653 HR

106 00'Eo

106 00'Eo102 00'Eo

102 00'Eo

16 00'No 16 00'No

20 00'No 20 00'No

I. THE PROPOSAL 1. I submit for your approval the following report and recommendation on a (i) proposed program grant, and (ii) a proposed project grant, both to the Lao People's Democratic Republic (Lao PDR) for the Health Sector Development Program (HSDP). The design and monitoring framework is in Appendix 1.

II. THE SECTOR: PERFORMANCE, PROBLEMS, AND OPPORTUNITIES A. Performance Indicators and Analysis

1. Country Context

2. The Lao PDR has made significant but uneven progress toward its Millennium Development Goals (MDGs).1 With the overarching goal of poverty reduction, the 6th National Socio-Economic Development Plan, 2006–2010, identifies the health sector as one of four priority sectors.2 The Government of the Lao PDR has requested that the Asian Development Bank (ADB) support the health sector with a sector program approach to improve sector performance toward MDGs, in line with the Vientiane Declaration on Aid Effectiveness.3 The HSDP is included in the country operations business plan, 2009–2011, for $20 million in 2009.4 3. The Lao PDR is among the poorest countries in Southeast Asia. However, its average per capita income increased from $335 in 2000 to $491 in 2005, then to an estimated $840 in 2008. Overall income poverty declined from 46% in 1992 to 27% in 2008,5 but economic growth has been primarily urban.6 4. The country is in transition from a centrally planned to a market-oriented economy, and economic growth is being driven by already completed investments and expansion of outputs. In the last decade, the Lao PDR’s annual gross domestic product grew at an annual average rate of 7.2%.7 Real gross domestic product growth is projected to decline to 5.5% in FY2009 due to falling commodity prices, declining exports, and a marked decrease in the garments and tourism sectors. In-migration of low-income workers has put more strain on the labor market, and low electricity demand caused a delay in major hydropower project construction. 5. The global economic crisis has also added to the Government's budget deficit,8 following emergency spending for flooding and oil price mitigation in 2008. The Government is planning to bridge the revenue gap through a range of measures, including seeking additional external aid, and estimates that additional external aid totaling $50 million–$60 million is needed in FY2010.

1 Committee for Planning and Investment, Government of the Lao PDR. 2008. Background Paper for the Health

Chapter of the Mid-term Review of the Sixth National Socio-Economic Development Plan of the Lao PDR 2006–2010. Vientiane.

2 Committee for Planning and Investment, Government of the Lao PDR. 2006. 6th National Socio-Economic Development Plan, 2006–2010. Vientiane.

3 Government of the Lao PDR. 2006. Vientiane Declaration on Aid Effectiveness 2006. Vientiane. 4 ADB. 2008. Country Operations Business Plan (2009–2011): Lao People's Democratic Republic. Manila. 5 National Statistical Centre, Committee for Planning and Investment, Lao PDR. 2004. Laos Expenditure and

Consumption Survey 2002/2003. Vientiane; and ADB Lao Resident Mission for 2008 data. 6 On the human development index 2008 of the United Nations Development Programme, the Lao PDR ranked

133rd out of 179 countries. 7 ADB. 2005. Country Strategy and Program Update (2006–2008): Lao People’s Democratic Republic. Manila. 8 Memorandum of Understanding of the 2009 Country Programming Mission between ADB and the Government of

the Lao PDR. ADB Lao Resident Mission, May 2009.

2

2. Sector Progress

6. In 2009, the Lao PDR has an estimated population of 6.2 million, and an annual population growth rate of 2%.9 Its rural population is highly scattered, with an average density of 24 people per square kilometer—much less than neighboring countries—resulting in substantial in-migration. Fully 73% of its people live in rural areas scattered over 10,552 villages in 17 provinces and 141 districts. The Lao mainly live in the valleys of the Mekong River and its tributaries. Small ethnic groups, about 30% of the population, live in more remote and mountainous locations, are often poor, and have limited access to services and markets. 7. Between 1990 and 2005, the Lao PDR’s child mortality rate reduced substantially from 170 to 98 per 1,000 live births, putting the country on track to achieve its MDG of 55 per 1,000 live births in 2015. Sadly, newborn deaths (i.e., deaths within the first month after birth) still account for nearly one half of infant mortality and nearly one third of child mortality. Child malnutrition remains high, with an underweight rate of 37% in 2006, compared with a target of 20% in 2015. The maternal mortality rate also decreased from 750 to 405 per 100,000 live births between 1990 and 2005, but the country is still likely to miss its target of 185 per 100,000 live births in 2015. Between 2000 and 2005, the total fertility rate declined from 4.9 to 4.1 children per woman, and the contraceptive prevalence rate has doubled in 10 years to about 40%. Less than one quarter of women is attended by skilled health personnel when giving birth. 8. Infections still cause the major burden of diseases in the Lao PDR, with malaria as the most often reported cause of illness. With support from the Global Fund to Fight AIDS, Tuberculosis and Malaria, malaria incidence has been reduced to 0.4%. While 87% of children below age 5 years sleep under a bed net, only 43% sleep under an insecticide-treated net.10 Of children less than age 1 year, 70% are immunized against measles, but a much smaller proportion is fully immunized.11 With increasing connectivity in the subregion, the country has seen an increase in its HIV/AIDS prevalence. Further, emerging diseases and dengue fever outbreaks, road accidents, and welfare diseases have put new demands on underresourced health services. 9. Under the stewardship of the Ministry of Health (MOH), the last decade saw significant expansion of the Lao PDR’s health services network, including hospitals, health centers, outreach, village health care, and associated programs. In the Lao PDR, there are 4 central, 4 specialized, 4 regional, 12 provincial, and 126 district hospitals. Due to low population density, district hospitals have relatively small catchment populations of 10,000–50,000 people. Only 26 “type A” district hospitals provide emergency surgery, unlike 100 “type B” district hospitals. The 789 health centers serve small catchment populations of 1,000–5,000 people. One health center serves as a focal service point for about eight villages, including for obstetric care. MOH also operates centrally managed priority programs linked to a specific MOH department12 and often also specific development partners, especially for maternal, newborn, and child health (MNCH) and communicable disease control. 10. Villages have a village health committee to ensure a healthy village environment, adequate village health care, and timely referral of emergencies. If it is more than a 2-hour 9 National Statistical Centre of the Lao PDR. 2005. Population Census 2005. Vientiane. 10 National Statistical Centre of the Lao PDR. 2007. Multiple Indicator Cluster Survey III. Vientiane. 11 Less than 15% of children had all eight recommended vaccinations by their first birthday. 12 Within the Ministry of Health, there are seven departments: (i) Cabinet, (ii) Curative, (iii) Food and Drug, (iv)

Hygiene, (v) Inspection, (vi) Organization and Personnel, and (vii) Planning and Finance.

3

walking distance to a health facility, the village will have two village health volunteers (VHVs) and a drug revolving fund with a drug kit containing 11–33 essential drugs. There are 5,668 villages (54%) with drug kits. Members of mass organizations like the Lao Front for National Construction and Lao Women’s Union volunteer as peer educators for health and nutrition promotion. Village private providers include former paramedics, drug shop owners, and traditional healers. Licensed private providers are mostly located in urban areas.

11. Despite this extensive network, the overall use of health services remains low. Data from the 2008 health information system suggest that there were 0.3 outpatient visits per 1,000 population per year at all public health facilities in the Lao PDR, compared to international standards of 1–2 interactions with a health facility per year. Bed occupancy rates average 40%, and the capacity of health infrastructure in the Lao PDR exceeds its current use. MOH is facing a major challenge to make the system more effective, efficient, equitable, and sustainable to help achieve MDGs by 2015. 12. Data from 1999 to 2008 in eight northern provinces illustrate primary health care (PHC) program impact on utilization by the poor. VHVs with drug kits have substantially improved access to basic care for both the lowest and second-lowest quintiles, as well as ethnic groups.13 About 75% of these provinces’ population have access to safe water, surpassing MDG targets. Further, a 50% access rate to latrines will likely achieve the MDG target.14 However, health services remain relatively less used, particularly by women and children. Overall, reaching MDGs will require more resources to reach lagging communities and households. 13. Total health expenditure has increased from about $12 to $19 per person between 2005 and 2009,15 compared to an international standard of $34 for developing countries in 2000. The increase is mostly due to higher household out-of-pocket spending. The share of domestically financed government health spending in total health expenditure was 9.7% in 2005. External aid has kept the share of government health spending in total health expenditures at 33.7%, with the remaining 66.3% coming from out-of-pocket expenditures. In real terms, public spending has remained almost constant at around $30 million per year (in current 2009 dollars), or $5–$6 per capita from FY2003 to FY2007, with the exception of FY2005 due to an increase in external aid.16 Domestic spending increased from $12.6 million in FY2003 to $16.8 million in FY2007, and this trend is continuing. This increase is mainly for actual wage increases as the health workforce remained more or less constant. The sector analysis is in Appendix 2. 3. Sector Plans, Policies, and Priorities 14. The 6th National Socio-Economic Development Plan identifies health as one of four priority sectors for development. The Health Policy and Strategy up to the Year 2020 (2000)17 and Primary Health Care policy (2000)18 formulate a vision of achieving health for all through a national public health system based on the principles of PHC and model healthy villages. The Government is aiming for mandated, universal coverage of the population with health insurance

13 MOH, Government of the Lao PDR. 1999. Household Survey in 11 Provinces of Lao PDR. Vientiane; and MOH,

Government of the Lao PDR. 2008. Health Equity Fund Household Survey in Three Provinces of the Lao PDR. Vientiane.

14 MOH, Government of the Lao PDR. 2008. Water Supply and Environment Report, 2008. Vientiane. 15 MOH, Government of the Lao PDR; United Nations Economic and Social Commission for Asia and the Pacific;

World Health Organization; and International Labour Organization. 2008. Review of Ongoing Health Financing Reform and Challenge in Expanding the Current Social Protection Schemes in Lao PDR. Vientiane.

16 Ministry of Justice, Government of the Lao PDR. Official Gazette, Lao PDR FY2003/04–FY2006/07. Vientiane. 17 MOH, Government of the Lao PDR. 2000. Health Strategy up to the Year 2020. Vientiane. 18 MOH, Government of the Lao PDR. 2000. Policy on Primary Health Care. Vientiane.

4

or subsidized programs like health equity funds. Public financing and provision of services will continue to be required in the future given high levels of poverty, considerable market failure, and limited private sector capacity, especially in remote areas. With new legislation, the Government is also encouraging nongovernment organization and private sector development, and urban areas have seen a considerable increase in private practitioners. 15. MOH is currently implementing the 6th Health Sector Development Plan (2006–2010).19 A midterm review of the plan in September 2008 identified eight priorities: (i) model healthy villages, (ii) maternal mortality reduction, (iii) child survival, (iv) nutrition and preparedness, (v) human resources for health (HRH), (vi) organization and management, (vii) health care financing, and (viii) aid harmonization. MOH is also preparing the 7th Health Sector Development Plan (2011–2015), which is being planned and budgeted from districts upwards. This plan will contain the objectives, priorities, strategies, targets, and medium-term expenditure projections for each province and MOH to meet MDG targets for health over the next 5 years. 16. MOH has introduced a range of policies to guide health sector reforms, as summarized in Appendix 2. Particularly relevant for village care are the national nutrition policy (approved in 2008) and a decree on model healthy villages (2009). These policies should help address the persistently high malnutrition rate of about 30% and improve overall health status through better village environments, village health care, social safety nets, and timely referrals. Second, MOH and partners have prepared The National Strategy for MNCH 20 to improve MNCH delivery, including timely referrals and access to emergency obstetric care. MOH has also prepared a draft national HRH policy to improve staff skills, quality, and distribution. Further, MOH is addressing the issue of cost recovery by rolling out provincial health equity funds for the poor. A new health financing policy is scheduled for 2011 to address more long-term solutions for health financing, universal health insurance, and aid harmonization. While these reforms are potentially beneficial toward achieving MDGs and putting the health sector on a more sustainable footing, the sector is relatively late to develop. Moreover, there are multiple managerial, technical, and financing constraints in implementing these policies and plans. 17. MOH is proposing that the 7th Health Sector Development Plan form the basis for a sector program approach in line with the Vientiane Declaration. ADB is a leading partner in implementing the Vientiane Declaration and is committed to increasing program-based lending. The World Health Organization (WHO) and Japan International Cooperation Agency (JICA) have been assisting MOH with the establishment of an aid coordination mechanism.21 MOH and its development partners have endorsed a new sector-wide coordination framework for health, and there is general agreement on the way forward (Appendix 2, Table A2.2) to a joint formulation, management, and monitoring of a single sector program. Toward this objective, sector working groups have been established at the policy, operational, and technical levels, including technical working groups for PHC, MNCH, HRH, and health financing and management. Sector reforms take place in the context of a broader review and adjustment of public sector fundamentals, including the roles and responsibilities of various levels in the sector; sources and uses of funds; results-based planning and budgeting; and financial management with support of ADB, World Bank, and other development partners.

19 MOH, Government of the Lao PDR. 2006. 6th Health Sector Development Plan (2006–2010). Vientiane. 20 MOH, Government of the Lao PDR. 2009. The National Strategy for MNCH. Vientiane. 21 JICA. 2007. Capacity Development for Sector-wide Cooperation in Health. Vientiane.

5

B. Analysis of Key Issues and Opportunities 1. Sector Planning and Financing 18. With low per capita income and high levels of poverty, public spending on health is critical in the Lao PDR. However, a major challenge confronting the health sector’s efforts to achieve the MDG targets is the low level of public financing, which is inadequate to run even current services. Low public spending on health results in significant out-of-pocket expenses incurred by the population for health care in public facilities. This deters the poor from using the services, with a range of consequences for individuals, households, and the public. 19. Prior to decentralization in 2000, provincial budgets were prepared centrally, but the Government now has a highly decentralized financing system. Provincial authorities prepare their budgets based on general directions and broad budgeting norms, and then submit these to the Ministry of Finance (MOF) and the Ministry of Planning and Investment for approval. Provincial budgets are mainly for operational costs with small investments for provincial priorities and counterpart funding.22 Provincial recurrent public health services costs are paid from revenues collected by the provincial authorities, and are largely absorbed by the number of personnel assigned by MOH to the provinces, leaving limited funds for other recurrent costs. In case provinces lack funds to achieve budget norms, MOF may allocate additional funds from shared or central revenues.23 20. In 2008, the Government did not meet the target for the recurrent health budget trigger for the Poverty Reduction Strategic Operations of the World Bank and other development partners (para. 43). The share of total recurrent budget actually decreased to 3.7% of total health spending in FY2008. Another trigger—increase in staff in priority districts—was actually achieved, but by doing so, it undermined the nonwage recurrent budgets in these provinces. External aid also ties down domestic funding for infrastructure projects, and may lead to reduced domestic funding as sector allocations are based on aggregate budget. MOH and MOF realize the need to contain investment spending and are requesting help to bridge the recurrent budget gap. Additional sector funding is expected from Nam Theun 2 revenue. Initially, this amount will be small, about $1 million–$2 million from FY2010 onwards, but it will become substantial from 2020. In addition, this money is not earmarked for recurrent budget support.24 21. Excluding cost recovery and aid, domestic financing of nonwage recurrent costs was only $1.6 million for all public health facilities in the country. Additional nonwage expenditures—derived from cost-recovery, extrapolating data from a study in one province—are estimated at $1 million or more countrywide. Some recurrent costs under external aid are booked as investment. Excluding provincial hospitals and offices, the estimated nonwage annual funding gap to operate district health services is at least $5.3 million. For comparison, if health care for the poor were to be subsidized through health equity funds at a modest level of $3 per person, this would cost about $3.5 million for 17 provinces per year. If obstetric care for pregnant women were to be subsidized, it could cost $5 million per year. 22 Although some aid also pays for recurrent costs, all aid is categorized as investment. 23 Technically, MOF redistributes provincial revenue funds among the provinces for equity purposes. 24 ADB. 2005. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the Lao

People's Democratic Republic for the Greater Mekong Subregion Nam Theun 2 Hydroelectric Project. Manila.

6

22. Since the introduction of cost recovery in 1995, the out-of-pocket cost of health care has increased substantially. Transport charges, fees, and indirect costs of health care—especially for catastrophic illnesses such as obstetric emergencies—are considerable and often prohibitive for the poor. An emergency caesarean section may cost several hundred dollars if transport at night is required. Low affordability of services for the poor is considered the most important cause of low use of services. Hence, MOH is considering mandating universal health insurance through a variety of schemes, and a new health care financing strategy is being prepared. Cognizant of the impact on MDGs, several development partners have initiated schemes to subsidize health care for the poor. Although health equity funds are quick to implement and help build up provincial capacity for managing health insurance, they are not sustainable. However, health equity funds are relatively cheap, and if government revenue is increased, they should be able to be sustained. 23. Limited resources are also not used efficiently, causing the Lao PDR health care system to be less effective. It has been input-driven, often lacking a sound public health rationale for allocating resources. In recent years, efforts have been made to make planning and budgeting more results-oriented through the introduction of strategic planning and budgeting, annual plans, grant in aid, and better monitoring. Projects and programs in the absence of an overall program approach, however, have led to fragmentation of services. Projects and programs are typically centrally funded and managed, are not well integrated or adapted to local capacity, use different indicators and reporting and financial systems, and demand a disproportionate share of staff time. Management responsibilities are typically segregated, with local health officers lacking the authority to make adjustments in implementing these projects and programs according to local needs and conditions. This imposes an additional burden on already stressed provincial and district health systems. With MNCH, there is the additional problem of a multitude of pilots and packages, all with limited coverage. Hence, it is important that MOH sets national standards for management and services and insists on harmonizing projects and programs. 24. The Government lacks a standard arrangement to implement policy and provide health sector-specific financing from the central level to the provinces. MOF and MOH are proposing that, to implement the sector program approach, a fund-flow modality is created to channel program funds to the provinces and to provide financial incentives to improve sector performance. The annual planning and budgeting cycle will be the core driver to implement the sector program approach. Provincial health offices are working to prepare and use comprehensive annual operation plans, showing past performance, proposed sources, and uses of funds. These plans also help reduce fragmentation and improve provincial aid coordination. Several building blocks have been put in place with the help of development partners. ADB has been supporting provinces with capacity building in planning and budgeting, and a countrywide health management information system has also become operational. ADB will further support provincial and district financial management training under capacity development technical assistance.

2. Access to Maternal, Newborn, and Child Health Care 25. Improving access to health services is a difficult task in the Lao PDR, given the low population density, rural living conditions, and low salaries. Health centers are placed strategically to maximize access for people and providers while containing costs, using a geographic information system to balance access and efficiency. However, it has not been feasible or cost-effective to provide hospitals and health centers for small catchment populations. It is estimated that 37 districts have around 25% of their populations living more than a 2-hour distance from a hospital, and in 18 districts, about 50% of the populations live

7

more than 2 hours from a hospital. Moreover, the existing network is not operating as planned due to serious resource constraints. It is estimated that one half of the health centers lack staff members, and most facilities face serious recurrent budget constraints. MOH, therefore, is giving priority to improving existing services, their impact, and efficiency, before expanding the network. 26. Achieving MDGs 4 and 5 will depend on good village-level prevention and care, timely referrals, and better maternal and child care at health centers and hospitals. The Government is promoting the concept of model healthy villages, which should help improve access to care at the village level. In the model, villagers take responsibility for improving their collective health through ensuring a healthy environment, nutrition, disease prevention, timely curative care and referral, and social safety net for the poor and other vulnerable groups including adolescents and chronic care patients. MOH has approved a decree to pilot this approach. 27. Although MNCH services are available at most health facilities, both their quality and quantity show major gaps. Only 5% of type B district hospitals can perform basic emergency obstetric care. All provincial hospitals can provide complete services for mothers and children on a regular basis, but performance assessments have revealed that the competency score for providers ranged from 51% to 84%, with the exception of active management of the third stage of labor, which was only 22%. District hospitals and health centers frequently lack specialists and midwives to provide needed care to communities. 28. Staff salaries are in the range of $25–$45 per month for civil servants at the operational level,25 insufficient to cover the living expenses of an average family. As a result, health care workers often must engage in secondary occupations to augment their income. Drawing such workers to rural areas is difficult due to lack of schools, social services, and higher transport costs. The Government, with support of Poverty Reduction Strategic Operations, has started increasing salaries about 15% in the past 2 years, but given the very low base, this is still inadequate to compensate staff members in rural areas. Therefore, rural staff incentives are being considered. 29. Many health facilities have equipment that is not being used, yet lack essential equipment, drugs, and other supplies to perform optimally. In a survey of 12 type A district hospitals in the eight northern provinces, five hospitals had full sets of basic equipment, one hospital had a full set of medium-range equipment, and one hospital had a full set of high-range equipment. None had a full complement of 31 basic drugs. Similar deficiencies in equipment and drugs were found at type B district hospitals and health centers.26 30. To improve MNCH services, MOH and development partners finalized the preparation of a national strategy, identifying six challenges for achieving MDGs for maternal, infant, and child mortality reduction: (i) insufficient health system capacity, (ii) fragmented responsibilities, (iii) lack of investment and high out-of-pocket expenses, (iv) limited availability and quality of services, (v) low access and use of services, and (vi) human resources constraints. 31. MOH, with help of United Nations agencies and other development partners, is preparing standards for MNCH targets, interventions, and resources at various levels. The plan is that MNCH-friendly health facilities are rolled out across the country, presuming a strong buy-

25 MOF, Government of the Lao PDR. 2004. Circular No. 0806. Vientiane. 29 April. 26 MOH, Government of the Lao PDR. 2006. ADB Primary Health Care Expansion Project. Health Facility Survey.

Vientiane.

8

in from provincial authorities, and will achieve an 80% coverage in 2015. This is not without challenges, due to lack of staff members and posting qualified staff members to remote areas. In addition, ethnic groups are often reluctant to use services if staff members cannot speak their language. Training students from various ethnic groups to become PHC workers has proved particularly successful in bridging this social gap, and their skills will also need to be upgraded. It also requires staff incentives and more operational expenses for supplies and maintenance. Achieving MNCH targets will require substantial recurrent budget support. 32. MOH is also considering making delivery care free to overcome the financial obstacles of institutional obstetric care. The total cost of all routine and complicated obstetric care amount to about $5 million per year. One option—but only targeting the poor—is health equity funds, which provide an existing mechanism for paying for maternal and child care for the poor, including transport costs. These funds are being piloted at the village level, whereby village health committees have funds for basic care and referral of the poor. Further improvement on the demand for health services, including for MNCH, is expected from model health villages. 3. Human Resources for Health 33. As access and acceptability of services improve, the quality of care is gaining prominence as a determinant of suboptimum health service utilization. MOH has shifted its human resources focus from increasing the quantity to improving the quality of its staff. 34. Based on an in-depth HRH situation analysis in 2006, MOH indicated a need for a systematic approach to training, deploying, and incentivizing the health workforce. Subsequently, with support from a technical working group and ADB, MOH analyzed the health workforce and prepared a draft national HRH plan, which proposed upgrading the workforce. As part of the plan, MOH will endorse a skilled birth attendance development plan in all district hospitals, and train a minimum of one person per health center in basic emergency obstetric care. The plan will also set standards for staff performance, remuneration, education and training, professional competence, and certification and licensing. The plan is being reviewed by stakeholders in MOH, other government agencies, and development partners. Its promulgation is expected by in 2010. 35. To achieve MDG 5, maternal mortality reduction, the number of staff members who can provide skilled birth attendance must increase. Indeed, providing obstetric care at all health care facilities is an important component of the national MNCH strategy. As part of the national HRH plan, MOH recently drafted a skilled birth attendance development plan to create a skilled workforce to reduce maternal and newborn mortality and morbidity. It aims to train existing staff members in skilled birth attendance, and new entrants in registered midwifery and community midwifery. With this, MOH plans to provide comprehensive emergency obstetric care in all provincial and type A district hospitals as well as basic emergency obstetric care in all type B district hospitals and health centers. In addition, MOH intends to train a minimum of one high-level PHC worker per health center, and where needed, an ethnic group member, in basic emergency obstetric care. MOH lacks funding, however, to implement the skilled birth attendance plan. 36. A number of studies have been conducted that found inadequate knowledge and skills of MNCH service providers for the provision of accurate information and appropriate services to clients, despite their participation in several in-service trainings. A survey among health personnel working in Oudomxay and Xieng Khouang provinces revealed that many health care workers were unable to diagnose and treat common diseases. The core problem is thought to

9

be substandard pre-service training, as staff quality is affected by the substandard level of teaching institutions at both the central and provincial levels. Education of the health care workforce is undertaken in three types of institutions. Pre-service training for high-level staff members takes place at the University of Health Sciences in Vientiane. The College of Health Technology in Vientiane provides pre-service training for mid-level technical nurses and post-basic bachelor’s degrees for nurses. The Luang Prabang School provides pre-service training for high-level PHC workers. Mid-level technical nurses and PHC workers are trained in regional public health schools located throughout the country. There is no domestic pre-service or post-graduate training of midwives at present. 37. Excessive intake of fee-paying students, lack of qualified lecturers, and poor skills training are some of the basic problems that affect these institutions. The number of fee-paying students is based largely on demand and the institutions’ desire to generate income, with limited consideration given to institutions’ capacity. By 2008, medical sciences faculty had an intake of 393 students, compared with intakes between 100 and 125 students annually from 2001 to 2004. The College of Health Technology reported that 80% of enrolled students in technical nurse training were fee-paying in 2005; in technical nurse schools in Champasak, Luang Prabang, and Savannakhet, fee-paying students exceed 60% of total enrolled students. While this trend has increased revenue, it has had a negative impact on quality of training. Poor students unable to afford fees are discriminated against by price. Without a system for continuing accreditation of these institutions, the quality of the training has sharply deteriorated. 38. The quality of education and training at these institutions was questioned even before the added burden of overcrowding. These institutions lack qualified teachers, skills-focused and participatory teaching methods, and proper facilities and equipment such as laboratories and computers. Other problems are the low level of basic science and math knowledge in high school graduates, lack of opportunity for hospital and community practice, and lack of adequate planning and supervision. In general, these institutions do not have a strategic approach nor plan toward improving the quality of education. C. External Assistance 1. Donor Coordination 39. Following the Vientiane Declaration, MOH has moved toward a sector program approach. The Government of Japan and WHO, with the help of JICA, are assisting MOH in sector-wide coordination. MOH and development partners have agreed on a coordination framework that is currently being implemented, and a national health sector program has been prepared based on priorities under the 7th Health Sector Development Plan. Sector working groups have been established at policy, operational, and technical levels. ADB is playing a leading role in the HRH working group and participates in working groups for health financing and MNCH. A summary of external assistance and coordination is in Appendix 3. 40. Under the Minister of Health’s strong leadership, there is good alignment of development partner investment. ADB, Lux-Development S. A., and World Bank are supporting provincial health services and health financing with similar interventions in, respectively, the northern, middle, and southern provinces. United Nations agencies mainly provide technical support. ADB; Agence Française de Développement; Global Fund to Fight AIDS, Tuberculosis and Malaria; and World Bank provide complementary support for communicable disease control. ADB, JICA, WHO, and World Bank also support HRH. The People’s Republic of China, India, and the Republic of Korea support hospital services.

10

41. However, the Lao PDR’s health sector has lacked domestic funding, and is increasingly facing a paucity of external funding as several bilaterals have moved out. It is increasingly dependent on a few partners, including the Global Fund and Lux-Development. In the next 10 years, the sector will continue to depend on substantial external support. Further, Nam Theun 2 revenues will only become more significant after 2018. 42. The World Bank and development partners27 are currently providing support for public expenditure reforms. Public sector fundamentals are being improved, such as through the 2006 Budget Law and ADB support for the medium-term expenditure framework.28 The Ministry of Education and other ministries have pioneered the sector program approach with considerable uncertainty, but now stand committed to developing this approach further. It is now seen as a more strategic and transparent approach with expected impact and efficiency gains. 43. Poverty Reduction Strategic Operations is a budget support mechanism for poverty reduction. Its framework includes a European Commission variable tranche of €1 million based on two triggers: (i) recurrent health budget as a percent of total budget, with the share at least equal to the baseline (3.9% in FY2007); and (ii) the number of health personnel in 47 priority districts at least equal to the baseline (1,644 in 2007). As stated previously, the first trigger was not achieved, as the share of total recurrent budget decreased to 3.7% in FY2008. The second indicator was achieved with an increase to 1,724 staff members in these districts. MOH noted that while Poverty Reduction Strategic Operations puts an additional financial burden on MOH, even if triggers were met, there is no assurance that funds would actually flow into the sector or be used for recurrent budget. 44. Additional funding to the health sector is expected from Nam Theun 2 revenue from FY2010 onwards. The amount and use of these funds are unknown, but the amount will be distributed across five sectors and will be small until FY2020.29 Estimated revenues to the Government will rise gradually (while commercial debt service is paid) from about $7.2 million in the first year (FY2010), to an average of about $10 million per year in the first 5 years (FY2014), to an average of about $15 million from FY2015 to FY2019, and increasing sharply thereafter to an average of about $40 million from FY2020 to FY2024. The health sector is expected to receive about an average of $2 million per year during the first 5-year period, FY2010–FY2014. While revenues may help increase domestic financing in the health sector in the near to medium term, MOH has not decided for what these funds will be used. These funds may be targeted to specific, centrally funded priority programs like immunization and model healthy villages rather than recurrent budget support. 2. Lessons from ADB Experience 45. ADB has been successfully supporting the Lao PDR’s health sector in three areas: (i) PHC in the eight northern provinces, (ii) MOH and provincial capacity building countrywide, and (iii) communicable disease control. ADB's Primary Health Care Expansion Project has just been closed, and its performance was satisfactory. It helped improve access to quality PHC in the eight northern provinces, and build institutional capacity countrywide. It had demonstrable

27 World Bank. 2007. Lao PDR Third Poverty Reduction Strategic Operations (PRSO-3). Washington, DC. 28 ADB. 2008. Technical Assistance to Lao PDR for Strengthening Public Financial Management. Manila 29 Revenue from Nam Theun 2 is expected to be available to the Government in FY2009–FY2010, including (i)

government contributions under article 19.1 of the Concession Agreement, (ii) water resources user charges, and (iii) Nam Theun Power Corporation dividends and taxes. The initial target sectors for the first round of revenue include (i) health, (ii) basic education, (iii) rural roads, (iv) environment, and (v) the poverty reduction fund. Revenue is to be used for specific sector programs and projects, but may include recurrent budget support.

11

impact on the use of health services, such as doubling the number of institutional deliveries. In total, almost 100 health facilities were constructed or upgraded. It also successfully trained ethnic group members as PHC workers and VHVs, and expanded drug revolving funds. While project implementation was relatively smooth, project evaluation identified several lessons linked to the low use and underfunding of health facilities, including staff quality, low pay, inadequate maintenance of equipment, and inadequate outreach and support of VHVs, which to a large extent are driven by constraints addressed in this HSDP, including low recurrent spending and substandard quality of pre-service education. 46. ADB's Health System Development Project approved in 2007 for 4 years is currently supporting MOH in improving sector performance in eight northern provinces and institutional capacity building countrywide. 30 This includes the preparation of the 7th Health Sector Development Plan and national HRH plan, strengthening provincial health planning and budgeting, management training, and piloting health equity funds and a results-based approach. Project implementation is mainstreamed through the relevant MOH and provincial departments, thereby helping build their capacities. From the end of 2009, ADB will also provide capacity development technical assistance to help develop detailed financial arrangements for the sector program approach and to strengthen provincial and district financial management.31 3. Sector Program Approach 47. In line with the Vientiane Declaration, MOH wants to implement the 7th Health Sector Development Plan through a sector program approach. MOH has asked ADB to help develop the approach in the health sector with its development partners. In view of provincial and district capacity constraints, a sector development program modality for the first program assistance in the Lao PDR's health sector is considered most appropriate. The modality supports a combination of policy reforms and recurrent budget support with accompanying investments and capacity building to help implement the reforms. Drawing on lessons identified in the education sector, MOF and MOH are proposing a fund-flow modality that ensures that program funds are used in the health sector. 48. Such an approach is considered in line with Strategy 2020 and the Operational Plan for Health.32 The operational plan envisages a direct role in program-based support for health that address governance and public expenditure management for cost-effective delivery of health programs and services, based on developing member country demand and the individual country partnership strategy process. Partners, especially Lux-Development and World Bank, indicated their support for the approach and interest in future program funding. The Lao PDR’s health sector makes a good case for assistance given (i) high poverty levels and MDG challenges, (ii) strong leadership from the Government for sector reforms and aid harmonization, and (iii) a current paucity of domestic and external funding. ADB will support a transition to new aid architecture in the Lao PDR's health sector to improve sector performance and to ensure that past investments are sustained.

30 ADB. 2007. Report and Recommendation of the President to the Board of Directors on a Proposed Grant to the

Lao People’s Democratic Republic for the Health System Development Project. Manila. 31 Proposed technical assistance to Lao PDR for Building Capacity for the National Health Sector Program Approach. 32 ADB. 2008. Operational Plan for Health under Strategy 2020. Manila.

12

III. THE PROPOSED SECTOR DEVELOPMENT PROGRAM

A. Impact and Outcome 49. The impact of the HSDP will be reduced maternal and child mortality and malnutrition by 2015. The outcome will be improved use of PHC, particularly for women, children, and ethnic groups. The design and monitoring framework is in Appendix 1. B. Special Features 50. Following the Vientiane Declaration in 2006, MOH, with support of WHO, JICA, and other partners, have agreed to a sector-wide coordination framework. MOH is committed to implement part of the 7th Health Sector Development Plan through a sector program approach. The HSDP is the first program assistance for the Lao PDR's health sector. It will focus on planning and financing, MNCH, and HRH development as a cohesive set of policy actions to address key constraints in access to and use of health care, particularly for poor women, children, and ethnic groups. Although the HSDP is national in scope to help create a countrywide platform for support, there is considerable variation in provincial financing, and the level of support under the HSDP will depend on annual assessment of performance and financing gaps. 51. Public sector financing prospects for the Lao PDR are good in the long term. Around 2020, domestic revenues—including from Nam Theun 2—will be substantial. However, in the medium term, the sector remains financially dependent on external funding. The HSDP presents bridge funding for this interim period. As implementation of policy reforms is partly shouldered by the provinces, MOF has agreed that external program funds will be passed on to the provinces as support for recurrent cost financing. The HSDP will support a fund-flow mechanism to provide supplementary recurrent budget support to the provinces, districts, and villages. C. Program Outputs 52. The program outputs are (i) strengthened planning and financing, (ii) increased access to MNCH care, and (iii) improved quality of HRH. The policy matrix is in Appendix 4.

1. Output 1: Strengthened Planning and Financing 53. MOH is developing the 7th Health Sector Development Plan as input to the 7th National Socio-Economic Development Plan. MOH’s plan is results-based, being created and budgeted from the district level, and aggregated for each province to form provincial health development plans. Annual operation plans will be developed for each province for each year in the planning period, will estimate the recurrent and capital costs required each year, and will provide the basis for securing program assistance for recurrent expenditures. 54. Provinces will be largely responsible for financing the downstream costs of policy actions. The program proceeds will be used to provide supplementary budget support for the provincial authorities, essentially helping the provinces to at least double nonwage recurrent spending. This will be done through results-based supplementary block grants for recurrent expenditures including, within certain budget norms, operational expenses, staff incentives, field allowances, maintenance and repairs, quality improvement measures, monitoring and reporting, and funding for health equity funds. These health equity funds make health care more affordable to the poor, and are a means to build up capacity for universal health insurance

13

coverage. It is anticipated that other development partners will also use the program financing modality. The budget support is considered a temporary measure until government revenues—either central or provincial—increase. 55. The first policy action for the first tranche release is that MOF shall have approved the program funding mechanism for supplementary program support for the provincial health sector and copy of such Memorandum of Understanding shall have been provided to ADB. It is anticipated that development partners will use this mechanism to increase funding for recurrent expenditures. Recurrent budget support will, within certain budget norms, be needs-based for operation and maintenance, staff incentives, and health equity funds for the poor. MOF has agreed to use the entire program funds of $10 million for non-salary recurrent budget support to the provinces. The second policy action is that MOH approves the national health information system strategic plan, 2009–2015.33 The third policy action is that MOF shall have provided a commitment to ADB to increase the domestic nonwage recurrent budget for health by at least 10% annually from FY2010 to FY2014 (Appendix 4). While as a proportion this increase may appear high, the Government's recurrent health spending is still very low at less than $2 million per year, and the gap can be entirely financed from program proceeds. It is also expected that after this period, other sources of funding will come on line. 56. The first policy action for the second tranche release is that provincial authorities shall have approved the results-based annual operation plans and budgets and copies thereof shall have been provided to ADB. The second policy action is that MOH issues a decision approving standards, guidelines, and terms of reference for district hospitals, and copies provided to ADB. Without such guidelines, it is difficult to budget MNCH requirements for these facilities. The third policy action is that MOF submits a letter to ADB confirming the increased domestic non-wage recurrent spending by at least 10% compared to FY2010 level. At this time, it is expected that the 7th National Socio-Economic Development Plan (2011–2015) will have been approved, as well as the health financing strategy, which are expected to mobilize additional program funding.

2. Output 2: Increased Access to Maternal, Newborn, and Child Health Care 57. In May 2009, MOH approved the national MNCH strategy, the first policy action for the first tranche release. It describes health system strengthening, and mobilizing individuals, families, and communities to achieve rapid and equitable scale-up for delivery of essential, cost-effective, evidence-based interventions to improve MNCH in selected districts, monitor MNCH care, and ensure that district health plans adequately address MNCH care. The national MNCH strategy is initially costed at $6.2 million. As the first policy action for the second tranche release, MOH issues a decision approving the rollout of the MNCH friendly health facilities, providing a minimum package of MNCH services and a copy thereof provided to ADB. The expansion of coverage of these qualified facilities will be a good indicator for access to quality obstetric care. A major issue is the cost of obstetric care, and MOH is considering various options to provide subsidized delivery care through a health equity fund or otherwise. 58. Model healthy villages have emerged from the midterm review of the 6th Health Sector Development Plan as an important priority for achieving MDGs. A healthy model village is defined as one that maintains basic conditions needed to lead a healthy life, emphasizing MNCH, including nutrition. With support of a $3 million Japan Fund for Poverty Reduction grant, MOH will field test a comprehensive model that has four outputs: (i) strengthened village

33 MOH, Government of the Lao PDR. National Health Information System Strategic Plan, 2009–2015. Vientiane.

14

capacity for participatory planning and management of model healthy villages, (ii) improved village infrastructure for PHC delivery, (iii) strengthened capacity of districts and health centers to support model healthy villages, and (iv) project management and implementation support. A second policy action of the first tranche release is Decree No. 381, approved in June 2009, establishing the directives for piloting at least two model healthy villages per district in each of the participating provinces (about 300 in total) together with a copy of the supplementary guidelines on piloting model healthy villages. Using experiences from this pilot, a second policy action of the second tranche release is that MOH issues a decision approving the standard guidelines and strategic plan for the scale up and rollout of model healthy villages in at least 300 remote villages in the participating provinces by the end of 2015.

3. Output 3: Improved Quality of Human Resources for Health 59. MOH, through the Department of Organization and Personnel and the HRH technical working group, prepared a draft national HRH policy in 2009 with support from ADB's Health System Development Project (footnote 30). Approval is expected in December 2009. The plan sets targets for workforce size, mix, and distribution; staff performance, remuneration, education, and training; professional competence; and certification and licensing. The plan is currently being costed and includes the skilled birth attendance plan of $3.5 million to improve skills in maternal and newborn health care. The national HRH policy is to be issued by a Prime Minister’s decree in January 2010. The policy action for the first tranche release is that MOH approves the national implementation plan for skilled birth attendance plan. The policy action for the second tranche release is that MOH submits to ADB a copy of the National Policy on Human Resources for Health approved by the Prime Minister. The plan, once approved, will commit the central and provincial authorities to finance downstream costs of staff upgrading and wages. D. Project Outputs 60. The project outputs are coordinated with program outputs: (i) strengthened planning and financing capacity, (ii) increased access to MNCH care, and (iii) improved quality of HRH.

1. Output 1: Strengthened Planning and Financing 61. Under the guidance of the provincial committees for health, a bottom-up planning process will be supported. Provincial health management teams will conduct strategic planning exercises to improve their 5-year plans and prepare medium-term expenditure frameworks to support basic public health functions. Based on these 5-year plans, district and provinces will be assisted in preparing and implementing results-based annual operation plans, including budgets. The Project will support the adaptation of guidelines, standards, and procedures for strategic planning, budgeting, and management. It will also help establish the fund-flow mechanism for program-financed block grants. It will set up a temporary financial control unit in MOH to support the provinces and MOF in the management of block grants to mitigate delays in the release of funds, and conduct periodic inspections of the use of program funds. 62. MOH has established clear terms of reference and guidelines for health centers. However, similar guidelines have not been established for district hospitals. Without such guidelines, it is difficult to budget MNCH requirements for these facilities. The Project will support MOH to prepare guidelines and terms of reference for district health offices and district hospitals. These will contain standards for organizational structure, personnel, management responsibilities, performance criteria, facilities, and equipment and drugs for district hospitals.

15

63. Under the overall umbrella of the national health financing policy, the Project will support the expansion of health equity funds based on lessons learned from ongoing pilot projects of ADB and development partners. The recurrent budget support can also be used to operate these funds. It is expected that, in addition to the three provinces under the current Health Systems Development Project (footnote 30), an additional three to five provinces will establish health equity funds, preferably to cover the entire province but otherwise the poorest districts. Expansion will be based on a firm commitment of the province to sustain the scheme from its own resources. The major challenges for scaling up health equity funds are (i) financial constraints, (ii) making pilots fully functional and sustainable at the provincial level, and (iii) developing standard health equity fund guidelines. The Project will support alignment with other health equity fund schemes, preparation of guidelines, provincial advocacy and capacity building, contracting, and training. This will include building MOH and provincial capacity in health equity fund management, preparation of a strategic plan, and preparation of national guidelines for their implementation. The Project will support the training of health equity fund management committees, staff training, field support, fund management oversight by a third-party managing agency, and technical support required for health equity fund implementation.

2. Output 2: Increased Access to Maternal, Newborn, and Child Health Care 64. The Project will help provinces implement the national MNCH strategy through a district-wide rollout of mother- and child-friendly health facilities in northern provinces. Priority will be given to districts with high maternal mortality rates. MOH, with the help of development partners, has developed minimum standards for MNCH services and has drafted an implementation plan for district-wide advocacy, planning, upgrading, and recognition of mother- and child-friendly health facilities. The Project will help conduct health services surveys for implementing the national MNCH strategy in northern provinces to provide a baseline of resources, services, and outputs. Funding will be provided for the use and provision of essential equipment at all levels based on need. The survey results will also assist provinces in seeking results-based supplementary budget support for MNCH services under the program assistance. 65. Civil works are concentrated in the northern provinces, as Lux-Development and World Bank are expected to provide similar support in, respectively, the central and southern provinces. The Project will support upgrading of Boun Neua District Hospital from type B to type A in Phongsali Province, upgrading Nam Bak District Hospital (type A) and renovating Vien Kham District Hospital (type B) in Luang Prabang Province, and renovating Mok Mai District Hospital (type B) in Xieng Khouang Province. It will also support replacing a total of 10 health centers and renovating a total of 10 health centers in Luang Prabang, Oudomxai, and Xieng Khouang provinces. All civil works will address waste management issues including staff training. The Project will also support countrywide assessment, advocacy, training, and piloting for the implementation of the national integrated health care waste management plan.34 66. The Project will also support MOH to achieve its target of piloting model healthy villages in at least two villages per district in all provinces (a total of 282 villages) in the first 2 years, and further roll out the approach with at least proportional representation of small and isolated ethnic group villages. The experiences of the Japan Fund for Poverty Reduction pilot will be used to prepare standard guidelines and strategic plan for expansion. The Project will finance capacity building of provincial and district health offices to organize, implement, supervise, and monitor model healthy villages, while program funds will be used to finance investment in the villages. 34 MOH, Government of the Lao PDR. 2008. National Integrated Health Care Waste Management Plan. Vientiane.

16

3. Output 3: Improved Quality of Human Resources for Health

67. The Project will support skilled birth attendant training and related training capacity inputs for up to $1 million, and MOH has already trained trainers in the five public health schools. However, additional regional training may be required. The United Nations Population Fund will monitor the institutional capacity for midwifery training including facilities, skills, and equipment, and indicate additional funding requirements. According to the skilled birth attendance plan, the Project will support training of about 500 staff members, including obstetricians, medical officers, midwives, nurses, medical assistants, and PHC workers. The Project will support about one third of the projected in-services training in the plan up to 2012. Improving skills training will require the recruitment of regional or overseas teachers. The Project will use information from its health services survey to fill gaps in essential MNCH skills and equipment. 68. The Project will also begin to address weaknesses in the pre-service training and education of health personnel who enter the health workforce. Sustainable improvement of HRH will require institutional strengthening for educational institutions. MOH has requested assistance to develop master plans for the University of Health Sciences and College of Health Technology. This output will also provide teaching equipment and help upgrade teachers’ skills. E. Investment Plan 1. Program Investment 69. The Government has requested that ADB support the Government's policy actions under the HSDP by providing a program grant of $10 million from its Special Funds resources to be released in two tranches ($5 million each), with the first tranche to be released upon grant effectiveness, and a second tranche within 24 months post-effectiveness. The size of the grant is based on the medium-term costs of the proposed policy actions with an estimated adjustment cost of about $15 million. The Government has agreed to pass on the equivalent of the $10 million program grant to the provinces as supplementary nonsalary recurrent budget support for the health sector for operation and maintenance; quality improvement; outreach and supervision; and rolling out mother- and child-friendly services, health equity funds, and model healthy villages. 70. The two-tranche design ensures follow-up support for policy actions that trigger the first tranche. In determining the amount of the grant, the following factors were considered: (i) the scope and strength of proposed policy actions, (ii) minimum cost of a package of basic services for the poor, (iii) short- and medium-term costs of proposed policy actions, (iv) fiscal constraints and associated financing gaps, (v) absorptive capacity of the provinces, and (vi) good prospects for sustaining increased domestic health sector financing in the long term. The Government has also noted that additional funding is expected from other development partners, which would allow further rollout of its priority programs for mother- and child-friendly services, health equity funds, and model healthy villages. 2. Project Investment 71. The project investment plan by component is in Table 1. Cost by category, year, and source of financing is in Appendix 6.

17

Table 1: Project Investment Plan ($ million)

Item Amounta

A. Base Costs 1. Strengthened Planning and Financing 3.4 a. Enhanced Provincial Planning and Financing Capacity 2.6 b. Efficient Program Administration and Coordination 0.8 2. Increased Access to MNCH Care, in Particular for Ethnic Groups 4.1 a. Upgraded District Hospitals and Health Centers 3.4 b. Expanded Model Healthy Villages 0.7 3. Improved Quality of Human Resources for Health 2.5 a. Trained Skilled Birth Attendants 1.2 b. Improved Quality of Pre-Service Education 1.3 Subtotal (A) 10.0

B. Taxes and Dutiesb 0.1

C. Contingencies a. Physical Contingenciesc 0.2 b. Price Contingenciesd 0.5 Subtotal (C) 0.7 Total Cost (A+B+C) 10.8 MNCH = maternal, newborn, and child health. a In June 2009 prices. b Taxes: 10% on civil works; 0% for other categories. c Physical contingencies: 5% civil works; 0% staff development, village program training, workshops, studies, and

system development, program management; 3% other categories. d Price contingencies: 0% staff development, international consulting services, program and project management;

3% other categories. Source: Asian Development Bank estimates.

F. Financing Plan 72. The total HSDP cost is estimated at $20.8 million equivalent, including a program cost of $10.0 million, and a project cost of $10.8 million equivalent. ADB will contribute $10 million for the Program and $10 million for the Project. The Government will contribute $0.8 million for taxes, duties, and in-kind services. The overall financing plan is in Table 2.

Table 2: Financing Plan for the Health Sector Development Program ($ million)

Source Total % Asian Development Bank – Program Grant (ADF) 10.0 48.0

Asian Development Bank – Project Grant (ADF) 10.0 48.0

Government 0.8 4.0

Total 20.8 100.0 ADF = Asian Development Fund. Source: Asian Development Bank estimates.

G. Implementation Arrangements 1. HSDP Management 73. MOH, through the Department of Planning and Finance (DPF), will be the Executing Agency (EA) for the HSDP, responsible for overall implementation and coordination. An MOH steering committee, chaired by the Minister of Health and comprising vice ministers and

18

representatives of MOH departments, will provide overall guidance in HSDP implementation. The MOF, Ministry of Planning and Investment, and other ministries will be invited to the steering committee, as required. 74. Within DPF, a project coordination unit will be established, with the DPF deputy director general as director. The unit will include three deputy directors, two administrative officers, and one private firm for accounting services. It will be responsible for (i) program coordination, (ii) timely submission of policy measures, (iii) preparing and managing the project annual plan and budget, (iv) providing guidance to national and provincial implementing agencies, (v) monitoring social and environmental safeguards, (vi) ensuring that ADB requirements are being complied with, (vii) monitoring and evaluation, (viii) submitting quarterly progress and financial reports to ADB, (ix) conducting reviews and surveys, (x) major civil works and procurement of goods and services, (xi) hiring consulting services, and (xii) administrative and financial management. 75. Within MOH, program implementation will be delegated to concerned departments acting as national implementing agencies, including the departments of Curative, Food and Drugs, and Organization and Personnel, and the MNCH Hospital. These departments will be responsible for planning, implementing, and reviewing delegated project activities within their responsibilities. Provincial health offices will act as implementing agencies, through the PHC coordination units and will be responsible for (i) supporting the preparation of annual operation plans; (ii) facilitating the processing and implementation of conditional grants; (iii) implementing provincial HSDP activities, and ensuring the quality of these activities, including training and minor civil works procurement; and (iv) financial management of the HSDP. 76. As per the gender and ethnic group action plan (Appendix 10), gender and ethnic group opportunities and concerns will be central to project implementation. Plans, training, and services will address the special needs of women and ethnic groups, and reports will be disaggregated by gender and ethnic group. An MOH gender committee will provide oversight to ensure implementation of the gender and ethnic group action plan. MOH will also appoint a gender and ethnic group focal point. International and national consultants (i.e., gender and community development experts) will support the EA. A gender specialist in the ADB Lao Resident Mission will provide backstopping and also help monitor the implementation of the plan. Representatives from the Lao Women’s Union and Lao Front for National Construction will facilitate participation by women and ethnic groups in project activities and participate in steering committee meetings. Quarterly progress reports will provide updates on the effect of outputs on women and ethnic groups. The midterm review mission will consider past updates and make adjustments as necessary. 77. Implementation period. The program period is from 1 January 2010 to 30 June 2012. The Project will be implemented over 4 years, from 1 January 2010 to 31 December 2013, and the grant will close by 30 June 2014. The project implementation schedule is in Appendix 7. 78. Project procurement. All ADB-financed procurement will be done in accordance to ADB’s Procurement Guidelines (2007, as amended from time to time). The procurement plan with indicative contract packages is in Appendix 8. Works, goods, and services $100,000 and above will be procured through national competitive bidding. Minor works, goods, and services costing less than $100,000 may be procured through shopping. Vehicles may be procured through the United Nations Office for Project Services, as its procurement procedures are acceptable to ADB.

19

79. Consulting services. The Project will require five international consultants for a total of 39 person-months, six national consultants for a total of 71 person-months, and two national firms for accounting and architecture. The international experts in program management (20 person-months), MNCH (3 person-months), medical education development (7 person-months), gender (6 person-months), and health equity fund (3 person-months) will be hired as individual consultants, with advance action for engaging the planning and financing expert. Accounting and architecture firms will be hired using biodata technical proposal and consultant qualification selection. Other national consultants will be hired as individual consultants. All consultants will be recruited in accordance with ADB’s Guidelines on the Use of Consultants (2007, as amended from time to time). 80. Advance contracting. MOH will take advance action to ensure project readiness and timely implementation. It will (i) finalize the project administration manual, and identify and approve key project staff members before grant negotiation; (ii) finalize and approve the terms of reference of the international planning and financing expert, as well as the fund-flow mechanism for program funds; and (iii) initiate the bidding process for goods and civil works. Contract with a firm will only be signed after the grant financing agreement is effective. Advance action for contracting does not commit ADB to approve this Project or to finance recruitment costs. 81. Program disbursement. The first tranche of $5 million will be released at grant effectiveness upon compliance of all the first tranche policy actions, and the second tranche of $5 million will be released after 24 months upon compliance with the second tranche policy actions (Appendix 4). The proceeds will be used to finance the foreign exchange costs of items produced and procured in ADB member countries, excluding items included on a list of ineligible items and imports financed by other bilateral and multilateral sources (Appendix 5). The Government will certify if the value of the Lao PDR's total imports minus imports from nonmember countries, ineligible imports, and imports financed under other official development assistance is at least equal to the amount of the grant to be disbursed in a given period. ADB will have the right to audit the use of the grant proceeds and to verify the accuracy of the Government's certification. MOF will provide an equivalent amount to the first and second tranche, respectively, in a special MOF program account for recurrent budget support to the provinces during the next 2 fiscal years. The first set of policy actions is expected to be fulfilled by October 2009, and the first tranche release is scheduled for December 2009. The second tranche is scheduled for release by June 2012. All policy actions will be verified by official documentation provided by MOF and MOH. 82. Project disbursement. Project grant proceeds will be disbursed in accordance with ADB’s Loan Disbursement Handbook (2007, as amended from time to time). Each fiscal year, DPF will ensure that each participating department and province prepares annual reports, plans, and budgets, and has these approved by the MOH steering committee before any funds are released. MOH and MOF will ensure the timely release of funds. 83. MOF will open an imprest account for the Project at the Bank of Lao PDR. ADB will deposit into the account an estimated 6 months of expenditure or 10% of the project grant amount, whichever is less. DPF will open a second-generation imprest account to manage project funds for MOH at any bank acceptable to MOH and ADB, and MOF will deposit an estimated 6 months’ expenditure or 5% of the project grant amount, whichever is less, in this account. The statement of expenditure procedure may be used in obtaining reimbursement for eligible expenditures and in liquidating advances from the imprest account or replenishing the

20

account. This procedure applies to contracts of not more than $100,000 equivalent per payment and to the liquidation of advances made from the imprest account according to the financial covenants of the grant. Detailed arrangements for establishing the imprest account and the state of expenditure procedure will conform to ADB’s Loan Disbursement Handbook. Adequate supporting documentation, as defined in the Loan Disbursement Handbook, must be kept at each level of project management to substantiate all expenditures made with the grant proceeds. 84. Project accounting, auditing, and reporting. The EA will hire an accounting firm for financial management according to the terms of reference in Appendix 8. MOH and provincial health offices will keep separate records and accounts for the Project, identifying the goods and services financed with the grant proceeds. The EA has implemented similar projects financed by ADB and others in the last 10 years. Past experience and the results of the assessment indicate satisfactory financial management capacity on the part of the EA. 85. The State Audit Organization or any other certified auditor acceptable to ADB will audit each year all accounts and financial statements, statements of expenditure and revenues, and activities in the imprest account related to the Project, according to auditing standards acceptable to ADB and international accounting and auditing standards. Audited financial statements and project accounts, together with the report of the auditor, including the auditor’s opinion on the use of grant proceeds, compliance with grant covenants, and use of the imprest account under ADB’s statement of expenditure procedure will be submitted not later than 9 months after the financial year due to the difficulty of arranging audit in scattered field sites. A separate audit opinion will be issued on the use of the imprest account and statement of expenditure procedure. 86. The EA will provide ADB with quarterly progress reports on project implementation within 30 days of the end of each quarter. The progress reports will be in English and in a format acceptable to ADB and will indicate, among other things, progress made against established targets, problems encountered during the previous quarter, steps taken to resolve problems, compliance with grant covenants, and the proposed program of activities for the succeeding quarter. Within 3 months after the physical completion of the Project, MOH will submit to ADB a project completion report with details of program implementation, accomplishments, outstanding issues, and proposed remedial actions. 87. Anticorruption measures. ADB’s Anticorruption Policy (1998, as amended to date) was explained to and discussed with the Government and EA. Consistent with its commitment to good governance, accountability, and transparency, ADB reserves the right to investigate, directly or through its agents, any alleged corrupt, fraudulent, collusive, or coercive practices relating to the Project. To support these efforts, relevant provisions of ADB’s Anticorruption Policy are included in the grant regulations and bidding documents for the Project. In particular, all contracts financed by ADB in connection with the Project shall include provisions specifying the right of ADB to audit and examine the records and accounts of the EA and all contractors, suppliers, consultants, and other service providers as they relate to the Project. 88. MOH has handled five ADB projects through the same administrative unit, which is now familiar with ADB procedures and anticorruption measures. The previous projects helped set clear procedures for the procurement of equipment and civil works, with financial management support from a private accounting firm. There have not been any major audit issues or instances of suspected fraud. MOH will ensure that (i) staff members not familiar with ADB’s Anticorruption Policy receive orientation; (ii) notice boards at the provincial health offices display information on contracts, list of participating bidders, name of the winning bidder, basic details

21

on bidding procedures, contract award, and list of goods and services procured; and (iii) an MOH steering committee comprising representatives from ADB, MOF, Ministry of Justice, Ministry of Planning and Investment acts as the grievance redress body to (a) receive and resolve complaints and grievances or act upon reports from stakeholders on misuse of funds and other irregularities; (b) review and address grievances of stakeholders in relation to either the Project, any of the service providers, or any person responsible for carrying out any aspect of the Project; and (c) proactively and constructively respond to them. 89. Involuntary resettlement. The four hospitals and 20 health centers will be upgraded, renovated, or replaced on existing government land free of encumbrances. No resettlement issues have been identified or are expected. However, these assessments will be confirmed during project implementation of civil works. If any land acquisition or other action is required that affects private persons and/or users of the land, a land acquisition and resettlement framework has been prepared in accordance with ADB’s Involuntary Resettlement Policy (1995) to guide the preparation of a land acquisition and resettlement plan (Appendix 11). In case of any change in scope, the new site will also be inspected for any possible resettlement issues. 90. Environment. The Project’s environmental impacts were reviewed through rapid environmental assessment. The Project will support the upgrading of four hospitals and upgrading or replacement of 20 health centers based on MOH guidelines for the construction of health facilities developed under the Primary Health Care Expansion Project (footnote 26). No significant adverse impacts were identified; the investment will have a positive impact on the environment. The main concern is medical waste management. Most health facilities separate waste, but the subsequent handling is inadequate. The Project will not cause any significant pollution, health hazards, or soil erosion. A summary initial environmental examination, in Appendix 12, examined the potential environmental impacts of the Project and identifies mitigation measures to avoid adverse environmental impacts and maximizes beneficial impacts. Environmental implications of proposed policy reforms were reviewed, and no negative environmental impacts are anticipated. Environmental impacts of the investment component were reviewed, and monitoring and mitigation measures were incorporated into the project design. Environmentally sound medical waste treatment will be included in the design of upgraded health facilities. Site selection, design, construction, replacement work, and facility operation will conform to relevant regulations and standards of the Government, international good practices, and ADB’s Environment Policy (2002). 91. MOH is planning to roll out a plan to improve waste management in health facilities, and the major challenge will be compliance with these guidelines, in terms of proper disposal of such waste. The Project will support the Environment Health Division, Department of Hygiene and Prevention, MOH, to disseminate Decree No. 1706 on health facility waste management signed by the Minister of Health on 20 July 2004; health care waste management guidelines developed by WHO, adopted by the Government and translated into Lao; and the national integrated health care waste management plan. 92. Performance monitoring system. The HSDP's overall impact, outcome, policies, and targets are aligned with ADB's country partnership strategy results framework, as shown in the design and monitoring framework. The HSDP targets four out of eight MDGs directly, and indirectly MDGs for gender, education, environment, and aid coordination. The HSDP supports pillar II, Inclusive Social Development; and pillar III, Good Governance and Capacity Development.

22

93. DPF will monitor implementation of all policy actions outlined in the policy matrix. DPF will submit to ADB quarterly reports until the completion of the HSDP that provide an update on the status of government policy actions, both in formulation and implementation. Data from the census, household surveys, service surveys, and HSDP implementation reports and documents will be used to monitor progress. The national health information system will be used for monitoring health service performance, which will be supplemented with (i) impact and outcome assessment using the Health Systems Development Project household survey scheduled for 2010 as a baseline, and an HSDP end-of-project survey in the fourth year; (ii) annual health service survey including on village health care; (iii) monitoring of project activities and inputs; (iv) social and environmental studies; and (v) monitoring of project management and financing. Particular attention will be given to monitoring benefits for the poor, in particular women, children, and ethnic groups. 94. HSDP review. MOH will provide ADB with quarterly and annual reports on the progress of the HSDP and related policy issues. The reports should review progress milestones vis-à-vis the achievement of indicators, identify issues, and propose adjustments, as needed. Within 3 months after each year following project effectiveness, MOH will submit to ADB an HSDP annual report summarizing the issues related to HSDP progress and compliance with covenants. The Government and ADB will conduct joint HSDP reviews, including midterm and completion reviews. The reviews will focus on outcome, activities, inputs, administration, program reforms, and institutional and sustainability aspects including aid coordination. The reviews will also examine compliance with social, environmental, financial, and other covenants in the grant agreement. MOH and the provincial authority will ensure that their staff members visit the field often and join ADB in all review missions.

IV. PROGRAM BENEFITS, IMPACTS, ASSUMPTIONS, AND RISKS A. Benefits and Impacts

95. Sector benefits. The HSDP supports the implementation of the 6th and 7th national health sector development plans, and is aligned with the sector coordination work led by MOH, WHO, and the Government of Japan, with technical support of JICA. The HSDP advances MOH efforts in implementing the Vientiane Declaration by supporting a sector program approach that will serve as a platform for sector program funding. The HSDP helps establish a fund-flow modality for MOF to provide external program funds for recurrent budget support to the provinces, thereby providing an instrument for policy compliance and improving sector performance. The lack of nonwage recurrent funds is a key constraint in sector performance, and improving this will help better the quality of operations, maintenance, staff incentives, and access for the poor. In addition, the HSDP supports several policy reforms that will help the sector focus on priority areas, in particular MNCH, and improve staff standards and quality, which will improve overall sector effectiveness, equity, and efficiency. 96. Improved planning and financial management capacity will result in more rational allocation of resources for recurrent costs and skills necessary to plan and monitor expenditures for uninterrupted flow of funds. This fundamental planning and financial management capacity will make management more technically efficient leading to cost savings, and make resource allocation in the health sector more efficient. In terms of sustainability, the HSDP will provide and stimulate critical bridge funding until domestic health financing improves to provide the country a head start in modernizing its health care system.

23

97. Economic and financial benefits. The HSDP supports the achievement of MDGs through cost-effective interventions targeting the poor, women, children, and ethnic groups, and will reduce illness and premature death, thereby improving productivity and income. Resource and out-of-pocket savings will result from increased access and better quality of services. Program funding will improve overall sector efficiency by increasing recurrent operational spending so that past investments will be preserved and better used. Improved planning and financial management capacity will result in greater efficiency of health sector financing. Program funding will also pave the way for aid harmonization that is expected to result in further improvement of efficiency and impact in the sector. Overall, program investment is expected to increase the number of people receiving good quality health care, and will contribute directly to improving productivity of the beneficiaries. 98. Economic benefits will accrue from reduced health care costs as a result of decreased incidence and severity of illness. Benefits include (i) cost savings due to improved access to efficient and effective health services, and (ii) increased income through reduced sick leave or time spent caring for the sick. Cost savings may arise from (i) reduced costs of curative services as a result of improved access to prevention and health promotion services; (ii) reduced out-of-pocket expenditures, mainly transport costs due to improved access to health services; and (iii) more efficient and rational diagnoses and treatments that reduce treatment cost.35 In addition, gains and investments in women’s health will have positive impacts on reducing the country’s population growth rate, improving the health and welfare of children and families, and reducing health costs and contributing to poverty reduction. Details of the economic and financial analysis are in Supplementary Appendix A. 99. Social impacts. The HSDP will increase the access and quality of health services and improve the health of the population in general, particularly for women, children, ethnic groups, and the poor, and thereby help achieve MDGs. Increased recurrent funding for operation and maintenance costs will increase accessibility and quality of health care services for the population at large (and women, children, and disadvantaged ethnic groups in particular). Increased access to preventive and curative care will lead to improvements in health status, improved quality of care to reduce the number of treatments and recurrence of illness, and better access for vulnerable groups. Cost-effective PHC will lead to decreases in maternal mortality, infant and child mortality, and general morbidity. Health equity funds will provide free health care services to the poor and, as a result, use of health services by the poor will increase, and equity in the distribution of health services will be improved. 100. The program and project investments will provide significant benefits for the poorest groups, including improved health care for women, children, disadvantaged ethnic groups, the poor, and those living in remote areas; an increase in the number of deliveries done at hospitals and health centers; and increased use of health services and health care facilities by the poor. Improved health care for the poor, ethnic groups, women, and those living in remote communities will result from increased access to MNCH services, strengthened planning and financial management capacity of the public health system, improved quality of HRH (particularly skilled birth attendants), and expanded health care financing and affordability. These elements will ensure the reduction of maternal and child mortality and diminish the key constraints in access to health care services, especially in remote and rural areas. Quality control mechanisms for health professionals and facilities, through provincial-level annual operation plans and guidelines for district health systems, should disproportionately benefit

35 Bloom and Choynowski. 2003. ADB Economics and Research Department—Economic Analysis of Health Projects:

A Case Study in Cambodia. ERD Technical Note Series No. 6. Manila.

24

those with the poorest quality services and health workers. The summary poverty reduction and social strategy is in Appendix 9. 101. Gender. Despite impressive gains on key health outcomes, there are wide variations and persistent inequities in health indicators by area. Women and adolescent girls in poor, remote, and ethnic group communities are particularly affected by the limited access to quality health services and lack of ethnically sensitive health staff members. Also, while the health care workforce is predominantly female (58%), the majority of them are concentrated in medium-level positions. MOH aims to increase the proportion of women in higher- and lower-level positions and ensure that all program activities are consistent with the provisions of the 2004 Law on the Development and Promotion of Women. The gender and ethnic group action plan (Appendix 10) outlines provisions and specific actions to ensure that women will receive access to resources equally. 102. Ethnic groups. Poverty rates and health indicators lag substantially among marginalized ethnic groups. A 2006 survey found that most of the poorest women and women in mountainous areas delivered babies at home, compared with about 4% of well-off women.36 Long distances to the nearest health facility and lack of transport, lack of qualified health staff and equipment in health centers in remote areas, and lack of ethnic group health workers or those who speak relevant languages at the health centers and district hospitals discourage poor, rural, and ethnic groups from seeking health care. Significant gaps remain in the staffing of health facilities in remote areas. The HSDP supports a number of measures to address the deficiencies and inequities in the health care system, particularly through improvements in the training of ethnic group health workers and in the incentives and support provided to the health care workforce in rural and remote areas. These are integral to the policy matrix and further supported and expanded on in the gender and ethnic group action plan (Appendix 10). 103. Land acquisition and resettlement. The civil works were reviewed, and no land acquisition and resettlement issues have been identified or are expected. Civil works are limited to renovation and upgrading of health facilities on existing government land, while there is no knowledge of any squatters or other use of this government land. The summary land acquisition and resettlement framework is in Appendix 11. 104. Environmental aspects. The main environmental concern is solid and medical waste management. Most health facilities separate waste but the subsequent handling is inadequate. The Project will support MOH plans to roll out improved waste management in health facilities, based on WHO guidelines. A specialized institution will advise MOH whether to use incinerators or other technology. A summary initial environmental examination (Appendix 12) and initial environmental examination (Supplementary Appendix C) have been prepared. Individual subprojects have been categorized as environmental category C as environmental impact is considered minimal. However, overall, the Project has been categorized as environmental category B (non-sensitive) in view of its overall sector implications. B. Assumptions and Risks

105. Program modality. The innovative nature of the design requires a buy-in from the Government and development partners. The program funding modality and fund-flow mechanism for the health sector is new in the Lao PDR, and requires agreement from MOH and MOF, and in principle, concurrence from partners. To date, full support has been confirmed.

36 National Statistical Center. Government of the Lao PDR. 2007. Multiple Index Cluster Survey III. Vientiane.

25

106. Financial management capacity. MOH and provinces lack experience in implementing program grants, and have limited capacity in financial management. Delays in preparing relevant budget and expenditure documents in accordance with rules and regulations may lead to delayed recurrent budget support. This is mitigated by project investment in training in planning, procedures for accounting, auditing and financial management at all levels, use of a special account, and monitoring. 107. Fund-flow mechanism. The fund-flow mechanism is standardized and will be implemented in all provinces. However, each provincial authority will need to agree to this fund-flow mechanism to access the funds. Pre-project capacity development technical assistance is helping set this up to ease the transition to the modality in each province. 108. Recurrent cost funding. Domestic public spending for recurrent costs in the health sector is low, in particular low nonsalary recurrent spending at the provincial level (about 14% of total recurrent expenditures). Low recurrent funding undermines past investments and threatens the operational viability of the public health system, especially at the lowest levels where poor women, children, and ethnic groups often receive care. Program funding mitigates this risk and helps improve efficiency, equity, and effectiveness of services. 109. Sustainability. Program funding will help bridge the financing gap until Nam Theun 2 revenue becomes more substantial. Expected revenue allocations to the health sector will be about $1 million in 2010, and gradually increase to cover a substantial part of recurrent cost requirements by 2020, if allocated as such. This will mitigate the sustainability risk of program funding. Expected technical efficiency gains from increased capacity in planning and financial management will well-position MOH for approval of Nam Theun 2 proposals for future funding.

V. ASSURANCES A. Specific Assurances 110. In addition to the standard assurances, the Government has given the following assurances. which are incorporated in the legal documents.

(i) Policy adoption and actions. The Government will ensure that the policies adopted and actions taken, as described in the development policy letter and policy matrix (Appendix 4), continue in effect for the duration and beyond the program period.

(ii) Use of program grant funds. The Government will ensure that (a) counterpart

funds in an amount equivalent to the program funds are made available to the participating provinces for nonsalary recurrent budget support in the health sector, and will not be used to pay for any costs accruing prior to the effective date or for payment of electricity bills; and (b) the counterpart funds equivalent to the program funds are completely additional to the nonsalary recurrent expenditures accrued in FY2009, in real terms, for the duration of the program grant.

(iii) Project counterpart financing. The Government will ensure that the counterpart

financing necessary for the Project is provided in time, and that MOH, through DPF, makes available all funds and resources necessary for construction and operation and maintenance of the Project on a timely basis. MOH will further

26

ensure that additional counterpart funding is available to cover any funding shortfalls that may occur during project implementation.

(iv) Resettlement. MOH will ensure that in the event that any resettlement impacts

are detected for an activity, (a) a resettlement plan for such activity in accordance with the project land acquisition and resettlement framework and ADB’s Involuntary Resettlement Policy is prepared; (b) resettlement plans are prepared on the basis of the detailed technical design, disclosed to affected persons, and submitted to ADB for review and approval; and (c) all compensation and rehabilitation assistance is paid before dispossession of assets. The summary land acquisition and resettlement framework is in Appendix 11. The full resettlement framework and plan is in Supplementary Appendix B.

(v) Gender and ethnic group action plan. MOH will ensure that the gender and

ethnic group action plan is fully implemented and that all project activities are designed and implemented in accordance with ADB’s Policy on Gender and Development (1998) and Policy on Indigenous Peoples (1998) including, but not limited to (a) 40% female participation in HSDP-supported training programs; (b) inclusion of equitable provisions relating to the MNCH, gender, and ethnic groups in annual operation plan and budget; (c) inclusion of provisions for gender and ethnic groups for all targets relating to workforce and consumers in all guidelines, terms of reference, policies, master plans, strategies, and action plans developed under the HSDP; and (d) disaggregating all monitoring and evaluation data by gender and ethnicity. The gender and ethnic group action plan is in Appendix 10.

(vi) Environment. MOH will ensure that the construction and/or upgrading of all

health facilities comply with all applicable laws and regulations of the Recipient, initial environmental examination, and ADB’s Environment Policy. MOH shall further ensure that (a) ADB is informed if the construction and/or upgrading of any health facility requires the removal of hazardous materials; (b) Decree No. 1706 on health facility waste management and the national integrated health care waste management plan is disseminated; and (c) health care waste management guidelines developed by WHO are translated into Lao and are adopted by the recipient. The summary initial environmental examination is in Appendix 12.

(vii) Internal financial control. The Government will ensure that the Internal

Financial Control Unit, the Department of Planning and Finance of MOH, has been empowered to conduct periodic inspection of program accounts in the provinces and districts.

B. Condition for Grant Effectiveness and Disbursements

111. The condition for program grant effectiveness is that all policy actions for the release of the first tranche, as set out in the policy matrix (Appendix 4), will have been satisfied.

27

VI. RECOMMENDATION

112. I am satisfied that the proposed grants would comply with the Articles of Agreement of the Asian Development Bank (ADB) and, acting in the absence of the President, under the provisions of Article 35.1 of the Articles of Agreement of ADB, I recommend that the Board approve

(i) the grant not exceeding $10,000,000 to the Lao People’s Democratic Republic from ADB’s Special Funds resources, for the program component of the Health Sector Development Program, on terms and conditions that are substantially in accordance with those set forth in the draft Program Grant Agreement presented to the Board; and

(ii) the grant not exceeding $10,000,000 to the Lao People's Democratic Republic from ADB's Special Funds resources, for the project component of the Health Sector Development Program, on terms and conditions that are substantially in accordance with those set forth in the draft Project Grant Agreement presented to the Board.

C. Lawrence Greenwood, Jr. Vice President

15 October 2009

Appendix 1 28

DESIGN AND MONITORING FRAMEWORK

Design Summary

Performance Targets/Indicators

Data Sources/ Reporting Mechanisms

Assumptions and Risks

Impact Reduced maternal and infant mortality, and child malnutrition

Infant mortality rate reduced from 55 to 45 per 1,000 live births between 2009 and 2015, and from 90 to 60 per 1,000 live births among poor ethnic groups. Maternal mortality ratio reduced from 300 to 260 per 100,000 live births between 2009 and 2015. Child malnutrition reduced from 30% to 25% between 2009 and 2015.

Reproductive health survey, MOH and United Nations

Assumptions Increased use of health services and VHVs improves health status. The poor, women, infants, and ethnic groups benefit from services. Risks Socioeconomic factors affect health and nutrition. Late referral due to lack of transport and other problems

Outcome Improved use of PHC, in particular by the poor, women, children, and small ethnic groups

Use of health services by the poor, women, infants, and small ethnic groups increased to twice the baseline of 2009 by 2014. Percent of deliveries by skilled birth attendants increased by 5% each year, including for the poor and ethnic groups. Consultations of VHVs increased to twice the baseline of 2009 by 2014. The number of poor and women accessing health equity funds increased by 10% each year.

Project household surveys, DPF, MOH Project health services survey, DPF, MOH

Assumptions Improved quality and affordability stimulate demand, especially by the poor, women, children, and ethnic groups. Rural women want to deliver in health facilities Risks Persistent physical and social barriers to using health services Limited funds to scale up health equity funds and model healthy villages

Outputs 1. Strengthened planning and financing capacity

Provincial annual operational plans and budgets are results-based, realistic, and largely implemented as planned by December 2013. Measurable annual improvement of operations and maintenance of district hospitals and health centers between 2010 and 2014.

Report of DPF, MOH Health equity fund reports and surveys, DPF, MOH

Assumption Provinces are committed to improving health services and release funds in time. Risk Provincial and district procurement constraints

Appendix 1 29

Design Summary

Performance Targets/Indicators

Data Sources/ Reporting Mechanisms

Assumptions and Risks

2. Increased access to MNCH care

Health services meeting 75% of MNCH standards increased by 5% each year. Health facilities with sufficient amenities for privacy needs of women increased by 5% each year. Number of certified model healthy villages increased by 50 each year as targeted by ethnic group.

Project household surveys, DPF, MOH Project health service surveys, DPF, MOH

Assumptions Skilled birth attendants are sufficiently skilled VHVs refer patients appropriately Village conditions can be improved with limited investment.

3. Improved quality of HRH

At least one staff member is trained as a skilled birth attendant per district per year. At least 50% of trained staff members are female. At least 75% of trained staff members achieved basic skills. University and college master plans are approved by 2013, with affirmative actions for females and ethnic groups.

MOH Training institution staff assessments, Department of Organization and Personnel, MOH

Assumptions Staff members have capacity for learning satisfactory skills. Institutions have capacity to achieve accreditation. Risk Training capacity is limited and takes time to improve.

Appendix 1 30

Activities and Milestones Inputs ($ million) For Program Output 1: 1.1. Ministry of Finance confirms fund-flow mechanism for recurrent budget support

by October 2009. 1.2. MOH approves the national health information system strategic plan by May

2009. 1.3. The Government commits to increase domestic nonwage recurrent spending

by 10% each year from FY 2010 to FY 2014 by October 2009. 1.4. Provincial authorities prepare and approve results-based annual operational

plans and budgets that meet minimum MOH standards by December 2011. 1.5. MOH issues a decision approving standards, guidelines, and terms of

reference for district hospitals by December 2011. 1.6. Provincial authorities have increased domestic nonwage recurrent spending by

10% compared to FY 2009, by December 2011. For Project Output 1: 1.7. MOH provides training in strategic and operational planning 2010–2013. 1.8. Consult women and ethnic groups on provincial health plans in all provinces. 1.9. Strengthen capacity in financial management 2010–2013. 1.10. Build health equity fund management capacity of provinces. 1.11. Scale up health equity funds by December 2011. 1.12. Implement the gender and ethnic group action plan throughout the HSDP. For Program Output 2: 2.1. MOH issues a decree approving the national MNCH strategy by May 2009. 2.2. MOH issues a decision on the guidelines and rollout of the model healthy

village to two villages per district, about 300 villages in total, by June 2009. 2.3. MOH issues a decision approving the rollout of MNCH-friendly health facilities,

providing a minimum package of MNCH services by December 2011. 2.4. MOH issues a decision approving the strategic plan for further rollout of the

model healthy village approach to 300 remote villages by December 2011. For Project Output 2: 2.5. MOH upgrades or renovates four hospitals and 45 health centers, including

adequate facilities for women's privacy needs June 2010–June 2012. 2.6. MOH supports scaling up of model healthy villages 2011–2013. For Program Output 3: 3.1. The Government approves the national skilled birth attendance plan by August

2011. 3.2. MOH submits the national human resources for health policy for approval to

the Prime Minister by January 2010. For Project Output 3: 3.3. Train 100 medical assistants, 80 midwives, 100 nurse-midwives, 60 technical

nurses, 120 auxiliary nurses and others stationed at district hospitals and health centers in skilled birth attendance June 2010–June 2013.

3.4. Upgrade 330 PHC workers to high level June 2010–June 2013. 3.5. Conduct studies on strengthening training institutions, including specific actions

to target improved educational attainment of female and ethnic group students by June 2012.

3.6. Upgrade teaching skills of 30 faculty members in MNCH, with at least 40% female participation, June 2010–June 2013

3.7 Provide 3 regional scholarships in MNCH education by June 2013.

Program 10.00 ADB: 5.0 First tranche,

December 2009 ADB: 5.0 Second tranche, June 2012 Project 10.80 ADB: 10.00 Government: 0.80 Total 20.80

ADB = Asian Development Bank; DPF = Department of Planning and Finance; HSDP = Health Sector Development Program; MNCH = maternal, newborn, and child health; MOH = Ministry of Health; PHC = primary health care; VHV = village health volunteer.

Appendix 2

31

SECTOR ANALYSIS A. Health Indicators 1. The Government of the Lao People's Democratic Republic (Lao PDR) has made significant but inadequate progress toward reaching Millennium Development Goals (MDGs) in the country’s health sector.1 Maternal and child mortality have been reduced substantially, and water and sanitation coverage are likely to surpass targets. However, malnutrition remains high, and the HIV/AIDS epidemic continues to spread. 2. From 1995 to 2005, the infant mortality rate reduced from 104 to 70 per 1,000 live births, and under age 5 years mortality has fallen from 170 to 98 per 1,000 live births. Nearly half of infant deaths (46%) are due to neonatal causes, and 60% occur in the first week of life. Many of these deaths are due to the mother’s poor health or inadequate care during and after pregnancy and childbirth, particularly among populations living in remote areas. By 2006, 70% of children under age 1 year received immunization against measles, although there is some disagreement regarding the accuracy of this figure.2 Fully 87% of children under age 5 years sleep under a bed net, but only 43% sleep under an insecticide-treated net.3 Nearly three quarters of the population have access to clean drinking water, and nearly one half use safe sanitation facilities.4 Unmet demand for family planning is also a factor. 3. The maternal mortality ratio decreased from 650 per 100,000 live births in 1995 to 405 per 100,000 live births in 2005, among the highest rates in Asia and the Pacific.5 The most common immediate causes of these deaths are hemorrhages, obstructed labors, pregnancy-induced hypertension, and sepsis. It is estimated that family planning has the potential to reduce maternal deaths by 25%–40%, skilled birth attendants by 13%–33%, and emergency obstetric care by 70%. From 1995 to 2005, the number of births attended by a skilled birth attendant increased from 14% to 23% (51% urban, 10% rural). Women's survival depends on timely access to quality emergency obstetric care; physical access to hospitals within a 2-hour travel distance is still below 50% in rural Lao PDR. This is compounded by late referral, lack of qualified personnel, and the relatively high cost of transport and services. Coverage of antenatal care (at least one visit) rose from 21.0% in 2000 to 28.5% in 2005. Access to antenatal care is lowest in rural areas without roads (9%). Uptake of antenatal care also increases sharply with women’s education. 4. The total fertility rate declined from 4.88 children per woman in 2000 to 4.07 children per woman in 2005.6 The significant progress in modern contraceptive access and use suggests a remarkable change in childbearing behavior among women in the last decade. Contraceptive prevalence doubled from 1994 to 2005. By 2005, 38% of eligible women were using a contraceptive method. However, rural access to contraceptives remains limited.

1 Committee for Planning and Investment, Lao PDR. 2008. Background paper for the Health Chapter of the Mid-term

Review of the 6th National Socio-Economic Development Plan of the Lao PDR, 2006–2010. Vientiane. 2 The measles vaccine coverage quoted here is from the Expanded Programme on Immunization report, Ministry of

Health (MOH). Information collected on this indicator in the Multiple Indicator Cluster Survey (MICS) III indicates that 67% of children surveyed had vaccination cards, less than 15% of the children had all eight recommended vaccinations by age 1 year, while measles vaccine by age 1 year was only 33%.

3 National Statistical Centre of the Lao PDR. 2007. MICS III. Vientiane. 4 MOH, Lao PDR. 2008. Water Supply and Environment Report, 2008. Vientiane. 5 National Statistical Centre of the Lao PDR. 2005. Population Census 2005. Vientiane. 6 National Statistical Centre of the Lao PDR. 2005. Lao Reproductive Health Survey. Vientiane.

Appendix 2

32

5. The prevalence of underweight children under age 5 years has remained fairly constant, from 44% in 1993 to 37% in 2005 (footnote 3).7 Fifty-nine percent of all child deaths in the Lao PDR is related to nutritional deficiencies.8 Poor breast-feeding and weaning practices are widespread. Most mothers give food supplements to infants within a few weeks of birth. Children with better road access were found to be equally malnourished.9 Micronutrients deficiencies such as of iodine, iron, and vitamin A are common. According to a 2007 survey, 37% of women of reproductive age and 41% of children under age 5 years are suffering from moderate anemia (footnote 3). Forty-five percent of the children under age 5 years is shown to be suffering from vitamin A deficiencies.10 Distribution of vitamin A capsules reaches only 29% of children under age 5 years. Twenty-seven percent of school-aged children and 13% of women of reproductive age are found to be at risk of developing goiters or other iodine-deficiency disorders. In 2007, 75% of households were using iodized salt (footnote 3). Malnutrition in women not only undermines their health and opportunities but also increases the incidence and fatality rate of complications in pregnancy and childbirth. 6. Communicable diseases still cause the largest burden of diseases. Main causes of illness are diarrheal diseases, malaria, measles, and common respiratory infections. The tuberculosis prevalence rate has also not declined.11 While the HIV prevalence is increasing in the general population, it's probably decreasing in female sex workers as the number of sex workers may have increased in recent years due to increasing income disparities and other factors. The country experienced outbreaks of influenza, anthrax, cholera, dengue fever, and other emerging diseases. Helminthiasis has a major impact on education and productivity. 7. Data on noncommunicable diseases are limited. The burden of road accidents is high at twice the rate found in neighboring countries. Tobacco and alcohol addiction also have major impacts on health, health services, and household incomes. B. Sector Organization 8. The Ministry of Health (MOH) is responsible for health, nutrition, population, and rural development, including small-scale water and sanitation, and also coordinates multisector programs such as those for HIV/AIDS and avian influenza. It has seven departments: (i) the Cabinet, (ii) Curative, (iii) Food and Drugs, (iv) Hygiene and Prevention, (v) Inspection, (vi) Organization and Personnel, and (vii) Planning and Finance. MOH has a national steering committee for health that oversees all MOH activities, including projects. MOH also operates centrally managed priority programs linked to a specific MOH department and often also specific development partners, in particular for maternal and child health and communicable diseases control. 9. By 2008, in 17 provinces and 139 districts, there were 4 central, 4 specialized, 4 regional, 12 provincial, and 126 district hospitals. Regional hospitals provide a wider range of specialist services than provincial hospitals and are also centers for training and technical supervision. Under each provincial committee for health of the provincial authority, the provincial

7 Government of the Lao PDR and United Nations. 2009. Millennium Development Goals Progress Report. Vientiane

(April). 8 Bounthom, Phengdy. 2005. Country Paper on Maternal and Child Malnutrition in Lao PDR. Vientiane (September). 9 United Nations World Food Programme. 2007. Laos–Comprehensive Food Security and Vulnerability Analysis.

Vientiane (calculated with the WHO reference standards). 10 MOH, National Institute of Public Health. 2001. Report on National Health Survey: Health Status of the People in

Lao PDR. Vientiane. 11 National Tuberculosis Centre, MOH.

Appendix 2

33

health office plans, implements, supervises, and monitors provincial health services. In each province, a primary health care (PHC) coordination office under the provincial health officer has responsibility for PHC activities. 10. District hospitals serve small catchment populations of 10,000–50,000 people. The 26 “type A” district hospitals are expected to conduct surgery requiring anesthesia, including caesarean sections. The 100 “type B” hospitals only conduct minor surgery. Under each district health committee, the district health office supervises health centers, the village health program, and other services like food security to ensure regular and good-quality service. 11. The 789 health centers also serve small catchment populations of 1,000–5,000 people. The functions of the health centers are prevention, health promotion, and diagnosis and treatment of diseases within their capacity. Like hospitals, health centers manage drug revolving funds to sustain service. Under the supervision of the district health office, the health center supervises and monitors village health care providers, and coordinates between villages and the district. “Type A” health centers with five staff members are headed by a doctor, and “type B” have three staff members headed by a medical assistant. One health center is a focal service point for about eight villages. 12. The village health committee ensures a healthy village environment, adequate village health care, and timely referral of emergencies. If more than a 2-hour walking distance from a health facility, the village will usually have a male and a female village health volunteer (VHV) and a drug revolving fund with a drug kit containing 11–33 essential drugs. There are 13,820 VHVs and 5,668 villages (54%) with drug kits. Members of mass organizations and others volunteer as peer educators for health and nutrition promotion. Village private providers include former paramedics and traditional healers. All are expected to promote good hygiene (i.e., clean water, food, body, clothes, and environment). In 2008, there were 285 registered private clinics and 2,118 registered pharmacies, mainly urban. There are also many unlicensed drug shops and a host of illicit private drug vendors that often sell poor-quality or fake drugs. C. Use of PHC Network 13. The Government and MOH have emphasized equitable access to health services for all, especially the poor and ethnic groups. Since adoption of the Primary Health Care Policy in 2000, MOH has used PHC to expand its network of health facilities. MOH has tracked health-seeking behavior among wealth quintiles since 1999 to ascertain the impact of the PHC network on access to care. VHVs and drug kits have substantially increased access for the poor and ethnic groups living in remote areas. Time series data from 1999 to 2008 in the eight northern provinces for use of VHVs, health centers, and district hospitals by the poorest quintile demonstrate substantial increase in use of services by the poor. 14. Among the poorest quintile, utilization of VHVs has increased significantly. In 1999, only 3% of the poorest quintile sought care from VHVs. In 2008, nearly 33% of the poorest quintile sought care at VHVs. Access to high-quality drugs distributed by a person in the village who has received training in the diagnosis and treatment of common diseases has significantly improved access to health services for the poor as well. A similarly dramatic pattern of increased care can be seen for health centers, and to a lesser extent for district hospitals. Data on health-seeking behavior in the second-poorest quintile demonstrate the same utilization trends. 15. MOH recently rolled out a new countrywide health information system to collect health service statistics. The 2008 series in Table A2.1 is the dataset since time series data are not

Appendix 2

34

available for trend comparisons. Reporting is probably incomplete, in particular for immunization and skilled birth attendance, as the data indicate even lower utilization than what is being collected from household surveys. However, it is considered a good start.

Table A2.1: Utilization Data for Specific Indicators from the Ministry of Health Health Information System, 2008

Country/Province TT2% SBA% FIC% Vit A2% OPD/1,000 IPD/1,000 BOR% Lao PDR 20 21 25 15 256 8 40 Vientiane (Capital) 16 7 20 34 242 8 15 Phongsali 3 8 6 16 66 10 12 Luang Namtha 29 23 13 0 193 38 52 Oudomxay 10 3 13 0 482 34 26 Bokeo 4 16 14 0 237 47 46 Luang Prabang 20 25 22 0 130 30 29 Houaphanh 5 8 5 0 200 32 27 Xaignabouli 17 26 34 23 240 42 47 Xieng Khouang 8 24 10 8 401 62 81 Vientiane Province 21 27 36 6 401 42 52 Bolikhamsai 13 24 28 33 218 53 45 Khammouane 23 22 28 33 265 66 41 Savannakhet 34 29 27 6 260 35 37 Salavan 10 20 40 24 183 42 41 Xekong 13 16 36 75 251 39 27 Champassak 28 29 29 29 278 44 56 Attapeu 43 14 27 12 244 40 31 BOR = bed occupancy rate; FIC = full immunization coverage by age 12 months; IPD/1,000 = inpatients per 1,000 people; OPD/1,000 = outpatient department visits per 1,000 people; SBA = skilled birth attendance; TT2 = tetanus-toxoid vaccination for pregnant women; Vit A2 = second dose of vitamin A. Source: Ministry of Health 16. A more accurate picture of health service use by province can be obtained from household surveys in the eight northern provinces supported by the Asian Development Bank (ADB) in 2004 and 2006. In these samples, use of preventive health services still remains low. However, in the eight provinces combined and in four individual provinces, there has been a great increase in coverage of all nine preventive indicators. Luang Prabang Province showed poor performance, where only two indicators improved and two declined, followed by Phongsali Province. D. Sector Plans, Policies, and Priorities 17. The Government’s overall vision for the health sector is formulated in the MOH Health Strategy up to the Year 2020

12 approved in 2001, and the Policy on Primary Heath Care (2000) that directly addresses the MDGs. Essentially, the Government aims to achieve health for all through a national public health system based on the principles of PHC, while continuing to provide services financed through universal health insurance and local and central revenues from various sources. 18. Public financing of services will continue to be needed in rural areas given high levels of poverty and considerable market failure. Capacity for service delivery is also limited in rural areas, with limited potential for contracting services. However, in 2009, the Government approved a new law for nongovernment organizations, which will help increase capacity for nonpublic services. It also encourages private sector development, and urban areas have seen 12

MOH, Government of the Lao PDR. 2000. Health Strategy up to the Year 2020. Vientiane.

Appendix 2

35

a considerable increase in private practitioners serving all income groups. More recently, in view of a traditional high burden of communicable diseases and a potential escalation of noncommunicable diseases with increasing income, the Government has also been promoting the concept of the model healthy village as the centerpiece of its PHC approach. 19. MOH is also implementing the 6th Health Sector Development Plan, 2006–2010.

13 The

midterm review of the plan identified eight priorities: (i) healthy village development, including access to quality health care, access to clean water and sanitation, safe environment, and health and nutrition promotion; (ii) maternal mortality reduction through birth spacing, antenatal visits, safe delivery, timely referrals, management of emergency obstetric care, and postnatal visits; (iii) increased child survival through neonatal care, exclusive breast-feeding promotion, full immunization, and integrated management of childhood illnesses; (iv) preparedness, prevention, and control of natural and epidemic disasters; (v) human resources for health to deliver high-quality care; (vi) organizational and management strengthening; (vii) sustainable health care financing, including increased public financing for the health sector at all levels; and (viii) creative implementation of the Vientiane Declaration for Aid Effectiveness through ownership; aid harmonization; making foreign assistance results-based, efficient, transparent, and accountable; and aiming to mobilize and efficiently use donor support. 20. The 7th Health Sector Development Plan, 2010–2014, is the centerpiece of the MOH policy agenda for the next 5 years. The plan contains objectives, priorities, strategies, targets, and medium-term expenditure projections for each province and MOH that will be required for the next 5-year planning period to meet MDG targets for health. 21. MOH has prepared a comprehensive national maternal, newborn, and child health (MNCH) strategy

14 to increase and integrate resources toward reductions in the maternal, infant, and child mortality rates. The strategy focuses on health system improvements for both supply and demand issues, including MNCH leadership and management, access to quality services, nutrition promotion, and social mobilization. MOH will gradually roll out services based on MNCH standards for hospitals, health centers, and model healthy villages. 22. The model healthy village program seeks to inculcate community ownership for the health of the family and village and to improve the village environment, family health and nutrition, and social protection within the village. MOH has issued guidelines for the piloting of the approach in two villages per district. Along with other partners, ADB will support this through a Japan Fund for Poverty Reduction project of $3 million.

15 This will be followed by developing standards and a countrywide plan for rolling out model healthy villages. 23. To support the 7th Health Sector Development Plan, MOH has prepared a draft national human resources for health policy with support of the working group. The policy aims to develop a professional health workforce that can provide high-quality services. It provides goals, guiding principles, a conceptual framework, and strategic directions that will guide human resources development for the health sector, and includes a plan for skilled birth attendance; accreditation of teaching institutions; and regulations for licensing, continuing education, and recertification of health professionals. This is expected to be approved by the Prime Minister in January 2010,

13 MOH, Government of the Lao PDR. 2006. 6th Health Sector Development Plan (2006–2010). Vientiane. 14 MOH, Government of the Lao PDR. 2009. The National Strategy for MNCH. Vientiane. 15 ADB. 2009. Grant Assistance to the Lao People's Democratic Republic for Developing Model Healthy Villages in

Northern Lao People's Democratic Republic. Manila.

Appendix 2

36

and will be followed by a strategy for implementation. 24. The Government emphasizes equitable access to health services for all people, especially for the poor and ethnic groups. Cost recovery was introduced in 1995 and modified in 2007 to address resource constraints in operating services. While it helped improve and increase the use of services, the poor cannot often afford health services and related costs or resort to selling assets. Among others, MOH introduced health equity funds, which are showing good results in bridging the financing gap for the poor and creating capacity for expanding health insurance. MOH is preparing a national health financing plan with three major objectives: (i) achieving universal coverage in pooled risk social protection schemes, (ii) establishing mechanisms for sustainable financing of hospitals, and (iii) attracting private investment to the hospital sector. 25. The implementation of past policies has varied considerably. Factors that influence the degree of policy implementation are the level of national and provincial priority, availability of financing, existing capacity, and coordination among levels and partners. A major issue is that MOH policy and financial leverage with provinces is limited due to the highly decentralized setup and tied to MOH leadership, goodwill, and externally financed projects. The expectation is that a national program approach can pull these policies together and provide provincial support for implementing them in the form of recurrent budget support. 26. Provincial capacity for sector reform has been developing, but there is substantial provincial variation, with about one third of provinces demonstrating substantial capacity in preparing plans and budgets (e.g., Oudomxay, Xaignabouli, Xieng Khouang, Savannakhet, and Vientiane Province), one third making a reasonable effort, and one third clearly being substandard. It is noted that these provinces have had more intensive and longer external assistance, including support. 27. Following the Vientiane Declaration and examples in other sectors, MOH is keen to develop a sector program approach. With support from the World Health Organization and the Government of Japan, the Japan International Cooperation Agency (JICA) has been assisting MOH with the establishment of a secretariat and aid coordination mechanism.16 It circulated the draft terms of reference of the sector-wide coordination mechanism for health on 15 June 2009, and the expected outcome is the joint formulation, management, and monitoring of a single sector program agreed on among MOH and development partners. 28. Sector working groups have been established at the policy level (e.g., diplomatic representatives), operational level, and technical level—including three technical working groups for PHC programs (with a major focus on MNCH), human resources development, and health financing. There are other working groups outside this framework, such as for HIV/AIDS and avian influenza, and discussions are ongoing on how to integrate these. A separate working group for health systems management and information system is being considered to address a range of program implementation issues such as provincial administrative capacity building, the flow of funds, and annual operational plans. The identified priorities are being combined into a single sector program approach. The building blocks for this approach are summarized in Table A2.2.

16

JICA. Capacity Development for Sector-wide Cooperation.

Appendix 2

37

Table A2.2: Progress of Building Blocks for the National Health Sector Program Approach

Building Blocks Assessment of Status Current Support 1. MOH Leadership MOH has strong but limited leadership capacity that also

needs to be institutionalized further. WHO, JICA

2. Government Support The Government gives high priority to the health sector. Sector financing has been a major issue, in particular for recurrent cost financing, which has not kept up with investment in infrastructure.

World Bank, JICA, ADB, European Commission

3. Program Approach MOH and the Government are committed to moving to a program approach to improve sector efficiency and impact.

ADB HSDP, World Bank, Lux-Development, JICA

4. 5-Year Strategic Planning and Budgeting Process

MOH has started strategic planning and budgeting process for the 7th Health Sector Development Plan, 2010–2014. The plan and its budget will be results-based. It will produce a medium-term expenditure framework for the health sector by province and program to meet 2015 targets for the health sector. Current plans call for the plan to be completed by December 2009.

ADB PHCEP and HSDP, World Bank, and Lux-Development support the planning process, with ADB also supporting the planning and budgeting tools and database.

5. Annual Bottom-up, Results-Based Planning and Budgeting Process

MOH has developed and pre-tested the methodology and instruments required for annual district level results-based planning and budgeting based on quantifiable targets.

ADB HSDP, World Bank, and Lux-Development support the planning process.

6. Planning and Budgeting Capacity at the Central, Provincial and District Levels

All districts in the eight northern provinces and the majority of districts in other provinces have been trained in results-based planning and budgeting. However, planning and budgeting capacity needs to be institutionalized. District health managers are provided certificate training, and provincial health managers receive master’s degrees in public health.

ADB HSDP is strengthening MOH and provincial capacity. ADB and other partners also provide scholarships.

7. A Strategic Framework and Policies for Sector Reform

The strategic framework is formulated in the MOH Health Policy and Strategy up to the Year 2020. The Primary Health Care Policy (2000) and other policies provide strategic direction. Specific policies and strategies cover all subsectors except for private sector development. Policies outside the sector, including on decentralization and budgeting, also shape the sector.

JICA, WHO, ADB, and World Bank mainly provide policy support.

8. Mechanism for Sector Program Funding

A fund-flow mechanism has been agreed between MOF and MOH, allowing sector program funds to move from MOF to provincial and district levels.

ADB HSDP

9. Financial Management and Procurement Procedures

These have been standardized at the MOF. ADB capacity building technical assistance, World Bank, SIDA

10. Policy, Strategic, and Technical Support and Partner Coordination

Support and aid coordination are managed through policy, operational, and technical working groups. Technical working groups include PHC, human resources, and health financing and management.

JICA and WHO are supporting the Sector Wide Coordination Mechanism.

ADB = Asian Development Bank, HSDP = Health Sector Development Program, JICA = Japan International Cooperation Agency, MOF = Ministry of Finance, MOH = Ministry of Health, PHCEP = Primary Health Care Expansion Project, SIDA = Swedish International Development Cooperation Agency, UNDP = United Nations Development Programme, WHO = World Health Organization. Source: Asian Development Bank E. Human Resources 29. The number of MOH staff members per capita has remained relatively constant at almost 2 per 1,000 population over the past 10 years. The net increase in the workforce has been below 2%, which is below the population growth rate and implies that the national ratio of

Appendix 2

38

health workers per capita has fallen. The Government gives priority to improving staff wages and quality, rather than increasing the number of staff members. In March 2008, there were 12,013 active personnel employed in the health sector workforce.17 Active staff members included 2,191 high-level (20%), 3,765 mid-level (34%) and 4,916 low-level (45%).18 Of these, 29% work in administration. Staff members are distributed between central (19%), provincial (33%), district (39%), and village or health center (10%) levels. Women comprise 58% of the public health sector workforce, but only 40% at health centers. The Lao comprise 89% of the workforce, compared to 65% of the Lao population. 30. Of the 20,107 volunteers or village providers in the Lao PDR in 2005, 13,702 were VHVs; 5,241 traditional birth attendants; 540 village health practitioners; and 624 traditional healers. While not employed by MOH, these providers are seen as an essential element in the delivery of health services, especially in remote and mountainous rural areas where travel from villages to health centers is difficult. All VHVs, village health practitioners, and most traditional birth attendants have had at least some short-course training by MOH. 31. On average, there were 2.1 health workers in health centers in 2005 compared to a target of 3 health workers to provide care and outreach. Twenty-three percent of district hospitals in the northern provinces did not have any medical doctors when surveyed in 2006, compared to a standard of four doctors per hospital. The majority of staff working in district hospitals and health centers is low-level health workers who lack necessary skills to provide quality care. Redistribution of staff members is difficult, as poorer provincial authorities lack funds to absorb them. In 2005, 39% of new recruits were placed at the central level. 32. PHC workers and mid-level technical nurses are trained in regional public health schools throughout the country. Concerted efforts have been made to improve their training and to increase the number of ethnic group and female health workers. The College of Health Technology in Vientiane provides pre-service training for mid-level health workers and post-basic bachelor’s degrees for nurses. It provided direct entry midwifery training from 1987 to 1990. In 1990, the course was combined with nursing and upgraded to the technical nurse course in 2004. Graduates are expected to be multiskilled nurse-midwives.19 Pre-service training for high-level staff members takes place at the University of Health Sciences in Vientiane. The National Institute of Public Health and the Francophone Institute of Tropical Medicine in Vientiane provide some postgraduate training. Overcrowding of teaching institutions is common as more private students are admitted than can be provided with quality education; therefore, it will be necessary to reduce (fee-paying) private students. Further improvement also requires better facilities, teaching skills, skills training, coordination of training, and follow-up of trainees to support them in applying their new skills. F. Health Planning and Financing 33. Since decentralization in 2000, MOH and provincial health authorities independently prepare their budget proposals for the health sector. Provincial recurrent health budgets are closely linked to the number of personnel assigned by MOH to both provincial and district levels. 17 Department of Organization and Personnel, Lao PDR. 2005. Statistics of Health Staff in Lao PDR, 2005. Vientiane. 18 High-level professionals have a university degree or equivalent. Mid-level staff members have completed 3 years

of study after graduation from high school, and include nurses and medical assistants. Low-level staff members have 2 years of vocational training, such as auxiliary nurses and primary health care workers.

19 However, MOH is considering splitting nursing and midwifery, which, in the Lao context with a highly scattered population and small hospitals, may be less optimal.

Appendix 2

39

34. The allocation of nonpersonnel components of the recurrent health budget is driven mainly by what is left after paying for salaries, previous allocations, and Ministry of Finance (MOF) budget norms. Health facilities mainly finance nonwage recurrent expenses from user fees and drug revolving funds.20 Depending on the status of the financial management performance of the facility, income may not be officially retained and used without passing through the treasury. Districts may also receive separate support for recurrent expenditures through donor assistance. While user fees and donor funding supplement nonwage recurrent spending, it remains very low. 35. Perhaps the major challenge confronting the health sector to achieve the MDG targets is the extremely low level of public financing. In 2005, government health spending (i.e., domestically financed and development partners) was about 1% of the gross domestic product. Low public health spending results in high out-of-pocket expenses by the population for health care in public facilities (Table A2.3) and low use of health services, causing more health risks.

Table A2.3: Regional Spending on Health, 2005a

(%)

Item Cambodia Lao PDR Mongolia Thailand Viet Nam

Expenditure per Capita $29 $19 $35 $98 $37 Total Health Expenditure/GDP 1.6 0.7 3.3 2.2 1.5 Public Expenditure on Health/Total Government Expenditure 12.0 4.1 11.0 11.3 5.1 Private Spending on Health/Total Health Spending 75.8 79.4 22.5 36.1 74.3 Out-of-Pocket Health Expenditure/Private Expenditure on Health 79.3 92.7 86.5 76.6 86.1

GDP = gross domestic product, Lao PDR = Lao People's Democratic Republic. a Or latest available year. Source: World Development Indicators, online database, 2008.

36. Table A2.4 gives health expenditures per capita by financing source in 2005. Total health expenditure per capita from all sources in 2005 was $19.60, well below the $34.00 recommended standard for developing countries. The share of domestically financed government health spending in total health expenditure was 9.7% in 2005. Generous foreign financing has kept the share of government health spending in total health expenditure at 33.7%, with the remaining 66.3% coming from household out-of-pocket expenditures. 37. Most of government recurrent spending is dedicated to salaries, comprising 83% in FY2007. Large expenditures in foreign financial aid may have created substantial inefficiencies through an excessive focus on investment without adjusting for recurrent expenditures. Nonwage recurrent expenditures by the government comprise only 17% of total government expenditures, which is a major constraint for effective service delivery. District hospitals and health centers primarily rely on small off-budget margins obtained from the sale of medicines to pay for operation and maintenance.

20 Drug revolving funds are off-budget and are therefore outside the scope of the formal budget preparation process.

Appendix 2

40

38. According to government policy (Prime Minister’s Decree No. 52 of 1995), the poor and several other groups (i.e., civil servants and their families, monks, and students in government schools) are supposed to be exempt from having to pay user fees at government health facilities. In practice, however, few of these exemptions seem to be made. In a recent survey of three northern provinces, for example, less than one third of 1% received free services from a public health provider.21

Table A2.4: Health Expenditure per Capita by Financing Source, 2005 (current $)

Financing Source Expenditure Per Capita Government (domestically financed) 1.90 Central Ministry of Health 0.45 Provinces 1.45 Donors 3.70 Nongovernment Organizations 1.00 Households 12.90 Risk Pooling 0.10 Total Per Capita ($) 19.60 Health Spending (%)

Domestically financed (%) 9.7 Foreign-financed (%) 24.0 Household-financed (%) 66.3

Source: Ministry of Health, Lao People's Democratic Republic; United Nations Economic and Social Commission for Asia and the Pacific, World Health Organization, International Labour Organization. 2008. Review of Ongoing Health Financing Reform in Lao People's Democratic Republic and Challenges in Expanding the Current Social Protection Schemes. Vientiane.

39. There is substantial evidence that the non-poor receive more health sector services. MOH is making efforts to make health care more affordable, for example, by improving cost recovery and promoting community-based health insurances and health equity funds for the very poor. None of the three formal health insurance schemes (civil servant health insurance, social security fund, and community-based health insurance), however, benefit the poor. These schemes, with a total coverage of less than 10% of the population, are not a viable option for making the services more affordable to the poor in the medium term. It will take a long time to cover the non-poor, given the current pace, capacity, use of services, and quality of care.22 40. Health equity funds have been successfully pilot tested in a few districts to compensate hospitals and health centers for the “loss” they incur when treating the poor. The fund currently is being tested on a large scale in Xieng Khouang Province under the Health System Development Project,

23 with two additional northern provinces scheduled for implementation in 2009 and 2010. World Bank is pilot testing new health equity fund schemes in nine districts located in four southern provinces. A standardized system for health equity funds and a strategic plan for expansion are necessary to build on these pilot tests to develop a countrywide system. Health equity funds for those who cannot afford health care services are a basic building block for universal coverage. 21 Ministry of Health. 2008. Health Equity Fund Household Survey Report. Vientiane. (October 2008). 22 Ministry of Health, Government of the Lao PDR and Japan International Cooperation Agency. 2002. Health Master

Planning Study. Vientiane. 23 ADB. 2007. Report and Recommendation of the President to the Board of Directors on a Proposed Grant to the

Lao People's Democratic Republic for the Health System Development Project. Manila.

SUMMARY OF EXTERNAL ASSISTANCE AND COORDINATION Table A3.1: Donor Coordination Matrix

Core Area MOH Action ADB Support Support from Other Partners

Prepare 7th National Health Sector Development Plan

Health System Development Project: Technical assistance and support for district and provincial planning

Joint partners review and comment on the plans through the various working groups.

Improve provincial annual operational plans

Health System Development Project: Umbrella support for 17 provinces and implementation in 8 northern provinces

Lux-Development supports three central provinces. World Bank supports six southern provinces.

Increase recurrent budget (gradual increase from Nam Theun 2 revenues)

HSDP: Bridging support by passing on program funding to the provinces for recurrent budget support

World Bank and Lux-Development support several pilot districts. European Commission offers grant for increase in recurrent budget.

Improve national planning and aid coordination capacity

Health System Development Project: Supports training of staff members, technical assistance, and support of provinces

JICA and WHO support aid coordination.

Improve provincial and district management capacity

Health System Development Project: Supports training and logistic support for provincial and district health managers

Lux-Development supports three central provinces. World Bank supports six southern provinces.

Improve flow of funds and financial management capacity

CDTA—Building MOH Capacity for a National Health Sector Program Approach: Helps improve flow of funds and financial management capacity of provinces and districts

JICA sector-wide coordination project

Strengthen health management information system

Health System Development Project: Roll out of full system in eight northern provinces

WHO provides technical support. Lux-Development and World Bank support roll out in other provinces

Roll out health equity funds, subject to availability of funding

Health System Development Project: Provincial pilots in three provinces HSDP: Expansion to other provinces HSDP: Helping prepare health equity fund strategy

Belgium Technical Cooperation, Swiss Red Cross, and World Bank support district health equity funds.

Strengthened Planning and Financing

Prepare health financing strategy PHCEP and Health System Development Project: Financing studies HSDP: Participation in working group

Leading partners are World Bank and WHO

Prepare national MNCH strategy HSDP: Support for national MNCH strategy and for promoting mother- and child-friendly health facilities

UNFPA, UNICEF, and WHO technical assistance; MNCH technical working group

Prepare provincial and district hospital standards and guidelines

PHCEP: Health center guidelines WHO technical assistance

Develop network of health facilities PHCEP, Health System Development Project, and HSDP: Eight northern provinces

World Bank and Lux-Development in other provinces, with other partners supporting selective construction

Increased Access to Services, Particularly for Mothers, Children, and Ethnic Groups

Improve equipment Health System Development Project: Eight northern provinces HSDP: Filling gaps countrywide

World Bank and Lux-Development in other provinces. Lux-Development also plans to support an equipment maintenance program.

Appendix 3 41

Core Area MOH Action ADB Support Support from Other Partners Roll out model healthy villages, subject to availability of funding

JFPR—Developing Model Healthy Villages in Northern Lao PDR: Support for pilot Health System Development Project: Support for provincial capacity building HSDP: Support for developing guidelines and roll out

Various pilots by partners and potential support for roll out.

National HRH policy by Department of Organization and Personnel

Health System Development Project: Technical assistance and support HRH technical working group HSDP: Support for implementing national HRH policy

UNFPA and MNCH technical working group

Training of staff to become skilled birth attendants UNFPA and JICA support public health schools. Upgrading PHC workers to mid-level status World Bank and Lux-Development provide

similar support.

Provide training to decrease maternal mortality rate

Training high-level PHC workers Aman Resorts provided new school.

Improved Quality of HRH

Improve quality of the University of Health Sciences and College of Health Technology

Develop institutional development plans, improve teaching skills, and provide teaching equipment

World Bank is upgrading the university building and provides master’s degree training and equipment.

ADB = Asian Development Bank; CDTA = capacity development technical assistance; HRH = human resources for health; HSDP = Health Sector Development Program; JICA = Japan International Cooperation Agency; JFPR = Japan Fund for Poverty Reduction; MOH = Ministry of Health; MNCH = maternal, newborn, and child health; PHCEP = Primary Health Care Expansion Project; UNFPA = United Nations Population Fund; UNICEF = United Nations Children’s Fund; VHV = village health volunteer; WHO = World Health Organization. Source: Asian Development Bank

42 Appendix 3

Appendix 3

43

A. Development Partner Coordination 1. The Ministry of Health (MOH) has organized a sector-wide coordination with the help of the Japan International cooperation Agency (JICA) and the World Health Organization (WHO). Working groups at policy, operational, and technical levels are functioning. The policy level working groups include heads of delegation. The operational level working group consists of representatives of the departments of MOH and development partners. It meets twice a month. There are three technical working groups: programs (with a focus on maternal, newborn and and child health), human resources development, and financing. There are other technical working groups for communicable diseases control, and a subgroup for monitoring. MOH and its partners are developing the sector strategic framework as the basis for program funding. 2. Six development partners are particularly active in supporting health system development in the Lao PDR: the Asian Development Bank, the European Union (EU), Japan International Cooperation Agency (JICA), Lux-Development, the World Bank, and the World Health Organization (WHO). The Global Fund for AIDS, Malaria and Tuberculosis assists vertical programs for HIV/AIDS, malaria, and tuberculosis. The Joint United Nations Programme on HIV/AIDS (UNAIDS), United Nations Children's Fund (UNICEF), and United Nations Population Fund (UNFPA) focus on maternal, nenonatal and child health in the health sector. 2. Japan International Cooperation Agency. JICA has three ongoing projects in the health sector: (i) Capacity Development for Sector-Wide Coordination in Health (August 2007–August 2010); (ii) Project for Medical Education and Research for Setthathirath Hospital (December 2007–November 2010) to improve the quality of undergraduate clinical training and early postgraduate training at Setthathirath Hospital for graduates of the University of Health Sciences; and (iii) Project for Human Resources Development of Nursing and Midwifery (May 2005–May 2010). This last project aims to strengthen the technical nurse training program at the five regional public health schools in Champassak, Khammouane, Luang Prabang, Oudomxay, and Savannakhet. It has provided new buildings and teaching equipment for each school, assisted MOH to prepare a ministerial decree on nursing and midwifery regulations signed in 2008, and improved the quality of clinical instruction in the hospitals associated with these schools. 3. European Union. The EU provides budget support to the Government of the Lao PDR through Poverty Reduction Strategic Operations (PRSO), which is financed jointly by AusAID, Embassy of Japan, European Commission, and World Bank. Funds are released into the general budget when policy triggers are met. In July 2008, under PRSO 5, the EU began providing a variable tranche of €1.0 million (about $1.5 million) for the health sector. There are two benchmarks or triggers for the release of these funds: (i) increase in the recurrent budget allocation to the health sector, and (ii) increase in the number of health staff members working in 47 priority districts. These funds are then released as budget support to the Ministry of Finance (MOF). Achievement of these triggers are measured based upon a budget summary of allocations to the health sector produced by MOF and made available to PRSO. The EU has subsequent plans for PRSO 6 in March 2010 and PRSO 7 (date not yet determined). In addition to the triggers under PRSO 5, PRSO 6 will have one additional benchmark for release of funds, i.e., the Government adopts a health financing strategy; and PRSO 7 will have one additional benchmark, i.e., the Government implements a health financing strategy. The EU is prepared to provide technical assistance to MOH to achieve these benchmarks. 4. Lux-Development S. A. Lux-Development commenced assistance to the health sector in 1996 when it constructed Maria Theresa Hospital in Vientiane Province. Since then, it has

Appendix 3

44

supported the Clinical Nurses School and PHC in six districts surrounding the Maria Theresa Hospital; it has supported MOH’s Medical Equipment Division, and it has provided vaccines and support to the Expanded Programme on Immunization. Lux-Development is preparing a €16.7 million (about $25.0 million) project that will (i) support health system development in Bolikhamxay, Khammouan, and Vientiane provinces; and (ii) support functional programs in the health sector including maternal, newborn, and child health; human resources development; monitoring and evaluation; asset management; and health care financing. It is being envisaged that this support will use a program planning mechanism at the outset, with the possibility of introducing a program budget support mechanism in the future. 5. World Bank. The World Bank-funded Health Services Improvement Project commenced in 2005 in the nine southern provinces. One component of the project provides district grants in aid. The project covers 79 districts. Support for districts in Bolikhamxay, Khammouan, or Vientiane provinces will be transferred to Lux-Development. The fund-flow mechanism for the grants is as follows: (i) MOF transfers funds to an MOH account, (ii) MOH sends quarterly advances to the districts, and (iii) advances are replenished quarterly. The average size of an annual grant is $8,000–$10,000. There is a complex, process-oriented formula for allocating the grants to each district. A portion of Nam theun 2 revenue will be earmarked for the health and education sectors to increase funding for recurrent costs. The fund-flow arrangements have not been finalized. 6. World Health Organization. WHO provides overall technical assistance in the sector, in particular also in the areas of communicable disease control, maternal and child health, health financing, and health systems development. It also plays a key coordination role in the sector-wide coordination mechanism. 7. United Nations Population Fund. UNFPA focuses on reproductive health including birth spacing. It procures contraceptive supplies—oral contraceptives, condoms, and intrauterine devices—for the entire country. It is also pilot testing a community-based distribution scheme in the provinces of Attapeu, Salavan, and Xekong. 8. United Nations Children’s Fund. UNICEF focuses on maternal, nenonatal and child health, in particular also maternal mortality reduction and immunization. All vaccines in the Lao PDR are procured via the UNICEF procurement system. UNICEF finances the vaccines and operational costs required to implement the Expanded Programme on Immunization in six provinces.

Table A3.2: Major External Assistance to the Health Sector, 2005–2013 ($ million)

External Agency

Project

Start

End

Total Obligated

Asian Development Bank Health System Development Project 2007 2011 13.0 Agence Française de Développement Support to the Health Sector 2007 2012 10.3 Global Agency for Vaccines and Immunization Expanded Programme on Immunization 2008 2011 5.5 Global Fund to Fight AIDS, Tuberculosis and Malaria Lao-405-G04-H 2005 2010 8.5 Lao-405-G05-M 2005 2010 18.0 Lao-405-G06-T 2005 2010 4.0 Lao-407-G07-M 2007 2011 4.0 Lao-607-G08-H 2007 2011 8.9 Lao-708-G08-T 2008 2013 11.0 Lao-708-G08-M 2008 2013 24.6 Japan International Cooperation Agency Medical Education and Research for Sithathirath Hospital 2007 2011 2.6 Capacity Development for Sector-Wide Cooperation in Health 2006 2010 1.3 Project for Human Resources Development of Nursing/Midwifery

2006 2010 2.7

Government of Luxembourg Health Information System 2006 2011 12.5 United Nations Children’s Fund Health and Nutrition 2008 2011 5.2 United Nations Population Fund Support Maternal and Child Health Activity 2007 2011 3.5 Support to Strengthen Health System 2007 2011 0.9 Strengthen IEC/BCC 2008 2011 0.8 World Bank Avian Influenza - Surveillance and Monitoring 2006 2010 0.4 Avian Influenza - Curative Services 2006 2010 1.7 Health System Improvement Project 2006 2011 20.4 World Health Organization Communicable Disease Control, Health System Development, Human

Resource Planning, Child and Adolescent Health 2007 2009 2.7

Total 162.5 IEC/BCC = information, education, and communication/behaviour change communication. Source: Department of Planning and Finance, Ministry of Health, Lao People’s Democratic Republic.

Appendix 3 45

Policy Matrix Tranche 1 Policy Actions

(At grant effectiveness - $5 million)

Monitoring Indicators

Tranche 2 Policy Actions (Within 24 months post effectiveness -

$5 million)

Monitoring Indicators

Output 1: Strengthened Planning and Financing The Ministry of Finance has approved the program funding mechanism for supplementary program support for the provincial health sector.

Following document will be submitted to ADB: Copy of the Memorandum of Understanding between MOF and the Ministry of Health (MOH) confirming the program funding mechanism to the provinces

Provincial authorities have approved results-based annual operational plans and budgets that meet minimum MOH standards.

Following documents will be submitted to ADB: Minimum MOH standards for annual operational plans and budgets Approved copy of the results-based annual operational plans and budgets

MOH has approved the National Health Information System Strategic Plan (2009–2015).

Following document will be submitted to ADB: Copy of the approved National Health Information System Strategic Plan (2009–2015)

MOH has issued a Decision approving standards, guidelines and terms of reference for district hospitals.

Following documents will be submitted to ADB: Copy of MOH's decision approving standards, guidelines and terms of reference for district hospitals. Copy of the standards, guidelines and terms of reference for district hospitals.

The Ministry of Finance has committed to increase the aggregate domestic non-wage recurrent budget for health by at least 10% annually from 2009/2010 to 2013/2014.

Following document will be submitted to ADB: Commitment letter confirming the commitment to increase non-wage recurrent budget for health by at least 10% annually.

Provincial authorities, on aggregate, have increased domestic non-wage recurrent spending by 10% compared to the 2009/2010 level, as reported to the Ministry of Finance.

Following document will be submitted to ADB: Letter from the Ministry of Finance confirming the increased domestic non-wage recurrent spending by at least 10% at aggregate level.

Output 2: Increased Access to MNCH Care MOH has approved the National Strategy for MNCH.

Following document will be submitted to ADB: Copy of the approved National Strategy for MNCH.

MOH has issued an implementation plan for the district-wise roll out of maternal, newborn and child friendly health facilities, providing a minimum package of MNCH services.

Following documents will be submitted to ADB: Copy of MOH's Decision approving the roll out of the maternal, newborn, and child friendly health facilities.

Appendix 4 49

Tranche 1 Policy Actions (At grant effectiveness - $5 million)

Monitoring Indicators

Tranche 2 Policy Actions (Within 24 months post effectiveness -

$5 million)

Monitoring Indicators

MOH has issued Decision 381, establishing the directives for piloting at least 2 model healthy villages per district in all provinces, totaling about 300 villages, and also issues guidelines for implementation

Following document will be submitted to ADB: Copy of Decision 381 and copy of guidelines

MOH has issued a Decision to scale up Model Healthy Village including at least 300 remote villages by end 2015.

Copy of MOH's Decision approving the standard guidelines and strategic plan for roll-out of the Model Healthy Village, including to about 300 remote villages.

Output 3: Improved Quality of Human Resources for Health The Government has approved a detailed national implementation plan for skilled birth attendance

Following document will be submitted to ADB Copy of the national implementation plan for skilled birth attendance

The Prime Minister has approved the National Policy on Human Resources for Health.

Following document will be submitted to ADB Copy of the National Policy on Human Resources for Health approved by the Prime Minister

ADB = Asian Development Bank, MNCH = maternal, newborn and child health, MOH = Ministry of Health. Source: Ministry of Health, Ministry of Finance.

50 Appendix 4

Appendix 5

51

LIST OF INELIGIBLE ITEMS 1. Grant proceeds will finance the foreign currency expenditures for the reasonable cost of imported goods required during the implementation of the Health Sector Development Program. 2. No withdrawals will be made for the following:

(i) Expenditures for goods included in the following groups or subgroups of the United Nations Standard International Trade Classification, Revision 3 or any successor groups or sub-groups under future revisions to the Standard International Trade Classification, as designated by Asian Development Bank (ADB) by notice to the Borrower:

Table A5: Ineligible Items

Chapter Heading Description of Items 112 Alcoholic beverages 121 Tobacco, unmanufactured tobacco refuse 122 Tobacco, manufactured (whether or not containing tobacco substitutes) 525 Radioactive and associated materials 667 Pearls and precious and semiprecious stones, unworked or worked 718 718.7 Nuclear reactors, and parts thereof, fuel elements (cartridges), nonirradiated

for nuclear reactors 728 728.43 Tobacco processing machinery 897 897.3 Jewelry of gold, silver, or platinum-group metals (except watches and watch

cases) and goldsmith or silversmiths’ wares (including set gems) 971 Gold, nonmonetary (excluding gold ore and concentrates) Source: United Nations.

(ii) Expenditures in the currency of the Lao People's Democratic Republic (Lao PDR)

or of goods supplied from the territory of the Lao PDR. (iii) Expenditures for goods supplied under a contract that any national or

international financing institution or agency will have financed or has agreed to finance, including any contract financed under any loan or grant from ADB.

(iv) Expenditures for goods intended for a military or paramilitary purpose or for luxury consumption.

(v) Expenditures for narcotics. (vi) Expenditures for environmentally hazardous goods; the manufacture, use, or

import of which is prohibited under the laws of the Lao PDR or international agreements to which the Lao PDR is a party.

(vii) Expenditures on account of any payment prohibited by the Lao PDR in compliance with a decision of the United Nations Security Council taken under Chapter VII of the Charter of the United Nations.

COST ESTIMATES AND FINANCING PLAN

2010 2011 2012 2013 Total Share Item ADB GOL ADB GOL ADB GOL ADB GOL ADB GOL Project ADB GOL A. Base Costs a 1. Civil Works 0 0 350 0 890 0 0 0 1,240 0 1,240 100 0 2. Equipment and Vehicles 332 0 512 0 1,443 0 60 0 2,347 0 2,347 100 0 3. Provincial Management 0 101 0 101 0 101 0 101 0 403 403 0 100 4. Staff Development 375 0 628 0 647 0 224 0 1,875 0 1,875 100 0 5. Workshops, Studies,

System Development 132 0 152 0 139 0 126 0 548 0 548 100 0

6. Consulting Services 206 0 443 0 256 0 72 0 977 0 977 100 0 7. Project Management and

Coordination 194 0 194 0 308 0 287 0 983 0 983 100 0

8. Operation and Maintenance 194 34 539 95 307 54 310 47 1,350 230 1,581 85 15 Subtotal (A) 1,433 135 2,819 196 3,990 155 1,079 148 9,321 634 9,954 B. Taxes and Duties (B)b 0 0 0 39 0 102 0 0 0 141 141 0 100 C. Contingencies 1. Physical Contingenciesc 28 1 68 3 114 2 22 1 232 7 239 2. Price Contingenciesd 20 1 98 6 267 5 64 6 448 18 466 Subtotal (C) 48 2 166 9 381 7 85 7 680 25 705 Total Cost (A+B+C) 1,481 137 2,985 244 4,371 264 1,165 155 10,000 800 10,800

ADB = Asian Development Bank, GOL = Government of the Lao PDR. a In June 2009 prices. Any bank charges (e.g., bank transfer fees) will also be financed from the fund resource. b Taxes: 10% on civil works; 0% for other categories. c Physical contingencies: 5% civil works; 0% staff development, village program training, workshops, studies, and system development, program management; 3% other

categories. d Price contingencies: 0% staff development, international consulting services, program and project management; 3% other categories. Source: ADB estimates.

52 Appendix 6

Appendix 7

53

IMPLEMENTATION SCHEDULE

Activity/Task 2010 2011 2012 2013 A. Output 1: Strengthened Planning and Financing Capacity 1. Enhanced Planning and Financing Capacity National meeting on HSDP Strengthen Planning Division MOH Create Internal Financial Control Unit Train provinces on program approach Train districts on program approach HEF provincial capacity building Consulting services 2. Efficient Program Administration and Coordination Program coordination and monitoring B. Output 2: Increased Access to MNCH Care, in Particular for Ethnic Groups 1. Upgraded Hospitals and Health Centers National Strategy for MNCH Guidelines for PH and DH Consulting services District-wise roll out of mother and child friendly health facilities

Improving district hospitals Improving health centers Assess equipment needs Replace MNCH equipment Ambulances for type B hospitals Motorcycles for health centers 2. Expanded Model Healthy Villages Guidelines and strategic plan Provincial and district capacity building ViIlage capacity building and monitoring C. Output 3: Improved Quality of Human Resources for Health 1. Trained SBAs Upgrading staff to SBA Upgrading PHC workers to mid-level Training high level PHC doctors 2. Improved Quality of Preservice Education Institutional development plans Upgrade faculty Consulting services Teaching and curriculum improvements HRMIS update DOP capacity building

DH = district hospital; DOP = Department of Organization and Personnel; HC = health care; HEF = health equity fund; HRH = human resources for health; HRMIS = human resource management information system; HSDP = Health Sector Development Program; MNCH = maternal, newborn, and child health; MOH = Ministry of Health; PH = provincial hospital; PHC = primary health care; SBA = skilled birth attendant, SDP = sector development program. Sources: Asian Development Bank; Ministry of Health.

Appendix 8

54

PROCUREMENT PLAN

Basic Data

Program Name: Health Sector Development Program Country: Lao People's Democratic Republic Executing Agency: Ministry of Health Project Grant Amount: $10 million Grant Numbers: TBD Date of First Procurement Plan: 8 June 2009 Date of this Procurement Plan: 2 October 2009 A. Process Thresholds, Review, and 18-Month Procurement Plan

1. Project Procurement Thresholds

1. Except as the Asian Development Bank (ADB) may otherwise agree, the following process thresholds shall apply to procurement of goods and works.

Procurement of Goods and Works

Method Threshold NCB for Worksa From $100,000 NCB for Goods From $100,000 Shopping for Works Below $100,000 Shopping for Goods Below $100,000 Exceptional Methods United Nations Office for Project Services Vehicles NCB = national competitive bidding. a See section C. 2. ADB Prior or Post Review 2. Except as ADB may otherwise agree, the following prior- or post-review requirements apply to the various procurement and consultant recruitment methods used for the Project. Procurement Method Prior or Post Comments Procurement of Goods and Works NCB Works Prior NCB Goods Prior Shopping for Works Post Shopping for Goods Post United Nations Office for Project Services Post Vehicles Recruitment of Consulting Firms Consultants Qualification Selection Prior Recruitment of Individual Consultants Individual Consultants Prior

NCB = national competitive bidding.

3. Consulting Services Contracts

3. The following table lists all consulting services contracts for which procurement activity is either ongoing or expected to commence within the next 18 months.

Appendix 8

55

Ref. Contract Description

Value of Contract

(cumulative) Number of Contracts

Recruitment Method

Expected Date of

AdvertisementA. International Consultants 1. Program management specialist

(20 person-months) 340,000 1 ICS QI 2010

2. Regional MNCH specialist (3 person-months)

24,000 1 ICS QII 2010

3. Medical education development specialist (7 person-months)

105,000 1 ICS QIII 2010

4. Health equity fund specialist (3 person-months)

47,000 1 ICS QIII 2010

5. Regional gender specialist (6 person-months)

48,000 1 ICS QI 2010

B. National Consultants 1. Planning and financing specialist

(24 person-months) 24,000 1 ICS QI 2010

2. Gender specialist (6 person-months) 6,000 1 3. Health systems specialist

(5 person-months) 5,000 1 ICS QII 2010

4. Community health development specialist (12 person-months)

12,000 1 ICS QIII 2011

5. Medical education development specialist (8 person-months)

8,000 1 ICS QIII 2010

6. Health equity fund specialist (16 person months)

16,000 1 ICS QIII 2010

7. Accounting firm 378,000 3 CQS QII 2010 8. National architecture firm 144,000 1 CQS QII 2010 CQS = consultant qualification selection; ICS = individual consultant system; MNCH = maternal, newborn, and child health, Q = quarter.

4. Goods and Works Contracts

4. The following table lists goods and works contracts for which procurement activity is either ongoing or expected to commence within the next 18 months.

Ref. Contract Description

Value of Contract

(cumulative)

Number of

ContractsProcurement

Method

Expected Date of

Advertisement 1. Upgrading of Nam Bak District Hospital,

type A, Luang Prabang Province 100,000 1 NCB Mar 2011

2. Upgrading of Boun Nua District Hospital, type B to type A, Phongsali Province

500,000 1 NCB Mar 2011

3. Renovation of Mok Mai District Hospital, type B in Xieng Khouang Province

85,000 1 NCB Mar 2011

4. Renovation of Viangkham District Hospital, type B in Luang Prabang Province

85,000 1 NCB Mar 2011

5. Replacement construction of health centers (10)

350,000 3 NCB Mar 2010

6. Renovation of health centers (10) 120,000 2 NCB Mar 2011 7. Replacement equipment for district

hospitals, type B (40) 400,000 1 NCB Mar 2011

8. Replacement equipment for district hospitals, type A (10)

200,000 1 NCB Mar 2011

9. Replacement equipment for provincial hospitals (4)

400,000 1 NCB Mar 2011

10. Replacement equipment for health centers (200)

240,000 1 NCB Mar 2010

11. Provision of teaching equipment (3 contracts)

180,000 3 Shopping Mar 2011

12. Supply of vehicles for management (4) 100,000 2 UNOPS Mar 2010

Appendix 8

56

Ref. Contract Description

Value of Contract

(cumulative)

Number of

ContractsProcurement

Method

Expected Date of

Advertisement 13. Supply of ambulances, type B hospitals (4) 120,000 1 UNOPS Mar 2010 14. Supply of province management and

model healthy villages outreach vehicles (25)

625,000 1 UNOPS Mar 2011

15. Supply of motorcycles or boats (52) 67,000 1 Shopping Mar 2010 NCB = national competitive bidding, UNOPS = United Nations Office of Project Services. B. Indicative List of Packages Required under the Project 5. The following table provides an indicative summary of all procurement (goods, works, and consulting services) over the life of the Project.

General Description

Estimated Value

(cumulative)

Estimated Number of Contracts

Procurement Method

Domestic Preference Applicable Comments

Goods 1,240,000 7 NCB No Hospital and health center equipment

387,000 7 Shopping No Office and teaching equipment, motorcycles, and boats

845,000 UNOPS Outreach and supervision vehicles and ambulances

Works 1,240,000 9 NCB No Replacement, renovation, or upgrading of health centers and district hospitals

Consulting Services

564,000 4 ICS Individual international consultants for program management, MNCH, gender, medical education, and health equity funds

71,000 5 ICS Individual national consultants for planning and budgeting, MNCH, health systems, community development, medical education, and health equity funds

522,000 4 CQS Accounting and architecture firms CQS = consultant qualification selection; ICS = individual consultant system; MNCH = maternal, newborn, and child health; NCB = national competitive bidding. C. National Competitive Bidding

1. General

6. The procedures to be followed for national competitive bidding (NCB) shall be those set forth for “Public Bidding” in Prime Minister’s Decree No. 03/PM of the Lao People’s Democratic Republic, effective 9 January 2004, and Implementing Rules and Regulations effective 12 March 2004, with the clarifications and modifications described in the following paragraphs required for compliance with the provisions of ADB Procurement Guidelines (2007, as amended from time to time).

2. Application

7. Contract packages subject to NCB procedures will be those identified as such in the project procurement plan. Any changes to the mode of procurement from those provided in the procurement plan shall be made through updating of the procurement plan, and only with prior approval of ADB.

Appendix 8

57

3. Eligibility 8. Bidders shall not be declared ineligible or prohibited from bidding on the basis of barring procedures or sanction lists, except individuals and firms sanctioned by ADB, without prior approval of ADB.

4. Advertising

9. Bidding of NCB contracts estimated at $500,000 or more for goods and related services or $1,000,000 or more for civil works shall be advertised on the ADB website via the posting of the procurement plan.

5. Procurement Documents

10. The standard procurement documents provided by the Ministry of Finance, Procurement Monitoring Office shall be used to the extent possible. The first draft English language version of the procurement documents shall be submitted for ADB review and approval, regardless of the estimated contract amount, in accordance with agreed review procedures (post and prior review). The ADB-approved procurement documents will then be used as a model for all procurement financed by ADB for the Project, and need not be subjected to further review unless specified in the procurement plan.

6. Preferences

11. For this Project, (i) no preference of any kind shall be given to domestic bidders or for domestically manufactured goods; and (ii) suppliers and contractors shall not be required to purchase local goods or supplies or materials.

7. Rejection of All Bids and Rebidding

12. Bids shall not be rejected nor new bids solicited without ADB’s prior concurrence.

8. National Sanctions List 13. National sanctions lists may be applied only with ADB’s prior approval.

9. Anticorruption Policy 14. A bidder declared ineligible by ADB, based on a determination by ADB that the bidder has engaged in corrupt, fraudulent, collusive, or coercive practices in competing for or in executing an ADB-financed contract, shall be ineligible to be awarded ADB-financed contracts during a period of time determined by ADB.

10. Disclosure of Decisions on Contract Awards 15. At the same time that notification on award of contract is given to the successful bidder, the results of the bid evaluation shall be published in a local newspaper or well-known, freely accessible website identifying the bid and lot numbers and providing information on (i) name of each bidder that submitted a bid, (ii) bid prices as read out at bid opening, (iii) name of bidders whose bids were rejected and the reasons for their rejection, (iv) name of the winning bidder, and (v) the price it offered as well as the duration and summary scope of the contract awarded.

Appendix 8

58

The Executing Agency or the Implementing Agency shall respond in writing to unsuccessful bidders that seek explanations on the grounds on which their bids are not selected.

11. Member Country Restrictions 16. Bidders must be nationals of ADB member countries, and offered goods, works, and services must be produced in and supplied from ADB member countries.

Appendix 9

59

SUMMARY POVERTY REDUCTION AND SOCIAL STRATEGY

Country/Project Title: Lao People’s Democratic Republic/Health Sector Development Program Lending/Financing Modality: Sector Development Program Grant Department/

Division: Southeast Asia Regional Department/ Social Sectors Division

I. POVERTY ANALYSIS AND STRATEGY

A. Link to the National Poverty Reduction Strategy and Country Partnership Strategy The Lao National Growth and Poverty Eradication Strategya outlines the Government’s commitment to reduce poverty. The strategy has been integrated into the 6th Socio-Economic Development Plan, 2006–2010,b which aims to achieve economic growth of 7.5%–8.0% annually; reach $700–$750 gross domestic product (GDP) per capita; create about 652,000 productive jobs; and reduce the number of poor households to 15%. The plan identifies the health sector as one of four priority sectors and is committed to provide all with access to PHC to achieve Millennium Development Goals (MDGs) and health for all. The country strategy and program for the Lao People’s Democratic Republic (Lao PDR), 2007–2011, of the Asian Development Bank (ADB)c is anchored in and closely aligned to the 6th Socio-Economic Development Plan. A results-based strategy, the country strategy and program focuses on sustainable economic growth, accelerating progress in non-income MDGs, building capacity for good governance, promoting regional cooperation and integration as an engine of progress, and fostering national development through the country’s own strategy and plans. The Government’s health sector initiatives, including the Health Sector Development Program (the HSDP), are included in ADB’s country operations business plan, 2009–2011.d The HSDP is also included in the areas targeted for development under the Poverty Reduction Partnership Agreement, signed on 28 September 2001, between the Government and ADB. ADB is also committed to support the Vientiane Declaration for Aid Effectiveness. In line with the priorities of the Government and ADB, the HSDP focuses on maximizing past investments in the country’s health sector by helping develop the national health sector program approach to improve overall health service delivery countrywide in terms of effectiveness, equity, efficiency, and sustainability. The HSDP will support MDG attainment and PHC delivery, with a focus on maternal, newborn, and child health (MNCH); planning and financing; human resources development; and expanded health care financing for the poor through health equity funds. B. Poverty Analysis Targeting Classification: Targeted intervention (TI-M) 1. Key Issues The Lao PDR is one of the poorest countries in Southeast Asia. A small domestic market, subsistence nature of the rural economy, skill shortages, and remoteness and isolation of much of the population are among the structural factors constraining growth and poverty reduction. However, the economy has grown and diversified in the last 5 years, based on the country’s natural resources base for hydropower, mining, and tourism. Between 2002 and 2007, annual growth in the country’s GDP, at constant prices, averaged 6%. The sustained economic growth over the last 5 years has greatly contributed to a sharp decline in poverty. From 33.5% in 2003, the poverty incidence fell to 22.3% in 2007, which can be attributed to (i) sound macroeconomic fundamentals coupled with prudent fiscal management; (ii) a decline in the unemployment rate from 5.0% in 2001 to 1.4% in 2007; (iii) expansion of hydropower, mining, and tourism; and (iv) gradual shifting of the economy from agriculture to high value-added industry. From 49.8% in 2002, the share of agriculture to GDP has declined to 42.3% in 2006 at constant prices. However, agriculture still provides 80% of national employment, and about 79% of the population lives in rural areas where livelihoods largely depend on this sector. The Lao PDR has a total area of 236,800 square kilometers, and two thirds of the country is mountainous. The country had a very low population density of 25 persons per square kilometer based on its population of 5.6 million in 2005. The population is composed of 49 ethnic groups that are officially recognized by the Government, and which are grouped based on four ethno-linguistic families: (i) Tai-Kadai, (ii) Mon-Khmer, (iii) Hmong, and (iv) Sino-Tibetan. Ethnic minorities more often live in the mountains, with less access to social services and markets. Rural areas lack infrastructure (e.g., roads, telecommunication, water, and electricity) and transport, more so in the north than in the central or southern parts of the country. Poverty rates and health indicators are lagging among marginalized ethnic groups. In addition to less physical access, the poor, rural, and minority ethnic groups face lack of access due to relatively high out-of-pocket costs, lack of qualified health personnel in rural health centers, and lack of health care workers who speak the relevant languages. Village health volunteers, about two thirds of whom are male, have received short training and only deal with minor illnesses.

2. Design Features The HSDP will provide significant benefits for the poorest groups, including improved health care services for women, children, disadvantaged ethnic groups, the poor, and those who live in remote areas. This will be achieved by increasing their access to MNCH services, strengthening the planning and financing capacity of the public health system, and improving the quality of human resources for health (particularly skilled birth attendants). The HSDP is expected to lead to an increase in the use of health services by the poor, including more deliveries done at hospitals and health centers, a reduction of maternal and child mortality, and improved health outcomes for the poor. Quality control mechanisms for health professionals and facilities, through provincial-level annual operational plans and guidelines for district health systems, should disproportionately benefit

Appendix 9

60

those with the poorest-quality services and health workers. The HSDP supports a number of measures to address the deficiencies and inequities in the health care system, particularly through improvements in the training of health workers, incentives for staff members in rural and remote areas, and support for model healthy villages and health equity funds. The HSDP will help increase the roles of the poor, women, and small ethnic groups in local planning, consultation, and decision making achieved through representation on village health committees, located within existing village development committees, and as village health volunteers and health staff members. C. Poverty Impact Analysis for Policy-Based Lending The policy reforms included in the HSDP are expected to have a variety of positive impacts for health consumers, especially those in poor and remote areas.

(i) The preparation of annual operation plans and budgets and the fund-flow mechanism to provinces will improve sector management and are also building blocks for channeling program support to the health sector. They will lead to more efficient funding of key health sector needs, including to poor and remote provinces.

(ii) The national MNCH strategy will address major impediments to achieving MDGs for reducing maternal, infant, and child mortality. The strategy will be comprehensive and address health system improvements such as financing, management, leadership, service delivery, and health workforce as well as demand issues that address efforts to enhance individual, family, and community participation.

(iii) Guidelines and terms of reference for personnel, facilities, equipment, and drugs required for provincial and district hospitals will help determine the optimum recurrent budget for these facilities, essential for addressing service gaps in rural and remote areas.

(iv) Guidelines for implementation and expansion of model health villages will support the Government's priority intervention for achieving MDGs for maternal, infant, and child mortality and will particularly address current service delivery gaps in rural, remote, and poor areas.

(v) The national human resources for health policy and national skilled birth attendance development plan will address deficiencies in the health sector workforce that are recognized as major impediments to achieving MDG targets.

(vi) The HSDP will support expansion of provincial health equity funds, which directly target health financing to the poor, and guarantee financing for MNCH services for poor women and minority ethnic groups.

II. SOCIAL ANALYSIS AND STRATEGY

A. Findings of Social Analysis The Lao PDR lags behind on several nonincome MDGs—life expectancy at birth is low (61 years), child malnutrition is high (30%), and infant mortality (55 per 1,000 live births) and maternal mortality rates (350 per 100,000 live births) are very high compared with other countries in Southeast Asia. One third of the adult population—and nearly half of all females—cannot read or write, and just 14% of the population has completed primary schooling. Diarrhea continues to be the second-biggest killer of children and the third-biggest killer of adults in the country. Malaria is the number one ranked cause of mortality overall, with 70% of the population at risk. The 2006 Multiple Indicator Cluster Survey III reported that 40% of children under age 5 years are moderately and 16% are severely stunted. Almost two in every five children under age 5 years are moderately underweight, and 6% are wasted. Some 37% of women of reproductive age and 41% of children under age 5 years suffer from moderate anemia. Forty-five percent of the children under age 5 years were observed to have vitamin A deficiency. Women are key beneficiaries of the HSDP. About 85% of women give birth at home, according to the 2005 Lao Reproductive Health Survey (footnote). Births assisted by health providers only marginally increased from 17.4% to 18.5% between 2000 and 2005. Sixty-three percent of births were assisted by family members or relatives, 12% by traditional birth attendants, and 3% gave birth alone. There are distinct disparities between urban and rural settings: 51% of the urban population delivered in health facilities, while most of the rural population gave birth at home (87% with road access and 97% without road access). Early pregnancy is also of concern, with an adolescent birth rate at 76 per 1,000 women aged 15–19 years old in 2005. Ten percent of married women had their first birth before they were 15 years old, and about 37% had given birth before turning 18. Early pregnancy has severe implications on the health of physically immature girls. While there is awareness on danger signs of pregnancy and childbirth (e.g., bleeding, lower back and abdominal pain, and baby’s breech position at the time of delivery), such knowledge is limited only among women who may have had two or more children. Small ethnic groups account for only one third of the country’s population, yet they make up more than half of the poor. A factor for the higher poverty rates among the ethnic groups is their places of residence, which are mainly in mountainous and remote areas with limited infrastructure, government access, and economic opportunities. There is a shortage of qualified health workers at the district hospitals and health centers. In remote areas, health workers face difficulties in communicating with health facility users due to language barriers.

Appendix 9

61

B. Consultation and Participation The HSDP was designed following a participatory approach and involved consultations with national, provincial, district, and village officials; staff members at hospitals and health centers; village residents; development partners; and key informants. Activities included (i) visits to program areas to consult with and inform officials; (ii) interviews with villagers and health staff members; (iii) collection of data at all levels; (iv) resettlement, engineering, and environmental field visits and consultations; (v) meetings with development partners; and (vi) a workshop with national and provincial stakeholders to review policy and design issues.

What level of consultation and participation (C&P) is envisaged during the project implementation and monitoring?

Information sharing Consultation Collaborative decision making Empowerment Was a C&P plan prepared? Yes No The HSDP design incorporates a number of mechanisms to ensure participation by a wide range of government and nongovernment stakeholders. The Gender and Ethnic Group Action Plan includes several measures to ensure that the concerns of ethnic groups and women are represented in the implementation of policy reforms and related investments. C. Gender and Development 1. Key Issues Promoting gender equality is an important national goal of the Lao PDR, as reflected in the 1991 Constitution, Lao National Growth and Poverty Eradication Strategy, 6th Socio-Economic Development Plan, and a number of the country’s international commitments. The National Commission for the Advancement of Women was established in 1991 to help ensure women’s equal access to basic services and productive resources. The commission is responsible for implementing national strategies and reports directly to the Government, while the Lao Women's Union helps implementation on the ground. Women in the Lao PDR remain more vulnerable and deprived than men because of their unequal access to land, food, education, and health care, and their long working hours. While gender roles vary within rural communities, women from ethnic groups tend to be the most disadvantaged. Compared with men, women have far lower average literacy, enrollment, and completion rates, and education gaps widen at higher levels of schooling. In 2004, girls were 30% less likely to participate in upper-secondary education and 40% less likely to participate in tertiary education than boys. Although women own and operate most registered small businesses, they have limited access to market information, technical training, and financial services. Women are key beneficiaries from investments in health care as they are primarily responsible for taking care of daily household needs and family health. The choice of health practices, such as the location of births and use of birth attendants continues to be shaped by culture and tradition, decisions that frequently do not appear to reside with women but with their parents and husbands. Early marriages and early child-bearing ages of women also build on such traditions, which have severe implications for the health and well-being of girls whose bodies are not sufficiently developed to withstand pregnancy and childbirth. 2. Key Actions. Measures included in the design to promote gender equality and women’s empowerment—access to and use of relevant services, resources, assets, or opportunities and participation in decision-making process:

Gender plan Other actions/measures No action/measure

III. SOCIAL SAFEGUARD ISSUES AND OTHER SOCIAL RISKS

Issue Significant/Limited/

No Impact Strategy to Address Issue Plan or Other Measures

Included in Design Involuntary Resettlement

No impact. All civil works will be done on government-owned land of existing health facilities.

Impact on land acquisition and resettlement will be confirmed. A land acquisition and resettlement framework has been prepared in case of any change of scope to direct the preparation and implementation of short land acquisition and resettlement plans, if needed.

Full resettlement plan Resettlement framework Short resettlement plan Due diligence report No action

Indigenous Peoples Limited (positive) The project design is built around the needs of ethnic groups and includes several strategies to ensure that ethnic groups benefit. Specific actions have been

Plan Other action Indigenous peoples

development framework No action

Appendix 9

62

incorporated into project design. A gender and ethnic group action plan has been prepared to help ensure that health personnel and consumers from small ethnic groups benefit from policy reforms and related investments.

Labor Employment

opportunities Labor retrenchment Core labor standards

Limited The upgrading of district hospitals and health centers will create some employment. The Executing Agency will ensure that all civil works comply with all applicable labor laws, and will not employ children during construction and maintenance activities. The HSDP will also have positive impacts in terms of increasing staff skills and their working conditions.

Plan Other action No action

Affordability Significant Village health volunteer training and the rollout of upgraded MNCH services, model healthy villages, and health equity funds will make health services more affordable to the poor.

Action No action

Other Risks and/or Vulnerabilities

HIV/AIDS Human trafficking Others

(conflict, political instability, etc.)

No impact Social assessments have not indicated any significant risks on child labor, HIV/AIDS, and human trafficking. Model healthy villages will result in increased community awareness and resilience. The HSDP is not involved in resettlement of ethnic minorities and does not support new health centers.

Plan Other action No action

IV. MONITORING AND EVALUATION

Are social indicators included in the design and monitoring framework to facilitate monitoring of social development activities and/or social impacts during project implementation? Yes No

HSDP = Health Sector Development Program. a Government of the Lao PDR. 2004. Lao PDR: National Growth and Poverty Eradication Strategy. Vientiane. b Committee for Planning and Investment, Government of the Lao PDR. 2006. 6th National Socio-Economic Development Plan,

2006–2010. Vientiane. c ADB. 2006. Country Strategy and Program: Lao People’s Democratic Republic (2007–2011). Manila. d ADB. 2008. Country Operations Business Plan 2009–2011: Lao People’s Democratic Republic. Manila.

Appendix 10

63

SUMMARY GENDER AND ETHNIC GROUP ACTION PLAN 1. The Ministry of Health (MOH) of the Lao People’s Democratic Republic (Lao PDR) is aiming to address gender and ethnic group opportunities and concerns in all MOH-associated services, programs, and projects. As part of its planned restructuring in 2010, MOH is considering establishing a gender unit for this purpose. It has established a gender committee, chaired by a vice minister and including representatives of its departments. 2. A gender and ethnic group action plan has been developed for the Health Sector Development Program (the HSDP) to integrate equity concerns in all program activities and to ensure that women and ethnic groups have equal opportunities to participate in and benefit from the HSDP. The plan is in accordance with current laws, policies, and regulations of the Lao PDR and the Policy on Gender and Development (1998) and Policy on Indigenous Peoples (1998) of the Asian Development Bank (ADB). Table A10 summarizes the proposed actions for women and ethnic groups under the HSDP.

Table A10: Gender and Ethnic Groups Action Plan

Program Outputs Proposed Actions Responsibility A. Strengthened Planning and Financing Policy Measures The national health information system strategic plan requires

disaggregated use of service data by gender and ethnic group. Provincial annual operation plans and budgets give priority to MNCH services, and specifically address needs of the poor, women, and ethnic groups. MOH standards, guidelines, and terms of reference for district hospitals include gender and ethnic group targets for staffing and requirements to ensure adequate facilities for women.

MOH PHOs MOH

Project Activities Guidelines for 5-year plans and annual operation plans and budgets adequately address poverty, gender, and ethnic group concerns. Training of provincial and district health officers adequately addresses poverty, gender, and ethnic group concerns. Women and ethnic groups are consulted in the planning, implementation, and monitoring of provincial health plans (e.g., Lao Women’s Union and Lao Front for National Construction). Provincial 5-year plans, annual operation plans and budgets, and district plans and budgets include poverty, gender, and ethnic group targets and staffing and service coverage. Provincial and district facilities have gender and ethnic targets for personnel, management, facilities, and coverage. Health equity fund design and guidelines provide for reaching women and ethnic groups in terms of targeting, awareness, and sensitization activities in a form and language understood by these groups. Provincial health equity funds provide for reaching women and ethnic groups in their targeting system and for appropriate awareness and sensitization activities in a form and language understood by the key target groups, in particular ethnic groups.

MOH MOH, PHOs PHOs PHOs, DHOs PHOs, DHOs MOH PHOs

Appendix 10

64

Program Outputs Proposed Actions Responsibility Health equity fund surveys disaggregate data by gender and ethnicity; health equity fund facility records document data on gender and ethnicity. Facility records track MNCH and use of health equity funds (e.g., routine deliveries, caesarean sections, and blood transfusions).

MOH PHOs, DHOs

B. Increased Access to Services, Particularly for Women, Children, and Ethnic Groups Policy Measures The national MNCH strategy is based on a participatory planning

approach involving beneficiaries, provides adequate analysis of binding constraints of MNCH with special attention to social and poverty dimensions of women and ethnic groups, and proposes realistic solutions and budgets to addressing these. MOH approves an implementation plan for the roll out of mother- and child-friendly health facilities to all districts. Guidelines for model healthy villages include specific actions to ensure participation of women and ethnic groups in village committees and other decision-making forums for model healthy villages, and to ensure substantial benefits to women and ethnic groups.

MOH MOH, PHOs MOH

Project Activities All provinces implement mother- and child- friendly health facilities in at least one district. All renovated and upgraded hospitals and health centers have sufficient facilities and equipment for maternal health care, and sufficient privacy for women, including separate toilet facilities. Training of midwives and skilled birth attendants includes awareness on barriers for facility-based deliveries by mothers from ethnic groups and possible solutions (e.g., use of village funds). At least 20% of participants in health manager training and 40% of participants in technical training are female. VHV and peer educator schemes are reviewed, strengthened, and sustained from a gender and ethnic group perspective. VHVs and peer educators are trained to better understand MNCH services, know danger signs, and promote timely referrals. At least one of two VHVs in each village is female. Provincial, district, and VHCs include at least 30% female members and a proportional mix of ethnic groups. Provincial and district annual operation plans and budgets include provisions for women and minority ethnic groups to ensure their inclusion and participation. Culturally appropriate information about health services and their expansion is disseminated using communication strategies that build upon ethnic groups’ respective languages and literacy levels. Village drug kits include contraceptive supplies.

MOH, PHOs, DHOs MOH, PHOs, DHOs MOH, PHOs, DHOs MOH, PHOs, DHOs MOH, PHOs, DHOs PHCs, DHCs, VHCs MOH, PHOs, DHOs PHCs, DHCs, VHCs PHCs, DHCs, VHCs MOH, PHOs, DHOs MOH, UNFPA

Appendix 10

65

Program Outputs Proposed Actions Responsibility C. Better Quality of Human Resources for Health Policy Measures The national human resources for health policy adequately

addresses gender and ethnic group aspects of the workforce and consumers. MOH has secured at least 50% of funding for implementation of the national skilled birth attendance development plan.

MOH MOH

Project Activities Female staff members and staff members from ethnic groups are at least proportionally represented in skills upgrading for medical assistants, midwives, nurse-midwives, nurses, and PHC workers. The implementation plan for the national human resources for health policy is developed using a participatory process that is approved by the human resources development working group and addresses shortages of female and ethnic staff members and students, staff retention in remote areas, and staff incentives. The university and college master plans are developed using a participatory process approved by the human resources development working group; and include gender and equity analysis and specific actions to improve educational attainment for females and ethnic group students. At least 30% of participants for upgrading teaching staff members are female, and ethnic groups are proportionally represented. The human resources management information system includes gender- and ethnic-specific information. MOH sets gender and ethnic human resources development targets for each health facility to ensure adequate presentation of the population in the catchment areas including at least one female staff member in each facility. Plans of public health schools include provisions for gender development and equity. Gender and ethnic issues are mainstreamed in the national human resources for health policy.

MOH, PHOs, DHOs, MOH, PHOs MOH MOH MOH, teaching institutions MOH MOH, schools MOH, education institutions

DHC = district health committee; DHO = district health office; MNCH = maternal, newborn, and child health; MOH = Ministry of Health; PHC = provincial health committee; PHO = provincial health office; UNFPA = United Nations Population Fund; VHC = village health committee; VHV = village health volunteer. Source: Asian Development Bank.

3. Implementation arrangements and estimated costs of the gender and ethnic group action plan are integrated into the overall arrangements and total budget of the HSDP. The gender committee will monitor and provide guidance for plan implementation and will be provided with a budget for quarterly meetings and annual workshops. MOH will appoint a gender and ethnic group focal point for the HSDP to ensure that all gender and ethnic group opportunities and concerns are addressed. Representatives from the Lao Women’s Union and Lao Front for National Construction, and from the Department of Ethnic and Social Affairs, will play critical roles in facilitating participation by women and ethnic groups in project activities and will be invited to participate in steering committee meetings, as required. International and national consultants (i.e., gender and community development experts) will support the Executing Agency in implementing the plan, particularly in integrating gender and ethnic concerns into all program activities during implementation. The gender specialist in the Lao Resident Mission will provide backstopping and help monitor plan implementation. The plan will

Appendix 10

66

be monitored as part of the overall system for the HSDP. Plans, training, and services will address the special needs of women and ethnic groups, and reports will be disaggregated by gender and ethnic group. Quarterly progress reports will provide updates on the effect of project outputs on women and ethnic groups. The midterm review mission will consider past updates and make adjustments, as required.

Appendix 11

67

SUMMARY LAND ACQUISITION AND RESETTLEMENT FRAMEWORK

A. Introduction 1. The Health Sector Development Program (the HSDP) will be implemented by the Government of the Lao People’s Democratic Republic (Lao PDR) as a sector development program including a Program and a Project. It will feature a comprehensive set of policy actions that will address key constraints in access to health care services in the country, particularly for women, children, and ethnic groups. An accompanying project grant will finance a set of investments directly linked with and supportive of the implementation of the policy actions in the Ministry of Health (MOH). The HSDP is designed to support the 6th National Health Sector Development Plan

1 through maximizing past investments in the health sector. It will focus on

primary health care (PHC) and maternal, newborn, and child health (MNCH) to achieve the country’s Millennium Development Goals (MDGs)

2 and will help develop a sector program

approach to improve overall health service delivery in terms of effectiveness, equity, efficiency, and sustainability. 2. Civil works covered by output 1 of the Project will involve upgrading four existing district hospitals and 20 health centers in the provinces of Luang Prabang, Phongsali, and Xieng Khouang. Although no land acquisitions were identified in the assessment and no land acquisitions are anticipated, MOH as the Executing Agency (EA) has prepared a land acquisition and resettlement framework (LARF), as an expression of its commitment to the Asian Development Bank (ADB) that it will prepare a land acquisition and resettlement plan (LARP) in case land acquisition and resettlement issues arise from civil works. The LARF prescribes the approaches in LARP preparation and addresses the compensation and resettlement issues under the Project. B. Land Acquisition and Processing Requirements 3. All civil works have been screened according to their impacts on land acquisition and resettlement, and no issues have been identified. However, in case of any change of scope that may involve land acquisition and resettlement, a LARF has been prepared. As per selection criteria developed in the program preparatory technical assistance,

3 only civil works with

involuntary resettlement category B and/or category C will be considered in case of a change of scope. If resettlement impacts are unavoidable, the EA will submit a short LARP with the LARF before ADB considers the change of scope. C. Legal and Policy Framework 4. The legal and policy framework in the LARF are built upon laws currently enforced in the Lao PDR, such as Decree No. 192/PM and Regulation No. 2432/STEA, and the relevant policies of ADB, such as the Involuntary Resettlement Policy (1995), its Operations Manual, and other related policies. The LARF will govern the LARPs that will be prepared under the Project,

1 MOH, Government of the Lao PDR. 2006. 6th Health Sector Development Plan (2006–2010). Vientiane.

2 The three goals are (i) 1, eradicate poverty; (ii) 4, reduce child mortality; and (iii) 5, improve maternal health. Their targets in the Lao PDR are to reduce each area of concern by 50% between 1990 and 2015.

3 ADB. 2008. Involuntary Resettlement. Operations Manual. OM F2/BP and OM F2/OP. Manila. (September 2006).

Appendix 11

68

in which compensation principles will supplement the provisions of relevant laws currently enforced in the Lao PDR, wherever a gap exists. D. Compensation and Entitlement Policies 5. The overall objective of the EA in defining the compensation and entitlement policy for the Project is to assure ADB that all people affected by the Project will be able to maintain and, preferably, improve their pre-program living standards and income-earning capacity through compensation for the loss of tangible and nontangible assets and provision of other assistance and rehabilitation measures. Consistent with the provisions of Decree No. 192/PM and Regulation No. 2432/STEA, and ADB’s Involuntary Resettlement Policy, all persons and entities with or without land certificates and/or land titles are eligible to receive compensation. They will be identified through a census in which the cutoff of eligibility to receive compensation and entitlement is the last day of the survey in civil works sites. The categories of affected persons (APs) under the Project are (i) legal users, (ii) nonlegal users, (iii) owners of houses and/or structures, and (iv) agricultural and nonagricultural laborers or employees. Their compensation and entitlement are described in Table A11.

Table A11: Entitlement Matrix

No.

Type of Loss/Impacts

Application

Eligible Persons

Compensation and Entitlements

1 Permanent loss of land (including agricultural and commercial land)

Residential land

Legal users of residential lands land

With sufficient remaining land to rebuild houses or structures: (i) cash compensation at replacement cost at current market prices for land of similar type within the district; and (ii) civil works contractor to improve remaining land, e.g., land filling and leveling, at no cost to APs to rebuild their houses or structures. Without sufficient remaining lands to rebuild houses or structures, either (i) replacement land of equal size and category at locations within the area satisfactory to APs with registered titles or secured tenure; or (ii) cash compensation at replacement cost equal to current prices for land of similar category nearby, plus assistance to purchase and register the land. Where remaining land is not viable to rebuild houses or structures, APs may request the Project to acquire the entire landholdings. All transaction fees, taxes, and other costs associated with replacement land and/or issuance of title or secured tenure will be paid for by the Project. If the head of household is married, the title will be issued and registered in the names of both spouses.

Nonlegal users APs will not receive compensation for affected land. If they have no other residential landholdings, they will be allocated replacement lands with leasehold tenure to rebuild their houses.

Appendix 11

69

No.

Type of Loss/Impacts

Application

Eligible Persons

Compensation and Entitlements

Agricultural land

Owner Replacement agricultural land of similar productivity or cash compensation at replacement cost equal to current prices for land of similar category nearby, plus assistance to purchase and register the land. Where remaining agricultural land is not viable for agricultural purposes, APs may request the Project to acquire the entire landholdings. All transaction fees, taxes, and other costs associated with replacement land and/or issuance of title or secured tenure will be paid for by the Project. If the head of household is married, the title will be issued and registered in the names of both spouses.

Tenant, sharecropper, labor

APs will not receive compensation for affected land. Assistance to APs to secure similar opportunities for tenancy or crop sharing.

Commercial land

Owner Replacement commercial land of similar productivity or cash compensation at replacement cost equal to current prices for land of similar category nearby, plus assistance to purchase and registration of the land. Where remaining commercial land is not viable for commercial purposes, APs may request that the Project acquire the entire landholdings. All transaction fees, taxes, and other costs associated with replacement land and/or issuance of title or secured tenure will be paid for by the Project. If the head of household is married, the title will be issued and registered in the names of both spouses.

Tenant APs will not receive compensation for affected land. Assistance to APs to secure similar opportunities for tenancy.

2 Loss of houses or structures

Completely destroyed house or structure

Owners of structures regardless of their land-use rights status

Cash compensation at full replacement cost based on current market prices for construction materials, cost of delivery, and cost of labor for the dismantling and rebuilding the structure of similar size and quality without any depreciation and deductions for salvaged material.

Partially affected houses or structures

Owners of structures regardless of their land-use rights status

APs will receive cash compensation at full replacement cost based on current market prices for materials, including the cost of delivery, and cost of labor for the dismantling and rebuilding or repair of the affected portion of the house or structure without any depreciation and deductions for salvaged material.

Appendix 11

70

No.

Type of Loss/Impacts

Application

Eligible Persons

Compensation and Entitlements

Tenant Assistance to APs to secure similar arrangement for housing.

3 Loss of trees Fruit trees and nut trees

Owners of structures regardless of their land-use rights status

Cash compensation at replacement cost based on current market prices given the type, age, and productive capacity at the time of compensation.

Timber trees Owners regardless of their land-use rights status

Cash compensation at replacement cost based on current market prices given the types, age, and diameter at breast height of trees at the time of compensation.

APs who relocate and rebuild houses and/or structures on remaining land or new land

If civil works has no impact on main source of income, cash allowance and/or in-kind assistance equal to 16 kilograms of rice per household member for 3 months.

4 Transition and subsistence allowance

APs who lose 10% or more of their productive or essential assets

If civil works affect the main source of income, or lose 10% or more of productive or essential assets, cash allowance and/or in-kind assistance equal to 16 kilograms of rice per household member for 6 months.

Vulnerable APs who are severely affected by relocation of house and/or structure

5 Supplementary allowance

Vulnerable APs who are severely affected by losing 10% or more of their productive or essential assets

The supplementary subsistence allowance could either be cash and/or equal to 16 kilograms of rice per household member for 1 month. Eligible to participate in income restoration program as provided for by the Project. Employment of any household member as laborers in project civil works.

6 Transport allowance APs who relocate to new land to rebuild new houses and/or structures

Assistance in cash or in-kind to move structure or deliver salvage materials, new building materials, and personal possessions to new site.

7 Unanticipated impacts All categories of legitimate APs and stakeholders

Provision of any of the above compensation and entitlements to APs. EA and ADB will work to resolve outstanding resettlement issues (para. 53 of OM Section F2/OP).

8 Loss of business, employment, and source of livelihood

Assistance as may be determined following an independent valuation of impact.

ADB = Asian Development Bank, APs = affected persons; EA = Executing Agency, OM = Operations Manual. Source: Asian Development Bank.

E. Gender Impact and Mitigating Measures 6. In compliance with ADB’s Policy on Gender and Development (1998), the HSDP will pay particular attention to women ensuring that, in case of any land acquisition or resettlement, they are (i) entitled to receive compensation for their affected land, structures, and trees; (ii) clearly listed as household heads to be provided with allowances for transition and subsistence, transport, and supplementary allowance for being vulnerable as the result of land acquisition; and (iii) extended other form of assistance during relocation. One of their household members will also be given preference for employment in civil works. Specific action plans for women will be incorporated in the LARP.

Appendix 11

71

F. Indigenous Peoples and Vulnerable Groups 7. Certain social groups that may be less able to restore their living conditions, livelihoods, and income levels will be identified under the Project. The EA will commit for special attention to indigenous peoples and vulnerable groups like the landless, poor, households headed by women, disabled, elderly, or children without means of support. The specific action plans for indigenous people and vulnerable groups will be defined in the LARP. G. Public Participation and Documents Disclosure 8. The HSDP is designed to encourage participatory approaches that involve information exchange and decision making in the LARP preparation process. The objective of information exchange is to allay the fears of APs about what may happen once the HSDP is implemented. The objectives of consultation are to (i) obtain some details that could be overlooked during LARP preparation, (ii) formulate resettlement options that balance the APs’ needs and capabilities with technical requirements of the subproject, and (iii) help avoid unnecessary and costly subproject development delay. A primer on the LARP translated into Lao will be furnished to host districts and villages as well as to APs and stakeholders. MOH will endorse the full English version of the LARP to ADB for approval and for posting on the ADB website. H. Grievance Redress Mechanism 9. Communications with APs under the Project will be designated to the national project coordination unit (PCU) that will be created for implementing the HSDP. It will ensure that APs are aware of the procedures in filing complaints or grievances that may arise during LARP implementation. A primer on the grievance and redress mechanism and appeals process will be disseminated to APs during the detailed measurement survey. The PCU will assign a desk unit to receive complaints from the APs or stakeholders. The resettlement committees at the provinces, districts, and village committees will also serve as the grievance and redress committees in each level. There are five procedural steps for the filing and resolution of grievance and complaints by APs, beginning from the village and district to the province and unit. The last resort of appeal by the AP is the court of law that will render the final decision. I. Management of Land Acquisition and Resettlement Plan Preparation and

Implementation 10. The LARF defines five areas of management concerns in LARP preparation and implementation. On the implementation arrangement, MOH will be on top of decision making. It will create the PCU for the direct supervision and coordination with the resettlement committees in the provinces, districts, and village committees, for the preparation, review, and approval toward implementation as well as internal monitoring and evaluation of LARPs. The training and orientation aspect will cover the orientation and workshops for the preparation stage and the implementation stage of LARP. In both stages, the PCU will conduct orientation and workshops for all parties involved. 11. The voluntary donation of land is not ruled out in the HSDP, but in such a situation, the PCU will adopt the conditions and procedures for voluntary contributions that have been established in other projects in the Lao PDR, and will follow the process in accordance with the ADB Operations Manual (footnote 3) and Prime Ministerial Decree No. 192/PM (2005). Database management concerning information on all APs will be the responsibility of the PCU. All data on APs will be computerized. On the review, endorsement and approval of LARP, the PCU will incorporate comments of APs. The PCU will submit the LARP to the provincial

Appendix 11

72

resettlement committee in English and Lao, and then endorse to Water Resources and Environment Agency, for approval. The Water Resources and Environment Agency-approved LARP will then be disclosed to the affected community and stakeholders, and submitted finally to ADB. ADB will place it on its website for downloading by the public. J. Resettlement Budget and Financing 12. The LARP will have a section that details the resettlement budget and financing arrangements. The budget will include the compensation at replacement cost, other allowances and assistance to APs, cost of replacement cost survey, administration costs, monitoring and reporting, and contingency allowance for unforeseen expenses and for cushioning the effect of inflation during LARP implementation. The cost of the LARP will be borne by the provincial authorities. MOH will approve the budget for LARP and request the provinces for the release of funds to the unit that will manage the compensation payments to the APs. K. Monitoring and Evaluation 13. The primary objective of monitoring is to identify as early as possible the activities achieved and the cause(s) of constraints so that arrangements in LARP implementation can be adjusted. Under the Project, the PCU will use two mechanisms for monitoring the LARP implementation: (i) internal monitoring in collaboration with provincial and district health offices and village health committees, and (ii) external monitoring by an independent third party.

14. The PCU will routinely perform internal monitoring of land acquisition and resettlement with results reported to ADB on quarterly basis. Related information will be collected from the field and reported monthly to the PCU program director to assess the progress and results of implementation, and adjust the work program. Internal monitoring will apply the following approaches: (i) review of detailed measurement survey on all APs, (ii) consultation and informal interviews with APs, (iii) in-depth case studies, (iv) sample survey of APs, (v) key informant interviews, and (vi) public meetings with people in the community hosting the civil works. 15. The independent third party that will be hired by MOH in consultation with ADB at the early stage of LARP implementation will (i) verify internal reports with APs as to the payments of compensation and entitlements, including the levels and timing of the compensation; (ii) interview a random sample of APs to assess their knowledge and concerns about the resettlement process; (iii) observe the functioning of the resettlement operation at all levels; (iv) verify the nature of grievance issues and the functioning of the grievance redress mechanism; (v) survey the standards of living of APs and those in the unaffected portion nearest the civil works sites before and after land acquisition and resettlement, to assess the effects of resettlement to APs; and (vi) advise the EA and PCU regarding the possible improvements in LARP implementation. Substantial compliance on LARP implementation by MOH will justify its request to ADB for no objection on the award of the contract for civil works.

Appendix 12

73

SUMMARY INTIAL ENVIRONMENTAL EXAMINATION A. Introduction 1. The summary initial environmental examination (IEE) is based on the IEE prepared for the Health Sector Development Program (the HSDP). The IEE (Supplementary Appendix C) examined the potential environmental impacts of the HSDP and identified mitigation measures to avoid adverse environmental impacts and to maximize beneficial impacts. Individual subprojects have been categorized as environmental category B (nonsensitive) in view of their overall sector implications, in accordance with the Environment Policy (2002) of the Asian Development Bank (ADB) and the relevant portion of the Operations Manual.1 Environmental implications of the policy reforms were also reviewed and are summarized in this summary IEE. Since no significant impacts are predicted from those reforms, the IEE focused on the HSDP’s investment component. This summary IEE has been prepared to comply with ADB guidelines for sector development programs. 2. The IEE was prepared for the proposed improvement of four district hospitals and 20 health centers in the northern provinces of the Lao People’s Democratic Republic (Lao PDR) according to

(i) ADB’s Environmental Assessment Guidelines (2003); (ii) the Government of the Lao PDR’s Environmental Protection Law (1999) and its

Implementing Decree (2002); (iii) the Government's Regulation on Environmental Assessment (2000) and Decree

No. 1706 on Health Facility Waste Management signed by the Ministry of Health on 20 July 2004;

(iv) health care waste management guidelines developed by the World Health Organization, adopted by the Government and translated into Lao; and

(v) the draft national integrated health care waste management plan, prepared by Ministry of Health (MOH) and consultants.

3. Consultations were conducted with concerned agencies and persons knowledgeable about the local health sector. The chief of the Environment Health Division, Department of Hygiene and Prevention, MOH, is the focal point and is responsible for health care waste management in MOH. It was disclosed that MOH is preparing a plan to roll out a solid waste management program in all health facilities. MOH is proposing that the HSDP support this by ensuring that all construction under the HSDP is implemented in line with its solid waste management program, and if possible, also by supporting general capacity building in the sector. Potential grant assistance for technical support was also identified. However, this solid waste management program still needs MOH endorsement. 4. Site surveys, assessment visits, and public consultations were conducted in the four identified hospitals and a sample of health centers. The health center sample was representative of environmental conditions for the other health centers to be renovated or upgraded under the HSDP. Rapid environmental assessment checklists in accordance with ADB guidelines were accomplished during the initial site visits. A situation analysis of the proposed upgrading of facilities was prepared; data were gathered from physical inspection of the facilities; and interviews with health care personnel, community members, and the public living in the vicinity of the facilities were conducted. 1 ADB. 2008. Environmental Considerations. Operations Manual. OM F1. Manila.

Appendix 12

74

B. Project Description

5. The Project will improve health facilities of four district hospitals and 20 health centers in four provinces (Luang Prabang, Oudomxay, Phongsali, and Xieng Khouang), as shown in Table A12.1. In these construction sites, in addition to the proposed improvements, investments will be made as needed for adequate and safe water, sanitation, and medical waste management systems, including appropriate wastewater systems. The Project will also provide equipment required for maternal, newborn, and child care in district hospitals and health centers, mainly in the eight northern provinces in line with the sector approach and based on needs and sources of funding.

Table A12.1: Civil Works and Equipment Components

Province

District Hospital

Civil Works

No. of Health Centers

(upgrading)

No. of Health Centers

(replacement) Civil Works District Hospital Type A Nambak, Luang Prabang Province District Hospital Type B to A Boun Nua, Phongsali Province District Hospital type B Renovation

Viangkham, Luang Prabang Province Mok-mai, Xieng khouang Province

Health Centers 10 10 Equipment District Hospitals A 8 District Hospitals B 34 Health Centers 140 10 No. = number. Source: Ministry of Health

6. ADB support of facilities in the northern provinces is complemented by support of Lux-Development S. A. in the three central provinces, and the World Bank in the six southern provinces. Table A12.2 summarizes the overall project outputs of the sector development grant.

Table A12.2: Summary of Outputs

Output Outputs Scope of Project Scope of Program

1 Strengthening planning and financing

Strengthen central, provincial, and district capacity for planning and budgeting, financial management, program approach, and management of health equity funds

Support for annual planning and budgeting and nonwage recurrent expenditures for health services including for health equity funds, health information system, and district hospital standards

2 Increased access to services, particularly for women, children, and ethnic groups

Improve selected health facilities; procure essential equipment; roll out the maternal, newborn, and child health minimum package, build capacity for model health villages

Support for improving maternal, newborn, and child health including rolling out mother- and child-friendly health facilities and model healthy villages

3 Better quality of human resources for health

Train skilled birth attendants and other staff members, initiate improvements in educational institutions, provide clinical support for rural health facilities

Implementation of the national policy on human resources for health, and national skilled birth attendance development plan

Appendix 12

75

7. Estimated total investment of the HSDP is $20.8 million; with an ADB grant of $20 million and $0.8 million as counterpart contribution from the Government. The program grant is $10 million and the project grant is $10.8 million. MOH will be the Executing Agency through the Department of Planning and Finance, while other MOH departments and provincial health offices will be the implementing agencies. The Project will be implemented with the support of a project coordination unit established within MOH and by the provincial health offices. HSDP approval is expected in 2009, and implementation is due to start in early 2010. It is to be implemented over a 4-year period, concluding in 2014. C. Environmental Description 8. Most Lao PDR hospitals—and almost all health centers—in the northern provinces are located in low population-density areas across hilly and mountainous terrain, which are connected through a system of winding, paved and unpaved roads. Many of the remote health centers are not accessible by main road connections. Reaching them can take a few hours of travel by footpaths and trails, less with the use of motorbikes. The project district hospitals and health centers to be upgraded, improved, or replaced are not situated within environmentally sensitive areas. None of the district hospitals and health centers proposed for upgrading and improvement is known to be closer than 20 kilometers to the periphery of these areas. 9. The districts comprising the service population of the district hospitals and health centers range in population from 12,000 to 65,000, implying a low volume of services. Livelihoods are predominantly based on agriculture or forest products, although the manufacturing and services sectors are growing. Economic development and population growth are occurring, with consequently increasing—but still modest—demands on health services and infrastructure. 10. Sanitation infrastructure in most districts and villages is basic, but coverage is high. Households typically construct pit latrines. In the low- and medium-density conditions that typify most small villages, these are usually appropriate and adequate for the disposal of wastewater and household sullage. Septic tanks, where used, are often inadequately designed, constructed, or regularly emptied. Public sanitation facilities are rarely installed. 11. Solid waste generation is currently increasing with economic activity, particularly with more trade in goods packaged in various forms of plastic containers. Some districts have collection systems, but none have appropriate disposal facilities. Collection systems are rarely adequate to collect refuse on a regular, thorough basis. Very little recycling and composting of solid waste takes place. The same situation occurs in hospitals and health facilities where separation of nonhazardous and hazardous wastes is commonly practiced, but not followed through with proper storage, collection, transfer, treatment, and disposal. 12. The districts and villages are impaired by poor drainage and indiscriminate littering of solid waste. Many district and village roads remain unpaved and dusty, with poor surface treatment and appear not to benefit from a regular repair and maintenance program. The main roads are lined with open canals or lined trench drains, which are poorly kept and frequently blocked. Blocked drains and puddles provide habitats for insect disease vectors. Data show that the most common diseases such as cholera, diarrhea, dysentery, and hepatitis—related to poor-quality drinking water and hygiene—and dengue fever are attributable to the presence of stagnant water.

Appendix 12

76

D. Environmental Impact and Mitigation Measures 13. Positive impacts are expected to arise from the subproject improvements in health facilities and increased access to health services for women, children, and ethnic groups. The upgrading and improvement projects will enhance public health and the quality of health care made available at the district and village service areas. They address priority problems that would otherwise hinder health sector development. 14. Some items of potential concern may occur in connection with subproject location and design, the construction phase, and operation phase. The main environmental concern is solid waste management. This is not so much a result of upgrading, but a preexisting problem that may increase in importance with the increased use of services. The upgrading creates a good opportunity to address this problem, in line with government plans. Other issues are (i) wastewater management, (ii) an increased burden on drainage systems due to upgrades of service facilities, and (iii) an increased burden on water supply sources. 15. As construction will only be concerned with upgrading existing premises, only minor local and temporary negative impacts are expected during the construction phase, in particular some noise, dust, deterioration of water quality through sediment laden runoff or improper waste disposal, and added breading sites for mosquitoes. These can be readily managed to acceptable levels through implementation of standard construction environmental management practices. Occupational health and safety standards must also be followed. 16. Project design for upgrading of each facility will incorporate (i) improved drainage and sanitation conditions in the hospital and health center facilities, (ii) behavioral changes in sanitation practices and raised awareness of sanitation and health, (iii) improvements to public sanitation facilities and drainage, and (iv) enhanced capacity of hospital and health center staff members to manage solid waste and sanitation through capacity building and supply of operation and maintenance equipment. 17. MOH will be advised to implement the establish policies, plans, and procedures, and national integrated health care waste management plan. This plan will establish the standards based on the Lao PDR's current environmental protection law, its implementing rules and regulations, and World Health Organization standards in health care waste management. It will be implemented at different levels for provincial, district, and health center applications. Health care waste management will be incorporated into operational manuals for health facilities, and personnel will be regularly trained on the implementation of correct practices. 18. Environmental impact and mitigating actions of program policies are summarized in Table A12.3.

Appendix 12

77

Table A12.3: Environmental Impact and Mitigating Actions of Program Policies

Policy Measures Positive/Negative Impacts Mitigating Measures

A. Strengthened Planning and Financing Preparation of Annual Operation Plans and Budgets Increased Nonwage Recurrent Cost Finance Expansion of Health Equity Funds

Positive: Incorporation of waste management Positive: Provides recurrent funds for maintenance and supplies Positive: Less income erosion due to medical care allows more investment in home improvement Negative: Increased use of services increases waste

Use village health committees and volunteers to advise poor households on investing for improving living conditions Ensure proper implementation of solid waste management program

B. Increased Access to Services, in Particular for Women, Children, and Ethnic Groups Approval of National Strategy for Maternal, Newborn, and Child Health Approval of Guidelines for District Hospitals Approval of Guidelines for Model Healthy Villages

Positive: Increased institutional delivery and waste management of tissue Negative: Increased use of services generates more waste at district hospitals Positive: Proper guidelines for managing waste management Positive: Increased environmental measures at the village level

Apply guidelines for waste management in general and disposal of tissues in particular Incorporate education on environmental health in model healthy villages and volunteer training

C. Better Quality of Human Resources for Health Approval of the National Policy on Human Resources for Health Approval of Skilled Birth Attendance Plan

Positive: Better skilled staff members in environmental health in general; waste management and disposal of tissue in particular

Ensure environmental waste management is part of curricula and training is hands-on

Source: Asian Development Bank E. Institutional Requirements and Environmental Management Plan 19. Typical environmental mitigation and monitoring plans for the pre-construction, construction, and operation stages of the upgrading and improvement projects have been prepared and are included in the IEE. During preparation of site-specific environmental management plans, reference will be made to the plans containing relevant site-specific mitigation measures for inclusion in the environmental management plan.

1. Environmental Responsibility

20. The project coordination unit in the Department of Planning and Finance will be responsible for the implementation of the environmental safeguards in the HSDP. It will ensure adequate consultation with representatives from central-level agencies, including the Water Resources and Environment Agency as the environmental regulatory agency. It will delegate implementation of policy actions to the Environment Health Division, Department of Hygiene and Prevention, as the focal point for improving health care waste management in MOH, and provide this office support for dissemination through workshops, training, and pilots of the new MOH standards and guidelines on waste management.

Appendix 12

78

21. The main environmental responsibility resides in provincial health offices, which are responsible for carrying out and preparing for IEEs in accordance with an environmental assessment and review framework prepared for the HSDP. These offices will also be responsible for the implementation of the environmental management plan during detailed design and construction, with overall guidance from the project coordination unit. During operation, responsibility for environmental management plan implementation rests primarily with the MOH-designated environmental unit to handle sanitation, health care waste management, and wastewater management.

2. Environmental Management Plan 22. Main environmental monitoring includes compliance monitoring; community feedback; and health care waste, sanitation, and wastewater management monitoring. Compliance monitoring will be conducted during the detailed design and construction phases to ensure that mitigation specified in the environmental management plan is carried out. The project coordination unit will assist provincial health offices in identifying proper indicators and undertaking compliance monitoring. Community feedback and monitoring of key environmental indicators will be integrated as part of the activities of the project monitoring group that will be formed. 23. An environmental management budget to cover costs for management and monitoring at the district hospitals and health centers will be established. F. Public Consultation and Information Disclosure 24. The consultations showed a high level of acceptance of the HSDP as it will improve the hospitals and health centers' current state and capability for improved efficiency and service delivery, particularly to achieve Millennium Development Goals. Some of the raised environmental concerns included the lack of proper waste management, lack of adequate personnel for facility operation and maintenance, inadequate water supply at certain times of the year, internal drainage problems during rainy seasons, and basic lack of equipment and supplies. Such concerns will be incorporated in the mitigation and monitoring plans during project design and implementation. 25. To ensure that future project activities are conducted in a participatory manner, a range of public consultation and disclosure activities will be implemented throughout project implementation and evaluation using project disclosure requirements. G. Findings and Recommendations

26. The project activities implemented under the HSDP are expected to have a range of major social benefits, particularly for mothers, children, and ethnic groups. The Project is expected to benefit the population of the targeted district hospitals and health centers. It is also expected to support policy reforms on the regulation of the hospitals and health centers with respect to hospital facility and equipment standards, environmental protection, sanitation and hygiene standards, environmental regulation issues (particularly on health care waste management issues), and quality of health care delivery. Based on the analyses contained in IEE, the following recommendations are made.

Appendix 12

79

(i) The IEE concluded that no significant environmental impacts will occur as a result of the activities under the Project. The overall HSDP classification of category B will continue to be monitored during implementation.

(ii) To ensure that environmental issues receive an appropriate level of recognition and action in its implementation, it is recommended that the grant agreement between ADB and the Government make specific reference to environmental issues and include relevant covenants for action in the said documents.

(iii) Environmental compliance certificates or their equivalent form in the Government should be issued by the Water Resources and Environment Agency before any civil works are contracted for construction.