Documat of

The World Bank

FOR OFFICIAL USE ONLY

CRepwt NO- P-5118-HA

MEMORANDUM AND RECOMMENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAL DEVELOPMENT ASSOCIATION

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED CREDIT OF SDR 22.2 MILLION

TO THE

REPUBLIC OF HAITI

FOR THE

FIRST HEALTH PROJECT

NOVEMBER 28, 1989

This document bas a resticted distribution and may be used by recipients only in the performance oftheir official dut Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALZNTs

Currency Unit - Gourde (0)US$1.00 - 0 5.000 1.00 - US$0.20

ABBRZVIATIONS

AIDS - Acquired Iuuunodeficiency SyndromeCIDA - Canadian International Development AgencyCOB - Government of HaitiG:N - Gross National ProductiCC - International Child CareIDA - International Development AssociationNEP - Ministry of Economy and FinanceMSPP - Ministry of Health and PopulationNGO - Non-governmental OrganizationPA - Programatic AreaPAlO - Pan American Health OrganizationPNC - Primary Health CareP30 - Project ManAgement UnitPPP - Project Preparation FacilityTB - TuberculosisUEK - Western Health Region

FISCAL YEAR

October 1 - September 30

FOR OFFICIAL USE ONLY

HAITI

FIRST HEALTH PROJECT

Credit and Pro1ect Summary

Borrower: Republic of Haiti

Beneficiary: Ministry of Health and Population

Amount: SDR 22.2 million (US$28.2 million equivalent)

Termst Standard IDA, with 40 years maturity

Financing Plan: GOH US$ 3.1 millionIDA US$ 28.2 millionCIDA USS 2.4 million

Total US$ 33.7 million

Economic Rateof Return: Not applicable

Staff AppraisalReports No. 8008-HA

map IBRD No. 21848

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

HMDORANDUK AND RECOKENDATION OF THE PRESIDENToF THE INTENuATIONAL DEVELOPHENT ASSOCIATION

TO THE EXECUTIVS DIRECTORSON A PROPOSED CREDIT TO THE

REPUBLIC OF HAITIFOR A FIRST HEALTH PROJECT

1. The following memorandum and recommendation on a proposeddevelopment credit to the Republic of Haiti for SDR 22.2 (US$28.2 millionequivalent) is submitted for approval. The proposed credit would be onstandard IDA terms with 40 years maturity and help finance a First HealthProject for Haiti. The project would be cofinanced on a parallel basis bythe Canadian International Development Agency (CIDA) for US$2.4 millionequivalent.

2. Background. Haiti is one of the poorest countries in Latin America,and its economic and social development face major challenges. Socialindicators, among the worst in Latin America, reflect the poor health statusthat prevails: life expectancy averages 54 years; the infant mortality rateis 119 per 1,000; and maternal mortality is 367 per 100,000 births. Diseasesof underdevelopment--diarrhea, malaria, typhoid, poliomyelitis, tuberculosis(TB) and other respiratory diseases--account for high mortality andmorbidity. Malnutrition, an underlying etiology of most diseases, iswidespreadt only one quarter of children under five years of age are in thenormal range of weight for age. Total fertility has risen and is now 6.8children per woman. Modern contraceptive methods are only practiced by 4.9Zof women in reproductive age. With the population growing at 2.12 per year,projections show the current population of 6.2 million doubling by the year2030. Since its silent start in the late 19709, Acquired ImmunodeficiencySyndrome (AIDS), frequently associated with TB, has reached epidemicproportions. Overall, the current health problems in Haiti may lead to analarming increase in under-five, young adult, and maternal mortality.

3. Responsibility for policy and public health services is carried bythe Ministry of Health and Population (MSPP). The MSPP, which employs overone-fifth of all public sector employees, has three layers of management:central, regional, and district level. The central level is responsible forservice standards and norms, and absorbs a significant share (23?) of thehealth budget; the four health regions act as the administrative liaisonbetween the district level and the center, orchestrating district planningand budgeting; and the fifteen district offices oversee the functioning ofhealth institutions in 136 communal sections. A streamlining of the MSPP iscurrently being planned, and would involve: the reorganization of thecentral administration along functional lines; the division of the fourregions into nine departments to bring the MSPP in line with theadmlnistrative structure of other ministries; and the strengthening ofadministration at the municipal level. Private health establishments, manyof them run by externally-funded non-governmental organizations (NG0s), makeup almost 502 of che health facilities in the country. NGO interventions inthe health sector have been, on average, more effective than governmentsponsored activities but have been fragmented and often developed without dueconsideration of gaps in services provided by the public sector.

4. Despite substantial funding of the health sector--total expenditureon health (public and private) reached 5? of GNP in 1987--the MSPP has beenquite ineffective in implementing the Government of Haiti's (GOH) health

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policy, issued in 1982. Four key factors have undermined efforts to promotepublic healths (a) excessive share of salaries C87.5X) In the operatingbudget. due to lack of control of personnel recruitment and failure toimplement retirement policles; tb) lack of consistency in applicatlon ofservice charges, poor management of revenue and, possibly, the disincentiveeffect of charges to the very poor for preventive services; Cc)centralization of human and financial resources in the Port-au-Prince arealand (d) inadequate management capability and support systems (for procurementof civil works, for example) in combination with crltical shortages ofmiterials, equipment, and drugs. The GOH has recognized these factors and isseeking external financing and technical assistance to address them.

5. Rationale for IDA Involvement. At present, IDA country assistancestrategy for Haiti has three main lines of actiont (a) support for theeconomic reforms and recovery program initiated in 1986, mainly throughtechnical assistance and policy dialogues Cb) selected investments forcritical social services, education, water supply, and health, directed tothe lowest income households and in a framework of due attention to finance,including sustainability, and to management and institutional development;and tc) assistance to the GOB in securing external financing for the socialsectors by promoting coordination and consultation among donors. Since 1976,IDA has financed four operations in the education sector to increase, amongother objectives, access to primary education; a proposed Fifth EducationProject is under preparation to expand the program as wall as to strengthensector management. IDA has also recently approved a credit for a Port-au-Prince Water Supply Project (Credit 2052-HA) that will expand servicecoverage while strengthening the operational efficiency, and an IndustrialRestructuring Project (Credit 2071-HA) that aims to complement existing tradepolicy reform and generate employment. In order to address the most adverseeffects of the depressed economic situation, IDA is preparing a furthercredit to support small-scale employment-generation projects and socialassistance. In extending the operations program to the health sector, theproposed project would closely fit IDA country strategy, and would helpimplement the recommendations of a 1987 IDA sector review. These advocate:reallocation of public resources in favor of primary health care (PHC)through increased financing of non-salary operating expenditures;decentralization of management, including delegation of operationalresponsibility to the municipal levelt and more integrated participation ofNGOs in PEC. IDA's presence in the sector would facilitate the coordinationof activities of other donors, by providing a framework for sectorinvestments. IDA would, for example, collaborate with the Pan AmericanHealth Organization (PAHO) in implementing the AIDS and TB national programs.Donor coordination would also be reinforced through the proposed parallelcofinacing from CIDA. IDA financing to rationalize PHC services delivery inthe two departments of the Western health region (WHR) is expected to serveas a model for possible replication by donors in other parts of the country.

6. Proiect Objectives. The project aims at assisting the GOH inimproving the country's health status and increasing the efficiency andeffectiveness of expenditures in health. The objectives includes (a)reducing MSPP central administration expenditures by about 352 in real terms;(b) changing the ratio of salaries to operating expenses from the current87.5/12.5 to 70/30 by 1994; (c) implementing improved cost-recoverymechanisms for medical services and drugs; (d) developing a more coherentinstitutional framework involving the selective strengthening of keymanagement and technical functions, and the development and enforcement ofpersonnel norms and standards; (e) for the 2.1 million population of the WHR,

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reducing both maternal and child mortality rates by 152 by the end of thethird year of the project, and by 402 by the end of the sixth year; and (f)reducing the potentially devastating effects of the TB and AIDS epidemics.

7. Project Description. The project would includes An Institutionaldevelogment comonoent (122 of total costs) designed to facilitate and makemore effective the project's health service delivery activities, whileensuring the future sustainability of PHC programs in Haiti. This would beaccomplished through: (a) development of simple budget allocation indicatorsto monitor and facilitate a more effective use of public resources in health;(b) design and implementation of more transparent and equitable cost recoverymechanisms for medical services and drugs; (c) reinforcement of MSPP'scapacity to manage civil works, and development of better procedures forpurchasing and distributing drug supplies; and (d) redeployment of personnelin the WHR to achieve a more balanced distribution between urban and ruralareas. To support these actions, the project would finance 20 man-months oftechnical assistance. A health services delivery coemonent (63Z of totalcosts) consisting of implementing a PHC services delivery model in the WHR.The W'HR covers one quarter of the area of Haiti, and is composed of fourhealth districts, including Port-au-Prince. Under the project, healthservices would be organized into 30 local health systems called ProgrammaticAreas (PAs) that would assume responsibility for coordinating health sectorservices at the municipal level. Standard health interventions, particularlytargeted to mothers and children, would be provided by community healthworkers in regularly scheduled population gatherings. Further, NGOs wouldexecute specific project activities, and coordination with NGOs in the sectorwould be improved. The project would also include the rehabilitation of 17facilities and the remodelling of 11 facilities, medical equipment andsupplies, essential drugs, vehicles, materials and equipment for theconstruction of latrines. and technical assistance. An epidemic preventionand control component (25X of total costs) covering: (a) the support of thePAHO-coordinated medium-term AIDS Control Program through financing oflaboratory testing equipment, education materials, and protective equipmentand supplies for health personnel. The AIDS Prevention and Control Unit ofthe MSPP would be responsible for the implementation of this sub-component,and it would be coordinated and monitored by the PAHO office in Port-au-Prince; and (b) the development of an integrated national TB control programthrough financing of drugs, laboratory equipment, and training andsupervision. The project would reinforce the institutional capacity of theMSPP to implement TB programs through the integration of activities withInternational Child Care (ICC), an NGO with operational and technicalexpertise in TB control activities. The project would also finance theorganization of a conference on TB and AIDS.

8. Project activities would be supported by a suitably staffed projectmanagement unit (PMU), integrated into and drawing on staff of the relevantMSPP directorates. Annual reviews, to be conducted jointly by the GOH andIDA, would assess progress in project implementation. Donor coordinationwould be attained through annual meetings to ensure coordination inallocation of external resources in the sector.

9. A Project Preparation Facility (PPF) of US$560,000 was approved byIDA in October 1987, and increased to US$750,000 in April 1989 and toU'$900,000 in November 1989. The total cost of the project is estimated atUS$33.7 million equivalent with a foreign exchange component of US$22.4million (66Z). A breakdown of costs and the financing plan are shown in

Schedule A. Amounts and methods of procurement, and the disbursementschedule are shown in Schedule D. The timetable of key events of projectprocessing is summarized in Schedule C. The status of Bank Group operationsin Haiti is shown is Schedule D. A map is attached. The Staff AppraisalReport, No. 8008-HA, dated November 28, 1989 is also attached.

10. Agreed Actions. Agreements were reached at negotiations that.(a) total expenditures attributable to MSPP's central administration willdecrease (in real terms) by 25? by September 1990 from their June 1989 level,and by 15 by September 1992 from their September 1990 levell (b) the cost-recovery study will be completed and discussed with IDA by April 1991, andimproved cost-recovery mechanisms, following recomendations of the studyagreed by IDA and the MSPP, will be put into effect by September 1991;(c) the MSPP shall take all measures as necessary to achieve at the end offiscal years 1990, 1991, 1992, 1993 and 1994 and each year thereafter theratios between salaries and other operating expenses of 84.5115.5, 81/19,77.5/22.5, 74/26, 70/30, and 70/30 respectively; (d) resources freed fromsalaries will remain available to the MSPP for other operating expenses;(e) data bases and financial information of the MSPP and the Ministry ofEconomy and Finance (MEF) will be substantially consistent, so as to enablebetter control over MSPP's salary expenses; (f) the MSPP shall cause each PAto be staffed in accordance with staffing profiles that have been agreed withIDA; (g) the MSPP shall maintain at all times within its staff an ExecutiveDirector, a Project Controller, and an Engineer with qualifications andexperience satisfactory to IDA; and (h) the MSPP shall, no later than fourmonths prior to the beginning of each fiscal year during the projects(1) submit to IDA for review and comments the public sector health budget andfor approval the detailed plan of pi-oject expenditures for the next followingyear, and (2) conduct annual project progress reviews, including budgetaryallocation and management of health resources. Conditions of crediteffectiveness are thatt (a) the GOH presents evidence that key staffpositions in the PAs programmed to initiate activities during the first yearof the project have been filled; (b) the MSPP and ICC have entered into anagreement stipulating, inter alia, the role and responsibilities of ICC inthe implementation of the TB control sub-component and the type ofexpenditures of ICC to be financed under the project; and (c) the GOB opensand maintains a project account under terms and conditions satisfactory toIDA, and deposits the initial amount representing three months of operatingexpenditures. Conditions of credit disbursement are that: (a) for therehabilitation of facilities of participating NGOs, the MSPP and the NGO haveentered an agreement, stipulating the role, responsibilities and reportingrequirements of the NGO, and type of expenditures to be financed under theproject; and (b) for the National AIDS Control Program sub-component, theMSPP has entered into an agreement with PAHO stipulating PAHO's role incarrying out this sub-component and the respective obligations of PAHO andthe MSPP.

11. Benefits. The project's main benefit would be to extend healthservice coverage and improv^ the health status of up to 2.1 million people inthe WHR, particularly of mothers and children, and control the spread of twomajor epidemics (AIDS and TB) nationwide. A second major benefit would bethe improvement of the effectiveness and efficiency of the health system:first, by addressing financial and institutional issues; and second, byrebuilding beneficiary trust in public services. A third benefit would bethe establishment of a framework that would facilitate future externalfinancing of PHC programs and integrate more effectively services provided bythe public and private health sectors.

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12. Risks. The project faces four main risks: (a) the weakorganizational and implementation capacity of the MSPP compounded by thepolitical and social instability of the country; (b) the lack of financialdiscipline and budgetary control in the sector; (c) the possibility of delaysin implementing the sector's decentralization strategy, particularly withregard to personnel; and (d) the sector inexperience with IDA-financed andpolicy-based health projects. These risks would be reduced by attention toinstitutional development, technical assistance, improved donor coordination,and the creation of a small and high-caliber PMU. The gradual phasing ofpolicy measures, supported by annual progress reviews, would also minimizeproject risks. In addition, to ensure timely start of the project,technical discussions on procurement and disbursement have been held withrelevant officials, and intense supervision efforts by IDA (four missions peryear) have been planned, particularly for the first two years ofimplementation.

13. Recomnendation. I am satisfied that the proposed Credit wouldcomply with the Articles of Agreement of the Association and recommend thatthe Executive Directors approve the proposed credit.

Barber ConablePresident

Attachments

Washington, D.C.November 28, 1989

-7

Schedule AHAITI

FIRST HEALTH PROJECT

Estimated Costs and Financing Plan

Estimated Costst a/

----- US$ million_--------Local Foreign Total

A. InstitutionalDevelopment 2.0 1.6 3.6

B. Service Delivery 6.2 11.4 17.6

C. Epidemic Control 1.2 6.3 7.5

TOTAL BASELINE COSTS 9.4 19.3 28.7

Physical Contingencies 0.2 0.9 1.1Price Contingencies 1.7 2.2 3.9

TOTAL PROJECT COSTS 11.3 22.4 33.7

a/ The project is exempted of taxes and duties.

-------- US$ million --------Local Foreign Total

Financing Plan:

GOH 3.1 0.0 3.1IDA 7.2 21.0 28.2CIDA 1.0 1.4 2.4

Total 11.3 22.4 33.7

Schedule SPage 1 of 2

HAITI

FIRST HEALTH PROJECT

Procurement Method(US$ million)

Proiect Element ICB Is LCB Other NA Total

Civil Works 3.5 3.5(3.5) (3.5)

Equipment, Furniture,Medical Supplies 10.3 10(l 3Drugs (10.*3) (10.3)

Furniture, Office Supplies 0.6 0.1 0.7(0.6) (0.1) (0.7)

Vehicles, Motorcycles 3.5 3.5(3.5) (3.5)

Training 4.3 4.3(1.9) (1.9)

Technical Assistance 1.9 1.9(1.9) (1.9)

Project Management 2.3 2.3Unit (2.3) (2.3)

New Staff Salaries 3.1 3.1t-) (-)

Veh. Op & Maintenance 2.2 2.2(2.2) (2.2)

Supervision Allowances 1.0 1.0(1.0) (1.0)

PPF Refinancing 0.9 0.9(0.9) (0.9)

TOTAL 3.5 10.3 4.1 10.8 5.0 33.7(3.5) (10.3) (4.1) (8.4) (1.9) (28.2)

NOTEt Figures in parentheses are the respective amounts financed by IDA.

Schedule Page 2 of 2

HAITI

FMST HEALTH PROJECT

Allocation of Credit Proceeds

Cutenory Credit Amount Disbursmnt(USI million) x

1. Civil works 8.4 100 of expenditure

2. Equipment, furniture 8.5 100 of expenditures

medical suppliesand drug (other than forthe AIDS sub-component)

8. Goods and services for the 1.7 100 of expendituresAIDS sub-component

4. Vehicles and metorcycles 8.0 100 of expenditures

5. Training and ftllowhtpe 100 of expenditures1.S (a) per dlem, mteerials

and trennportation0.1 (b) fellowshipe abroad

S. Technical assistance 1.0 100 of expendituresand studies (excluding

TA from CIDA)

7. Salarie of the PUU and t.0 100 of oxpendituresnon-eatery operating costs

8. PPF refinancing 0.9 100 of expenditures

10. Unallocated 2.5 -

TOTAL: 28.2

Estlated Disbursements(USS milion)

IDA Fisal Year

1990 1991 1992 1998 1994 19"S 1996

Annual 2.5 8.4 4.2 4.7 4.7 4.5 4.2Cumulative 2.5 5.9 10.1 14.8 19.5 24.0 29.2

-10 -

Schedule C

HAITI

FIRST HEALTH PROJECT

Timetable of Ke9 Pro1ect Processing Events

Time needed to prepares Two years

Prepared by: MSP? with assistance of consultantsand IDA

First IDA missions June 1987

Appraisal mission departures June 1989

Negotiations: November 1-3, 1989

Date of Board presentation: January 16, 1990

Planned date of effectiveness: April 1990

List of relevant PCR's and PPAR's Second Education Project(PCR No. 6529, December 1986)First Education 2roject(PPAR No. 4605, June 1983)

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Schedule D

HAITI

FIRST HEALTH PROJECT

STAus OF BAN KmP WUATIN IN HAT

A. Stateent of Beok Lease and IDA Credilt a. of September So, 19

-- USS M1 I Ion----Amount

Credit Fical ' (Le Cancelloin)No. year broer PugPoo Sanb IDA Undisbureed

One loan and 17 ceWite have bee fully dlibrsed 2.6 188.0

1257-H 1o2 Rpubilc of Haiti Forestry 4.0 0.4FP-H 1to Republc of Haiti Urban Oelomt 18.0 1.$.188-A 188 R"ubilc of Haiti Urban elopmt 8.0 1.81410-A 1984 Repblic of Haiti Rural lopmt I 19.1 0.71527-A 18 Republic of Haiti Fourth Poer 21.1 2.81592- 1888 Repubilc of Haiti Fourth Education and Training 19.0 6.61756-H 1a? Republic of Haiti Treneprt ViI 2s0J 8.01766-H 1987 Repblic of Haiti Tochnlal Asetance 8.O 9.22062-HA 188 1/ Repblic of Haiti Wtr Supply 26.9 19.465-HA 1061/ Republic of Haiti Power V 24.0 28.7

Total 2.0 "S.0 72.0Of which ha. bee repad 1.6 8.2

Total Now Outetaadng 2/ 8806

Amount Sold 0.4of which has bee rpaid 0.4

Total Undieburse 72.0

1/ Not yet effective.2/ DIfference du to fIucustion It aDR/USD eachange rate.

Converted at rate prevtling aat September We, 10.

S. Statement of IFC Inveetment as of September 89, 180

US-hM Illion--Investment Fisecl Typ ofNumber year Ob Igoer lulnse Lon EquIty Total

829-HA 11"2 Przosours at Investises Integrated Poultry 1.4 6.1 1.5Aesocle, S.A.

Total Gross Coemitmnt 1.4 0.1 1.5Lee Repaymente, Cancellations, Soles 1.1 _ 1.1

Total comitmnte now hld by IFC 9.8 9.1 0.4

Total Undibureed °.9 9.6 0.9

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