Malawi - Second Family Health Project

Dolmu:t Of The World Bank FOR OFFICIAL USE ONLY Co4 ,2CP-4s. Report No. P-4423-MAI REPORT AND RECOMMENDATION O THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT IN AN AMOUNT OF SDR 8.7 MILLION TO THE GOVERNMENT OF MALAWI FOR A SECOND FAMILY HEALTH PROJECT March 5, 1987 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Ctirrency Unit * Malawi Kwacha (MK) (September 1986) US$1.00 a tDC2.00 MX11.00 * US$0.50 (January 31, 1987) SDR1.00 * US$1.27 ABBREVIATIONS AND ACRONYMS CDR Crude Death Rate CEM Country Economic Memorandum CG Consultative Group CIF Carriage, Insurance and Freight CHS Chief of Health Services CMS Central Medical Stores DMO District Medical Officer EEC European Economic Community EDF European Development Fund EP&D Department of Economic Planning and Development ESW Economic and Sector Work GDP Gross Domestic Product ICB International Competitive Bidding IEC Information, Education and Communication INR Infant Mortality Rate INDEBANK Investment and Development Bank of Malawi KfW Kreditanstaldt fur Wiederaufbau MCH Maternal and Child Health MOCS Ministry of Community Services NOR Ministry of Health IWS Ministry of Works and Supplies NRDP National Rural Development Project ODA Overseas Development Administration PIlAM Private Hospitals Association of Malawi PHC Primary Health Care UNFPA United Nations Fund for Population Activities UNICEF United Nations Children's Fund VHC Village Health Committee GOVERNMENT FISCAL YEAR April 1 to March 31  FOR OfmICIAL USE ONLY MILAWI SECOND FAMILY HEALTH PROJECT Credit and Projlct Sumary Borrower: Republic of Malawi Beneficiaries: Ministry of Health, Department of Economic Planning and Development Credit AmQunt: SDR 8.7 million (US$ 11.0 million equivalent) Terms: Standard IDA Terms Project The project objectives are to: (a) improve the health status Description: of families, particularly of mothers and children, through expansion and strengthening of primary health care programs; (b) increase the availability and accessibility of child spacing services within the maternal and child health program; (c) further strengthen the Ministry of Health's (MOH) capacity to plan, manage and evaluate health services in the framework of a decentralized health system; and (d) design and implement a sultisectoral family health program through other government agencies. The project is comprised of two parts. The first part consists of activities to be undertaken by the NOH and includes (a) the building of health centers, replaceaent of a district hospital and the training of and provision of equipment and supplies to village health care workers to extend coverage of the primary health care system; (b) technical assistance, training, and provision of computer equipment to reorganize the MOH and to strengthen drug production and supply, health service management and manpower development; and (c) the ploduction of Information, Education and Communication (IEC) materials, health worker training, and the provision of vehicles, drugs, and facilities to strengthen matetnal and child health, child spacing and nutrition programs. The second part of the project consists of activities to be coordinated by the Economic Planning and Development Department (EP&D) and includes (a) training of women's welfare workers and youth program instructors and the production of educational materials on family health to be introduced into functional literacy and youth programs; and (b) the production of IEC materials on family health and child spacing concepts to be introduced into the mass media. Benefits The project would directly benefit about two million people and Risks: throughout the country through strengthening and expanding primary health care and family health programs and through increased accessibility of child spacing services. In the medium term, health status is expected to be improved by a significant reduction in the incidence of infant and This docLument has a restricted distribution and may be used by recipients only in the performance of their oficial dutiet Its contents may not otherwise be disclosed without World Bank authorization.  - ii - maternal mortality and morbidity. Population increase would be slowed through a siglnificant increase in women using modern contraceptives. The main project risk relates to the weak implementation capacity. The project minimizes this risk by (a) strengthening with additional staffing and technical assistance the units involved In carrying out the civil works component; (b) Improving coordination of multisectoral family health activities through the EP&D which is being strengthened with technical assistance; (c) implementing multisectoral fatily health activities through mlnistries with demonstrated adequate Implementation capacity; and (d) supporting a comprehensive management review of the MOH's reorganization. Estimated Cost: Local Foreign Total -(US$ Million)- - Primary Health Care 4.4 3.2 7.6 Management, Manpower and Support Systems 1.8 1.5 3.3 Family Health 3.0 2.8 5.8 Project Management 0.2 1.3 1.5 Multisectoral Health Program 2.7 1.6 4.3 Total Baseline Costs 12.1 10.4 22.5 Physical Contingencies 0.7 0.8 1.5 Price Contingencies 0.5 0.4 0.9 Total Project Costs a/ 13.3 ;1.6 24.9 a/ Includes US$0.4 million for taxes and duties. Financing Plan: Local Foreign Total ----(US$ million) -- IDA 4.7 6.3 11.0 UNICEF 1.2 1.4 2.6 European Development Fund 2.4 1.1 3.5 'fW 2.2 1.9 4.1 Government of the Netherlands .3 .6 .9 UNFPA .9 - .9 Government of Malawi (including taxes) 1.6 0.3 1.9 TOTAL 13.3 11.6 24.9 Estimated Disbursement of IDA Credit: IDA FY 1988 1989 1990 1991 1992 1993 ----- --US$ Millions-- - Annual 0.6 2.4 3.0 2.7 1.7 0.6 Cumulative 0.6 3.D 6.0 8.7 10.4 11.0 Rate of Return: N.A. Staff Appraisal Report: Report No. 6471-MAI, dated February 24, 1987. Mpj IBRD 20099  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF MALAWI FOR A SECOND FAMILY HEALTH PROJECT 1. I submit the following report and recommendation on a proposed credit to the Republic of Malawi for SDR 8.7 million (US$11.0 million equivalent) on standard IDA terms to help finance a Second Family Health Project. PART I - THE ECONIOMY 1/ 2. A Country Economic Memorandum (Report No. 5801-MAI) dated October 4, 1985, was circulated to the Executive Directors on October 15, 1985. Annex I contains the basic country data. Background 3. Malawi Is a small (118,500 sq km), densely-populated (about 7 million people in 1985), landlocked country in southeastern Africa. Its main assets are moderatc.y fertile soils, good water resources and a climate favorable to crop production. Unlike its neighbors, Malawi has no known substantial mineral resources. 4. With a GNP per capita of US$170, Malawi has been identified by the United Nations as one of the world's poorest countries. Nevertheless, from independence in 1964 until 1979, Halawi had steady economic growth, averaging 6 percent per annum in real terms (3 percent per capita). The leading sectors were agriculture and manufacturing. Investment rose from 9 percent of GDP at Independence to 33 percent in 1979, financed by increased domestic savings (from nil to 14 percent of GDP in 1979), and rising official and private capital inflows. In 1980 and 1981 Malawi met with serious difficulties due to world economic conditions, structural imbalances in the economy and deficient Government policies, and GDP contracted by 6 percent over those two years. Consumption fell somewhat, but savings and investment were reduced drastically. Recovery began in 1982, with growth averaging 3.2 percent through 1985, but preliminary indications show no economic growth in 1986. 5. Malawi's economic growth has been due in large part to the pragmatic policies of the Government. Malawi has adopted an outward looking strategy based on agriculture, consistent with the country's resource endowment. Government investment has concentrated on provision of infrastructure, utilities and support services to encourage private initiative. The Government has also emphnsized agriculture, a sound policy given that 90 percent of the population lives in rural areas and depends on agriculture for its livelihood. Traditionally, more than half of the development budget has been directed towards agriculture and transport. I/ Parts I and II of this report are substantially the same as those of the President's Report on the Second Lilongwe Water Supply Project (Report No. P-4374-MAI dated October 30, 1986).  -2- 6. Malawi's economy is heavily dependent on three primary commodity exports (tobacco, tea, and sugar) and is highly vulnerable to international price fluctuations. In 1980-85 these three commodities averaged 70 percent of total exports and 16 percent of GDP. Since 1974, there have been periodic balance of payments problems of increasing severity due primarily to (a) rapid escalation in import prices, particularly of fuel and intermediate and capital goods; (b) cyclical swings in export prices of tobacco, sugar and tea; (c) signifLcantly higher costs of transport for exports and imports owing to rising ocean freight charges, port congestion in Mozambique, and, more recently, severe disruptions of overland transport routes through Mozambique resulting in couplete severance of direct rail links to Mozambique ports in 1984; and (d) an increasing debt service burden. Economic Developments 1978-86 7. Beginning in 1978, Malawi's chronic balance of payments problems became less manageable. The current account deficit rose from a level of 8-9 percent of GDP in the uid-1970s to 18 percent in 1978 and 23 percent in 1979. Import prices rose by 39 percent over this period, primarily due to petroleum price hikes. Conversely, export prices declined by 16 percent Cdue mainly to falling tea and tobacco prices). In 1980 and 1981, a drought led to reduced agricultural exports and necessitated increased imports of subsistence crops (maize). Nevertheless, by 1981 Malawi enjoyed a surplus on the merchandise trade balance (f.o.b.) thanks mainly to a contraction in imports and has increased this surplus steadily since 1981. Continuing current account deficits were due to a large deficit on the service accounts. Transport costs for imports and exports were greatly increased due to continuing problems with traditional export routes through Mozambique. Debt servicing also contributed to the deficit on the invisibles account. These current account deficits were initially financed by sharply increased private capital inflows. These were still not sufficient to finance the current account deficit and the country drew down its foreign reserves to less than one month of imports by end 1983. In 1984, the current account deficit was greatly reduced to three percent of GDP and reserves were increased by US$65 million. This was due to' improvements in the terms of trade, led by record tea prices, and a sharp increase in exports, as previous stocks of tobacco and sugar were moved out of the country, resulting in a large trade surplus, nearly matching the deficit on the services account. By contrast, in 1985 terms of trade experienced a drastic downturn, mainly owing to a sharp drop of tobacco prices, which in conjunction with expansionary fiscal and monetary policies provoked a current account deficit of 9 percent of GDP. Again, reserves fell to insufficient levels. Preliminary data seem to indicate for 1986 a slight reduction in the current account deficit to about 8 percent of GDP, although this was achieved by sharply limiting imports. At the same time, the overall BOP deficit was more than US$80 million. A major item in this deficit is short term outflows and errors and omissions equal to more than US$90 million. If some of this outflow turns out to be security related imports, then the current account deficit will be higher. In any case, the country has not been able to finance all of this deficit and import payment arrears were about US$60 million at the end of 1986. 8. The economic difficulties of 1980-81, as well as problems with public corporations, led to an increase in the Government budget deficit reaching 16.5 percent of GDP in 1981, double historic levels. This was due  -3- primarily to a rapid increase in government expenditures, attaining 35 percent of GDP in that same year. Much of this was made up of recurrent expenditures, especially interest payments. Revenues did not increase commensurately, given the recession, hence the large fiscal deficit. These deficits were financed by government borrowing, primarily domestic. Public sector credit represented 60 percent of total domestic credit in 1984 and as a percentage of GDP it increased to 13 percent in 1984 as compared to 9 percent in 1974. The fiscal position had improved with increased revenues and restrained spending, so that the deficit was reduced to 8.9 percent of GDP by FY84/85 and 10.9 percent by FY85/86, though still above target levels. Indications are that the deficit may increase to at least 12.5 percent of CDP in FY87, as the severe import cuts reduced Government revenues, and expenditures are likely to exceed the budget by significant amounts. Improving expenditure control is a key element to continuing Malawi's economic recovery. Inflation has been within a range of 10-15 percent since 1981. 9. Given Malawi's early stage of development, foreign capital inflows, especially of a public nature, have been important in development financing. In the pre-recessionary period (1969-79), foreign savings financed approximately half of domestic investment. During the recession (1980-81), public and private capital inflows were used to maintain consumption levels, and domestic savings fell. Since 1981, domestic savings have been increasing, while private inflows have virtually ceased. Public transfers continue, financing approximately 50 percent of all investment. While multilateral assistance, led by World Bank Group loans and credits, has increased, grants and bilateral transfers have declined from past levels, and have not kept pace with Malawi's needs. Stabilization and Adjustment Programs 10. Initially, the country attempted to offset the economic downturn of 1979-1980 by increased external borrowing, mostly on commercial terms, in order to maintain import levels and thus production, employment and consumption. It soon became evident that with increasing inflationary pressures and fiscal and balance of payments disequilibria, more stringent adjustment efforts were needed. The Government, therefore, launched a stabilization effort designed to reduce short-term fiscal and balance of payments disequilibria and a structural adjustment program designed to improve efficiency of resource use and ensure that positive growth of per capita income can be reestablished and sustained over the medium and longer-term within the context of .a manageable balance of payments current account deficit. The structural adjustment program is broad-based; aimed at encouraging diversification of production and exports, improving performance of productive sectors, rehabilitating, restructuring and otherwise strengthening key development institutions, and improving resource mobilization and allocation in the public sector. 11. The Government and the IPF agreed to a standby program for SDR 22 million in August 1982. A first phase of a multi-year stabilization effort, the program aimed at reducing both the balance of payments current account deficit and the budgetary deficit. As part of the program, the Government devalued the kwacha against the SDR by 15 percent in April 1982. The other performance criteria involved phased ceilings on net domestic assets of the banking system and on net credit to the Government and a limit on government external commercial borrowing. The standby was  4 implemented satisfactorily, and the Government and the IMF concluded a new multi-year program. A three year Extended Fund Facility was approved in September 1983 and, was successfully iuplemented until April 1985. In early 1986 due to a combination of unfavorable terms of trade and inadequate domestic policy response, the programmed targets for public sector deficit and domestic credit expansion were not achieved. As a result, the Extended Facility became inoperative. Under the Extended Facility program an active foreign exchange policy was pursued. Thus, in September 1983 the Government devalued the Kwacha against the SDR by 12 percent and in January 1984 the Kwacha was pegged to a basket of seven currencies. In April 1985, the Kwacha was devalued by 15 percent in terms of the reference basket to reverse a real appreciation which had taken place since late 1983, was devalued again by an additional 10 percent in August 1986, and 20 percent in February 1987. The Government of Malawi and the IMF are currently discussing a possible new Standby Arrangement and an SAF loan. 12. The Bank's first Structural Adjustment Loan in support of the Government's program was made in June 1981, for US$45 million. After initial difficulties, good progress was made in implementing the Government's adjustment program. Additional funds were allocated to the agricultural sector, certain agricultural prices were adjusted, public utility tariffs were increased and the budget for 1982-83 was trimmed, with sufficient resources provided for major development sectors. The second tranche was released in April 1982. However, during 1982 the country's efforts were set back by increased disruption of the traditional transport routes and continued depressed demand for Malawi's export products. Nevertheless, the country was able to hold its current account deficit to 11.J percent of GDP in 1983, reduce the budgetary deficit for FY1982183 to 9 percent of GDP, and meet its IMF standby borrowing ceilings. 13. The second phase of the structural adjustment program was supported by a Second Structural Adjustment Credit approved by the Board in December 1983. The second phase builds upon the reforms of SAL 1, focussing on measures to improve the mobilization and management of resources, to strengthen key institutions, and to upgrade the performance of the public sector. The program has been successful in achieving most of its objectives. Among the achievements of the program have been (a) increased smallholder export production following an increase in price incentives; (b) increased industrial production and investment incentives resulting from a program of price decontrols; (c) increased domestic energy production; (d) a strengthening of the financial position of key public and private enterprises; and (e) a reduction in the budgetary and balance of payments deficits. Efforts to improve the control and allocation of public expenditures and to reduce the overall size of Government have been slow, but steps in the right direction have been taken. While the economy has grown at a moderate rate in 1983-85, prospects are for continued economic difficulties and the need for continued adjustment to balance of payments, fiscal and transport constraints. 14. An IDA Credit for US$30 million equivalent and a US$40 million equivalent African Facility Credit for the Third Structural Adjustment Operation were approved by the Board on December 19, 1985. The third phase of the program is designed to encourage productivity and efficiency, diversify the export base and promote exports, strengthen the Government's policy making capability, and improve the performance of development  -5- institutions. The Government has taken action, inter aLia, to reduce subsidies, complete the prlce deregulation proceca, strengthen its policy and planning unlts, reduce parastatal deficits, and rationalize the role of the Agricultural Development and Marketing Corporation, including a compre- hensive reform of the agricultural marketing system. The second tranche was released in October 1986, about three months behind schedule mainly because of delays in preparing the Government's three year public sector investment program and setting up an export promotion program. In January 1987, the Board approved a supplemental financing credit to SAL III to further support reform efforts in agricultural marketing and pricing. External Debt Restructuring 15. By the end of 1985, Malawi's external public debt outstanding and disbursed totalled almost US$800 million. In late 1982, Nalawi rescheduled both its official and commercial debts. Otherwise its debt servicing, including repayments to the IMF, would have amounted to over US$130 million, equivalent to about 48 percent of exports of goods and services. This compares to a level of about 10 percent in the mid-1970s. A second year of rescheduling was agreed to in October of 1983, keeping the debt service ratio to 28 percent in 1983. The Government has not asked for any further rescheduling. The debt service ratio was above 40 percent in 1986 but is expected to fall to about 26 percent by 1989. Because of this high debt service ratio, commercial bank borrowing will have to remain sharply curtailed and the balance of payments gap should be closed by concessionary financing. PART II - BANK GROUP OPERATIONS IN MALAWI 16. Over the past 21 years, Malawi has received 36 IDA credits and one Special Fund credit, totalling about US$512 million, and 10 Bank loans totalling US$124 million, of which 2 were on third window terms. Malawi has also received one African Facility Credit totalling US$40.0 million equivalent. The first Bank loan to Halawi was made on third window terms in June 1976 and the first standard Bank loan in April 1977. Of Bank Group assistance, some US$182 million (27 percent) was for agriculture, US$108 million (16 percent) for education, US$114 million (17 percent) for roads, US$168 million (25 percent) for structural adjustment, US$39 million (6 percent) for power, US$31 million (5 percent) for water, and the balance of US$35 million (5 percent) for health, development finance, technical assistance, and urban housing. In FY86, a credit of US$11.6 million equivalent for an Agricultural Extension and Planning Support Project, a US$30.0 million equivalent IDA Credit and a US$40.0 million African Facility Credit for the Third Structural Adjustment Operation, a US$7.6 million loan for an Industrial and Agricultural Credit Project, and a loan of US$16.7 million equivalent for a Second Wood Energy Project were approved. For FY87 a US$20.0 million equivalent credit for the Second Lilongwe Water Supply Project has been approved, as well as a US$10.0 million supplemental credit from the African Facility. Additional lending operations are planned in transport, education and agriculture. IFC's equity participations and lending commitments in Malawi total about US$27.9 million and include investments in textiles, sugar, a Development Finance Corporation (INDEBANK), tourism, the manufacture of alcohol from molasses and a leasing and finance company. In addition, a US$0.5 million equity subscription and US93.2 million loan investment in the Viphya Plywoods and Allied Industries United were approved in August 1984 and August 1986.  6 Annex II contains a Summary Statement of Bank Group Operations am of September 30, 1986. Bank Lending Strategy 17. Support for the Government's structural adjustment program wlll continue to remain a focal point of the Bank's lending program. Greater emphasis will be placed, however, on new initiatives designed to achieve more effective productivity gains, and to bring about more vigorous production and export diversification results. Equally important will be efforts to help the Government strengthen its institutions in charge of economic management with a view to solidifying the policy changes that have been made and expanding the capaclty for taking future policy initiatives. Another area of emphasis will be human resource development. Malawl's life expectancy, Infant survival, primary school enrollment and completion, end secondary school enrollment rates are among the lowest in the world, while the population growth rate is among the highest. Finally, Malawi needs support in its efforts to further improve the efficiency of resource use, identify potential sources of future growth and promote resource conservation. Increased aid coordination and mobilization will be needed for Malawi to reach its growth potential. 18. Our economic and sector work will focus on helping the Government formulate its medium and longer term development strategy. The next CEM (FY87) will focus on this topic. Other ESW will complement the program related to institutional and human resource development and diversification. Identifying areas of development management that need strengthening will contribute to helping the Government to institutionalize the reforms that it has been making. To help develop a strategy for diversification and privatization will require in depth looks at the National Rural Development Program (NRDP) and the agricultural sector as a whole as well as defining an industrial development strategy. As progress has been made in the SALs to improve the industrlal policy environment, the focus of the industrial sector work will be on institutions and policies which affect investment Incentives and opportunities. The recommendations of a report on the parastatal sector will provide a basis for the Government's restructuring of parastatals. Sector work on local governments will focus on increasing cost recovery for urban services and on strengthening the role of local authorities in providing for urban services. 19. A Consultative Group meeting was held in January 1986 with the objective of improving donor coordination and increasing the level of resources needed to support Malawi's adjustment process. Local aid coordination efforts have been increasing and a second CC is expected ln 1987. External Debt 20. The Bank Group's share of Malawi's external debt (disbursed and outstanding) at the end of 1985 was about 52 percent (IBRD: 10 percent, IDA: 42 percent), and its share in debt service was about 12 percent. Because Malawi is one of the least developed countries, many other donors give aid on grant terms. Other major donors have been the United Kingdom, the Federal Republic of Germany, the European Economic Community, and the AMrican Development Bank.  -7- Disbursements 21. The levels of disbursements for Malawi, Including program lending, were as Eollows: in FY 1982, US$70.1 million; in FY 1983, US$33.2 million; in FY 1984, US$58.2 million; in FY 1985, US$46.4 million; and in FY 1986, US$68.3 taillion. Disbursements of the Bank Group loans and credits in Malawi have generrlly been good and compare favorably with other countries in the region and even on a Bank-wide basis. The disbursement rate on loans and credits to Malawi (excluding the effect of non-project lending) hac averaged about 26 percent per annum, significantly higher than the Eastern Africa Regional average of 19 percent and the Bank-wide average of about 21 percent. Project Implementation 22. In general, projects in Malawi havt been implemented efficiently and effectively. The Audit and Project Completion Reports underscore the fact that project objectives are usually met and the benefits of investments have been extended nationwide. During the period 1983-85, there were problems due to inadequate budgetary provisions, but since then these problems have been satisfactorily resolved. Malawi continues to rely heavily on expatriate technical assistance for project management and project accounting. Efforts are being made to increase the number of trained Malawians in key positions and to strengthen the Government's overall management capacity. PART III - THE POPULATION AND HEALTH SECTORS A. Population Demographic Backeround and Socio-economic Implications 23. Malawi's population ln 1985 was estimated to be 7.15 million and the population growth rate is currently 3.2 percent per annum. Malawi is one of the most densely populated countries in Sub-Saharan Africa, with a population density which has risen to about 74 per km2 from 59 Inhabitants per km2 at the time of the 1977 census. The total fertility rate is estimated at between 7.5 and 8.0. If fertility remains constant, population will grow from its current level to about 21 million by 2015, a 200 percent increase in 30 years. If an accelerated decline in fertility is achieved, the population is estimated to grow to 10.6 million in 2000 and 13.3 million in 2015 -- an 86 percent increase. Nonetheless, an accelerated fertility decline could reduce the population growth rate in 30 years by over a third. 24. A continuation of the present rate of population growth would have significant socio-economic consequences. During the 1970s, economic growth averaged 6.8 percent annually while the population growth rate during the same period was 2.8 to 2.9 percent. This resulted in a continued increase in per capita income. Between 1979 and 1983, annual growth in GDP has failed to match population growth, with a consequent slight decline in per capita incomes. Malawi's economy is largely dependent on the agricultural sector. Agriculture is under increasing pressure to feed and to provide employment for the growing population. By 2015, if fertility, current nutrition, and land productivity levels remain constant, there would be a land deficit of 13 percent. Nutritional intake  in aome areas io already declining duo to population prescure on limited land and agricultural production. The implications of unchecked population growth would also be ataggering for primary education expenditure.. To achieve currant enrollment targets for primary education, annual costs would rise by 553 percent in constant kwachas by 2015. Wlth accelerated fertility decline, annual coat. would rise by 171 percent In the came 30 year period. Thus, at current enrollment rates, rapid fortility decline could result in annual mavings of MK93 million by 2015. Smlilarly, If rapid fertillty decline occurs, annual secondary education expenditure could be cut by up to 43 percent within 30 yearm. Population Policy 25. Only recently has the Government recognized population growth am a problem and, In 1982, endorsed the Introduction of child spacing into the health delivery system's Maternal and Child Realth (MCi) Program. The Government maintains that the introduction of child spacing does not interfere with the right of families to have as many children as desired and that the goal of the program is "to reduce maternal morbidity and mortality by allowing the mother to rest between pregnancies and to reduce Enfant and child morbidity and mortality." Initial child spacing activities were introduced under IDA's first Health Project (Credit 1351-MAI). Although no systematic surveys have been undertaken, it Is evident that demand for contraceptives ls growing rapidly and that people are willing to travel long distances to obtain them. 26. During the last two years, there has been increasing awareness among citizens and government officials of the socio-economic Implications of rapid population growth. In October 1984, at the Governmente's request, IDA undertook a Population Sector Review. The review recommended that the Government establish a capacity for population policy formulation and planning and that the MCH program and its child spacing component be expanded and strengtbened. These recommendations were accepted by the Government. Also, the Ministry of Health has provided in its new Ten 'Year Health Plan (0986-1995) for a nationwide expansion of the chlld spacing program and a broadening of the concept to address issues related to women's development and literacy, and to provide information through existing health and education programs. B. Health Health and Nutrition Status 27. Life expectancy at birth is only 41 years and mortality ts particularly high among Infants and children. The Crude Death Rate (CDR) is estimated to be 23 per thousand and the Infant Mortality Rate (IMR) 151 per thousand live births. Malaria, respiratory infections, diarrheal diseases and eye and skin diseases, all of which are relatively easily preventable, account for nearly 80 percent of morbidity in young children. Data shows that 57 percent of all deaths in Malawi occur in children under five years of age and that malnutrition directly or indirectly accounts for at least one-third of all deaths in the country. 28. Malawian infants have a verv high level of stunting which becomes increasingly prevalent in children b-:tween 6 and 24 months of age, coinciding with the nutritionall- _fftlcal period of weaning. This problem  - 9 - peaks in 3 year olds, 65 percent of whom show evidence of stuntlng. Fifty percent of preschool children are chronically malnourished. Except for Ethiopia, this is the highest rate in Eastern and Southern Africa and compares with 37 percent in Kenya and 28 percent in Zimbabwe. Inadequate food availability between harvests is a documented problem with 30 percent of women reporting that they run out of food in September (6 months after the April harvest) and 60 percent reporting that they run out of food In December. 29. Despite a national surplus of maize production and of maize In storage, distribution problems combined with issues of low incomes and affordability leave large parts of the population malnourished and lacking in a balanced diet. Having become increasingly cognizant of nutrition as an issue, in July 1986, the Government held a seminar attended by high level government officials. A decision has been taken, in the context of a reform of the agricultural marketing system, to establish a Food and Nutrition unit in the Economic Planning and Development Department (EP&D) of the Office of the President and Cabinet. This unit would coordinate and maintain an overview of activities related to food security and nutrition In Malawi, estimate the nutrition effects of selected policies and programs, develop early warning and nutritional surveillance systems and determine the most cost-effective ways to reach nutrition goals. 30. Disease patterns are exacerbated by low standards of living characterized by poor hygiene. Only 30 percent of those living in rural areas have atoss to safe water. Health status is clearly lowest in rural areas where a shortage of health services, combined with lack of knowledge about hygiene, crowded housing, and absence of sewerage, create conditions conducive to the spread of infectious and parasitic diseases. Bealth Sector Organization and Management 31. Objectives of Health Care Delivery. Malawi's First Healtb Plan following independence (1965-1969) emphasized health manpower development and training, particularly of nurses, midwives and health inspectors. The more comprehensive Second Plan (1973-1988), which was prepared with World Health Organization assistance, emphasized expansion and strengthening of the basic health services network, the prevention and control of communicable diseases, as well as the training of health manpower. Achievements fell short of expectations. Implementation of the second plan was hampered by: lack of adequate financial resources, scarcity of trained manpower, Inadequately defined and coordinated policies and strategies, a bias toward hospital based curative services, and lack of criteria for guiding health sector investments. 32. Under the first IDA-assisted health project, the MOR began preparation of a new 10-year National Health Plan. The National Health Plan (1986-1995) sets the following medium term goals: "to achieve a drop in early childhood mortality of 33.3 percent over a five year period; to achieve an improvement in maternal health; and to impact on the extent and severity of illness due to major causes of morbidity in those 5 years of age and over through the Primary Health Care approach and/or core health services." To achieve these goals, the following specific objectives have been formulated: (a) to improve access to a rational network of health facilities by extending especially community based services and by modestly strengthening hospital facilities and staffing; (b) to establish mechanisms  - 10 - for MOH manpower development and monitoring of deployment; (c) to improve management of the expanded health delivery system; (d) to improve child survival of the under-five group; (e) to improve health status generally by strengthening relevant programs; and Cf) to improve the nutritional status of mothers and children. Recognizing budgetary constraints, emphasis would be placed on reallocation of resources in accordance with newly adopted priorities, improved cost recovery and the cost-effective delivery of services, and avoidance of any real growth In the MOH's recurrent budget. 33. Organization and Financing of Health Services. The Ministry of Health (MOH) has primary responsibility for the development of policies, strategies and programs for health care in Malawi. Public health services are provided mainly by the MOH. The Private Hospitals Association of Halawi (PHAM), made up of church-related and other private voluntary agency facilities, is the largest non-government provider of health services, providing about 50 percent of the country's patient care infrastructure. Although the two systems are not formally linked, there are plans to achieve closer coordination. Specifically, MOR will begin to utilize PHAM training capacity; there will be adoption of standardized preventive and curative interventions and of standardized job descriptions and training for health staff. 34. MOB services are provided at five levels: community, health centers and rural hospitals, district hospitals, regional (central) hospitals and special hospitals. Services at the community level consist of an extensive network of outreach activities through mobile clinics and the Primary Health Care (PHC) program (para. 44); this level of service stresses interventions associated with the care of children who are under five years of age (health education, environmental sanitation, diarrheal disease control, immunizations, pre- and post-natal care, and growth monitoring). The MOH runs a network of 162 health centers and 19 rural hospitals, which are similar to health centers, although they have beds for inpatient care. Many healtb centers, whose activities are focussed on preventive and outpatient health care, run nutrition clinics (nutrition education, food preparation demonstrations and free food supplements). There are 21 district hospitals and 2 regional hospitals in the Central and Southern Region, which serve as referral facilities respectively for health centers/rural hospitals and district hospitals. The hospital at Zomba, in terns of bed capacity, is larger than a district hospital, smaller than a regional hospital, and is classified as a general hospital. Special hospitals offer specialized services, including mental health services and inpatient care for leprosy and tuberculosis cases. There are considerable regional variations with regard to the distribution and coverage of facilities. Twenty percent of all health facilities are situated in the Northern region; 33 percent of all facilities are situated in the Central region and 47 percent are in the Southern region. Respectively, in the Northern, Central and Southern regions, 57, 70 and 100 percent of the population is within 8 km of a health facility. 35. With increasing emphasis on a preventive rural health care system, the organizational structure of MOB has grown increasingly cumbersome and inefficient. Recognizing this, the Malawi Civil Service Review Commission undertook a comprehensive study of the MOB in 1984. The study highlighted the following umajor management problem: (a) lack of clear definition of objectives, (b) unclear lines of authority, over-centralized decision-making and too many levels of authority at the  - 11 - central level, and, at the district level, managers were expected to handle too large a workload, (c) inadequate management support systems, (d) no firm monitoring and control of expenditures, and (e) inadequate supervision of community health workers. Other major studies have emphasized the need for improved operational efficiency and management of hospitals and of the Central Medical Stores. The findings and recommendations of the Civil Service Review Commission have been studied by a high-level inter- ministerial committee and additional management studies have been carried out. At negotiations, the Government submitted to IDA for review and comment a well-defined position and plan regarding reorganization of the MOH. It was agreed that (a) a revised organizational chart would be sub- mitted to the Association for review and comment by September 1, 1987, and the revised organizational structure would be formally adopted by October 1, 1987; and (b) the key positions of Controllers for clinical services, for family health, for community health services and for health technical support would be filled by October 1, 1987. 36. The approved capital budget of the MO1, as a percent of the total Government budget, increased from about 1.2 percent in 1977/78 to 4.8 per- cent in 1985/86. The 1985/86 capital budget was about 7.5 million, which represented a per capita expenditure of about MK0.6 up from MKO019 in 1977/78. Of this total, 1K6.3 million (84 percent) is externally financed, and the remaining 16 percent is financed from Government resources. MOH has continued to actively pursue hospital cost recovery. As a result of revised fee schedules, collections have risen from MK570,000 in 1982/83 (3.3 percent of MOH gross expenditure) to MK1.6 million in 1985/86 (4.3 percent of MOH gross expenditure). By 1990, it is projected that income from fees will rise to MK5.3 million or 6.8 percent of MOR expenditure. 37. An analysis of MOH's recurrent budget has indicated that an additional MK2.03 million would be needed to implement the first three years of plan activities. Since an increase in Treasury allocations is unlikely, the MOH would adopt significant cost reduction measures. Specifically, restructuring of the Central Medical Stores is expected to yield KK910,000 in reduced costs, and efficiency measures to be implemented in the hospital system is expected to yield MK1.2 million in 1986, rising to MK4.3 million by 1990. A plan of action to implement cost reduction measures was reviewed at negotiations and it was agreed that to facilitate implementation of the plan, the Government would (a) establish by July 31, 1987, a committee chaired by the Deputy Secretary of MOE with representatives from each of the three major hospitals to monitor implementation of the cost reduction measures; (b) implement cost reduction measures at MOB and at the Queen Elizabeth Central Hospital by December 31, 1987; (c) by March 31, 1988, submit to the Association for its review and comment an evaluation of implemented cost reduction measures and a plan for extension of these measures to the Kamuzu and Zomba hospitals; (d) by April 30, 1988, decentralize financial accounting and management functions of the three major hospitals from the MO0 and implement cost reduction measures at the Kamuzu and Zomba hospitals; and (e) by December 31, 1988, implement cost reduction measures at all district hospitals. 38. Manpower and Training. It was also found that of nearly 5,000 established positions in MOB, nearly 15 percent were vacant. A considerable amount of sanpower development activities have been undertaken during the past 5 years; nonetheless, the numbers of dentists and medical officers have declined. However, the number of clinical officers, enrolled  - 12 - nurses, laboratory technicians and health assistants (primarily manpower staffing for rural health facilities) has risen substantially. It is likely that OH will be able to maintain adequate staffing of rural facilities during the plan period, especially since PRAM training facilities produce more enrolled nurses than they can absorb. 39. Malawi continues to suffer a severe shortage of doctors despite the large number of expatriate physicians. Only about 20 percent of Malawian doctors trained abroad return to Malawi. Although MOB has for some time now wanted to establish a medical school in the country, preliminary feasibility studies have highlighted the high cost. A review of options to establish a medical education program in conjunction with existing teaching hospitals has recently been completed by the Ministry of Health. The Government has appointed a coordinator who would manage the large amount of additional preparatory work which is needed to develop a cost-effective medical school investment program. This preparation is expected to be completed within the next 12 months. The project would largely not be affected by physician shortages due to the focus on community level health care which relies primarily on auxiliary health staff (para. 38). 40. Pharmaceutical Procurement and Distribution. Having overcome problems of management efficiency, the Central Medical Stores has been evolving since 1984 into an increasingly efficient supplier of pharmaceuticals. Prices of drugs are fixed at CIF value plus 12.5 percent to cover all operating costs (up from 3 percent before 1984). Regional stores are being built in Lilongwe and Mzuzu. Implementation of plans to improve drug procurement and monitoring has begun. The development of a district level network, equipping of a quality control laboratory and further training of staff constitute the next phase of development of the pharmaceutical system. 41. Disease Control and Prevention. Health planning and evaluation is made difficult by the scarcity of valid epidemiological data and NOH's limited capacity to collect and analyze health status information. Various disease control programs (bilharzia, tuberculosis, sexually transmitted diseases, onchoceriasis, malaria and leprosy control programs) historically have been developed with little coordination between each other and with the health system as a whole. Under the ongoing IDA-assisted health project, a Community Health Sciences Unit was established and necessary laboratory facilities were provided to permit a more adequate assessment of epidemiological data and the development of appropriate interventions. UNICEF will be undertaking an Expanded Program for Immunization throughout the country during the project period. Health Programs 42. The Maternal and Child Health (MCH) Program. The MCR program was initiated in 1973. There are MCH coordinators at both the regional and district levels. Child care services are provided through 1,075 clinics which cater to the care of children under 5 years of age. The objectives of the program are to: expand throughout the country; strengthen the training of health workers; increase immunization coverage to 80 percent of all children by 1990; improve children's nutritional status and decrease the incidence of underweight children through growth monitoring with nutrition education and food supplementation where necessary; use  - 13 - Traditional Birth Attendants (TEAs) to deliver MCH services; and promote child spacing. A 1984 evaluation gave the program high marks for the quality of service and the confidence in the program of those assisted. However, coverage is far from adequate. While 60 percent of women have at least one ante-natal visit, postpartum care is virtually non-existent and less than 50 percent of children are being reached. Services are constrained by lack of transport, drugs and educational materials. 43. Child Spacing Program. In 1983, child spacing services were introduved in the two central hospitals in Blantyre and Lilongwe and the Zomba General Hospital and are now available in all district hospitals. While initially services were provided only by doctors, since the participation of midwives who run daily child spacing clinics there has been a significant increase in the nuuber of those requesting and using the services. Training of trainers and service providers has exceeded the targets and the MOH has begun to use mass media and community seminars to spread general family health and child spacing messages. However, the program is experiencing problems related to inadequacy of facilities and contraceptive supplies, the lack of a good reporting system, and a lack of coordination between MOB headquarters which orders commodities and the Central Medical Stores (CNS) which handles contraceptive distribution. The proposed project would implement a simple data collection and record system supplemented by periodic sample surveys. 44. The Primary Health Care (PEC) Program. In 1978, the MOH began implementation of the PHC program on a pilot basis in three districts. The approach adopted by Malawi consists of (a) training district and health center staff in PEC concepts and in community sensitization; and (b) the establishment of village health committees (VHCs). VHCd, which receive regular training and supervision, are responsible for initiating PHC activities at the community level. MOH has now expanded the program to cover 9 districts. Other districts are now eager to implement the PEC program. An evaluation carried out in 1985 concluded that (a) community participation in the program was good and understanding and acceptance of the concept of self-reliance was developing; and (b) the education intensive approach is providing a solid basis for nationwide expansion. The evaluation could not assess the impact on health status because of the short implementation period. Bank Group Experience and Strategy 45. IDA has been involved in Malawi's health sector since 1971 when the first Karonga Rural Development Project included a health component. In all, ten agricultural projects have included health components with a total investment of about US$4.5 million. The first IDA-assisted health project began in 1983 and focused on critical issues relating to health planning and financing. The project components have emphasized cost-effectiveness (through strengthening the CMS); cost recovery (with the introduction of fees for some categories of services); stronger community involvement (through the PHC program); consolidation rather than expansion of health facilities; and institution building (through strengthening the planning process and establishment of improved systems of financial accounting). These strategies have been subsequently reflected in the National Health Plan (1986-1995), developed by the Government under the project in close collaboration and dialogue with IDA. The project's civil  - 14 - works component has, however, lagged behind schedule and am a result the projectihas been extended by two years to December 31, 1987. 46. Bank strategy in the sector is focussed on (a) making family health and child spacing services more accessible with an emphasis on the comaunity-based health service delivery of the primary health care system; (b) continuing institution building activities in the Ministry of Health by strengthening management, manpower development, planning and evaluation capacity; and (c) broadly disseminating family health and child spacing concepts through the mass media and through existing educational programs run by other ministries (a multisectoral approach). The 10 year plan is the basis for the proposed project which finances about 53 percent of the first three years of plan investments for which investment costs total US$43.0 million in constant terms. The subsequent IDA lending program to the sector would continue support for plan implementation. PART IV - THE PROJECT 47. Appraisal of the proposed project took place from November 27 to December 20, 1985. A final appraisal to confirm project scope and cofinancing arrangements took place in September 1986. The project was negotiated in Washington, D.C. from February 2 to 6, 1987. The Halawian delegation was led by Mr. A. Upindi, Principal Secretary, Department of Economic Planning and Development, Office of the President and Cabinet. A supplemental project data sheet, including a timetable of key events and a summary of special conditions, is attached as Annex III. A. Project Objectives and Design 48. The objectives of the project are to: (a) improve the health status of families, particularly mothers and children, through expansion and strengthening of existing health programs; (b) increase the availability and accessibility of a complete range of child spacing services within the Maternal and Child Health (MCH) program; (c) strengthen the MOR's capacity to plan, manage and evaluate health services in the framework of a decentralized health system; and (d) design and implement through other ministries a multisectoral family health program. The project would support activities at the national, regional, district and community levels throughout the country. The proposed project is comprised of two parts. Part A comprises activities to be undertaken by the MOB and Part B comprises multisectoral family health activities coordinated by the Department of Economic Planning and Development (EP&D), Office of the President and Cabinet. B. Detailed Features 49. The Government has established the following targets for the first five-year period of the National Health Plan (1986-1995): (a) reduction of the Infant Mortality Rate (IMR) from a national average of 151/1,000 to 100/1,000 live births; (b) reduction of cuiulative mortality of 0-4 year olds from 330/1,OO to 210/1,000; (c) reduction of maternal mortality from 16/1,000 to 10/1,000 births; and (d) achievement of a target of 10 percent of women of child bearing age who (or whose husbands) are practicing contraception. While these targets may be overly ambitious, they are indicative of the high priority placed by the Government on improved health status and on reducing the rate of population increase.  - 15 - Part A Primary Health Care (PHC) 50. The project would support the expansion of the PHC program from 9 districts at present to 6 more districts out of a total of 24. Village Health Committees (VHCs) will continue to undertake activities in sanitation and water, msternal and child care and treatment of common diseases. In addition, the MOH has decided to provide child spacing services through VHCs. This decision is significant since it means that education on child spacing and contraceptives will soon be available at the grassroots level throughout the country. 51. The project would finance (a) training of VHC members and health staff, with an emphasis on regular refresher training, and visits by health workers to study the success and difficulties being faced in the implementation of PHC in other areas; (b) about 400 drugs kits for VHCs, at the rate of one kit per GHC annually; and (c) 48 motorcycles and 300 bicycles, financed in parallel by UNICEF, to improve the ability of health staff to supervise VHCB. 52. In each area where the PHC program is implemented, a health center is required to act as a referral facility for village level activities. The project would finance the upgrading to health centers of 6 existing health subcenters and the building of 19 new health centers. In each new center, the project would finance 3 houses for 2 enrolled nurses and one medical assistant and one house would be added at each upgraded health center. During negotiations, the Government provided assurances that the health centers (once completed) would be adequately staffed by at least one medical assistant and 2 enrolled nurses. 53. Health centers and rural hospitals refer patients to district hospitals. In Malawi, a number of district hospitals function in inadequate, old buildings, and overcrowding is common. With the implementation of PUC programs and the introduction of child spacing services at the district level and below, the role of the district hospital has become even more crucial. The project would support the replacement of one existing 102 bed hospital at Mzimba, including construction of space for surgical contraception and 40 additional beds. In addition, provision is made for 20 staff houses for key staff and for two ambulances and one station wagon. Management, Manpower and Support Systems 54. Management. This component would strengthen the management of health services at the national, regional, and district levels by restructuring the MO1 and improving systems and procedures (paras. 35 and 36). Detailed management studies of each unit of the health care delivery system have also been completed. The proposed project would finance short-term consultant services to develop unit and job descriptions. After finalizing unit and job functions, national, regional, and district workshops would be held to train health staff in management and new procedures. A national five-day workshop for 25 unit heads and program managers would take place annually. A four-month consultancy would be provided to develop curricula and plan the seminars. The project would also finance three one-month study tours annually to neighboring countries  - 16 - 55. The project would support establishment of a regional health team in each of the country's three regions and a vehicle and driver for each team. A regional health team would comprise a regional health officer (team leader), a regional nursing officer, a regional NCR coordinator, and a regional public health inspector who would back up and supervise health services in the region. The positions of three regional health officers and three regional nursing officers would be filled by October 1, 1987. 56. To address issues related to hospital management and administration, detailed studies of hospital management made recommenda- tions which could save up to 40 percent of non-personnel costs. The project would support annual workshops in hospital management and administration for all hospital secretaries and administrators. 57. The Planning Unit of the MOH was expanded and six new posts were established through the first IDA-assisted project. With the development of a National Health Plan (para. 32) and training in planning of senior Planning Unit officials, the Planning Unit has evolved into an effective organization. The project would support the MOlts efforts to decentralize its planning capability by strengthening district level planning. A senior internationally recruited health planner, appointed in 1986, has begun training district level staff. The project would provide training courses in health planning and one five-day workshop annually for 20 senior officials to assess implementation of the plan and to recommend modifications in strategy. 58. The project would finance the salaries of an expenditure control accountant, three regional level accountants and one accountant at each of the three main hospitals and at each of the 21 district hospitals. Also, four computers would be financed (one for the MOR headquarters and the remaining three for the main hospitals in Blantyre, Lilongwe and Zomba). The Government provided assurances that the positions of expenditure control accountant, three regional accountants and one accountant at each of the main three hospitals would be filled by October 1, 1987. Assurances were also provided that a position of assistant accountant at each of the 21 district hospitals would be established by August 31, 1988. 59. Manpower. Manpower development under the project focusses primarily on longer run development of health manpower and capacity. Implementation of the project does not require significant additional manpower. This component Includes: (a) strengthening the capacity of the MOB to train enrolled nurses; (b) establishing an in-service training capacity; and (c) developing MOR's capability to undertake manpower planning and analysis. Project assistance would include (a) construction, furnishing and equipping of one school and boarding facilities for enrolled nurses, with a capacity for 140 students to be built near the Zomba General Hospital; (b) in-service training for about 1,000 health workers annually by construction, furnishing and equipping of three regional level training facilities; and (c) overseas training for one year in manpower planning. During negotiations, the Government gave assurances that a training officer would be appointed by September 1, 1987, to coordinate in-service training activities and that, beginning December 31, 1987, annual in-service training plans for the GOM fiscal year beginning the following April would be submitted to IDA for review and comment. IDA has reviewed and found satisfactory the content of all the proposed training programs and courses to be included in the proposed project.  - 17 - 60. Efforts to improve the efficiency of the pharmaceutical system would continue under the project with decentralization of the system. The project would finance the renovation of pharmaceutical depots at eight district hospitals including furniture and equipment, and the establishment of a quality control laboratory. Through 28 man-months of consultant services the project would finalize drug legislation, review CMS drug production processes, review quality control procedures, and computerize CMS operations. There would be training for drug prescribers and for pharmacy assistantB in the scope and functions of the revised CKS. The project would also finance 25-1/2 months of overseas training in drug inspection, drug administration, quality control and drug manufacture. Family Health 61. This component would support the maternal and child health, child spacing, and nutrition programs. 62. MCH. This program would be strengthened by the replacement of 27 vehicles andi2 boats, to be used for service supervision and for the provision of mobile services at the regional and district levels. The project finances a one month consultant for the development of (a) an integrated course in family health for 200 health workers to be held annually; (b) annual in-service training in priority diseasote (diarrhea, malaria, respiratory illness, measles and nutritional deficiency) for 900 health workers; (c) development of a MCH manual for use by health workers in MOH and PRAM units; (d) printing of Information, Education and Communications (IEC) and training materials developed for the MCH program; and (c) annual drug supplies for 1,100 MCH centers and 639 ante-natal clinics. Training activities would emphasize development of post-natal services. 63. Child Spacing. The project would provide extensive orientation to health staff and VHC members and training to service providers in child spacing concepts; and would finance the printing of IEC materials for child spacing. The project provides a one month consultancy to review training plans for surgical contraception and to develop a system of quality control. The project would also finance (a) the building, furnishing and equipping of surgical contraception units at seven district hospitals; (b) construction, furnishing and equipping of three urban health centers in Blantyre and Lilongwe and an urban family health unit in Lilongwe; and (c) the upgrading of two existing health centers in Blantyre and Lilongwe. The project would support the appointment of six medical assistants and 16 enrolled nurses for the new urban family health centers. During negotiations assurances were provided that these staff would be appointed to the urban centers once completed. 64. Nutrition. The project would promote nutrition education through MOH and growth surveillance at health clinics. These activities would be undertaken in conjunction with the Ministry of Community Services (MOCS). The project would finance the development and production of flip charts, posters and booklets for use by the MOR through health clinics. Health workers would be trained in nutrition as part of the family health training program. To further develop nutrition activities the project would provide two person months of consultancy.  - 18 - Part B Functional Literacy and Women's Programs 65. The Government hopes to reach 2 million people by 1990 through its adult functional literacy program which is run by the Ministry of Community Services (MOCS). This project component would introduce topics related to child spacing, nutrition and maternal and child health into the functional literacy curriculum by financing the design and production of written/pictorial materials. All adult literacy centers would be blanketed with this information, and all grassroots workers would be trained on family health topics. The project would finance (a) the construction, furnishing and equipping of a MOCS training center for the Northern Region; (b) 10 study tours of one month duration by planners and program managers from MOCS to study the operational aspects of similar successful programs in adult functional literacy and women's activities in neighboring developing countries; (c) training women's groups to undertake nutrition surveillance and related nutrition education; and (d) the construction of fish ponds to provide protein for mothers and children at the village level. The Government would establish by September 1, 1987, a Health Education Review Committee chaired by the Deputy Chief Medical Officer, with members from the Ministries of Health and Community Services and the Information and Youth Departments to approve Information, Education and Communications (IEC) messages prepared by non-MOH agencies under all components of Part B of the project. Youth Programs 66. Youth between 13 to 19 years of age are an important target group for family health education activities. While the Malawi Young Pioneers (MYP) program trains youth in this age group in a number of technical and social activities, family health education needed for fertility regulation is not provided. This leads to unplanned pregnancies and an increase in the school dropout rate. Youth participating in the MYP tend to be role models in their communities and their training in family health concepts would therefore benefit a broad range of Malawian youth. The project component would provide (a) training and educational materials on family health topics to 100 MYP matron/instructors/instructresses to be in turn imparted to MYP youth; (b) basic training courses for young women; (c) the construction of 10 simple shelters to be attached to existing dispensaries, where MYP and community training courses would be held; and (d) the provision of sewing machines and the establishment of fish ponds to demonstrate income generating activities. Income generation, particularly for women, has been demonstrated to reduce morbidity and fertility. Information, Education and Communication 67. This component, to be implemented by the Information Department, Office of the President and Cabinet, would make comprehensive use of the mass media for the dissemination of family health messages. Health and child spacing messages would be introduced into the Chichewa paper, Boma Lathu- which reaches a monthly audience of 500,000. The messages would also be disseminated by poster boards on long distance buses; labels on match boxes; radio programs; and through the production of two 20 minute films annually. The project would finance overseas training of three Information Department staff in graphics, audio-visual techniques and  - 19 - development comunications. These staff would focus primarily on developing family health messages. Project %osts and Financing 68. Total costs of the proposed project amount to MK49.8 million or US$24.9 million equivalent (US$24.5 million net of taxes and duties). Foreign exchange costs account for US$11.6 million or 47 percent of total project costs. Project costs have been estimated for civil works on the basis of the value of current Ministry of Works and Supplies contracts for comparable buildings. Incremental salaries, local training costs and operational and maintenance expenses are based on current government scales and rates. Total costs include US$2.4 million equivalent for contingencies. Physical contingencies include 10 percent for civil works and 10 percent for vehicles and equipment. The following price contingencies have been included: (a) on foreign exchange expenditures, 12 percent in 1986, 3 percent in 1987, 1 percent in 1988, and 1 percent in 1989; and (b) on local cost 4xpenditures, 13 percent in 1986, 10 percent in 1987, 8 percent in 1988 and 6 percent in 19B9. Price contingencies account for 4 percent of base costs. In view of the gap between domestic and foreign inflation rates, the exchange rate is assumed to adjust so as to maintain purchasing power parity. 69. Of the total project costs, US$1.9 million wocald be financed by the Government, which would cover all operating costs, 6 percent of the Investment costs of the project and all taxes and duties. The proposed IDA credit of US$11.0 million would finance 44 percent of the total project cost and would support the construction and equipping of (a) 12 new health centers and the upgrading of 6 existing health centers and associated housing, (b) one. district hospital, (c) the Zomba School of Nursing, (d) 3 regional health training centers, and (e) a regional training center at Mzuzu. It would also support (a) technical assistance and training for the management, manpower and support systems component of the project (except the subcomponent related to drug production and supply), (b) the provision of 27 vehicles and two boats for the MCH program, (c) the establishment of 163 fish ponds, production and printing materials for the functional literacy program, and (d) training activities for youth programs and assistance for project management. UNICEF is providing US$2.6 million to support (a) the primary health care program; (b) equipment for new and upgraded health centers and technical assistance, materials and support for workshop and training activities for the MCH program; and (c) technical assistance and production of materials for nutrition activities delivered through the MOH and MOCS. The European Development Fund is expected to contribute US$3.5 million and would support (a) the establishment of 7 new health centers and associated housing; (b) training activities of the functional literacy program; and (c) equipment, materials and monitoring activities for the IEC program. The KfW would contribute US$4.1 million and would support (a) construction and equipping of the urban family health unit in Lilongwe; (b) 7 surgical contraception units; (c) 3 new urban health centers; (d) upgrading and re-equipping of 2 existing urban health centers; (e) technical assistance to the surgical contraception program; and (f) salaries and maintenance costs related to the maternal and child health and child spacing programs. The Government of the Netherlands would provide US$.9 million to finance the drug production and supply sub-component. The United Nations Fund for Population Activities would provide US$.95 million to support training activities, technical assistance  - 20 - and material production for the child spacing program. The Government provided assurances that should investments be proposed outside the agreed program for the first five years of the Health Plan, those investments would be undertaken only by mutual agreement with IDA. Project Implementation 70. The Principal Secretary of the Ministry of Health would have overall responsibility for implementation of Part A while the Deputy Secretary, Economic Planning and Development Department (EP&D), would have overall responsibility for coordination of Part B of the project, although day to day responsibility would be carried by the Principal Secretary for the Ministry of Community Servlces. The Health Education Review Committee (para. 65) would also support implementation of Part B. For Part A, a full-time project coordinator would be responsible for day-to-day project management. Two coordinating committees, one each for Part A and Part B of the project, would be established and would meet every month to discuss implementation progress. The coordinating committees would include senior representatives of all agencies and departments involved in the project. The coordinating committees would be chaired respectively by the Principal Secretary of MOH and by the Deputy Secretary of EP&D. The Planning Unit, which would have principal responsibility for day to day project implementation activities, would be strengthened by the appointment (by October 1, 1987) of an architect and of a procurement officer whose qualifications and experience are satisfactory to IDA. Starting from FY88, annual implementation plans would be submitted to IDA four months 'efore the beginning of the Malawian financial year. In addition, an overall project coordinating committee for both parts of the project, under the chairmanship of the Principal Secretary of EP&D would be established by October 1, 1987, and would include the Principal Secretary of the KOH and the Principal Secretaries of the other concerned agencies or departments. A mid-term review of project implementation would be carried out not later than December 31, 1988. The project is expected to be completed by December 31, 1992. Procurement 71. It is expected that 27 percent of total project costs would be procured through international competitive bidding (ICB), including construction of the Mzimba District Hospital (US$2.6 million) and of the Zomba School of Nursing (US$1.0 million). Local firms bidding for contracts would receive a preference of 7.5 percent. Civil works contracts for 12 rural health centers, 3 regional health training centers, and a functional literacy regional training center, are too small and scattered to attract firms from outside Malawi and would be awarded following competitive bidding advertised locally and in accordance with procedures acceptable to IDA. The remaining items of civil works (upgrading 6 existing rural health centers and associated housing, 10 shelters and 163 fish ponds), which account for about US$.5 million, would be by force account of the Ministry of Works and Supplies. 72. Furniture and equipment would be grouped as far as possible into contracts valued at US$100,000 or more, and would be procured through ICB. Furniture and equipment contracts valued at less than US$100,000 but more than US$20,000 would be procured through local competitive bidding up to an aggregate amount not to exceed US$1.0 million. Furniture or equipment :r ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ --  - 21 - at least three price quotations, provided that the aggregate value of such purchaseas does not exceed US$300,000. Vehicles would be procured am a package through ICB and suppliers would be required to maintain adequate after-sales service and an inventory of spare parts. Contracts for IEC materials and supplies would be awarded following competitive bidding advertised locally, In accordance with procedures acceptable to IDA. All IDA-financed contracts over US$200,000 procured through ICB would be subject to prior IDA review. Other contracts would be subject to selective post award review. For all consultants employed for this project, qualifications, experience and ternm and conditions of employment would be in accordance with the 'Guidelines for the Use of Consultants by World Bank Borrowers and The World Bank as an Executing Agency" (August 1981). PROCUREMENT TABLE 1/ (US$ millions) ICB LCB OTHER2/ N.A.3/ TOTAL I. INVESTMENT COSTS A. Civil Works and Design 3.8 3.9 4.0 0.0 11.7 Fees (3.2) (3.3) (-) (-) (6-5) B. Furniture, Equipment 3.0 0.6 2.1 0.0 5.7 Vehicles, Materials (2.3) (0.2) (-) (-) (2.5) C. Technical AssiBtance 0.0 0.0 0.3 1.3 1.6 H- H- - (1.3) (1.3) D. Monitoring, Research, 0.0 0.0 0.1 0.2 0.3 and Evaluation C-) (-) () (0.2) (0.2) E. Training 0.0 0.0 2.8 0.4 3.2 C-) C-) (-) (0.4) (0.4) F. Overseas Training 0.0 0.0 0.1 0.1 0.2 (-) C-) (-) (0.1) (0.1) II. RECURRENT COSTS 0.0 0.0 1.6 0.6 2.2 TOTAL 6.8 4.5 11.0 2.6 24.9 TOTAL IDA (5.5) (3.5) H-) (2.0) (11.0) 2 of Total 27% 18% 45% 10% 100% 1/ Number:; in paxenthesis show the costs to be financed by IDA. T/ Other includes itens financed in parallel by donor agencies. 3/ NA includes activities not subject to procurement. Dis bursements 73. Proceeds of the proposed credit would be disbursed as follows: (a) 85 percent of total expenditures for civil works; (b) 100 percent of foreign expenditures for directly imported goods and 90 percent for local training and for locally procured services, equipment, supplies, vehicles; and (c) 100 percent of expenditures for consultant services and external fellowships. All cofinancing would be on a parallel basis as divisible components have been assigned to individual cofinanciers.  - 22 - 74. In order to expedite the flow of funds for disbursements, a Special Account with an initial deposit of US$.9 million would be established ln US dollars with a commercial bank. All disbursement requests would be fully documented, except that disbursements against expenditures for civil works, equipment, supplies and materials under contracta or purchase orders for less than US$20,000 equivalent would be supported by Statements of Expenditures, documentation for which would be held by the implementing agencies and he mado available for inspection by supervision missions. Monitoring, Reportink and Evaluation 75. Each project coordinator would monitor the progress of implementation of their respective part of the project and the coordinator for Part A would prepare and submit to IDA and other donors quarterly progress reports on overall project implementation. Regular coordination meetings of the donor agencies would be held in Lilongwe. 76. A number of indicators would be utilized to measure p;ogress. To measure attainment by 1991 of the 10 percent target of contraceptive use by women of child bearing age, annual targets by contraception method have been developed. During the project period, the number of women using contraceptives is expected to increase by about 45 percent to about 55,000. If the 10 percent target is achieved (from the current level of 2 percent), then (a) the total fertility would be in the range of 7.0-7.1 (from the current level estimated at 7.7), and (b) a scenario of moderate fertility decline would result whereby the population would increase to 17 million by 2015. This represents a 70 percent increase in population In 30 years as compared to a 200 percent increase if fertility were to remain constant. 77. In addition, several surveys and studies are being financed under the management component and by UNICEF as follows: (a) a base-line health status and utilization survey; (b) a study of the impact of revised fee schedules on service utilization and a study on the potential for health insurance; (c) annual review workshope of the hlealth Plan; (d) annual impact studies of various programs; (e) a mid-term evFaluation of the PHC program; (f) a special evaluation of the Ezrpanded Program of Immunization; and (g) a tuberculosis prevalence survey. The Governmnent has provided assurances that the results of these surveys would be made available to IDA within three sonthc of their completion for review and comment. Accounts and Audit 78. Project funds would be maintained in a separate account and would be channeled from the Ministry of Finance to the MOH for Part A and the EP&D for Part B and would be administered by the respective Deputy Secretaries. Project financial records would be maintained by the Chief Accountant, NOR, for Part L and by tk.4. ChLef Accountant, Office of the President and Cabinet for Part B. the Government Ihas provided assurances that audit of project accounts and statements of expenditures by the Auditor General or indepenldent auditors acceptable to IDA would be made available to IDA within six months of the close of each GOlf fiscal year.  - 23 - Project Benefits 79. In the medium to long term, the project financed programs in i_' ffamily health, disease prevention and nutrition are expected to significantly reduce morbidity, mortality and fertility levels (para. 49). Thro-zg'i increased coverage of comimnity based health services, the project is expected to directly reach and thereby improve the health status of about two Allion people. Child spacing services would be introduced in rural ar.as. At the district level, strengthening the hbopital system and -provision of surgical contraception units would provide a complete range of family health and child spacing services. The institution of In-service training would ensure that the quality of service providers remains good. Activities to improve management and support system combined with restructuring of MOH would contribute to cost savings, more efficient use of manpower and improved health care delivery. Continued strengthening of -health planning at the national and district levels would ensure that -h'ealth programs address priority health problems. The implementation of new accounting systems at the MOR, at district level, and, in the hospitals would enable better monLtorLng of expenditures, and improved fee collection. Expansion of the pharmaceutical system up to the district level would further improve the efficiency of distribution. 80. Family health activities through the multisectoral approach are expected to benefit about 2.5 million people. Of these, about 600,000 people would be reached through the functional literacy program, 300,000 through women's programs, 100,000 through youth programs, and 1.5 million through IEC activities. These activities are expected to increase awareness of family health problems in the short-term and in the medium-term result in increased demand for family health services. Project Risks 81. The main project risk relates to the MOE's weak organizational structure and implementation capacity particularly with regard to civil works. In the first Health Project, the MOB has been unable to adequately coordinate with the Ministry of Works and Supply (MOWS). Furthermore, the MOWS has been understaffed for about two years. Steps taken to minimize this risk include the hiring of expatriate architects to supplement and train existing staff and to coordinate with MOWS. Also, arrangements have been made to advance project preparation with tender documents for all ICB contracts having been completed prior to negotiations. The Government has shown strong COmmiL dent to carrying out a comprehensive restructuring of the Ministry which would strengthen its capacity to implement the project and to improve the overall efficiency of sectoral management. 82. A second risk concerns the introduction of family health activities through a multisectoral approach. The EP&D would be expected to undertake a new function as coordinator for multisectoral activities. Through additional staffing, training, and technical assistance, its coordinating role in the area of health activities would be developed gradually. In the meantime, this component is being implemented through the ministries and departments which have a good track record for implementing other projects. The activities being undertaken would initially be of a pilot nature, and major expansion of multisectoral family health prograus would be considered at the next phase, based on this initial experience.  - 24 - PART V - RECOMHKEDATION 83. I am satisfied that the proposed credit would comply with the Articles of Agreemnt of the Associatlon and recommend that the Executive Directors approve the proposed credit. B. Conable President Attachments Washlngton, D.C. March 5, 1987  - 25 - ANNEX I 1qpa11 * 7-0 (13 illuW 1 Q Ip1t*U 3WIlO (115) Page I of 3- _ticaur at on=*m . . MSU m mdmm mm m 13 1140 118 IlK 1183 11S 5 13R1 - 1 111 omu 1cpmkc t 1466 -0.7 W -52 3.0 3.6 3.3 2.9 3.1 3 LS 3.7 Lg AglaabF 291.1 -L4 6.54.3 5.6 0.9 3.0 3.1 3.3 3.5 3. hIMAM IO. 14-L. 0.1 3.1 0.4 4.1 3.3 LS 3.7 3.9 461 NW b5 4.0 -3.0 L3 3.2 2. 4.2 3L 3.4 3. LS 461 tl_uv"cn 97.2 -LI -4.3 -1.1 3.7 2.6 L4 -t.1 3.4 2.4 1.9 3.9 0c= 1uu 1735 -13.7 -31.1 2L4 10.' -36.5 15.2 17.6 1.5 7.8 i 3.9 h_m of IQS 31.0 Z.8 -19.8 -.9 460 23.l 2.Z LS 3.7 3.9 40 il i dm at Ws 33.3 -97 -2169 -5.0 1.5 -1.2 13.6 3.0 3.1 3.2 3.3 5.4 _am uat umbh 1 -4.4 5.97 U0 14.3 22.19 -7 3.0 3.1 16.3 2.6 3.9 Cm dml&c (193 - IOD) 130 139.3 1 10 191.7 31.3 221.0 24.0 251.0 21.1 M 3dm_mrm (WsU) 1. 1.12 L0.I 0.5 0.7 0.31 o.5 0.46 0.43 OA5 am (u at 01 Ime aF (me *F_.W tbmm (ws am L95 I w- ma19815) 1913 1983 1163