Oman - Review of Recurrent Public Expenditure in Public Health and Education Sectors

DOCUMENT OF THE WORLD BANK FOR OFFICIAL USE ONLY CONFIDENTIAL Report No. 12163-OM OMAN REVIEW OF RECURRENT PUBLIC EXPENDITURE IN PUBLIC HEALTH AND EDUCATION SECTORS August 1994 FILE COPY Technical Cooperation Unit Country Department I Middle East and North Africa Region This document has a restricted distibution snd may be used by recipients only in the performance of thrit official duties. Its contents may not otherwoe be disclosed without World Bank sushorirstion. FILE COPY CONFIDENTIAL Report No: 12163 OM Type: ECO OMAN REVIEW OF RECURRENT EXPENDITURE IN PUBLIC HEALTH AND EDUCATION SECTORS Contents Page PREFACE INTRODUCTION ........................................ i EXECUTIVE SUMMARY ................................... iii I. FISCAL POLICY AND MACROECONOMIC DEVELOPMENTS ....... 1 A . Background ...... ..................... ... ... ..... 1 Role of Government ............................... 1 Central Focus of the Report .......................... 2 B. Factors Influencing the Budget Deficit ...................... 4 C. Budget Structure and Fiscal Adjustment ..................... 4 Oil Prices and Revenues ............................ 5 Structure of Public Expenditures ....................... 6 Macroeconomic Performance ......................... 12 Worrisome Products of Maintaining High levels of Public Spending . . 15 D. Most Recent Fiscal Developments: Plan Versus Reality ........... 19 Determination of Budget Envelope ...................... 19 Reserves Depletion ........................... 21 E. Conclusion ...................................... 25 II. THE BUDGETARY PROCESS ............................. 27 A . Introduction ...................................... 27 B. General Background ................................. 27 Coverage and Structure of the Budget .................... 27 C. Description of the Budgetary Process ...................... 30 The Five-Year Planning Process ................... 31 Preparation of the Annual Budget ....................... 31 Budget Implementation and Control ..................... 32 Monitoring, Audit and Evaluation ..................... . 33 D. Assessment of the Budgetary Process ...................... 34 E. Process Issues .................................... 35 The Incentive Structure for Budget Planning and Management: The Question of Government Commitment ................ 35 Division of Labor in the Budget Process .................. 35 Relationship of Spending to Development Objectives ........... 36 Management Information and Transparency ................. 36 Monitoring and Evaluation ........................... 37 F. Objectives of an Improved Budget Process . . . . . . . . . . . . . . . . . . . 37 G. Recommendations for Implementation . . . . . . . . . . . . . . . . . . . . . . 39 Il. EDUCATION EXPENDITURE REVIEW . . . . . . . . . . . . . . . . . . . . . . 42 A . Background ...................................... 42 B. Analysis of Public Education Expenditures ................... 45 Magnitude and Evolution of Public Education Expenditures ....... 45 Allocation of Public Education Spending .................. 46 Equity in Allocation of Education Spending ................. 49 C . Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Quality and Internal Efficiency of the Education System ......... 51 Expansion, Public Expenditures, and the Private Sector ......... 52 G ender Issues .............................. 52 D. Summary and Recommendations ......................... 53 Restructuring Public Education Priorities .................. 54 Indications of Underallocation to Non-wage ................. 54 Mobilization of New Sources of Education Finance ............ 54 Forecasting Education Budgets .................. 55 IV. HEALTH EXPENDITUREREVIEW ......................... 56 A . Introduction ...................................... 56 Background .................................... 56 Health Objectives and Policy .......................... 56 Demographic Characteristics .......................... 57 Epidemiological Profile ............................. 58 B. Health Care System Components ......................... 59 Health Care System Organization ....................... 59 Health Care Delivery .............................. 60 Utilization of Health Services ......................... 61 C . Health Budget .................................... 63 Evolution of Public Finance .......................... 63 Recurrent Expenses ........................... 63 Capital Expenses ............................ 64 Development or Projects Budget ................... 64 Budget Forecast (1991-1995) ......................... 65 D . Sector Issues ..................................... 66 E. Recommendations .................................. 67 Primary Health Care Reform and Hospital Sector ............. 68 Cost of Medicine and Medical Supplies ................... 69 Cost Analysis and Unit Cost Calculations .................. 69 A Study on Cost Recovery ........................... 70 Budgetary Allocations for Operation and Maintenance Expenditures . . 70 A Health Care Cost Awareness Campaign .................. 71 Omanization of Health Care Professions ................... 71 Human Resource Management Systems ................... 71 V. COST OF SERVICES AND EXPENDITURE NORMS .............. 72 A . Introduction ................. ..................... 72 B. The Cost AnalysisExercise ............................ 73 Ministry of Health 73 M inistry of Education .............................. 74 Ministry of Electricity& Water........................ 74 Ministry of Electricity & Water ........................ 74 Basic and General Findings .......................... 74 Budget Preparation and Level of Detail Available ......... 74 Performance Measures ......................... 75 Periodic Review ............................. 75 Specific Sector Findings ............................ 75 M inistry of Education ......................... 75 M inistry of Health ........................... 76 Ministry of Electricity (electricity sector) .............. 80 Ministry of Electricity (water sector) ................ 81 C. Comparative Analysis of Education and Health Cost ............. 84 EducationalCost ................................. 86 Health Care Expenditures............................ 87 VI. A STRATEGY FOR RATIONALIZING PUBLIC SPENDING ......... 89 Set a Firm Budget Envelope .............................. 89 Cut Defense Spending .................................. 89 Medium-term Approach to the Budget Problem ................... 89 Educating the Ministries of the Virtues of Rationalizing Expenditures and of the Consequences of Overspending .................... 90 Productivity Improvement in the Public Sector ................... 90 Subsidy Reduction and User Charges ......................... 91 Expenditure Reductions ................................. 91 Mobilization of New Sources of Non-Oil Revenue ................. 92 Oil Policy and Rising Expectations .......................... 92 Review of Sector Ministries Programs ........................ 92 APPENDIX I. APPENDED TERMS OF REFERENCE ................. 94 APPENDIX II. STATISTICAL APPENDIX ....................... 106 Tables Intro. I: Net Deficit Effect of Some Civil Ministries, 1993 ii 1.1: Relative Shares of Government Expenditure in the Final Consumption and Gross Capital Formation 2 1.2: The Deficit and the Means of Finance, 1979-1991 3 1.3: Public Revenue and Expenditure, 1985-1991 5 1.4: Breakdown of Civil Current Expenditure by Type of Expense 7 1.5: Indices of Government Finance Indicators 8 1.6: Government Civil Employees 9 1.7: Index of Civilian Recurrent Expenditures 9 1.8: Breakdown of Civil Current Expenditures 11 1.9: Breakdown of Civil Development Expenditure 12 1.10: Major Indicators, 1976-1991 13 1.11: Planned Budgets 20 1.12: Financing the Budget Deficit, 1987-1992 22 1.13: Public Finance (1991-1993) 24 2.1: Estimated Government Revenue and Expenditure During the Fourth Five- Year Plan (1991-1995) 29 3.1: Evolution of Primary Education Enrollment Rates 44 3.2: Public Education Expenditure by Major Regions (1987) 46 3.3: Public Education Expenditure Per Student and Enrollment Ratios 48 4.1: Population Growth Data 58 4.2: Development Expenditures - Distribution by Level of Care 64 5.1: Education Costs Per Student by Level 76 5.2: Illustrative Exercise for Hospitals 78 5.3: Illustrative Exercise for Health Centers 79 5.4: Summary Illustrative Exercise 80 5.5: Cost Per Kilowatt Hour 61 5.6: Water Production Capacity 83 5.7: Theoretical Budget Based on Oman 1990 Production Expenditures 84 5.8: Oman: Comparative Educational Cost and Program Effectiveness Data 85 5.9: Oman: Comparative Health Care Cost and Program Effectiveness Data 88 Figures 1.1: Major Indicators, 1982-1991 6 1.2: Public Spending and Inflation 8 1.3: Private and Public Investment Indices 14 1.4: Private Investment and Government Expenditure 16 1.5: Private Investment Versus Construction 17 1.6: Index of Revenue Indicators, 1985-91 17 1.7: Indices of Government Expenditures 18 1.8: Budget Deficit and Withdrawals 21 1.9: Financing the Deficit 22 1.10: Current Budget Deficit 23 3.1: Evolution of Total Education Expenditure, Total Government Expenditure, and GDP 45 3.2: Enrollment and Public Expenditures by Levels 47 3.3: Indicators of Vertical Equity in Education Expenditures 50 PREFACE The Green Cover Draft of this report was submitted to the Government in August 1993, based on a mission to Oman in October-November 1992 consisting of Messrs. Abdelaleem Sharshar (Task Manager/Team Leader), Andre Komenan (Education Economist), Jean-Marc Guimier (Health Economist), Andrew Hamilton (Budget Process Specialist) and Mahesh Reddy (Cost Analysis Specialist). The discussion of the report with the Goverment in February 1994 resulted in revising the report. The revisions were undertaken by Mr. Sharshar with inputs from Messrs. Komenan, Guimier, and Ready. The revisions were also reviewed and cleared by Mr. William Tyler. The early drafts of this report were reviewed and many valuable comments were niade by Messrs Tyler, Mike Stevens, Francis Steier, Bassam Ramadan, Albert Sales, Brian Smith, and Derek White. Additional support at headquarters was provided by Mr. George Guess (consultant), N. Habib (editor), Mark Higgins and F. Hatab (report preparation and processing). INTRODUCTION Terms of Reference: Rationale for a Limited Expenditure Review 1. This review was conducted at the request of the Ministry of Finance and the General Secretariat of the Development Council. In preparation for this task, a Bank Mission visited Oman in April 1992 to consult with the Government on the coverage of the Public Expenditure Review (PER) and the Oman Country Economic Memorandum (CEM), which was to be conducted by the Bank early in 1993. 2. The outcome of this consultation was an agreement on the following four major areas to be covered in this limited PER: a. general analysis of the recurrent expenditures of civil ministries within the context of recent macroeconomic developments in Oman; b. analysis of expenditures in the education and health sectors in the context of the Government's existing policies, goals and objectives for these sectors; c. analysis of the processes for planning, preparation, monitoring, and control of the General State Budget; and d. conducting a Standard Cost Analysis (SCA) exercise, to the extent permitted by available data, as a mean of estimating expenditure norms for the Ministries of Education, Health, and Water and Electricity. 3. The general analysis of recurrent expenditures highlights the current problems of rising spending and financing the deficit. The sectoral analysis of health and education expenditures highlights fiscal performance issues that are common in most other sectors. The other two components, i.e., review of the budget process and cost analysis, were added to throw an additional light on the problem of controlling the general budget and overall spending. 4. The concentration of this review on government financing of health and education services underlies the issue of cost recovery in public service sectors. The relatively high contribution to the deficit of these two services makes them a primary target for investigation, since reducing their contribution to the deficit would go a long way in dealing with the overall deficit. A major factor in their high contribution to the deficit is their pricing policy, i.e., free education and nearly free health care. That separates health and education providers from ministries that supply utilities, e.g., electricity and water and telecommunications, as the latter contribute revenues to the general state budget to offset most of their expenditures [Table Intro. 1]. ii Table (Intro.1) NET DEFICrr EFFECT OF SOME CIVIL MINISTIES, 1993 MINISTRY RO '000 CURRENT EXPENSE CURRENT REVENUE BALANCE EDUCATION 140,722 665 (140,057) HEALTH 94,039 4.806 (89,233) ELEC. AND WATER 114,717 88,588 (26,129) COMMUNICATIONS 20,953 12,781 (8,172) POST, TELEG., TEL. 4,520 4,900 380 Source: MOFE, The State General Budget. 1993. Technical Notes 5. The General Budget of Oman covers the Central Government, including its share of Petroleum Development Oman (PDO) expenditures, the regional administration (six regions and two governorates, divided into 59 administrative units "Wilayat"), and public authorities and organizations. The official budget document does not reflect the entire fiscal position of Oman (revenues and deficits) because transfers to and earnings of the State General Reserve Fund (SGRF) are not included. The Fund was established in 1980 "to safeguard the future economic development" of Oman. The Fund's sources include a portion of oil revenue, budget surpluses, return on own investments, and any other resources that are considered appropriate to be added to the Fund. Withdrawals from the Fund are allowed for meeting Fund's own obligations and to finance the budget deficit when there is a need. The portion of oil revenue destined to the SGRF varied between 5 and 15 percent over the years according to fluctuations of oil prices and revenues. 6. There are no itemized budgets for Security and National Defense. Also, these is no available information, except for total allocations, for the Royal Court and affiliated agencies. In essence, the only data available on itemized expenditures on an annual basis are those of recurrent expenditures for the civil ministries. In addition, data on development expenditures are available by project for each ministry or agency. iii EXECUTIVE SUMMARY Introduction: Focus, Levels of Analysis and Major Findings i. The main focus of this limited public expenditure review is on the recent developments in public expenditure and the budget deficit, factors underlying the continuing rise in public spending and the deficit, and on measures to control them. The choice of the health and education sectors was an indication of the Government's frustration over the unabated rise in the current expenditures in the civil ministries which contribute the most to the deficit. That choice was, also, based on the assumption that the fiscal issues facing these two public service sectors would illustrate the broader problems that might exist throughout the government sector. A standard cost analysis exercise and a review of the budget process were added. They were designed to throw additional light on the problems of controlling civil ministries' budgets and overall spending. ii. At the macro level, the relationships between public spending and the major policy objectives of the Oman Government, i.e., diversification and private sector development, economic stabilization and reserves accumulation, price stability, and employment of Omanis are examined. At the micro level, the review highlights the microeconomic bases of the budget deficit. Inefficiency of public service programs is an important contributor to the deficit problem. Underpricing (free or heavily subsidized public services), non-optimal input mix (labor versus non-labor cost), misallocation of resources between service programs (primary versus tertiary level services), imbalance of resource utilization (hospitals versus health centers), service quality, and leakages and loss of output are all common symptoms indicating that big gains could be obtained if efficiency of public service programs is improved. Also, defects in the budget process are important contributors to the deficit. The soft budgetary ceiling, the high degree of aggregation in budget preparation (the wide definition of the budget unit) and the lack of adequate information and tools (e.g., standard unit cost) to prepare least-cost budgets and provide a basis for cost recovery, and the lack of a system to compare performance (output) with spending (inputs); all of which reinforce the prevailing inefficiency in government operations. Fiscal Policy and Macroeconomic Developments iii. The recent developments in Government spending are reinforcing the inherent bias of an oil-based economy against non-oil tradable goods and economic diversification. The existing fixed nominal exchange rate is inconsistent with the overvalued real exchange rate that is induced by oil dominance, the expanded role of the government, and the Omani liberal importation policy of goods and labor. After the successful fiscal adjustment, following the collapse of oil prices in 1986, the rate of increase of oil revenues was followed by a higher rate of increase of total current spending and a much higher rate of increase in civil current spending, thus elevating the budget deficit. The increasing spending financed, iv mostly, the public wage bill and non-wage purchases in the course of providing free public services. As most of government material purchases were imported, the impact on the current account was negative. Also, as most of the government purchased services are non- tradable, produced mostly by foreign labor which has high propensity to save and remit their savings abroad, the effect of government spending was a relative increase in non-tradables' prices and further weakening of the BOP, leading to further appreciation of the real exchange rate. These impacts were reinforced by private sector induced spending, as much of it paid for imports of goods and services and for domestic services as well. iv. All methods, except money printing, had been used to finance the deficit. Debt/GDP ratio had remained above 16 percent over the last 8 years., Depletion of SGRF reserves is clearly correlated with developments in the budget deficit. Borrowing is used, at times, to slow down the depletion of SGRF reserves. All these methods, also, appreciates the real exchange rate, constraining non-oil exports and increasing imports. Furthermore, the recent development, since 1991, of domestic borrowing through issuance of development bonds may in fact be crowding out the private sector despite the assumption that domestic borrowing absorbs excess private liquidity. It is noted that private liquidity is accumulating, primarily, because of lack of private investment opportunities in production of goods. The combination of appreciated real exchange rate, continuous deterioration of terms of trade against produced goods, and the crowding out effect of increased public domestic borrowing to finance the deficit are straining private sector development in Oman. v. Finally, given the existing liberal foreign labor policy on one hand and the downward public wage rigidity on the other, the relatively large wage differential between public and private employment and between domestic and foreign labor, and the Government use of non-competitive Omanization measures; emerging unemployment among Omanis is becoming an increasing source of concern. vi. The Budget Deficit. The budget deficit has been an abiding feature of the fiscal situation in Oman since 1976 and is projected to continue beyond the current Fourth Development Plan (1991-95). Throughout the 1976-1991 period, an overall budget deficit, i.e., the excess of government expenditures over gross revenue (before any transfers are made to the SGRF) occurred in all but four years. Between 1982 and 1992, a budget surplus was realized only once, in 1990, not as a result of expenditure restraint but as a result of sharp increases in oil prices and revenues. This review shows that public spending has reached unsustainable levels. Over 80 percent of public revenues comes from nonrenewable sources, i.e., oil. But the Government has been spending as if this revenue comes from reproducible sources instead. Therefore the deficit that seem manageable under normal conditions, is in fact unsustainable. vii. Factors Influencing the Budget Deficit. There are several factors that underlie the deficit problem in Oman. First is the relatively high claim of government spending on GDP (49 percent in 1990). Second is the flatting oil revenues since 1982. Third is the disproportionate share of defense allocations of total resources (41 percent of V government revenue in 1990). Fourth is the the continuing increase in civil recurrent expenditures in response to the sharp increase in, the demand for public services due to the free of charge policy of providing most public services and underpricing public utility services. Fifth are the deficiencies in the budget process, i.e. softness of budget ceiling, open ended processing of new spending requests, the arbitrary nature of the incremental approach to budget preparation, and the lack of regular performance evaluation of public financed programs. viii. Special Features of Public Spending. There are also some special features of public spending in Oman that lessen the ability of the Government to control the growth of public spending and the deficit. The structure of public expenditures is dominated by recurrent expenditures which in turn are dominated by defense and national security and civil ministries' spending. In addition, the recurrent expenditure structure of both parts of the government sector is dominated by wages and salaries, whose share of recurrent expenditures averages about 56 percent, but can get as high as 83 percent as in the some Ministry of Education budgets. ix. The inability to control the growth of recurrent expenditures on the part of civil ministries is due to several factors. First, is the continued emergence of new completed public service facilities such as new schools and health care facilities. The pressure to increase the supply of public services is likely to continue as the demand for these services continue to increase. Second, is the continuous rise in the wages and salaries budget, even at times of severe fiscal contraction. The rise in the wage bill is due to continuing increase in public employment and the excessive levels of public salaries and allowances. Third, is the relatively high cost and inefficiencies involved in operating and maintaining public service programs. x. The current Fourth Plan projects a resumption of economic growth for the 1991-95 period at the rate of 6.3 percent per annum, depending in large measure on the strategy of inducing the private sector to invest more in the non-oil economy. The growth of government expenditures overall, and of the civil ministries, is planned to rise at the rate of 3.5 percent annually. But government agencies are taking a more expansive view of their spending needs. Actual public spending during the first two years of the Fourth Plan, i.e., 1991 and 1992, surpassed planned spending by a wide margin. Actual government expenditures surpassed planned expenditures by 6 percent in 1991, 17 percent in 1992, and is expected to surpass it by about 14 percent in 1993. Subsequently, actual current deficit exceeded planned deficit by 51 percent in 1991, 176 percent in 1992, and is expected to surpass it by 105 percent in 1993. This big increase in the deficit led to over-shooting the Plan target rates of deficit/revenue and deficit/GDP in these three years. The planned deficit/revenue rate of about 10 percent was surpassed to about 18, 28 and 22 percent in these three consecutive years. Also, the planned deficit/GDP rate of about 4.3 percent was surpassed to 7, 11 and 8.6 percent in the three years. These developments are causing a great deal of concern over maintaining fiscal stability. vi xi. Of all possible repercussions of the lingering deficit, the depletion of foreign reserves, the expansion of foreign indebtedness, the potential acceleration of inflation rates, and the possible crowding out of private investments represent the greatest threat to the Omani economy. Considering that oil revenue is not income in the normal sense, but the proceeds from the sale of an asset, the level of government spending was, and still is, excessive. The rate of reserves accumulation of SGRF should have been much higher than the actual rates. Furthermore, if the SGRF reserves, estimated at RO 1,330 million at the end of 1992, were expressed net of cumulative foreign indebtedness, estimated at RO 1,500 million, the real SGRF balance at the end of 1992 would have been negative. xii. The depletion of foreign reserves to finance the budget deficit violates the macroeconomic objectives set forth in the Fourth Plan. If present trends continue, in the longer run, as external indebtedness unavoidably accelerates, the current account balance will deteriorate under the burden of an increasing debt service ratio. Competition for sources of finance between the public and private sectors will intensify, raising real interest rates and crowding out private investment, thus defeating the most important long term policy objective of the Oman Government, i.e., diversification and private sector development. Signs of these trends are beginning to emerge. The Budgetary Process xiii. Oman currently possesses most of the necessary elements of an effective medium-term expenditure planning and control process. These include competent macroeconomic planning and analysis linking GDP growth to other government finance variables, i.e., revenues and public expenditure levels, a rolling multi-year public investment plan with detailed monitoring and the beginnings of a system of plan evaluation and follow- up, a forward fiscal plan with revenue and expenditure projections, a well-coordinated set of mechanisms for inter-ministerial discussions and priority setting, and a computerized financial management information and control system. Oman's budget planning, control and monitoring institutions, procedures and systems have progressively matured during the 1980s within a well thought-out system. xiv. There is clearly a scope for further improvement. Indeed, the recent controversy over the recurrent spending needs of the civil ministries gives ample evidence that such improvements are urgently needed to restore fiscal balance and budgetary control. Fortunately, the existing system provides a solid foundation for the necessary next steps, which should focus on improving budgeting and resource management within the civil ministries, reinforced by strengthened oversight by the Undersecretariat for Financial Affairs. vii Process Issues xv. The Budget Process: Needs Versus Resource Availability. The five-year planning process has established links between the annual budgets and the five year development plan. But it appears that a perception has taken root within the Government that the Contingency Fund (which exists to meet unforeseen international and domestic developments, but which is also allocated in the Fourth Plan to finance a portion of the planned deficit) and even the SGRF can be used to meet ministry demands not funded under the plan, if the ministries press their case. The perception that the budget envelope for the civil ministries is not firm has adverse consequences for good management. It relieves ministers of the need to set firm internal priorities and to budget accordingly. It also places MOFE.in the untenable position of seeking to enforce spending allocations which are in danger of being subsequently overridden by the Deputy Chairman of the Council for Financial Affairs. xvi. Division of Labor in the Budget Process. Both the structure of the budget and the weakness of ministerial-level budget preparation force thousands of spending decisions up to the level of the MOFE budget staff and beyond them to the Financial Affairs Council. If MOFE aims to move away from micro-level budget decision-making toward a role of priority setting across ministries and management oversight, the ministries must be empowered and enabled to set priorities within a firm budget envelope, and held accountable for performing their missions efficiently. Shifting more of the burden of priority setting within sectors, budget preparation and resource management to the civil ministries will allow MOFE to act more as a quality controller of the budgetary process, and as a focal point for framing the major intersectoral trade-off issues which should be the focus of the senior levels of government. xvii. Relationship of Spending to Development Objectives. Oman's development objectives are spelled out in both general and quantified terms in the five-year plans, but the links between these objectives and the recurrent spending of the civil ministries do not appear to be clearly established in the budget process. Establishing such links, in the form of explicit development related performance criteria for key functions of major ministries and explicit criteria for budget review, will permit both MOFE and the civil ministries to perform a stronger role in budget preparation and oversight. xviii. Management Information and Transparency. Spending detail is accounted for at the level of line items for personnel, purchases of goods and services, transfers, etc. These details are aggregated first into "budget units" and then into ministry and functional categories. In the design of the present government budget information system, ministries have been left to decide for themselves the definition of a "budget unit." The resulting "budget units" often do not reflect the operating structure or the program objectives of ministries, and some large ministries have only one "budget unit" to cover the bulk of their operations. For example, the Ministry of Education lumps all primary and secondary education throughout Oman into one "budget unit." viii xix. The existing system of "budget units" does not provide sufficient transparency into ministerial operations and unit costs to support priority setting within and between the civil sectors and ministries nor to monitoring and evaluation of resource management and performance by ministries. Rectifying these short-coming for the key civil ministries is a precondition to a more effective division of labor in the budget process, as well as to improving the efficiency and productivity of government operations. xx. Monitoring and Evaluation. The Government of Oman has a well established system of financial accountability, including up-to-date accounts for every spending agency and a regular system of financial audits. In addition, development projects are subject to independent audits for compliance with the plan and evaluation by the Secretariat General for State Audit. A strategy for improving budgeting and resource management within the civil ministries, and for holding them accountable for achieving the government's priority objectives within limited resources, requires strengthening MOFE capability for forecasting, reviewing, monitoring and evaluation of ministries' performance in pursuing the government's objectives. Education Expenditure xxi. Oman's education system compares well with those of other developing countries. Education claimed more than 26 percent of total recurrent expenditures in 1991 after growing at a rate of 12.4 percent annually between 1988 and 1991, a period that witnessed 7.6 percent annual growth for government recurrent expenditures as a whole. Furthermore, in 1991 education claimed 5.7 percent of GDP, which compares favorably with other countries. On a per capita basis, education spending in Oman stands higher than the average in developing countries. Its educational system is also more equitable than in most developing nations, with a "Gini Coefficient" of 0.38 compared to an overall average of 0.60. xxii. Examination of the quality of education and the internal efficiency of the system, however, raises some important questions and suggests recommendations for reforming that system. The government budget is the main source of education finance. Private education is virtually non-existent, and cost sharing is so far being avoided for reasons of social expediency. The following measures of system reform are recommended. xxiii. Restructuring Public Education Priorities is urgently needed. The present pattern of allocation of current expenditures among the three levels of education reflects an alarming imbalance as illustrated by higher education absorbing too high a proportion of education expenditures, in terms of both the relative shares and expenditure per student. xxiv. Indications of Underallocation to Non-wage inputs, particularly education material and laboratory equipment, are evident. Within the non-wage category, there are ix indications that quality driving inputs such as teaching materials, libraries, and science labs are being neglected in favor of overspending on quality unrelated administrative inputs. xxv. Mobilization of New Sources of Education Finance is another urgent task. The required, levels of spending to finance future expansion and maintenance of a high- quality education system cannot be met by government sources alone. Several important sources of finance are identified, i.e., user charges for university educational services, charges for social services from those who can afford to pay, private education and, most importantly, savings from improved internal efficiency of education programs. xxvi. Internal Efficiency. Considerable resources could be released for future expansion if the internal efficiency of education systern could be improved. Because of the great incidence of repetition and dropouts, it takes an average of 9.7 years for elementary school students to complete a 6-year cycle. That represents 62 percent more time and resources than would be required to complete the cycle under a perfectly efficient system. This potential gain in efficiency could be materialized as savings of the wasted resources and/or as an increase in the level of educational services (service more students) at no extra cost. The pressure for more public appropriations could be eased either way. xxvii. Cost Recovery. Cost sharing as a supplementary source of finance should be considered on both economic and social grounds. Currently, at the university level, a large portion of the budget finances social services that have little impact on the quality of education while only 4 percent goes to instructional material. These social services should be targeted to those students who could not afford direct and the opportunity cost of university education. A scheme of cost-sharing of accommodations, transportation, meals, and textbooks should be studied and promoted. Other instruments should also be studied, e.g., low interest or interest-free student loans. xxviii. Private Education. To support the expansion of the education system, the following measures are recommended: (i) a reform of the procedures regulating the creation and development of private schools so it becomes easier and rewarding to establish private schools; and (ii) financial incentives to promote private schools, e.g., tuition support, direct subsidies, or secondment of qualified teachers on the government payroll; that have proven effective in other countries. Health Expenditure xxix. Tremendous achievements were realized in the provision of public health services to the population of Oman during the last two decades. Annual growth rates in the period 1971-1990 averaged about 17 percent for hospital beds, 17.6 percent for doctors, 22.3 percent for nurses, 22 percent for inpatients, and 83.5 percent for outpatients. According to MOH estimates, life expectancy at birth rose from 44 to 66 years. From 1980-1991, the infant mortality rate decreased from 64 to 28 per 1,000, crude death rates x dropped from 17 to 7.6 per 1,000, and children immunization coverage increased from 40 percent to 85 percent. Currently, over 90 percent of the population has ready access to permanent or mobile medical facilities providing them with both preventive and curative health care. Forty-two percent of hospital beds are in the Muscat area, however, which has only 22 percent of the population. xxx. The Government policy objective is to provide free preventive and curative health services to all citizens. The attainment of this objective was facilitated by establishing a three-tiered health delivery system, i.e., primary care at the wilayat level (health care centers), secondary care at the regional level (polyclinics and regional hospitals), and tertiary referral at the national level (e.g., the Royal Hospital). In addition, specific health care programs such as eye health care, tuberculosis control, control of diarrheal diseases, and malaria control operate under MOH management. At the end of 1991, total health manpower for the country stood at 15,023 of which 12,636 were on the MOH payroll. Almost 51 percent of the medical, paramedical and other staff are Omanis. xxxi. The actual MOH budget grew at an average rate of about 14 percent between 1988-1991, when it stood at RO 96.2 million. The 1991 recurrent expenditures claimed 88.5 percent of that budget and salaries and allowances claimed about 60 percent of these expenditures. Primary estimates indicate that too many people are employed in the health sector, even though there is a clear shortage of some categories of technicians, such as laboratory technicians, biochemists, microbiologists, and physiotherapists. xxxii. Misallocation Among Non-Wage Inputs. In 1991, non-wage expenditures accounted for 37.1 percent of the recurrent budget. Spare parts and maintenance of building, machineries, equipment and computer received only 3.7 percent and medical supplies claimed 14.4 percent of the non-wage budget. Spare parts and maintenance allocations are far below the average technological depreciation rate of 8 to 12 percent of the capital stock. Of the medical supplies allocations, 73.6 percent is for drugs and 14.6 percent is for equipment. The medical supplies per capita allocation is estimated at about RO 5.0. While this average is relatively low, its regional distribution is highly inequitable. It stands at RO 10.6 in Muscat, and is only RO 2.0 in Batinah. xxxiii. Potential Sources of Savings. There are indications of potential savings in the present system. By improving the procurement process of drugs and equipment to reduce the purchasing prices to the prevailing international levels, the cost of purchases could be reduced by about 22 percent. Further savings could be realized by reducing the waste caused by the relatively high rate of visits per capita to public health facilities, a practice encouraged mainly by free access to these facilities. Also, the cost of construction of new health facilities is relatively high and its reduction should be investigated. The new Rustaq hospital under construction will cost roughly RO 12 million for 200 beds (an average of RO 60,000 per bed). This average is equal to the construction cost in western countries. xi xxxiv. The social reasons behind the present policy of providing free health services to all citizens and to expatriate workers in the public sector are well established. It is also noted that nominal charges are collected from certain categories of the population and for specific health services. Providing free health care for those who cannot afford to pay for it is a sound and equitable policy. But as economic conditions stabilize at a more moderate and sustainable growth rates and social indicators also moderately improve while the cost of public health services continue to rise, the time may be right for a comprehensive study of alternative efficient and equitable methods of financing public services in general and public health services in particular. Alternatives may include a national sales tax as well as health insurance schemes for both public and private employees. The feasibility of applying a gradual and progressive schedule of user charges for medicine and for particular public health service should be considered as one of the most important alternatives. xxxv. Currently, there are four major health care providers in addition to MOH facilities. All of them are public institutions. They include the hospitals and facilities run by Petroleum Development Oman [PDO], the Royal Omani Police, the Armed Forces, and the University. There are no private hospitals or clinics with beds in Oman. Encouraging the private sector to play an increasing role in the provision of health services may prove to be an efficient way to satisfy demand for particular kinds of curative care. An effective private/ public competition in supplying curative care, possibly through the privatization of one or two of the major hospitals, would have positive efficiency, equity, and budgetary effects. xxxvi. A way to reduce waste and improve the internal efficiency of the public health sector is to implement a cost accounting system that allows the senior managers of the sector to establish input utilization parameters and performance indicators. These standard specifications would be helpful in preparing cost efficient budgets and in monitoring implementation of these budgets at the sector level, regional operations level, and at the hospital (central) level. xxxvii. Perhaps, one of the most important sources of savings in the long run is improvement in the allocative efficiency of the sector's resources among its different service programs and facilities. This review identified some problems in the utilization of health facilities and services. Hospital resources are utilized mostly for general consultations and preventive care, which would more appropriately be carried out by polyclinics and health centers. Also, the average length of stay and the occupancy rates in hospitals are relatively low even though there indications of over-prescription of hospital stays and laboratory testing. Re-examination of inter-sector allocations is an issue that should be afforded high priority. An awareness campaign should be launched for prescribers and patients regarding waste and mis-use of health facilities and supplies. Continuation of the Omanization of health professions would eventually improve health services delivery to Omanis. Finally, the allocation of public expenditures should be modified to reduce regional disparities xii xxxviii. There is a need to study alternative means of improving the efficiency of the health care operations while satisfying the fundamental principles of the Sultanate's health policy. Sector studies could include: (i) studies to evaluate activity in the primary health care centers and in the hospital sector; (ii) a study of procedures to decrease the cost of medicine and other medical supplies, including a local production system; (iii) development of a cost accounting system (a good beginning was made by MOH) that could be used by sector managers to monitor unit cost and to project efficient health budgets; and (iv) a feasibility study to establish a cost recovery system in the health sector. Cost of Services and Expenditure Norms xxxix. To rationalize budget preparation, service program managers and their budget officers need to assess the level of expenditure on, or the cost of, the goods and services that are required to provide their services efficiently. Excessive expenditure or cost per unit of service wastes scarce budgetary resources, while under-funding operations, maintenance, and supply needs can only erode the value of existing capital investment and/or the quality of the service. To avoid resource excesses or shortfalls, specially when a firm budget constraint is enforced, the unit cost is a necessary tool for improving the sector ministries' capability to make the right trade-offs, plan expenditures, and prepare efficient budgets. In addition, knowing the standard unit cost would allow MOFE to determine whether public service programs are over- or underfunded. An equally important use of standard cost analysis in Oman civil ministries relates to cost recovery of public services. If, and when, the Government decides to charge the users of public services, good estimates of the cost of service units become essential information without which appropriate levels of charges can not be determined. xl. The exercise of cost analysis in this review should be viewed as an experimental effort, despite the usefulness of some of the preliminary findings in terms of identifying certain operational inefficiencies. It is experimental as far as the use of conservative assumptions pertaining to work loads and input requirements is concerned. When it was felt that adequate information could be assembled, as was the case with MOH, a computer simulation model was used to estimate workloads and allocate expenditures among services, inputs and recipients of health care. The results of this exercise provided the foundation for several useful conclusions and recommendations, as reported in Chapter IV, on health expenditures. In the exercise, unit cost per recipient (student, patient, or unit of output such as kwh and gallon) in education, health care, and electricity and water are calculated in Chapter V. Information on comparative costs of education and health care is also provided. xli. To introduce a continuous and comprehensive program of standard cost analysis as a budgetary tool for budget preparation and evaluation of program effectiveness for all ministries, a few preparatory steps are required.- First, a training activity for service and fiscal managers as proposed in Appendix II, Appended Terms of Reference. Second, a xiii redefinition of the budget unit is required to include budgets for regions, for programs (e.g., primary, secondary, and tertiary education), and for major expenditure units (e.g., hospitals, health centers, etc.). Third, it is proposed that the Ministry of Finance and Economy and the sector ministries establish administrative units for cost analysis whose function would be to prepare the data and to perform the actual calculations of expenditure norms as proposed in Appendix II. Strategy for Rationalizing Public Spending xlii. A medium-term strategy to deal with the current fiscal problem is needed. The basic elements of that strategy are: (1) inform the ministries of the necessity for rational spending and of the consequences of overspending and neutralize citizens' rising expectations for more free and subsided services; (2) set abiding expenditure ceilings by Cabinet decision.; (3) make additional funding for a particular ministry conditional on identifying and applying equal saving; (4) cut expenditures, especially defense and recurrent civil expenditures through freezing or reducing the levels of public wages and employment; (5) focus on improving the use of resources that are already available to the ministries, and on the use of the realized savings as a source of financing expansion of public service programs; (6) reorient the public investment program away from public building and other forms of construction and towards the maintainance of public capital; (7) mobilize new sources of non-oil revenue through user charges and divestiture of some state owned enterprises with the proceeds going directly into the SGRF, and provided that an optimum public saving plan is in place with strong safeguards to curb the Government appetite for spending; (8) conduct a full-scale review of expenditures, including development spending, of civil ministries that are not covered in this review; and (9) clearly, redefine the objectives of SGRF as a heritage fund and the Contingency Fund as a stabilization mechanism, and establish impenetrable boundaries between them. Future Studies Program xliii. In the course of this study, several gaps in information, and in the organizational arrangements that could address these gaps, were identified. Successful efforts to improve plan/budget preparation and the efficiency of public service programs would require dealing with these deficiencies. For that purpose, several steps and studies are here proposed: 1. Conduct a public expenditure review for sectors that are not covered in this study, particularly those providing public utility services, e.g., electricity & water, transportation, and communications; and/or performing regulatory functions, e.g., commerce and industry. xiv 2. Conduct a public investment program review in preparation for the forthcoming Fifth 5-Year Plan. 3. Improve the capability of MOFE for budget analysis, projections, and evaluation of performance of public service programs; through an integrated institutional development program that includes reorganization, staffing, and training. 4. Establish a budget reform task force under the chairmanship of the DPM, and supported by a technical committee headed by the Undersecretary of Finance, to plan and oversee the implementation of a more efficient budget processes. 5. Study the returns to education and education expenditure priorities. 6. Undertake a hospital sector study focusing on network organization, hospital management, and upgrading the skills of health professionals. 7. Conduct a feasibility study of local production of medicine. 8. Study and evaluate the technical and financial feasibility of reforming the cost recovery system in the public service sectors. 9. Conduct a training program for developing an integrated cost analysis system in MOFE and in civil ministries. I. FISCAL POLICY AND MACROECONOMIC DEVELOPMENTS A. Backgrotnd Role of Government 1. The Omani Government's role surpasses the traditional role of government. It replaces the market, to a significant extent, in structuring the Omani economy through planning and implementing a sizable public investment program that averaged about 70 percent of gross capital formation between 1976-1991 [Table 1.1]. As the biggest consumer, with an average share of about 50 percent of total final consumption, and the biggest employer the Government has a big influence on both the commodity and factor markets. It is noted, however, that the relative shares of Government in both investment and consumption had been declining over the years. These trends indicate some success in achieving the Government's objective of increasing the role of the private sector in the Oman economy. However, the Government still controls market entry, private production and employment through an elaborate regulatory and incentive system that is meant to develop non-oil sectors and increase the share of Omanis in the labor force. In performing this extended role the Government relies on fiscal policy and the general budget as the main instrument of that policy. 2. The Oman oil-based economy had evolved under two major influences: (i) relatively excessive subsidies to consumers and producers in the form of physical infrastucture; free public services, and low cost inputs; and (ii) overvalued currency which encouraged imports and reinforced the bias towards non-tradable services and against non-oil tradables. The existing environment of fixed nominal exchange rate (since 1986) and the liberal importation policy of goods and labor fostered this evolution. 3. The high rate of increase of oil revenues, after 1988, was followed by a higher rate of increase of government spending, most of which financed the provision of public services free of charge, elevating the budget deficit, and increasing the relative prices of non-tradable services (particularly housing), and constraining efforts aimed at developing the private industrial sector. These efforts were further constrained, to a lesser degree, by a crowding out effect of increased public domestic borrowing. Finally, given the existing liberal foreign labor policy on one hand and the downward public wage rigidity on the other, the relatively large wage differential between public and private employment and between domestic and foreign workers is such that emerging unemployment among Omanis is becoming an increasing source of concern. Excessive government spending is reinforcing the inherent bias of an oil-based economy against non-oil tradable goods and private economic diversification. 2 Table 1.1 RELATIVE SHARES OF GOVERNMENT EXPENDITURE IN THE FINAL CONSUMPTION AND GROSS CAPITAL FORMATION FINAL CONSUMPTION GROSS CAPITAL FORMATION YEARS TOTAL GOVERNMENT RELATIVE TOTAL GOVERN RELATIVE RECURRENT SHARE DEVELOP. SHARE 1976 422 5 240 9 57.0% 317 1 259.8 81.9% 1977 514.7 268.5 52.2% 289.5 218.9 75.6% 1978 582.6 272.3 46.7% 273.5 186.1 680% 1979 692.1 3547 51.2% 3354 2157 64.3% 1980 1,0760 499.2 464% 465.7 305.8 65.7% 1981 1,247.0 656.4 52.6% 583.5 389.6 66.8% 1982 1,509.9 715.2 47.4% 706.7 482.2 68.2% 1983 1,582.0 779.8 49.3% 7369 5299 71.9% 1984 1,746.5 808.0 46.3% 913.2 652.5 71.5% 1985 2,063 7 938.1 45.5% 953.1 701.7 73.6% 1986 1,9490 929.0 47.7% 898.4 651.9 72.6% 1987 1,850 1 913.7 494% 564 3 3997 70.8% 1988 2,135.8 956.0 44.8% 511.1 353.4 69.1% 1989 2,237.4 975.6 43.6% 444.2 291.9 65 7% 1990 2,625.5 1,544.9 58.5% 529.2 308.3 58 3% 1991 2,9004 1,394.7 48.1% 6594 410.3 62.2% Source- Development Council Central Focus of the Report 4. The main focus of this report is the budget deficit, which has been an abiding feature of the fiscal situation in Oman since 1982 [Table 1.2], and is projected to continue beyond the current Fourth Plan (1991-95). The review will deal generally with the question of how to manage the deficit in a manner that is consistent with the long-term macroeconomic objectives of the Omani Government, i.e., revenue and price stability, sustained real growth, diversification in non-oil economic activities, private sector development, and Omanization goals. However, the review will deal specicifically with the microeconomics of the budget deficit, i.e., the efficiency of budget processes and of public spending programs, unit cost analysis, private supply alternatives, and user charges as a method of rationalizing both revenues and expenditures. 3 Table 1.2 THE DEFICIT AND THE MEANS OF FINANCE, 1979-1991 MEANS OF FINANCING (R.O. MILLION) NET CHANGE GOVT. GOVT BUDGET IN GOVT. ITEM/ REVE- EXPEND- DEFICIT NET ACCOUNT YEAR NUES ITURES (R.0 NET NET WITHDR- TOTAL (R.O. MILLION) GRANTS LOANS AWALS MILLION) FROM SGRF 1979 692.0 662.0 30.0 61.9 -13 0 0.0 48.9 78 9 1980 1188.0 950.0 238.1 35.2 1.0 -274.3 -238.1 0.0 1981 1478.0 1223.0 254.3 50.0 50.5 -215.9 -1154 138.9 1982 13340 1413.0 -79 1 14.7 41.0 -984 -427 -121 8 1983 1424.0 1547.0 -123.1 50 7 162.8 -89.9 123.6 0.5 1984 1513.0 1760.0 -247 1 72 8 150.7 -27.5 196.0 -51 1 1985 1776.0 1928.0 -152.1 -8.8 73.4 96 8 161.4 9.3 1986 12200 1887.0 -666.0 -0.3 215.9 492 4 708.0 42.0 1987 1512.0 1609.0 -97 0 2 7 -52.2 146.5 97.0 0.0 1988 1248.0 1567.0 -319.7 15.8 72 1 231 8 3197 0.0 1989 14830 1666.0 -182.7 6.2 34.6 -113.0 -72.2 -254.9 1990 2040.0 1887.0 152.5 -21.7 -147.3 -163.6 -332.6 -180.1 1991 1860.0 1868.0 -8.0 -1.3 4 9 -184 4 -180 8 -188.8 Source- Development Council The Budget Deficit 5. Throughout the 1976-1991 period, overall budget deficit, i.e., excess of government expenditures over gross revenue (before any transfers are made to the SGRF) had occurred in all but four of these years. Between 1982 and 1992, a budget surplus was realized only once, in 1990, not as a result of expenditure restraint but as a result of sharp increases in oil prices and revenues. 6. This review shows that public spending has reached unsustainable levels. Over 80 percent of public revenues comes from non-renewable sources, i.e., oil. But the Government has been spending as if this revenue came from reproducible sources instead. Therefore the deficit, which might be manageable under normal conditions, is in fact unsustainable. To continue the present rate of public spending is to push the saving and investment rates way below what it takes to maintain present standards of living in the post- oil era.' World Bank, Oman - CEM, July 1993, Chapter 3. 4 B. Factors Influencing the Budget Deficit 7. There are several factors that underline the deficit problem in Oman. Oil revenue represents over 80 percent of government revenues. A sharp reduction in oil revenue could push the budget deficit to record high levels, as it did in 1986. On the expenditure side, however, a sharp increase in the demand for public services is pushing the budget deficit to new highs. This rising demand is influenced by several factors. First, is the rapidly growing population, especially the urban population and the as yet unserved or under-served rural population, whose expectation for more free public services was reinforced by the Government's policy of promoting regional equality. Second, the Government's pricing policy, i.e., free provision of most public services and underpricing public utility services, encourages wasteful consumption and increases the demand for them even further. To undercharge is to exacerbate the deficit problem as well as to reduce the allocative efficiency of both production and consumption. 8. Third, in addition to the demand-induced rise in public spending, another major source of pressure for higher levels of spending stems from deficiencies in the budget process. Softness of budget ceiling, open-ended processing of new spending requests, the arbitrary nature of the incremental approach to budget preparation, and the lack of regular performance evaluation of public financed programs are all major flaws in the current budget process. Measures to improve the budget process, including the application of a system of standard cost analysis, are specified in this report. 9. Fourth, there are also some special features of public spending in Oman that lessen the ability of the Government to control the growth of defense and civil current expenditures. The fiscal adjustment in the wake of the oil price collapse in 1986, which put the heaviest burden on development and defense spending, points to the difficulty of reducing recurrent expenditures. 10. This inability to control the growth of recurrent expenditures was due to several factors. First, is the continued emergence of new completed public service facilities such as new schools and health care facilities. The pressure to increase the supply of public services is likely to continue as the demand for these services continue to increase. Second, is the continuous rise in the wages and salaries budget, even at times of severe fiscal contraction. The rise in the wage bill is due to continuing increase in public employment and the excessive levels of public salaries and allowances. Third, is the relatively high cost and inefficiencies involved in operating and maintaining public service programs. 5 C. Budget Structure and Fiscal Adjustment Oil Prices and Revenues 11. Underlying the fiscal problem is the dominant role of oil in government finances. During the period 1985-91, oil revenue averaged over 80 percent of government revenues [Table 1.3]. It was no surprise, then, that the sharp decline in the price of oil in the 1986 had a very destabilizing effect on the Oman economy. Prices dropped from over $34 p/b in 1982 to about $13.5 in 1986 and again in 1988, and failed to reach the $18 p/b level, which underlines projected revenues and expenditures during the current Fourth Plan period (1991-95), except in 1990 when oil reached $21 p/b, leading to higher spending and higher deficit. The resulting drop in oil revenues could have been compensated by increasing oil exports. The Government kept the growth rate of oil production between 2 to 7 percent, except in 1985 and 1986 when prices were cut in half over the course of one year and production was allowed to increase by 19 percent and 12 percent successively to soften the impact on the economy. In addition, the impact of declining oil revenues could also have been softened by raising levels of non-oil revenues. However, their limited fiscal role in Oman minimizes their effect for stabilization purposes. Table 1.3 PuBuc REVENUE AND EXPENDrTuRE 1985 -1991 Relative Shares (%) 1985 1986 1987 1988 1989 1990 1991 GOVERNMENT REVENUE 100.0 100.0 100.0 100.0 100.0 100.0 100.0 OIL 85.0 76.1 79.0 79.6 80.7 83.4 81 5 NON-OIL 15.0 23.9 21.0 20.4 19.3 16.6 18.5 GOVERNMENT EXPENDITURES 100.0 100.0 1000 100.0 100 0 1000 100.0 DEFENSE (CURRENT) 38.6 35.3 36.3 37.6 36.1 39.3 34.4 CIVILIAN (CURRENT) 31.1 34 4 40.3 43.5 45 7 43.9 43.9 DEVELOPMENT 27.7 28.2 20.4 17.9 16.2 15 1 21 0 OTHER EXPENDITURES 2 6 2 2 3 0 1.0 2.1 1 7 0.7 Source- Development Council 12. Oil revenue stood at RO 1,510 million in 1985. From 1986 to 1989, oil revenue remained below the 1985 level. The oil revenue index (1985 = 100) dropped to 62 in 1986, rose to 79 in 1987, dropped again to 66 in 1988, to rise back to 79 in 1989. It was not until 1990 that oil revenue exceeded the 1985 level as it recovered to RO 1,701 million and the index reached the 113 level. However, it dropped once more in 1991 to 100, i.e., back to the 1895 level [Figure 1.1]. 6 Index of Revenue Indicators, 1985-91 121 (111s * 11 ill- - II - II 1115 lill 131) lill 1111 1111 1111 Year a Gov. Raeshuge Oil Raemeig Figure 1.1 Structure of Public Expenditures 13. Another important factor underlying the fiscal problem in Oman is related to the structure of public expenditures. The structure of public expenditures is dominated by recurrent expenditures, including defense, which in turn are dominated by wages and salaries. From 1985-1991, recurrent expenditures claimed an average of 77 percent of government expenditures. This share was divided between defense and civilian expenditures at an average of 37 percent and 40 percent respectively [Table 1.3]. Expenditures on wages, salaries and employee allowances averaged about 56 percent of civil current expenditures between 1987-1991 [Table 1.4]. However, after the deep cuts in 1986, the wages budget increased every year at an average rate of 7 percent annually, with increases of 16 percent and 10 percent successively in 1989 and 1990. 7 Table 1.4 BREAKDOWN OF CIVIL CURRENT EXPENDITURE by Type of Expense (RO Milhon) 1987 SHARE 1988 SHARE 1989 SHARE 1990 SHARE 1991 SHARE TOTAL WAGES, SALARIES ALLOWANCES AND OTHERS 284 6 57.0 290.1 54.2 337.0 56 2 370.2 56 1 374.8 55.6 EXPENDITURE ON GOODS AND SERVICE 185.7 37.2 204.9 38.3 221.7 37.0 2446 37 1 2466 36.6 SUBSIDIES AND OTHER CURRENT TRANSFERS 29.2 5.8 40.2 7.5 41.3 6.9 45.2 6.8 52.7 7.8 TOTAL CIVIL CURRENT 499 5 100.0 535 2 100.0 600.0 100.1 660.0 100 0 674 1 100.0 EXPENDITURE Source. Development Council 14. The fiscal adjustment experience of Oman during the second half of the 1980s reflected the constraints imposed by the revenue and expenditures structure. The Government succeeded in reducing the overall level of expenditures below the 1985 level throughout the 1986-91 period. However, the rate of expenditure reduction was always less than that of oil revenues, until 1990, when oil revenues exceeded the 1985 level and the government revenue exceeded its expenditures for the first time; yielding RO 153 million budget surplus. That was, mainly, due to unexpected rise in oil prices. 15. The effect of budgetary contraction was most profound in the case of development expenditures and the defense and security component of the recurrent budget [Table 1.5 and Figure 1.2]. By the year 1989, development expenditures dropped to about one half of their 1985 level. Also, defense expenditures remained below its 1985 level through the year 1991. However, total current expenditures continued to rise (beyond 1985 level) in 1989 and 1990, after a small reduction in 1987-1988. That was caused by the unabated rise in civil recurrent expenditures throughout the 1985-1991 period. 8 Table 1.5 INDICES OF GOVERNMENT FINANCE INDICATORS (1985 = 100) YEAR 1985 1986 1987 1988 1989 1990 1991 TOTAL REVENUE 100 69 85 70 84 115 105 OIL REVENUE 100 62 79 66 79 113 100 NON-OIL REVENUE 100 100 119 95 107 127 129 TOTAL EXPENDITURE 100 98 83 81 86 98 97 TOTAL CURRENT 100 98 92 95 101 117 109 DEFENSE 100 89 78 79 81 99 86 CIVIL 100 108 108 114 127 138 137 DEVELOPMENT 100 100 62 58 51 54 73 .OTHERS 100 81 95 31 68 62 26 DEFCrr 100 438 64 210 120 -100 5 MEANS OF FINANCE 100 438 60 198 -45 -206 -112 N. GRANTS 100 3.4 -31 180 -70 247 15 N. LOANS 100 294 -71 98 47 -201 7 N. WITHDRAWAL FROM SGRF 100 508 151 239 -117 -169 -190 Source: Development Councd 16. The budget cuts imposed by the Government on the civil ministries were more than offset by their rising employment, from 38,000 civil employees in 1980 to over 65,000 in 1985 and to over 80,000 in 1990 [Table 1.6]. The result was that the share of non-wage spending (including operations and maintenance) was relatively reduced. Indices of Go v Ex penditures ilai lil- II- II II- 1115 lill lill 1111 lill lill 1111 Year 0 T. Cirrvst Esp. Gerr-Deleoce + Corr-Civil D 0 v. Esp. FIGURE 1.2 9 Table 1.6 GOVERMENT CIVIL EMPLOYEES PERCENT ANNUAL GROWTH RATE YEAR OMANI EXPATRIATES TOTAL OMANI/ TOTAL OMANI EXPATRIATES 1980 23445 15395 38840 60.4 - 1981 26886 16865 43751 61.5 14.7 9.5 1982 29647 20162 49809 59.5 10 3 19.5 1983 33543 21334 54877 61.1 13.1 5.8 1984 37119 24924 62043 59.8 10.7 16.8 1985 39192 27456 66648 58.8 5.6 10.2 1986 40223 27327 67550 59.5 2.6 -0.5 1987 42977 29283 72260 59.5 6.8 7 2 1988 45574 29535 75109 60.7 6.0 0 9 1989 47785 29484 77269 61.8 4 9 -0 2 1990 50444 30060 80504 62 7 5.6 2.0 Source: Development Council 17. Consequently, the composition of government spending changed substantially. The budget for civil ministries increased its share from 31 percent of total government expenditures to about 44 percent between 1985 and 1990, while the development budget fell from over about 28 percent to 15 percent of total public expenditure, during the same period [Table 1.3 above]. Civilian current expenditures continued to grow above the 1985 level throughout the period under consideration, at an average rate of over 6 percent annually. Throughout the 1985-1990 period, only once in 1987, these expenses did not increase as a result of salary freeze, restraints on public sector hiring, and equipment purchasing [Table 1.7]. Table 1.7 INDEX OF CIVILIAN RECURRENT EXPENDITURES YEAR 1985 1986 1987 1988 1989 1990 1991 RO MILLION 599 649 648 682 761 828 820 INDEX 100 108 108 114 127 138 137 Source Development Council 18. The biggest share of the civil recurrent budget finances civil servants' salaries and wages. It averaged about 56 percent of the civil recurrent budget during the 1987-1991 period, and increased at an average rate of over 8 percent annually [Table 1.4, above]. Operation and maintenance cost, on the other hand, claimed only about 37 percent of that budget, and increased at about the same annual rate of wages increase. The remainder (7 percent average) represent subsidies to support public enterprises and other non-interest transfers which had been rising at a much faster rate than the other two components of the 10 civil recurrent expenditures (from RO 29 million in 1987 to about RO 53 million in 1991), reflecting government policy toward private sector development. 19. Over the last five years, the allocation of recurrent civil expenditures among different sector ministries reflected the strong role of the Government in providing education, health, housing, electricity and water, transportation, and communication services. One-third of all civil recurrent expenditures was allocated to education and health (22.5 percent on education and 11 percent on health), 16.5 percent for electricity and water, and 10.5 percent on housing [Table 1.8]. This pattern of allocation may be interpreted as an indication of the Government desire to distribute oil revenue among the citizens as a basic social policy directive. The supply of these basic services free of charge or at subsidized prices. 20. Allocation of civil development expenditures [Table 1.9] show that the share of education has declined, from about 21 percent in 1987 to 7 percent in 1991. Also, allocation to health changed erratically from 4.6 percent in 1987 to only 1 percent in 1988, back to 4.7 percent in 1989, to decline again to 1.5 percent in 1990 and, then increased to 3 percent of civil development expenditures in 1991. Allocations to housing, on the other hand, had gained phenomenal increases throughout this period, from 20 percent in 1987 to 38.5 percent in 1991. This pattern of allocation of development expenditures reinforces the previous inference as to the distributive role of the Government, through the provision of free or underpriced social goods and services. 11 Table 1.8 BREAKDOWN OF CIVIL CURRENT EXPENDITURE (RO Million) 1987 SHARE 1988 SHARE % 1989 SHARE 1990 SHARE 1991 SHARE % GENERAL PUBLIC SECTOR 996 200 86.1 16.1 1026 17.0 118.9 18 1 1109 16.4 EDUCATION AFFAIRS & SERVICES 111 2 220 1180 22.0 128.2 21.4 153.9 23 3 1609 23.9 HEALTH 51 8 10.0 61 4 11.5 - 634 106 69.5 105 11.0 756768 112 11.4 HOUSING 48 2 96 55.1 10.3 589 100 72.2 15 8 1002 14.9 FUEL AND ENERGY 89 7 18 0 96.0 18 0 97 0 10.0 104.3 AGRICULTURE, FORESTRY. 2.5 19.2 2.8 FISHING 11.7 2.3 12.5 2.3 130 16.0 165 TRANSPORTATION & 3.6 23.5 3 5 COMMUNICATION 19 1 3.8 21.9 4.1 21.4 . 2 2 23.5 15.2 107 0 15 9 OTHERS 682 143 84.2 15.7 1155 128 101.2 TOTAL CIVIL CURRENT 4995 1000 535.2 1000 6000 100.0 660.0 1000 674.1 1000 EXPENDITURE 12 Table 1.9 BREAKDOWN OF CIVIL DEVELOPMENT EXPENDrrEURE (RO Million) 1987 SHARE 1988 SHARE 1989 SHARE 1990 SHARE 1991 SHARE GENERAL PUBLIC SECTOR 41.8 18.2 36.3 19.1 26.6 16.2 16.0 11.2 31.5 14.2 EDUCATION AFFAIRS & SERVICES 47.7 20 7 26.0 13.7 17.3 10.5 13.2 9.2 15.6 7.0 HEALTH 10.6 4.6 1.8 1.0 7.8 4 8 2.2 1.5 6.7 30 HOUSING 46.1 20.0 37.2 19.6 35.8 21.8 48.4 33.9 84.3 38 5 FUEL AND ENERGY 31.5 13.7 35.6 18.8 25.7 15 7 19.6 13.7 28.6 13 0 AGRICULTURE, FORESTRY, FISHING 8.6 1.5 11.7 6.9 13.8 8.4 144 10.1 17.3 7.8 TRANSPORTATION & 27.5 12.0 17.5 9.2 19.9 12.1 14.9 10.3 15.8 7.1 COMMUNICATION 16.2 9.3 23.6 11.7 17.2 10.5 142 10.1 22.0 9.4 OTHERS TOTAL DEVELOPMENT 230.0 100.0 189.7 100.0 164.1 100.0 142.9 100.0 221.8 100.0 EXPENDITURE Macroeconomic Performance 21. A combination of a conservative fiscal and monetary policies, proved to be adequate to produce good overall macroeconomic performance, punctuated on occasion by big drop in oil prices and revenues, over the last two decades . The monetary management of oil revenues was simplified by: (i) a one time devaluation of the currency that left the Riyal pegged to the US Dollar at the fixed rate of $1 = RO 0.3845 in 1986, (ii) by managing this nominal exchange rate through buying and selling of currencies, (iii) by depleting SGRF reserves and increasing public debt to finance the deficit, but not using the Central Bank to finance any part of the budget deficit, and (iv) by managing interest rates through setting ceilings that were mostly ineffective in view of the adequacy of money supply. 13 Table 1.10 MAJOR INDICATORS 1976-1991 (PERCENT) YEARS/ R.GDP GROWTH INFLATION RATE: DEBT/ DEBT/ TRADE PRIVATE PUBLIC BUDGET MIY ITEM RATE GDP DEFLATOR ODP SERVICE BALANCE/GDP INVESTMENT/ INVESTMENT/ DEFICIT/ GDP (1978 = 100) (1978 = 100) RATIO (1985=100) GDP GDP GDP 1976 NA NA 4.8 3.2 18.9 6.5 29.4 -11.1 11.6 1977 NA NA 7.8 3.4 16.7 7.5 23.1 -3.9 12 1978 0.0 0.0 6.8 6.6 12.0 9.2 19.7 -8.7 12.2 1979 4.3 +30.0 4.0 5.9 22.9 9.3 16.7 +2.3 13.3 1980 6.0 +51.0 2.5 5.6 29.9 7.7 14.8 +11.5 9.8 1981 17.0 +3.0 4.1 4.6 31.7 7.8 15.6 +10.2 7.7 1982 11.5 -6.0 5.5 7.3 20.5 8.6 18.4 -3.0 8.8 1983 16.0 -10.0 11.2 6.7 20.6 7.6 19.3 -4.5 9.3 1984 16.7 -5.0 15.0 6.9 16.9 8.6 21.4 -8.1 10 1985 16.2 -2.3 15.3 7.0 16.1 7.3 20.3 -4.4 9.5 1986 1.2 20.0 26.6 20.8 4.0 8.8 23.3 -23.8 95 1987 -34 +11.0 23.1 20.8 23.5 5.5 13.3 -3 2 11.1 1988 5.4 +7.6 26.2 11.8 13.2 5.4 13.1 -10.9 11.1 1989 3.3 +7.0 24.8 13.6 20.2 4.7 9.0 -5.7 10.7 1990 7.5 +16.0 16.5 11.0 25.7 5.5 7.6 +3.8 10.7 1991 7.5 -9.1 16.9 10.7 15.1 6.3 10.4 -0.2 9.6 Source: Development Council 14 22. The conservative fiscal policy of the Government meant that most public investments between 1976 and 1990 were directed toward building basic infrastructures and basic social services facilities for which the long-term rates of return are usually high. That included building modern government institutions, where some unavoidable excesses were made in public employment leading to low public sector productivity. Another manifestation of the conservative management of oil revenue is the Government's refrain from subsidizing consumption and production, both public and private, at the scale or the levels of subsidization that were adopted by neighboring GCC governments. Also, the establishment of the State General Reserve Fund (SGRF) in 1980 as a future generations fund was a good idea except that its primaty function as a saving and investment (abroad) was overshadowed by its secondary deficit finance function. The excessive withdrawal of reserves to finance non-optimal increases in public current expenditures reduced the effectiveness of the SGRF as a future generations fund. Finally, the dominance of oil in government revenue and the inability of the present tax administration to implement a direct taxation system on individuals and Omani businesses minimizes the role of non-oil revenue as a fiscal instrument. 23. Oman maintained a reasonable macroeconomic performance from 1981-91 as evidenced by an average real GDP annual growth rate of 8.5 percent. This is a commendable performance, considering the havoc which changes in oil prices play-as they did in 1986 Major Indicators, 1982-1991 2 1 2 2 21- Figure 1.3 15 lead to negative growth rate in 1987 [Table 1.10 and Figure 1.3]. Although the good performance of the first half of the 1980s overshadows the modest fiscal performance of the second half, real growth rates had been on an upward trend since 1988, and the economy seems to be recovering steadily. Except for 1986, when the ratio of trade balance to GDP dropped to 4 percent, that ratio had averaged 20 percent over the 1981-1991 period. Furthermore, the debt service ratio had been generally declining since 1987. Worrisome Products of Maintaining High levels of Public Spending 24. The Current Account. After recovering from a 1988 deficit of RO 129 million to a RO 122 million surplus in 1989, the current account surplus jumped to a record RO 452 million in 1990. However, in 1991, that record surplus was replaced, again, with a deficit amounting to RO 45 million. The drop in the price of oil in 1991 provides some explanation of this volatility of the current account. But it was the record level of imports in 1991, at 13 percent annual rate of increase, that explains the dramatic change in the current account balance beteen 1990 and 1991. In fact, imports continued to rise, unabated, throughout the 1987-1991 period, from RO 756 million in 1987 to the record RO 1279 million in 1991 in response to the high levels of spending which the Government maintained throughout the same period. The potential problem of external balances was further demonstrated by the increase in remittances of foreign labor, the demand for which was fueled by government spending as well, from RO 262 million in 1987 to RO 340 million in 1991. 25. The Debt/GDP Ratio. The prevailing debt/GDP ratio (16 percent in 1991) may seem less worrisome for a non-oil economy. For an oil economy with far less than optimal saving rate (Gross National Savings to GDP was only 10 percent in 1991 compared to an optimal saving rate of about 40 percent under the best circumstances),' and for one that is likely to increase its foreign borrowing in the future, this debt ratio is relatively high. This concern is reinforced by the current account deficit of 1991 ($250 million), which was caused mainly by a record growth rate of imports, and by the persistence of that deficit in 1992; despite a reduction due to higher than expected growth of oil exports. .26. Inflation. The inflation rate (change in the GDP deflator) has been negative in 7 of the last 10 years (1982-1991). Only in 1987, 1989, and in 1990 did inflation rate rise. The double digit inflation of 1990 was accompanied by a double digit rise in the Consumer Price Index. There is little doubt that this rise in inflation rates was triggered by the first significant increase in public spending (13 percent in 1990) since the 1986 fiscal contraction. Figure 1.4, below, suggests that public spending in Oman has always driven inflation (GDP deflator), except in 1987 when drastic spending cuts were made leading to drop in imports, but the expected downward pressure on inflation was overcome by the recovery of oil prices and the subsequent rise in oil exports to more than 36 percent over 1986 exports. 2 World Bank, Oman - CEM, July 1993, Chapter 3. 16 Publi c Spending and Inflation 11 (I Am igI Grswth RWtoo) 1- 11 1171 1111 1111 1112 liIl 1114 1115 1ili 111 1 1 133 111 1 ll 1111 3 GDP Defslater Rats 3 5peldilg Rate Figure 1.4 27. Private Investment. One of the most important objectives of the modern macroeconomic policy of Oman is diversification of economic activity by inducing an accelerating rate of private investment in the non-oil sectors. Success or failure in this area reflects strongly on the long-term sustainability of the Omani economy. As Table 1.10 indicates, the ratio of private investment to GDP has remained below that of public investments since 1976. It also shows that the ratio of private investments had dropped from 8.6 percent in 1982 to 5.5 percent in 1990. Although private investments had risen from RO 152 million in 1989 to RO 249 million in 1991, it is still representing only 6.3 percent of GDP, and is still below its 1984 level of RO 261 million. 28. The question is whether private investments are affected by fiscal developments and in what ways. As Table 1.10 shows, during 1980-85 public investment increased from 14.8 percent to 20.3 percent, while private investment decreased from 7.7 percent of GDP to 7.3 percent. This relationship was reversed during 1987-1991, as these ratios changed from 13.3 percent (public) and 5.5 percent (private) to 10.4 percent and 6.3 percent respectively. It should be noticed that because of the small share of private investment in GDP, these changes seem insignificant. But as Figure 1.5 shows, since 1987, the rate of change in private investment became smaller than that of public investments. As the latter accelerated since 1989 to reach in 1991 levels as high as its 1984 highs, private investments lagged and still stand at about 60 percent of their 1985 highs. 17 29. Non-oil GDP is driven by government expenditures. So, as public spending rises, so does private sector activities and private investment (Figure 1.6). The performance of private investment seem to be driven, particularly, by levels of activity in construction (Figure 1.7). Because construction forms a major part of public investments, private investment is also influenced by public investment (Figure 1.5). PRIVATE AND PUBLIC INVESTMENT INDICES 333 43, - 410 - 130 - 1 1 1 I'sI l i1382 1 4 I'1? IIs I ;I4 1 10 1l77 1 l71 lii illi ill$ llt? till till 0 Ip Ids 4 g lados Figure 1.5 PRIVATE INVESTMENT and GOV. EXPENDITURE (IlIen 1373=111) 33I 2 51- 131 31 157 117 1 1 1 l ? 11 1 111 1 1 l ll l ll DGoo Elosed Mgol 1 Ip lade6s Figure 1.6 18 30. Throughout the 1980s, and especially since 1986, the ratio of private investment to non-oil GDP has been falling (Table 1.10). This phenomenon is related to the completion of the large construction projects in the early 1980s as well as the severe cuts in public spending following the sharp drop in oil prices and revenues in 1986. However, this ratio began rising in 1990 as public spending began to rise again. Pr i vate Investment vs Construct ion 21 1S - 1i - 22 i1 - 23 I I I l I I I 1 " 11 l illi | i, 11 1 | i 1l ill ilis 1111 lol 1113 1 1 1117 lolli 1111 fl Colu l.gd) 4 1PIpt .god) Figure 1.7 31. This mixed picture of private investment is a cause for concern, as there were signs of private capital flight up to 1990, as indicated by the sizable non-bank private capital movements which are included in "errors and omissions" in the BOP, which amounted to RO 116 million. This capital outflow, which was reversed to some extent in 1991, could suggest a lack of domestic investment opportunities. This interpretation is reinforced by the absence of signs of lack of domestic liquidity or a lack of commercial banks credit to the private sector. The issuance of development bonds in 1991 to finance the deficit was, thus, thought of as a safe way of mobilizing available private resources. 32. In 1991, the Government introduced development bonds as an experimental method for financing the deficit. The experiment succeeded and the issue was over subscribed at RO 40.6 million. The Government planned for RO 140 million again in 1992, but the issue was under-subscribed by a small margin at RO 138.3 million, indicating that additional subscription will have to come out of additional savings or at the expense of financing 19 private investments. Given the present scarcity of medium and long-term financing through the Omani banking system, crowding out private investments may become a possible outcome of sustained recourse to development bonds. 33. The long-term sustainability of the Omani economy depends to a large extent on the success of the private sector in assuming the leading role in the economy. This is a difficult task in view of the continuing dominance of oil income and the prominent role of public expenditures as a driving force in the Oman economy. These dominant forces will eventually be deflated and a government policy to initiate and regulate this deflation, by reducing public spending and increasing public savings, is needed. In addition, improving the performance of the government sector, including public authorities and public companies is an essential element of this policy reform program. A bold program of privatization may be the jump start that the private sector needs to transform its role from one of dependence on the public sector to one of the leading sector. D. Most Recent Fiscal Developments: Plan Versus Reality Determination of Budget Envelope 34. At the center of the current budget deficit problem is the question of how the budget envelope is determined. The Fourth Five Year Development Plan (1991-1995) had established a mechanism for balancing Government revenues and expenditures. The basic elements of this mechanism are summarized below. a. The budget deficit should not exceed 10 percent of Government revenue. b. The annual rate of increase of civil recurrent expenditures should not exceed 3.5 percent. c. The following planned budgets are based on the additional assumption that oil prices will stabilize in the range of $18-28 p/b during the plan years [Table 11]. d. The rate of servicing the foreign debt (including installments and interest) should not exceed 15 percent of export revenues. 35. An implementation mechanism was established by Decision 12/92 of The Council for Financial and Economic Affairs. The decision instructs MOFE to: a. appropriate, each month, and subject to end of year adjustment, 1/12 of planned Net Oil Revenue (Table 1.13) to cover public expenditures; b. transfer 15 percent of remaining Oil Revenue received by MOFE to SGRF; 20 Table 1.11 PLANNED BUDGETS Item\Year 1991 1992 1993 1994 1995 Revenues: Oil Revenue 1484 1556 1629 1707 1785 Transfer to Reserves 266 281 326 343 356 Net Oil Revenue 1218 1275 1303 1364 1429 Other Revenues 359 379 395 416 438 Total Revenues 1577 1654 1698 1780 1867 Expenditures: Defense & Security 508 537 528 520 522 Royal Court 152 156 151 154 159 Civil Current 534 552 580 601 621 Development 211 233 258 297 302 Other, incl. Interest & PDO Expenditures 359 361 374 386 425 Total Expenditures 1764 1839 1881 1958 2029 Planned Deficit 187 185 183 178 162 Source: Development Council c. transfer to the Emergency Reserve Fund (ERF) a minimum of 7.5 to 10 percent of remaining oil revenue for prices between $18 to $20 and $20 to $22, respectively; d. allocate additional oil revenues from prices between $22 to $25 between different expenditure categories as follows: 40 percent for defense, 30 percent for development, 15 percent for civil current, and 15 percent for deficit reduction; and e. transfer all additional oil revenue, beyond $25 p/b, to the SGRF. 36. The primary function of SGRF, i.e., as a saving and investment fund, has not been achieved. Its secondary function, i.e., financing the deficit when needed, became so prominant since the fund's creation in 1980 and encouraged the expansionary agents in the Oman Government to increase public spending while oil revenue was levelling off or declining. However, the newly established ERF had succeded in stabilizing Government revenue since 1991 in both absolute and relative terms. In light of the realities of the first two years of the Fourth Plan (1991-95), the budget deficit is exceeding all predictions. After more than 35 percent jump in current civil expenditures in 1992 alone, the 21 expansionary for:es are gathering momentum as this unprecedented increase in civil spending was accompanieL by equally high rates of increase in defense, and to lesser degree, development expenditures. Given the oil-based nature of the Omani economy and the consequent need to increase public savings out of current oil revenue, it is clear that these budget deficits cannot be sustained. Should the deficits continue, and the Government's expansionary fiscal policies be maintained, the macroeconomic objectives of the Government cannot be attained. In this scenario, inflationary pressures would build up, foreign balances would erode still further, private sector development would be hampered, dependence on foreign labor continue, and, most importantly, increased current consumption would be at the expense of future consumption. BUDGET DEFICIT AND WITHDRAWALS FROM THE SGRF 211 -IMIR -211 -311 - -1 111) lill 1111 1111 iill 1112 Gurrest Osficit E SGRF Wit1drawvl Figure 1.8 37. Reserves Depletion. Figure 1.8 shows that as the deficit increases net withdrawals from the SGRF rise, and vice versa. It also shows that the SGRF had been used more to finance rising government spending than as a "future generations' fund." The Government made increasingly large withdrawals from the fund to finance the budget deficit peeking in 1986 at RO 380 million. According to MOFE's data, between 1987 and 1989 the net additions to the SGRF were negative and the balance of the fund fell below the minimum legal requirement of RO 1200 million. The balance improved in 1990-91 due mainly to rising oil prices. However, the continued increase in public spending and the budget deficit led to higher gorein and domestic indebtedness as well as in "unfinances" deficit 22 is not an income in the normal sense, but a proceed from the sale of an asset, the level of government spending was, and still, excessive. The rate of reserves accumulation of the SGRF should have been much higher than the actual rates. Furthermore, if the SGRF reserves, estimated at RO 1330 million at the end of 1992, are netted of the cumulative foreign indebtedness, estimated at RO 1500 million, the real SGRF balance at the end of 1992 would have been negative. 39. The depletion of foreign reserves to finance the budget deficit violates the macroeconomic objectives as set forth in the Fourth Plan. In the longer run, as external indebtedness unavoidably accelerate, the current account balance will deteriorate under the burden of increasing debt service ratio. Competition on sources of finance between the public and private sectors will intensify, raising real interest rates and crowding out private investment, thus, defeating the most important long term policy objective of the Oman Government, i.e., diversification and private sector development. Signs of these trends are beginning to emerge. 40. The consequences of financing the mounting deficit are costly. Reserves depletion will accelerate and government indebtedness will rise. The SGRF reserves, at the end of 1992, stood at about RO 1.3 billion while the accumulated indebtedness was over RO 1.0 billion. In the short run, the planned policy of setting a ceiling on foreign indebtedness at the RO 1 billion is the hardest to violate because of the time requirement to negotiate and close a sizable loan. Therefore, higher spending would have a bigger short-term impact on reserves and domestic debt. This explains the recourse to the issuance of development bonds to finance the deficit in 1991 and 1992, and the increasing reliance on short-term loans and the delaying of settlement of government standing obligations which appear in Government accounts under "unfinanced deficit" [Table 1.12 and Figures 1.9 & 1.10]. Table 1.12 FINANCING THE BUDGET DEFICIT, 1987-1992 Item\Year 1987 1988 1989 1990 1991 1992 Total Revenues 1460.0 1204.8 1370.1 1876.3 1585.1 1679.5 Total Expenditures 1609.1 1567.2 1665.8 1887.4 1868.1 2159.8 Current Deficit -134.9 -362.4 -295.7 -11.1 -283.0 -480.3 Financing the Deficit 1. Net Grants 2.7 15.8 6.2 -21.7 -1.3 -4.9 2. Net Loans -52.7 72.1 34.7 -147.3 4.9 -51.4 3. Development Bonds 40.6 138.3 Total Loans -52.7 72.1 34.7 -147.3 45.5 86.9 4. Withdrawals from SGRF 198.4 274.6 254.9 0.0 50.0 149.2 5. Unsettled Obligations 65.0 0.0 0.0 180.1 188.8 249.1 T. Means of Financing Deficit 134.9 362.4 295.7 11.1 283.0 480.3 Source: MOFE 23 FINANCING THE DEFICIT sil 311 il 1 e - -21 1iii 1iii 13II 1iii 1|i1 1312 lit treets lit I & eit'l delt filthdreie (SGRf) amettisd deficit Figure 1.9 CURRENT BUDGET DEFICIT -ll -211 - -ill -$II - 1iii illi 1iii 1iii 1||1 1112 correlt deficit Figure 1.10 24 41. The current Fourth Plan projected a resumption of economic growth for the 1991-95 period at the rate of 6.3 percent per annum, depending in large measure on a strategy of inducing the private sector to invest more in the non-oil economy. The growth of government expenditures overall, and of the civil ministries, was planned to rise at the rate of 3.5 percent annually. 42. Government agencies took a more expansive view of their spending needs. The actual public spending during the first two years of the Fourth Plan, i.e. 1991 and 1992, had surpassed the planned spending by a wide margin (Table 1.13). Actual government expenditures surpassed planned expenditures by 6 percent in 1991, 17 percent in 1992, and is expected to surpass it by about 14 percent in 1993. Subsequently, actual current deficit exceeded planned deficit by 51 percent in 1991, 176 percent in 1992, and is expected to surpass it by 105 percent in 1993. Table 1.13 PUBLIC FINANCE (1991 - 1993) (RO Million) Item 1991 1992 1993 Excess Rates Planned Actual Planned Actual Planned Estimated 1991 1992 1993 (Primary) Revenue 1577 1585 1649 1660 1698 1698 -- -- -- Expenditure 1764 1868 1818 2126 1881 2138 5.9 16.9 13.7 Current Deficit 187 283 169 466 183 375 51 176 105 % of Revenue 11.8 17.8 10.2 28.1 10 8 22 1 -- -- - % of GDP 4 9 7.2 4.2 10.9 4 3 8.6 -- -- -- Source- Development Council 43. This big increase in the deficit led to over-shooting the Plan target rates of deficit/revenue and deficit/GDP in these three years. The planned deficit/revenue rate of about 10 percent was surpassed to about 18, 28, and 22 percent in these these three consecutive years. Also, the planned deficit/GDP rate of about 4.3 percent was surpassed to 7, 11, and 8.6 percent in the three years.These developments are causing a great deal of concern over maintaining fiscal stability. The 1992 deficit had risen to over 28 percent of Government revenue and is expected to reach 22 percent on 1993, compared to a planned target of 10 percent. In addition, the deficit jumped to about 11 percent of GDP in 1992 and is expected to be over 8.5 percent in 1993, compared to a planned rate of about 4.2 percent. compared to a planned target of 4.2 percent. Furthermore, the 1992 deficit amounts to about 35 percent of the SGRF reserves as they stood at the end of that year. 25 44. These developments are more pronounced in the case of civil recurrent expenditures. According to the latest MOFE figures, these expenditures increased from RO 674 million in 1991 to RO 780 million in 1992, i.e., at about 16 percent annual growth rate. That large, one-time increase sought for 1992 reflected a widespread view among operating agencies of the Government that they had for the previous several years been unable to execute their approved programs within funds provided by MOFE. There is a prevailing contrary view that the rapid growth of civil ministries in the period from 1975 to 1990 outstripped their capacity to manage resources efficiently, a situation certainly not without parallel in other countries which have encouraged the rapid growth of the public sector. In this view, the spending ministries must become better managers of the limited available funds if they are to perform their missions effectively. 45. The disagreement over the resources needed to carry out the missions of the civil ministries was fought out over the course of calendar year 1992. After promulgation of the 1992 budget in December 1991, the civil ministries besieged MOFE with, literally, hundreds of requests for additional 1992 funds amounting to over RO 200 million. Late in the year the Council for Financial Affairs decided to ratify most of the requested additions. The result was a higher deficit, larger withdrawals from the SGRF, larger development bonds issue, and larger unsettled obligations. 46. What is troubling here is the size of the new requests for additional allocations during the budget year relative to the approved budgetary allocations. It is clear that sector ministries behave as if they believe that the budget ceiling is soft and flexible, and the practice of approving most of the new expenditure demands encourages it. Additional requests for appropriations are becoming the rule rather than the exception. If these additional budget allocations are allowed to continue, deviation between projected and actual macroeconomic developments could be a serious destabilizing factor. E. Conclusion 47. Oman's economy projects a sense of economic stability as it suppresses the serious symptoms of prolonged budget deficit. These symptoms are beginning to surface and are causing a good deal of concern, especially with the growing conviction that the Government is consuming at a level that, if continued, could put the long-term objectives of the Government at jeopardy. The current high real GDP growth rates of the first two years of the Fourth Plan will have to be followed by real contraction if serious efforts are made to avoid the consequences of the rising budget deficit. The depletion of foreign reserves, unabated growth of imports and foreign labor remittances, relatively high debt/GDP ratio, the rising inflationary pressures and, the anemic pace of diversification and the stagnant share of private investments in GDP despite government efforts to increase that share, are fundamental developments that are becoming increasingly visible and their impact is increasingly being felt. The microeconomics of. the deficit, i.e., efficiency of budget management -revenue and spending- are as important as its macroeconomics. This report emphasizes that view by promoting rationalization of budget processes, budget allocations, 26 improving the efficiency of public service programs, and cost recovery as measures to reduce the deficit and to avoid its serious macroeconomic implications. 48. To address both problems, increasing spending and the budget deficit, will entail a radical curbing of the appetite of sectors ministries for higher spending and the public's expectations of what the Government can provide. A feasible starting point is the setting of a firm budget envelope for all civil ministries and for each sector ministry based on priorities set by the Development Council. In setting these budgetary constraints, it should be recognized that present levels of government spending are higher than they should be, as the current levels of public savings are much lower than they ought to be. The current oil revenue is not an earned income in the true sense. It is in fact a sales value of a national asset, and should be mostly invested to generate future income for future generations of Omanis. 27 H. THE BUDGETARY PROCESS A. Introduction 1. Oman's planning and budgeting institutions and procedures have evolved through several stages. Between 1975 and 1980, the government established an institutional framework for planning and managing public spending, with two responsible centers of management: a Development Council and a Financial Affairs Council. The basic Financial Law originated in this period. 2. Between 1981 and 1988 the Government took various steps to improve the planning and management tools supporting high-level decision making on the plan and the budget. Among these were the acquisition of macroeconomic planning models and trained staff, systematic procedures for public investment planning and monitoring, a structure for government budget accounts consistent with the IMF system for government financial accounts, and a computer system for centralized management of all government accounts. 3. As a result of this methodical and incremental approach to institutional development and capacity building, the Government of Oman now possesses most of the necessary elements of an effective medium-term expenditure planning and control process. 1 4. The Government has recently found it increasingly difficult, however, to gauge and manage the recurrent expenditure of civil ministries. Recurrent spending by the civil ministries has risen continuously over the past 15 years in response to a rapid expansion of government social and economic services. Expenditure projections by the civil ministries for the coming years show scant signs of abatement in the rate of growth, which exceeds projected national economic growth and threatens to disrupt national economic planning and management. Social and political commitment to expand public services is the driving force behind the expansive budget projections. 5. This expenditure review has pointed to the need for a systematic improvement in the methods of planning and managing resources at the level of the civil ministries. Realization of the benefits of these reforms will also require improvements in the processes for planning, monitoring and evaluating public expenditure at the level of the Ministry of Finance and Economy. This section defines the directions for such procedural reforms and recommends a process for realizing them. B. General Background Coverage and Structure of the Budget 6. The annual budget of the Government of Oman is planned within the framework of a Five-Year Development Plan; the current Five-Year Plan, the fourth since 1976, runs from 28 1991 to 1995. There are two fiscal accounts: The General Account, and the State General Reserve Fund [SGRF]. A third account, the Contingency Fund, accumulates surpluses or is depleted by deficits not financed by borrowing. Since it is not used to fund expenditures directly, the International Monetary Fund [IMF] regards it as a part of the general government fund system rather than a separate fund analogous to the SGRF.' However, funds for the SGRF and the Contingency Fund are subtracted from the gross oil revenues of the government (its share of the sales of the Petroleum Development Oman [PDO] consortium), according to formulas based upon the price of a barrel of oil, and only the remainder is considered "revenue" [Table 2.1].' 7. The SGRF was established under Sultani Decree No. 1 of 1980 to manage investments of surplus oil revenue. The SGRF does not publish statements of its income, expenses and fund balances, but does report regularly to the Financial Affairs Council (whose functions are described in Part II, below). Withdrawals from the SGRF have been used to finance the budget deficit when required, at the discretion of the Financial Affairs Council. 8. As described in the Fourth Five-Year Plan, the purpose of the Contingency Fund is "to cope with any international or domestic variables that might emerge during the Plan's implementation." The principal use would be to cover a portion of a planned budget deficit.' For background, see A. Premchand, Abdelali Tazi, and William A. Allan, Budgetary and Accounting Systems in GCC Member States, Fiscal Affairs Department, International Monetary Fund, Washington, D.C., August 27, 1986, passim. 2 See section on "Determination of Budget Envelope" in Chapter I of this report. The plan envisioned total transfers to the Contingency Fund during 1991-1995 of RO 533 million, offset by withdrawals of RO 450 Million to cover half of a planned five-year budget deficit of RO 879 million; the balance to be financed by the issuance of government bonds, or by external borrowing. 29 Table 2.1 ESTIMATED GovERNMENk REVENUE AND EXPENDITUREA DURING THE FOURTH FIVE-YEAR PLAN (1991-1995) (RO Million) 1991 1992 1993 1994 1995 Total I Revenue -Oil Revenue 1,481 1,554 1,629 1,707 1,785 8,156 Minus transfers to a SGRF 185 198 208 219 227 1,037 b. Contingency Fund 78 84 118 124 129 533 1. Net Oil Revenue 1,218 1,272 1,303 1,364 1,429 6,586 2. Nat. Gas Revenue 61 66 73 79 86 365 3 Other Recur. Rev 265 278 289 304 319 1,455 4. Capital Receipts 5 5 5 5 5 25 5. Capital Recovery 28 28 28 28 28 140 6. Total Revenue 1.577 1 6 1 867 8571 II Expenditures -Recurrent Expenditures 7 Defense, Secunty 572 576 583 585 588 2,904 8. Civil Ministries 622 644 666 690 714 3,336 9. Interest 88 100 106 114 124 532 10. Gov Share PDO Recurr.Exp 7 83 88 94 100 442 11. Total Recurrent 1 403 1 526 214 -Investment Expenditure 12. Civil Development 206 231 253 292 297 1,279 13. Nat. Gas Explor 7 8 8 9 10 42 14. Gov.Share PDO Capital Exp. 163 146 146 142 164 761 15 Dev contingency 5 5 5 5 5 25 16 Total Investment 381 390 412 448 476 2 107 -Private Sector Support 17. Industrial Sector 6 6 6 6 6 30 18. Oman Housing Bank 6 6 6 6 6 30 19. Oman Dev. Bank 2 2 2 1 1 8 20. Oman Bank for Agn- culture & Fishenes 3 3 3 3 3 15 21. Other 7 8 9 11 11 46 22 Total Private Sec 24 25 26 27 27 129 23. Total Public Expenditure 1764 1 818 1 2029 9450 24. Deficit (6-23) (187) (169) (183) (178) (162) (879) 25 Net Extrn.Borrowing 0 0 0 0 0 0 26 Cont Fnd.Withdrawal 50 100 100 100 100 450 27. Gov't. Bond Issue 137 69 83 78 62 429 28 Total Financing 187 169 183 178 162 879 a In current values with built-in inflation rate of 3 percent p.a. 9. The state budget covers inter alia municipal services provided by the government, the recurrent and development budgets of the Civil Aviation and Ports Authority, [subsidies to state-run public utilities,] and the Government's capital of the PDO. The budget also covers the Government's ownership contribution in state-owned (complete or partial) enterprises. 30 10. Since 1989, the state budget of Oman has been presented in a format consistent with the Government Financial Accounts model of the International Monetary Fund. This framework provides both a functional and an economic classification of expenditures for government operations. Table 2.1 shows the Fourth Five-Year Plan for the major functional categories of the state budget. This report addresses the procedures for planning, executing, monitoring and evaluating the recurrent spending of civil ministries [Table 2.1, line 8]. 11. It is doubtful that the Government can continue to support growth of recurrent spending by civil ministries of 20 percent or more a year. On the other hand, it is believed that the ability of ministries to serve priority goals within the resources likely to be available can be strengthened through improvements in efficiency. The determined pursuit of these efficiencies requires a strong government commitment to macroeconomic and fiscal objectives. It also requires improving procedures for planning and managing expenditures, particularly at the ministerial level. C. Description of the Budgetary Process 12. The Development Council prepares Oman's medium-term Development Plans in consultation with the Ministry of Finance and Economy and the civil ministries. It is headed by the Sultan of Oman. The Deputy Prime Minister for Financial Affairs presides over the regular sessions, aided by the Secretary General for the Council and supported by a Technical Secretariat. Having accumulated more than 15 years of experience with medium- term planning, Oman is currently in the midst of the Fourth Five Year Development Plan [1991-95]. The Financial Affairs Council guides and coordinates the preparation and implementation of the annual budget within the guidelines set forth by the Development Plan, as adjusted by changes in resources and internal and external conditions. Its membership is similar to that of the Development Council. Staff support to the Financial Council for the planning, control monitoring and evaluation of the recurrent expenditures of civil ministries is provided by the Undersecretary for Financial Affairs in the Ministry of Finance and Economy [MOFE].' Planning and control of recurrent expenditures, as well as control of the annual expenditures for development, are managed by the Directorate General for Budget and Government Accounts and the Directorate General for Expenditure Control, both subordinate to the Undersecretary of Finance. These organizational elements of MOFE conduct their budget dialogue with ministry directors of finance and their staffs. 13. By the early 1980s it had become evident that the budgetary and financial control procedures and management information systems adopted in the mid-1970s were strained by the rapid growth in government transactions. Following a period of study and consultation with the International Monetary Fund, a new budget information management system and a new budget classification were adopted and installed between 1985 and 1988. The classification follows IMF guidelines, while the budget information management system 4 The state budget for defense and national security, and the methods for its planning and control, were beyond the mandate of this mission. 31 permits daily tracking of cash balances at the ministry level. The government has now accumulated five years of experience with the new budgetary system, with generally satisfactory results in the control of expenditures. 14. The Five-Year Planning Process has the following major features: a. A periodic five-year development plan establishing a macro-economic framework for planning, including an envelope for government revenue and spending; reviewing and establishing development policies and priorities; ranking projects by priority; listing agreed development projects and budgets by sector and by geographic region; and setting targets for all components of government revenue and spending. The last plan was issued in January 1991 for the 1991-95 period. One specific development objective in this plan is "to enhance the efficiency of the government's administrative machinery." b. A process of rolling annual adjustments to the development budget and projects list, based on updated macro-economic projections, project status reports and policy review. c. A process of quarterly progress review and follow-up. 15. The development plan is broken down both by sector and by geographic region. Subsequent transfers between sectors and regions are strictly controlled. 16. Although it sets targets for recurrent spending based on consideration of alternative macroeconomic projections, the Development Council is not concerned with the details of the recurrent budget. Spending ministries are asked to provide capital and recurrent cost estimates for each project, along with an overall projection of their five-year spending requirements. In preparing the Fourth Development Plan, however, Council staff found many gaps in the project-level information provided by spending ministries, particularly in estimating the recurrent costs of completed projects. Ministry-level spending requests, when summed, were found to exceed available resources by a factor of 2. Preparation of the Annual Budget 17. The legal foundation for the budget process of Oman is set forth in the 1982 Law of the Financial System, which spells out the delegations of authority, and related responsibilities, from the Sultan to subordinate elements of the government. The Deputy Prime Minister [DPM] for Finance and Economy is directly responsible to the Sultan for all financial affairs of state and the correctness of government accounts. Ministries and agencies of the government are required to operate within rules established by the law and the regulations and directives of the DPM for Finance and Economy, who is permitted to ask for and receive all details necessary to substantiate budget requests. 32 18. Oman's fiscal year runs from January 1 to December 31. The annual budget for the coming year is normally issued by decree of the Sultan in late December. Preparation of the annual budget is evolving toward a rolling medium-term expenditure plan, but still retains the essential features of an annual incremental approach to budgeting. At the end of each annual planning cycle, in November or early December, prior to finalization of the state budget for the coming year, revisions are made to the macroeconomic projections for the remaining years of the development plan. This projection sets the framework for both the next budget year and for the next budget planning cycle. 19. This cycle officially begins in July. Based on guidance from the Financial Affairs Council, the Undersecretary of Finance issues an annual budget circular to the civil ministries calling for detailed budget estimates for spending requests for the execution of existing activities, the expected costs of new projects completing development, and such other additions to its resources as each ministry deems necessary for the coming budget year, all offset by identifiable savings. Since 1991, this call has also included a request for ministry spending projections for the succeeding four fiscal years. Ministry finance directors may then issue their own internal budget circular to budget elements of their agencies. Ministry requests are compiled, reviewed internally, and submitted to MOFE by September 9 [Appendix Figure 2.1 for the recurrent budget structure]. 20. Over the next two months, project requests from the ministries are reviewed by the Development Council's Secretariat while recurrent spending estimates are reviewed in line- item detail by the Directorate General of the Budget and Government Accounts in MOFE, which then integrates the development and recurrent spending plans in a staff-recommended draft budget. The staff recommendation is then forwarded to the Undersecretary for discussion with the ministry concerned.s Ministry appeals are reviewed by the Financial Council along with updated estimates of revenues, adjustments are made in the levels recommended by the budget staff, and a final budget is promulgated in December [Chart 1, appended]. 21. Neither the MOFE circular nor the ministry circular reviewed by the mission sets any explicit spending envelope nor clearly directs that spending requests should be related to development goals and priorities. While reporting formats are clearly specified, there is no parallel explicit expression of the criteria for budget review either at the ministerial level or at MOFE. Budget Implementation and Control 22. Computer support for budget implementation and control was upgraded between 1986 and 1988, to coincide with the introduction of a revised budget classification. With this exception, a reorganization of the MOFE Financial Affairs staff, and some changes in I Staffing plans are independently reviewed by the office of the Ministry of Civil Service which may make recommendations to MOFE. 33 ministerial titles, the procedures for implementation and control remain as they were described by a 1986 IMF study.6 The essential features are as follows. 23. For purposes of control, the government is divided into "self-accounting" and centralized units. The self-accounting units are the Departments of Defense, Police, Internal Security and the Royal Court. MOFE releases funds to them on a weekly basis after checking their balances, which are kept on the MOFE computer. They issue their own checks and report monthly to MOFE. The centralized units, consisting of all civil ministries except the Royal Court, can spend against their budget appropriation once it has been entered into the MOFE computer. All vouchers are checked by the Directorate General for Expenditure Control and payments checks are processed by the Directorate of Public Accounts. MOFE also provides spending ministries with permanent imprest accounts to meet petty cash expenses. 24. All contracts are submitted to the DG for Expenditure Control for approval and are registered in the MOFE computer. Purchases. and contracts for more than RO 25,000 are subject to precommitment review. Up to RO 100,000, approval rests with the Local (ministry-level) Tender Committee; above that level, the Central Tender Committee must approve, and in addition, if the contract amount exceeds RO 500,000 approval must be sought from the Deputy Prime Minister for Legal Affairs. Also, all commitments above RO 50,000 require advance verification by MOFE: by the Undersecretary for Financial Affairs up to RO 250,000 and by the Deputy Prime Minister for Finance and the Economy for amounts exceeding that level. 25. Transfers are permitted between kinds of expenditure within the same item. For transfers between items other than wages and salaries, MOFE approval is required. Transfers between chapters (e.g., wages to purchases) are not permitted. Transfers between projects up to 10 percent of the cost must be approved by the appropriate Tender Committee; transfers which increase project costs by more than 10 percent must be submitted to the Financial Affairs Council. 26. Payroll is highly automated and is operated by MOFE. MOFE also expects to activate a computerized personnel data base in 1993 that will provide project-level detail on personnel costs. This system will be shared with the Ministry for Civil Service and will be used both for personnel management and budget planning and control. Monitoring, Audit and Evaluation 27. With the exception of the self-accounting units, all ministry commitments are recorded in the MOFE computer, which also keeps track of payments. Cash management is done on a daily basis; reconciliation between the treasury and banks is done at the end 6 A. Premchand, et. al., o , p. 39 ff. 34 of each day. Self-accounting units report monthly to MOFE. Ministries make quarterly reports to the Development Council on the status of projects. The final accounts are prepared within four months of the end of the fiscal year by MOFE, using the format of the Budget Law, and submitted to the Development Council, Financial Affairs Council, the Secretariat General for State Audit and His Majesty. 28. The Secretariat General for State Audit audits the final accounts and reports to His Majesty before the end of the year. Units subject to audit include all government agencies except when exempted by Royal Decree, public corporations, companies fully or partially owned by the state, companies granted the right of operating on state property, and any corporations receiving government grants. It should be noted that public companies and authorities are audited by private auditing firms selected by their Boards of Directors on which government representatives sit. The audits cover financial matters and personnel procedures. In addition, the Secretariat General is directed to follow-up development projects regarding compliance with the Development Plan, to evaluate these projects, and to perform any other audit ordered by His Majesty. Audit findings are submitted to the concerned unit, which has two months to reply to any findings of non-compliance. The Minister of the Diwan of Royal Court must report unrectified non-compliance to His Majesty and the Council of Ministers and, for matters concerning personnel administration, the Council of Civil Service. 29. The annual report of the Secretariat General for State Audit covers all financial violations discovered, comments on these violations and action taken to correct them; comments on the effectiveness of financial regulations and procedures, financial staff and financial records in use, and comments on the State Final Accounts. It also should include a general evaluation of development projects. In addition, the Minister of the Diwan of Royal Court is directed to submit an annual report and commentary on any obstacles faced by the Secretariat General during audit. 30. In addition to the independent audit conducted by the Secretariat General for State Audit, the Internal Audit Department of the Undersecretariat for Financial Affairs in MOFE conducts audits of all financial and administrative regulations in force and cash in Imprest Funds, and supervises treasury stocktaking. It also coordinates with the Secretariat General for State Audit concerning the audit of MOFE accounts. D. Assessment of the Budgetary Process 31. Oman currently possesses most of the necessary elements of an effective medium-term expenditure planning and control process. These include competent macroeconomic planning and analysis linking GDP growth to other Government Finance variables, i.e., revenues and public expenditure levels, a rolling multiyear public investment plan with detailed monitoring and the beginnings of a system of plan evaluation and follow-up, a forward fiscal plan with revenue and expenditure projections, a well-coordinated set of mechanisms for interministerial discussions and priority setting, and a computerized financial management 35 information and control system. Oman's budget planning, control and monitoring institutions, procedures and systems have. progressively matured during the 1980s within a well thought-out system. 32. There is clearly scope for further improvement. Indeed, the recent controversy over the recurrent spending needs of the civil ministries gives ample evidence that such improvements are urgently needed to restore fiscal balance and budgetary control. Fortunately, the existing system provides a solid foundation for the necessary next steps, which should focus on establishing firmer overall envelope, improving budgeting and resource management within the civil ministries, reinforced by a strengthened oversight from the Undersecretariat for Financial Affairs and the Secretariat General for State Audit. E. Process Issues 33. The review of the budgetary process for recurrent expenditures of the civil ministries has identified several issues which merit consideration by the government of Oman in pursing a strategy for strengthening budget planning and resource management by the civil ministries. 34. The Incentive Structure for Budget Planning and Management: The Question of Government Commitment. The five-year planning process has established links between the forward budget for all functions of the government and the government's economic plans. But it appears that a perception has taken root within the Cabinet that the Contingency Fund (which exists to meet unforeseen international and domestic developments, but which is also allocated in the Fourth Five-Year Plan to finance a portion of the planned deficit) and even the SGRF (which exists to underwrite the nation's long term financial security, looking to the day when oil reserves are exhausted) can be used to meet ministry demands not funded under the forward budget, if the ministries press their case. The perception that the budget envelope for the civil ministries is not firm has adverse consequences for good management. It relieves ministers of the need to set firm internal priorities and to budget accordingly. It also places MOFE in a the untenable position of seeking to enforce spending allocations which are in danger of being subsequently over-ridden by Cabinet decisions. While the administrative reforms described below will increase the capacity of the governments and its ministries to plan and manage budgets, their effectiveness will be weakened without a strong commitment by the government to the maintenance of fiscal discipline at the ministerial level. 35. Division of Labor in the Budget Process. Both the structure of the budget and the weakness of ministerial-level budget preparation force thousands of spending decisions up to the level of the MOFE budget staff and beyond them to the Financial Affairs Council and the Cabinet. For example, during the time that the mission was in Oman the reviewers of the Directorate General for the Budget and Government Accounts, were considering a request to establish a round-the-clock medical clinic to treat emergencies -- largely of transient passengers -- at Seeb International Airport. The annual costs, while not large in 36 the scale of the nation's health expenditures, appeared to be disproportionate to the projected number of cases requiring emergency medical treatment. It was apparent that the requesting ministry had not informed MOFE of alternative solutions to the perceived need (such as the use of nearby hospital facilities) nor of the possible alternative sources of the requested funds. Overall government priorities cannot be set and maintained at this level of detail. If MOFE aims to move away from micro-level budget decision-making toward a role of priority setting across ministries and management oversight, the ministries must be empowered and enabled to set priorities within a firm budget envelope, and held accountable for performing their missions efficiently. Shifting more of the burden of priority setting within sectors, budget preparation and resource management to the civil ministries will allow MOFE to act more as a quality controller of the budgetary process, and as a focal point for framing the major inter-sectoral trade-off issues which should be the focus of the senior levels of government. 36. In the case of budget execution, the automation of the payments system averts some of the administrative overload that would otherwise be created by the existing ceilings for tender and commitment authority, which appear rather low for operations as large as those of the ministries of Education, Health, and Electricity and Water. 37. Relationship of Spending to Development Objectives. Oman's development objectives are spelled out in both general and quantified terms in the five-year plans, but the links between these objectives and the recurrent spending of the civil ministries do not appear to be clearly established in the budget process. Establishing such links requires moving towards a program-oriented presentation of the budget. 38. Management Information and Transparency. Oman's present budget structure and budget information systems appear to be reasonably well suited to setting spending limits consistent with overall macroeconomic objectives; to setting broad priorities between development, recurrent and military spending; and to detailed accounting for expenditures. But they are not well adapted to supporting and monitoring budget planning and management at and below the ministerial level. Spending detail is accounted for at the level of line items for personnel, purchases of goods and services, transfers, etc. These details are aggregated first into "budget units" and then into ministry and functional categories. In the design of the present government budget information system, ministries have been left to decide for themselves the definition of a "budget unit." The resulting "budget units" often do not reflect the operating structure or the program objectives of ministries, and some large ministries have only one "budget unit" to cover the bulk of their operations. For example, the Ministry of Education lumps all primary and secondary education throughout Oman into one "budget unit. " 39. The existing system of "budget units" does not provide sufficient transparency into ministerial operations and unit costs to support priority setting within and between the civil sectors and ministries nor to monitoring and evaluation of resource management and performance by ministries. Rectifying these shortcomings for the key civil ministries is a 37 precondition to a more effective division of labor in the budget process, as well as to improving the efficiency and productivity of government operations. 40. Monitoring and Evaluation. The government of Oman has a well established system of financial accountability, including up-to-date accounts for every spending agency and a regular system of financial audits. In addition, development projects are subject to independent audits for compliance with the Development Plan and evaluation by the Secretariat General for State Audit. Government recurrent operations are not, however, otherwise subjected to audits of performance or compliance with development objectives. To some extent, rectification of this shortcoming depends upon design of a better budget structure. While performance measures (e.g., hospital out-patient visits, classroom size and student/teacher ratios) exist and are employed in building and defending ministry budgets, they can be related to unit costs only with great difficulty in view of the high level of aggregation employed in the "budget units." Nor do the performance measures appear to be subject to regular audits and cross-checks, leaving doubts concerning their validity. A strategy for improving budgeting and resource management within the civil ministries, and for holding them accountable for achieving the government's priority objectives within limited resources is a corollary of greater discretion for departmental managers, who have more flexibility in using funds, but subject to a firmer budget envelope and evaluation of their performance. F. Objectives of an Improved Budget Process 41. Among the major objectives of the Fourth Five-Year Plan is the objective of enhancing "the efficiency of the government's administrative machinery." Feasible improvements in the efficiency of ministerial operations offer the optimal resolution of the conflict between the nation's long-run financial security and the near-term requirements of the development process. It is recommended that this goal be pursued through a strategy of improving budgeting, resource management and efficiency within key civil ministries, under the oversight and guidance of MOFE. (The ministries of Education, Health, and Electricity and Water, for example, account for half of all recurrent spending by civil ministries and have complex operations.) 42. Implementation of this strategy will require changes in the process and methods of budget formulation at the ministerial level, and would be strengthened by changes in the process and methods of budget guidance and budget review by MOFE. A first step to strengthening the budget process is to establish some clear reform objectives and a process for reaching them. The mission believes that the following objectives represent an achievable set of improvements to the budget process which would support the recommended strategy: 43. Establish a rolling, annual, multi-year planning envelope for recurrent spending by civil ministries. The Financial Affairs Council, after receiving updated multiyear budget forecasts from the Development Council for the coming period should issue annual guidance 38 to MOFE setting a ceiling for recurrent spending by development ministries for this period. This guidance should be consistent with the government's macroeconomic objectives, its development objectives, and the overall resource plan. The guidance should cover, at a minimum, the final budget for the current fiscal year, the resources available for the next annual budget, and at least one -- and preferably two or more -- of the following future fiscal years. For example, guidance issued in early 1993 would cover the 1993 budget year, the 1994 budget to be planned in 1993, and the resources for 1995 and, if feasible, later years. The guidance should set an envelope for overall recurrent spending for the civil ministries, and sub-targets for the major functional categories established in the government's budget structure. These functional targets should then be broken down by specific individual ministries, so that each ministry has an initial planning target. At the end of each budget planning cycle, it would be the duty of the Financial Affairs Council and, as needed, the Development Council, to adjust the spending envelopes for individual ministries and functions, within the spending envelope for civil ministries, to reflect the current appreciation of government priorities in the light of any changes since the beginning of the planning cycle. Finalization of the budget for recurrent spending of the civil ministries would be followed by the issuance of resource planning guidance for the next multiyear period. 44. Establish exDlicit criteria for budget review by MOFE and incorporate these into the budget circular. In addition to setting a target for ministry-level spending for a multiyear period, the MOFE budget circular should explicitly state the criteria upon which agency requests will be judged. These criteria should at a minimum require ministries to show the relationship between their own spending priorities and the development objectives set forth in the current five-year plan. Over time, MOFE and selected individual ministries (subject to higher-level review) should negotiate program-level performance measures reflecting progress toward meeting development plan objectives within budget constraints. These measures would become the basis for monitoring and evaluation of ministry performance within the ministry, by MOFE and by the Secretariat General for State Audit. 45. Tighten the rules for observing the planned budget envelope and for processing and approving additional appropriations. The present practice reveals that budgets are determined more on need and less on availability of resources. The existing line item detail reinforces the apparent open-ended nature of the budget process. The ministries may appeal and may try to undermine MOFE. The rules under which they could appeal need to be tightened. One way to do that is by moving the appeals review up to the Cabinet level, and by setting a condition of finding savings somewhere else, or in some other ministry if additional funds are to be allocated to a particular ministry. 46. Expand the scope of MOFE review. The Directorate General for the Budget should review ministerial budgets not only for efficiency (using the revised budget structure covered below and the standard cost tools covered elsewhere in this Public Expenditure Review) but also for conformity with development objectives. It should examine, for example, the appropriateness of the balance between competing ministerial missions and objectives, such as the relative emphasis given to the primary, secondary and tertiary levels of education and 39 health-care delivery. It should also make recommendations to the Undersecretary concerning the balance of spending between ministries where appropriate. 47. Revise the existini budget structure and management information system to provide greater transparency into ministerial operations, beginning with the most important civil ministries. The design of "budget units" should be rationalized in accordance with the operational structure of ministries and government development objectives to reflect resources, at a minimum, at the program and regional levels [Text Annex ]. The government should explore the options and costs for designing and implementing the revised budget structure and its supporting data processing requirements before proceeding with this reform. 48. Monitor and evaluate the performance of civil ministries in meeting development objectives, including the efficiency of their operations. Monitoring and evaluation of performance should be conducted at three levels: within ministries, by MOFE, and by the Secretariat General for State Audit. The design and implementation of a monitoring system should proceed in parallel with the development of explicit criteria for budget and performance review and of an improved budget structure and management information system, beginning with the key development ministries. G. Recommendations for Implementation 49. The strategy of strengthening the efficiency of the government's administrative machinery through improvements to the budget process necessarily involves the participation of many actors in the budget process, from the Undersecretary of Finance down to the field operational unit directors of key civil ministries, and much negotiation. The criteria for assessing efficiency and also consistency of spending with development objectives must be worked out ministry by ministry and sector by sector. The design of ministerial budgets likewise requires study and negotiation by the ministry concerned and by MOFE. As reforms are introduced, MOFE and ministerial staffs must be familiarized with their purposes and methodologies. New staff may have to be recruited and trained. 50. Given the many details that must be considered and the number of actors who must be consulted to produce effective improvements in budget planning and management, the establishment of a senior-level government committee or task force to guide reforms and resolve issues and disputes is of central importance to the reform of the budget process. 51. Most such reforms fall within the purview of the Deputy Prime Minister for Financial and Economic Affairs. The Financial law appears to give the DPM adequate authority to design and implement the recommended reforms. Thus overall responsibility for budget process reform should rest with the DPM. Expanding the authority of the Secretariat General for State Audit to encompass evaluation of recurrent spending by civil ministries for support of national development objectives and managerial efficiency, however, probably 40 requires a decree by H.M. The Sultan. The DPM should recommend that this change in law be enacted. 52. The reforms will require careful design involving the participation of the affected ministries along with MOFE and the General Secretariat of the Development Council. It is therefore recommended that the Government establish a ministerial-level interagency task force headed by the DPM for Financial and Economic Affairs to guide the design and implementation of the recommended reforms. The task force should commit itself to see the reforms through to implementation -- a process which may require several years. It should establish a regular schedule of meetings (perhaps quarterly) with an agenda to address the sequencing of reforms, decide their design and timetable for implementation, and oversee their implementation. 53. To carry out the necessary technical analysis and support, the task force should form a technical committee to work with the Undersecretary of Finance with participation from ministries, to present options for design and implementation, and to follow the implementation of agreed reforms. Staff support for the technical committee should be drawn from The General Directorate of the Budget and National Accounts in MOFE and the staff of affected ministries, supplemented by such outside expertise as the Undersecretary may require. An additional small staff may be required for the arrangements and coordination of the meeting calendars, preparation of agendas, organizing seminars, etc. 54. The reform process should also be supported by periodic seminars designed to inform budget personnel at all levels of government priorities and resource constraints, as well as the purposes and methods of proposed reforms. 55. It is suggested that the key technical reforms be introduced incrementally over several budget seasons, giving ample time to develop consensus on such issues as the design of budget units, automated data support, detailed criteria for budget review and performance monitoring; to design organizational changes at MOFE and at the ministerial level necessary to support the implementation of reforms; to instruct MOFE and ministerial level staff on the practical application of the new planning and monitoring systems; and to recruit and train the additional personnel which may be required to operate the reforms .' " For example, a systematic survey of the budget management information needs of senior decision-makers (ministers of selected departments, the Development Council, the Financial Affairs Council, etc.) could be a starting point both for defining the structure of budget accounts and designing measurable performance indicators which could be appended to budget submissions and correlated with the redefined budget units and subunits. 41 TEXT ANNEX 2-A SULTANATE OF OMAN I- Present Recurrent Budget Structure LEVEL 1: Functional Classification (e.g., Education) LEVEL 2: Ministerial Classification (e.g., Ministry of Education) LEVEL 3: "Budget Unit" Classification (e.g., Main Office of Education; Directorate General of Education, Salalah; Agriculture Institute, Nizwah; Teachers Training Institute, Capital Area; Sohar Industrial Secondary School; Teachers Training Institute, Salalah; Main Office of Youth Affairs; Department of Youth Affairs, Salalah; Sultan Qaboos Sports Complex.) ALL LEVELS" Line Item" Classification (e.g., components of personnel expenditures, objects of expenditure for goods and services, transfers, interest) NOTE: The Main Office of Education budget unit aggregates- all line-item spending on primary and secondary education throughout Oman except as indicated above. II- Illustrative Proposed Recurrent Budget Structure LEVEL 1: Functional Classification LEVEL 2: Ministerial Classification LEVEL 3: Subfunctional Classification within Ministry (e.g., Primary Education, Secondary Education, Technical Education, Teachers Education, Youth Affairs, Sports) LEVEL 4: Regional Classification LEVEL 5: Subfunctional Classification by Region (as appropriate) (LEVEL 6): (Classification by School District) (LEVEL 7): (Classification by Spending Unit, e.g., individual schools) NOTE: Levels 6 and 7 primarily serve Education Ministry budgeting and cost accounting, and may be inappropriate or too costly to implement in the national budget structure. Thus the Government of Oman may wish to explore the installation of a two-tier budget information system, one tier at MOFE for government-wide management information and the second tier at each key ministry for ministerial-level management information. The two information systems would overlap at Levels 4 or 5. 42 III. EDUCATION EXPENDITURE REVIEW A. Background 1. This section reviews recurrent expenditures in the education sector in Oman. It analyzes their evolution and allocation, while focusing particularly on two important aspects of the Omani education system, namely quality and expansion. Education, which is considered a right for every citizen, is viewed by the Omani government as a prime tool for rapidly developing the country's human resources and implementing its "Omanization" policy. To this end, the government is heavily involved in education, exercising a strict control of the supply of educational services through direct provisions at all levels, and maintaining a strict regulatory framework for private education. The government also promotes education through an incentive system that includes gratuitous services and grants for transportation, textbooks, meals, etc., at all levels and scholarships in higher education. 2. The Omani education system consists of four levels, primary, preparatory, secondary and higher education. The pre-university formal general education system follows a 6-3-3 pattern, with the first 9 years (primary and preparatory) comprising basic education, and the last three years, secondary education. It normally enrolls students between the ages of 6 and 18 years of age. While all students completing primary education are expected to continue on to preparatory level, entry to secondary general education is subject to passing the preparatory school certificate. Current passing regulations require students to score at least 160 grade points for this certificate for male students. Girls are exempt from this requirement in order to promote their enrollment beyond basic education.' Male students who score below 160 are encouraged to pursue their education in one of three technical education institutes: commercial, agricultural, and industrial, or in vocational institutes which provide three-year training normally leading to employment. 3. Other pre-university education streams include preparatory and secondary education delivered through mosque schools and the Islamic secondaries . A special education program offers two-year programs to prepare handicapped youth for roles in society. The government has also embarked in an ambitious literacy and adult education program aimed to eradicate illiteracy before the turn of the century. Illiteracy stands now at 41 percent of the population 15 years and older. 4. Postsecondary education, in 1991/92, includes mainly the Sultan Qaboos University and 10 postsecondary colleges and institutes. The University was established in 1986 and is the only higher education institution delivering Bachelor's and Master's Degrees in Medicine, Engineering, Sciences, Agriculture, Arts and Literature, Education and Islamic 8 Successful female students are enrolled in secondary schools unconditionally, once awarded the preparatory school certificate. 43 Studies.' The 10 postsecondary institutes consisi of 9 intermediate teacher training colleges (5 for males and 3 for females) which provides two-year initial training for primary school teachers, one Oman Technical Industrial College which trains, also in two years, medium- level technicians, and one institute for special education. In addition, a number of other institutions provide specialized training under the authority of other technical ministries or parastatals: the Ministry of Justice, Endowments and Islamic Affairs (Judiciary preaching and Guidance Institute), the Diwan of the Royal Court (other Islamic Studies), the Ministry of Health (Institute of Health Sciences), the Ministry of Defense (Special Program), the Ministry of Palace Affairs (Royal Symphony Institute), the Royal Court (Staff College), Petroleum Development Oman (PDO) (Training Center), General Telecommunications Organization (GTO) (Institute of Telecommunications), and the Central Bank (The Institute of Banking). 5. Educational expansion in Oman has been extraordinary. Starting with very low levels of enrollment,"0 average annual growth rates have exceeded 60 percent during the 1970s, and 13 percent during the 1980s. Table 3.1, showing the evolution of primary enrollment in Oman with that of selected countries, demonstrates the uniqueness of the education expansion experienced by Oman over the last 20 years. The overall net enrollment rate is 70 percent with rates of 90 percent at the primary level, 50 percent at the preparatory level, and 20 percent at the secondary level. This expansion has created expectations leading to tremendous pressure on higher levels of education. 9 The University enrolls students mainly from the general education stream who pass the General Secondary School Certificate and high performing graduates of 9 of the 10 colleges and institutes listed in this paragraph.. 1o In 1969/70 only 909 students were enrolled in primary schools and there was no post secondary education. Since then, primary enrollment has been multiplied at close to 300 times since 1969, preparatory enrollment at close to 500 times since 1971, secondary enrollment at close to 1,200 times since 1972, and enrollment in the very young University is currently 3,400. 44 Table 3.1 EvoLUTION OF PRIMARY EDUCATION ENROLLMENT RATES Selected Countries (Percent) COUNTRY 1970 1975 1980 1989 Egypt 72 75 89 97 Kuwait 89 92 102 100 Morocco 52 62 93 68 Tunisia 101 97 103 115 United Arab Enurates 98 101 88 Ill Hong Kong 107 119 106 105 India 73 81 83 98 Indonesia 77 86 107 118 Korea (Republic of) 103 107 110 108 Pakistan 40 119 106 105 Singapore 106 110 108 110 Argentina 106 106 106 111 Brazil 84 88 99 105 Ivory Coast 63 64 79 75 Kenya 61 104 115 94 Oman 3 44 60 102 Source: UNESCO Yearbook, 1984, 1991 6. The government budget represents by far the main source of funding for the education system; there are no local, private (for fees or tuition) or external contributions that finance public education, and private education plays only a minor role in the system. The Ministry of Education (MOE) is responsible for the funding and management of primary, preparatory, secondary general and technical, and adult education, whereas higher education falls under the authority of the Sultan Qaboos University Council. Vocational education is under the responsibility of the Authority for Vocational Training. 7. Oman's Fourth Five-Year Development Plan (1991-95) assigns to the government a strategic role in education and four key objectives. Since basic education is considered as a right for all, the strategic role is to provide, free of charge including textbooks and transportation, primary and preparatory education to all youth between the age of 6 to 18. Attendance at other education levels is also free subject to admission. The plan's four key objectives in education are (i) to boost quality and internal efficiency; (ii) to improve the transition rate from preparatory to secondary and, soon, to university; (iii) to improve the 45 quality of school infrastructures by phasing out leased buildings and other temporary structures, tents, etc., unfit for teaching; and (iv) to develop non-formal educational programs to provide access for those who missed the opportunity to receive formal education. B. Analysis of Public Education Expenditures Magnitude and Evolution of Public Education Expenditures 8. Figure 3.1 presents an overview of the evolution of education expenditures along with the total government expenditures. Recurrent education expenditures represent the largest component (75 percent in 1991) of total education expenditures, wherein this ratio is about 40 percent in the other sectors. The share of education in total government recurrent expenditures (more than 26 percent in 1991) indicates a growth of education expenditures at a faster rate than those in the government as a whole. Education recurrent expenditures grew at a rate of 12.4 percent between 1988 and 1991, while the total government recurrent budget grew at a rate of 7.6 percent. 46 9. Total education expenditures represented 5.69 percent of GDP in 1991, and grew regularly over the last three years. This ratio is not atypical, as public education expenditure represents from 4.1 to 7.3 percent of GDP in industrial countries and from 2.5 to 7.5 percent in developing countries [Table 3.2]. Public spending per capita on education was about RO 145 (US$380), a level above the average in developing countries but well below that of industrialized countries (between US$500 and US$1,150 in OECD countries). Table 3.2 PUBLIC EDUCATION ExPENDITURE BY MAJOR REGIONS (1987) Countries Public Expenditure on Education Public Expenditure on Education as Percentage of GNP per Inhabitant (US$) Africa Excluding Arab States 4.8 15 Asia Excluding Arab States 4.4 58 Arab States 6.6 134 Latin America and Caribbean 4.1 78 All Developed Countries 5 9 * 704 Oman 7.9 460 Source UNESCO, Statistical Yearbook, 1989. Allocation of Public Education Spending 10. The current distribution of public recurrent education resources among the three levels of education [Figure 3.2] indicates alarming imbalances which, if they persist, are potentially detrimental to the development of a quality basic education and thus to the quality of students feeding into higher education. While comprising 68 percent of total enrollment, primary education claims only 39 percent of recurrent education expenditures, while university education with 0.79 percent of the enrollment claims 22 percent of the same expenditures. Preparatory expenditures claim about the same share as enrollment at that level (19.03 percent for 21.76 percent of enrollment), and secondary education claims, with 7.64 percent of enrollment, some 12.56 percent of expenditure share. 47 Graph 3 Enrollment and Public Expenditures by Levels Percent 120 . . .. Other 1gr.Higher 1 Secondary 6o or Ptor 20 Primary 0 Sourcc: Oman Financial Statistics Figure 3.2 11. Table 3.3 shows that while Oman's expenditure per secondary student as a multiple of primary expenditure is comparable with Tunisia and Morocco, it is higher for instance than in Indonesia, India, and Pakistan. Expenditure per student in higher education is about five times higher than Morrocco, more than twice the expenditure in Tunisia, about three and half times what it is in India, about two and half times the expenditure in Pakistan, and way above expenditure levels in mature industrialized countries. The fact that Qaboos University is relatively new may account for some of the additional expenditure, but future allocations should be made on the basis of rates of return of different levels of education and the efficient requirements of running and maintaining high quality education at all levels. 48 Table 3.3 PUBLIC EDUCATION EXPENDITURE PER STUDENT AND ENROLLMENT RATIOS MAJOR WORLD REGIONS, CA. 1986 Expenditure per Student as a Multiple of Prinary Level Expenditure Gross Enrollment Ratio Country Secondary Higher Primary Secondary Higher Morocco 2.3 5.9 77.0' 34.0' 8.8' Tunisia 24 12.1 116.0' 39.0' 5.7' Hong Kong 1.4' 5.6' 104.0 73 0 13 lV India 1.4 7.9 96.0 38.0 6.4 Indonesia 1.0' 3.2' 117.0 46.0 n.a. Pakistan 1.9 12.6 40.0' 19.0 5.0 Argentina 20.3 29.6 109.0' 71.0' 38 7' Brazil 1.1 5.9 101.0' 37.0' 10.9' Ivory Coast 4 6' 27.2* 75.0' 20.0b 2.6' Kenya 2.6' 37.9' 98 Ob 21.0' 1.3b Industrial Cntnes 1.1 2.2 100 80.0 21.0 Omand 2.3 27.7 98.0 38.0 3.3 Data for 1984 Data for 1985 Data for 1987. Does not include preparatory, level for which ratio is 2.0; data are for 1989 Source: UNESCO Database 12. From the analysis of the more recent evolution of recurrent expenditures [Appendix Table 3-1], questions arise regarding the pattern of decreasing non-wages expenditures in the education budgets. Non-wage expenditures typically comprise essential quality-enhancing educational inputs. In 1990-91, salaries and benefits represented overall 73 percent of the Ministry of Education's total expenditures. This percentage varied from one level of education to another as follows: 72 percent of primary education expenditures, 83 percent of preparatory level expenditures, and 73 percent of general secondary level. 49 13. Although it could not be observed directly, there were indications that much of this expenditure was consumed for administrative purposes rather than for direct provision of services. Indeed, non-salary expenditures of the MOE (27 percent of 1990-91 recurrent expenditures) included only 1.5 percent of educational supplies; similarly, only 21 percent of vocational recurrent expenditures went to non-salary expenditures, of which only 4.6 percent went to educational supplies. 14. At the university level, where instructional materials can be expected to make up a large part of the recurrent expenditures, only 4.18 percent are devoted to them (while 3 percent of the same budget went to food supplies). A large part of university expenditures go to social services with no direct or little impact on the quality of the education. For 75 percent of the 3,400 students who live more than 100 km away from the campus, full accommodation, i.e., full room and board, is provided without cost. The 25 percent remaining are transported free of charge from home to the campus. All textbooks are provided free of charge, and students whose parents' income falls below a current threshold of RO 200 per month (45 percent of the current enrollment) receive a stipend of RO 40. 15. The scope for reallocating the resources of the university as it faces serious funding problems in maintaining expensive equipment and in hiring and retaining high-quality professors and researchers is greater than for other levels of education. Private returns on investments in university education are generally much higher and immediate than at other levels, making them very profitable. With 1993 census data, actual calculations of costs and benefits of different levels of education can be carried out to determine the relative private and social returns at each level of education. Such calculations represent an invaluable input into the government's resource allocation and education finance strategy [Appendix Terms of Reference A: Education]. Equity in Allocation of Education Spending 16. To measure the level of vertical equity in the distribution of public education spending among a generation of children, a coefficient of dispersion (Gini coefficient) was estimated (Chapter Annex 3.1) that allows international comparisons [Figure 3.3]. The results of the computation yielded a coefficient of 0.38, a figure that indicates the Omani educational system is more equitable than in most developing countries where the overall average is 0.60. This remains less equitable than that of industrial countries (Gini = 0.22). 50 Graph 2 Indicators of Vertical Equity in Education Ependitures 0.7 0.6 Source* Mingat and Tha: 'On Equity in Education Again* An Internationaal Comparison'. Jomual of Human Resouirces, Vol 20 No2, 1985 Note: The lower the ratio, the more equitable the. distribution of public education expenditures Figure 3.3 C. Issues 17. To maintain the strategic role of the Government in education and its key objectives during this period of fiscal constraint as a result of the declining trend in oil prices, a drastic restructuring of public education expenditures is required, including the revision of priorities and mobilization of all potential resources available for the education sector. The recent relative stagnation of the total education recurrent budget is a clear indication that unless additional resources are directed to the sector, the country will have to reconsider its immediate education objectives. Between 1991 and 1992, the total education budget increased by 12 percent in nominal terms, a rate that higher than the preceding three-year average increase of 10.4 percent and higher than the 10.8 percent average annual increase in the student population. This rate of increase in educational spending can not be maintained. At the same time, there are physical signs that the education system is "losing steam" and in need of further support: (i) an increase of the student-teacher ratio, which in primary level rose progressively from 24 students per teacher to 28 over the 1980s and (ii) the continuous expansion of evening schools and second shifts. The additional financial support would have to come mostly from sources other than the national budget. Cost savings through improvement of internal efficiency of the education system, cost recovery, 51 and private education are important sources of support that complement public finanacing of education. 18. The principal issue now facing Oman is how to achieve the plan's four objectives for education and sustain the tremendous effort of the last 20 years in a period when competing demands from other sectors on the government budget are growing and greater efficiency in public resource allocation is critically important in managing public resources. Further, to expand enrollment in basic education beyond its current level will now require reaching a geographically dispersed population, making containment of unit costs more difficult to achieve. 19. Development in the education sector has now reached the point where choices and trade-offs between quality and quantity will need to be made and educational resources reallocated or alternative sources of funding discovered for the government to achieve its objectives. As a consequence, serious consideration should now be given to the sustainability of the educational system, the efficient use of its resources, external efficiency, and the quality of the educational services provided. 20. Although education expenditure may be viewed in some cases as a consumption, it is also the most important investment in human capital. This investment requires a longer gestation period than most investments, however, making it difficult to borrow against. This is one important reason why education has been traditionally heavily subsidized. Another reason for subsidization is the external benefit to society generated by education that includes (i) an improvement of the quality of the work force resulting in higher returns on other investments and growth; (ii) an increase in the scope for greater international economic competitiveness; (iii) the building of national identity and an improvement in social behavior. Problems arise when the provision of education is either directly -- entirely or in large part -- assumed by the Government, when these benefits could be efficiently realized with private sector support. Quality and Internal Efficiency of the Education System 21. The need to improve the quality of education is recognized and stressed by the Fourth Five-Year Development Plan. This is a legitimate concern. For a systematic analysis of the quality of the education system, however, one would need standardized measures not yet available in Oman. In the absence of such standardized measures, quality of education is often assessed on the basis of the internal efficiency of the education system. It has been estimated that [Appendix Table 3.10 and 3.11], because of the great incidence of repetitions and dropouts, it takes on average 9.7 years for an elementary school students to complete the 6-year cycle. That is 62 percent more than required, and therefore substantial savings could be made with a more efficient system. At the current primary unit cost of RO 294, as much as RO 1,087 (almost four years of primary schooling) could be saved with a completely efficient system. 52 22. Every year at the primary level, an average of one out of seven students is not admitted to a higher grade and consequently repeats or drops out. The ratio is similar at the preparatory level, but it is one student out of 15 at the secondary level. Practice and experience indicate that, by improving the quality and efficiency of existing primary education services, children now dropping out of the formal education system would be encouraged to remain in school at little or no extra cost to the government. 23. Improving the quality of education involves enhancing teacher quality and motivation, improving methods of instruction, providing adequate supervision and school management, and upgrading curricula, textbooks and other educational materials and facilities. Although textbooks are provided free of charge to all students from elementary to secondary levels, the mission noted that elementary schools are not equipped with libraries, and many preparatory level schools are still lacking books and science laboratories. Scientific research based on worldwide data conclude that independent reading is a major factor boosting student achievement, and that this is most efficiently achieved through the availability of adequate school or classroom libraries. Expansion, Public Expenditures, and the Private Sector 24. Gender Issues. At issue for Oman is a further expansion of enrollment to boost education for females. This will require a proportionately higher level of funding because of rural dispersion and the separation of schools by gender, and as a result, cost per student for outreach to the unenrolled portion. of the school-age population will be substantially higher than for the enrolled portion. Transition rates between primary and preparatory levels (60 percent) and between preparatory and secondary (35 percent) are currently very low and will need to be increased. Inequalities in female student enrollment (which is less than 45 percent of total enrollment, in general, with the exception of the University, where it reaches 60 percent)," will need to be addressed vigorously, especially in rural areas where resistance is still very strong. For all these efforts additional resources will need to be found. 25. Additional resources to finance education are needed in view of the increasing demand for educational services and the fact that the cost of meeting this aditional demand is increasing specially as the share of females in enrollment is rising. The additional resources could be drawn from several sources: (i) from savings that could be realized by improving the internal effiency of educational programs; (ii) from parents through cost sharing; (iii) from local communities through an active involvement in funding and rhanaging the school system; and (iv) through a greater role for the private sector. While each of these alternatives may have its advantages and disadvantages, it can be argued that the most " The high proportion of females among the Sultan Qaboos University students is explained by the fact that parents are more reluctant to send their daughters abroad to study at a foreign university and prefer to send their sons. 53 efficient way to address the issue is to liberalize the education market, and to promote the participation of private investors in the provision of education services. 26. Private provision of education services in Oman is at its infancy, and will develop only slowly given the current official policy towards the 'involvement of the private sector in education. Private education in other countries has proven to be a very helpful support to governments, as it enables them to divert some of their resources from expanding coverage to the improvement of quality in public schools. Private education in Oman represents a minute part of enrollment (less than 3 percent in 1991/92), and is concentrated at the preschool and basic education levels, although demand for other levels of private education is perceived. The current regulatory framework imposes stringent restrictions on the creation, tuition, and overall functioning of private schools. What is required is a liberalization of the market for education fully justified not only on economic, but social equity grounds. A well designed financial incentive system to promote a liberalized education system could then be put in place. 27. Private provision of education services should also be extended to large areas of vocational training. In addition to the merit of alleviating the government's financial burden, private sector involvement in the provision of vocational training would have important quality and relevance implications. D. Summary and Recommendations 28. Oman's education system compares well with other developing countries. Education claimed more than 26 percent of total recurrent expenditures in 1991 after growing at a rate of 12.4 percent annually between 1988 and 1991, a period that witnessed 7.6 percent annual growth for government recurrent expenditures as a whole. Furthermore, in 1991 education claimed 5.7 percent of GDP, which compares favorably with other countries. On a per capita basis, education spending in Oman stands higher than the average in developing countries. Its educational system is also more equitable than in most developing nations, with a "Gini Coefficient" of 0.38 compared to an overall average of 0.60. 29. On the grounds of social equity and economic efficiency it is recommended that a number of measures be taken to generate savings and additional resources to be reallocated towards maintaining the capital of the university and providing much needed educational inputs. One measure would be student cost sharing in the purchase of their textbooks, the total of which is estimated at RO 80 to 100 per student per semester. Student contributions of perhaps 50 percent of the total costs would not only generate substantial savings for the university but promote better care of the books by the students, as well as a market for used books that would benefit all parties. Other recommendations are: (i) targeting social services at the university to those students who cannot afford the direct and opportunity costs of university education; (ii) the contribution of the students to their meals and accommodations; (iii) a feasibility study for student loans to be repaid during subsequent employment; (iv) a reform in administrative procedures to encourage savings and allow the 54 university to re-inject such savings into its own expenditures; and (v) a reform in the university's administrative and financial procedures for revenue collection to promote private grants/funding of the university or some of its colleges. 30. Examination of the quality of education and the internal efficiency of the system, however, raises some important questions and suggests recommendations for reforming that system. The government budget is the main source of education finance. Private education is virtually non-existent, and cost sharing is so far being avoided for reasons of social expediency. The mission strongly recommends the following measures of system reform: 31. Restructuring Public Education Priorities is urgently needed. The present pattern of allocation of current expenditures among the three levels of education reflects an alarming imbalance, in terms of both the relative shares and expenditure per student. 32. Indications of Underallocation to Non-wage inputs are evident. Within the non- wage category, there are indications that quality driving inputs such as teaching materials, libraries, and laboratories are being neglected in favor of overspending on administrative inputs, most of which have little impact on quality. 33. Mobilization of New Sources of Education Finance is another urgent task. The required levels of spending to finance the future expansion and maintenance of a high-quality education system cannot be met by government sources alone. The mission identified few important sources of finance: Internal Efficiency. Considerable resources could be released for future expansion if the internal efficiency of education system could be improved. Because of the great incidence of repetition and dropouts, it, currently, takes an average of 9.7 years for elementary school students to complete a 6-year cycle. That represents 62 percent more time and resources than is required to complete that cycle under a perfectly efficient system. This potential gain of higher efficiency could be materialized as savings of the wasted resources and/or as an increase in the level of educational services (e.g., more student enrollments). The pressure for more public appropriations could be eased either way. Cost Recovery. Cost sharing as a supplementary source of finance should be considered on both economic and social grounds. Currently, at the university level, a large portion of the budget finances social services that have little impact on the quality of education while only 4 percent goes to instructional material. These social services should be targeted to those students who could not afford the direct and the opportunity cost of university education. A feasibility study of cost sharing of accommodations, transportation, meals, and textbooks should be undertaken. Other instruments should, also, be studied, e.g., low or free student loans. 55 Private Education. To support the expansion of the education system, the mission recommends (i) a reform of the procedures regulating the creation and development of private schools; and (ii) financial incentives to promote private schools, e.g., tuition support, direct subsidies, or secondment of qualified teachers on the government payroll that have proven effective in other countries. 34. Forecasting Education Budgets. The MOFE needs to upgrade its capability to forecast budgets of civil ministries. Chapter V offers an example of using unit cost analysis to forecast education budgets. If a minimum expenditure per student is known, then the budget for different educational program could be estimated. However, budgetary allocations among the different levels of education should be determined on the basis of the social rate of return to spending on each level. Also, Chapter IV offers another example of a pragmatic method for forecasting budgets based on a base year budget and the application of a set of assumptions that reflects the necessary and recommended adjustments of input proportions and output mix. 56 IV. HEALTH EXPENDITURE REVIEW A. Introduction Background 1. As Appendix Table 4.5 shows, tremendous achievements were accomplished in the provision of public health services to the population of Oman during the last two decades. Annual growth rates in the period 1971-1990 averaged about 17 percent for hospital beds, 17.6 percent for doctors, 22.3 percent for nurses, 22 percent for inpatients, and 83.5 percent for outpatients. According to MOH estimates, life expectancy at birth rose from 44 to 66 years. Between 1980 and 1991, the infant mortality rate decreased from 64 to 28 per 1000, crude death rates dropped from 17 to 7.6 per 1000, and children immunization coverage increased from 40 percent to 85 percent. Currently over 90 percent of the population has ready access to permanent or mobile medical facilities providing them with both preventive and curative health service. Forty-two percent of hospital beds are in the Muscat area, however, which has only 22 percent of the population. 2. The attainment of these accomplishments was facilitated by establishing a three-tiered health case system, i.e., primary care at the wilayat level (health care centers), secondary care at the regional level (polyclinics and regional hospitals), and tertiary referral at the national level (e.g., the Royal Hospital). In addition, specific health care programs operate under MOH management such as eye health care, tuberculosis control, control of diarrheal diseases, and malaria control. At the end of 1991, total health manpower the University, Military, Police, PDO, and the private sector stood at 116,167 of which 12,636 (Appendix Table 4.6) were on the MOH payroll. Almost 51 percent of the medical, paramedical, and other staff are Omanis. 3. Currently, there are four major health care providers, all of them public institutions. They include the hospitals and facilities run by Petroleum Development Oman [PDO], the Royal Omani Police, the Armed Forces, and the University. There are no private hospitals or clinics with beds in Oman. Encouraging the private sector to play an increasing role in the provision of health services may prove to be an efficient way to satisfy demand for particular kinds of curative care. The feasibility of subsidizing some of the services provided by private health clinics might be one of the alternatives to be considered. Health Objectives and Policy 4. The government's policy is to provide free preventive and curative health services to all citizens by establishing and administering hospitals, health centers and polyclinics. To that end, eight overall aims of the Ministry of Health are articulated in the Fourth Five-Year Development Plan: (i) to proceed with the implementation of the health services plan including specialized hospitals, general hospitals, polyclinics and health centers according 57 to health and social criteria; (ii) to reduce infant mortality from the current (1959 reference) rate of 31 per 1,000 to 20 per 1,000; (iii) to develop all rural and remote regions so that no citizen lives more than an hour's travel from basic health services; (iv) to eradicate poliomyelitis from the Sultanate of Oman; (v) to achieve specific objective such as to bring the percentage of vaccinations of pregnant women against tetanus to 100 percent, to achieve universal coverage (100 percent), deliveries in hospitals and maternity centers, and to achieve postnatal care rate of 100 percent; (vi) to increase hospital and government health center beds from 3,360 (1990) to 4,619 by 1995, raising the average number of beds from 26.0 per 10,000 to 32.2 per 10,000; (vii) to encourage the private sector to provide health services in specialized medical fields; and (viii) to widen the training of national managers and increase the rate of Omanization in professions connected with health services. Demographic Characteristics 5. The total population of the Sultanate of Oman reached around 2 million" in mid- 1992, of which 480,000 were expatriates. Nearly half of the population is less than 20 years old and only 5 percent is more than 55 years old (Appendix Table 4.1). 6. The population distribution throughout the nine regions of the country shows that around 50 percent of the people live in the two main provinces of Muscat in the north and Batinah in the south. 7. The population has grown rapidly over the last 10 years, at an annual rate of 38 per 1,000. This is due to at least three factors, a decrease in infant mortality from 6.4 percent in 1980 to 2.8 percent in 1991, a rapid decrease in the overall death rate, and a high, unchecked birthrate. The population is expected to double within 20 years. 1 Due to lack of census population, statistics have been taken either from peripheral administrative reports or from projections made according to various estimates. Numbers, therefore, vary greatly depending on source. The Development Council used a population of 1.6 million in 1991 in constructing the current Fourth Five-Year Development Plan (1991-1995). 58 Table 4.1 POPULATION GROWTH DATA (PER 1,000) DEATH RATE DEATH RATE CRUDE BIRTH NATURAL YEAR BIRTH RATE INFANTS OTHERS RATE INCREASE RATE (a) (c) (b) (d) (a) (c) (e) 1980 50.0 64.0 10.0 13 3 37 0 1981 500 59.0 9.5 12 5 37.0 1982 500 55.0 9.0 11.8 38.0 1983 500 51.0 8.6 11.2 39.0 1984 490 480 81 10.5 38.0 1985 48.0 45.0 7.7 99 38.0 1986 47 0 42.0 7 4 9.4 38.0 1987 47.0 38.0 70 8 8 380 1988 46.0 34.0 6.6 8 2 38.0 1989 45.4 31.0 6.3 7 7 38.0 1990 44.9 29.0 6.3 7.6 37 0 1991 444 28.0 6.3 76 37.0 (a) Per 1,000 population (b) Per 1,000 lifebirths (c) Results obtained by applying age-specific fertility rates found in 1988 Maternal and Child Health Survey to estimated agc/sex distribution of population (d) 55 in 1982 and 45 in 1985 (Child Mortality Survey). 34 in 1988 (Maternal and Child Health Survey, 1988), interpolation and extrapolation for other years. (e) Results obtained by applying western life tables to estimated age/sex distribution of population Sources The Annual Statistical Report, Directorate General of Planning, MOH It can be clearly seen from the basic population growth data above [Table 4.1] that immense progress has been made in the health sector during the last decade as demonstrated by the considerable drop in the death rate. Epidemiological Profile 8. Analyzing the reasons for medical consultation in the health facilities [Appendix Table 4.2.1] provides significant data for determining the main health care needs of Omani population. Diseases of the respiratory system represent 20 percent of the consultations (acute pneumonia and tuberculosis are thus priorities for the public sector), and infectious diseases and parasitic diseases especially malaria are commonplace in the pathology of the region as they constitute 15 percent of the reasons given for medical consultation. Wounds, sometimes over-infected, represent 11.5 percent of the additional reasons for medical consultation, and diseases of the digestive system comprise nearly 8 percent, with infectious or viral diarrhea for infants predominating. Moreover, 50 percent of the reasons for medical consultation for women pertained to childbearing issues [Appendix Table 4.2.2]. It should be noted that no census or comprehensive health survey has been undertaken yet, thus information about specific region or group is simple not available. 59 9. Diseases are preventable for the large part of them. For this reason MOH of Oman considered them as a priority of its Health Policy. Despite this fact there is no systematic relationship of cause and effect between preventive needs and the Oman's curative oriented Health Policy. B. Health Care System Components Health Care System Organization 10. Statistical information for the health sector is currently available for the Sultanate of Oman in The Annual Statistical Report, published by the Directorate General of Planning in the Ministry of Health, and in The Statistical Yearbook, published by the Directorate General of National Statistics in the Development Council General Secretariat. These sources give general information on health services and show how resources are being used in terms of improved provision of services, increased efficiency and service utilization. They also constitute an essential means for showing where service provision needs to expand in the future. 11. The Sultanate is divided into 59 administrative units called wilayats. The wilayats are grouped into nine administrative health regions: Muscat, Janubia, Dakhilya, Sharqiya, North Batinah, South Batinah, Dhahirah and Musandarn [Appendix Table 4.3. 1]. Only the regions of Muscat and Dhofar are administered by governors. In addition to the Ministry of Health, four other government organizations provide health care in the country, the Ministry of Defense, the Royal Omani Police, Petroleum Development Oman, and the. University Hospital which has provided primary health care to university students and staff since opening in 1990. No private hospitals exist in Oman, but private physicians provide preventive and curative care in their own clinics. 12. In the early 1990s, in order to give greater autonomy to each region and to assist in the integration of both curative and preventive services for providing a comprehensive health care service, the Ministry of Health launched an administrative decentralization program by introducing a Regional Health Office in each of the regions [Appendix Table 4.3.2]. Under the Ministry's central authority are three undersecretaries, for Administrative & Financial Affairs, for Planning, and for Health Affairs. The latter contains three directorates, the Directorate General of Regional Health Services, responsible for providing health services and associated with the Director General of each region; the Directorate General of Curative Medicine, responsible for planning, monitoring and supervising primary, secondary and tertiary care through hospitals, health centers, maternity centers and mobile medical units; 60 and the Directorate General of Preventive Medicine, responsible for planning and supervising preventive programs provided at both the mobile units and public health units.'3 13. For the attainment of sector goals and in keeping with national health policy, a three- tier system has been set up in the country. Primary care at the wilayat level is served by health centers headed by a physician that provide basic health services. Due to the need for local maternity care in remote areas, some of the wilayat centers have a few maternity beds.14 Secondary referral occurs at the regional level in polyclinics for general medicine and maternity, as well as in outpatient services and regional hospitals. At this level are district hospitals from 50 to 160 beds in size and regional hospitals with 200 or more beds, both with extensive inpatient and outpatient services including specialized services in medicine, surgery, pediatrics and obstetrics. Tertiary referral at the national level includes the three major hospitals in Muscat that also act as national referral hospitals. In addition, the Ibn Sina hospital provides psychiatric care. The system is decentralized and the focus is on primary health care and secondary referral. This serves two main objectives, to minimize overcrowding at the tertiary referral level and raise health standards and service quality at the wilayat and regional levels. 14. The Ministry of Health manages a number of specific vertical Health Care Programs as well." They target both disease problems, e.g., eye health care, tuberculosis control, diarrhea disease control, acute respiratory infection and malaria control, and health related problems, e.g., work related, maternal and child health, school health, immunization, etc. Health Care Delivery 15. From 1971 to 1990, the government of Oman managed to increase health facilities severalfold, specifically in the number of hospitals and beds, and in the health sector workforce. Some of the facilities were hurriedly built and are now in an unusable state, and health coverage for the period was strongly skewed. By the end of 1991 there were 229 curative and preventive units'" comprised of 46 hospitals, 94 health centers (of which 12 had beds), 68 public health units, and 21 small health facilities [Appendix Table 4.3.1]. The total number of beds under administration by the Ministry of Health and other 13 Prior to 1990, the Public Health Units and Public Health Compounds functioned directly under the Director of Preventive Medicine. However, regionalization in 1990 brought about the integration of the delivery of health services as a single package comprising preventive, curative, promotive and rehabilitative services. 14 In order to provide comprehensive primary care services, all the local health facilities provide preventive services, including maternal and child health and environmental sanitation. 15 In preparation for the Fourth Five Development Plan, the outlines of these programs were developed in an MOH report. 16 To which 292 private health facilities have to be added (Table 3.2). 61 government and private organizations rose to 4,315 compared with 3,348 at the end of 1986 (a 30 percent increase). The hospitals under the Ministry of Health alone totaled 3,473 beds [Appendix Table 4.4]. 16. During the same 19-year period, total health-related employment in the Ministry of Health alone expanded at an average annual growth rate of 17.6 percent for doctors and 22.3 percent for nurses [Appendix Table 4.5]. At the end of 1991, the total personnel employed by the Ministry of Health was 12,636 [Appendix Table 4.6] and the total health workforce for the whole country was 15,023. Almost 51 percent of the medical, paramedical and other staff employed under the Ministry of Health were Omanis. This percentage is only 9 percent for doctors, however, and 19 percent for dentists, 16 percent for pharmacists and 11 percent for all nurses. 17. At the end of this period of development (1971-90) according to data available from the Ministry of Health, over 95 percent of the population had ready access either to permanent health facilities having at least one doctor and essential equipment, or to the mobile medical teams that visited the more isolated communities with limited access, providing them both curative and preventive health services. 18. Medical supplies are currently provided to health facilities through the Director General of Pharmaceutical Affairs & Drug Control (DGPADC), which is also in charge of regulating practice in the pharmaceutical sector. The annual funds allocated to the DGPADC for buying medical supplies is essentially divided between drugs (73.6 percent) and equipment (14.6 percent) [Appendix Table 4.7]. 19. The total MOH budget for medical supplies is RO 12.3 million of which 1.3 is for the University Hospital. This total represents an increase of 65.1 percent from 1988, with medical supplies per capita averaging RO 4.8 for 1992 [Appendix Table 4.8]. 20. According to procurement regulations, medical supplies are bought through local agencies. The purchase price of drugs and medical supplies in Oman is generally higher than the international average, especially for medical equipment. Should purchasing occur through international market bids, as is the case in many countries, savings to the Ministry of Health are estimated at RO 1.5 or 2 million each year, i.e., some 22 percent of the medical supplies budget [Appendix Table 4.9]. Utilization of Health Services 21. Providing facilities and launching public health campaigns have produced significant results for main health indicators as reported by the Ministry of Health [Appendix Table 4.10]. The infant mortality rate dropped from more than 64 per 1,000 (1980) to 28 per 1,000 in 1991, and the crude death rate fell from 17 per 1,000 to 7.6 per 1,000 during the same period. From 1971 to 1990, outpatients expanded from 56,000 to 5.8 million and 62 inpatients from 4,000 to 183,000 [Appendix Table 4.5]. Child immunization coverage against major communicable diseases increased from less than 40 percent to more than 85 percent. 22. The statistical data for medical consultations [Appendix Table 4.10.1] show the main reasons given for hospital consultations are general practice (50 percent of the cases), prenatal, postnatal and child health (19 percent), and immunization (14 percent). This information shows that a large part of hospital activity is devoted to activities that would more appropriately be carried out in polyclinics or health centers. Reasons given for consultations at health centers [Appendix Table 4.10.2] were general practice in 91 percent of the cases, prenatal, postnatal and child health (6 percent), and immunization (3 percent). 23. Tables 4.10.1 and 4.10.2 show that the high rate of population per health centers in the main regions (Muscat and Batinah) is the reason of the hospital over-utilization for preventive and some curative cares, which should be more appropriate to be provide in health centers. In other words the demand for preventative and some curative cares and their supplying are unbalanced. 24. In 1991, the health centers registered 3.4 million outpatient visits compared to 6.6 million for the hospitals [Appendix Table 4.11.1]. This huge activity combined translates to a yearly average of 5 visits per person (1.7 visits in the health centers and 3.3 in hospitals)." This also translates to an average of 111 visits per day per health center and 391 visits per day per hospital. In addition, these figures show that visits to hospitals are more than double those to health centers, large differences in consultations exist from one region to another, ranging from 32 health center visits per day in Musandam to 249 in South Batinah, and from 62 hospital visits per day in Al Woustah to 5,960 in North Batinah. These statistics show a utilization of health facilities that does not conform to their designated use. 25. Concerning hospital activity seen in Appendix Table 4.11.2, two points need to be highlighted, the short average length of stay of the patients (4.7 days), and the low rate of occupation (71 percent). To evaluate hospital activities, standard hospital activity norms are used here as a reference. The average standard length of stay is 7 days for short stays and 60 days for long stays. Bed distribution is 70 percent for short stays and 30 percent for medium stays, and the average standard rate of occupation is 80 percent. Applying these standards in Sultanate hospitals, the number of hospital stays would be about 110,000 compared to the current 190,000. This calculation indicates that a large number of hospital stays are probably prescribed unnecessarily. This conclusion, together with the low rate of activity observed, suggests a hospital overcapacity of 15 to 20 percent. 26. Using as a reference, standard hospital activity norms such as (i) the average length of stay: 7 days for short stays and 60 days for long stays, (ii) the distribution between beds " For comparison, the yearly average number of visits in western European countries is 4.5. 63 of short stay: 70 percent and the beds for medium stays: 30 percent and, (iii) the average rate of occupation: 80, and applying these norms to the Sultanate hospitals, show that the number of hospital stays should be about 110,000 compared to the current 190,000. This calculation shows that a large number of hospital stays is probably unnecessarily prescribed. This conclusion, associated with the low rate of activity observed, shows a hospital overcapacity of 15 to 20 percent. 27. The other activities of the hospitals and health centers involve deliveries (45,100 in 1991, nearly 70 percent of total births), radiographies (410,000 in 1991), laboratory tests (5.6 million in 1991, of which 50 percent were in the Muscat region), and dental care (237,000 visits in 1991). These considerable numbers particularly. for laboratory tests show a relative over-consumption of health care, as was suggested earlier by the number of consultations. C. Health Budget Evolution of Public Finance 28. The actual MOH budget grew at an average annual rate of about 14 percent between 1988-1991 (Appendix Table 4.12.2), when it stood at RO 96.2 million, of which only RO 6.7 million was for development expenditures. The 1991 recurrent expenditure claimed 88.5 percent of that budget, representing 12 percent of total recurrent budget of all civil ministries, an increase of 50 percent from the 1988 level when it stood at 8 percent of the total (appendix Table 4.12.1). Salaries and allowances claimed about 60 percent of recurrent expenditures. As will be shown later, there are indications that too many people are employed in the health sector even though there is a clear shortage of some categories of technicians such as laboratory technicians, biochemists, microbiologists, and physiotherapists. 29. In 1991, non-wage expenditures accounted for 35.3 percent of the recurrent budget (Appendix Table 4.A.8). Spare parts and maintenance of building, machineries, equipment, and computer, received only 3.5 percent of recurrent budget, and medical supplies claimed 13 percent of that total. Spare parts and maintenance allocations may be far below the average international technological depreciation rate of 8-12 percent. An accurate determination would, however, require an accurate estimation of the capital stock in the public health sector. Of the medical supplies allocations, 73.6 percent is for drugs and 14.6 percent is for equipment. The medical supplies per capita allocation is estimated at about RO 5.0. While this average is relatively low, its regional distribution is highly inequitable. It stands at RO 10.6 in Muscat, and is only RO 2.0 in Batinah (Appendix Table 4.8). 30. Recurrent Expenses. Most of the recurrent expenses are devoted to salaries and employee benefits (63 percent). Based on the relatively low salary level in the country (the average annual salary plus allowances in the health sector is RO 4,250), these figures suggest 64 that too many people are employed in the public health sector. On the other hand, the calculation done for the different care levels of the sector shows that certain professional categories (such as doctors, pharmacists and dentists) are understaffed in health centers while they are overstaffed in hospitals. Operating expenses represent only 37 percent of the total: 14.5 percent for medical supplies, 5.5 percent for electricity and water, 3.7 percent for spares and maintenance, 1.8 percent for food supplies, and 1.6 percent for fuel [Appendix Table 4.12.2]. Insufficient budget allocations in certain spending categories mean that many health facilities encounter operating difficulties. Allocations for spares and maintenance of buildings, machinery, equipment, vehicles and computers are insufficient to cover the technological depreciation. 31. The regional distribution of recurrent expenses [Appendix Table 4.13] is quite uneven. The region of Muscat, excluding the Ministry of Health's Main Office and including the Royal Hospital and the University Hospital, represents 22 percent of the population, but claims 62 percent of the total distribution, leaving only 38 percent for all the other regions. Thus, the inhabitants of the North Batinah region receive only RO 8.9 per year, compared to RO 84.2 for the Muscat region. 32. Capital Expenses. Capital expenses for minor works, cars, machinery, equipment and office furniture represent only 4.5 percent of the total Ministry of Health's budget on average during 1990 and 1991 compared to 2.9 percent in 1988 [Appendix Table 4.12.2]. Despite the large increase, which shows a willingness to improve health system operation, these expenditures are not enough to cope with renewed equipment needs. As is the case with operating expenses, they are distributed unequally among the different regions. 33. Development or Projects Budget. According to the Fourth Five-Year Development Plan, RO 107.9 million will be invested in the health sector from 1991 to 1995 [Appendix Table 4.14]. The purpose of this investment, the amount of which is higher than a one-year recurrent budget, is to implement regionalization and the other main goals of health policy. The investment amount is split between New Projects (RO 83.2 million and Ongoing Projects (RO 24.7 million). . Table 41 DEVELOPMENT EXPENDITURES - DISTRIBUTION BY LEVEL OF CARE TOTAL VALUE FIRST LEVEL SECOND LEVEL THIRD LEVEL (RO MILLION) (%) (%) (%) New Projects 83.2 11 7 82.4 5.9 Ongoing Projects 24 7 17 3 77.1 5.6 Total Projects 104.5 111 84.6 4.2 65 34. Classifying development budget at each of the three levels of health care [Table 4.2 and Appendix Table 4.15] shows that 11.1 percent of the budget is assigned to the primary level, 84.6 percent to the secondary level and 4.3 percent to the tertiary level. The investment effort in the health sector is essentially intended for either the building of new hospitals (70 percent of the New Projects budget)' or for expanding and improving existing hospitals (15 percent of the New Projects budget).19 35. Two comments can be made in this area of investment: the unit cost of building regional hospitals is relatively high (RO 60,000 per bed),20 and the investment programs are not followed by an increase in capital expenditures. This last point is important. If not enough funds are devoted to maintaining new buildings, they risk faster than normal depreciation. 36. There is evidence to indicate that Recurrent Expenditures are insufficiently funded. This evidence is demonstrated in tables A8 and A9. These tables show that in 1991, while capital expenditure was RO 4.41 and development expenditure was RO 44.8, total spares and maintenance allocation was only RO 3.1 (6.4 percent of the new capital, assuming that all the RO 44.8 is an addition to the capital stock). Thus the part of the recurrent expenses devoted to maintain the capital is not sufficient to maintain the new and/or the existing Capital. Budget Forecast (1991-1995) 37. The exercise summarized in the nexts two paragraphs offers an example of a realistic and pragmatic approach to forecast budgets using data that is already available. From the current situation as represented by the 1991 budget, a budget forecast has been made for 1991-1995 [Appendix Table 4.16]. This forecast takes the following elements into account: (i) an average annual rate of growth of 6 percent for all budgetary posts (part A of the table); (ii) integrated spending by the Health Development Program drawn up by the Health Ministry for the preparation of the Fourth Five-Year Development Plan (part B of the table); (iii) the main recurrent costs associated with New Projects of the Fourth Five-Year Development Plan, i.e., capital expenses, electricity and water, and spares and maintenance (part C of the table); and (iv) an increase in funds intended for medical supplies by 25 percent, in order to bring them to a more realistic level (part D of the table). The result of the calculation is shown in part E of the table. " In the Dakhilya region: RO 13.1 million; Dhahira region: RO 11.9 million; North Batinah region: RO 18.9 million; Musandam region: RO 3.0 million; and Sharqiya region: RO 11.9 million. 11 In the Dhofar region: RO 4.7 million; Musandam region: RO 1.2 million; Muscat region: RO 3.8 and RO 1.3 million; and Sharqiya region: RO 0.9 million. 20 RO 12 million for the new Rustaq's hospital (200 beds). 66 38. The result of this exercise suggests the following budget forecast: RO 132.9 million in 1992 reaching RO 140.6 million in 1993, RO 151.6 million in 1994 and RO 140.1 million in 1995." In this scenario, the health budget would represent nearly 16 percent of the total budget of the civil ministries. It is quite unlikely that public funds could be devoted in such proportion to health spending, however. Were this to be the case, the Ministry of Health would face two alternatives. The first is to continue under-funding of operating expenses by observing the growth rate acceptable to the Ministry of Finance (about 6 percent per year) while risking the degradation of patrimony and the improper functioning of health facilities and equipment. The second is to find a complementary financial source by setting up a cost recovery system to cover the difference between the amount of spending provided for in the general health budget and the total amount necessary for the proper operation of the health system. 39. Another method of forecasting budgets using unit cost analysis is demonstrated later in this Chapter and the results for three major hospitals are given in Appendix Tables 4.1.1- 4.1.3. D. Sector Issues 40. The health sector has been treated as a high priority sector in terms of budgetary allocations since 1971. The efforts undertaken have enabled the government to set up a large network of health facilities and to provide health coverage whose benefits can be measured today through the main health indicators. The current health system is nevertheless costly, and it is quite likely that public funding will no longer be able to finance its expansion in the years to come as it has in the past. 41. The general situation of the health sector can be summarized from institutional and financial perspectives. On the institutional side, an ongoing decentralization of health services that gives more autonomy to regions has obvious benefits. It allows for better integration of curative and preventive services and awareness campaigns at local and regional levels, improved environmental health, and enhanced community and social development. On the financial side, however, current expenditures seem to be insufficient for facing all the operating and maintenance needs of health facilities. And considering the sources of internal program inefficiency which the mission discovered, a better use of current levels of appropriations may negate the need for higher levels of recurrent health budgets. 42. Impressive as the basic situation in the health sector may be at present, several drawbacks were found. First, preventive and curative health services in hospitals, health centers and polyclinics are free of charge for citizens and expatriates employed by the government, while expatriates working in the private sector have to pay. This policy is a source of over-consumption and waste, the cost of which weighs heavily upon the general budget and reduces the efficiency of health facilities. Patients seek medical consultation 2 The drop in 1995 is due to the decrease in investments for that year, which go from RO 29.7 million in 1994 to RO 12.8 million in 1995. 67 more than is necessary, i.e., nearly 5 visits per year per person. Hospital visits are sometimes used as an excuse to justify social gatherings, and the same patient may often consult two or three doctors for the same illness. In addition, the medical staff prescribes medicine that is not always used and sometimes performs examinations that are not always necessary, e.g., 2.5 laboratory examinations on the average in 1991. This behavior is observed more in urban centers and in hospitals than in health centers. 43. A second drawback was seen in the large disparities that still exist in service supply, despite efforts undertaken by the Ministry to decrease regional inequalities in health coverage. These regional disparities exist in allocations for infrastructures, budgetary appropriations and healthcare personnel. A third drawback concerns medical supplies, as the portion of the budget intended for buying equipment is quite inadequate to cope with needs, particularly in the Wilayat. Additionally, the mode of acquisition of drugs and medical supplies drives the buying costs higher. 44. The health sector's dilemma can be seen as resulting from the combination of two factors, an increasing politicizing of the unmet needs of isolated communities and the demand for health services as a result of rapid population growth on the one hand, and on the other, a health policy of providing free preventive and curative health services to all citizens. These factors not only contribute to an increased supply of services and an upgrading of health indicators, but lead as well to financial consequences of low efficiency. Sources of inefficiency are found in six areas: (i) misallocation of professional staff; (ii) service quality at the primary care level leaving much to be desired; (iii) the poor state of health facilities outside major urban centers and inadequate space for handling the daily patient-load; (iv) the relatively high cost of drugs; (v) the lack of medical supplies on the one hand and the waste of services, supplies, and medical staff on the other; and (vi) insufficient allocations for maintenance. E. Recommendations 45. There are indications of potential savings in the present system. By improving the procurement process of drugs and equipment to reduce the purchasing prices to the prevailing international levels, the cost of procurement could be reduced by more than 20 percent. The present agency law, that allows the local agent of a foreign supplier to recieve his commission even if the MOH buys directly or throught the GCC pool, is a major reason for the relatively high cost of medical supplies and drugs. Further savings could be realized by reducing the waste caused by the relatively high rate of visits per capita to public health facilities, a practice encouraged mainly by free access to these facilities. Ninety percent of outpatient visitations are for general practice purposes and only 10 percent go for antenatal, postnatal, and child health. 46. The cost of construction of new health facilities seems to be relatively high. The new Rustaq hospital under construction will cost roughly RO 12 million for 200 beds (an average of RO 60,000 per bed). This average is equal to the construction cost in western countries. 68 47. The social reasons behind the present policy of providing free health services to all citizens and to expatriate workers in the public sector is appreciated. There exist some elements of a scheme of cost recovery through charging user fees to certain categories of the population and for specific health services. Providing free health care for those who cannot afford to pay for it is a sound and equitable policy. But as economic conditions continue to improve and social indicators continue to rise, while the cost of public health services also increases, the time may be right for a comprehensive study of alternative efficient and equitable methods of financing public services in general and public health services in particular. Alternatives may include personal and business income taxes as well as health insurance schemes for both public and private employees. The feasibility of applying a gradual and progressive schedule of user charges for medicine and for particular public health service should be considered as one of these alternatives. 48. To reduce waste and improve the internal efficiency of the public health sector, a cost accounting system that allows the senior managers of the sector to establish input utilization parameters and performance indicators needs to be considered. Elements of such cost accounting system exist in MOH. Standard cost would be helpful in preparing cost efficient budgets and in monitoring implementation of these budgets at the sector level, regional operations level, and at the hospital (central) level. 49. There is a need to study alternative means of improving the efficiency of the healthcare operations while satisfying the fundamental principles of the Sultanate's health policy. Sector studies could include: (i) two studies would evaluate activity in the primary health care centers and in the hospital sector; (ii) procedures would be established to decrease the cost of medicine and other medical supplies, including a local production system; (iii) a system of cost accounting would be established in the Health Ministry; (iv) a feasibility study would be undertaken to establish a cost recovery system in the health sector; (v) the allocation of public expenditures would be modified to reduce regional disparities; (vi) an awareness campaign would be launched for prescribers and patients regarding health costs; (vii) continuing omanization of health professions would be promoted; and (viii) a human resources management system would be established in the Ministry of Health. Primary Health Care Reform and Hospital Sector 50. In order to improve the efficiency of the health system at primary and secondary levels and to ensure better allocations of the health staff, the mission recommends launching two studies. The studies' main objectives would be to assist MOH in further developing its strategies for primary health care and for reorganizing the hospital sector, and to identify direct support that could be given by the international community to the Omani PHC sector and the RHS as part of a wider health assistance program. 22 See TOR in Appendices 2-3. 69 Cost of Medicine and Medical Supplies 51. In order to maximize the healthcare output given budgetary constraints, or to minimize public expenditures for a given level of healthcare, the mission recommends improving the procurement process in the Directorate General of Pharmaceutical Affairs & Drugs Control, especially for drugs and equipment purchases bought at a relatively high price, and a cost review to reduce the construction cost of new health facilities." 52. With the aim of reducing the importation cost of medicine, the mission recommends carrying out a technical and financial feasibility study on the local manufacturing of certain essential medicines.24 The aims of this study would be to determine which products could be manufactured locally, and to evaluate the opportunity of building a production plant from financial and economic perspectives. Cost Analysis and Unit Cost Calculations 53. A cost accounting system in MOH, intended to establish unit costs for the main activities of health facilities, would enable the Ministry to measure levels of activity continuously at each level of the health system. It would provide decision makers with a tool for measuring the efficiency of the health system, a means to control the activity of health facilities, and a theoretical basis for calculating goods and services costs in view of setting up a cost recovery system. 54. The computer simulation model derived from the budgets of several health facilities and provided in Appendix Tables 4.1.1-4.1.3, illustrates the principle of establishing major unit costs per outpatient visit and inpatient stay. It allows comparisons of the unit costs of these different health facilities and shows, for instance, that unit costs of the University Hospital are between two and three times those of the Royal Hospital. Additionally, it shows that unit costs of a health center are 1.5 times less than those of the Royal Hospital. To extend the benefits of such comparisons, the Ministry of Health could undertake and complete similar calculation sheets integrating all the health facilities' activities registered daily, such as laboratory activities, X-rays, etc. 55. A broader use of such calculation sheets in the Ministry of Health would allow cost- of-service comparisons by types of health facilities within different regions. This would provide data for the Ministry of Health to be used in determining whether human and financial resource allocations were made according to real levels of activity. Many of the 3 The new Rustaq hospital, under construction, will cost roughly RO 12 million for 200 beds (average cost per bed: RO 60,000). This average is similar to that of high-level hospital construction prices in western countries. 24 See TOR in Appendix 4. 70 previous recommendations are based on primary cost calculations from the mission's experimental model. A Study on Cost Recovery 56. Launching a technical study of the kind involved in unit cost calculations as described above would allow a cost recovery program' to be established that would apply to citizens and expatriates employed by the government. Cost accounting both for inpatients and outpatients would provide the means to perform the estimations required for setting up a cost recovery system. The system could be implemented immediately for medicine and subsequently for other health services. 57. Implementing a cost recovery program for medicine requires distinguishing among three categories of medicine. The first category is over-the-counter drugs (OTCs), including common products that do not require a doctor's prescription, such as aspirin and paracetamol and drugs with limited effects (vitamins, trace elements, health products, etc.). The second category is comprised of essential drugs prescribed by a medical doctor, and includes most antibiotics, antihistamines, corticoids, anesthetics, etc. widely used in health care facilities for treating about 90 percent of common diseases. The last category involves other prescription drugs that are either dangerous, addictive, specialized, or costly, e.g., hypnotics, anti-cancer drugs, anti-viral drugs, etc. 58. Cost recovery for medicine should only concern outpatients. OTCs for outpatients can be considered a private good, purchased at full cost. Essential drugs may be sold at half price; other prescription drugs would not be involved in the cost recovery system. As there are many people who cannot afford drugs, the study would pay particular attention to their special needs. 59. The study would also cover payment for services through a price subsidized system. Other vital public health activities such as immunization, child and mother health, delivery, emergency and long term chronic diseases and endemic diseases, would not be involved. Budgetary Allocations for Operation and Maintenance Expenditures 60. There is a need to reconsider budgetary allocations in the health sector, particularly with regard to operating and capital expenses. An important objective of such reconsideration is to reduce regional disparities seen in the current allocation of technical and human financial resources particularly for Dhofar, North and South Batinah and Dhaira. Another objective is to correct the amount of budgetary allocations inside each region to improve efficiency at each level of the health system. A third objective is that sufficient budgetary allocations be provided to cover the depreciation of housing, machinery, and equipment (the I See TOR in Appendix 5. 71 optimal rate should be about 8-12 percent), and allocations for medical supplies be gradually increased until they reach RO 10 per capita from RO 4.6 per capita for 1991. A Health Care Cost Awareness Campaign 61. To control the waste of goods and services in the health sector, this report recommends elaborating and launching an information campaign oriented toward prescribers and consumers. The purpose of such a campaign would be to educate people regarding better uses of services and medical supplies, as well as involving them in decisions concerning health services, particularly in appropriate uses of resources. Omanization of Health Care Professions 62. Omanization in the health sector must continue, particularly for those professions whose members are in direct contact with patients and are responsible for medical diagnoses. High priority should be afforded government policies that encourage Omanis to enter these professions. A higher percentage of Omanis in the health sector would directly impact care quality, insofar as health care providers who do not speak Arabic are often misunderstood by the patients. Human Resource Management Systems 63. Salaries and employee benefits for health personnel represent 63 percent of total recurrent expenses for the MOH, increasing annually at an average rate of approximately 20 percent. Meanwhile, certain professions are under-represented in the health care system, such as dentists, pharmacists, physiotherapists, X-ray technicians and laboratory technicians. To better control the growth in salary and correct quantitative imbalances seen in certain professions, this report recommends the Ministry establish a human resource management system. The system's main goal would be to develop a selective hiring policy, based on the sector's real needs. The policy would (i) use a standardized system to evaluate needs in all the health professions by type of infrastructure and by care level; (ii) relate long-term revisions of personnel needs to development programs for infrastructures; and (iii) employ favored hiring practices in priority sectors. 72 V. COST OF SERVICES AND EXPENDITURE NORMS A. Introduction 1. One of the major problems which mars the process of budget preparation is the lack of accurate data on the cost of public services per unit of output (per kw of electricity or per gallon of water) or per capita (per patient or per student). The budget process could be enhanced by installation of a cost accounting system which allows the calculation of the cost of individual public service programs (primary education or children immunization) as well as the cost of each major input (Labor or non-labor) used in the provision of the program service(s). Some ministries use standard cost measures to determine the recurrent expenditure requirements necessary to accommodate a certain level of new demand for their services." These ratios, however, are historical and they are not frequently updated. Also, some ministries have started the effort to establish cost accounting systems, such as MEW and MOH.27 2. To rationalize budget preparation, service program managers and their budget officers need to assess the level of expenditure on, or the cost of, the goods and services that are required to provide their services efficiently. Excessive expenditure or cost per unit of service wastes scarce budgetary resources, while under-funding operations, maintenance, and supply needs can only erode the value of existing capital investment and/or the quality of the service. To avoid resource excesses or shortfalls, specially when a firm budget constraint is enforced, the unit cost is a necessary tool for improving the sector ministries capability to make the right trade-offs, plan expenditures, and prepare efficient budgets. In addition, knowing the standard unit cost would allow MOFE to determine whether public service programs are over- or under-funded. 3. An equally important use of standard cost analysis in Oman civil ministries relates to cost recovery of public services. If, and when, the Government decides to charge the users of public services, good estimates of the cost of service units become essential information without which appropriate levels of charges could not be determined. 4. Ideally, however, minimum physical inputs per unit of service, including technical and administrative staff-time, should be established as a first step, taking into consideration the state of technology prevailing in the service industry. In a second step these inputs would be priced to establish what represents the best unit cost under the prevailing 26 The MOE adopted a manual which contains physical coefficients to translate the number of new entrants to an education level into number of classes and number of new teachers. Given the salary scale they then estimate the additional wage and allowances allocations which they need. 27 The cost accounting program in the MOH is a product of a technical assistance component of a WB financed health project. 73 indigenous circumstances. In a third step, international comparative norms could be used to indicate possible areas of improvement reflecting industry advances and to validate the local expenditure norms. In a fourth step, techniques such as variance analysis (unit costs to standards) and correlation coefficients (association of recurrent to capital expenditures) can be used to modify norms and control costs. 5. The following exercise of cost analysis should be viewed as an experimental effort, despite the usefulness of some of the preliminary findings in terms of identifying certain inefficiencies in services programs' operations. It is experimental in the sense that a pragmatic approach was used to satisfy the first two steps of the ideal methodology as prescribed in the previous paragraph. That approach involved some conservative assumptions pertaining to ideal work loads and inputs requirements. It, also, used actual budget figures to avoid the technical problems of estimating efficient physical input coefficients and the problems of inputs valuation. When it was felt that adequate information could be assembled, as was the case with MOH, a computer simulation model was used to estimate workloads and allocate expenditures among services, inputs and recipients of health care. The results of this exercise provided the foundation for several useful conclusions and recommendations, as seen in the 9hapter on health expenditure review. 6. This section provides basic data in some detail for Omani fiscal managers on the unit cost per recipient (student, patient, or unit of output) in education, health care, and electricity and water. The section also provides information on comparative costs of education and health care. The sources used to develop average expenditure norms include those developed by the World Bank mission to Oman in November 1992, and available secondary data on comparable jurisdictions. Where possible, unit costs of particular non-wage recurrent items have been provided and also compared to other countries. While comparisons initially were limited to similar per capita service expenditure countries, data weakness required extending the scope into other countries and other regions. It is believed that the preliminary observations based on this data will provide a general sense of the position of Omani education and health systems relative to the systems of the few countries cited in this section. B. The Cost Analysis Exercise 7. An inventory of the available information at MOFE and the Ministries of Education, Health, and Electricity and Water was evaluated for unit cost analysis purposes. Direct cost of services analysis per recipient or per unit of output was difficult, except in the case of electricity for which detailed and reliable data were readily available. The significant differences among these different agencies are given below. 8. Ministry of Health. The Directorate General of Finance and the Chief Budget Officer of the Ministry of Health [MOH] do not possess budget detail on personnel and material requirements since the budget is prepared by each Regional Director General of Finance [DGF]. Consequently, this information was not available through the Ministry of Finance 74 and Economy's [MOFE] data base, requiring the mission to estimate budgets for hospitals and health centers were estimated on the basis of unit costs for Muscat and Dhofar. This situation poses a problem for fine-tuning management decisions on the reallocation of limited resources. The existent budget format is attached. 9. Ministry of Education. The Ministry of Education [MOE] budget for primary, preparatory, secondary, commercial secondary, Islamic preparatory and secondary, and special education schools is aggregated in MOE's main office department budget for the entire nation. Other departmental budgets cover the agricultural school, industrial school and teachers training colleges. This budgeting system is a mixture between a departmental budget, regional budget and a functional budget. Consequently, while some costs of services can be measured, 90 percent of the services, which are in the primary to secondary schools system, by region, cannot be measured. The existing budget format is attached. 10. Ministry of Electricity & Water (electricity sector). The Directorate of Electricity's [DE] budget is similar to that of MOE, using a mixture of departmental, regional and functional unit budgeting. The Ministry also prepares a Statistical and Economic Study report, complete with cost data by power station in the nation and the Ghubrah Desalination Plant (sic). Fuel costs, which are a major input element, are budgeted and expensed in the DE (northern and southern sectors) budget. The existing format of its budget, with the aggregation of budgetary account line items, is shown in Appendix Table 5.15. 11. Ministry of Electricity & Water (water sector). The Directorate of Water's [DW] budget does not include the costs associated with the Ghubrah Desalination Plant. Some debate exists as to whether water or electricity is the byproduct; hence, the major desalination plant costs are included in the DE's budget. Since 1990 some functional units (Nizwa Water Supply, Masirah Water Supply, Rural Desalination Plants and Water Pumping Stations for SUR, FANS & TOWI) have been consolidated in the Department of Water for Towns & Villages. The existing format of budgeting, with the aggregation of budgetary account line items, is shown in Appendix Table 5.16. Basic and General Findings 12. Budget Preparation and Level of Detail Available. Discussions with all three ministries revealed that the existing level of aggregation for budgeting in each ministry was determined by MOFE. With the existing system of budgeting, detail by cost center is not readily available. Consequently each ministry claimed that detailed cost data by service program or by recipient was not readily available. 13. The result of budget aggregation at this high level is that financial allocations (inputs) are difficult to match to services delivered or required (output). In addition, managers may find the process of performing this analysis time consuming and tedious. The ability to relate inputs to outputs by functional units and by region, on the other hand, would provide 75 valuable information for prioritizing the allocation of resources especially in times of fiscal austerity. 14. Performance Measures. There are currently no common agreements by the Sector Ministries and the MOFE regarding unit cost measures that might be used to determine appropriate budget allocation levels and to monitor the relation of spending to budget. Predictably, this situation leads to debates and disagreements regarding the adequacy of budget allocations. 15. Periodic Review. No formalized structure to review the relationship between spending and operational performance exists in MOFE. Consequently, unit cost standards developed by the sector ministries are being used by MOFE to determine forward recurrent budgets. An annual analysis of operational and financial data would provide a managerial tool for fine-tuning unit costs of service. Specific Sector Findings 16. Ministry of Education. The MOE budget is aggregated into six departments. The Main Office Department is the source of funding for Primary, Preparatory, Secondary, Islamic Studies, Commercial Secondary and Special Education. This level of budgeting did not provide accurate detail on the cost of each functional unit. 17. Data collection. MOE prepares statistics on students, teachers, school administrators and support staff, classrooms, schools, etc., by region. Data was, also available on the average salary and allowances by Omani and Non-Omani categories, as well as on the cost of books and distribution per student according to the level of education. 18. Unit cost calculation. In calculating the wage and non-wage cost, student data from the 1991 statistical report was used. To determine the wage cost per student, ratios of personnel distribution by education category (i.e., primary, secondary, etc.,) to the workload or number of students were calculated [Appendix Table 5.1]. 19. The weighted average for wage (salary plus allowance) [Appendix Table 5.2] was calculated by using 70 percent non-Omani and 30 percent Omani weights. This was based on the information reported in the Statistical Year Book of 1990. The proportion of teachers per classroom was based on data reported for 1991. The proportion of school administrators to teachers was also based on the same data. A general administrative overhead factor of 8 percent was applied to the combined salaries of teachers and school administrators [Appendix Table 5.3]. The wage component was calculated for four categories, Primary, Preparatory, Secondary and Other Secondary, the latter category including Islamic Preparatory & Secondary, Commercial Secondary and Special Education. 20. The cost of books was the other major component calculated. Book cost was calculated per student for the four levels of education. Operations and Maintenance (OM) 76 was based on actual expenditures for 1991. This is approximately 14 percent of total wages and books (direct variable costs). The cost per student in each level of education is summarized below. Table 5.1 EDUCATION COSTS PER STUDENT BY LEVEL Item Per Student (RO Bzs) (RO millions) Wage Primary 203.71 Preparatory 429.13 Secondary 498.78 Other Secondary 498.78 Non-Wage: Books (Students) Primary 2.37 Preparatory 4.85 Secondary 9.50 Other Secondary 9.50 (Teachers) Primary 2.37 Preparatory 4.85 Secondary 9.50 Other Secondary 9.50 Non-Wage: Other 33.59 Total Proposed Budget 1991 120 58 (Appendix Table 3) Total Expenditures 1991 117.90 (Over) Under-Funding 2.68 14% of Wage & Books including operations and maintenance, and supplies and capital 21. The results indicate that the Ministry of Education is adequately funded. The variance from actual expenditures to proposed budget is 2.22 percent. 22. Ministry of Health. A review of MOH information, for purposes of cost and performance analysis, revealed that the data is compiled on an aggregate basis by region (i.e., Muscat, Dhofar, etc.). Only the Royal Hospital is budgeted as a separate entity. In all other cases Hospitals and Health Centers are budgeted on a regional level. The expenditure classifications within the regional budgets are at the line item detail level. 23. MOH prepares an Annual Statistical Report. The report has comprehensive data on the number of patients by category, by hospital and by health center grouped by administrative region of the Sultanate. Information on the number of employees was 77 categorized into four divisions, Administrators, Medical and Paramedical, Technical and Professional, Farrashes and Others. Associated salary data was unavailable. 24. Financial autonomy appears to be given to each Regional Directorate (the administrative division of the region). The system of budget preparation was changed between 1989 and 1990. Prior to 1990 the budget breakdown was on a departmental basis (i.e., Directorate of Health, DG of Pharmaceuticals, DG of Medical Services, etc.); subsequently, the budget has been reorganized by geographical region. 25. It should be noted that significant progress has been made in evolving the information systems in MOH to provide forward planning by compiling utilization statistics. Based on a prior Bank mission proposal the Ministry is in the process of implementing a Full Cost Accounting System for The Royal Hospital, Khoula Hospital and Al-Nahdha Hospital. The system is an internal system and is not a part of the Unified Financial System used by MOFE. 26. Data collection. Due to the fact that the systems are still developing in MOH, uniform data for the period prior to 1991 was unavailable. As mentioned earlier, administrative reorganizations have led to budget reorganizations as well. Consequently, historical data for trends on cost movements is lacking. 27. Minimum data was available for 1991; hence the unit costs developed are solely dependent on some broad assumptions and within the constraints of the time available. It must be noted that the unit costs developed cannot be viewed as standards since only one year's data was used. Input costs (such as allocations for salaries and medical supplies) were estimated based on averages rather than actuals. 28. Unit cost calculations. Actual expenditures (for 1991) were estimated for hospitals and health centers. The personnel costs were apportioned based on the staffing strength as of December 31, 1991 and an average salary (the same average salary was used for Omani and Non-Omani) was computed by employee classification. The allowances were apportioned on the same basis. The medical supplies and other operating expenditures were apportioned with the major share to hospitals and a smaller portion to health centers. 29. A computer simulation model was used for hospitals and health centers to analyze the effect of inputs (addition of staff, increase in salaries for staff, medical supplies allocations, maintenance of equipment allocations, etc.) to the possible output levels (beds in a hospital, bed occupancy rate, time involved in servicing outpatients and inpatients, etc.) and vice versa. The model was used to calculate the results for The Royal Hospital and the hospitals and health centers in the regions of Muscat and Dhofar. 30. Methods and assumptions. The method used to calculate the costs was first to determine the full capacity of a facility. The elements used to determine full capacity were staffing and hours of operation of the .facility. The variable costs such as medical supplies, 78 electricity and water were allocated based on 1991 actual expenditure reports obtained from MOFE. 31. Personnel were grouped into five categories, doctors, nurses, dentists, support staff and administrators. The administrators category health administrators and collar workers only. The support staff includes technical and professional personnel and unskilled personnel. Only two service categories were classified, outpatients and inpatients. [The model can be replicated for as many service categories as necessary based on the ability to develop data.] 32. Allocation of costs was based on a theoretical estimate of time spent on each service category by the hospital personnel and the amount of variable costs consumable. Assumptions for the allocation of costs are listed in the Appendix tables. The summary results of this exercise for hospitals are listed below in Table 5.2 and the detail calculations with assumptions and calculations are shown in the Appendix Tables 5.4 - 5.10. Table 5.2 ILLUSTRATIVE ExERcIsE FOR HosPrrALs (RO Billion) Hospitals (by region) Cost Detail Royal Muscat Dhofar Average' Oulp"im IpeK O utpalin ial OupaK ima speukp lap"im Average Wage Cost 14.59 31.06 5.26 19.41 2.73 13.37 7.52 21.28 Average Non-Wage Cost 3.46 32.35 1.21 11 04 0.50 13.31 1.72 18.90 Cost Per Patient 18.05 63.41 6.47 30.46 3.22 26.69 9.25 40 18 The average shown here is only illustrative Upon completion of this exercise for each region in MOH the average will be more meanngful. RATIOS Hospital Employees to Beds Doctors 043 025 024 Nurses 1 79 1 01 065 Support Staff 1.06 1 26 077 Administrators 0.35 0 20 0 27 33. The model was also used for the health centers in Muscat and Dhofar. The same methods were applied except that the service categories were limited to outpatients only. It was assumed that the facility operates for 14 hours, two shifts of 7 hours each day. The summary of results are shown in Table 5.3. 79 Table 5.3 ILLUSTRATIVE EXERCISE FOR HEALTH CENTERS (RO Billion) Cost Detail Muscat Dhofar Average' Ou0pane lntMm Omm lapsam Outpane IMate Average Wage Cost 1.42 1.83 1.08 Average Non-Wage Cost 2.18 1.57 1.88 Cost Per Patient 3.60 3.40 3.50 The average shown here is only illustrative Upon completion of this exercise for each region in MOH the average will be more meaningful RATIOS Muscat Dhofar Patients per diem 1543.54 903 76 Nurses to Doctors 2 21 4 90 Support Staff to Doctors 8 05 12 20 Administrative Staff to Doctors 0.79 2 I 34. Interpretation of results. The results determined in the two tables will initiate a discussion for a more detailed review of any sector which may have significant cost variances. For example, in Table 5.3 costs per patient are within a reasonable margin of variance. However, the staffing ratios indicate significant variances such as 2.21 nurses to one doctor in the Muscat region as compared to 4.90 nurses to one doctor in the Dhofar region. The patient loads are 70 percent more in Muscat than in Dhofar. Support and Administrative staff per doctor is 51 percent and 167 percent more in Dhofar. This is probably the reason for the apparent equalization of the cost per patient between the two regions. 35. Conclusion. In summary, to determine the funding level for MOH the averages will be used to calculate the expenditure level for 1991 based on patient attendances. It must be noted that this exercise is more illustrative than prescriptive. 80 Table 5.4 SUMMARY ILLUSTRATIVE EXERCISE Hospitals AMouNTS IN RO COST PER OUTPATIENT AVERAGE WAGE COST^ 4.00 AVERAGE NON-WAGE COsrW 0 86 TOTAL 4.85 NATIONAL TOTAL OUTPATIENTS 6,566,435*** 31,847,210 COST PER INPATIENT AVERAGE WAGE COSr 16.39 AVERAGE NON-WAGE COST^ 12.18 TOTAL 28.58 NATIONAL TOTAL INPATIENTS 1,075,718, 30,715,454 Health Centers AMOUNTS IN RO COST PER OUTPATIENT AVERAGE WAGE COsT 2.96 AVERAGE NON-WAGE COST .54 TOTAL 3.50 NATIONAL TOTAL OUTPATIENTs 3,397,023b 11,889,580 EXPENDITURE FORECASE FOR 1991 74,452,244 ACTUAL EXPENDITURES FOR 1991 78,625,718 (OVER) UNDER-SPENDING (4,173,474) Only Muscat and Dhofar hospital costs used, since Royal is skewed. Source: MOH Annual Statistical Report 1991; does not include University Hospital Financial and Statistical Data. Adjusted for 85% occupancy of inpatient beds; national occupancy rate for 1991 was 71%. 36. The analysis reveals that expenditure forecast is within a 5 to 6 percent variance level. Also, hospitals handle twice the outpatient load for three times the level of funding of the health centers. 37. Ministry of Electricity (electricity sector). A review of the electricity sector's budget information was difficult due to consolidations of accounts between the electricity sector and the water sector budgets. The classification of the electricity sector budget is shown in Appendix Tables 5.15-16. This sector's costs are being calculated by the Director 81 General of Electricity (northern sector) and complied in an annual Statistical and Economic Study report. 38. Data collection. Operations data was available readily and in a usable format. The budget is aggregated by political region and then by geographic region. This may pose a difficulty in MOFE measuring inputs to outputs for like operations (i.e., gas fuel generators, diesel fuel generators). 39. Unit cost calculations. Since useful data was available, a simple and direct method of cost per kilowatt hour of electricity was calculated. The unit costs are shown in Appendix Table 5-16. Three levels of unit costs were calculated, per kwh of production, per kwh of transmission and per kwh of billing. 40. A few ratios were calculated to measure efficiency. The annual kwh produced per plant employee is 3.8 million per year. The annual kwh produced per administration employee is 48.7 million per year. These ratios can be used when additional facilities are planned or to monitor against budget to actual expenditure variances. The cost per kwh billed is summarized in Table 5.5. Table 5.5 COST PER KILOWATT HOUR (RO Bzs) Wage Adminstrative .000128 Operations & Maintenance .001343 Total Wage .001471 Non-Wage: Administrative .000103 Operations & Maintenance Fuel .016284 Maintenance .002820 Other .001843 Total Non-Waye .021050 Total Cost per kwh Billed .023 Bzs 41. Conclusion. Comparison to other utilities, as in the case of the water sector, was not possible due to the complexity of operations. The industry standard data from the US included nuclear power generation plants that skew production costs. It appears that a great amount of electricity is lost between transmission and (recorded) consumption. The annual cost of losses could be is approximately RO 17 million. The unit cost calculated here could be used in determining the billing rate per unit of electricity sold. 42. Ministry of Electricity (water sector). A review of the 'water sector's budget information was difficult due to consolidations of accounts between the electricity sector and the water sector budgets. Water sector personnel had difficulty compiling and forwarding 82 information due to the consolidated budgets. The same recommendations apply to this sector. The budget was classified on a functional unit basis to enable monitoring of inputs to outputs. Budget reorganization in 1990 resulted in the non-availability of historical information, and reliable water production statistics were not available for 1991. 43. Data collection. Total water production statistics were not available for 1991, hence the fiscal year 1990 was used to calculate unit costs. The water production and consumption data was available in the National Statistical Yearbook of 1990. The financial information was derived from two sources, MOFE's Financial Accounting System reports and The Statistical and Economic Study of 1991, which included 1990 financial information, prepared by the DG of Electricity (northern sector). 44. Analysis of water sector. The desalination plant at Ghubrah is the biggest producer and supplier of water in Oman. Total water production for 1990 is reported at 13.2 billion gallons (60.06 million M3). The total expenditure estimated for 1990 amounts to RO 22.07 million, of which 73.42 percent constitutes fuel [Appendix Table 5.12]. The desalination plants use a combination of diesel fuel and gas, and some plants are cogeneration plants that produce electricity as a by-product. Due to difficulties in estimating cost sharing, the MOE electricity budget contains the allocations for five desalination plants (viz., Ghubrah, Masiraii, Kumzar, Sheesa and Lima). Wages account for 7.90 percent of the total expenditures. Outside services and miscellaneous expenditures-contracted services for certain water treatment facilities of the Interior Region-account for 16.52 percent, and spares and maintenance accounts for 2.16 percent of the budget. 45. The water sector's recurrent budget has increased by 35.71 percent from 1988 to 1991, an annual growth of 8.93 percent. Development expenditures have risen from RO 2.9 million in 1988 to RO 38.09 million in 1991. Unlike most budgets the non-wage portion of the budget has risen faster than the wage section. Wages have increased annually by 3.66 percent while operating expenses have risen by 26.49 percent. The production capacity increases from year to year have been summarized below in Table 5.6. 83 Table 5.6 WATER PRODUCTION CAPACITY 1988 1989 1990 Annual Production 11,728,300,000 12,186,000,000 13,214,300,000 (in Gal per year) Conversion Factor 220 220 220 Annual Production 53,310,455 55,390,909 60,065,000 (in n3) % Change per year 3.90% 844% Average % Change 4.11% Source: Statistical Yearbook, 1990 46. Unit cost calculations. The assumptions for arriving at the number of personnel was to extract the personnel, from the 1990 and 1991 budgets for the water sector. This sector covers those plants not inlcuded in the electricity sector budget. The expenses for the desalination plants in the electricity sector's budget were extracted from the Statistical and Economic Study prepared by the DG of Electricity (Northern Sector) [Appendix Table 5.12]. 47. The wage and non-wage categories for Kumzar, Sheesa and Lima were estimated using Ghubrah as the base. The category "other plants" was assumed to be entirely in the water sector budget. Total wage cost RO 4.08 million was divided by the annual production to arrive at .068 baisas per M3 . Non-wage cost per in' is .300 baisas [Appendix Table 5.12]. It must be noted here that the high cost when compared to the US Statistics is due to the extensive use of fuel to produce steam for water desalination. In order to adjust for this unusuality, fuel costs were extracted and the non-wage cost dropped to .095 biasa per in'. The total cost reduced to .163 baisa per M3. In comparing the costs to the US Water Industry Data Base [WIDB] statistics, the total cost per In' is 200 percent more even without the fuel costs [Appendix Table 5.13]. 48. Conclusion. In summary, to determine the funding level for the Ministry of Water a theoretical exercise was constructed. To estimate the theoretical budget, efficiency standards for personnel per M3 of water produced were used. It must be noted that this exercise is more illustrative than prescriptive, since a significant amount of variables such as terrain, miles of pipe [data unavailable], and labor policy can substantially alter the results. The calculations and conclusions are summarized in Table 5.7 and detailed in Appendix Table 5.14. 84 Table 5.7 THEORETICAL BUDGET BASED ON OMAN 1990 PRODUCTON EXPENDITURES (RO) Comments Wages 517,705 145 employees @ ave wage (RO 3561) Non-Wage Expenditures 14,291,301 Total Estimated Budget 14,809,006 1991 Expenditures 22,077,912 (Appendix 5 18) (Over) Under Expenditures (7,268,906) C. Comparative Analysis of Education and Health Cost 49. To illustrate the use of comparative unit cost data, UNESCO and World Bank sources are used for comparison with Oman's unit cost of education and health care as calculated by the PER mission previously in this report. Tables 5.8 and 5.9 summarize this data. The choice of comparators was influenced, primarily, by the availability of data. Ideally, other GCC countries would be used for comparison but there is no data available on unit cost of service for most of them. 85 TABLE 5.8 OMAN: COMPARATIVE EDUCATIONAL COST AND PROGRAM EFFECTIVENESS DATA (current values) PROGRAM OMAN IRAQ JORDAN YEMEN THREE OMAN EFFECTIVENESS 1991 1989 1989 1989 COUNTR DEVIATIO Y N AVERAG FROM E AVERAGE 1. PUPILS/TEACHER 50 39 31 87 52 (2) 2. ED. EXPENDITURES/CAPITA' $249 $62 $126 $43 $77 $197 3. ED. EXPENDITURES/GDP 3.9% 43% 7 1% 7.0% 61% -2 2% 4. TOTAL # STUDENTS 388,792 4,340,000 988,823 1,280,000 2,200,000 (1,820,000) COST EFFECTIVENESS ($) TOTAL EXPENDITURES 46 2M 194M 74.8M 550M 272.93M (226 73M) TOTAL EXPENDITURES/PUPIL 119.00 8.41 74.97 465 17 182.85 (73 85) A. WAGE 1. WAGE COST/STUDENT $100 $4.01 14767 (47 7) B. NON-WAGE 1. MATERIALS COST/STUDENT $1.39 $1.73 $482 (34) 2 0 & M/STUDENT $12.86 $2.63 $7 55 5 3 3 NON-WAGE COST/STUDENT $19.10 $4.4 23 83 (47) COST EFFECTIVENESS (%) EDUCATIONAL LEVEL 1 2 3 TOTAL 1 2 3 TOTAL TOTAL 1 2 3 TOTAL A WAGE 1. PERSONNEL/TOTAL ED.EXPENDS. 51 40 33.50 1440 84 20 53.00 26.00 18.00 90.00 85 53 46 1 87 87 4 (3 2) B NON-WAGE I NON-WAGE/TOTAL ED. EXPENDS. 15 80 1000 15.00 1.40 12.80 12 60 3.2 2. TEACHING MATERIALS 050 0.40 0.30 1.20 000 040 340 3.80 2.30 1.40 1 20 050 270 290 (24) 3. OPERATIONS & MAINTENANCE 1080 2.00 200 1.90 590 10.60 1.30 0.10 2 80 3.60 72 4. GRANTS-SCHOLARSHIPS/STUDENTS 4 10 0.00 1.80 5.18 2.30 1 8 Sources UNESCO Statistical Yearbook (1991), UN Statistical Yearbook (Facts on File, 1991); World Bank Yemen Appraisal (1992). Ghana PER (1989) * Using the 1991 120 m budget @ RO 0 385/$ = $46 2 m divided by 2 0 m population = $23 10 per capita educational expenditures 86 50. Educational Cost. The data on comparative education cost and program effectiveness (Table 8) reveals that Oman compares well with Iraq, Jordan and Yemen in terms of per capita education expenditures and operation and maintenance spending per student. But it falls short of the average of these three countries in the share of educational expenditures of GDP, expenditures per student, wage cost per student, teaching materials cost per student, and non-wage cost per student. 51. Educational quality depends on relative shares allocated to education from the total budget. Since it is not uncommon for wages to consume much of a recurrent budget, care must be exercised to ensure that non-wage expenditures are adequate. Oman does not seem to be spending excessively on wages per student. If the comparative norm is $147.67 per student, Oman spends an average of $100 for personnel wages per student which is $47.67 less per student. But the wage proportion and wage cost per student increased in 1989-91 from 80 percent to 84.2 percent and $94 to $100 respectively. Wage cost determinants will need further investigation. 52. The conclusion that current wage levels were not excessive is fortified by comparing the ratios of school level wages to total educational expenditures. A comparison with Iraq and Yemen indicates that Oman spends less in the first two educational levels; only on the third level does Oman spend substantially more for wages. This reflects the opening of the new university. 53. If we compare 1989 and 1991 wage data by school level, it becomes evident that Oman's expenditures for both second and third levels increased above the norm while those for the first level dropped slightly. Ratios of wage to school level reinforce the conclusion that despite recent relative increases at the second and third levels, Oman spent at or below the norm. 54. Lower wage shares and costs per student have not translated into higher recurrent spending on goods and services. 1991 data compared with 1989 UNESCO figures in Table 8 above suggest that Omani expenditures are slightly below the average norms on teaching materials (0.8 percent). In 1991, this dropped to 1.7 percent below the norm. Similarly, teaching materials per student expenditures were slightly below the norm in 1989, and dropped further in 1991. 55. Oman is above average on operations and maintenance [O&M] expenditures (3.2 percent). Comparing 1989 and 1991 expenditures, O&M expenditures increased from 3.2 percent above the norm to 7.2 percent above the norm. It has been suggested that about 4.0 percent of total recurrent budgets should be allocated to regular maintenance activities to avoid expensive rehabilitation (Ghana PER: 121). Since Oman spends 10.8 percent for this purpose, it is above this norm as well as above regional averages. 56. But low non-wage and total expenditures per student ($4.73 and $63.85 below regional averages respectively) still suggest that the maintenance and supplies areas are being 87 underfunded. If actual educational expenditures per capita are only $23.10 [Table 5.8], this would suggest that budget shares to education may be inadequate and that human and physical capital could be eroded by below average non-wage expenditures. 57. Other disturbing trends can be noted by comparing materials to total educational expenditures. Teaching material expenditures dropped from 0.8 percent above the norm in 1989 to 1.7 percent below the norm in 1991. Since expenditures/student for materials also dropped from $0.49 to $3.41 below the norm in the same period. Whether this reflects efficient purchasing and use of teaching materials, or a drop in the support necessary for quality teaching should be examined. At this stage, it can only be concluded that expenditures are below the norm (average) and dropping. 58. Health Care Expenditures. Every Omani health program effectiveness measure in Table 5.9 indicates better performance than the six-country average norm. Oman even compares favorably with health care program performance in two US states (selected because of similar population size and low per capita income). While per capita expenditures average $500 lower than Oman, the very high levels of US health expenditure (percentage GDP) largely reflect inflationary costs and frequently do not translate into cost effective health care coverage. Moreover, the ratios of Omani physicians/bed and nurse/bed are only marginally lower than the two-state average. In short, Omani health care program performance is impressive. 59. Comparative cost data suggests, however, that this level of output may not continue. Average budgetary wage costs are below the norm by 19.0 percent. In addition, as indicated in Table 5.9, average non-wage expenditures for the 3 regional hospitals are also 19 percent below the norm, which may reflect low expenditures for medical supplies (10.5 percent) and for maintenance (6.0 percent). Using 1991 data for the total public health sector, expenditures for spares and maintenance and medical supplies were only 3.7 percent and 1.8 percent of the total respectively. Expenditures for the 2 items fall below the 6- country expenditure norm by 14.8 percent and 23.4 percent. Low expenditure levels for medical supplies cannot be accounted for by efficient purchasing. The difference between average local and international drug purchasing prices amounted to 22.39 percent in 1991. Similar sectoral studies should be performed on operations and maintenance cost effectiveness. 60. Table 5.9 employs comparative averages as norms. The weakness of such an approach is that the validity of the norm depends on the representativeness of the sample. If the comparative base is invalid, the norm can provide no guidance to service cost effectiveness. Ideally, as noted above, cost standards should be established from studies of workload and unit cost data. Since the sample here depends largely on data availability, the weakness of the "average norm" approach can be remedied only by using primary data from studies of service delivery in other countries. 88 Table 5.9 OMAN: CONIPARATIVE HEALTH CARE COST AND PROGRAM EFFECTIVENESS DATA PROGRAM OMAN MISSISSIPPI NEW MEXICO MOROCCO TUNISIA ALGERIA UGANDA MALAWI GHANA 2-STATES VS OMAN 6Co *VMIFw vsoktqi EFFECTIVENESS 1991 199t 1991 1989 1991 1991 1989 1990 1989 AVERAGE OMAN A%LRACE OMAN I. HEALTH EXPENDITIURESCAPITA $170, 3746 $595 5.50 $62 326 50 3050 4 80 36 50 $67050 (S500 50) $17 68 $152 31 2 HEJLTH CARE ACCESS 91% 70% 90% 88% 61% 80% 60% 74 8% 162% 3 POPULATIONIPHYSICIAN 1.792 6.751 3.797 7.727 1.750 2.300 20.562 41.108 8,278 5.724 (3.482) 13620 (It 2a) 4. HOSPITAL BED OCCUPANCY RATE 71% 64% 63.2% 635% 63.4% 5% 53% 639% 7 1% 587%' 12 3 V 5. PHYSICIAN/ED 0.31 0 23 060 0 11 0 27 0 17 0002 0 002 0 003 042 (01) 009 0 22 6 NURSESIBED 1.1 067 0 82 0.37 091 0.30 0.020 0 007 0070 074 (0 41) 0 28 o 97 7. ADMINIST1ATORIBED 0.27 1.77 2.48 COST EFFECTIVENESS (11I QMI ! TI M R I M R! TIAL TOTAL HEALTH EXPENDIURES $484M S394M 125 6M 19 19M $78M A. WAGE COSTIPATIENT' 32.90 820 346 261 $211 429 S95M $653.211 $95M 15 sM 52.18M $32 2M IN 1345 IN ($337) 1. PHYSICIANIPATIENT S1.10 320 OUT $278 OUT (1275) 2. NURSE(PAIENT S0 60 5 30 B. NON-WAGE COSTS 10.70 7.30 293 219 3180 366 350M $315M $277M S9.75M $7 OM 145 OM NON-WAGE/INPITTENT S293 (6286) NON-WAGEJOUTPATIENT $237 ($2361 1. MEDICAL SUPPLIESPATIENT $0.30 300 $304M S1TM S115M S6.05M S2.33M $31.3M 2. MADITENANCE/PATIENT 30.02 0 46 31,150 $15 2M 323.5M $3.7M 34 67M 314.8M1 3. WATER-EL.CTRICITY/PATIENT 30.10 1.72 C. COST/PATIENT (A+B) 33.56 15.30 639 480 3390 795 $145M $4844M $394M $25 6M $9.19M 378M $289 (1264) COST EFFECTiVENESS (%I WAGE COSTS 650% 54% 53.7% 66% 53.7% 66.0% 620% 23.7% 41.3% 540% 11 0% 460% -190% PYSICIANIPATIENT 170% NON-WAGE COSTS 350% 46% 463% 34% 65.0% 703% 38.0% 763% 580% 460% -110% 54 3% .19 0% MEDICAL SUPPLIES/PATIEN'T 147% 21% 350% 292% 263% 254% 400% 25 2% .105% MADITENANCE/PATIENT 20% 0% 3.1% 6.0% 14.4% 508% 19.0% 15 5% 605' WATERIELECTRICITYPAT1ENT 7.6% RATIO OF OUTPATIENT TO INPAITIENT COST 0 81 023 Sources American Hosprtal Assocladon (1991): Facts on Fil (1991); Econmt (1990); ICONE/SEDES Morocco (1989); World Bank PERs Uganda. Malawl, Ghana (1989-90). TunisIa Appraisal (1991). I/ Oman is reported at 170 health expenditures per caplus by Facts on FIle (1991 New Book of World Rankings). But with a 78.6M R.O. budget for 1991. at 0 385 R.O./S. tis amounts to only $14 75/capita (329 5M divided by 2 0M population) IHeAth carecapita expendinures Incudes capinl investen: calculadons here are for recurren costsi patient only. 3) 4- Country average 11 Measures costlinpaticec day rather than cost/admission sine the latter excludes length of stay. 4 The 1989 ICONEISEDES an Morocco study did ot calculate costsicase or patient. Instead reported aggregate demand equalled health care *consumptoo. This suggests budgetary needs are determined by the rather elastic concept of service consumpoon as reported by misusmei Since reported demand would dererminu requested supply of Ainds hrom she treasmy. MOF canuot detesmine from this Information if needs are too high or too low. Thus. the $145 milon figure Is total cost. not cost/padent. 2t Reported dam on recurrent costs by Infout patient or case are not available except In the US. fi (6 0) is based on total Omanl 0 & M expendimse of 9.6% of tde ecurrets health budget for t dte regions. 89 VI. A STRATEGY FOR RATIONALIZING PUBLIC SPENDING 1. The recent developments in public spending and the budget deficit calls for a short and medium-term strategy for rationalizing public spending and an action plan for spending and deficit reduction. In what follows, the major elements of such strategy are outlined. 2. Set a Firm Budget Envelope. Despite the existence of a budget envelope parameters (Chapter I), the budget process in Oman is open ended with no effective binding ceilings on spending. The first step at rationalizing fiscal decisions is identifying a well defined annual budget constraint by a Cabinet decision. Then, requests for additional funding should be accepted only if equal savings could be identified and applied at the same time. 3. Cut Defense Spending. Despite the traditionally high share of defense in public spending, greater shares were registered in 1991 and 1992, as defense expenditure claimed claimed 46 percent of government revenues and 18 percent of GDP in 1992, alone. This is a highly political issue, and it could be argued that security is a prerequisite for economic development. It could, also, be argued that part of defense and national security spending is of a civilian nature. But, setting aside the actual expenditures of 1991 and 1992, the opportunity cost of defense spending in Oman is exceptionally high. Planned defense spending averages about one third of government expenditures, which is equal to all civil ministries current expenditures. 4. The oil revenue that is used to finance defense expenditures could be invested locally or abroad in projects with positive rates of return. How much of defense spending produces public good and how much finances consumption is hard to tell. The size of the defense budget leaves little doubt that the long-term welfare of the Omani society could be served better with less defense spending. After all, defense like any other activity is subject to diminishing returns. In addition, there seem to be no effective linkage between the trained armed forces and civilian employment, since there is no draft system and those who enlist in the military are in for life. Also, there is no clear spill-over effect of military spending on the economy, since there is no military industry and most of the ware -- both soft and hard -- is imported. However, the Government's conservative attitude toward fiscal adjustments in time of need was demonstrated when military spending was deeply cut during the 1986 fiscal crisis. There is no reason to assume that this would not happen again. 5. Medium-term Approach to the Budget Problem. A two-element approach is proposed here: a. Develop and implement, now, certain non-oil revenue enhancing measures as well as cuts in certain big ticket expenditure items. 90 b. Develop a medium term strategy, promote it, and begin implementation as soon as feasible. It is likely that the first option will be strongly, and perhaps effectively, resisted and blocked by the civil ministries. The evident collapse of oil revenues in 1986 made it possible to accept such alternative. However, such an immediate and decisive action may be difficult to sell at this time as the cost of not doing so lies ahead in the future. To risk a failure of a sustained stabilization adjustment at this time is very costly. Therefore, it is recommended that a convincing strategy be drawn, patiently promoted, and gradually implemented. 6. Educating the Ministries of the Virtues of Rationalizing Expenditures and of the Consequences of Overspending. It is important that other ministers understand and appreciate the urgent need to curb expenditures. Otherwise, the strategy could be interpreted as an action by the perceived nexus of the Ministry of Finance and the General Secretariat against the rest of the Government. It is, also, very important that those affected by the strategy, i.e., the citizens and their representatives understand that the present level of public expenditure is unsustainable and would lead to a dismal future. The budget scenario that will follow, therefore, is the plan scenario. The Government aims at maintaining the stated objectives and targets of the Fourth Development Plan (1991-95). This means that the Government prefers to keep the plan projections of macroeconomic indicators intact. Deviations from these targets, especially public finance deviations, need to be contained. The big deviation appears on the expenditure side and alarmingly flagged out by the accelerating budget deficit. 7. The consequences of a continuation of this expenditure trend on plan objectives are very serious, and senior government officials should be acquainted with them. These include: - lower medium-term growth rates, - depletion of the SGRF reserves, - increased external debt that would worsen the B.O.P. and further appreciates the real exchange rate, thus discouraging goods production, while encouraging services production, and - raising unemployment among Omanis, - increasing domestic debt, thus, crowding out private sector investment and failure of diversification, - lower saving rates and, thus, lowering the standard of living for future generations of Omanis. 8. Productivity Improvement in the Public Sector. The focus of the strategy should be on improving the productivity of the public sector which is relatively low at the present time. The potential saving of improving public sector productivity is a major source of financing future increases in service levels. For instance, the review of the education budget 91 shows that it takes one generation of elementary school students an average of 9.7 years to complete a 6-year cycle. That means that a perfectly efficient system could cost only 62 percent of the current budget. It follows that if the Ministry of Education succeeds in reducing the attrition and repetition rates by 50 percent in the next two years, it could save 19 percent of the elementary education budget. The point is that the budget of the ministry of education could be frozen for the next two years, and new entrants could be accommodated through savings derived from improved productivity of the education system. The review of the health budget, also, shows a potential for large savings by improving the medical procurement system. But, since it takes time to raise productivity, the strategy should encompass reduction of present levels of public spending provided that these cuts are unlikely to reduce service levels or the quality of the service of the ministries affected, now or in the future. They should also aim at generating higher levels of efficiency in both public and private sectors through improvement of the regulatory environment of private education. 9. Subsidy Reduction and User Charges. In addition, expenditure reduction should be supported by mobilizing new sources of domestic revenues, particularly those that induce efficiency in production of public services and in the consumption of these services. Raising the price paid by public producers for under-priced inputs and levying user charges on the consumers of these services, are considered as a part of this strategy. 10. Expenditure Reductions. Expenditure cuts could take two forms: (1) nominal across the board reduction based on the assumption that small cuts could be absorbed by reducing the level of waste in resource utilization; and (2) specific reductions which supports the objective of productivity improvement. A list of expenditure cuts should include the following categories of expenditures: a. Phase out all distortionary and non-targeted subsidization programs. b. Freeze public employment and offer early retirement options to increase attrition rates. c. Freeze the current salary structure. d. Consider cheaper and more efficient alternatives to the present employees allowances. Some of these allowances may be eliminated as they became obsolete. e. Cut the social services programs to university students and instead give cash subsidies, grants, and loans for those who deserve them on merit or need basis. f. Reduce public expenditures on housing and housing related expenses. g. Reduce cost of government purchases of material and services by using more competitive procurement methods. 92 11. Mobilization of New Sources of Non-Oil Revenue. These should be considered on condition that an optimum public saving plan is in effect with strong safe guards, thus curbing the Government appetite for spending. Perhaps the most important condition is the establishment of the integrity of the SGRF as a trust fund for future generations of Omanis, and of the Emergency Reserve Fund as a stabilization fund in the case of severe drop in oil revenue or for national emergencies but not meeting additional spending needs of government agencies. The following non-oil revenue sources are rational candidates for mobilization: a. User charges for tertiary health and education services. b. Raise electricity and water tariffs as a subsidy reducing measure. c. Introduce business income tax on Omani owned businesses as a measure to improve the competitive environment of business in Oman and attracting foreign investors. d. Apply a surcharge on cars and luxury imports as a measure to curb conspicuous consumption. e. Surcharge on liquor and tobacco imports. f. Divestiture of some state owned enterprises as a measure to improve investment opportunities for Omani investors. The proceeds from the sale of public assets should be transfered to the SGRF. g. Raise municipal fees as a step toward self-financing municipal services. 12. Oil Policy and Rising Expectations. Oman is adopting a progressive but conservative oil policy. Two main elements of that policy stands out. First, Oman follows an aggressive reserve buildup policy, under which proven oil reserves had been rising. Second, Oman promotes largescale joint ventures in gas and petrochemical development. However, there are two emerging drawbacks. Publicizing over-optimistic oil outlook raises expectations and adds pressures on the Government for higher and higher public spending. In addition, some of the currently promoted multinational ventures may be too risky to the extend that the discount rate may be too high to yield positive rates of return. 13. Review of Sector Ministries Programs. This.review was started as a World Bank- assisted PER in November/December 1992 in the ministries of Education and Health and showed that there is a need for greater efficiency and cost recovery. These reviews should be extended to other ministries, and preferably done by them. They should be encouraged to reevaluate their program priorities and the methods of reducing the cost of these programs within a firmly set budget ceiling for each of them. These set ceilings should still be those approved in the Fourth Development Plan. In other words, the ministries could be asked to 93 do their reviews with the objective of identifying programs to be cut and reduction rates that will allow them to meet the overall budget ceiling of the Plan so that, at the end of 1995, the commutative recurrent and development expenditures will be those set in the Plan. The Plan is indicative only for the private sector, but should be viewed as compulsory for the public sector, except in emergency situations. Little, if any, of the additional appropriations of the last two years could be characterized as emergency appropriations. These reviews should culminate in a submission of a budget for each of the next two years, and a downward revision of the current 1993 budget. The implementation of this idea will have the beneficial effect of encouraging the ministries to improve their planning and priority setting and to improve the efficiency of implementing their programs through more effective utilization of their existing resources. 14. Just as was done for the ministries of Education and Health, ministries should be asked to assess the average operation and maintenance cost necessary to deliver adequate level of services (standard cost) at a high level of utilization of their facilities (capacity loads). There is a prevailing feeling that current appropriations are less than they should. But there is little doubt that some ministries programs had expanded too fast to be effectively manageable and that their cost is much higher than what is economically justifiable. It may be better to concentrate the limited budgetary resources on few high priority programs than to spread them thinly among a large number of programs. In other words, the proposed budgets for the next two years should identify programs that will use more appropriations and those that will be reduced or eliminated. 15. The public service sector ministries' review should include their own ideas on how to recover some of the cost of their services from those they serve. Those ministries should be given the incentive to take this task seriously by allowing them to retain some of the cost recovery revenue in addition to their future budget appropriations. This may soften some ministries' current resistance to cost recovery as an antisocial measure. 94 APPENDIX I. APPENDED TERMS OF REFERENCE A. Education Initial TOR for a Study on the Returns to Education and Education Expenditure Priorities in Oman 1. The purpose of the study will be to analyze and present evidence on the relationship between earnings and education in Oman and to discuss the implications of the findings for school investment and expenditure priorities in the country. Based on widely used methods, the study will calculate and compare private and social rates of economic returns to the various levels and types of schooling with the view to design a education finance strategy for sustaining the government's human resources development efforts. 2. The data for the study will come from the 1993 population census and the 1991 budget consumption survey. 3. Fifteen to 20 sw of consultant work by an expert with extensive experience in the field of economics of education would be necessary to undertake the task. To ensure that transfer of skills and internalization of the findings and recommendations of the study are maximized, the international consultant will work closely with an Omani national for the entire study period. 4. The study will be carried out under the overall supervision of the Development Council, and a national reference group will be constituted to provide advice and guidance to the team in charge of the study. This reference group will include inter alia representatives from the Development Council, the Ministry of Finance, the Ministry of Education, the Authority for Vocational Training. 5. The study would start during the second half of 1993, and would be completed during the first quarter of 1994. B. Health Hospital Sector Study Objectives 6. The Hospital Sector Study has two main objectives: to assist the Ministry of Health in further developing its strategy for the hospital sector, and to identify direct support that could be given by the World Bank and other donor agencies to the Omani hospital sector as part of a more widespread assistance program. The study will focus on the regional and district hospitals of one region only; however, it should provide enough reliable information 95 to establish the basis for a national hospital sector reform. This study will further develop recommendations of the Review of Health Sector Report prepared by the World Bank (September 1990) for the Development Council of Oman on reorganizing the hospital sector. 7. The work will be done in close collaboration with the Ministry of Health to ensure the best possible transfer of knowledge and skills. To work with the Consultant, the Ministry will designate counterparts in three categories: a DG Regional Health Services Task Force for questions on policy issues; a Working Group to be involved in the daily operations of the study; and medical practitioners, managers, and other professionals from the designated hospitals to work closely with the consultant during hospital field work. Scope of Study 8. The study will focus on three areas, hospital network reorganization, management improvement, and upgrading of the skills of health professionals relative to the new technologies to be introduced. 9. Hospital Network Reorganization. The study will provide the Ministry of Health with the required tools for establishing a new hospital to delineate size, location, and functions of the various facilities at each level of the system. A detailed hospital map for the designated region will be prepared, including a complete description of the regional hospital and of existing district hospitals. The map's details will include size, range of specialties, beds per specialty, outpatient services, services offered in the diagnosis department, laboratory services, and other technical services for regional and existing district hospitals. The study will also assess the need for additional hospitals in the area, and provide an estimate of the various categories and numbers of technical and non-technical personnel necessary. 10. For the city of Muscat, where the Qaboos and University hospitals serve educational as well as health care functions, the study will assess how the educational function is fulfilled. The study will determine the way the hospitals could be organized in order to become more effective as teaching hospitals. It will also extend the same effort to a chosen regional hospital. A description similar to that for urban hospitals will be prepared for regional and district hospitals' facilities. 11. For these different facilities, the analysis will include: a catchment assessment, an activity analysis (rate of admission, length of stay), and a productivity analysis. 12. After this first stage of the reorganization study, the consultant will determine, in terms of medical technology, management, and skill upgrading, the gap between the existing situation and the proposed one. It will also provide an estimate of the total costs (investment and recurrent) of the hospital sector. 96 13. Hospital Management. The second part of the study will allow the Ministry of Health to determine the need for immediate improvements in the management of the national hospitals of Muscat, as well as the hospitals of the designated region. Existing management practices will be analyzed and a plan will be proposed for improvements the situation may warrant. The improvement plan will clearly indicate any changes necessary in the existing framework of laws and regulations and will also identify any structural constraints to management improvement and ways to address these constraints. 16. Skills Improvement. The last part of the study will identify ways to make the most efficient use of human resources in hospitals under the conditions upgraded technology and improved management produce. A training plan will be proposed for the different categories of personnel, e.g., doctors, nurses, technicians, etc. Current medical practices will be analyzed regarding use of technology and prescription habits. ??? Special attention will be given to educational skills in the hospitals of the city of Muscat with educational functions. The latter provide an important opportunity in the training of medical doctors. Practices in these hospitals should be exemplary, as they are the best places for disseminating information about changes in medical practices. Given the leading role of the School of Medicine in this field, faculty members should be strongly associated with the study at this stage. Work Schedule 17. The total duration of the study will be four months including two and a half months on-site in Oman and one and a half months to complete documents and reports. The field study will consist of a one and a half month diagnostic phase to make primary assessments. At the end of the first stage, a seminar will be organized to cover the four main areas of the study and provide an opportunity to exchange information with Omani officials. At this three or four day seminar, the results of the first assessments will be presented and possible solutions discussed. All possible donors interested in providing assistance in the hospital sector will be invited to the seminar. 18. The second phase of the field work will last one month and will be devoted to the design of a rehabilitation plan for the hospitals of the selected region. Ideas and issues that may have emerged during seminar discussions will provide additional guidelines for this phase of the work. Reporting 19. A preliminary report (aide-memoire) will be prepared at the end of the study's first phase for briefing purposes and left with the Ministry of Health for comment. At the end of the second phase, a final report will include the results of the surveys done in Oman, a summary of the discussions of the seminar, an outline of the issues, components, costs and a schedule for implementing a global hospital reform in Oman, and a detailed plan for the immediate rehabilitation of the hospitals in the designated region. 97 20. This plan for rehabilitation will delineate hospitals by size, the distribution of beds by specialty, the range of in- and outpatient services, the functions o Lhese facilities and the services available at the different levels and articulate their rationales. Second, internal organizational changes will be proposed with a corresponding training program. Third, a list by item and cost of equipment for a two or three-stage technical rehabilitation per facility will be developed, including maintenance requirements in terms of costs and availability of local expertise. Finally, the rehabilitation plan will include a complete description of the training programs necessary for improving the technical skills of the professionals. Feasibility Study for a Local Production Plant for Medicine Objectives 21. This is a study to evaluate the financial and technical feasibility of establishing a medicine production plant in the Sultanate of Oman. Its principal objectives are to decide which products might be locally manufactured, and to determine the economic and financial advantages of locally produced medicines. 22. The study would be done in close collaboration with the Development Council and the Ministry of Health to furnish them concurrently with the means to determine the advisability of establishing a medicine production plant. To work with the consultant, the two agencies would designate counterparts in a Task Force from the Directorate General for Planning, and a Task Force from the Directorate General for Pharmaceutical Affairs and Drug Control. Scope of Study 23. The feasibility study entails six successive stages. 24. First Stage. This stage deals with the collection of data on the volume of importation. It consists of two parts, the first of which is an analysis of the demand for medicine in the country. This part is based upon data furnished by the Directorate General of Pharmaceutical Affairs and Drug Control. The second is an evaluation of the established market potential over the next 10 years for essential medicines. It is based on an epidemiological analysis of importation costs, in terms of foreign currency, and sale prices, in terms of local currency. 25. Second Stage. The second stage is to be devoted to strategic planning. It identifies the advantages and disadvantages of potential technologies for complete manufacture and/or repackaging of products bought in bulk, and proposed statutes for the enterprise. 26. Third Stage. The third stage involves a quantitative evaluation of potential means of production. It determines the product range for which manufacture is foreseen, proposed 98 techniques of production, necessary investment estimates for land, buildings, equipment, raw materials, consumable niaterial, technical assistance, and so on. 27. Fourth Stage. This stage analyzes and evaluates the cost of a production plant, as was defined in the third stage. 28. Fifth Stage. The final stage is devoted to a financial analysis of the project. This analysis will determine direct production costs and consider the breakdown of operational and structural costs, in order to determine prime costs and market price. An evaluation of profitability will emphasize three key indicators, the rate of internal profitability, investment return time and profitability index for the project. Work Schedule 29. The total duration of the study will be three months, including two months in Oman and one month to complete the documents and reports. The field study will consist of a diagnostic phase of one month to make assessments. At the end of this first stage, a seminar will be organized to cover the four main areas of the study and provide an opportunity to exchange information with Omani officials. At this three or four-day seminar, the results of the first assessments will be presented and possible solutions discussed. 30. The second phase of the field work will last one month and will be devoted to the completion of the feasibility study. Ideas and issues that may have emerged during seminar discussions will provide additional guidelines for this phase of the study. Reporting 31. A preliminary draft report will be prepared at the end of Phase I and sent to the Ministry of Finance for immediate comment. A final report at the end of Phase II will be provided no later than one and a half months after completion of the field work. The final report will include the results of the field study, a summary of the discussions of the seminar, a complete description of the project, investment costs for infrastructure and equipment, and the economic and financial analyses. Cost Recovery Study Objectives 32. This study evaluates the technical and financial feasibility of implementing a cost- recovery system in the public health sectors. The cost-recovery system would apply to medicine and relevant services, considering types and duration of consultations and various examinations in hospitals and health centers. Its principal objectives are to determine a schedule of charges based on actual operating costs in health facilities, and to propose a 99 phased schedule for the implementation of a cost-recovery system for medical products first and related services subsequently. 33. Its work will be done in close collaboration with the Ministry of Health and the Ministry of Finance so as to provide them with the technical and financial means, and thus enabling them to estimate a cost-recovery program for Omani citizens in the public health sector. Scope of Work 34. The study will focus on five areas: (i) an analysis of the operating costs for health facilities, e.g., health centers, regional hospitals and the Royal Hospital; (ii) a schedule of health-related charges for outpatient visits, hospital stays, and technological services); (iii) medicinal costs; (iv) a proposed schedule for the implementation of the system; and (v) an evaluation of the impact of the cost-recovery system on the Ministry of Health's budget. 35. Analysis of Operating Costs. For each type of health facility (health centers, regional hospitals and the Royal Hospital), the consultant will determine the standard operating costs. This will be achieved by: (i) drawing up a global budget for each type of health facility (a stage to be completed in conjunction with the Ministry of Health's budget???); (ii) compiling the total expenses for each medical profession to include related service fees for doctors, nurses, dentists and various medical examinations like radiographies, laboratory services, etc.; (iii) evaluating the average time dedicated by each profession to outpatients and inpatients in conjunction with information on outpatient attendances and inpatient discharges provided regularly by the Ministry of Health in its annual statistical report; and (iv) to establish individual standard costs of consultations for outpatients, hospital stays, and the various medical examinations. 36. Costs of Medical Services. This part of the study will allow the Ministry of Health to determine a schedule of charges for the offered medical services. The evaluations mentioned in paragraph 4 will be discussed with the representatives of the Ministry of Health, in order to establish appropriate rates for Omani citizens and for non-Omanis. The consultant will propose modes of application for the costs, e.g., one annual free consultation, with subsequent consultations to be charged on a graded scale: 25 percent of the total rate for the second consultation, 50 percent for the third and 100 percent for the fourth and following visits. for example. The consultant will determine the supportive measures necessary to ensure proper functioning of the system (computerized administration of regional and national hospitals, done manually for patients at health centers) and provide a plan for the practical application of the schedule of costs. The plan will offer two options: a gradual application for the whole of the territory and another gradual application for each region. 100 37. Medicinal Costs. The study will also allow the Ministry of Health to determine a schedule of cost recovery for medicine. The cost recovery for medicine should only concern outpatients, as the cost recovery for inpatient medicine will be included in service charges. 38. First, the consultant will establish lists of medicines according to three categories: (i) over the counter drugs (OTCs) not requiring a doctor's prescription, e.g., common products such as aspirin, paracetamol and drugs with limited effects (vitamins, trace elements, health products etc.); (ii) essential drugs prescribed by a medical doctor, e.g., most antibiotics, antihistamines, corticoids, anesthetics, and prescription medicines that are widely used in health care facilities to treat about 90 percent of common diseases; and (iii) other prescription drugs that are either dangerous, addictive, specialized or costly, e.g., hypnotics, anti-cancer drugs, anti-viral drugs, etc. 39. Second, the consultant will propose a method for pricing medicine to the Ministry of Health in adherence to the following general principles. Outpatient OTCs as a private good may be purchased at full cost, essential drugs may be sold at half price, and other prescription drugs may be excluded from consideration in the cost-recovery system. 40. Implementation Schedule. The consultant will establish a schedule for the application of charges. For instance, the Ministry of Health will subsidize 50 percent of the value for medicine affected by the charges. The second year, the subsidy will only be 25 percent and from the third year on, outpatients will pay full price for the medicine. Finally, the consultant will propose a particular financial channel for the medicine for each area in the health sector, in order to evaluate the impact of cost recovery on the medicine budget. 41. Due to the number of people who cannot afford drugs, the study would pay particular attention to the needs of those not in a position to pay for drugs. To achieve this, the consultant will establish, with the Ministry of Health, guidelines for payment remission based on socioeconomic criteria. 42. Evaluation of Impact of Cost Recovery on Budget. Based on the implementation schedules proposed in paragraphs 5 and 6, the consultant will evaluate the impact of cost recovery on the Ministry of Health's budget. In conjunction with the Ministry of Finance, the consultant will propose the formation of a special fund provided for by the benefits of cost recovery. The fund will be dedicated to financing the improvement of basic health care. Work Schedule 43. The total duration of the study will be three months, including two months in Oman and one month to complete the documents and reports. The field study will consist of a diagnostic phase of one month, to make primary assessments. At the end of this first stage, a seminar will be organized to cover the five main areas of the study, and provide an opportunity to exchange information with Omani officials. At this three or four-day seminar, the results of the first assessments will be presented and possible solutions discussed. 101 44. The second phase of the field work will last one month and be devoted to the completion of the cost-recovery system. Ideas and issues that may have emerged during seminar discussions will provide additional guidelines for this phase of the work. Reporting 45. A preliminary draft report will be prepared at the end of Phase I and sent to the Ministry of Health and the Ministry of Finance for immediate comment. A final report after Phase II will be provided no later than one and a half months after the departure from the field. This report will include the results of the field study, a summary of the discussions of the seminar, an outline of the issues, the components of the cost-recovery system, and the proposed implementation schedule. C. Standard Cost Analysis Training Proposal for Development of an Integrated Cost Analysis System Program Rationale 46. Recent advances in development of recurrent budget norms expressed as costs/unit of service suggest that Standard Cost Analysis (SCA) could be a useful tool to both MOFE and spending ministry decision-makers. At one level, MOFE needs to know whether programmatic budget proposals are excessive and wasteful, excessive and possibly necessary or useful, or insufficient in specific non-wage areas to maintain the value of capital assets. 47. A functioning SCA system can provide this data where the existing administrative system consistently generates hard data for use in its public expenditure decisions. The Omani system meets this criterion, consistently generating high quality data at the program level for decision-making. Similarly, spending ministries need budget norms to determine whether each step in the performance of a task is cost effective. SCA can provide this information from data that in most cases already exists within the spending ministries. SCA can suggest ways of reallocating inputs to decrease costs of production in such areas as health and education in order to increase cost effective service delivery. Program Objectives 1. To enable Omani decision-makers to construct performance indices (cost and program) from existing data systems. 2. To enable Omani decision-makers in both MOFE and the spending ministries to develop performance standards for recurrent program (submitted by the ministries) and national budget items. 102 3. To leave behind the capability to use standard cost analysis to improve program and cost effectiveness of public expenditures. Program Participants 48. Mid-level and supervisory staff personnel from the spending ministries. These should be program, budget and accounting officials. Similar participants should also attend from MOFE. The seminar should be interactive, with data and case analyses developed from particular ministries and MOFE. The format will utilize case studies, team projects, computer data exercises, and management simulations. Program Components and Outputs 49. Introduction to Public Expenditure Analysis 1. Results of past reforms and conditions for success. Weaknesses of prior efforts to reform budgeting and government performance through Performance Budgeting, ZBB, PPB and hybrid Value for Money systems. 2. Strengths and success stories: New Zealand, Australia and US county and city governments. Seminar participants should understand the conditions for success; consistency with past efforts, management incentives, reduced paperwork, and smaller unit size. Seminar participants can learn the weaknesses of a purely quantitative ratio approach to public management and the need to avoid norms becoming management straightjackets. 50. Standard Cost Analysis. SCA is less a reform technique than a system for achieving objectives through the least costly means (similar in this regard to Performance Budgeting). There are four stages of development: (1) Pre-Unit Cost, (2) Unit Cost, (3) Performance Indices, and (4) Analysis. 1. Development of Unit Cost Data Systems. a. Reporting systems. Since most data is already available by program and cost center or budget item, there would be no need for training on the Pre-Unit Cost stage. The Omani system captures wage/non-wage data for such basic outputs as: kilowatts, pupils, inpatients and outpatients. Training is needed to ensure that the current systems are providing program and budget officials with appropriate information to make trade- offs and reallocations. A session would be devoted to description of current financial and management information systems between and within MOFE and spending ministries. 103 b. Expansion of existing systems. Current data systems should be expanded to other functional areas as transport for highways, urban transport and port operations. A session would be devoted to team efforts to examining the need to spread existing reporting systems to other ministries. c. Task and activity analysis. For SCA to function, each ministry must know the cost of subtasks and activities that relate to output, e.g. scheduling, maintenance and supplies to ensure on-time bus service performance. Each of these tasks must be not be funded below a certain threshold or the output must suffer. A session can be devoted to breaking programs into component parts and assessing the cost of each to total performance. Most of this data already exists and can be retrieved as the task linkages are made clearer by seminar participants. d. Comparative unit cost norms. To ensure that unit cost data systems are used and updated, MOFE needs to assign or create analytic responsibility in one unit. The unit would measure Omani unit costs and employ them for budget preparation and approval. This unit would also be responsible for developing a new timetable and request forms. The unit would employ available secondary data for comparison of Omani unit cost performance while recognizing the weaknesses of comparing local primary with external secondary data (old data, exchange rate differentials, and variable definitions of budget categories as recurrent expenditures). A session should be devoted to: organization of such a unit within MOFE, changes in the current budget process caused by regular use of unit cost data, and the perils of comparative standard cost analysis. 2. Development of Performance Indices a. Constructing workload or output indicators. Secondary industry sources provides a wealth of possible output measures, e.g. electricity, health, education, agriculture and urban transport. Seminar participants should explore other indicators that may be of better utility to them in the Omani context. b. Criteria for workload indicator selection. The seminar should employ team exercises to critically examine the strengths and weaknesses of particular industry workload measures. Which few indicators are of most value to managers? to MOFE? How resolve the differences given limited time that should be devoted to cost performance analysis from regular management duties? More importantly, seminar participants should examine particular measures for their areas of responsibility and assess what is really being measured. Are there dysfunctional management 104 incentives created by particular measures? What are they and how might they be remedied by a different workload measure? 3. SCA Techniques a. Variance analysis. A session should be devoted to calculating variances between planned and actual expenditures and unit costs in order to develop prices, rates or spending norms. Participants should recognize the value of conducting this quarterly from ongoing data collection, leading to departmental and MOFE review of costs and results during the fiscal year. The analytic unit created by MOFE should also compare variances by quarter and year and develop narrative explanations for the differences found. A session should be devoted to the technique and narrative explanations for variance. b. Correlation analysis. A session should be devoted to the strengths and weaknesses of using correlation coefficients (r) to develop norms from the association between recurrent and capital expenditures. This is a useful technique to indicate underfunding of non-wage maintenance and supply items that can diminish the value of capital investments. c. Unit cost formula development and public management. Finally, participants recognize that many public services are delivered by inter- governmental or inter-departmental cost sharing arrangements. Omani officials should recognize the potential management and policy distortions the cost system could create ironically in the process of leading to greater cost effectiveness. A session should be devoted to the effects on unit costs (debits-credits) of decisions by one level of government or ministry to cut services. For example, where bus services are jointly provided and many jurisdictions contribute revenues for such service (a fairly common model),lack of a variable pricing structure could result in windfall unit cost savings to a jurisdiction replacing off-peak services. It would be credited with unit cost savings exceeding the incremental savings to the original service provider simply by replacing services (e.g., privatized services). Seminar participants should work up examples of possible dysfunctional incentives between pricing, unit cost measures and performance measures. Participants should then explore ways to revise funding formulae to ensure that unit cost and workload measures do not generate dysfunctional management incentives. 105 Evaluation 51. Seminar participants should evaluate the training program at the end and one year later to discern whether the tools and lessons imparted have encouraged the development and application of the SCA. 106 APPENDIX H. STATISTICAL APPENDIX Appendix Figure 2.1 Oman Current Procedures for Recurrent Budget Preparation Agent Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Issue The Sultan Decree Financial Budget * BudgetJ Approve Affairs Forecast Forecast Budget Council Deputy Prime Minister for Finance and The Economy Undersecretary Budget of Finance Circular and Request for Draft Projections Bde Directorate General For Budget and Review Estimates Public Accounts Ministries Ministerial Review Estimates Guidance and Projections Ministry Operational Prepare Directorates Estimates and Projections / One Year Appendix Figure 2.2 Oman Proposed Procedures for Recurrent Budget Preparation Agent Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec The Sultan Issue Decree Development Council Budget Financial Forecast Recommend Affairs Multi-Year Council Recurrent Budget Spending Deputy Prime Targets Minister for Finance and The Economy Budget Circular Draft Undersecretary with Ministry of Finance Targets and Budget Review Criteria Directorate General Review Requests & For Budget and Prepare Issues Public Accounts Spending Ministerial Ministers Guidance Approve Requests Ministry of Finance Review Budget and Directorates Prepare Issues Ministry Operational Prepare Detailed Budget Directorates Estimates and Main Headings For Subsequent Years Appendix Table 3.1 EVOLUTION OF THE EDUCATION BUDGET (1987-1992) IN CURRENT VALUES % ANNUA DISTRIBUTIO 1987 1S8$ 198 1990 1991 1902 oANGE 1990 UM347 12042$ tsm$4) 172W36 V0~4 I.s M40% - Institute of Jurisprudence, Oratory and Guidance - - - 830 - 0.00% - Ministry of Education and Youth 100128 95132 108487 123122 126190 6 51% 72.22% - Miustry of Social Affairs & Labour 6782 6409 6766 8754 9.69% 4.50% - Sultan Qaboos University and Educational Hospital 18397 18884 34850 40102 40563 30 12% 23.20% - Supreme Committee for Vocational Training & Labour - - - 116 - 000% - Vocational Training Authonty - - - 6995 - 0.00% - Secret General for Council of Educ and Vocat.Tram. - 105 95 - 0.07% TOA 0S W TR U M W ,l 0M3*4 M4304 424M~ 654400 681W 41" EDUCAoxN XCU r cMA L "e 1924 Z$43 2302 .3470 $220 1.e4% 0000% - Institute of Junsprudence, Oratory and Guidance - - - 23 - 000% - Ministry of Education and Youth 1212 1939 1390 1499 1650 9.03% 60.38% - Ministry of Social Affairs & Labour 109 109 97 478 112.84% 4.21% - Sultan Qaboos University and Educational Hospital 603 495 807 1483 1415 33.67% 35.06% - Supreme Committee for Vocational Training & Labour - - - - 0.00% - Vocational Training Authority - - - 114 - 0.00% - Secret General for Council of Educ. and Vocat Train - 10 - 0.3S% TOTAL GVRMEW 4MO)TAtK =P11o 124MZ 1200 t14w slim 14.87% EDUJCATION'f015VELWMMT MP 00$4 2MW0 42kaZ 54o66 62071W - Institute of Jurisprudence, Oratory and Guidance - - - - 0.00% - Ministry of Education and Youth 13441 9611 15601 24313 36329 42.57% 36.40% - Ministry of Social Affairs & Labour 3304 3058 12631 11601 83.71% 29.47% - Institute of Public Administration - - - 1495 - 0.00% - Sultan Qaboos University and Educational Hospital 31339 10936 14630 17702 14618 -13.34% 34.13% - Supreme Committee for Vocational Training & Labour - - - 1000 - 000% - Vocational Training Authority - - - 9365 - 0.00% - Secret General for Council of Educ. and Vocat.Train - - 1000 - 0.00% TOTAL GOVERNMENT DEVELOPMENTIEXP. 349662 31307 +45.W4 7t219 893756 3L90% TOTAL EDUCATION EXPENDITURES 175315 146573 195372 230159 240721 9.33% TOTAL GOVERNMENT EXPENDITURES 894650 874029 1152349 1384819 1594856 19.57% -onP (c00tr80s oooo 2926000 s23100ce ones00s 'd(X700 5Z7 RECURRENT EDUC EXP/TOTAL RECURRENT EXP. 23.51% 22.17% 24.04% 26.29% 25 62% EDUC. REC CAPITAL EXP./TOTAL REC CAPITAL EXP. 16.05% 2047% 19.18% 19.72% 16.84% TOTAL EDUC DEVEL. EXP./TOTAL DEVEL EXP. 13.75% 7.42% 8.31% 7.66% 7.03% TOTAL EDUC. EXP /TOTAL OVT EXP. 19.60% 16.77% 16.95% 16.62% 15.09% TOTAL EDUC EXP/GDP 5.99% 4.54% 4.78% 5.69% SOURCE. Oman Financial Statistics NOTE: % annual change were calculated from 1988 to 1992, with the exception of those of the Ministry of Social Affairs and Labour Appendix Table 3.2 RECOMPOSITION OF THE EDUCATION BUDGET (1990-91) LEVE ENROLLMENT DISTRIgUTION RECURRENT MlITRIBUTION INVESTMENT DISTRIBUTION TOTAL D ISTRIDUTION EXPENDITURES 1EXPENDITU1S EXP91DITUM Primary 258390 67.77% 68214960 39.26% 5279800 15 73% 73494760 35.45% Preparatory 72574 1903% 37811054 21.76% 8388700 2499% 46199754 2228% - General + Islamic 72574 19 03% 37811054 21.76% 8388700 24 99% 46199754 22.28% Secondary 29132 7.64% 21738200 12.51% 2961420 8.82% 24699620 11.91% - General + Islamic 25848 6.78% 15651812 901% 2961420 8.82% 18613232 8 98% - Technical 686 0.18% 1158411 067% 0.00% 1158411 056% . Industrial Techn 185 005% 310615 0 18% 000% 310615 0 15% . Agricultural Techn 148 0.04% 524660 0.30% 0.00% 524660 0 25% Commercial Techn 353 0.09% 323136 0.19% 0.00% 323136 0 16% - Vocational 1912 050% 3769566 2.17% 0.00% 3769566 I 82% Interm. Tcher Trg Coll. 2244 0.59% 6338280 3.65% 000% 6338280 306% Oman Techn. Ind. Coll. 459 0 12% 863824 0.50% 0.00% 863824 0 42% Sultan Qaboos Univ. 3021 0 79% 38789000 22.32% 16934000 50.45% 55723000 26 88% Other 15447 4.05% 0.00% 0.00% 0 0 00% - Literacy Centres 7577 1 99% 0.00% 0.00% 0 0 00% - Adult Education 7870 2 06% 0.00% 0.00% 0 0 00% 0 TOTAL 3826710,0% 173755318 100.00% 33563920 100,00% 20719238 100.00% NOTES: I Enrollment in public insitutions only 2 Recurrent budget by level (primary to secondary) was computed by multiplying unit costs by the day and boarding enrollment as follows only day students in Primary and preparatory levels, 1900 boaring students and 23,948 day students in general secondary level schools; 162 boarding students and 191 day students in commercial technical schools, only boarding students (333) in Agricultural and Industrialtechhnical institutes, and 1470 boarding students and 774 day students in intermediate teacher training college 3 The budget of Sultan Qaboos University for the academic year 1990-91 was estimated by adding 3/12 of 1990 and 9/12 of 1991 budgets 4 Data on primary and secondary special education are missing 5 Investment budget is based only on cost of adding 302 new classrooms (91 in existing schools, and 214 in new schools), 275 preparatory level classrooms in new schools and 118 additions in existing schools, and 77 general secondary classrooms in new schools and 33 additions in existing schools. 6 General and Islamic education arc pooled together for simplicity. Islamic studies typically represent less than 0 15% of total enrollment and less than 0 50% of recurrent expenditures 7. Secondary vocational training and Oman technical Industrial College recurrent expenditures come from the Ministry of Finance Database. Appendix Table 3.3 SALARIES AND ALLOWANCES FOR SPECIAL AND GENERAL CADRES STEPS BEGINNING ANNUAL UPPER ELECTRICITY WATER HOUSING TELEPHONE SALARY RAISE LIMIT ALLOWANCE ALLOWANCE ALLOWANCE ALLOWANCE (Omanis) a 1658 50, None 36 8 b 271 40 1658 36 8 c 981 30 1271 36 8 d 787 20 981 36 8 e 605 10 787 36 8 Special 1200 71 30 400 50 1 800 40 1200 50 20 400 30 2 545 15 710 36 8 330 3 497 15 662 36 8 330 4 448 12 580 36 8 330 6 412 12 544 24 6 250 6 376 12 508 24 6 250 1 327 10 437 24 6 250 2 279 7 356 12 5 180 3 218 7 295 12 5 180 4 194 5 249 12 4 70 5 170 5 225 10 4 50 6 146 5 201 9 3 40 7 121 5 176 8 2 30 8 104 4 148 8 2 30 1 170 6 360 6 2 25 2 150 6 260 6 2 25 3 130 6 240 6 2 25 4 109 4 197 6 2 25 5 92 4 180 6 2 25 6 80 3 146 6 2 25 7 68 3 134 6 2 25 8 55 3 121 6 2 25 Appendix Table 3.4 EDUCATION RECURRENT EXPENDITURES 1992 LEVELS SALARIES & OTHER TOTAL SALARIES BENEFITS RECURRENT RECURRENT AS % OF TOTAL RECURRENT ELEMENTARY 49,352,490 18,862,470 68,214,960 72.35% PREPARATORY 31,787,412 6,315,647 38,103,059 83.42% SECONDARY - General 11,370,824 4,280,988 15,651,812 72.65% - Industrial Technical 149,665 160,950 310,615 48.18% - Agricultural Technical 322,788 201,872 524,660 61.52% - Commercial Technical 176,853 146,283 323,136 54.73% - Interm. Teacher Trg Coll. 3,011,448 6,331,944 9,343,392 32.23% TOTAL 96,171,480 36,300,154 132,471,634 72.60% NOTE: Reconstitution based on unit costs. Unit costs are not available for all other levels and types of education: vocational training, Sultan Qaboos University, Oman Technical Industrial College. - Recurrent budget by level (elementary to secondary) was computed by multiplying unit costs by the day. and boarding students as follows: only day students in elementary and preparatory levels; 1900 boarding students and 23948 day students in general secondary level schools; 162 boarding students abd 191 day students in commercial technical schools; only boarding students (333) in Agricultural and Industrial technical institutes; and 1470 boarding students and 774 day students in intermediate teacher training college. Appendix Table 3.5 UNIT COSTS (Based on 1986-90) DIRECT COSTS INDIRECT COSTS OPERATIONS & TEACHING & TEXTBOOKS STIPENDS. TOTAL DIRECT END OF SERVICE SCHL & COLL. BLDG TOTAL TOTAL MAINTENANCE OTHER STAFF TRANSPORT COSTS COSTS FOR STAFF DEPRECIATION INDIRECT COSTS UNIT COSTS COSTS ACCOMOD. IN INST. & MIN. & CASH EXP. 1. DAY SECTIONS GENERAL PRIMARY 63 191 10 - 264 16 14 30 294 SPECIAL EDUCATION PRIMARY 60 703 11 37 811 - - GENERAL PREPARATORY 63 438 20 - 521 30 14 44 565 SPECIAL EDUCATION PREPARATORY 60 1787 19 37 1903 - - GENERAL SECONDARY 63 464 42 - 569 33 14 47 616 INDUSTRIAL SECONDARY IN SOHAR 273 809 53 - 1135 54 438 492 1627 AGRICULTURAL SECONDARY IN NIZWA 812 2181 53 - 3046 135 425 560 3606 COMMERCIAL SECONDARY 143 501 58 - 702 44 200 244 946 INTERMED TEACHER TRAINING COLL 221 1342 79 1164 2806 90 190 280 3086 ISLAMIC SECONDARY 63 464 42 540 1109 33 14 47 1156 MOSQUE PREPARATORY 60 417 19 540 1036 2. BOARDING SECTIONS SPECIAL EDUCATION PRIMARY 60 703 11 433 1207 - - GENERAL SECONDARY 63 464 42 497 1066 33 14 47 1113 INDUSTRIAL SECONDARY IN SAKHAR 273 809 53 544 1679 54 438 492 2171 AGRICULTURAL SECONDARY IN NIZWA 812 2181 53 499 3545 135 425 560 4105 COMMERCIAL SECONDARY 143 501 58 465 1167 44 200 244 1411 Intermed Teacher Training Coll 221 1342 79 1188 2830 90 190 280 3110 Islamic Secondary 63 464 42 622 1191 33 14 47 1238 SOURCE Sultanate of Oman Development Council Techmcal Secretariat Appendix Table 3.6 PLANNED INVESTMENTS BY LEVEL OF EDUCATION (1990-1996) YEARS ------> 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 TOTAL LEVEL OF EDUCATION (Excluding INVESTMENTS 1990-91) PRIMARY LEVEL (Class size=33) Expected Increase in Enrollment 10036 9405 9803 11424 11269 11721 53622 Required Increase in Classrooms of which. 305 285 298 347 342 356 1628 Number of Classrooms in New Schools 214 200 209 243 239 249 1354 Number of Classrooms added to Existing Schools 91 85 89 104 103 107 488 Costs 5279800 4934000 5157500 6000900 5908100 6152700 28153200 PREPARATORY LEVEL (Class size=26) Expected Increase in Enrollment 10218 8187 5959 3980 3125 3167 24418 Required Increase in Classrooms 393 315 230 115 121 122 903 Number of Classrooms in New Schools 275 221 161 81 85 85 633 Number of Classrooms added to Existing Schools 118 94 69 34 36 37 270 Costs 8388700 6734500 4910500 2464500 2588900 2597300 19295700 SECONDARY LEVEL (Class size=26) Expected Increase in Enrollment 2844 3582 4473 5487 4641 3533 21716 Required Increase in Classrooms 110 138 173 212 179 136 838 * Number of Classrooms in New Schools 77 97 121 148 125 95 586 . Number of Classrooms added to Existing Schools 33 41 52 64 54 41 252 Costs 2961420 4478480 5407520 7202200 5563760 4408760 27060720 REPLACEMENT OF UNFIT SCHOOLS Costs 191520 159600 127680 95760 63840 638400 TEACHERS ACCOMODATIONS (all levels) Costs 518175 431812 345450 259088 172725 1727250 INTERMEDIATE TEACHER TRAINING COLLEGE Costs 0 1115000 0 0 0 0 1115000 TOTAL DEVELOPMENT EXPENDITURES 16629920 17971675 16066932 16140730 14415608 13395325 77990270 Source: Development Council Appendix Table 3.7 PLANNED EDUCATION DEVELOPMENT EXPENDITURE (1991-95) (Includes Development Budgets of MOEY, Sultan Qaboos University, and Authority for Vocational Training) 1991 1992 1993 1994 1995 TOTAL PERCENTAGE GENERAL AND TECHNICAL EDUCATION NEW PROJECTS 15.874 17.557 17.669 19.346 8.706 80.307 9049% - Educational Facilities 15.570 15 896 16453 18.205 7.617 73.741 83.09% - Social Facilities 0.304 0 604 0.157 0.082 0.028 1.175 1.32% - Infrastructures 1.157 1.209 1.059 1.966 5.391 6.07% Incl. Central Administration (0.100) (0.150) (0.905) (1 155) ON-GOING PROJECTS 8 439 0.000 0.000 0.000 0.000 8 439 9.51% - Educational Facilities 8 407 8.407 947% - Social Facilities 0.032 0.032 0.04% - Infrastructures 0 00% Incl. Central Administration 0.00% GRAND TOTAL 24.313 17.557 17669 19.346 8.706 88746 10000% PERCENTAGE 27 40% 19.78% 19.91% 21.80% 981% 100.00% SULTAN QABOOS UNIVERSITY NEW PROJECTS 7.162 5.848 7.962 5.209 2.856 29.037 73.37% - Educational Facilities 2.250 5.848 7.062 5.209 0.301 20.670 52.23% - Social Facilities 4.912 0.900 2.371 8.183 20.68% - Infrastructures 0.184 0.184 0.46% ON-GOING PROJECTS 10.540 0.000 0.000 0.000 0000 10540 26.63% - Educational Facilities 6.980 6.980 17.64% - Social Facilities 3.560 3.560 9.00% - Infrastructures 0.00% GRAND TOTAL 17.702 5.848 7.962 5.209 2.856 39.577 100.00% PERCENTAGE 44.73% 14.78% 20.12% 13.16% 7.22% 100.00% VOCATIONAL TRAINING NEW PROJECTS 0.000 0.000 3.425 1.750 0.000 5 175 5.83% * - Educational Facilities 3.425 1.750 5.175 30.85% - Infrastructures *ON-GOING PROJECTS 11.601 0.000 0.000 0.000 0.000 11.601 13.07% - Educational Facilities 10.978 10978 65 44% - Infrastructures 0.623 0.623 3.71% GRAND TOTAL 11.601 0.000 3.425 1.750 0.000 16.776 100.00% PERCENTAGE 69.15% 0.00% 2042% 10.43% 000% 10000% Source: Sultanate of Oman - The Fourth Five Year Development Plan (1991 - 1995)'- November 1991 Appendix Table 3.8 Equity in the Distribution of Public Spending on Education Cumulative Distribution of Public Education Resources (1 I)(l)(1V) (V) (VI) (vil) (vill) (Ix) (x Education Net Highest Duration Unit Cumulative Aggregate Share of total Cumulative Cumulative Level Enrollment Level Of Cost Public Exp. Cumulative Aggregate Distribution Distribution Ratio (%) Attained Cycle (Omani Per Student (OR) Expenditure (OR) Expenditure of School-range of (Years) Rials) [(iv)x(v)] I(vi)x(ill)] (Percent) Population (%) Resources (%) 1. No Schooling 0 18 0 0 0 0 0 18.00 0 2. Elementary 82 39.78 6 294 1,764 70,171.92 36.15 57.78 36.15 3. Preparatory 42.22 15.38 3 565 1,695 26,069.1 13.43 73.16 49.58 4. Secondary 26.84 25.11 3 653 1,959 49,190.49 25.34 98.27 74.92 S. University 1.73 1.73 4 7,034 28,136 48,675.28 25.08 100.0 100.0 6. Total - 100 - - - 194,106.79 100 - - NOTES 1. Net enrollment rates have computed using the population distribution In the fourth five-year plan (1990-95) document. 2. Enrollment rate for the university is based on the 18-25 age group population. For simplicity, only university students have been included. 3. Unit costs for secondary level are estimated as follows: day students represent 92.57% of secondary general enrollment (unit costs=O.R.616), and boarding students represent 7.43% of enrollment (unit costs= O.R.1,113). 4. Unit cost for the University was estimated based on the 1990 recurrent budget. Appendix Table 3.9 Distribution of Cumulative Public Spending on Education 10 () I t 57 p 2 7i, 16 . Percentage of the School Range Population Appendix Tables 3.8 and 3.9 (Note) Computing the Gini Coefficient This method is concerned with the distribution of public education resources among groups which leave the education system at different levels (elementary, preparatory, secondary and university). The method is based on the fact that the total public education resources appropriated by an individual depends on the length of his/her stay in school and it uses the enrollment structure in the country (as reflected by the enrollment rates at each level of schooling) and the unit public cost of education. Table 3.8 summarizes the different computational steps. It shows that among pupils from the same generation, * 82% enter primary school [Line 2, Col. (ii)] and, therefore, 18% [(100%-82%), L.1, C.(iii)] will leave the school-age range with no schooling; consequently, they will benefit from no public resources for education. * 42.22% [L.3, C.(ii)] will enter preparatory level and 39.78% [(82% - 42.22%), L.2, C.(iii)] will leave the school-age range with only elementary schooling, and will each accumulate O.R.1,764 [L.2, C.(vi)] of public spending on education (O.R.294 a year during 6 years), and collectively they will accumulate O.R.70,171.92 [(39.78 times O.R.1,764), L.2, C.(vii)]. - 26.84% will enter secondary level and 15.38% [(42.22%-26.84%), L.3, C.(iii)] will leave the school range with preparatory schooling; they will individually accumulate O.R.1,695 (O.R.565 per year during 3 years) and collectively O.R.26,069.1. * 1.73% will enter and 25.11% [(26.84%-1.73%), L.4, C.(iii)] will leave the school range with secondary education; they will individually accumulate O.R.1,959 (O.R.653 per year during 3 years) and collectively O.R.49,190.49. Finally, 1.73% [L.5, C.(iii)] will leave the school-age range with university education and will accumulate individually O.R.28,136 (O.R.7,034 per year during 4 years) and collectively O.R.48,675.28. The total public edu;ation expenditure for this generation is O.R. 194,106.79 [L.6, C.(vii)]; Col. (viii) shows the share of this total going to each school leavers/graduates at each level; Col. (ix), derived from Col. (iii), shows the cumulative distribution of school-range population at each level, and, Col. (x), derived from Col. (viii), shows the corresponding cumulative distribution of resources utilized. A Lorenz curve is drawn by plotting the results shown in Columns (ix) and (x) (Graph 3...), with each point on the curve reflecting the cumulative share of school-range population and education public spending. The diagonal of the curve represents the ideal case of a perfectly equitable system where each group of the school-range population receives exactly its corresponding share of public education expenditures; the closer the actual Lorenz curve is to the diagonal, the more equitable the public resources are distributed among a generation of school-age children. Therefore, the ratio of the area delimited by the diagonal and the curve (OABCDE) over the total area below the diagonal (OEF, that is 5,000= 100xlOO/2) -the Gini coefficient- provides a measure of equity of the distribution of public education resources. This distributional pattern can be summarized by a coefficient (Gini coefficient) which measures the level of equity in the appropriation of public resources used to subsidize the provision of education. This coefficient focuses on the education system as a whole and reflects the distribution of public education spending among a generation of children according to their education attainment when leaving the system. The analysis accounts for the fact that the pattern of distribution of public education spending results from the combination of the enrollment structure in the country and the unit public cost of education at each level of study; the resulting coefficient allows international comparisons [Graph 2] (For regional averages, see Mingat and Tan, 1985)!'. The results of the computation yielded a coefficient of 0.38 (See appendix 3...), a figure which indicated that, while the Omani educational system is less equitable than in industrial countries where the average coefficieQt is 0.22, it is much more equitable than that in developing countries where the overall average is 0.60. Mingat, Alain and Jee-Peng Tan (1985). On Equity in Education Again. Journal of Human Resources, 20 (2) Appendix Table 3.10 STUDENT FLOWS 46_513 4684 39326 724 1730 3 3975 33621 1151 1022 7935 33621 6784 3160 9439 29439 252 8708 4763 22424 210 461 1347122424 LEGEND. = x dropouts 10261 2590 17373 2 = z repeaters y = y promoted 9956 2043 15217 ASSUMPTIONS1 1. To even out annual variations, transition rates are based on a three-year average for each grade. 10510 2 Students are allowed to repeat a class only once. They exit the system if oot promoted after the second year. 3 Transition rates used are as follows: Orade I Orade 2 Orade 3 Orade 4 Grade 5 Grade 6 Promotions rates 84 539 85.493 87.56 76 171 77.475 87 592 Repetition rates 10069 10 109 9.4 16.18 11.551 11.76 Dropouts rates* 5.391 4.398 3.04 7.649 10 934 0.648 * Dropout rates for repeaters are higher since they are not allowed to further repeat Appendix Table 3.11 Effect of Repetition and Dropouts on the Efficiency of Primary Education System YEARS GRADE ATTAINED 1 2 3 4 5 6 PRIM. ALL STUDENT GRADUATES STUDENTS YEARS 1 2508 - - - - - - 2508 2508 2 724 1730 - - - - - 2454 4908 3 0 1151 1022 - - - - 2173 6519 4 0 0 1236 2252 - - - 3488 13951 5 0 0 0 3210 2461 - - 5671 28355 6 0 0 0 0 2895 113 15217 118225 109350 7 - 0 0 0 0 1489 10510 11999 83993 ALL 3232 2881 2258 5462 5356 1602 25727 46518 249584 Number of Years to Produce 25727 Graduates = 249584.3 Number of Years to Produce I Graduate = 9.701262 "Wastage" ratio= 9.7/6 = 1.616877 Table 4.1.1 Model for CaIculating Unit Costs for In-patients & Out-patients (Royal Hospital) OVERHEAD a SUPPORT COSTS O P E k A T 1 O N CO S T Ovr d Supp u D D Nur~ Nr nlma DDau~ A Cost of Opeatons f star Suaff St0f m~ Ltmo b~ Amou_ AmA R" A R~ Azo~ 1 Sulanu 7.070.634 629.856 1.740.000 1.802.327 2.885.467 12.983 2 Anoa~ 3.765.03 335.392 926.532 959.720 1.536.481 6.914 3 Mdac1Suppba 2.714.518 0.00% 0 0.00% 0 65.50% 1.778,009 34.25% 929.722 0.25% 6.786 4 M.,- cs 563.846 23.005 129,685 13.00% 73.300 46.50% 262.188 16.50% 93.035 1.00% 5.638 5 War & 0n y 1.428.172 5.00% 71.409 15.00% 214.226 26.50% 378,465 53.00% 756.931 0.50% 7.141 6 O~r 2.149.510 9.71% 208.799 29.18% 627.329 11.75% 252.609 49.261 1.058,909 0.09% 1.864 7 ToW (1+2+3+4+5+6+7) 17,691,717 1,375.140 3.581,386 5.433.320 7.260.544 41.327 8 Sharina a A -m- Exp-no > 32.32% 13.02% 178993 54.56% 750,316 .10%= 1.321 9 Siang o Suppon Saff > 19.23 774.321 80.62% 3.24d.861 0.14% 5.715 10 Toa Cmu 0f 0a - (7+8+9) 6,386.633 11.256.722 48.362 11 N mber f Epay | 2306 F 224 673 271 1.136 2 12 Hur Workd pr Empy per Year 1 610 1610 1.610 13 Ammi Hour Workd (11112) 42 14 Com p Hour by typ of Staff (21/25) 14.64 6.15 15.02 B Costs for Out-Patient : 15 Timm pam for v n Om-Pint (% of Workd Hou)27.00 15.00% 100.00% 16 Hors p~ for viim~ Ou&-Pa,ins ((13*15)/3*1.5) 58,902 137.172 3.220 17 Durnoodvus(% of Hour) 60.00% 50.00% 75.00% 18 Nu-ber of (-Pait by typo of saff (16/17) 377.547 98.170 274,344 4.293 19 Coc of vn (14-17) 8.78 3.08 11.26 20 Tota10%* ~ne Etp- e (18919) 862.195 4.254 48.362 C Costs for In-Patient 21 Coa for In-P (10 - ToW row 20) 5,524.438 10.412,46710 22 Toal Numr cf Budb 635 23 Bas 0-=-na Rao 75.00% 24 Coet per Bed per Ytar (21122/23) 33.463.32 25 Nu-ber t In-Pnc~ Day@ 173.831 26 Con pr In-Pa Day (21/25) 91.68 26 Total In-Pa~iu Få~w-uno (Tabl row 21) 15,936,905 D Cost Anlysis 27 ToWal Con for tb Hospital (row 20 + row 21) F71.717 28 Total Com for Om-Pus (Total row 20) 1.754.812 29 Total Con for I-Panas (27-28) 15.936,905 D 1 Unit Cost per Out-Patient Con Per VIRa - Doaor (row 17) 8.78 - Nurm. (row 17) 3.08 - De~. (row 17) 11.261 D 2 Unit Cost per In-Patient - Una Com per Bd per Y.r (row 24) - Umt Con per In-Pm~ Day (row 26) 91.68 D3 Stafing Analysis Curre=g S~n~o Staff Numaber Staff Number Saarum Mo. Supplies Per BMd Alloances Per Staff - Doctor 271 0.43 10.192 6.561 - Nurna 1136 1.79 3.893 818 - D.nia 2 0.00 9.948 3,393 - Adm.vao 224 0.35 4.309 0 -Suppor Stff 673 1.06 3.962 0 -Total orAvrasg 2.306 3.63 4.699 1.177 'ab>e 4.1.2 Model for Calculating Unit Costs for In-patients & Out-patients (University Hospital) OVERNEAD & SUPPORT COSTS O P E R A T l 0 N C 0 3 T r 0ehd Suppo Suppon Dar Dar Nr Nur Dm r - Å Cos of Operation sarr Swf sLarf Tagal ~ ~ ~ t A[oe A.~_- Åm.-an~.i. An.-~- BdnLime kan Am~u Ri A.om Rs A..u- Ra.. Amo ..a Am~u R~s mu i Saaris 3.789.344 1.003.800 800.100 731. l 1.235.8= 18.116 2 Allow~ 1.860.753 49.10% 492.915 392.888 359.202 606.852 8.896 3 Mdi~ Suppis 1.722.917 0.005 0 0.00% 0 65.505 1.128.511 34.25% 590.099 0.25% 4.307 4 M.å- 794.091 23.00% 182.641 13.00% 103.232 46.50% 369.252 16.0% 131.025 1.00% 7.941 5 Wa a~&øEary 792.511 5.005 39.626 15.00% 118.877 26.50% 210.015 53.00% 420,031 0.50% 3.963 6 Oihe 1.956.822 27.66% 541.297 24.31% 475.616 8.91% 174.393 38.89% 760.986 0.23% 4.530 7 Tad (1+2+3.4+5.4.7) 10.91648 2.260.278 1,890,713 2.972.873 3,744.821 47.752 8 Shring at Adam-Ep-a.- > 33.60% 759.453 122% 278.6 53.76 1.215.126 032% 7.233 9 S nt af Spn Staff > 18.55% 491.718 % 2.145.677 0.48 12.T72 10 TallCondar--(746.9) 3.743.057 7,105.24 67.757 I Nbr af Emplos 864 239 210 77 336 2 12 Hur W~r pc Empoyep Ycr 1,610 1610 1,610 13 An~Mual rWo~e (11-12) 1 54.960 32 14 Co p Hu by typ af Staff (225) 30.19 13.14 21.04 B Cots for Out-Patient : 15 71m* paa for ~iid Ot-P s (% of Warked Hours) 15.50% 3.00% , 16 Hur p= far vmdaa Cut-P~dns ((13-15)/3·1.5) 9.608 8.114 3.220 17 Du n atfvus(% af Haur) 60.00S 50.00% 75.00% 18 Numr of <-Pa sby typof ataff (16117) 36,322 16.013 16.229 4293 19 C= of vu (14I17) 18.12 6.7 15.78 20 Tal Oau -Paa En (1819) 290,087 106.584 67.757 C Costs for In-Patient 21 Com for In-Pa (10 - Tol row 20) 3,452.970 6,999,040 22 Taal Nub a Beds 291 23 Bad Ow~7 Ruot 31.00% 24 Cmo per Bd per Year (21/22/23) 115.863 25 Nmbr- n-Pad Days 32.927 26 Co= per ln-Pa~ Day (2125) 317.43 26 TW an-Padim =e-ikn (T«osa row 21) 10,452.0I0 D Cost Analysis 27 ToWal Coa for tha H ~opital (row 20 + row 21) 10.916.438 28 Toal Coa for Ot-Pamg (Total row 20) 464.428 29 Total Cot for n-Pa^a (27-28) 10.42.010 D I Unit Cost per Out-Patient Ccm Per vIs - Daor (ro 17) 18.12 - Nuse (rom 17) 6.57 - De~t (ro 17) 15.78 Q 2 Unit Cost per In-Patient - Unit Co pr B"d per Yr (ro 24) 115.863 - U=a Co pr In-Paag Dy (ro. 26) 317.43 D3 Staffing Analysis Crrnt~ Sa~nan Staff Nuber Staff Numer S.lanes & M. Sup.plos. Pr B"d AlloWan Per Staff - Doctor 77 0.26 14.165 14.656 - Nurao 336 1.15 5.484 1.756 2 0.01 13.506 2.154 SA-.arøazow 239 0.82 6.262 0 - Suppon Staff 210 0.72 5.681 0 -Toaal ar Avr=go 864 2.97 6,539 1.994 Table 4.1.3 Model for CaIculating Unit Costs for In-patients & Out-patients (Health Center) OVERHEAD & SUPPORT COSTS O P E R A T l 0 N C O S T Ovrhd Ovrtd] Suäp~ supn Dr r NDrN Nurmom Densa r .. A Cost of Operations Sr T ABa~ An-- 1n~ _1. An~ na-A~ Budga Lim h~ Ra _1 Am~ R~ Amom 1 S.ne 67,044 5.624 12.927 33.253 15.240 0 2 Allau~ 35.700 53.25% 2.995 6.883 17.707 8.115 0 3 McdicalSup 60.000 0.00% 0 0.00% 0 65.5% 3,300 34.50% 20700 0.00% 0 4 M .-- 6.676 23.00% 1.53 13.00% 868 46.50% 3104 17.50% 1.168 0.00% 0 5 W~aer E~cny 5.648 5.00% 22 15.00% 847 26.50% 1,497 53.50% 3,022 0.00% 0 6 Othe 13,351 11.11% 1.483 27.78% 3,709 27.78% 3.709 33.33% 4,450 0.00% 0 7 Taal (1+2+34.5+6#7) 188,419 11.92 2523 98.569 0 8 Sharing atAfiratiw Expw > 31.25% 3,725 31.25% 3,725 37.50% = 470 0.00% 0 9 Sannga of SppoSaff > 45.45 13163 54.55% 15,796 0.00% 0 10 Total Coat - (79) 115.458 2,61 0 11 Number at Eciployes 18 2 5 5 6 0 12 H~urs Woritd p Employ per Yar 1.610 1.610 13 Ana HoutWorked (1112) 8.050 9.660 0 14 Coct pe Hour by t c Staff l(21/25) 14.34 7.55 0.00 B Costs for Out-Patient : 15 Tum pax for iuiing Out-Pas (5 at Workd Hovr) 100.00W% 0.00% 16 Hours a for vuting Out-Pas ((13115)/3*1.5) 8.050 9.660 0 17 Duau of -mas (% of Houx) 40.00~ 35.00S 0 .0% 18 Number of Om-Ptana by typc a staff (16/17) 47.725 20.125 27,600 0 19 Com of vu (14917) 5.74 2.64 0.00 20 TLal Om-t Eim a (18*19) 115.458 0 C Costs for In-Patient 21 Com for In-Panat (10 - TaWalo 20) 0 0 0 22 Total Num af d 0 23 n~ RA 0.00i 24 Com per Bld per Ymr (21/22/23) 0 25 Numer of ln-Pan Daya 0 26 Com per In-Påt Day (21/25) 0.0 26 Total In-Panont ExpIi~ ('aTal row 21) 0 D Cost Analysis 27 Total Con for the Hospital (row 20 + row 21) 18.419 28 Total Con for Out-Paut (rotal row 20) 188.419 29 Total Con for In-Pian (27-28) [ D1 Unit Cost per Out-Patient Con Per Viså - Domr (ro 17) 5.74 - Nurm (row 17) 2.64 - Dmut (row 17) 0.00 D 2 Unit Cost per In-Patient - Unia Con per Bed per Ymr (row 24) 0 - Umt Com per l-Pa-an Day (row 26) 0.00 D3 Staffing Analysis Currom Siua~on Staff Number Stn Nu -ber Salanes & Med. Supphes. Per Bed Alloa Per Staff - Docicr 5 0.00 10.192 7,860 - Nure 6 0.00 3.893 3,450 - Dectig 0 000 0 0 - Ami ,auvo 2 0.00 4.309 0 - Suppot Staff 5 0.00 3.962 0 - Ttal or Awrag 18 0.00 5.708 3.333 Notes of Appendix Tables 4.1.1 - 4.1.3 General The spreadsheet is presented in columns (A.. .K) and rows (1.. .4). Cells in grey have to be filled by the MOH. SECTION A (costs of operations) Ist Step (Fixed parameters) The figures in Al, A2, A3, A4, A5, A6 are given in the budget of the MOH. The figures in Cl, C2, El, E2, Gl, G2, II, 12, Kl, K2 are the result of applying the average salary + allowance for each category of staff provided by the MOH. The figures in All, C11, Ell, Gil, Ill, Kll & C22, are from the Annual Statistical Report of the MOH. (All these figures have to be updated). 2nd Step The figures in Al, A2 & A6, are broken down by taking into account the approximate number of staff in each category of staff. The figures A3, A4, A5 are broken down according to a key which takes into account who prescribes drugs (A3) who utilizes the maintenance services (A4) who uses up water and electricity (A5). A first total per category is given in A7, C7, E7, G7, 17 & K7. 3rd Step The figure C7 is broken down according to the proportion of each category of personnel in the other sections (support staff, doctors, nurses & dentists). Results are given in E8, G8, 18 & K8. Then the figure E8 is broken down according to the proportion of the three categories of health professionals (doctors, nurses & dentists). Results are given in G9, 19 & K9. The figures in G10, 110 & K10 are the final result of this sharing of the cost. This method is quite pragmatic. It is preferable to use the separate spreadsheet which is attached that permits a better breakdown of the figures. 4th Step The figures in G12, 112, & K12 are estimated on the basic of (52 weeks a year times five days a week times 7 hours a day, minus 4 weeks for vacation minus 70 hours of theoretic absence). The number of employees times the number of hours worked per employee per year times the number of employees gives the annual total of worked hours (G13, 113 & K13). These figures are used to calculated the hourly cost for the three categories of health professionals (doctors, nurses & dentists). SECTION B (costs for out-patients) The figures in G15, 115 & K15 are estimates of the proportion of the time spent by each category of health professional for visiting out-patients (the major part of the activity of the doctors and nurses is supposed to be devoted to in-patients). These data have to be provided by the Hospital management. The figures in G16, 116 & K16 are estimates of the real time spent to attend out-patients (50% of the time). The figures G17, 117 & K17 are an estimate of the duration of a visit. The figures in G18, 118 & K18 are the result of the following calculation : hours spent for visiting out-patients divided by the duration of the visits. The sum G18 + 118 + K18 has to be compared to the figure C18 given in the Annual Statistical Report of the MOH. The unit cost of a visit is obtained by multiplying the hourly cost by the duration of a visit. The amount spent by the hospital to treat out-patients is given in G20, 120 & K20 by multiplying the cost of a visit by the total number of visits. SECTION C (costs for in-patients) The total in-patients expenditures (G21+I21+K21) is given by subtraction: Total cost of operation (row 10) minus total out-patients expenditures (row 20). The figures C22, C23 & C25 are given in the Annual Statistical Report of the MOH. The cost per bed per year (C24) is obtained by the following calculation: Total cost for in- patients divided by the number of beds times the average bed occupation rate. The cost per in-patient day (C26) is a product of the division of the total cost for in-patients by the number of in-patient days. SECTION D (cost analysis) Section DI: C27, C28 & C29 have already been calculated elsewhere in the spreadsheet. Section D2: C30, C31 & C32 have also already been calculated elsewhere in the spreadsheet (G19, 119 & K19). Section D2: C33 & C34 have also already been calculated elsewhere in the spreadsheet (C24 & C26). Section D3: D35-D39 is the result of the division of the number of staff for each category by the total number of beds. E35-E39 is the same calculation for salaries + allowance. F35-F39 is the same calculation for medical supplies (only for health professionals). G35- G39 is the result of the division of the number of out-patients visited by each category of staff by the number of staff for each category. All the calculations have to be improved, using updated data and perhaps more detailed breakdown. Appendix Table 4.1 Distribution of the Population OMANI NON OMAN I TOTAL Cumulated Total Age Male Female Total Male Female Total Male Female Total Population Percent 0 4 157,366 152,684 310,050 6,854 11,054 17,909 164,220 163,738 327,958 327,958 16.40% 5 9 147,288 143,746 291,034 5,386 8,467 13,853 152,674 152,214 304,887 632,846 31.65% 10 14 107,753 102,038 209,790 2,938 4,469 7,406 110,690 106,506 217,197 850,042 42.51% 15 19 74,419 66,287 140,706 1,224 1,882 3,106 75,643 68,169 143,812 993,854 49.70% 20 24 51,938 49,902 101,840 12,730 13,171 25,901 64,668 63,073 127,741 1,121,595 56.09% 25 29 43,411 46,178 89,589 69,523 62,563 132,086 112,934 108,741 221,675 1,343,270 67.17% 30 34 36,434 37,985 74,419 62,179 56,918 119,098 98,614 94,903 193,517 1,536,787 76.85% 35 39 33,334 32,026 65,360 39,902 35,986 75,888 73,236 68,012 141,248 1,678,035 83.91% 40 44 30,233 28,302 58,535 23,990 22,109 46,099 54,223 50,411 104,634 1,782,670 89.14% 45 49 25,582 23,089 48,670 12,240 11,290 23,530 37,822 34,378 72,200 1,854,870 92.75% 50 54 22,481 19,365 41,846 5,386 4,939 10,325 27,866 24,304 52,170 1,907,040 95.36% 55 59 13,178 12,662 25,840 1,714 1,646 3,360 14,892 14,308 29,200 1,936,240 96.82% 60 64 13,954 12,662 26,615 490 470 960 14,443 13,132 27,575 1,963,815 98.20% 65 69 6,202 5,958 12,160 0 0 0 6,202 5,958 12,160 1,975,975 98.81% 70 74 5,426 5,958 11,385 0 0 0 5,426 5,958 11,385 1,987,360 99.38% 75 6,202 5,958 12,160 0 235 235 - 6,202 6,194 12,395 1,999,755 100.00% Total 775,200 744,800 1,520,000 244,555 235,200 479,755 1,019,755 980,000 1,999,755 Source : Statistical Year Book (1990) Development Council - Directorate General of National Statisics Appendix Table 4.2.1 Inpatient Morbidity Statistical Report (General Groups - All Hospitals) (ICD GROUP 11A & 11B excluded) ICD Group Disease / Condition 1991 1991 1991 1991 1991 1991 Code Total (a) in percent Male (a) in percent Female (a) in percent 8 Diseases of the Respiratory System 25,919 19.77% 14,106 19.39% 11,813 20.23% 1 Infectious & Parasitic Diseases 18,930 14.44% 10,215 14.04% 8,715 14.92% 17 Injuries & Poisonning 15,061 11.49% 10,312 14.18% 4,749 8.13% 7 Diseases of the Circulatory System 10,593 8.08% 5,992 8.24% 4,601 7.88% 9 Diseases of the Digestive System 10,160 7.75% 5,523 7.59% 4,637 7.94% 10 Diseases of the Genifourinary System 8,459 6.45% 3,373 4.64% 5,086 8.71% 16 Symptoms, Signs & Ill-Defined Conditions 8,344 6.36% 4,561 6.27% 3,783 6.48% 6 Diseases of the Nervous System & Sense Organs 6,034 4.60% 3,564 4.90% 2,470 4.23% 12 Diseases of the Skin & Subcutaneous Tissue 4,789 3.65% 3,309 4.55% 1,480 2.53% 15 Conditions Originating in the Perinatal Period 4,274 3.26% 2,289 3.15% 1,985 3.40% 3 Endocrine, Nutritional, Metabolic &immunity Disordes 4,224 3.22% 1,740 2.39% 2,484 4.25% 4 Diseases of the Blood & blood forming Organs 4,056 3.09% 2,141 2.94% 1,915 3.28% 13 Diseases of the Musculoskeletal System & Connective Tissue 3,079 2.35% 1,744 2.40% 1,335 2.29% 2 Neoplasms 2,215 1.69% 1,082 1.49% 1,133 1.94% 18 Other Reasons for Contact with Health Services 2,007 1.53% 1,140 1.57% 867 1.48% 14 Congenital Anomalies 1,571 1.20% 957 1.32% 614 1.05% 5 Mental Disorders 1,411 1.08% 685 0.94% 726 1.24% 1 Total 131,126 100.00% 72,733 100.00% 58,393 100.00% (a) Total Discharges, Dead & Alive. Source Annual Statistical Report (MOH - Directorate General of Planning) Appendix Table 4.2.2 Inpatient Morbidity Statistical Report (General Groups - All Hospitals) ICD Group Disease / Condition 1991 1991 1991 1991 1991 1991 Code Total (a) in percent Male (a) in percent Female (a) in percent 11 B Normal Delivery 41,168 21.73% 0 0.00% 41,168 35.26% 8 Diseases of the Respiratory System 25,919 13.68% 14,106 19.39% 11,813 10.12% 1 Infectious & Parasitic Diseases 18,930 9.99% 10,215 14.04% 8,715 7.46% 11 A Complications of Pregnancy & Birth 17,188 9.07% 0 0.00% 17,188 14.72% 17 Injuries & Poisonning 15,061 7.95% 10,312 14.18% 4,749 4.07% 7 Diseases of the Circulatory System 10,593 5.59% 5,992 8.24% 4,601 3.94% 9 Diseases of the Digestive System 10,160 5.36% 5,523 7.59% 4,637 3.97% 10 Diseases of the Genitourinary System 8,459 4.46% 3,373 4.64% 5,086 4.36% 16 Symptoms, Signs & Ill-Defined Conditions 8,344 4.40% 4,561 6.27% 3,783 3.24% 6 Diseases of the Nervous System & Sense Organs 6,034 3.18% 3,564 4.90% 2,470 2.12% 12 Diseases of the Skin & Subcutaneous Tissue 4,789 2.53% 3,309 4.55% 1,480 1.27% 15 Conditions Originating in the Perinatal Period 4,274 2.26% 2,289 3.15% 1,985 1.70% 3 Endocrine, Nutritional, Metabolic &immunity Disordes 4,224 2.23% 1,740 2.39% 2,484 2.13% 4 Diseases of the Blood & blood forming Organs 4,056 2.14% 2,141 2.94% 1,915 1.64% 13 Diseases of the Musculoskeletal System & Connective Tissue 3,079 1.62% 1,744 2.40% 1,335 1.14% 2 Neoplasms 2,215 1.17% 1,082 1.49% 1,133 0.97% 18 Other Reasons for Contact with Health Services 2,007 1.06% 1,140 1.57% 867 0.74% 14 Congenital Anomalies 1,571 0.83% 957 1.32% 614 0.53% 5 Mental Disorders 1,411 0.74% 685 0.94% 726 0.62% Total 189,482 100.00% 72,733 100.00% 116,749 100.00% (a) Total Discharges, Dead & Alive. Source : Annual Statistical Report (MOH - Directorate General of Planning) Appendix Table 4.3.1 Regional Distribution of Population, Hospitals & Health Centers under the MO Region Population Hospitals Health H. Centers Public Quarantine MCH Malaria (*) Centers whithout Health Units Centers Control whith beds beds Units Centers Muscat 444,472 7 0 9 4 3 1 0 Dhofar 216,546 5 5 19 13 2 0 0 Dakhilya 247,294 6 0 10 9 0 0 3 Shargy 290,784 10 0 18 17 0 1 2 NorthlBatinah 369,427 4 1 8 7 1 0 1 South Batinah 212,541 5 1 6 7 0 0 4 Dhahira 180,780 4 1 8 9 1 0 1 Musadam 31,766 3 3 1 1 0 0 1 Al Woustah 6,390 2 1 3 1 0 0 0 Total 2,000,000 46 12 82 68 7 2 12 Source Annual Statistical Report (MOH - Directorate General of Planning) (*) Statistical Year Book (1990) Development Council - Directorate General of National Statistics Appendix Table 4.3.2 Regional Distribution of Private Health Facilities (1990) Region Dental Specialist General Total pharmacies Clinics Clinics Clinics Health Clinics Facilities Muscat 15 14 66 95 69 Dhofar 4 2 12 18 18 Dakhilya 3 0 19 22 10 Sharqiya 3 0 30 33 15 Batinah 7 1 92 100 31 Dhahira 0 7 17 24 14 Total 32 24 236 292 157 Source- (*) Statistical Year Book (1990) Development Council - Directorate General of National Stati Appendix Table 4.4 Regional Distribution of Population per Hospitals beds & Health Region Population Hospitals Total Pop. per Pop. per (*) Beds Health Hospitals H. Centers Centers Beds Muscat 444,472 1,450 9 307 49,386 Dhofar 216,546 377 24 574 9,023 Dakhilya 247,294 351 10 705 24,729 Sharqiya 290,784 499 18 583 16,155 North Batinah 369,427 262 9 1,410 41,047 South Batinah 212,541 190 7 1,119 30,363 Dhahira 180,780 207 9 873 20,087 Musadam 31,766 89 4 357 7,942 Al Woustah 6,390 48 4 133 1,598 Total 2,000,000 3,473 94 576 21,277 Total (without Muscat) 1,555,528 2,023 85 769 18,300 Source Annual Statisstical Report (MOH - Directorate General of Planning) (*) Statistical Year Book (1990) Development Council - Directorate General of National Statistics Appendix Table 4.5 Development of Health Services (1971 - 1990) No of Indice of No of Indice of No of Indice of No of Indice of No of Indice of In-Patients Growth Hospital Growth Out-Patients Growth Doctors Growth & Nurses Growth (1971 = 100) beds (1971 = 100) (1971 = 100) (1971 100) (1971 = 100) 1971 3,974 100 216 100 56,098 100 46 100 77 100 1972 12,430 313 526 244 120,380 215 61 133 115 149 1973 23,140 582 664 307 145,110 259 84 183 208 270 1974 28,800 725 934 432 183,330 327 150 326 335 435 1975 56,119 1,412 1,000 463 1,376,580 2,454 147 320 411 534 1976 64,900 1,633 1,252 580 1,982,000 3,533 160 348 522 678 1977 77,700 1,955 1,409 652 2,449,300 4,366 202 439 624 810 1978 86,431 2,175 1,409 652 2,564,317 4,571 208 452 659 856 1979 92,462 2,327 1,428 661 2,777,400 4,951 215 467 687 892 1980 108,208 2,723 1,784 826 3,123,354 5,568 294 639 857 1,113 1981 125,608 3,161 1,866 864 2,525,854 4,503 348 757 1,025 1,331 1982 134,999 3,397 2,041 945 3,328,434 5,933 385 837 1,164 -1,512 1983 142,722 3,591 2,133 988 3,616,137 6,446 465 1,011 1,386 1,800 1984 155,546 3,914 2,587 1,198 4,071,611 7,258 572 1,243 1,753 -2,277 1985 150,798 3,795 2,813 1,302 4,589,863 8,182 638 1,387 1,947 2,529 1986 151,868 3,822 2,841 1,315 4,821,734 8,595 674 1,465 2,057 2,671 1987 166,611 4,193 3,450 1,597 5,296,596 9,442 836 1,817 2,973 3,861 1988 177,470 4,466 3,316 1,535 5,435,136 9,689 907 1,972 3,260 4,234 1989 177,338 4,462 3,360 1,556 5,591,425 9,967 919 1,998 3,274 4,252 1990 183,375 4,614 3,431 1,588 5,837,768 10,406 994 2,161 3,512 4,561 Average Annual Rate of Growth (1971/80) 39.16% 23.51% 49.47% 20.38% 27.25% Average Annual Rate of Growth (1981/90) 3.86% 6.28% 8.74% 11.07% 13.11% Average Annual Rate of Growth (1971/90) 22.34% 15.67% 83.53% 17.56% 22.27% Source: (*) Statistical Year Book (1990) Development Council - Directorate General of National Statistics Appendix Table 4.6 Staff employed under Ministry of Health by region (1991) National North South Ministry Categories Total Muscat Dhofar Dakhilya Sharqiya Batinah Batinah Dhahira Musandam Woustah (a) 1 Health Administrators 54 10 2 3 0 3 3 4 1 0 28 2 Doctors 1,167 515 107 112 124 85 50 69 30 4 71 3 Dentists 54 18 6 5 5 5 2 5 1 1 6 4 Pharmacists 37 9 6 1 6 1 1 2 0 0 11 5 Nurses 3,855 2,020 310 326 360 286 153 178 75 26 119 6 Medical/Health Assistants 100 19 16 16 20 7 6 7 6 3 0 7 .Physiotherapists 38 26 4 1 2 1 0 0 0 0 4 8 Sanitary Inspect/Supervs/ Quarantine Supervisors 156 32 11 23 26 11 11 13 2 0 27 9 RadiographerslX-Ray Tech 145 63 13 15 14 9 5 7 4 1 14 10 Microbiologists/Lab Tech/ Chemists/Assistants 405 189 36 29 28 19 14 17 8 2 63 11 Assistant Pharmacists Dispensers 194 50 12 19 18 11 14 13 4 2 51 12 Medical Orderlies 1,851 701 141 214 296 140 115 119 35 22 68 13 Other paramedical Staff 433 86 29 59 82 37 40 18 11 2 69 14 Other medical staff 363 102 16 26 36 2 26 17 1 2 135 15 Other support staff 3,728 927 231 361 465 270 231 186 118 26 913 16 Teachers/Tutors 56 0 3 3 1 4 0 4 0 0 41 Total 12,636 4,767 943 1,213 1,483 891 671 659 296 91 1,619 Percentage of total staff 100.00% 37.73% 7.46% 9.60% 11.74% 7.05% 5.31% 5.22%1 2.34% 0.72% 12.81% (a) Includes Ministry & D GS, Malaria cotrol, I H S, Institute of 0 P.H, Institute of Ass. Pharmacists Source- Annual Statistical Report (MOH - Directorate General of Planning) Appendix Table 4.7 Repartition of medical supplies by type of product (1991) Value in Percentage Amount RO Million RO per capita (a) Drugs 6,784,448 73.6% 3.392 Equipments 1,345,828 14.6% 0.673 Medical Devices & Dressing 506,990 5.5% 0.253 Laboratories 414,810 4.5% 0.207 Dental 119,834 1.3% 0.060 Prosthesis & Orthopedics 46,090 0.5% 0.023 Total 9,218,00 100.0% 4.609 (a) Excluding University Hospital Source . MOH (Directorate General Pharmaceutical Affairs & Drug Control) Appendix Table 4.8 Regional Distribution of Medical Supplies Region Population Value Average Value Average % Change Amount RO in RO In % in RO In% 1991-92 r 1000 1991 1992 (a) (b) Pop. (c) Muscat 444,472 2,342,000 25.41% 1,721,000 23.18% -2.02% 10.6 Royal Hospital (d) 2,208,000 23.95% 1,903,000 25.64% 14.92% Dhofar 216,546 1,022,000 11.09% 805,000 10.84% 5.02% 4.8 Dakhilya 247,294 692,000 7.51% 611,000 8.23% 17.73% 3.0 Sharqiya 290,784 949,000 10.30% 738,000 9.94% 3.69% 3.3 North Batinah 369,427 948,000 10.28% 775,000 10.44% 9.00% 2.7 South Batinah 212,541 434,000 4.71% 328,000 4.42% 0.77% 2.0 Dhahira 180,780 490,000 5.32% 415,000 5.59% 12.93% 2.9 Musadam 31,766 133,000 1.44% 127,000 1.71% 27.32% 4.8 Al Woustah (e) 6,390 Total 2,000,000 9,218,000 100.00% 7,423,000 100.00% 7.37% 4.8 Toal (without Muscat) 1,555,528 4,668,000 3,799,000 8.51% Source Annual Statistical Report (MOH - Directorate General of Planning) (*) Statistical Year Book (1990) Development Council - Directorate General of National Statistics (a) First nine months of the year (b) Estimate value for 1992 (c) Average for 1991 & 1992 (d) Average given in Muscat region (e) Included in Dakhliya Appendix Table 4.9 Comparison between the drugs purchase prices of the DGPA and international drugs purchase prices 1 2 3 4 = (3/4) 5 = (1*2) 6 = (l*3) 7 = (6/5) International Nonproprietary or Unit Quantity International D.G.P.A. Purchase Total Cost Total Cost Total Name & Dosage per 1000 Purchase (a) Purchase (b) Price with Inter. with D.P.G.A Purch. Price (a) Price (1991) Price (1991) Diff.(in %) Purchase Price Purchase Price Diff.(in %) Acetylsalicylate lysine 500mg inj vial 100 0.199 0.420 110.93% 19,912 42,000 110 93% Acide ascorbique 500mg nj vial 100 0 091 0.162 77.59% 9,145 16,240 77 59% Amino acides 500ml inj bottle 6 1.752 2.550 45.53% 10,513 15,300 45 53% Adrenaline Img inj vial 30 0 021 0.090 322.58% 639 2,700 322.58% Amiodarone 150mg mj vial 2 0.270 0.650 140.36% 541 1,300 140.36% Atropine sulfate 0,25mg mj vial 80 0.011 0.085 684.08% 867 6,800 684 08% BenzylpenilBenzathine 2,4 MU inj bottle 50 0.166 0200 20.83% 8,289 10,016 20.83% Cefotaxime I g inj vial 3 2.802 1.925 -31.31% 8,407 5,775 -31.31% Chloramphenicol 250mg oral coate 200 0.025 0.014 -45.03% 4,912 2,700 -45.03% Chlorazepate dipotassique 10 oral tablet 30 0.021 0.041 95.29% 635 1,240 95.29% Chloroquine 100mg oral tablet 15,000 0.006 0.007 7.86% 97,345 105,000 7.86% Chloroquine 100mg/2ml ini vial 10 0.125 0.105 -16.25% 1,254 1,050 -16.25% Chlorpromazine 25mg mj vial 5 0.100 0.018 -81.70% 500 92 -81.70% Colchicine 1mg oral tablet 10 0.022 0.060 179.64% 216 603 179 64% Cotrimoxazole 160mg/800mg inj vial 10 0.419 0.612 45.98% 4,189 6,115 45.98% Cotrinoxazole 160mg/800mg oral tablet 500 0.048 0 016 -67.46% 23,968 7,800 -67.46% Cotrimoxazole 40mg/200mg oral bottle 100 0.664 0.546 -17.74% 66,372 54,600 -17.74% Dexamethasone 4mg inj vial 60 0.146 0.129 -11.38% 8,761 7,764 -11.38% Dextran 40 000 (3,5 % ) 500ml inj bottle 2 2.043 1 490 -27.06% 4,086 2,980 -27.06% Dobutamine 250mg (base) inj bottle 3 0.486 3.153 548.29% 1,459 9,459 548.29% Droperidole 50mg/Haloperidol inj vial 2 0.124 0.200 61.58% 248 400 61.58% Erythromycine 500mg oral tablet 80 0.045 0.012 -74.46% 3,617 924 -74.46% Furosemide 20mg mj vial 80 0.234 0.060 -74.35% 18,714 4,800 -74.35% Furosemide 250mg inj vial 20 0.427 2.350 449.79% 8,549 47,000 449.79% Gentamicine 40mg inj vial 50 0.189 0.224 18.41% 9,459 11,200 18.41% Glucose 10 % 500ml inj bottle 30 0 633 0.355 -43.90% 18,982 10,650 -43.90% Glucose 30 % 20ml inj vial 20 0.067 0.060 -10.65% 1,343 1,200 -10.65% Glucose 5 % 500ml inj bottle 250 0.504 0.335 -33.59% 126,106 83,750 -33.59% Insuline retard 40 UI/ml Inj bottle 3 0.897 2.700 201.09% 2,690 8,100 201.09% Iron + Acide folique oral tablet 520 0011 0014 21.85% 5,975 7,280 21.85% Ketamine 50mg inj vial 5 0.343 4.750 1282.90% 1,717 23,750 1282.90% Lidocaine I % 20ml inj vial 3 0.341 0.230 -32.49% 1,022 690 -32.49% Lidocaine 2 % Adrenaline inj syrin 30 0.327 3.250 892.57% 9,823 97,500 892.57% Loperamide 2mg oral capsu 30 0.065 0.085 31.40% 1,936 2,544 31 40% Methyldopa 250mg oral tablet 15 0.024 0.012 -49.28% 354 180 -49.28% Metronidazole 250mg oral tablet 350 0.009 0.006 -31.74% 3,046 2,079 -31 74% Metronidazole 4g/I00ml susp. oral bottle 500 0.369 0.595 61.36% 184,366 297,500 61 36% Nifedipine 10mg oral tablet 10 0 086 0 036 -57.90% 860 362 -57 90% Nystatine 0,1 MU gyn tablet 20 0.040 0.068 70.55% 792 1,350 70.55% Nystatine 0,5 MU oral coate 30 0 036 0.050 37.66% 1,090 1,500 37.66% Paracetamol 500mg oral tablet 1,500 0.005 0.003 -35.22% 6,947 4,500 -35.22% Potassium chlorure 572mg oral tablet 5 0 015 0.007 -54.80% 73 33 -54.80% Prednisone 5mg oral tablet 200 0.012 0.006 -54 52% 2,419 1,100 -54 52% Rifampicine 300mg oral capsu 10 0.073 0.092 26.27% 729 920 26.27% Serum antitetanique 1500UI inj syrin 80 0.490 0.225 -54.12% 39,233 18,000 -54.12% Sodium chlorure 0,9 % 500ml inj bottle 150 0 499 0.330 -33.80% 74,779 49,500 -33 80% Sodium chlorure 10 % 10ml inj vial 10 0.034 0.035 1.98% 343 350 1.98% Sodium lactate 500mI inj bottle 1 0.758 0.330 -56 47% 758 330 -56.47% Streptomycme sulfate Ig inj bottle 50 0.122 0.150 2342% 6,077 7,500 23.42% Water for injection 5ml mj vial 400 0.018 0.020 15.77% 7,080 8,196 15.77% Total and Average 811,131 992,720 22.39% Source (a) Purchase prices of the Health Care Pharmacy of C6tc d'Ivoirc (change rate 1 RO = 678 FCFA) (b) Purchase pnces of the Directorate General Pharmaceutical affairs & Drug Control Appendix Table 4.10.1 Regional Distribution of Attendances in Hospitals by Type of Clinic Total Muscat Other Total Muscat Other Regions Regions General Practice 3,253,972 364,476 2,889,496 49.6% 26.4% 55.7% Pediatrics 601,057 85,901 515,156 9.2% 6.2% 9.9% A & E Casualty 487,931 210,512 277,419 7.4% 15.3% 5.3% General Medicine 381,902 182,068 199,834 5.8% 13.2% 3.9% Ophtalmology 246,889 68,350 178,539 3.8% 5.0% 3.4% Dental 229,991 57,311 172,680 3.5% 4.2% 3.3% Immunization 218,888 31,147 187,741 3.3% 2.3% 3.6% Obst. & Gynaecology 173,840 36,628 137,212 2.6% 2.7% 2.6% Dermatologie 164,936 63,539 101,397 2.5% 4.6% 2.0% Antenatal 161,784 57,910 103,874 2.5% 4.2% 2.0% Child Health 148,517 0 148,517 2.3% 0.0% 2.9% General Surgey 145,679 43,516 102,163 2.2% 3.2% 2.0% ENT 138,642 58,729 79,913 2.1% 4.3% 1.5% Orthopedics 81,992 42,037 39,955 1.2% 3.0% 0.8% Others 63,231 32,038 31,193 1.0% 2.3% 0.6% Psychiatry 41,658 33,154 8,504 0.6% 2.4% 0.2% Urology 9,146 4,423 4,723 0.1% 0.3% 0.1% Chest Diseases 8,898 6,191 2,707 0.1% 0.4% 0.1% Postnatal 6,758 814 5,944 0.1% 0.1% 0.1% Immunization School 599 0 599 0.0% 0.0% 0.0% Immunization Outreach 125 0 125 0.0% 0.0% 0.0% Total 6,566,435 1,378,744 5,187,691 100.0% 100.0% 100.0% Source Annual Statistical Report (MOH - Directorate General of Planning) Appendix Table 4.10.2 Compared Regional Distribution of Attendances in Hospitals & Health Centers by Type of Clinic Health Health Health Hospitals Hospitals Hospitals Centers Centers Centers Other Total Muscat Other Total Muscat Regions Regions General Practice 91.0% 94.7% 90.3% 49.6% 26.4% 55.7% Antenatal 2.9% 1.7% 3.2% 9.2% 6.2% 9.9% Immunization 2.9% 3.5% 2.8% 7.4% 15.3% 5.3% Child Health 2.5% 0.0% 3.0% 5.8% 13.2% 3.9% Postnatal 0.2% 0.1% 0.3% 3.8% 5.0% 3.4% Immunization School 0.2% 0.0% 0.2% 3.5% 4.2% 3.3% Others 0.1% 0.0% 0.1% 3.3% 2.3% 3.6% Immunization Outreach 0.1% 0.0% 0.1% 2.6% 2.7% 2.6% Dental 0.1% 0.0% 0.1% 2.5% 4.6% 2.0% Total 100.00% 100.00% 100.00% 87.71% 79.78% 89.82% Source . Annual Statistical Report (MOH - Directorate General of Planning) Appendix Table 4.11.1 Regional Distribution of Attendances in Hospitals & Health Centers Total Muscat Dhofar Dakhilya Sharqiya North South Dhahira Musadarn Al Woustah Batinah Batinah Population (*) 2,000,000 444,472 216,546 247,294 290,784 369,427 212,541 180,780 31,766 6,390 1 - Health Centers (H.C.) No of Health Centers 84 9 14 10 18 9 7 9 4 4 No of Attendances 3,397,023 563,393 329,872 427,692 370,115 650,095 636,610 301,251 47,395 70,600 Attendances per Population 1.7 1.3 1.5 1.7 1.3 1.8 3.0 1.7 1.5 11.0 Daily Attendances per H.C. 111 172 65 117 56 198 249 92 32 48 2 - Hospitals (H.) No of Hospitals 46 7 5 6 10 4 5 4 3 2 No of Attendances 6,566,435 1,378,744 637,529 985,999 1,359,624 869,786 416,904 664,918 207,605 45,326 Attendances per Population 3.3 3.1 2.9 4.0 4.7 2.4 2.0 3.7 6.5 7.1 Daily Attendances per H. 391 540 349 450 372 596 228 455 190 62 Source Annual Statistical Report (MOH - Directorate General of Planning) (*) Statistical Year Book (1990) Development Council - Directorate General of National Statistics Appendix Table 4.11.2 Regional Distribution of Hospial's activity Total Muscat Dhofar Dakhilya Sharqiya North South Dhahira Musadam Al Woustah Batinah Batinah Bed Strength 3,470 1,448 376 351 499 262 190 207 89 48 Discharges 189,482 50,706 16,513 26,219 36,053 23,564 12,455 17,715 4,715 1,542 Patient Days 897,696 395,278 93,285 95,319 119,016 69,056 44,800 59,625 15,382 5,935 Mean Stay 4.7 7.8 5.6 3.6 3.3 2.9 3.6 3.4 3.3 3.8 Occupancy Rate 71% 75% 68% 74% 65% 72% 65% 79% 47% 34% Source: Annual Statistical Report (MOH - Directorate General of Planning) Appendix Table 4.12.1 Evolution of the MOH's Budget (Proposed Budget in RO '000) MOH's Budget National Budget Share of MOH (%) Current Capital Total Balance Costs of Total Current Current Total Current Current Total Current Expenditure Expenditure Expenditure Costs of New Allocations Revenue Expenditure Allocations Revenue Expenditure Allocations Revenue (Equipments On-going Projects Estimates & Capital Estimates & Capital Estimates & Furniture) Projects Expenditure Expenditure 1989 59,635 1,838 61,473 n.a. 12,840 n.a. 1,312 768,300 n.a. 205,000 8 00% 0 64% 1990 67,719 1,771 69,490 16,235 16,150 32,385 1,334 636,700 515,554 205,300 1091% 628% 065% 1991 75,295 3,421 78,716 24,316 16,759 41,075 1,771 712,819 712,819 265,400 1104% 576% 067% 1992 81,151 3,858 85,009 50,829 21,364 72,193 4,448 701,100 903,756 278,000 12 13% 7.99% 1 60% 89-92 change 3608% 109.90% 3829% 21308% 66.39% 12292% 239.02% -8.75% 75.30% 35.61% Annual rate of growth 10 81% 28.04% 1141% 7694% 17.31% 49 31% 50.23% -3.00% 32.40% 10.69%1 Appendix Table 4.12.2 Ministry of Health - Actual Expenditures 1988/1991 1988/1991 Percent Percent Percent Percent Total Av. annual Categories 1988 of total 1989 of total 1990 (a) of total 1991 (a) of total % Change % Change Salaries 23,236,136 37.8% 24,403,650 38.5% 30,181,646 39.5% 33,875,594 39.8% 45.8% 24.7% Employee Benefits 16,073,354 26.2% 16,717,121 26.4% 20,949,086 27.4% 19,632,988 23.1% 22.1% 14.8% Operating Expenses 22,129,996 36.0% 22,198,732 35.1% 25,251,609 33.1% 31,621,812 37.1% 42.9% 12.6% - Medical supplies 7,439,391 12.1% 6,989,591 11.0% 9,179,489 12.0% 12,282,299 14.4% 65.1% 18.2% - Electricity and Water 2,321,086 3.8% 2,807,962 4.4% 3,605,438 4.7% 4,655,165 5.5% 100.6% 26.1% - Spares & Maintenance 1,914,551 3.1% 2,235,261 3.5% 2,376,716 3.1% 3,158,203 3.7% 65.0% 18.2% - Food Supplies 1,927,775 3.1% 1,569,428 2.5% 1,617,891 2.1% 1,565,058 1.8% -18.8% -6.7% - Machinery & Vehicle Fuel 1,921,676 3.1% 1,664,101 2.6% 1,441,550 1.9% 1,382,570 1.6% -28.1% -10.4% - Other 6,605,516 10.8% 6,932,389 10.9% 7,030,525 9.2% 8,578,516 10.1% 29.9% 9.1% Total Recurrent Expenses 61,439,486 100.0% 63,319,502 100.0% 76,382,341 100.0% 85,130,394 100.0% 38.6% 11.5% Total Recurrent Expenses 61,439,486 94.2% 63,319,502 87.2% 76,382,341 92.7% 85,130,394 88.5% 38.6% 11.5% Capital Expense 1,934,906 3.0% 1,505,732 2.1% 3,729,463 4.5% 4,411,762 4.6% 128.0% 31.6% Total Recurrent & Capital Expense 63,374,392 64,825,234 80,111,804 89,542,156 41.3% 12.2% Development Expense 1,837,697 2.8% 7,772,740 10.7% 2,241,807 2.7% 6,696,009 7.0% 264.4% 53.9% Total Ministry 65,212,089 100.0% 72,597,975 100.0% 82,353,611 100.0% 96,238,165 100.0% 47.6% 13.9% (a) Including the University Hospital Appendix Table 4.13 Regional Distribution of the MOH's Actual Budget (Average for 1990 & 1991) Region Population Recurrent Recurrent Recurrent Capital Development Total Total Total (*) Expenses Expenses Expenses Expense Expense Budget Budget Budget RO Percent RO Per Capita RO RO RO Percent 0 Per Capita Ministry of Health Main Office (a) 19,248,544 2,056,201 4,468,908 25,773,653 Muscat (b) 444,472 37,440,189 60.87% 84.24 1,843,119 0 39,283,307 61.84% 88.38 Dhofar 216,546 4,400,249 7.15% 20.32 42,699 0 4,442,948 6.99% 20.52 Dakhilya 247,294 4,746,582 7.72% 19.19 21,068 0 4,767,650 7.51% 19.28 Sharqiya 290,784 5,718,739 9.30% 19.67 14,829 0 5,733,569 9.03% 19.72 North 13atinah 369,427 3,308,236 5.38% 8.96 43,288 0 3,351,524 5.28% 9.07 South Batinah 212,541 2,303,434 3.74% 10.84 10,008 0 2,313,442 3.64% 10.88 Dhahira 180,780 2,512,945 4.09% 13.90 31,010 0 2,543,955 4.00% 14.07 Musadam 31,766 1,077,449 1.75% 33.92 8,391 0 1,085,841 1.71% 34.18 Total (without MOH Main Office) 1,993,610 61,507,823 100.00% 30.85 2,014,412 0 63,522,235 100.00% 31.86 Total (with MOH Main Office) 80,756,367 4,070,612 4,468,908 89,295,888 (a) Including Plan for Health Development (b) Including Royal Hospital & University Hospital Appendix Table 4.14 Development Expenditure - Total Sector Total Value Plan's Period Sector alue (RO Percent 1991 1992 1993 1994 1995 Service Sector New Projects 0.194 0.2% 0.194 Ongoing Projects 0.000 0.0% Social Structures New Projects 82.988 76.9% 16.759 20.161 19.923 21.759 4.386 Ongoing Projects 23.865 22.1% 23.865 Infrastructures New Projects 0.000 0.0% Ongoing Projects 0.851 0.8% 0.400 0.451 Total New Projects 83.182 77.1% 16.759 20.161 19.923 21.759 4.580 Total Ongoing Projects 24.716 22.9% 24.265 0.451 0.000 0.000 0.000 Grand Total 107.898 100.0% 41.024 20.612 19.923 21.759 4.580 Source The Fourth Five Development Plan (1991-1995) Development Council General Secretariat 1 Development Expenditure - New Projects 2 Development Expenditure - Ongoing Projects Appendix Table 4.15 Development Expenditure - Distribution by level of care Total Ist Level 2nd Level 3rd Level Region Value Percent Percent Percent (RO million) Al Woustah 0.000 0.00% 0.00% 0.00% Al Woustah 0.248 100.00% 0.00% 0.00% Dakhilya 14.899 4.44% 95.56% 0.00% Dakhilya 8.024 6.44% 93.56% 0.00% Dhalura 13.784 13.28% 86.72% 0.00% Dhahra 0.000 0.00% 0.00% 0.00% Dhofar 5.908 20.79% 79.21% 0.00% Dhofar 0.441 0.91% 99.09% 0.00% Musandan 4.359 2.64% 97.36% 0.00% Musandam 0.008 100.00% 0.00% 0.00% Muscat 5.887 0.00% 87.01% 12.99% Muscat 3.657 4.18% 7.41% 88.41% North Batinah 18.886 0.00% 100.00% 0.00% North Batinah 3.939 69.89% 18.66% 11.45% Sharqiya 14.201 9.22% 90.78% 0.00% Sharqiya 0.473 0.00% 100.00% 0.00% South Batmah 2.783 100.00% 0.00% 0.00% South Batmah 7.010 0.00% 100.00% 0.00% National level 2.500 0.00% 0.00% 100.00% National level 0.516 29.84% 70.16% 0.00% Subtotal 1 in value 83.207 7.929 72.013 3.265 Subtotal 1 in percent 100.00% 9.53% 86.55% 3.92% Subtotal 2 in value 21.300 3.683 16.433 1.184 Subtotal 2 n percent 100.00% 17.29% 77.15% 5.56% Total 1+2 in value 104.507 11.612 88.446 4.449 Total 1+2gpercent 100.00% 11.11% 84.63% 4.26% Source The Fourth Five Development Plan (1991-1995) Development Council General Secretanate 1 Development Expenditure - New Projects 2 Development Expenditure - Ongoing Projects Appendix Table 4.16 Budgetary Forecast Actual Forecast Forecast Forecast Forecast A - Actual expenditure 1991 1992 (a) 1993 (a) 1994 (a) 1995 (a) Salaries 33,875,594 35.908,129 38,062,617 40,346,374 42.767,157 Employee Benefits 19,632,988 20,810,968 22,059,626 23,383,203 24,786,195 Operating Expenses (of which) 31,621,812 33,519,120 35,530,268 37,662,084 39,921,809 - Medical supplies 12,282,299 13,019,237 13,800,392 14,628,415 15,506,120 - Electricity and Water 4,655,165 4,934,475 5,230,544 5,544.377 5,877.039 - Spares & Maintenance 3.158,203 3,347,696 3,548,557 3,761.471 3,987,159 - Food Supplies 1,565,058 1,658,961 1,758,499 1,864,009 1,975,850 - Machinery & Vehicle Fuel 1,382.570 1,465.524 1,553,455 1,646,663 1,745,463 - Other 8,578,516 9,093,227 9,638,820 10,217,149 10,830,178 Total Recurrent Expenses (1+2+3) 85,130,394 90,238,217 95,652,510 101,391,661 107,475,161 Capital Expense 4,411,762 4,676,468 4,957,056 5,254.479 5,569,748 Development Expense 6.696,009 Total (10+11+12) 96,23816 94 100,609,566 1066461 113,044,909 (a) Average annual growth rate 6.00% B - Health Development Programs Salaries & Employee Benefits 6,430,000 6,345.000 6,310,000 6,295,000 Operating Expenses (of which) 1.248,700 1,163,860 1,380,600 1,605,060 - Medical supplies 200,000 25,000 30,000 36,000 - Electricity and Water - Spares & Maintenance - Food Supplies - Machinery & Vehicle Fuel 10,700 6,860 5,600 6,060 - Other 1,038,000 1,132,000 1,345,000 1,563,000 Total Recurrent Expenses (14.15) 7,678.700 7,508.860 7,690,600 7,900,060 Capital Expense 535,000 343,000 280,000 303,000 Development Expense (new projects) 16,759,000 20,161,000 19,923,000 21,784,000 4,580,000 Total (22+23+24) 1 2 27f7,S 2 C - Recurrent Costs Capital Expense 12 % of row 23 (cumulate) 2,011,080 4.430,400 6,821,160 9,435,240 9,984,840 Electricity and Water 6 % of row 23 1,005,540 1,209,660 1,195.380 1,307.040 274,800 Spares & Maintenance 4 % of row 23 670,360 806,440 796,920 871,360 183,200 D - Increasing of Medical Supplies 25 % of row 4 3,254,809 3,450,098 3.657,104 3,876,530 E - Previsional MOH's Budget Salaries & Employee Benefits (1+2+14) 63,149,097 66,467,243 70,039,577 73,848,352 Operating Expenses (of which) 40.038,730 42,136,526 44,878,188 45,861,399 - Medical supplies (4+16+29) 16,474,047 17,275,489 18,315,519 19,418.650 - Electricity and Water (5+17+27) 6,144,135 6,425,924 6,851,417 6.151,839 - Spares & Maintenance (6+18+28) 4,154,136 4,345,477 4,632,831 4,170,359 - Food Supplies (7+19) 1,658,961 1,758,499 1,864,009 1,975,850 - Machinery & Vehicle Fuel (8+20) 1,476,224 1,560,315 1,652.263 1.751,523 - Other (9+21) 10,131,227 10,770,820 11.562,149 12,393,178 Total Recurrent Expenses (30+31) 103,187,827 108,603,768 114.917,765 119,709,751 Capital Expense (11+23) 9,641,868 12,121,216 14,969,719 15,857,588 Development Expense (12+24) 20,161,000 19,923,000 21,784,000 4,580,000 Total (38+39+40) 132,990,695 140,647,984 151,671,484 140 147,339 Appendix Table 4.A. 1 Regional Distribution of Hospitals In Patients Region Hospitals Discharges total Mean Rate of Beds (Out-Patients) patients S occupancy days beds whith beds Muscat 1,450 50,706 395,278 7.8 75% Dhofar 377 16,513 93,285 5.6 68% Dakhilya 351 26,219 95,319 3.6 74% Sharqiya 499 36,053 119,016 3.3 65% North atinah 262 23,564 69,056 2.9 72% South Batinah 190 12,455 44,800 3.6 65% Dhahira 207 17,715 59,635 3.4 79% Musadam 89 4,715 15,382 3.3 47% Al Woustah 48 1,542 5,935 3.8 34% Total 3,473 189,482 897,706 4.7 71% Total (without Muscat) 2,023 138,776 502,428 3.6 68% Source: Annual Statistical Report (MOH - Directorate General of Planning) Appendix Table 4.A.2 Regional Distribution of Attendance in Hospital Out-Patients Region Population Total Daily Attendances (*) Attendances Average Per Attendance Population Muscat 444,472 1,378,744 3,777 3.1 Dhofar 216,546 637,529 1,747 2.9 Dakhilya 247,294 985,999 2,701 4.0 Sharqiya 290,784 1,359,624 3,725 4.7 North Batinah 369,427 869,786 2,383 2.4 South Batinah 212,541 416,904 1,142 2.0 Dhahira 180,780 664,918 1,822 3.7 Musadam 31,766 207,605 569 6.5 Al Woustah 6,390 45,326 124 7.1 Total 2,000,000 6,566,435 17,990 3.3 Total (without Muscat) 1,555,528 5,187,691 14,213 3.3 Source Annual Statistical Report (MOH - Directorate General of Planning) (*) Statistical Year Book (1990) Development Council - Directorate General of National Statistics Appendix Table 4.A.3 Regional Distribution of Attendance in Health Centers Out-Patients Region Population Total Daily Attendances (*) Attendances Average Per Attendance Population Muscat 444,472 563,393 1,544 1.3 Dhofar 216,546 329,872 904 1.5 Dakhilya 247,294 427,692 1,172 1.7 Sharqiya 290,784 370,115 1,014 1.3 North Batinah 369,427 650,095 1,781 1.8 South Batinah 212,541 636,610 1,744 3.0 Dhahira 180,780 301,251 825 1.7 Musadam 31,766 47,395 130 1.5 Al Woustah 6,390 70,600 193 11.0 Total 2,000,000 3,397,023 9,307 1.7 Source: Annual Statistical Report (MOH - Directorate General of Planning) (*) Statistical Year Book (1990) Development Council - Directorate General of National Statistics Appendix Table 4.A.4 Regional Distribution of Attendances in Health Centers by Type of Clinic Health Centers Total Muscat Dhofar Dakhilya Sharqiya North South Dhahira Musadam Al Woustah Batinah Batinah General Practice 91.0% 94.7% 98.5% 93.1% 93.4% 82.8% 86.7% 94.1% 97.1% 98.5% Antenatal 2.9% 1.7% 1.3% 2.7% 3.5% 5.1% 3.3% 1.7% 1.4% 1.5% Immunization 2.9% 3.5% 0.0% 3.6% 0.3% 7.1% 1.3% 2.6% 1.6% 0.0% Child Health 2.5% 0.0% 0.2% 0.6% 2.4% 2.5% 8.2% 1.6% 0.0% 0.0% Postnatal 0.2% 0.1% 0.0% 0.0% 0.1% 0.9% 0.2% 0.1% 0.0% 0.0% Immunization Schoo 0.2% 0.0% 0.0% 0.0% 0.0% 0.9% 0.0% 0.0% 0.0% 0.0% Others 0.1% 0.0% 0.0% 0.0% 0.3% 0.3% 0.0% 0.0% 0.0% 0.0% Immunization Outre 0.1% 0.0% 0.0% 0.0% 0.0% 0.4% 0.0% 0.0% 0.0% 0.0% Dental 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.4% 0.0% 0.0% 0.0% Total 3,397,023 563,393 329,872 427,692 370,115 650,095 636,610 301,251 47,395 70,600 Source Annual Statistical Report (MOH - Directorate General of Planning) Appendix Table 4.A.5 Health Facilities and staff in Government Sector & Private Sector (1990) Number Medical Pharmacists Dentists Nursing Others Total Doctors Staff Sultan of Oman's Armed Forces - Hospitals 3 3 - Clinics with beds 24 24 - Clinics without beds 7 7 - Number of Beds 459 459 - Staff 144 22 16 153 688 1023 Royal O n Police - Hospitals I 1 - Clinics with beds 0 0 - Clinics without beds 4 4 - Number of Beds 65 65 - Staff 22 6 2 90 44 164 Petroleum Development (Oman) - Hospitals 0 0 - Clinics with beds 11 11 - Clinics without beds 0 0 - Number of Beds 39 39 - Staff 10 1 0 36 32 79 Others Private - Hospitals (a) 0 0 - Clinics with beds (a) 0 0 - Clinics without beds (a) 326 326 - Number of Beds (a) 0 0 - Staff 357 203 42 299 151 1052 Ministry of Health - Hospitals (a) 46 46 - Health Centers with beds (a) 12 12 - Health Centers without beds (a) 82 82 - Number of Beds (a) 3453 3453 - Staff 994 33 40 3512 3161 7740 Universitv - Hospitals 0 - Clinics with beds 0 - Clinics without beds 0 - Number of Beds 0 - Staff 52 8 1 209 105 375 Source: Stastistical Year Book (1990) Development Council - Directorate General of National Statistics (*) Statistical Year Book (1990) Development Council - Directorate General of National Statistics (a) 1991 Appendix Table 4.A.6 Population per type of Health Care Staff, Health Facilities & Expenditure Region Pop. per Pop. per Pop. per Pop. per Pop. per Recurrent Capital Development Medical Nurse Other Hospitals H. Centers Budget Expense Expense Staff (a) Staff Beds Per Pop. (b) Per Pop. (b) Per Pop. (c) Muscat (d) 820 220 202 307 49,386 30.26 4.15 13.24 Dhofar 1,820 699 421 574 9,023 4.31 0.20 27.28 Dakhilya 2,096 759 322 705 24,729 3.74 0.09 60.25 Sharqiya 2,154 808 294 583 16,155 3.01 0.05 48.84 North Batinah 4,060 1,292 719 1,410 41,047 1.75 0.12 51.12 South Batinah 4,010 1,389 457 1,119 30,363 2.06 0.05 13.09 Dhahira 2,379. 1,016 446 873 20,087 2.23 0.17 76.25 Musadam 1,025 424 167 357 7,942 5.41 0.26 137.22 Average 1,590 519 266 576 21,277 16.25 2.04 40.48 Source - Annual Statistical Report (MOH - Directorate General of Planning) (a) Doctors, Pharmacists & Dentists (b) Average for 1990 & 1991) (c) Fourth Five Years Plan (1991 - 1995) (d) Without Ministry of Health Main Office Appendix Table 4.A.7 Ministry of Health - Actual Expenditures - Recurrent Budget Categories 1988 Percent Percent 1989 Percent Percent % Change of Total of Op. Exp. of Total of Op. Exp. 1988-19e Ministry of Health Main Office Salaries 23,236,136 36.66% 24,403,650 37.65% 5.02% EMPN-Yee Benefits 16,073,354 25.36% 16,717,121 25.79% 4.01% 604,654 100.00% 659,864 100.00% 9.13% - Medical supplies 12,278 2 03% 4,205 0.64% - Electricity and Water 49,783 8.23% 46,397 7.03% - Spares & Maintenance 927 0.15% 83 0.01% - Food Supplies 2,364 0.39% 1,613 0.24% - Machinery & Vehicle Fuel 0 0.00% 0 0.00% - Other 539,303 89.19% 607,565 92.07% D.G. of Pharma. & Med. Supplies 5,098,001 100.00% 4,803,832 100.00% -5.77% - Medical supplies 4,985,181 97.79% 4,709,370 98.03% - Electricity and Water 33,971 0.67% 31,166 0 65% - Spares & Maintenance 4,827 0.09% 5,589 0.12% - Food Supplies 148 0.00% 96 0.00% - Machinery & Vehicle Fuel 16 0.00% 16 0 00% - Other 73,857 1.45% 57,597 1.20% Department of Preventative Medicines 361,704 10000% 353,139 100.00% -2.37% - Medical supplies 174,227 48.17% 187,868 53.20% - Electricity and Water 18,357 5.08% 21,789 6.17% Spares & Maintenance 2,133 0.59% 1,695 0.48% - Food Supplies 445 0.12% 543 0.15% - Machinery & Vehicle Fuel 3,174 0.88% 1,973 0.56% - Other 163,369 45.17% 139,270 39.44% Department of Medical Services 6,881,823 100.00% 6,544,742 10000% -4.90% - Medical supplies 89,948 1.31% 91,920 1.40% - Electricity and Water 1,186,696 17.24% 1,210,943 18.50% - Spares & Maintenance 47,033 0.68% 41,778 0.64% - Food Supplies 1,754,558 25.50% 1,329,945 20.32% - Machinery & Vehicle Fuel 56,526 0.82% 41,459 0.63% - Other 3,747,062 54.45% 3,828,697 58.50% Department of General Services 3,582,400 100.00% 3,187,505 100.00% -11.02% - Medical supplies 0 0.00% 0 0.00% - Electricity and Water 26,594 0.74% 21,923 0.69% - Spares & Maintenance 1,527,803 42 65% 1,401,842 43.98% - Food Supplies 99 0.00% 73 0.00% - Machinery & Vehicle Fuel 1,674,610 46.75% 1,441,195 45.21% - Other 353,294 9 86% 322,472 10.12% Department of Housing and Stores 721,959 100.00% 678,024 100.00% -6.09% - Medical supplies 0 0.00% 0 0.00% - Electricity and Water 5,778 0.80% 5,691 0.84% - Spares & Maintenance 29,613 4.10% 22,065 3.25% - Food Supplies 162 0.02% 148 0 02% - Machinery & Vehicle Fuel 40 0.01% 20 000% - Other 686,367 95.07% 650,100 95.88% Royal Hospital 4,809,696 100.00% 5,797,061 100 00% 20.53% - Medical supplies 2,177,758 45.28% 1,996,228 3444% - Electricity and Water 999,907 20.79% 1,470,053 25.36% - Spares & Maintenance 302,215 6.28% 762,208 13 15% - Food Supplies 170,000 3.53% 237,010 4.09% - Machinery & Vehicle Fuel 187,311 3.89% 179,438 3.10% - Other 972,506 20.22% 1,152,124 19.87% Other Unclassified Departments 69,758 100.00% 174,563 100.00% 150.24% Total Operating Expenses 22,129,996 34.92% 100.00% 22,198,732 34.24% 100.00% 0.31% - Medical supplies 7,439,391 33.62% 6,989,591 31.49% - Electricity and Water 2,321,086 1049% 2,807,962 12.65% - Spares & Maintenance 1,914,551 8.65% 2,235,261 10.07% - Food Supplies 1,927,775 8.71% 1,569,428 7.07% - Machinery & Vehicle Fuel 1,921,676 8.68% 1,664,101 7.50% - Other 6,605,516 29.85% 6,932,389 31.23% Total Recurrent Expenses 61,439,486 63,319,502 3.06% Capital Ex pes MainHealthU Ofice 34,022 28,850 -15.20% D G. of Pharma. & Med Supplies 356,553 199,431 -44.07% Department of Preventative Medicines 33,945 27,870 -17.90% Department of Medical Services 994 998 0.40% Department of General Services 921,829 824,103 -10.60% Department of Housing and Stores 249,412 283,202 13 55% Roal Hospital 332,979 131,974 -60.37% Other Unclassified Departments 5,172 9,303 79.87% Total Capital Expenses 1,934,906 3.05% 1,505,732 2.32% -22.18% Total Recurrent & Capital Expenses 63,374,392 100.00% 64,825,234 100.00% 2.29% Development Expense 1,837,697 7,772,740 1071% 322.96% Ministry Total 65,212,089 72,597,975 100.00% 11.33% Appendix Table 4.A.8 Ministry of Health - Actual Expenditures - Recurrent Budget Percent Percent Percent Percent Categories 1990 of Total f Op. Exp 1991 of Total of Op. Exp. % Change Ministry of Health Main Office Salaries 3,586,125 18.33% 3,690,832 16.27% 2.92% Employee Benefits 2,937,216 1501% 2,796,153 12 33% -4.80% Operating Expenses 11,254,869 57.52% 100.00% 13,899,566 61.28% 100.00% 23.50% - Medical supplies 5,564,107 4944% 7,831,841 56.35% - Electricity and Water 160,937 1 43% 196,006 1.41% - Spares & Maintenance 976,382 8.68% 1,105,121 7.95% - Food Supplies 87,576 0.78% 66,538 0.48% - Machinery & Vehicle Fuel 260,107 2.31% 178,429 1 28% - Other 4,205,761 37.37% 4,521,631 32.53% Total Recurrent Expenses 17,778,210 20,386,552 14.67% Capital Expense 1,790,237 9.15% 2,296,834 10 13% 28.30% Total Recurrent & Capital Expenses 19,568,448 100.00% 22,683,386 100.00% 15.92% Development Expense 2241,807 6 6,009 198 69% Region-Total 21,810,255 29,379,395 34.70% Royal Hospital Salaries 5,976,071 36.85% 7,070,634 39.97% 18.32% Employee Benefits 3,771,933 23.26% 3,765,038 21.28% -0 18% Operating Expenses 5,757,452 35.50% 100.00% 6,510,533 36.80% 100.00% 13.08% - Medical supplies 2,299,980 39.95% 2,714,518 41.69% - Electricity and Water 1,444,326 25.09% 1,428,172 21 94% - Spares & Maintenance 421,470 7.32% 563,846 8.66% - Food Supplies 234,811 4.08% 174,200 2.68% - Machinery & Vehicle Fuel 159,838 2 78% 161,206 2.48% - Other 1,197,027 2079% 1,468,592 22.56% Total Recurrent Expenses 15,505,455 17,346,204 11.87% Capital Expense 711,193 4.39% 345,513 1.95% -51.42% Total Recurrent & Capital Expenses 16,216,649 100.00% 17,691,717 100.00% 9.10% Development Expense9.0 Region-Total 16,216,649 17,691,717 9.10% University Hospital Salaries 2,355,561 29.52% 3,789,344 34 71% 60 87% Employee Benefits 1,323,919 1659% 1,860,753 17.05% 40.55% Operating Expenses 3,179,746 39.84% 100.00% 3,839,598 35.17% 100.00% 20.75% - Medical supplies 1,296,126 40.76% 1,722,917 44.87% - Electricity and Water 764,415 24.04% 792,511 20.64% - Spares & Maintenance 718,609 22.60% 794,091 20.68% - Food Supplies 58,907 1.85% 102,710 2.68% - Machinery & Vehicle Fuel 10,597 0.33% 18,653 0.49% - Other 331,091 10.41% 408,716 10.64% Total Recurrent Expenses 6,859,226 9,489,694 38.35% Capital Expense 1,121,255 14.05% 1,426,743 13.07% 27.25% Total Recurrent & Capital Expenses 7,980,481 100.00% 10,916,438 100.00% 36.79% Development Expense Repion-Total 7,980,481 10,916,438 36.79% Muscat Area Salaries 6,599,092 51.63% 6,368,705 49.07% -3.49% Employee Benefits 4,751,035 37.17% 4,031,994 31.06% -15.13% Operating Expenses 1,422,260 11.13% 100.00% 2,506,710 19.31% 100.00% 76.25% - Medical supplies 14,997 1 05% 10,994 0.44% - Electricity and Water 482,696 33.94% 1,321,562 52.72% - Spares & Maintenance 58,139 4.09% 142,832 5 70% - Food Supplies 356,742 25.08% 310,639 12.39% - Machinery & Vehicle Fuel 104,709 7.36% 111,956 447% - Other 404,976 28.47% 608,727 24.28% Total Recurrent Expenses 12,772,387 12,907,409 1.06% Capital Expense 9,492 0.07% 72,042 0 56% 658.97% Total Recurrent & Capital Expenses 12,781,880 100.00% 12,979,450 100.00% 1.55% Development Expense Region-Total 12,781,880 12,979,450 1.55% 1 of 4 Appendix Table 4. A. 8 Ministry of Health - Actual Expenditures - Recurrent Budget Percent Percent Percent Percent Categories 1990 of Total f Op. Exp 1991 of Total of Op. Exp. % Change Southern Area Salaries 2,030,352 47.90% 2,296,685 49.43% 13.12% Employee Benefits 1,397,493 32.97% 1,293,834 27 84% -7.42% Operating Expenses 791,310 18.67% 100.00% 990,824 21.32% 100 00% 25.21% - Medical supplies 248 0.03% 247 0.02% - Electricity and Water 283,103 35.78% 412,535 41 64% - Spares & Maintenance 71,059 8.98% 39,636 4 00% - Food Supplies 178,124 22.51% 184,482 18.62% - Machinery & Vehcle Fuel 58,541 7.40% 68,933 6.96% - Other 200,236 25.30% 284,990 28.76% Total Recurrent Expenses 4,219,156 4,581,342 8.58% Capital Expense 19,983 047% 65,415 1.41% 227.35% Total Recurrent & Capital Expenses 4,239,139 100.00% 4,646,757 100.00% 9.62% Dvelo-ent Expense 4,239,139 4,646,757 9.62% Interior Area Salaries 2,306,965 49.45% 2,467,137 50 66% 6.94% Employee Benefits 1,575,109 33.76% 1,336,474 27.44% -15.15% Operating Expenses 775,048 16.61% 100.00% 1,032,432 21.20% 100.00% 33.21% - Medical supplies 267 0.03% 304 0.03% - Electricity and Water 141,488 18.26% 132,472 12.83% - Spares & Maintenance 26,935 3.48% 200,339 19.40% - Food Supplies 183,991 23.74% 183,892 17.81% - Machinery & Vehicle Fuel 267,014 34.45% 241,147 23.36% - Other 155,353 20.04% 274,277 26 57% Total Recurrent Expenses 4,657,122 4,836,042 3.84% Capital Expense 8,000 0 17% 34,135 0.70% 326 69% Total Recurrent & Capital Expenses 4,665,122 100.00% 4,870,178 100.00% 4.40% Development Expense RegioneTotEl 4,665,122 4,870,178 4.40% Northern Area Salaries 2,857,921 51.03% 3,152,180 53.73% . 10.30% Employee Benefits 2,015,082 35.98% 1,694,098 28.88% -15.93% Operating Expenses 719,177 1284% 10000% 999,021 17.03% 100.00% 38.91% - Medical supplies 21 0 00% 45 0.00% - Electricity and Water 118,848 16.53% 164,280 16.44% - Spares & Maintenance 20,603 2.86% 73,344 7.34% - Food Supplies 208,169 28 95% 214,676 21 49% - Machinery & Vehicle Fuel 198,068 27.54% 215,894 21.61% - Other 173,468 24.12% 330,781 33.11% Total Recurrent Expenses 5,592,180 5,845,299 4.53% Capital Expense 7,988 0 14% 21,671 0.37% 171.31% Total Recurrent & Capital Expenses 5,600,167 100 00% 5,866,970 100.00% 4.76% Development Expense ReioeTotal 5,600,167 5,866,970 4.76% Batina Area - Sohar Salaries 1,514,706 48 63% 1,777,914 49 55% 17.38% Employee Benefits 1,086,271 34 87% 1,032,272 28.77% -4.97% Operating Expenses 504,444 16 20% 100 00% 700,864 19.53% 100.00% 38.94% - Medical supplies 3,384 0.67% 393 0.06% - Electricity and Water 116,596 23.11% 36,115 5.15% - Spares & Maintenance 25,580 5 07% 138,120 19.71% - Food Supplies 122,139 24 21% 116,817 16.67% - Machinery & Vehicle Fuel 130,639 25 90% 139,233 19.87% - Other 106,106 21 03% 270,187 38.55% Total Recurrent Expenses 3,105,422 3,511,050 13.06% Capital Expense 9,367 030% 77,208 2.15% 724.25% Total Recurrent & Capital Expenses 3,114,789 10000% 3,588,258 100.00% 15.20% Rvelonmet Expense 3,114,789 3,588,258 15.20% 2 of 4 Appendix Table 4. A. 8 Ministry of Health - Actual Expenditures - Recurrent Budget Percent Percent Percent Percent Categories 1990 of Total f Op. Exp 1991 of Total of Op. Exp. % Change Batina Area - Rustaq Salaries 1,097,340 49.18% 1,240,642 51.79% 13.06% Employee Benefits 744,742 33.38% 667,944 27.88% -10 31% Operating Expenses 381,201 17 08% 100.00% 474,998 19 83% 100.00% 24.61% - Medical supplies 100 0.03% 355 0 07% - Electricity and Water 15,162 3.98% 23,979 505% - Spares & Maintenance 17,104 4.49% 47,834 10 07% - Food Supplies 92,994 24.40% 88,058 18.54% - Machinery & Vehicle Fuel 173,137 45.42% 176,458 37.15% - Other 82,704 21.70% 138,313 29.12% Total Recurrent Expenses 2,223,284 2,383,585 7.21% Capital Expense 8,063 0 36% 11,953 0.50% 48.25% Total Recurrent & Capital Expenses 2,231,346 100 00% 2,395,538 100.00% 7.36% Develooment Expense RegdionTotal 2,231,346 2,395,538 7.36% Al-Dhahira Area Salaries 1,293,089 51.86% 1,390,130 53.58% 7.50% Employee Benefits 863,590 34.63% 733,890 28.29% -15.02% Operating Expenses 312,548 12.53% 100.00% 432,643 16 68% 100.00% 38.42% - Medical supplies 259 0.08% 685 0.16% - Electricity and Water 47,923 15.33% 77,564 17.93% - Spares & Maintenance 22,139 7 08% 29,745 6.88% - Food Supplies 81,304 26.01% 80,611 18.63% - Machinery & Vehicle Fuel 68,206 21.82% 58,065 13.42% - Other 92,716 29.66% 185,972 42.99% Total Recurrent Expenses 2,469,228 2,556,662 3.54% Capital Expense 24,237 0.97% 37,783 1.46% 55.89% Total Recurrent & Capital Expenses 2,493,464 100.00% 2,594,446 100.00% 4.05% Development Expense Repgion-Total 2,493,464 2,594,446 4.05% Musandam Area Salaries 526,623 51.98% 589,225 50.86% 11.89% Employee Benefits 367,915 36.31% 344,122 29 70% -6.47% Operating Expenses 112,185 11.07% 100.00% 214,829 18.54% 100.00% 91.50% - Medical supplies 0 0.00% 0 0.00% - Electricity and Water 29,788 26.55% 69,953 32.56% - Spares & Maintenance 18,043 16.08% 23,292 10.84% - Food Supplies 13,133 11.71% 42,436 19.75% - Machinery & Vehicle Fuel 9,812 8.75% 11,416 5.31% - Other 41,409 36.91% 67,732 31.53% Total Recurrent Expenses 1,006,722 1,148,176 14.05% Capital Expense 6,493 0.64% 10,289 0.89% 58.46% Total Recurrent & Capital Expenses 1,013,216 100.00% 1,158,466 100.00% 14.34% Development Expense ReoTotal E n 1,013,216 1,158,466 1434% Plan for Health Development Salaries 37,800 18.25% 42,167 28.01% 11.55% Employee Benefits 114,780 55 42% 76,416 50.76% -33.42% Operating Expenses 41,369 19 98% 10000% 19,795 13 15% 100.00% -52 15% - Medical supplies 0 0.00% 0 0 00% - Electricity and Water 157 0.38% 16 0.08% - Spares & Maintenance 653 1.58% 3 0.02% - Food Supplies 0 0.00% 0 0.00% - Machinery & Vehicle Fuel 880 2.13% 1,179 5 95% - Other 39,679 95.92% 18,598 93 95% Total Recurrent Eipenses 193,948 138,378 -28.65% Capital Expense 13,155 6.35% 12,175 8.09% -7 45% Total Recurrent & Capital Expenses 207,103 100.00% 150,553 10000% -27.31% Delilo et Expen 207,103 150,553 -27.31% 3 of 4 Appendix Table 4.A.8 Ministry of Health - Actual Expenditures - Recurrent Budget Percent Percent Percent Percent Categories 1990 of Total f Op. Exp 1991 of Total of Op. Exp. % Change Total Ministry Salaries 30,181,646 3767% 33,875,594 37.83% 12.24% Employee Benefits 20,949,086 26 15% 19,632,988 21 93% -6.28% Operating Expenses 25,251,609 31.52% 100.00% 31,621,812 35.31% 100.00% 25.23% - Medical supplies 9,179,489 36.35% 12,282,299 38.84% - Electricity and Water 3,605,438 14.28% 4,655,165 14.72% - Spares & Maintenance 2,376,716 9.41% 3,158,203 9.99% - Food Supplies 1,617,891 6.41% 1,565,058 4 95% - Machinery & Vehicle Fuel 1,441,550 5.71% 1,382,570 4.37% - Other 7,030,525 27 84% 8,578,516 27.13% Total Recurrent Expenses 76,382,341 85,130,394 1145% Capital Expense 3,729,463 4.66% 4,411,762 4.93% 18.29% Total Recurrent & Capital Expenses 80,111,804 100.00% 89,542,156 100.00% 11.77% Development Expense 2,241,807 6,696,009 Total Ministry 82,353,611 96,238,165 1686% 4 of 4 Appendix Table 4.A.9 Development Expenditure (New Projects & Ongoing Projects) Sector Projects Total Value Plan's Period Location Value (RO) Percent 1991 1992 1993 1994 1995 1 Development Expenditure - New Projects 1.1 Service Sector - Housing Sector Living accomodation Health Center Dhofar 0041 21.1% 0.041 Living accomodation Health Center Dhofar 0.038 19.6% 0.038 Living accomodation Health Center Dhofar 0.038 19.6% 0.038 Living accomodation Health Center Dhofar 0.038 19.6% 0.038 Living accomodation Health Center Dhofar 0.039 20.1% 0.039 Total Service Sector 0.194 100.0% 0.000 0.000 0.000 0.000 0.194 1.2 Social Structures Health Center Dakhilya 0.250 0 3% 0.250 Health & maternity Center Dakhilya 0.412 0 5% 0.412 Hospital Dakhilya 13.069 15.7% 0.369 12.700 Hospital Dakhilya 1.168 1 4% 0068 1.100 Expansion Health & Maternity Center Dhahira 0.132 0.2% 0.132 Expansion Health & Maternity Center Dhahira 0.139 0 2% 0 139 Health & maternity Center Dhahira 0.538 0.6% 0.538 Health & maternity Center Dhahira 0.155 02% 0.155 Health & maternity Center Dhahira 0.444 0.5% 0 444 Health & maternity Center Dhahira 0.423 0.5% 0.423 Hospital Dhahira 11.953 14.4% 11.953 Expansion Health & Maternity Center Dhofar 0.165 02% 0.165 Expansion Health & Maternity Center Dhofar 0.127 0.2% 0.127 Expansion of Hospital Dhofar 4.680 5.6% 0.180 4.500 Health Center Dhofar 0.319 0.4% 0.319 Health & maternity Center Dhofar 0.423 0.5% 0 423 Expansion Health & Maternity Center Musandam 0.115 0.1% 0 115 Expansion of Hospital Musandam 1.244 1.5% 0.244 1.000 Hospital Musandam 3.000 3.6% 3.000 Central Blood Bank Muscat 0.541 0.7% 0.021 0.520 Control Laboratory Muscat 0.224 0.3% 0.224 Expansion of Hospital Muscat 3.845 4 6% 3.845 Improvement Hospital Muscat 1.277 1.5% 1.277 Minor Works National 2.500 3.0% 0 500 0 500 0.500 0.500 0.500 Hospital North Batinah 18.886 22 8% 0.886 18.000 Expansion Health & Maternity Center Sharqiya 0 115 0.1% 0.115 Expansion Health & Maternity Center Sharqiya 0.115 0 1% 0 115 Expansion Health & Maternity Center Sharqiya 0.124 0.1% 0.124 Expansion Health & Maternity Center Sharqiya 0.124 0 1% 0.124 Expansion of Hospital Sharqzya 0.966 1.2% 0 966 Health Center Sharqiya 0.344 0 4% 0.344 Health & maternity Center Sharqiya 0 488 0 6% 0.488 Hospital Sharqiya 11 925 14 4% 0 300 11 625 Health Center South Batinah 1.036 1.2% 1 036 Health Center South Batmah 1.035 1.2% 1 035 Health Center South Batmah 0.312 0.4% 0.312 Health Center South Batmah 0 400 0.5% 0.400 Total Social Structures 83.013 100.0% 16.759 20.161 19.923 21.784 4.386 Total New Proiects 83.207 16.759 20.161 19.923 21.784 4.580 1 of 2 Appendix Table 4.A.9 Development Expenditure (New Projects & Ongoing Projects) Sector Projects Total Value Plan's Period Location Value (RO) Percent 1991 1992 1993 1994 1995 2 Development Expenditure - Ongoing Projects 2.1 Social Structures Health Center Al Woustah 0.248 1.0% 0 248 Health Center Dakhilya 0.020 0.1% 0 020 Health Center Dakhilya 0.249 1.0% 0.249 Health Center Dakhilya 0.248 1.0% 0.248 Reconstruction Hospital (Implementation) Dakhilya 6.923 29.0% 6 923 Reconstruction Hospital (Studies) Dakhilya 0.110 0.5% 0.110 Repairs and Expansion in Hospital Dakhilya 0.248 1.0% 0.248 Repairs and Expansion in Hospital Dakhilya 0.226 0.9% 0.226 Establ. Preventive Service Office Dhofar 0.001 0.0% 0.001 Expansion of Hospital Dhofar 0.437 1.8% 0.437 Health Center Dhofar 0 003 0.0% 0 003 Quarantine Musandam 0.008 0 0% 0 008 Expansion of the Health Science Inst Muscat 0.984 4.1% 0.984 Expansion of the Out Patient Clinic in Hspita Muscat 0.148 0 6% 0.148 Furniture & Equip. for Hospital Muscat 0 123 0.5% 0.123 Health Center Muscat 0.142 0 6% 0.142 Maternity & Child Care Center Muscat 0.011 0.0% 0 011 Medical Warehouses Muscat 0.977 4.1% 0.977 The Royal Hospital Muscat 1.194 5.0% 1.194 Works to complemented projects Muscat 0.078 0.3% 0.078 Consultative & Planning Studies National 0.047 0.2% 0.047 Establ. of Quarantine National 0.103 0.4% 0.103 Minor Works National 0.353 1.5% 0.353 Minor Works National 0.009 0.0% 0.009 Three Primary Health Care National 0.004 0.0% 0.004 Health Center North Batmah 0.796 3.3% 0.796 Health Center North Batnah 0.791 3.3% 0.791 Health Center North Batmah 0.415 1.7% 0415 Health Center North Batinah 0.378 1.6% 0.378 Health Center North Batinah 0.373 1.6% 0 373 Hospital North Batinah 0.735 3.1% 0.735 Repairs and Expansion in Hospital Sharqiya 0.246 1.0% 0.246 Repairs and Expansion in Hospital Sharqiya 0.227 1.0% 0.227 Reconstruction Hospital (Implementation) South Batmah 6 910 29.0% 6.910 Reconstruction Hospital (Studies) South Batmah 0 100 0.4% 0.100 Total Social Structures 23.865 100.00% 23.865 0.000 0.000 0.000 0.000 2.2 Infrastructures Ministry Prelises North Batinah 0.449 99.6% 0 449 Health Administration Budding North Batinah 0.002 0 4% 0.002 Total Infrastructures 0.451 100.0% 0.451 0.000 0.000 0.000 0.000 Total Ongoing Projects 24.316 24.316 0.000 0.000 0.000 0.000 2 of 2 Appendix Mn. of Educ. Stat. Info. Table 5. 1 1991 Data * (National Totals) Primary Schools Data Ratio Number of Classrooms 7,865 Number of Students 272,068 Students to Classrooms 34.59 Number of Teachers 9,816 Teachers to Classrooms 1.25 Number of Administrators 417 Administrators to Teachers 0.042 Preparatory Schools Number of Classrooms 2,768 Number of Students 84,129 Students to Classrooms 30.39 Number of Teachers 4,686 Teachers to Classrooms 1.69 Number of Administrators 628 Administrators to Teachers 0.134 Secondary Schools Number of Classrooms 1,046 Number of Students 31,092 Students to Classrooms 29.72 Number of Teachers 1,973 Teachers to Classrooms 1.89 Number of Administrators 361 Administrators to Teachers 0.183 Other Secondary Schools (incl. Special Education) Number of Schools 11 Number of Students 1,503 Number of Teachers 176 Number of Administrators 26 Administrators to Teachers 0.148 * Source: Ministry of Education - Planning Directorate Ministry of Education Appendix Table 5.1a Sultanate of Oman Ethnic Origin Teachers Admins. Total % Omani 5,351 946 6,297 34.65% Non-Omani 11,638 238 11,876 65.35% Total 16,989 1,184 18,173 100.00% Overhead calculation basis: Admins. % of Total 6.52% Teachers % of Total 93.48% Source Ministry of Education, A Booklet on Educational Statistics for the Academic Year 1991/92 Appendix Tables 5-2 & 5-3 Attachment 1 Sultanate of Oman Actual Pxiendiums on Education 10/30/92 02:00 PM % Annual % Annual Change Change Categories 1988 1989 1990 1991 198-91 1C199-91 Ainistry of Educationi Main Offic Salaries 44.833,486 6,67N,418 51,428,142 $6,126,442 8.40% 370.21% Employee Benefits 21,729,512 2,932,35S 35,489,746 33,188,367 17.58% $15.9% Operating E.Wpense: (of which) 21,494,632 19,479,598 17,382,725 17,210,756 6.64% -5.82% - Educational supplies 307,794 2,593,307 1,654,287 2,283,137 213.92% -5,98% - Food supplies 498,640 357,487 434,894 461,923 -1.82% 14.61% - Other supplies 7,017,571 956,815 957,410 975,942 -17.37% 1.00% - Training and schoiarshipq 10,032,797 7,050,691 5,202,677 4,058,659 -19.85% -21,22% - Grants 616,656 581,279 662,127 661,382 2.42% 6.69% - Operations and Maintenance 6,062,%65 6,665,752 6,862,538 7,363,417 7.15% 5.23% - Others 1,948,608 1,274,267 1,608,793 1,406,289 -9.28% 5.18% T.tal Rvcurrent Yrpenver 33,057,631 29,090,370 104,300,613 106,S2S,564 6,99% 133.09% Capital Expense 1,555,288 887,498 2,156,995 1,772,177 4.65% 49.84% Total Recurrent & rapital rp:-nver 89,612,918 29,977,868 106,457,608 108,297,742 6.95% 130.63% Development Expense 6,542,294 5,129,150 7,704,213 7,445,140 4.60%/ 22.58% Raginn 7'ntal 96,155,212 35,107,018 114,161,821 115,742,882 6.79% 114.84% Dir. Gen. ofEducation, Salalah Ralaries 4,615,705 4,907,452 5,240,487 5,763,513 8.29% 8.72% Employee Benefits 1,786,184 2,001,544 3,011,571 2,705,216 17.15% 17.58% Operating Expenses: (of which) 941,799 948,972 1,124,231 1,115,586 6.07% 8.78% - Fducatinnal iupplics 5,783 2,989 2,996 2,993 -16.08% 0.06% - Fond tupplics 73,325 56,784 73,071 96,280 10.44% 34.78% - Other suppliea 83,381 55,708 56,281 70,722 -5.06% 13.48% - Training and scholarships 1,06 900 425 68S -11.89% -11,94% - Grams 209,241 179,548 159,715 149,735 -9.48% -8.30% - Operations and Maintenance 471,190 s74,046 753,523 714,679 17.23% 12.25% - Others 99,814 78 997 78,226 80,492 -6.45% 0.95% Tatal Recurrent Krpensrs 7,145,69K 7.857.968 9.376,295 9,584,315 10.16% 10.98% Capital Expense 2.299 35,390 127.126 34.291 463.85% -1.55% Total Recurrent & Capital Expenses 7,347,987 7,893,358 9,503,421 9,618,605 10.30% 10.93% Development Expense 1,01,923 Region Total 7,347,987 7,893,358 9,503,421 10,680,528 15.12% 17.66% Agriculture Institutc of Nizw-d Salaric3 - 150,845 142,132 136,140 149,225 -0.36% 2.50% Employee Bcncflta 49,668 52,981 74,043 61,131 7.69% 7.69% Operating Expenses; (of which) 134,877 110,509 108, 166 97,548 -9.23% -5.86% - Educational supplies 20,321 21,121 17,714 14,823 -9.02% -14.91% - Food suppliCs 40,924 26,301 29,324 27,425 -11.00% 1.98% - Other supplies 3,6e5 12,139 18,939 11,738 73.43% -1.65% - T1'raining and scholurships 0 0 0 0 - Grajnt3 40,638 23,784 18,548 19,702 -17.17% -8.58% - Operations and Maintcnancc 18,033 19,222 16,087 16,15S -3.47% -7.98% * Otheri 11.297 7,A62 7,wS 7,705 -10.60% -1.00% Tutul Recurrent Expenses 335,390 305,622 318,349 307,904 -2.73% 0.37% Page 1 of 3 Atchmont Sultanate ofman Actual ronKsditurcs on Education 10/30/92 02:00 PM % Annual % Annual Cbange Change Categories 1988 1989 1990 1991 1988-91 1989-91 Capital Expense 29,843 6.950 6,643 14,10 -17.58% 51.47% Tidal Ifecumrent & rapital Fvron.r 365,233 312,573 324,992 322,008 -3,94% 1.5 L% Development Expense Region Total 365,233 312,573 324.992 322.008 -3.94% 1.51% Tachers Training Institute, Capital Area Salaries 8192,143 1,098,745 1,241,174 1,620,511 27.21% 23,74% Employee Benefits 435,353 533,858 756,581 861,356 32.62% 30.67% Operating Expenses: (of which) 1,066,549 634,224 654,111 747,798 -9,96% 8.95% - Educational supplies 31,226 40,159 93,277 65,928 37.04% 32,08% - Food supplics 190,325 188,163 229,308 283,887 16.39% 34.41% - Other supplies 17,687 66,038 41,566 53,344 67.20% -9.61% - Training and scholarships 0 0 0 0 - Grantm 76R,098 282,426 168,223 204,136 -24.47% -13.86% - Operations and Maintenance 41,041 54.550 78,083 124,192 67.53% 63.83% - Others 18,172 22,889 43,654 16,312 -3.41% -14.37/ Trtal Recurrent Expenses 2,394,045 2,266,828 2,651,866 3,229,666 11.63% 21.24% Capital Expense 96,644 31,323 215,552 185,718 30.72% 246.46% Total Recurrent C rapital Fxpensas 2,490,688 2,291,150 2,867,419 3,415,383 12.38% 24,31% Development Expense Region Total 2,490,681 2,298,150 2,867,419 3,415,383 12.38% 24.31% Sohar Industrial Secondary School Salaries 133,487 135,962 160,866 160,515 6.75% 9.03% Employce Benefits 32,818 35,809 60,502 42,339 9.67% 9.12% Operating Espenses: (af which) 143,595 112,399 102,416 90,113 -12.42% -9.91% - FAuc-ational supplies 25,611 23,193 23,974 17,750 -10.23% -11.73% - Food supplies 41,986 20,683 33,240 32,071 -7.39% 5.07% - O1hcr supplies 6,957 6,500 6,102 6,173 -3.76% -2.52% - Training and scholarshipe 0 0 0 0 - Gramns 51,547 33,992 21,070 20,262 -20.23% -20.20% - Opeminnn and Maintenance 17,484 16,220 15,499 13,005 -8.54% -9.91% - Others 11 2,831 2,531 251 746.03% -45.57% Taal Recurrent Expenses 309,900 284,170 323,784 292,967 -1.82/* 1.33% Capital Expenne 1144 10,321 10,083 9.644 -5.29% .3.28% Total Recurrent & Capital hkpemes 321,364 294,491 333,867 302,611 -1.95% 1.38% Uevelopimient Expense Region Total 321,364 294,491 333,867 302,611 *1.95% 1.38% Tvaacers Training Institute, Salalah Salaries 317,973 367,024 384,415 377,707 6.26% 1.46% Employee Benefits 179,637 187,289 241,390 193,790 2.63% 1.74% Operating Expenses: (of which) 264,505 158,860 136,907 124,798 -17.61% -10.72% - Educational supplies 11,467 12,814 13,818 10,384 *3.15% -9.48% -Food supplies 34,270 33,816 41.205 42,234 7.75% 12.45% - Other supplies 8,145 8,082 9,510 9,352 4.94% 7.86% - Training and wholarships 0 0 0 0 Page 2 of 3 Attachment Suitangte of Oman Actual Expenditures on EducAIlon 10/30/92 02:00 PM % Annual % Annual Change Change Categories 1988 1989 1990 1991 1983-91 1989-91 - Grants 183,257 74,455 27,683 25,636 -28.67% -32.78% - Operations and Maintenance 17,484 18,010 27,647 23,429 11.34% 15.05% - Others 9,883 11,684 16,966 13,763 13.09% 8.90% Total Recurrent rpenses 762,115 713,173 762,713 696,295 -2.88% -1.18% Capital Expense 28,557 5,175 9,423 5,907 -26.44% 7.07% Total Recurrent & Capital Expenses 790,672 718,348 772,136 702,202 -3.73% -1.12% Development Expense Regon Total 790,672 718,348 772,136 702,202 -3.73% -1.12% MINISTRYOFEDUCA0TION Manistry Level Summaries Salaries 50,943,640 13,329,732 58,591,224 64,197,912 8.67% 190.81% Allowances 24,213,173 5.743,837 39,633,833 37,052,199 17.67% 272.54% Tatal Wage- 75,156,812 19,073,570 91,225,059 101,250,112 11.57% 215,42% Operating Expenses (of *hich) 24,047,957 21,444,562 19,508,S63 19,386,599 -6.46% -4.80% - Educational supplies 402,202 2,693,583 1,806,067 2,395,014 165.16% -5.54% -Food supplies 869,470 672,293 141,121 944,420 2.87% 20.24% - Other supplies 2,157,405 1,1os,2s2 1,089,809 1,127,277 -15.92% 1.00% - Training and scholarships 10,033,862 7,051,591 5,203,102 4,059,344 -19.85% -21.22% - Grants 1,169,433 1,175,485 1,057,364 1,080,853 -14.06% -4.03% - Operations and Maintcnance 6,627,796 7,347,800 7,753,375 8.254,877 8.18% 6.17% - Othcr 2,0117,7114 1,398t529 1,757,725 1r524,812 .8.99% 4.51% Recurrent Expenditure 99,204,769 40,518,132 117,733,620 120,636,710 7.20% 98.87% Capital Expenditure 1724,094 976.657 2,525.822 2,021,841 5.76% 51 51% Rccurrent & Capital 100,928,862 41,494,789 120,259,443 122,658,551 7.18% 97.80% Non-Wage(Operating A Capbt * 15,818,188 15,449,629 16,911,283 17,429,095 3.39% 6.41% Development Expenditure 6,542.294 5.129.150 7 704t213 8,507 10.01% 3211% Total Expenditure 107,471,157 46,623,939 127,963,65S 131,165,614 7.35% 90.66% * Operating expenses is n4justod for Scholarships, which is not a non-wage expenditure for unit cost calculation Page 3 of 3 Min. of Educ. Stat. Info. Appendix Table 5.2 Salary & Allowance Schedue* (RO.Bzs per Month) Employee Category Salary Allowance Teachers Total W.Avg. * Annual Primary Omani 21 234.50 Wage Primary Non-Omani 218 148.75 Preparatory Omani 279 234.50 452.50 403.62 4,843 Preparatory Non-Omani 279 188.75 36.75 Secondary Omani 279 234.50 513.50 487.42 5,849 Secondary Non-Omani 279 188.75 467.75 513.50 487.42 5,849 Admiysiratora 467.75 Primary Omani 218 249.50 Primary Non-Omiani 218 163.75 Preperaeory Omani 279 254.50 467.50 418.62 5,023 Preparatory Non-Omani 279 208.75 381.75 Secondary Omani 279 2S9.50 533.50 507.42 6,089 Sccondary,Non-Omani 279 213.75 487.75 538.50 512.42 6,149 SuRort Staf 492.75 Social Worker Omani 279 Social Worker Non-Omanl 279 Librarian Omani 279 476.00 470.87 5,650 Librarian Non-Omani 21s 467.00 SGrctnry Osuni 194 476.00 413.30 4,960 Secretary Non-Ouani 0 0.00 366.00 Labratory Tech. Omani 218 280.00 280,00 3,360 Labratory Tech. Non-Omani 194 0.00 Subject Guidance Couns. 0 279 415.00 372.82 4,474 Subject Guidance Coun. N-O 292 341 Education Counsellor 0 218 526.00 500.35 6,004 Educution Counsellor N-O 218 481.00 452.00 402.98 4,836 366.00 Source: Ministry of Education - Directorate of Financc (Summaried frm uriginal) W. Avg. - Weighted Average computed as 57 % Non-Omani & 43 % Oman - Source of percentages - Statistical Year Book 1990. Change in Weighted Average done per Mr. Sharshar's Rcqucat Min. of Edur. Stat. Into. ADDendix Table 5.3 Ministry of Education Unit Cost Calculations & Estimated Budget for 1991 Wage Costs Primary Schools Costs Proposed I Wage/Employce Ratio Total Wage Expenditure Wnne Cost (per Clse) Teachers 4,843.47 1.25 6,044.95 School Admin. & Support (1) 484.35 0.04 256.80 Sub-Total 5,327.82 6,301.75 Main-Office Admin. (8%) (la) 426.23 0.08 504.14 Total Wage Cost 6,805.89 Wage per Class 6,805.89 Studonts per Clas. 34.59 Wage Cost per Student 196.75 Total Students 1991 272,068.00 Proposed Primary Budget 33,528,286,79 Prcnaratory Schools Costs Wage Cost (SCr Class) Wage/Employee Ratio Total Wage Teachers 5,849.07 1.69 9,902.00 School Admin. & Support 5491 0.13 1 ,3 2 7 .0 3 Sub-Total 6,433.98 11,229.03 Main-Office Adminlstration (8%) 514.72 0.0 898.32 Total Wage Cost 12,127.35 Wage per Class 12,127.35 Students per Class 29.72 Wage Cost per Student 407.9 Total Studcals 1991 14,129.00 Proposed Preparatory ISudget 34,323,754.80 Secondary Schools Costs Wagg Cost (per Close) Wasc/Emtployce Ratio Total Wage Tcachers 5,849.07 1.9 11,032.71 School Admin. & Support (1) 584.91 0.18 2,018.6 Sub-Total 6,433.98 13,051.37 Main-Office Administration (8%) 514.72 0.08 1,044.11 Total Wage Cost 14,095.48 Wago per Class 14,095.45 Students per Class 29.72 Wage Cost per Student 474. T4otal Studetls 1991 3 ,092.00 Proposed Scconidasy Budget 14,743,868 Sub-total 102,595,909 Min. of Educ. Stat. Info. Other Secondary Education * (2) (Incl..Special P.dcation) 474.20 Number of Studentas 1,503.00 Total Other Secondary 712,724.60 School & Main Olicc Admin. Proposed Other Secondary Budget [CSecOatry Wag per Sident used] Toal PrupuVed Wago BudIet 103,308,634 cost No-ware CosS per Student # of Students Total Budget &I.r Prituary 2.37 272,068.00 644,801.16 Prcparatory 4.85 84,129.00 408,025.65 Seiulary 9.50 31,092.00 295,374.00 Other 9.50 1,503.00 14,278.50 1,362,479 Teachers Guides Primary 2.37 9,516.00 23,263.92 Prcparatory 4,85 4,686.00 22,727.10 Secondary 9.50 1,973.00 18,743.50 Other 9.50 176.00 1,672.00 66,407 Prupod Bvok3 1judget t,428,886 Other Expenditures (3) (incL 0 & M, Supplics & Capital) 33.59 13,059,897.00 13,059,897 Urania & Suholarships (4) 4,869.776 Tulal Prupwed Budget 122,667,193 1991 Actual cxpcnditurs/ ) 117,916,344 (Over) Under SEndin 4750846 Percent Under tFunded 3.87% Min. of Eduo. Stat. Info. Note: (1) : A ratio was calculated based on actual statistics from the Ministry of Education. The source of the Statistics is A Booklet on Educational Statistics for the Academic Year 1991/92. The ratio varies with the level of Instruction and has been accounted for as such. Note: (Ia): A 8% overhead factor was used. The 8% was applied to the sum of teachere and school administrators wage component. The overhead factor Is based on the Administrator/Teacher statistics on PR0as 7 & 9 of the Booklet on Ed. Statiatics 1991/92. Note: (2) : Includes Islamic Preparatory, Islamic Secondary, Commercial Secondary and Special Education. Note: (3) : Other Expenditures Include all other coAts per 1991 actual expenditures for Min. of Education Main Office & Dir. Gen. of Salalah hut for the following expenses, Educational Supplies, Training & Scholarships, Grants. However, Included in this category is RO 80,000 for teacher's training. Note: (4) : Grants & Scholarships added to proposed budget. This amount is as reported in the 1991 Financial Statements. Note! tm of Total Recurrent A Capital Expenses for Min. of Education Main Office & Dir. Gen, of Education, Salalah. Note: Development Expenses are excluded from unit cost calculation since they arv not considered recurrent. These expenses are a function of the economy and special needs. Appendix Tables 5-4 thru 5-10 Attachment 2 The World Bank Public Expenditure Review . Standard Cost Analysis Ministry of Heakh.- Actual Eipendire 10/28/92 5:26 PM % Change Cateories 198 * 1989 1990 199 1988-91 Ministry of Health Main Offiec Salaries 2,607,496 2,672,415 3,586,125 3,400,%32 41.55% Employee Benefits 1,831,654 1,839,163 2,937,216 2,796,153 S2.66% Operating Expenser. 14,771,676 15,447,639 11,254,869 13,899,566 -5.90% Total Recurrent Expenses 19,210,826 19,959,217 17,778,210 20,386,532 6.12% Capital Expense 1,328,092 1,033,513 1,790,237 2,296,814 72.94% Total Recurrent & Capital Erpenses 20,538,919 20,992,730 19,563,448 22,683,386 10.44% Development Expense 1,837,697 7,772,740 2,241,807 6.696,009 264.37% Region Total 22,376,616 28,765,470 21,810,253 29,379,395 31.30% Royal Hospital Salaries 4.345.242 4,453,426 5,076,071 7,070,634 62.72% E.mployee Benefits 2,352,184 2,361,828 3,771,933 3,765,038 60.07% Operating Expenses: 7.556,482 7.902.272 5.757,452 6,510,533 -13.R4% Total Recurrent Expenses 14,253,909 14,717,525 15,505,455 17,346,204 21.60% Capital Expense 527,601 410.576 711,193 345,513 -34.51% Total Recurrent & Capital Expenses 14,781,510 15,128,101 16,216,649 17,691,717 19.69% Developmcnt Expcn3c Region Total 14,781,510 15,128,101 16,216,649 17,691,717 19.69% Muscat Area Salaries 4,798,243 4,917,707 6,599,092 6,363,705 32.73% Rmployee Benefits 2,962,755 2,974,901 4,751,035 4,031,994 36.09% Operating Expenses: 1,866,674 1,952,094 1,422,260 2,S06,710 34.29% Total Recurrent Expenses 9,627,674 9,844,702 12,772,387 12,907,409 34.07% Capital Expense 7,042 S,480 9,492 72,042 923.07% Total Recurrent & Capital Expenses 9,634,716 9,850,182 12,781,880 12,979,450 34.72% Development Expense Region Total 9,634,716 9,850,182 12,781,880 12,979,450 34.72% Southern Area Salaries 1,476,283 1,513,038 2,030,352 2,296,685 55,57% Employce Benefits 871,480 875,052 1,397,493 1,293,834 48.46% Operating Expenses: 1,038,571 1,086,096 791,310 990,824 -4.60% Total Recurrent Expenses 3,386,334 3,474,187 4,219,156 4,581,342 35.29% Capital Expense 14,824 11,536 19,983 65,415 341.26% Total Recurrent & Capital Expenses 3,401,158 3,485,723 4,239,139 4,646,757 36.62% Development Expense Region Total 3,401,158 3,485,723 4,239,139 4,646,757 36.62% Page 1 of 3- Attachment 2 The World Bank Public Erpendilire Reviow Standad Coat Analysi& Snitnnar.oOmnan Ministry of Henith - Actal Expenditum 10/28/92 5:26 PM % Change Catetories 198 1919 a 1990 1991 1988&91 Interior Arca Salaries 1,677,410 1,719,173 2,306,965 2,467,137 47.08% Employee Benefits 982,241 986.268 1,575,109 1,336,474 36.06% Operating Expenses: 1,017,226 1,063,775 775,048 1,032,432 1.49% Total Recurrent Expenses 3,676,872 3,769,216 4,657,122 4,136,042 31.53% Capital Expense 5935 4,618 81000 34,135 475.17% TotalRRecurrent & Capital Expenses 3,682,813 3,773,835 4,665,122 4,370,173 32.24% DevelopntI Expena Region Total 3,682,813 3,773,835 4,665,122 4,870,1718 32.24% Northern Area Salaries 2,073,014 2,129,750 2,357,921 3,152,180 S1.69% EmpIoyee Benefits 1,256,609 1,261,760 2,015,082 1,694,091 34.82% Operating Expenses: 943A898 987.092 719.177 999,021 5.84% Total Recurrent xpanses 4,278,521 .4,378,603 5,592,130 S,94S,299 36.62% Capital Expense 5.926 4.611 7,988 21,671 265.72% Total Recurrent & Capital Expenses 4,284,447 4,313,214 5,600,167 5,166,970 36.94% Development Expense Region Total 4,234,447 4,383,214 5,600,167 5,866,970 36.94% Datina Arca - Sohar Salaries 1,101,354 1,128,774 1,514,706 1,777,914 61.43% Employee Benefits 677,401 680,173 1,036,271 1,032,272 52.39% Operating Expenses: 662,068 692,365 504,444 700,364 5.86% Total Recurrent Erpenxes 2,440,822 2,501,317 3,105,422 3,511,050 43.85% Capital Expense 6,949 5,408 9,367 77,208 1011.06% 'ol Recurrent & Capital lwpenses 2,447,772 2,506,724 3,114,789 3,588.258 46.59% Development Expense Region Total 2,447,772 2,506,724 3,114,789 3,588,258 46.59% Batina Arca - Rustaq Salarics 797,884 817,749 1,097,340 1,240,642 55.49% Employee Benefits 464,423 466,327 744,742 667,944 43.82% Operating Fxpenses: 500,315 523,210 381,201 474,998 .5.06% Total Recurrent .rpen.w 1,762,621 1,807,285 2,223,284 2,383,585 35.23% Capital Expense 5981 4,655 8,063 11,953 99.84% Total Recurrent & Capital Expenses 1,768,603 1,81-1,940 2,231,346 2,395,538 35.45% Development Expense. Region Total 1,768,603 1,811,940 2,231,346 2,395,538 35.45% Page 2 o.L- Attachment The World Dank Public Expenditure Review - Standard Cost Analysis Ministry of Health - Actual Excenditures 10/28/92 5:26 PM I% Change Catenories 1988 * 19890 1990 1991 198.91 Al-Dhahira Area Salaries 940,214 963,623 1,293,089 1,390,130 47.85/. Employee Benefita 538,537 540,744 863,590 733,890 36.27% Operating Trpenses: 410,210 428,981 312,548 432,643 5.47% Total Recupent Krpenser 1,88,961 1,932,341 2,469,229 2,556,662 35.35V% Capital Expense 17.980 13,992 24.237 37,783 110.14% Total Recum'ent & Capital Expenses 1,906,941 1,947,340 2,493.464 2,594,446 36.05% Development Expense __7 Region Total 1,906,941 1,947,340 2,493,464 2,594,446 36.05% Musandam Arca Salaries 382,911 392,444 526,623 589,225 53.88% Employee Benefits 229,432 210,173 167,915 14, 122 49.99% Operating Expenses: 147,239 153,977 112,185 214,829 45.900/ Total Recumwent Erpenses 750,583 776,794 1,006,722 1,14R,176 S1.16% Capital Expense 4,817 3,749 6,493 10,289 113.600% Total Recurrmni & Capital Expenses 764,400 780,543 1,013,216 1,158,466 S1.SS% Development Expense Region Total 764.400 780,543 1,013,216 1,15R,466 .41.55% Plan for Hrolth Development Salarics 27,484 22,160 37,800 42,167 53 42% Employee Benefits 71,577 71,170 114,780 76,416 I.76% Operating Expenses: 54,296 56,780 41,369 19,795 -63.54% Total Rccurrvnt Expenses 153,357 156,119 193,948 131,378 -9.77% Capital Expense 9759 7,rS94 13,155 12.175 24.76% Total Recurrent & Capital Expenses 163,116 164,413 207,101 150,553 -7.70% Development Expense Region Total 163,116 164,411 207,103 150,553 -7.70% * 1988 & 1989 Actual Expenditures wcre reallocated using 1990 as base. MINISTRY OF HEAL TMH Miqlatry level Salaries 20,232,539 20,736,268 27,126,085 30,086,250 48.70% Ministry Level Vringe Benefits 1 l238292 -12,288,465 19L625 166 17772 235 45.22% htinlstry Level Wagey (VaL & Frg. Ben.) Expenditures 32,470,830 33,024,733 47,451,252 47,858,425 47.39% Ministry Level Operating Expenditures 28,968,655 30,294,21 22,071,R63 27,782,214 -4.10% Ministry Lorl Recurrent Expenditure 61,439,486 63,319,014 69,523,115 75,640,699 23.11% Ministry Level Capital Expenditure 1 934 906 1,505,732 2,608,208 2,985 019 54.27% Ministry Lcvl Recurrent & Capital Expenditure 63,374,392 64,824,746 72,131,323 78,625,718 24.07% Afinbry Level Non-WaSv(Oper. A Cap.) Expejditures 30,903,5G1 31)800,013 24,680,071 30,767,233 -0.44% Ministry Level Development Expenditure 1.837.697 7772.740 2,241.807 6696,.009 264.37% Ministry Level Total Expenditure 65,212,089 72,597,486 74,373,130 85,321,728 30.84% Page 3 of 3 Appendix Table 5. 4 Ministry of Health Summary of Cost Analysis for Royal Hospital. Muscat Regon Hospitals & Dhofar Region Hospitals ELLUSTRATIVE EXERCISE Hospitals (by region) Royal Muscat Dhofar Average * Out-Patient In-Patient Out-Patient In-Patient Out-Patient In-Patient Out-Patient In-Patient Wage Cost per Patient (R-O. Bzs) (R.O. Bzs) (R.O. Bzs) (R.O. Bzs) (R.O. Bzs) (R.O. Bzs) (R.O. Bzs) (R.O. Bzs) Doctors 5.77 4.23 1.68 2.51 1.01 2.29 2.82 3.01 Nurses 3.28 21.68 0.88 11.85 0.36 7.43 1.51 13.65 *Dentists 0.05 0.00 0.16 0.00 0.07 0.00 0.09 0.00 Support Staff** 3.99 4.32 2.04 4.50 0.88 2.95 2.30 3.92 Administrative 1.50 0.82 0.50 0.56 0.41 0.70 0.80 0.70 Average Wage Cost 14.59 31.06 5.26 19.41 2.73 13.37 7.52 21.28 Non-Wage Cost per Patient Medical Supplies 1.80 11.87 0.58 5.27 0.30 6.16 0.89 7.77 Maintenance 0.15 2.96 0.04 0.32 0.00 0.29 0.06 1.19 Water & Electricity 0.38 7.49 0.33 2.97 0.05 2.98 0.25 4.48 Other (Incl. Capital Exp.) 1.14 10.03 0.27 2.48 0.14 3.88 0.52 5.46 Average Non-Wage Cost 3.46 32.35 1.21 11.04 050 13.31 1.72 18.90 Cost per Patient 18.05 63.41 6.47 30.46 3.22 26.69 9.25 40.18 * - The average shown here is only illustrative. Upon completion of this excercisefor each region in MOH the average wll be more meaningful * - Support Personnel includes, lab. techs., radiographers, pharmacists, medical orderlies, skilled and unskilled laborers, etc Ratios Total Employees to Beds Doctors to Beds 0.43 0.25 0.24 Nurses to Beds 1.79 1.01 0.65 Support Staffto Beds 1.06 1.26 0.77 Administrators to Beds 0.35 0.20 0.27 Conclusion: This excercise in linking expenditures(Input) to service levels(output) for three regional hospitals was an attempt to provide quantitative data conclusions for fine tuning management decisions on allocation of resources based on demand. This excercise, assuming the assumptions made are reasonable and accurate, indicates a greater use of outpatient facilities rather than the inpatient facilities in Hospitals. Sources of Information: Financial Information Source: Ministry of Finance & Economy Patient Load, Hospital Facility Capacity & Personnel Data Source: Ministry of Health Appendix Table 5.5 Page 1 of 2 Ministry orHealth Calculation ofCost ofHomteras Operanons Royal Hospital Calculated from 1991 Actual Expenditures ILLUSTRATIVE EXCERCISE Wage costs (1) (ROs) (ROs) (ROs) (ROs) Salaries Salaries Allowances Total Wage Stafling Avg. Wage Doctors 1,662,550 1,241.302 2,903,852 271 10,715 Nurses 3,104,786 1,853,122 4,957,907 1.136 4,364 Dentists 14,370 5,819 20,190 2 10,095 Support Staff 1,582,846 664,795 2,247,641 673 3,340 Admimstrative 706,081 0 706,081 224 3,132 Total Wage Expenses 7,070,634 3,765,038 10,835,671 2,306 Out-Patients In-Patients Tota %Used Annual % Used Annual Non-Waae Expenses (2) 1991 Exp (RO) Expense (RO) Expense(RO) Medical Supplies 2,714,518 25.00%/ 678,629 75.00% 2,035,888 Maintenance 563,846 10.00% 56,385 90.00% 507,461 Water & Electricity 1,428,172 10.00% 142,817 90.00% 1,285,354 Other (IncL Annual Capital Exp.) 2,149,510 20.00% 429,902 80.00% 1,719,608 Total Non-Wage Expenses 6,856,046 1,307,733 5,548,312 Wage Cost Allocations (3) Average Number of Annual Annal [Based on Time Spent by Patient Wage (RO) Personnel % Time Expense (RO) % Time Expense(RO) Category] Number of Doctors 10,715 271 75.00% 2,177,889 25.00% 725,963 Number of Nurses 4,364 1,136 25.00% 1,239,477 75.00% 3,718,431 Number of Dentists 10,095 2 100.00% 20,190 0 Number of Support Personnel 3,340 673 67.00% 1,505,920 33.00% 741,722 Administrators 3,152 224 80.00% 564,865 20.00% 141,216 Total Personnel 2,306 5,508,340 5,327,331 Total Expenditures 6,816,073 10,875,644 Out-Patients In-Patients Cost Per Out-Patient (RO.Bzs) (RO.Bzs) Number of Outpatients 377,547 Cost per Patient 18.05 Cost per In-PatIent 6341 Avg. Occupancy Rate 74.00% Avg Bed per Day 470 Amoendi Table 5.5 Page 2 of 2 Ministry of Health Calculation ofCost ofHositals Operarons Royal Hospital Calculated from 1991 Actal Expenditures ILLUSTRATIVE EXCERCISE Wage Costs (RO.Bzs) Out-Paticat In-Panent Doctors 5.77 423 Nurses 3.28 21.68 Denusts 0.05 0.00 Support Staff 3.99 4.32 Adminstrative 1.50 082 Average Wage cost 14.59 3106 Non-Wage Costs (Bzs) Out-Patient In-Patient Medical Supplies 1.80 11.87 Maintenance 0.15 2.96 Water & Electricity 0.38 749 Other 1.14 10.03 Average Non-Wage cost 3.46 32.35 Ratios Total Enployees to Beds Doctors to Beds 0.43 Nurses to Beds 1.79 Support Staff to Beds 1.06 Administrators to Beds 0.35 WORK LOAD/PER YEAR ESTIMATION EXERCISE((a 100% capacity) Out-Patient Services (4) Number of % of Active Staffing Affocation Personnel Time Used Pers,nl Number of Doctors 271 75.00% 203 Number ofNurses 1,136 25.00% 284 Number of Dentists 2 100.00% 2 Number of Support Personnel (5) 297 67.00% 199 Total Out-Patient Personnel 688 Out-Patient personnel/shift 344 Number of possible visits 1,108,066 Ot-Patient In-patien Annual Hours per Employee (6) 1610 Patients per Hours (7) 2 Number of Beds in Region 635 Theoritical Cost per Patient 6.15 46.92 Variance Iom Cost per Patient -11.90 -1649 fNegative variances indicate over aUocation ofresourcer and positive variances indicate under aBocation ofresource] Note: The above exercise is intended to measure against a theoritical maximum workload. Variances from theoritical costs to actual costs(per patient) can be used to determine efficiences in allocation of resources. Caution should be used in estimating mamimum workloads. e11 AG otes (1) : Wage coaste were allocated on a percentage basis. The base was personnel distribution as of December 31, 1991 based on an average salary by employee classification. ells A17 ote: (2) : An allocation of 75% of the 1991 actual expenses was made for honpitals. Of the 75% allocated, based on 1991 actual expenditures, 331 was allocated to Out-patients and 67% for In-patients. ells A24 ote: (3) : It is assumed that Doctors spend a greater period of time with out- patients than In-Patients, hence, an assumption of time allocation of 75% was attributed to Doctors. It io aoumed that Nurses contribute a greater amount of time for In-patient services, hence, an allocation of 75% of Nurses time. alls A44 ates (4) Total beds = 635 times 74% - 470 . Source: MON Annual Statistical Report 1991 Table 2.3. ells A70 otes (5) : Of the available personnel the same assumptions of time useage between Out-patients and In-Pattents are made. There by arriving at an estimated number of personnel catering to Out-patients in full-time equivalentc. The annumption of Out-patient facilities working hours is 14 hours ( or two shifts). The number of possible visits is calculated by multiplying a per shift staff * 7 hours * 52 weeks * 5 days * 2 visits per hour. (An assumption that each patient requires, on an average, 30 minutes. ell: B75 otes (6): Number of Technical personnel is arrived at by deducting the number of Unskilled Labor, Skilled Labor and Medical orderlies. It is assumed they do not provide direct services to out-patients. ell: A80 otes (7) : Annual hours are computed as follows: (7 hours per day * 5 days per week * 52 weeks)-(7 hours per day * 30 days vacation, personal leave and sick time) ells A81 ates (8): Assumption is that a minimum of thrity minutes per out-patient would be spent by every out-patient staff. Royal Hosp. Addendum Report to Oman PER 8/93 DRAFT-March 9. 1994 11 rdditional Explanation for Appendix Table 5.5: Appendix Table 5.5 was prepared to Vrovide a methodology to asscss the effciency of the Hospital, or Hospitals by Region The table was prepared as a template for fature use by Omani Officials. The table has the necessary data elements, such as statistics on employees, expense categorlex by wage and non-wage. Also Included is a percent oftime allocated for 'In-patiente' and 'Out-patients'. This is since hospitals administer medical services to both in-patients and out- patients. Purpose of this exercise is to provide a medwholo"y to measure the efficiency of the Hospital, calculate the wage & non-wage components, and calculate the unit cost per service and measure it to a theoretical costi. Note that Appendix Table 5.5 is for Royal Hospital only. However, an analysis of three hospitals/group of hospitals by region (Royal, Muscat & Dhofar) was done for comparison. Understanding the methodology of one exercise will suffice to understand the others. In Appendix Table 5.5 Rows 7 through 13 attempt to establish an average wage cost by personnel classification. The amount in cell references (cr) BS - B12 were allocated by percent of staffing. The salary and allowance amounts2 are divided by staffing cr F9 - F12 to arrive at the Average Wage cr G8 - G12. The next section attempts to distribute non-wage expenditures between the 'In-patient' and 'Out- patient' categories. The percentages in'%/ Used' column (cr ]19-T)21) is a guess. It should be noted here that in-patients share a larger portion of the costs since they are in the hospital for a longer period of time. Therefore, a higher percentage is allocated to the 'Tn-patient' category. Section 'Wage Cost Allocation' distributes the personnel costs by the two patient categories. The as,. .mption is doctors spend 75% of their time with out-patients and 25% of their time with in- patients. The reverse is true for Nuracs. The 'Total Expenditures' in cr P34 & G34 is the distributed amounts by 'Out-patients' and 'In- patients'. This data is then used to determine unit cost per patient. RO 6,816,073 cr E34 is divided by the 'Number of Outpatients4 cr D39 for a unit cost of RO 18.05. Wage costs by Doctors, Nurses etc., are calculated as follows: Annual expense (for doctors) / Annual Patient load I Theoretical cost is the cost per unit with a given physical and financial resoue base. This means that if a hospital has 100 hedq, opeates for 24 hours, is allocated S 1,000,000 (which includes salaries & O&M qapensw) and has no lag time in filling beds (at 100% occupancy). The theorctical unit cost per brA will bc S27.40 per bd per day (S1,000,000 / 100 / 365). However, if occupancy is at 70%. that is beds ar not occupied by patients all the time but only 70% of the tirm, the unit cost is $39.14 ($1,000,000 t70 / 365). 2 Source: MOFE Financial Reports for Fiscal Year (FY) 1991. See Attachment 3. 3 Source: MOH MOHealth Planning Directorate - Dr. Lambourni Computer Flies. 4 Source: MOH MOH1ealth Planning Directorate * Annual Statistical Report 1991 Table 2.4 uMagement Stategles Pago 3 Addendum Rcport to Oman PER 8/93 DRAFT-March 9. 1994 RO 2,177,289 (cr E27) 1377,547 (cr D39) - RO 5.77 (cr E47) Wage cost for 'In-patients' are calculated as follows: Annual expense (for doctors) / 365 / Average Beds Occupied per day. RO 725,963 (cr G27) / 365 (days in a year) / 470 (cr F44) The section on Total Employees to Beds' is a performance indicator to measure stafftn8 efficiencies (or deficiencies). Comparing one statistic to another hospital will raise questions for over staffing or under staffing. 'Workload/Year estimation' is to gauge capacity at a hospital. This data In this.nercise is nurely ustrative. it must not he construed as fAct. Prior to performing this exercise real data must be achieved by a Time Study. The underlying assumption In this exercise is the availability of the staff for 'Out-patient' care. Annual Hours per Employee - 7hours * Sdays 52weeks - 1,820 Less. 7hours * 30dayss * _.2d_ Total 1,610 (cr C80) Number of Possible visits Outpaticnt personnel / shift * Annual Hours per Employee * Patients per Hour 344 (cr D77) * 1610 * 2 (30 minutes per paticnt)- 1,108,066 Out-patients per year. Theoretical cost per Out-patient is RO 6,816,073 / 1,108,066 = RO 6.15 (cr El84). The same is true for the 'In -patient' category, the calculation is at 100% capacity as opposed to 74%6 capacity. 5 30 days are for compensated absence, such as vacation, sick & pcrsonal leave. 6 Sourc: MOH Planning Dircctorate - Annual Statistical Report 1991 Tabic 2.3. Managemient Strwgiar Page 4 ADDeOdix Table 5.6 Page 1 of 2 Ministry of Health Calculation o(Cost ofHospitals Operations Muscat Region Hospitals Calculated from 1991 Actual Expenditures rLLUSTRATIVE EXERCISE Ware costs (1) (RO) (RO) (RO) (RO) Salaries Salaries Allowances Total Wage Staffing Avg. Wage Doctors 1,174,439 1,064,528 2,238,967 205 10322 Nurses 2,043,364 1,486,051 3,529,415 822 4,294 Dentists 107,735 53,043 160.777 16 10,049 Support Staff 2,088,308 955,162 3,043,469 1,023 2,975 Admmistrative 444,573 181,909 626,481 166 3,774 Total Wage Expenses 5,858,417 3,740,692 9,599,109 2,232 % of Regional Out-Paticins In-Patients Expenses Alloc. Total % Used Annual %Used Annual Non-Ware Expenses (2) to Hospitals 1991 Exp(RO) Expense(RO) Expense(RO) Medical Supplies 75.00% 1,756,500 33.00% 579,645 67.00% 1,176,855 Maintenance 75.00% 107,124 33.00% 35,351 67.00% 71,773 Water & Electricity 75.00% 991,172 33.00% 327,087 67.00% 664,085 Other (IncL Annual Capital Exp.) 75.00% 827,523 33.00% 273,083 67.00% 554,440 Total Non-Wage Expenses 3,682,319 1,15,165 2,467,153 Wae Cost Allocations (3) Average Number of Annual Annual [Based on Tame Spent by Patient Wage(RO) Personnel % Time Expense(RO) % Time Expense(RO) Category] Number ofDoctors 10,922 205 75.00% 1,679,225 25.00% 559,742 Number ofNurses 4,294 822 25.00% 882,354 75.00% 2,647,061 Number of Dentists 10,049 16 100.00% 160,777 0 Number of Support Personnel 2,975 1,023 67.00% 2,039,124 33.00% 1,004,345 Administrators 3,774 166 80.00/o 501,185 20.00% 125,296 Total Personnel 2,232 5,262,665 4,336,444 Total Expenditures 6,477,831 6,803,597 Out-Patients In-Patients Cost Per Out-Patient Number of Outpatients 1,001,197 Cost per Patient 6.47 Cost per In-Patient 30.46 Avg. Occupancy Rate 75.28% Avg. Bed per Day 612 ADDendix Table 5.6 Page 2 of 2 Ministry of Health Calculation ofCost orHostals Operations Muscat Region Hospitals Calculated from 1991 Actual Expenditures ILLUSTRATIVE EXERCISE Wage Costs per patient Doctors 1.68 2.51 Nurses 0.88 11.85 Densts 0.16 0.00 Support Staff 2.04 450 Administrative 0.50 0.56 Average Wage cost 5.26 1941 Non-Wage Costs per patient(Bzs) Out-Paticals In-Patents Medical Supplies 0.58 5.27 Maintenance 0.04 0.32 Water & Electricity 0.33 2.97 Other 0.27 2.48 Average Non-Wage cost 1.21 11.04 Ratios Total Employees to Beds Doctors to Beds 0.25 Nurses to Beds 1.01 Support Staff to Beds 1.26 Administrators to Beds 0.20 WORK LOADIPER YEAR ESTIMATION EXERCISE ((Q 100% capaety) Out-Patient Services (4) Number of % of Active Staffnr Allocation Personnel Time Used Personnel Number of Doctors 205 75.00% 153.75 Number of Nurses 822 25.00% 205.50 Number of Dentists 16 100.00% 16.00 Number of Technical Personnel (5) 72 67.00% 48.24 Total Out-Patient Personnel 423 Out-Patient personnel/shift 212 Number of possible visits 681,819 Out-patient In-paien Annual Hours per Employee (6) 1610 Patients per Hours (7) 2 Number of Beds in Region 813 Theoritical Cost per Patient 9.50 22.93 Variance from Cost per Patient 3.03 -753 INegative variances indicate over allocation ofresources and positive variances indicate under allocation ofresoireer.] Note: The above exercise is intended to measure against a theoritical maximum workload. Variances from theoritical costs to actual costs(per patient) can be used to determine efficiences in allocation of resources. Caution should be used in estimating maximum workloads. Anendix Table 5.7 Page 1 of 2 Ministry of Health Calculation ofCost ofHosmials Overanons Dhofar Region Hospitals Calculated from 1991 Actual Expenditures ILLUSTRATIVE EXERCISE Wale costs (1) (RO) (RO) (RO) (RO) Salaries Salaries Allowances Total Wage Staming Avg. Wage Doctors 474,083 382,303 856,385 91 9,411 Nurses 559,874 364,050 923,924 245 3,771 Dentists 31,002 13,460 44,462 5 8,892 Support Staff 591,023 243,317 834,341 288 2,897 Administrative 244,333 83,762 328,096 101 3,248 Total Wage Expenses 1,900,315 1,086,892 2,987,207 730 % of Regonal Out-Patients In-Patients Expenses Alloc. Total % Used Annual % Used Annual Non-Ware Expenses (2) to Hospitals 1991 Exp (RO) Expense(RO) Expn(RO) Medical Supplies 75.00% 766,500 25.00% 191,625 75.00% 574,875 Maintenance 75.00% 29,727 10.00% 2,973 90.00% 26,754 Water & Electricity 75.00% 309,401 10.00% 30,940 90.00% 278,461 Other (Incl. Annual Capital Exp.) 75.00% 452,865 20.00% 90,573 80.00% 362,292 Total Non-Wage Expenses 1,558,493 316,111 1,242,382 Wage Cost Allocations (3) Average Number of Annual Annual [Based on Time Spent by Panrent Wage(RO) Personnel % Time Expense(RO) % Time Expense(RO) Category] Number of Doctors 9,411 91 75.00% 642,289 25.00% 214,096 Number of Nurses 3,771 245 25.00% 230,981 75.00% 692,943 Number of Dentists 8,892 5 100.00% 44,462 0 Number of Support Personnel 2,897 288 67.00% 559,008 33.00% 275,332 Administrators 3,248 101 80.00% 262,477 20.00% 65,619 Total Personnel 730 1,739,217 1,247,991 Total Expenditures 2,055,328 2,490,373 Out-PaUats In-Patients Cost Per Out-Patient Number of Outpatients 637,529 Cost per Patient 3.22 Cost per In-Patient 26 69 Avg Occupancy Rate 68.00% Avg. Bed per Day 256 ADDendix Table 5.7 Page 2 of 2 Ministry of Health Calculation ofCost ofHospirals Operonons Dhofar Region Hospitals Calculated frio 1991 Actual Expenditures ILLUSTRATIVE EXERCISE Wage Costs per padient Out-Patient In-Patient Doctors 1.01 2.29 Nurses 0.36 7 43 Dentists 0.07 0.00 Support Staff 0.88 2.95 Administrative 0.41 0.70 Average Wage cost 2.73 13.37 Non-Wage Costs per patient (Bas) Out-Panlents In-Patents Medical Supplies 030 6.16 Maintenance 0.00 029 Water & Electricity 0.05 2.98 Other 0.14 388 Average Noo-Wage cost 0.50 13.31 Ratios Total Emplovees to Beds Doctors to Beds 0.24 Nurses to Beds 0.65 Support Staff to Beds 0.77 Administrators to Beds 0.27 WORK LOAD/PER YEAR ESTIMATION EXERCISE (AR 100% capacity) Out-Patient Services (4) Number of % of Active Staffine Allocadon Personnel Time Used Personoel Number of Doctors 91 75.00% 68.25 Number of Nurses 245 25.00% 61.25 Number of Dentists 5 100.00% 5.00 Number of Technical Personnel (5) 120 67.00% 80.40 Total Out-Patient Personnel 215 Out-Patient personnel/shift 107 Number of possible visits 345,989 Out-Patient In-Patient Annual Hours per Employee (6) 1610 Patients per Hour (7) 2 Number of Beds In Region 376 Theoritical Cost per Patient 5.94 18.15 Variance from Cost per Patient 2.72 -8.54 [Negative variances indicate over allocation ofresourca and positive variances indicate under allocation ofresourcAr.) Note: The above exercise is intended to measure against a theoritical maximum workload. Variances from theoritical costs to actual costs(per patient) can be used to determine efficiences in allocation of resources. Caution should be used in estimating maximum workloads. Appendix Notes to Tables 5.5 - 5.7 Note: (1) : Wage costs were allocated on a percentage basis. The base was personnel distribution as of December 31, 1991 based on an average salary by employee classification. Note: (2) : An allocation of 75% of the 1991 actual expenses was made for hospitals. Of the 75% allocated, based on 1991 actual expenditures, 33% was allocated to Out-patients and 67% for In-patients. Note: (3) : It is assumed that Doctors spend a greater period of time with Out-patients than In-Patients, hence, an assumption of time allocation of 75% was attributed to Doctors. It is assumed that Nurses contribute a greater amount of time for In-patient services, hence, an allocation of 75% of Nurses time. Note: (4) : Of the available personnel the same assumptions of time useage between Out-patients and In-Patients are made. There by arriving at an estimated number of personnel catering to Out-patients in full- time equivalents. The assumption of Out-patient facilities working hours is 14 hours ( or two shifts). The number of possible visits is calculated by multiplying a per shift staff * 7 hours * 52 weeks * 5 days * 2 visits per hour. (An assumption that each patient requires, on an average, 30 minutes. Kate: --5)- -Nnber.of.TchnicaL.prr%nne cz ;q.r_jtPe number of Unskilled Labor, Skilled Labor and Medical Orderlies. It is assumed they do not provide direct services to out-patients. Note: (6) : Annual hours are computed as follows: (7 hours per day * 5 days per week * 52 weeks)-(7 hours per day * 30 days vacation, personal leave and sick time) Note: (7) : An assumption that a service provider spends, on average, 30 minutes per out-patient is made. Aumedix Table 5.8 Ministry of Health Summary of Cost Analysis for Muscat Region Health Centers & Dhofar Region Health Centers ILLUSTRATIVE EXERCISE Health Centers(by region) Muscat Dhofar Average * Out-Patient In-Pattrnt i)-Patient In-Patient Out-Patient In-Patient Waee Cost per Patient (RO. Bzs) (R.O. Bzs) (R.O. Bzs) (R.O. Bzs) (R.O. Bzs) (R.O. Bzs) Doctors 0.32 0.25 0.19 Nurses 0.32 0.56 0.29 Dentists 0.00 0.00 0.00 Support Staff 0.69 0.82 0.50 Administrators 0.09 0.20 0.10 Average Wage Cost 1.42 1.83 1.08 Non-Waee per Patient Medical Supplies 1.04 0.77 0.91 Maintenance 0.06 0.03 0.05 Water & Electricity 0.59 0.31 0.45 Other (IncL Capital Expenses 0.49 0.46 0.47 Average Non-Wage Cost 2.18 1.57 1.88 Cost per Patient 3.60 3.40 3.50 * - The average shown here as only illustrative. Upon completion of this arcercise for each region in MOH the average wrll be more meaningful ** - Support Personnel includes, lab. techs.. radlographers, pharmacists, medical orderlies, skilled and unskilled laborers, etc. Ratios Patints per Day 1543.54 903.76 Nurses to Doctors 2.21 4.90 uppor Staff to Doctors 8.05 12.20 Adminrative Staffto Doctors 0.79 2.11 Conclusion: This excercise in linking expenditures(Input) to service levels(output) for three regional hospitals was an attempt to provide quantitative data conclusions for fine tuning management decisions on allocation of resources based on demand. Sources of Information: Financial Information Source: Ministry of Finance & Economy Patient Load, Hospital Facility Capacity & Personnel Data Source: Ministry of Health ADyendix Table 5.9 Page 1 of 2 Ministry of Health Calculaton ofCost ofHealth Center Operanons Muscat Region Health Centers Calculated from 1991 Actual Expenditures ILLUSTRATIVE EXERCISE Wage costs (1) (RO) (RO) (RO) (RO) Salaries Salaries Allowances Total Wage Stallng Avg. Wage Doctors 91,774 90,537 182,312 19 9,595 Nurses 103,763 74,179 177,943 42 4,237 Dentists 0 0 0 0 0 Support Staff 276,026 112,419 388,446 153 2,539 Adminisrative 38,724 14,166 52,890 15 3,526 Total Wage Expenses 510,288 291,302 801,590 229 % of Regizonal Ou0t-Patents In-Patients Expenses Alloc. Total % Used Annual % Used Annual Non-Wage Expenses (2) to Health Centers 1991 Exp(RO) Expense(RO) Expense(RO) Medical Supplies 25.00% 585,500 100.00% 585,500 Maintenance 25.00% 35,708 100.00% 35,708 Water & Electricity 25.00% 330,391 100.000/ 330,391 Other (IncL Annual Capital Exp.) 2.00% 275,841 100.000/ 275,841 Total Non-Wage Expenses 1227,440 1,227,440 0 Ware Cost Allocadons (3) Average Number of Annual Annual [Based on Time Spent by Patient Wage(RO) Personnel % Time Expense(RO) %Time Expense(RO) Category] Number of Doctors 9,595 19 100.00% 182,312 Number of Nurses 4,237 42 100.00% 177,943 Number of Dentists 0 0 100.00% 0 Number of Support Personnel 2,539 153 100.00% 388,446 Admirustrators 3,526 15 100.00%/ 52,890 Total Personnel 229 801,590 0 Total Expenditures 2,029,029 0 Out-Patients In-Patients Cost Per Out-Patient (RO.Bzs) (RO.Bzs) Number of Outpatients 563,393 Cost per Patient 3.60 Cost per In-Patient 000 Avg. Occupancy Rate 0.00% Avg. Bed per Day 0 ADDudix Table 5.9 Page 2 of 2 Ministry of Health Calculation ofCost ofHealth Center Operations Muscat Region Health Centers Calculated from 1991 Actual Expeoditures ILLUSTRATIVE EXERCISE Wage Costs (RO.Bas) Doctors 032 000 Nume 032 000 Dentists 0.00 0.00 Support Staff 0.69 0.00 Administrative 0.09 000 Average Wage cost 1.42 0.00 Non-Wage Costs (RO.Bzs) Out-Patients In-Patients Medical Supplies 1.04 0.00 Maintenance 0.06 0.00 Water & Electricity 0.59 0.00 Other 0.49 000 Average Non-Wage cost 2.18 0.00 Ratios Patients per Day 1,544 Nurses to Doctors 2.21 Support Staff to Doctors 8.05 Administrative Staff to Doctors 0.79 Out-Patient Services (4) Number of % of Active Stafzor Allocation Personnel Time Used personnel Number of Doctors 19 100.00% 19.00 Number of Nurses 42 100.00% 42.00 Number of Dentists 0 100.00% 0.00 Number of Technical Personnel (5) 48 100.00% 48.00 Total Out-Patient Personnel 109 Out-Patient personnel/shift 55 Max Number of Outpatients 175,490 Out-Patients In-Patients Annual Hours per Employee (6) 1610 Patients per Hour (7) 2 Number of Beds in Region 0 Theoritical Cost per Patient 11.56 0.00 Variance from Cost per patient 7.96 0 [Negative variances indicate over allocation of resources and positive variances indicare under allocation ofresources.] Note: The above exercise is intended to measure against a theoritical maximum workload. Variances from theoritical costs to actual costs(per patient) can be used to determine efficiences in allocation of resources. Caution should be used in estimating maximum workloads. Appendix Table 5.10 Page 1 of 2 Ministry of Health Calculation ofCost ofHealth Center Overations Dhofar Region Health Centers Calculated from 1991 Actual Expenditures ILLUSTRATIVE EXERCISE Ware costs (1) (RO) (R0) (RO) (RO) Salaries Salaries Allowances Total Wage StaffIng Avg. Wage Doctors 44,479 38,695 83,173 10 8,317 Nurses 109,946 73,945 183,891 49 3,753 Dentists 0 0 0 0 0 Support Staff 190,982 78,354 269,335 122 2,208 Admimstative 50,963 15,948 6,911 21 3.178 Total Wage Expenses 396,369 206,942 603,311 202 % of Regional Out-Patients In-Patients Expenses Alloc Total % Used Annual % Used Annual Non-Ware Expenses (2) to Health Centers 1991 Exp(RO) Eqpne(RO) Expense(RO) Medical Supplies 25.00% 255,500 100.00% 255,500 Maintenance 25.00% 9,909 100.00% 9,909 Water & Electricity 25.00% 103,134 100.00% 103,134 Other (IncL Annual Capital Exp.) 25.00% 150,955 100.00% 150,955 Total Non-Wage Expenses 519,498 519,498 0 Wape Cost Allocations (3) Average Number of Annual Annual [Based on Time Spent by Patient Wage(RO) Personnel % Time Expense(RO) %Time Expen:se(RO) Category] Number of Doctors 8,317 10 100.00% 83,173 Number of Nurses 3,753 49 100.00% 183,891 Number of Dentists 0 0 100.00% 0 Number of Support Personnel 2,208 122 100.000/ 269,335 Administrators 3,178 21 100.00% 66,911 Total Personnel 202 603,311 0 Total Expenditures 1,122,809 0 Out-Patients In-Paents Cost Per Out-Patient (RO.Bzs) (RO.Bzs) Number of Outpatients 329,872 Actual Cost per Patient 3.40 Cost per In-Patient 0.00 Avg. Occupancy Rate 0.00% Avg. Bed per Day 0 Table 5.10 Page 2 of 2 Ministry of Health Calculation ofCost of Health Center Operanrons Dhofar Region Health Centers Calculated from 1991 Actual Expenditres II,,USTRATIVE EXERCISE Wage Costs (RO.Bzs) Out-Paent 0 In-Patient Doctors 0.25 0.00 Nurses 0.56 000 Dentists 0.00 000 Support Staff 0.82 0.00 Administrative 0.20 0.00 Average Wage cost 1.83 0.00 Non-Wage Costs (Baa) Out-Paients In-Patients Medical Supplies 0.77 0.00 Maintenance 0.03 0.00 Water & Electricity 0.31 0.00 Other 0.46 000 Average Non-Wage cost 1.57 0.00 Ratios Patients per Day 903.76 Nurses to Doctors 4.90 Support Staff to Doctors 12.20 Administrative Staff to Doctors 2.11 WORK LOAD/PER YEAR ESTIMATION EXERCISE ((Al 100% capacity) Out-Patient Services (4) Number of % of Active Stafuing Allocation Personnel Time Used Personol Number of Doctors 10 100.00% 10.00 Number of Nurses 49 100.00% 49.00 Number of Dentists 0 100.00% 0.00 Number of Support Personnel (5) 122 100.00% 122.00 Total Out-Patient Personnel 181 Out-Patient personnel/shit 91 Number of possible visits 291,410 Annual Hours per Employee (6) 1610 Patients per Hour (7) 2 Number of Beds In Region 0 Theoritical Cost per Patient 3.85 0.00 Variance from Cost per patient 0.45 0 [Negative variances indicate over allocation ofresources and positive variances indicate under allocadon ofreouces.J Note: The above exercise is intended to measure against a theoritical maximum workload. Variances from theoritical costs to actual costs(per patient) can be used to determine efficiences in allocation of resources. Caution should be used in estimating maximum workloads. Appendix Notes to Tables 5.9 - 5.10 Note: (1) : Wage costs were allocated on a percentage basis. The base was personnel distribution as of December 31, 1991 based on an average salary by employee classification. Note: (2) : An allocation of 25% of the 1991 actual expenses was made for health centers Note: (3) : It is assumed 100 % of the facility's time is for out-patients. Note: (4) : Of the available personnel the same assumptions of time useage between Out-patients and In-Patients are made. There by arriving at an estimated number of personnel catering to Out-patients in full- time equivalents. The assumption of Out-patient facilities working hours is 14 hours ( or two shifts). The number of possible visits is calculated by multiplying a per shift staff * 7 hours * 52 weeks * 5 days * 2 visits per hour. (An assumption that each patient requires, on an average, 30 minutes. Note: (5) : Number of Technical personnel is arrived at by deducting the number of Unskilled Labor, Skilled Labor and Medical Orderlies. It is assumed they do not provide direct services to out-patients. Note: (6) : Annual hours are computed as follows: (7 hours per day * 5 days per week * 52 weeks)-(7 hours per day * 30 days vacation, personal leave and sick time) Note: (7) : An assumption that a service provider spends, on average, 30 minutes per out-patient is made. Sultanate of Oman Ministry of Electricity Administration Operations & Maintenance (All Sectors) (in RO millions) Year Main Office * Spares & Grand Wage Non-Wage Wages Fuel Maintenance Other Total Total 1991 Expenditures * 455,787 365,967 5.98 69.42 10.41 9.06 94.86 95.68 Less: Water Sector Expenses * 1.19 11.31 -0.34 2.48 15.32 15.32 Total Electricity Sector 455,787 365,967 4.79 58.11 10.06 6.58 79.54 80.36 Data ** Number of Customers 252,291 Administrative Staff 95.00 Plant Staff 1,539 Less: Water Sector Estd 330 Total Staff Electricity Sector 1,209 Electricity Statistics (in millions) RO Value KWHrs (Produced) / Year -------- 4,625.29 KWHrs (Plant Use) / Year -------------- 260.17 KWHrs (Transmitted) / Year ------------ 4,365.12 KW-Irs (Billed) / Year -------------- 3,568.30 KWlrs (Lost) / Year -------------- 796.82 17. (796.82 mil KWHrs * .022520 Bzs) Cost per KWIIr Administration Operations Grand Wage Non-Wage Wages Fuel Sp. & Mnt. Other Total Total Produced 0.000099 0.000079 0.001036 0.012563 0.002176 0.001422 0.017196 0.017374 Transmitted 0.000104 0.000084 0.001098 0.013311 0.002305 0.001507 0.018221 0.018409 Billed 0.000 1 2 TO00- 3 EsT0$?:00124 .0--bb ILLIOOIW AAW~~29. Ratios (Annual Ratios) Administrators to Operations Source - Ministry of Finance Financial Report Employees (%) 7.86% ** Source - Statistical & Economic Study by D.G. of Electricity KWHrs / Admin. Employee 48,687,263 (Northern Sector) K WHrs / Plant Employee 3,825,715 KWHrs Used / Custormer 18,333 water - Sultanate of Oman 1990 (in Million ROs) (in Cu M) Outside Plants Production Wages Non-Wages Fuel Spare & Services & Total (Inc. Min. of Elec. Budget) per Year Maintenance Other Costs Ghubrah (1) 33,130,000 1,100,000 12,820,000 10,220,000 300.000 2,300,000 13,920,000 Masirah (1) 390,000 73,300 1,131,600 947,300 37,500 146,800 1,204,900 Kumzar (1) 19,000 7,543 87,913 70,083 2,057 15,772 95.456 Sheesa (1) 18,000 4.711 54,905 43,770 1,285 9,850 59,616 Lma * (1) 22,033 3,596 41,915 33,414 981 7,520 45,511 O thers (in W ater B udget) (2) 26,485,967 2,891,256 3,861,173 994,883 739,300 2,126,990 6,752,429 Total (3) 60,065,000 4,080,407 17,997,505 12,309,450 1,081,123 4,606,932 22,077,912 Cost Category % of Total 7.90% 92.10% 7342% 2.16% 16.52% 100.00% (Ghubrah = Base) Total Desalination Plants 14 Population 1,505,674 Total Employees 1,142 Cost per Cu M fin RO.Bzs) Wage Cost 0.068 Non-Wage Cost 0.300 Total Cost 0.368 Non-Wage (w/o Fuel) 0.095 Total Cost (w/o Fuel) 0.163 * Data unavailable - estimated based on Ghubrah percentages * Plant Total cost per MOE - Statistical & Economic Study Report 1991. Estimated due to lack of data at the Ministry of Water Ministry of Water - Sultanate of Oman United States Statistics U.S.A. Water Production Converted to Metric System % of Total in Rials Water Productionlyear (Gal.) 8,229,423,590,000 Total expenses 2,042,007,600 In CU Ms 37,406,470,864 Salaries 802,508.987 Population 95,334,100 Other 765,752,850 Chemicals 82,791.300 Gals Per person 86,322 Energy 260,489.700 Outside Services 125,196,600 O & M w/o Salaries 3,217,100,000 Salaries 2,082,900,000 39.30% CU M of Water Produced Total 0 & M 5,300,000,000 (in U.S.A.) 37,406,470,864 Labratory Expenses 59,600,000 Total Expense 5,359,600,000 Wage Cost / Cu M (Bzs) 0.021 Non-Wage Cost / Cu M (Bzs) 0.033 # of Employees 69,172 Total Cost / Cu M (Bzs) 0.054 Cost per Employee 77,482 Total Expenses 5,359,600,000 100.00% Wages 2,106,322,800 39.30% Non-Wages 3,239,450,000 Other 2,009,850,000 37.50% Chemicals 217,300,000 4.10% Energy 683,700,000 12.90% Outside Services 328,600,000 6.20% Source: WIDB (Water Industry Data Base - Published by American Water Works Association Exchange Rate of U.S.$1.00 = 0.381 Bzs tr Ministry of Water - Sultanate of Oman Recalculation of Water Budget Based on WIDB Statistics Standards Production per Employee per year (Cu M) 413,114 (WIDB standard is 249.000 gallons per employee per day, the conversion factor Is 220 gallons per Cu M). Therefore, 249.000 * 365 days / 220 = 413,114) Non-Wage per Employee 0.033 Standard from Table 2 (w/o Fuel) Oman Fuel Cost 0.205 Total Non-Wage Cost 0.238 Oman Production per year 60,065,000 (in Cu M) Number of Employees 145 (per Standard) Average Wages 3.561 Theoritical Budget based on Oman 1990 Production (in ROs) Wages 517,705 (145 Employees RO 3.561 average Oman wage) Non-Wage 14,291,301 Total Estimated Budget 14,809.006 1991Expenditures 22,077,912 (See Table 1) (Over) Under Expenditures (7.268,906) Ministry of Water - Sultanate of Oman Note: (1) : Source: Statistical & Economic Study of 1991 by D.G. of Electricity (Northem Sector) Note: (2) : Estimated based on total water production from National Statistic Manual for 1990. Note: (3) : Source: National Statistics Manual of 1990. Possible includes Underground Wells and Surface Water plants. Data unavailable from Ministry of Water. Appendix The World Bank Tbie L Public Expenditure Review - Standard Cost Analysis Page 1 of 2 Sultanate of Oman Ministry of Electricity & Water - Actual Expenditures 10/28/92 8:06 PM % Change Categories 1988 1989 1990 1991 1988-92 Ministry of Electricity & Water Main Office Salaries 223,562 210,384 226,207 247,246 10.59% Employee Benefits 130,384 129,639 219,825 208,541 59.94% Operating Expenses: 286,883 277,993 265,619 287,806 0.32% Total Recurrent Expenses 640,829 618,017 711,651 743,594 16.04% Capital Expense 27,204 32,384 51,217 78,161 187.32% Total Recurrent & Capital Expenses 668,033 650,401 762,867 821,755 23.01% Development Expense Region Total 668,033 650,401 762,867 821,755 23.01% Directorate of Electricity Salaries 1,494,081 1,598,783 1,679,876 1,768,841 18.39% Employee Benefits 1,009,693 1,092,852 1,573,297 1,398,484 38.51% Operating Expenses: 51,687,498 49,766,208 53,823,262 48,912,491 -5.37% Total Recurrent Expenses 54,191,272 52,457,843 57,076,435 52,079,816 -3.90% Capital Expense 80,960 122,371 123,494 163,028 101.37% Total Recurrent & Capital Expenses 54,272,232 52,580,214 57,199,929 52,242,843 -3.74% Development Expense 20,718,270 12,756,192 14,708,118 11,140,104 -46.23% Region Total 74,990,502 65,336,406 71,908,047 63,382,947 -15.48% D.G. of Electricity - Southern Area Salaries 740,889 746,098 755,578 781,696 5.51% Employee Benefits 580,064 577,198 763,323 654,175 12.78% Operating Expenses: 11,501,950 11,757,060 12,750,293 13,650,699 18.68% Total Recurrent Expenses 12,822,903 13,080,357 14,269,194 15,086,570 17.65% Capital Expense 62,188 56,799 52,981 51,900 -16.54% Total Recurrent & Capital Expenses 12,885,091 13,137,156 14,322,175 15,138,469 17.49% Development Expense 0 0 0 689,509 #DIV/O! Region Total 12,885,091 13,137,156 14,322,175 15,827,978 22.84% Masirah Power Station Salaries 8,416 5,610 0 0 -100.00% Employee Benefits 7,542 3,704 0 0 -100.00% Operating Expenses: 871,325 634,726 224,914 48,284 -94.46% Total Recurrent Expenses 887,283 644,040 224,914 48,284 -94.56% Capital Expense 0 0 0 0 000% Total Recurrent & Capital Expenses 887,283 644,040 224,914 48,284 -94.56% Development Expense 0 0 0 0 0.00% Region Total 887,283 644,040 224,914 48,284 -94.56% Cities & Villages Power Stations Salaries 550,280 626,438 668,712 679,640 23.51% Employee Benefits 348,849 398,997 559,517 498,692 42.95% Operating Expenses: 20,932,561 23,152,774 23,520,684 24,556,613 17.31% TotalRecurrent Expenses 21,831,690 24,178,209 24,748,912 25,734,945 17.88% Capital Expense 43,374 80,248 62,818 109,821 153.20% Total Recurrent & Capital Expenses 21,875,064 24,258,457 24,811,730 25,844,767 18.15% Development Expense 0 0 0 0 0.00% Region Total 21,875,064 24,258,457 24,811,730 25,844,767 18.15% ADDeadix The World Bank Table 5.15 PublIc Expenditure Review - Standard Cost Analysis Page 2 of 2 Sultanate of Oman Ministry of Electricity & Water - Actual Expenditures 10/28/92 8:06 PM 191 %Change Categories 1988 1989 1990 1991 1988-92 Coastal Area Power Stations Salaries 117,651 111,035 113,885 120,117 2.10% Employee Benefits 70,304 66,828 97,679 84,862 20.71% Operating Expenses: 527,421 538,207 592,621 558,305 5.86% Total Recurrent Expenses 715,375- 716,070 804,184 763,283 6.70% Capital Expense 7,239 6,665 1,929 2,214 -69.41% Total Recurrent & Capital Expenses 722,614 722,735 806,114 765,497 5.93% Development Expense 0.00% Region Total 722,614 722,735 806,114 765,497 5.93% Ministry of Electricity (Admin. & Operns.) Ministry Level Salaries 3,134,878 3,298,349 3,444,257 3,597,540 14.76% Ministry Level Fringe Benefits 2,146,835 2,269,218 3,213,641 2,844,753 32.51% Ministry Level Wage (Sal & Frng. Ben.) Expenditures 3,134,878 3,298,349 3,444,257 3,597,540 14.76% Ministry Level Operating Expenditures 85,807,639 86,126,969 91,177,393 88,014,198 2.57% Ministry Level Recurrent Expenditure 91,089,352 91,694,535 97,835,291 94,456,492 3.70% Ministry Level Capital Expenditure 220,964 298,468 292,439 405,124 83.34% Ministry Level Recurrent & Capital Expenditure 91,310,316 91,993,003 98,127,730 94,861,615 3.89% Ministry Level Non-Wage (Oper. & Cap.) Expenditures 86,028,603 86,425,437 91,469,833 88,419,322 2.78% Ministry Level Development Expenditure 20,718,270 12,756,192 14,708,118 11,829,613 -42.90% Ministry Level Total Expenditure 117,743,560 110,290,553 126,983,321 148,934,446 26.49% Apenidix The World Bank TahjI Public Expenditure Review - Standard Cost Analysis Page 1 of 2 Sultanate of Oman Ministry of Electricity & Water - Actual Fxpenditures 10/28/92 8-06 PM % Change Categories 1988 1989 1990 1991 1988-92 Directorate of Water Salaries 763,950 800,344 853,303 875,380 14.59% Employee Benefits 505,525 537,175 765,716 670,835 32.70% Operating Expenses: 1,368,080 1,434,244 1,435,435 2,407,612 75.98% Fuel 139,817 163,169 Maintenance & Spares 401,832 751,267 Electricity & Water 146,578 568,641 Outside Services 661,542 793,913 Other 85,666 130,622 Total Recurrent Expenses 2,637,556 2,771,764 3,054,454 3,953,827 49.90% Capital Expense 95,096 111,230 113,477 192,863 102.81% Total Recurrent & Capital Expenses 2,732,652 2,882,994 3,167,931 4,146,690 51.75% Development Expense 2,982,322 2,658,365 10,979,541 38,096,528 1177.41% Region Total 5,714,974 5,541,359 14,147,472 42,243,217 639.17% Department of Water for Towns & Villages Salaries 492,182 581,317 698,219 765,184 55.47% Employee Benefits 1,286,107 1,303,243 574,017 528,573 -58.90% Operating Expenses: 429,744 708,275 2,425,738 2,419,467 463.00% Fuel 316,417 311,015 Maintenance & Spares 337,468 353,161 Electricity & Water 392,070 243,191 Outside Services 1,249,575 1,358,756 Other 130,207 153,345 Total Recurrent Expenses 2,208,034 2,592,836 3,697,974 3,713,224 68.17% Capital Expense 10,067 19,814 17,391 39,414 291.52% Total Recurrent & Capital Expenses 2,218,100 2,612,651 3,715,365 3,752,638 69.18% Development Expense 0.00% Region Total 2,218,100 2,612,651 3,715,365 3,752,638 69.18% Water Pumping Stations for SUR, FANS, TOWI etc. Salaries 132,791 69,027 0 0 -100.00% Employee Benefits 69,724 40,887 0 0 -100.00% Operating Expenses: 40,012 10,428 0 0 -100.00% Total Recurrent Erpenses 242,52, 120,342 0 0 -100 00% Capital Expense 0 0 0 0 #DIVIO! Total Recurrent & Capital Expenses 242,527 120,342 0 0 -100.00% Development Expense 0 0 0 0 #DIV/0! Region Total 242,527 120,342 0 0 -100.00% Masirah Water Supply Salaries 11,339 8,578 0 0 -100.00% Employee Benefits 4,442 2,760 0 0 -100.00% Operating Expenses: 36,343 5,658 0 0 -100.00% Total Recurrent Expenses 52,124 16,995 0 0 -100.00% Capital Expense 355 156 0 -100.00% Total Recurrent & Capital Expenses 52,479 17,151 0 0 -100.00% Development Expense 0 0 0 0 #DIV/O! Region Total 52,479 17,151 0 0 -100.00% Apoendix - The World Bank Table 5.16 Public Expenditure Review - Standard Cost Analysts Page 2 of 2 Sultanate of Oman Ministry of Electricity & Water - Actual Expenditures 10/28/92 8:06 PM %91 / Change Categories 1988 1989 1990 1991 1988-92 Rural Desalination Plant Salaries 0 0 0 #DIV/0! Employee Benefits 0 0 0 #DIV/O! Operating Expenses: 447,181 206,312 0 0 -100.00% Total Recurrent Expenses 447,181 206,312 0 0 -100.00% Capital Expense 0 0 0 0 #DIVIO! Total Recurrent & Capital Expenses 447,181 206,312 0 0 -100.00% Development Expense 0 0 0 #DIVIO! Region Total 447,181 206,312 0 0 -100.00% Nizwa Water Supply Salaries 30,690 17,043 0 0 -100.00% Employee Benefits 14,679 8,503 0 0 -100.00% Operating Expenses: 16,906 4,147 0 0 -100.00% Total Recurrent Expenses 62,275 29,694 0 0 -100.00% Capital Expense 12,714 1,969 0 0 -100.00% Total Recurrent & Capital Expenses 74,989 31,662 0 0 -100.00% Development Expense 0 0 0 0 #DIV/0! Region Total 74,989 31,662 0 0 -100.00% MINISTRY OF WATER (Operns) Ministry Level Salaries 1,430,953 1,476,310 1,551,523 1,640,564 14.65% Ministry Level Fringe Benefits 1,880,477 1,892,569 1,339,733 1,199,408 -36.22% Ministry Level Wage (SaL & Frng. Ben.) Expenditures 1,430,953 1,476,310 1,551,523 1,640,564 14.65% Ministry Level Operating Expenditures 2,338,266 2,369,065 3,861,173 4,827,079 106.44% Ministry Level Recurrent Expenditure 5,649,697 5,737,943 6,752,428 7,667,051 35.71% Ministry Level Capital Expenditure 118,232 133,168 130,868 232,277 96.46% Ministry Level Recurrent & Capital Expenditure 5,767,929 5,871,111 6,883,296 7,899,327 36.95% Ministry Level Non-Wage (Oper. & Cap.) Expenditures 2,456,498 2,502,233 3,992,041 5,059,356 105.96% Ministry Level Development Expenditure 2,982,322 2,658,365 10,979,541 38,096,528 Ministry Level Total Expenditure 8,750,250 8,529,476 17,862,837 45,995,855 425.65% Sultanate of Oman Minisry of Finance & Economy Integrated Financial System National Level t : Ministry of Education 114 Department/Regir Main Office 11401 Functional Unit: Administration 1140101 (% Avail) Net Balance Period-to-date Current Month Revised Total Approved Account # Expenditures Expenditures Budget Revision Budget Existing line item accounts listed Regional Level Ministr': Ministry of Education 11 Dcpartneiegion: Muscat Region 11402 Functiofigltfhki:1 Regional Directorate (Administration) 1140 2 0 1 (% Avail) Net Balance Period-to-date Current Month Revised Total Approved Account # Expenditures Expenditures Budget Revision Budget Existing line item accounts listed Functional Budget Unit # 1 Ministry: Ministry of Education 114 Suggested epartment/Region: Muscat Region 11402 Account Code Structure: i rii19 Primary Schools 114021 0 113 -Ministry (% Avail) Net Balance Period-to-date Current Month Revised Total Approved Account # 02 - Regional Level (Muscat) Expenditures Expenditures Budget Revision Budget 0 1 - Administrative Unit Existing line item accounts listed 10 - Functional Unit # 1 (Primary) 20 - Functional Unit # 2 (Preparatory) 30 - Functional Unit # 3 (Secondary) Functional Budget Ministry: Ministry of Education 114 (not shown) Unit #2 Department/Re ion: Muscat Region 11402 Uni #2luU"l9l Preparatory Schools 1140220 Expenditures Expenditures Budget Revision Budget (% Avail) Net Balance Pcriod-lo-daic Current Month Revised Total Approved Account 51 Existing line item accounts listed Suggested format for preparation of the Budget for the Ministry of Health. [Discussed with the Ministry of Finance Computer Support Division) Sultanate of Oman Minisry of Finance & Economy Integrated Financial System 1Regional Level Regional LeMinistry or Education 114 Dcpartmenl/Re n: Dhofar Region 11403 'Fuincti6ri11tJtiii Regional Directorate (Administration) 1140301 (% Avail) Net Balance Period-to-ate Current Month Revised Total Approved Account # Expenditures Expenditures Budget Revision Budget Existing line item accounts listed Functional Budget Unit # 1 Ministry: Ministry of Education 114 Suggested Qcpartment/Region: Dhofar Region 11403 Account Code Structure: onv","1uiJ0Primary Schools 1140310 113 -Ministry (% Avail) Net Balance Pcriod-to-dite Current Month Revised Total Approved Account # 03 - Regional Level (Dhofar) Expenditures Expenditures Budget Revision Budget 01 - Administrative Unit Existing line item accounts listed 10 - Functional Unit # I (Primary) 20 - Functional Unit # 2 (Preparatory) Functional Budget 30 - Functional Unit # 3 (Secondary) Unit # 2 Ministry: Ministry of Education 114 (not shown) epartmient/Region: Dhofar Region 11403 @Fg@gIfi 4Preparatory Schools 1140320 (% Avail) Net Balance Period-to-date Current Month Revised Total Approved Account # Expenditures Expenditures Budget Revision Budget Existing line item accounts listed 00 Sultanate of Oman Minisry of Finance & Economy Integrated Financial System National Level u Ministry ofHealth 113 Departmentiegift. main ofice 11301 Functional Unit: Administration 1130101 (% Avail) Net Balance Period-to-date Current Month Revised Total Approved Account # Expenditures Expenditures Budget Revision Budget Existing line item accounts listed Regional Level leolLMi '~gion: Ministry of Health 113 -Dpa=e ego:Muscat Region 11302 in 1ioii't Regional Directorate (Administration) 1130201 (% Avail) Net Balance Period-to-date Current Month Revised Total Approved Account # Expenditures Expenditures Budget Revision Budget Existing line item accounts listed Functional Budget Unit # I Ministry: Ministry of Health 113 Suggested epartment/Reion: Muscat Region 11302 Account Code Structure: r,TW 9jX Hospitals 1130210 113 -Ministry (% Avail) Net Balance Period-to-date Current Month Revised Total Approved Account # 02 - Regional Level (Muscat) Expenditures Expenditures Budget Revision Budget 0 1 - Administrative Unit Existing line item accounts listed 10 - Functional Unit # I (Hospital) 20 - Functional Unit # 2 (Health Center) Functional Budget Ministry: Ministry of Health 113 Unit # 2 Department/Reion: Muscat Region 11302 WS t,115M Health Centers I130220 (% Avail) Net Balance Period-to-date Current Month Revised Total Approved Account # Expenditures Expenditures Budget Revision Budgeto Existing line item accounts listed Suggested format for preparation of the Budget for the Ministry of Health. [Discussed with the Ministry of Finance Computer Support Division] Sultanate of Oman Minisry of Finance & Economy Integrated Financial System Regional Level IN Ministry of Health 113 Department/Re : Dhofar Region 11303 jot''11t Regional Directorate (Administration) 1130301 (% Avail) Net Balance Period-to-date Current Month Revised Total Approved Account # Expenditures Expenditures Budget Revision Budget Existing line item accounts listed Functional Budget Unit # Ministry: Ministry of Health 113 Suggested artment/Re ion: Dhofar Region 11303 Account Code Structure: . '5,AUE Hospitals 1130310 113 -Ministry (% Avail) Net Balance Period-to-date Current Month Revised Total Approved Account # 03 - Regional Level (Dhofar) Expenditures Expenditures Budget Revision Budget 0 1 - Administrative Unit Existing line item accounts listed 10 - Functional Unit # 1 (Hospital) Functional Budget 20 - Functional Unit # 2 (Health Center) Unit # 2 Ministry: Ministry of Health 113 epartment/Rmon: Dhofar Region 11303 iIESUIO M Health Centers 1130320 (% Avail) Net Balance Period-to-date Current Month Revised Total Approved Account # Expenditures Expenditures Budget Revision Budget Existing line item accounts listed Sultanate of Oman Minisry of Finance & Economy Integrated Financial System National Level t Ministry of Electricity & Water 119 Department/RegiWF. Main Office 11901 Functional Unit: Administration 190101 (% Avail) Net Balance Period-to-date Current Month Revised Total Approved Account # Expenditures Expenditures Budget Revision Budget Existing line item accounts listed Regional Level Minis : Ministry of Electricity & Water 119 Deparex;e ion: Muscat Region 11902 0I "'dti Regional Directorate (Administration) 1190201 (% Avail) Net Balance Period-to-date Current Month Revised Total Approved Account # Expenditures Expenditures Budget Revision Budget Existing line item accounts listed Functional Budget Unit # 1 Ministry: Ministry of Electricity & Water 119 Suggested epartment/Region: Muscat Region 11902 Account Code Structure: $&ih4 i $Fossil Fuel Plants (Coal or Diesel) 1190210 119 -Ministry (% Avail) Net Balance Period-to-date Current Month Revised Total Approved Account # 02 - Regional Level (Muscat) E xpenditures E xpenditures Budget Revision Budget 0 1 - A dm inistrative U nit Existing line item accounts listed 10 - Functional Unit # I (Fossil Fuel) 20 - Functional Unit # 2 (Gas Plants) Functional Budget Ministry: Ministry of Electricity & Water 119 Unit # 2 Department/Region: Muscat Region 11902 bi 'Ili 08Gas Plants l90220 (% Avail) Net Balance Period-to-date Current Month Revised Total Approved Account # Expenditures Expenditures Budget Revision Budget Existing line item accounts listed Suggested format for preparation of the Budget for the Ministry of Health. [Discussed with the Ministry of Finance Computer Support Division] W Sultanate of Oman Minisry of Finance & Economy Integrated Financial System Regional Level ist Ministry of Electricity & Water 119 Department/Re n: Dhofar Region 11903 I"iOrftil Regional Directorate (Administration) 1190301 (% Avail) Net Balance Period-to-date Current Month Revised Total Approved Account # Expenditures Expenditures Budget Revision Budget Existing line item accounts listed Functional Budget Unit # Ministry: Ministry of Electricity & Water 119 Suggested partment/Repion: Dhofar Region 11903 Account Code Structure: I Fossil Fuel (Coal or Diesel) 1190310 119 - Ministry (% Avail) Net Balance Period-to-date Current Month Revised Total Approved Account # 03 - Regional Level (Dhofar) Expenditures Expenditures Budget Revision Budget 01 - Administrative Unit Existing line item accounts listed 10 - Functional Unit # 1 (Fossil Fuel) Functional Budget 20 - Functional Unit # 2 (Gas) Unit # 2 Ministry: Ministry of Electricity & Water 119 epartment/Region: Dhofar Region 11903 l Gas Plants 1190320 (% Avail) Net Balance Period-to-date Current Month Revised Total Approved Account # Expenditures Expenditures Budget Revision Budget Existing line item accounts listed Sultanate of Oman Minisry of Finance & Economy Integrated Financial System (Water Sector) Regional Level Ministo : Ministry of Electricity & Water 119 Departme&egion: Muscat Region 11902 rc ! Regional Directorate (Administration) 1190211 (6 Avail) Net Balance Period-to-date Current Month Revised Total Approved Account # Expenditures Expenditures Budget Revision Budget Existing line item accounts listed Functional Budget Unit # I Ministry: Ministry of Electricity & Water 119 Suggested epartment/Region: Muscat Region 11902 Account Code Structure: SMMUM11 Desalination 1190260 119 -Ministry (% Avail) Net Balance Period-to-date Current Month Revised Total Approved Account # 02 - Regional Level (Muscat) Expenditures Expenditures Budget Revision Budget 11 - Administrative Unit (Water Sector) Existing line item accounts listed 60 - Functional Unit # I (Desalination) 70 - Functional Unit # 2 (Ground Water) Functional Budget Ministry: Ministry of Electricity & Water 119 Unit #2 Department/Reion: Muscat Region 11902 fPX 210ifi Ground Water 1190270 (%6 Avail Net Balance Period-to-date Current Month Revised Total Approved Account # Expenditures Expenditures Budget Revision Budget Existing line item accounts listed Suggested format for preparation of the Budget for the Ministry of Health. [Discussed with the Ministry of Finance Computer Support Division) s-I b Sultanate of Oman Minisry of Finance & Economy Integrated Financial System Regional Level st Ministry of Electricity & Water 119 Department/Re n: Dhofar Region 11903 n i,M v Regional Directorate (Administration) 1190311 (% Avail) Net Balance Period-to-date Current Month Revised Total Approved Account # Expenditures Expenditures Budget Revision Budget Existing line item accounts listed Functional Budget Unit #I Ministry: Ministry of Electricity & Water 119 Suggested epartment/Re 'on: Dhofar Region 11903 Account Code Structure: 11E i RII Fossil Fuel (Coal or Diesel) 1190360 119 - Ministry (% Avail) Net Balance Period-to-date Current Month Revised Total Approved Account # 03 - Regional Level (Dhofar) Expenditures Expenditures Budget Revision Budget II - Administrative Unit Existing line item accounts listed 60 - Functional Unit # I (Desalination) Functional Budget 70 - Functional Unit # 2 (Ground Water) Unit # 2 Ministry: Ministry of Electricity & Water 119 epartment/Relon: Dhofar Region 11903 VON' Gas Plants 1190370 (% Avail) Net Balance Period-to-date Current Month Revised Total Approved Account # Expenditures Expenditures Budget Revision Budget Existing line item accounts listed