Turkey - Health Transition Project

Document of The World Bank FOR OFFICIAL USEONLY ReportNo: 27717-TU PROJECTAPPRAISAL DOCUMENT ONA PROPOSEDLOAN INTHEAMOUNT OFEURO49.40 MILLION TO THE REPUBLIC OF TURKEY FORA HEALTHTRANSITION PROJECT INSUPPORTOFTHEFIRSTPHASEOFTHE PROGRAMFORTRANSFORMATIONINHEALTH April 21,2004 HumanDevelopmentUnit EuropeandCentralAsia Region This document has a restricted distribution and may be used by recipients only inthe performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS (Exchange Rate Effective, March 22,2004) Currency Unit = Turkish Lira 1,333,333 = US$1 US$1.47589 = SDR 1 US$ 1.22685 = Euro 1 FISCALYEAR January 1 - December31 ABBREVIATIONSAND ACRONYMS APL Adaptable Program Lending OPV Oral Polio Vaccine CAS Country Assistance Strategy PHC Primary Health Care COA Chart o f Accounts PHCSP Primary Health Care Services DPT Diphtheria, Pertussisand Tetanus Project EU EuropeanUnion PIU Project Implementation Unit FMM Financial ManagementManual PMR ProjectManagement Report FMR Financial Monitoring Report PMSU Project Management and Support FMS Financial Management Specialist Unit GDP Gross Domestic Product PPP Purchasing Power Parity GOT Government of Turkey PPSAL Programmatic Public Sector HNP HealthNutritionPopulation Adjustment Loan HTP HealthTransition Project PTH Programfor Transformation in IASC Inter Agency Steering Committee Health IAWG Inter Agency Workmg Group RfP Request for Proposals IT Information Technology SA Special Account MCF Management Consultant Firm SECAL Sectoral Adjustment Loan MDG MillenniumDevelopmentGoals S I L Specific Investment Loan M&E Monitoring and Evaluation SPH School of Public Health MIS Management Information System SOE Statement of Expenditures MOH MinistryofHealth SPO State PlanningOrganization MOLSS MinistryofLaborand Social SSK Social Security Institute(Sosyal Security Sigortalar Kurumu) NAB National Advisory Board TMA TurkishMedicalAssociation N C D Non-communicable Diseases TOR Terms o fReference NHIF National HealthInsurance Fund TWG Technical Working Group NPMDA National Pharmaceuticals and UAP UrgentAction Plan MedicalDevices Agency UHI UniversalHealth Insurance OECD Organization for Economic Co- WHO World Health Organization operation and Development Vice President: Shigeo Katsu Country Director AndrewN.Vorkink Sector Director: Charles C. Griffin Sector Manager: ArminFidler Task Team Leader: EnisBaris  TURKEY FOROFFICIAL USEONLY HealthTransitionProject CONTENTS Page A . STRATEGIC CONTEXT AND RATIONALE ................................................................. 1 1. Country and sector issues.................................................................................................... 1 2. Rationale for Bank involvement ......................................................................................... 1 3. Higher level objectives to which the project contributes .................................................... 2 B. PROJECTDESCRIPTION ................................................................................................. 2 1. Lendinginstrument............................................................................................................. 2 2. Program objective and Phases ............................................................................................ 3 3. Project development objective andkey indicators.............................................................. 4 4. Project components............................................................................................................. 5 5. Lessons learned andreflected inthe project design............................................................ 6 6. Alternatives considered and reasons for rejection .............................................................. 6 C . IMPLEMENTATION .......................................................................................................... 7 1. Partnership arrangements.................................................................................................... 7 2. Institutional andimplementation arrangements.................................................................. 8 3. Monitoringand evaluation of outcomes/results .................................................................. 8 4. Sustainability....................................................................................................................... 9 . . . 5. Critical risks andpossible controversial aspects................................................................. 9 6. Loadcredit conditions andcovenants............................................................................... . . 10 D APPRAISALSUMMARY . ................................................................................................. 11 1. Economic andfinancial analyses...................................................................................... 11 2. Technical........................................................................................................................... 12 3. Fiduciary........................................................................................................................... 13 4. Social................................................................................................................................. 14 5. Environment ...................................................................................................................... 15 6. Safeguard policies ............................................................................................................. 15 7. Policy Exceptions andReadiness ...................................................................................... 15 This documenthas a restricteddistributionandmay be used by recipients only in the performance of their official duties I t s contents may not be otherwise disclosed without World Bank authorization . .  Annex 1: CountryandProgramBackground .......................................................................... 16 Annex 2: Major RelatedProjectsFinancedby the Bankand/or other Agencies .................23 Annex 3: ResultsFrameworkandMonitoring ........................................................................ 28 Annex 4: DetailedProjectDescription ...................................................................................... 34 Annex 5: ProjectCosts............................................................................................................... 39 Annex 6: ImplementationArrangements ................................................................................. 40 Annex 7: FinancialManagementandDisbursementArrangements ..................................... 42 Annex 8: Procurement................................................................................................................ 50 Annex 9: EconomicandFinancialAnalysis ............................................................................. 56 Annex 10: SafeguardPolicyIssues ............................................................................................ 63 Annex 11:ProjectPreparationandSupervision ..................................................................... 64 Annex 12: Documentsinthe ProjectFile ................................................................................. 65 Annex 13: Statementof LoansandCredits .............................................................................. 66 Annex 14: Countryat a Glance ................................................................................................. 69  TURKEY HEALTHTRANSITIONPROJECT PROJECT APPRAISAL DOCUMENT EUROPE AND CENTRAL ASIA ECSHD Date: April 21, 2004 Team Leader: EnisBaris Country Director: Andrew N.Vorkmk Sectors: Health(100%) Sector Director: Charles C. Griffin Themes: Health system performance (P); Injuries Sector Manager: ArminH.Fidler and non-communicable diseases (S); Other social protection and riskmanagement (S); Decentralization(S); Administrative and civil service reform(S) Project ID: PO74053 Environmentalscreening category: C Lending Instrument: Adaptable ProgramLoan Safeguard screening category: S3 ProjectFinancingData [XILoan [ ] Credit [ ] Grant [ ] Guarantee [ ] Other: For LoansKredits/Others: Total Bank financing: (e 49.40 million) Borrower: Republic of Turkey Undersecretariat o fTreasury Ankara, Turkey Tel: 90-312-213 0297; Fax: 90-312-212-8550 e-mail: hazine@,hazine.gov.tr www.hazine. gov.tr ResponsibleAgencies: MinistryofHealth Ankara, Turkey Tel: 90-312-4357100 e-mail: sabahattin@saglik.gov.tr www.saalik.rrov.tr MinistryofLabor and Social Security Ankara, Turkey Tel: 90-312-212 0257 Fax: 90-312-212 5239  tteksoz@csgb.gov.tr www.csgb.gov.tr Does the project depart from the CAS incontent or other significant respects?Re$ PAD A.3 [ ]Yes [XINO I Does the project require any exceptions from Bank policies? Re$ PAD0.-7 Have these been approved by Bank management? [XIYes [ ] N [ IYeso I s approval for any policy exception sought from the Board? [ ]Yes [XINO Does the project include any critical risks rated "substantial" or "high"? Re$ PAD C.5 [XIYes [ ]No Does the project meet the Regional criteria for readiness for implementation?Re$ PAD D.7 [XIYes [ ]No Project development objective Re$ PAD B.2, TechnicalAnnex 3 Program's overall objective i s to improve the governance, efficiency, user and provider satisfaction, and long-term fiscal sustainability o f the healthcare system inTurkey. The objective o f Phase Iis to assist the Government to strengthen the institutional environment for the implementation o fthe Programfor Transformation inHealth that will improve system stewardship, streamline financing and service delivery, andbuildthe institutional capacity to extendhealthinsurance coverage to the whole population ina fiscally sustainable manner. The obiective o fPhase I1i s to enable the Government to complete its fiscal and institutional readinessfor nationwide transition to family medicine and the implementation o f universal healthinsurance. Proiect description Re$ PAD B.3.a, TechnicalAnnex 4 The specific objectives, set inlinewith Government's PTH, are to : (i) re-structure MOHfor more effective stewardship andpolicy making; (ii) establish a universalhealthinsurance fund; (iii)introduce family medicine as the model for the provision o fprimary health care services (iv) ensure financial and managerial autonomy for all hospitals irrespective o f ownership; and (v) set up a fully computerized health and social information system. ComponentA: Restructuringthe M O H for Effective Stewardship. This component supports MOH's institutionaltransition fiom a mainlyprovider o f services to apolicy maker andregulator o f service provision, while retainingkey publichealth functions. Component B: BuildingCapacity of the Health Insurance and Social Security Institutions. This component supports the establishment o f a single healthinsurance fund. Component C: Reorganizingthe Delivery o f Healthcare Services. This component has four sub- components: (i) adoptionof family medicine as an organizational model for the provision o f outpatient or primary healthcare services; (ii) integration andharmonizationo f MOHand SSK hospitalstowards great autonomy; and (iii) buildinganewpatientreferralmechanismto re-enforce systemhierarchy. Component D: StrengtheningHumanResources Capacity aims at developing skills and competence of  iealth work force. Component E: BuildingInfostructure for Health and Social Security. This component supports the jevelopment o f national standards inline with the realignment of institutionalroles andresponsibilities. Component F: Project Management. This component provides support for project coordinationbetween the two ministries, overall project govemance. Which safeguard policies are triggered, ifany? Re$ PADD.6, Technical Annex 10 None Significant, non-standard conditions, ifany, for: Re$ PAD C.7 Boardpresentation: None. FullBoardPresentation. Loadcredit effectiveness: Disbursement conditions: 1. Criteria for application and eligibility for fundingunder the PopulationHealthGrantbe establishedbefore funds couldbe disbursedunder Sub-component C.4; 2. Law o fthe School o fPublic Health enactedbefore the disbursement for the procurement of goods under Sub-component D.2.; and 3. The Bank has to review and provide its no objection to disburse loanproceeds for the Pilot sub- project category under PartC.1,2,3 and Eof the project. Other conditions: 1. the PMSUandthe PIUsto bemaintainedthroughout the Projectwith qualified staffandadequate resources; 2. the IASCto be maintainedthroughout the Project with satisfactory terms of reference; 3. the POMto be maintainedthroughout the Project; 4. a mid-term review to be conducted not later than March 31,2006; and 5. PopulationHealth Grants to be provided under terms and conditions as agreedwith the Bank.   A. STRATEGIC CONTEXT AND RATIONALE 1. Country and sector issues While Turkey has made considerable progress in expanding healthcare coverage and improving on key health indicators, it continues to rank far behind most middle-income and EUaccession countries in terms o f health status and access to healthcare. Life expectancy is nearly ten years below the OECD average, and infant and maternal mortality rates are among the highest o f middle-income countries. The health sector in Turkey is under-performing in achieving health outcomes commensurate with its level o f socio-economic development and the amount o f expenditures in healthcare which stand at about 6.9% o f the GDP. Substantial and sustained efforts will have to be made if the country is to meet the European health and service standards and the Millennium Development Goals by the year 2015. A recent World Bank sector study "Reforming the HealthSector for ImprovedAccess andEfficiency" (Report No.: 24358-TU released in March 2003) identified the following issues as the main reasons behind the under-performance: Inequalities in health and access to health care. A careful analysis o f the allocation o f human and financial resources reveals that there are wide discrepancies in the distribution o f health personnel, with most physicians, particularly specialists, locatedinwestern and large urban areas. Similarly, the distribution o f public health expenditures i s not equitable; the richer regions spending more public money per person on health care. As for health insurance coverage, large segments o fthe population, mostly the rural and the unemployed, do not have adequate health insurance. Many are relying on the Government's Green Card scheme which only allows free access to hospitals, but not to primary health care or drugs. There remain gaps between the urban and rural contexts, and the different parts o f Turkey across most health indicators. Inefficiencies in resource allocation. Increasingly less i s spent on preventive care and on maternal and child health. The primary health care system is under-funded and ineffective, relying more and more on user fees. A large number o f health centers are understaffed inrural areas in general, and in the Eastern and South Eastern Anatolia regions o f the country inparticular. The majority o f general hospitals are operated inefficiently, with considerable wastage o f resources. Inadequate system stewardship and governance. The Ministry of Health (MOH) had in the past limitedinterest and capacity in effectively performing key stewardship and regulatory functions with regard to setting health policies, criteria and standards. Until recently, there was traditionally little coordination between the MOH and the Ministry o f Labor and Social Security (MOLSS) with both beingresponsible for both health financing andprovision o fhealth care. 2. Rationalefor Bankinvolvement While Bank's past involvement inthe health sector in Turkey has not been very effective inbringing about systemic reform, the timing and scope o f this new partnership is very opportune, as the current government is strongly committed to extensive reforms in the health sector, particularly in extending health coverage to the entire population, and reducing the inequalities in access to and utilization o f services across the country. Indeed, both the Urgent Action Plan (UAP) and the Program for 1  Transformation in Health (PTH) have set tight deadlines for the necessary legislative and institutional reforms, and several new bills have already been drafted on restructuring the social security system, establishing the Universal Health Insurance (UHI), and reorganizing the MOH and its affiliated institutions. Many o f these draft laws have now been opened to public scrutiny, and extensively discussed by government agencies, the civil society and other stakeholders. They wouldbe read inthe National Assembly subsequent to the passage o f the Framework Law on Public Administration. As for the day-to-day operations o f the health care system, several positive changes have already been effected that have enhanced patient choice. Most important of all is that patients can now visit any MOH or MOLSS hospital, regardless of their eligibility, a major change o f both symbolic and operational implications. Another important milestones is the recruitment, for the first time, of physicians by the MOH on a contractual basis to encourage posting in under-served areas. The momentum already set up by the demonstration o f the strong political will and intent o f the Government to bring about sweeping changes is unprecedented, and provides a unique window of opportunity for continued Bank support to the sector. 3. Higher level objectives to which the project contributes The most recent CAS', and the Policy Note: "Turkey: Greater Prosperity with Social Justice" that was prepared in November 2002 to assist the incoming new government, Government's own UAP, released inJanuary 2003, and its sectoral spin-off, PTH, all concur almost entirely that a fundamental overhaul - as opposed to piecemeal changes - is needed and that the system needs to be "transformed". There is a general consensus that the transformation should at least entail: (i) the separation of provision and financing of health care so as to achieve a more efficient resource allocation and use; (ii) introduction of universal public health insurance so as to ensure equity and access to health services; (iii)financial and administrative autonomy for public hospitals in order to improve technical efficiency and strengthen management; (iv) introduction of family medicine in order to integrate and streamline delivery of primary health care with inpatient care and ensure comprehensiveness and continuity inhealth care; and (v) increased emphasis on improvingmaternal andchildhealth. This programis designed specificallyto correspond andcontribute directly to PTH's eight main objectives. B. PROJECTDESCRIPTION 1. Lendinginstrument Adaptable Programmatic Lending (APL) is considered to be the appropriate loan instrument for the following reasons: (i) the project is designed to support a large-scale program, GOT'Sown PTH, with a broad set o f objectives aiming at reforming the entire health sector; (ii) are two implementing there agencies, working intandem, albeit on different healthcare functions and in a sequenced manner; (iii) full implementation of the program requires the passage of a packaged set of new laws and amendments which need to come into effect in a sequenced manner and should precede major investments under the related component; and (iv) while PTH's full implementation will take time, and adjustments will undoubtedly be made along the process, there is a need for flexibility for the proper timing o fPhase I1to stay the course with the implementation of the UHI. 'Board Document No. R-2003-0181. Board date: November 6,2003 -Report No. 267560-TU 2  Both the SIL and the SECAL were considered as possible alternatives, but given the mixture o f investment and technical assistance needs, and the scope o f the proposed First Programmatic Public Sector Adjustment Loan (PPSAL-I) covering Social Security in general, including the UHI, these instruments were not deemed appropriate. Proposed financial terms reflect the preference o f the Borrower and are in line with the terms applicable to the Bank's portfolio inTurkey. 2. Programobjective and Phases The overall Program objective is to improve the governance, efficiency, user andprovider satisfaction, and long-term fiscal sustainability o f the healthcare system inTurkey. Such a transformation would be the first step towards achieving the longer term sectoral goal o f narrowing the gap in access to, quality and utilization o f health services between Turkey and the EUcountries. This Program, with a comprehensive and interrelatedarray o f reform elements, is technically sound, yet very ambitious. As such, even a partial implementation would be a major improvement over the current highly fragmented and inefficient healthcare system. Experience fiom other OECD and middle income countries show that the track record o f such reform initiatives is checkered, and implementation uneven, with both success stories and "lessons leamed", depending upon the political economy. Yet, the same experience also shows that when a window o f opportunity for a comprehensive health reform presents itself in the narrow policy space o f a government - a rare occurrence, especially in Turkey - the design should encompass a full and mutually reinforcing reform agenda, inclusive o f all the key functions o fhealth financing, service provision and system governance. Phase I:(FY05-FY08) will assist GOTto: (i) restructure MOH for more effective stewardship and policy making; (ii) and pilot family medicine as a model for the provision o f primary health design care services; (iii) introduce financial and managerial autonomy for all public hospitals; (iv) lay the foundation for the establishment o f the universal health insurance fund; and (v) design and pilot the "infostructure" for the health and the social security system. The estimated cost o f investment in Phase Iis about 49.40 million. There will be four triggers for Phase 11: (i) Universal Health Insurance Law has been adopted by the National Assembly; (ii)satisfactory progress has been made towards the establishment o f the institutional arrangements for the social security system, particularly for the UHI and a unified2 pensions system, using a common database and technological platform; (iii) "infostructure" for new social security agencies has been pilot tested and evaluated; and (iv) a new Primary Health Care (PHC) organizationalmodelbased on FamilyMedicinepilot has beentested and evaluated (please see Annex 4 for definitions anddetails). Phase I1will assist GOTto: (i) roll out family medicine as the model for the provision o f primary health care services; (ii) complete financial and managerial autonomy for public hospitals; (iii) make the universal health insurance fund fully functional; and (iv) set up a fully computerized information "Unified" means harmonization of norms and standards with regard to obligations, entitlements and benefits across various pensionplans. 3  system for health and social security. The estimated cost of investment in Phase I1 is about 114 million. Phase Ii s designed to be self-contained inits investment and impact should the Government fail to deliver o n its reform agenda. Infact, the size o f the operation was influenced by what i s needed to lay the ground for systemic changes through institutional capacity building and pilots, yet still sufficient to leverage policy changes. Should the reform process be interrupted, the project will still leave behind a better trained cadres of professionals, and experience from field-tested pilots on financing and service provision. The project's overall objective and design are fully in line with the CAS diagnosis that "radical reforms are necessary in the health sector", and its own objective to support Government's UAP andits health sector objectives. 3. Project development objective and key indicators The objective of Phase Iis to enable the Government to strengthen the institutional environment for the implementation of its PTHthat will improve system stewardship, streamline financing and service delivery, and build the institutional capacity to extend health insurance coverage to the whole population in a fiscally sustainable manner. Once the Program is fully implemented, all segments of the population would have full access to essential healthcare services, free choice of a familyphysician and a more transparent andequitable referral system. The specific objectives, set in line with the Government's PTH, are to assist GOTto: (i) re- structure MOH for more effective stewardship and policy making; (ii) establish a universal health insurance fund; (iii) introduce family medicine as the model for the provision o f primary health care services; (iv) ensure financial and managerial autonomy for all public hospitals irrespective of ownership; and (v) set up a hlly computerized health and social security information system. Upon completion o f the Program, it is expected that MOH will be a smaller and leaner agency, with a resource base and skills mix in line with its renewed mandate of system stewardship, namely doing "more steering and less rowing", or in health parlance, mostly policy setting and regulating with no responsibilities for service provision, except for that of public health programs (Tuberculosis, HIV/AIDS, etc.). Similarly, MOLSS is also expected to relieve itself from the function of service provision, increasingly specializing and building its institutional capacity in essential insurance functions o f balancing revenues and expenditures, thus in risk assessment, actuarial analysis, the definition of an essential service package, premium setting, and strategic purchasing from andcontracting with providers. 4  4. Project components The proposed project has six components: Component A: Restructuring the MOHfor Effective Stewardship (Base Cost of 9.60 million). This component supports MOH's institutional transition from a provider o f services to a policy maker and regulator of service provision, while retaining key public health functions. This component has four sub-components: (i)restructuring o f the MOH; (ii)establishment o f a National Pharmaceutical and Medical Devices Agency OMDA); (iii)quality assurance and accreditation o f health facilities; and (iv) establishing Monitoring andEvaluation (M&E) Capacity for the PTH. Component B: Building Capacity of the Health Insurance and Social Security Institutions (Base Cost of 3.00 million). This component supports the establishment o f a single health insurance fund by means o f consolidating the four existing health insurance schemes, and expanding its reachto an additional estimated22 million citizens who are not fully covered. Component C: Reorganizing the Delivery of Healthcare Services (Base Cost of 15.67 million). This component has four sub-components: (i) introductiono f family medicine as an organizational model for the provision o f outpatient or primary health care services; (ii) harmonization o f MOH and SSK hospitals towards greater autonomy; (iii) developing an effective patient referral system to re-inforce system hierarchy; and (iv) strengthening population health programs, including disease surveillance, maternal and child health, preventionand control o f communicable and non- communicable diseases (NCDs). The reorganization will be implemented in a phased manner, withpilots inlargecities duringPhaseI, be rolledout nationwideduringthe secondphase. to Component D: Strengthening Human Resources Capacity (Base Cost of 8.72 million) aims at developingthe skills andcompetenceof the healthworkforce, inline with the changing role ofthe MOH and its affiliated institutions. It has two sub-components: (i) and social security health humanresourcespolicy andplanning; and (ii) strengthening the School o f Public Health(SPH), to become a center o f excellence inadvocacy, training andresearchfor the MOH. Component E: Building Infostructure for Health and Social Security (Base Cost of 15.13 million). This component supports the development o f national standards in line with the realignment o f institutionalroles andresponsibilities inboth MOHand MOLSS. This will be done inaphasedmanner, first with the development ofstandardsandthe establishment ofarecords and information network in the social security system, and thereafter between the social security system and the hospitals. It has two sub-components: (i) buildingthe health information system; and(ii) buildingthe social security informationsystem. Component F: Project Management (Base Cost of 2.60 million). This component involves activities related to project management. It will support project coordination between the two ministries as well as project implementation in each ministry, and an oversight mechanism for overall project guidance and policy support for both the PTH and the project itself. It will fund project management, including financial management and procurement, as well as technical assistanceneededto support the Project Management Support Unit(PMSU). 5  The HTP was designed andwill be implemented inparallel with the proposedPPSAL, which will provide budgetary support for the overall reform o f the social security system. The synergies and inter-linkages between the two projects will provide both investment andbudgetary support for the healthreformagenda o f the Government. 5. Lessons learned and reflected inthe project design The Health Transition Project will be Bank's fourth engagement in the HNP sector in Turkey. The previous First Health (1991) and Second Health (1994) projects were investment projects aimed to strengthen the delivery o f health services in the country. The Primary Health Care Services Project (1997) was a reform-oriented project aimed at introducing family medicine in Turkey. Due to the difficulties in passing the necessary law, the project could not be implemented. The loan was eventually cancelledwithout disbursement. Bank's past experience in the health sector in Turkey i s rather checkered, with past macroeconomic instability, uncertain political environment and limited MOH absorptive capacity being the main reasons behind less-than-optimal project implementation. Delays in counterpart funding, numerous policy and personnel changes, equally applicable to both the Bank and the Government, hinderedtimely project implementation, leading to numerousproject extensions. The presence o f a single party government with its large parliamentary majority may ease some o f the problems that have been experienced in the past. However, other issues may still hinder effective project implementation. These include: (i) staff turnover, with the consequent loss high o f project memory and skills; (ii) lack o f additional financial incentives and limited career opportunities for civil servants who often have to work longer hours at Bankprojects; (iii)reliance on external procurement agencies and the subsequent problems o f compatibility with Government's own rules and regulations; and (iv) limited integration o f MOH's technical and operational staff and capabilities with project design and operations, and the potential loss o f ownership by and disengagement o fthe MOH staff from project activities. Many o f these issues are not particular to Turkey, affecting the effectiveness o f most Bank operations, especially in the social sector. Several measures have been taken to mitigate the problems mentioned above, both in terms of the proposed project management structure (please see C.2 and Annex 6 for more details,) and the way the project has been prepared. For example, all relevant MOH technical units have been fully informed o f Project's scope and purpose, and defined project activities. In addition, the new public procurement law should mitigate some o f the past problems. The proposed project is quite different in nature from a typical investment operation inthat it relies heavily on technical assistance, and focuses on system reformrather than investing ininfrastructure and equipment. Finally, a Project Management Consultant Firm(MCF) will provide continuoustechnical and logistic support to the PMSU. 6. Alternatives considered and reasons for rejection Two alternatives were considered andrejected for the following reasons: 1. No new health project. Given the past history of cancellations and delays in Bank-financed health operations, this option was seriously considered from a pure and narrow operations 6  perspective. However, as mentioned above, there is a unique window o f opportunity to reformthe health sector in Turkey which i s an explicit and integral part o f the UAP, the sth Five Year Development Plan and the PTH. Indeed, given the commitment and political will to reform the health sector, the Government is poised to implement its own program regardless o f the Bank's financial support. Moreover, the most recent CAS, and previous sector work, clearly point to a need for comprehensive reform, and concur almost fully with Government's own program. Therefore, this option was rejected as the Bank's financial and consequent technical involvement would provide the new Government with the necessary impetus, funding and support for a timely andthorough implementation o fits reformstrategy. 2. Another Sector Investment Loan, or apure TechnicalAssistance Loan. These options were not considered as viable for the following reasons: (9 Transition in the health sector i s a long process which needs consistent and continuous support. The scope and components o f any reform initiative, and the course and direction o f implementation, are likely to change over time due to a myriad o f political, social, economic and other reasons. (ii) ThetransitionofthehealthsectorinTurkeyisgoingtobeacomplexprocess,withmany stakeholders becoming "winners" and "losers" as new institutions are being created, roles andresponsibilities redefined, andlines o f authority and accountability for key functions o f financing, service provision and management realigned. It will be a lengthy process and therefore needs to be phased and sequenced appropriately. (iii) Theprojectdepartssignificantlyfrompreviousprojectsinscope,design, componentsand activities. There will be no investment inhealth facilities and equipment; instead support will be for capacity building, institutional strengthening, and discrete technical assistance to the process o f change, while adaptable to changing needs andpolicies along the way. The proposedoperation is ambitious inscope andinthe nature o f changes attempted. Therefore, a technical assistance loan would not be a suitable instrument for support to a long-term, sequenced and relatively complex reform initiative. The APL instrument also provides for triggers at the end of the first phase to provide impetus for continuous and sustained government engagement to bringabout the necessary changes inthe sector. Inthis regard, an APL is considered the most suitable instrument to support both the process of policy dialogue, institutional support and actual reform implementation in the field while also encouraging the enactment o f key legislation that would eventually establish the UHIand change the roles andresponsibilities ofbothministries, particularly the MOH. The design o fthe APL will mitigate the risk o f losing commitment o f the key stakeholders and credibility o f Government's health reform agenda, while gradually investing, first rather modestly during Phase Iand, subsequently, heavily once the UHILaw i s enacted andits fiscal sustainability is assessed. C. IMPLEMENTATION 1. Partnershiparrangements While there will not be any parallel or co-financing from other international agencies, agreements inprinciple havebeenreachedbothwiththe EUand WHO withregardto: (i) EU's substantial the 7  technical and financial support to MOLSS through a grant of approximately 50 millionto build its social security information platform and network; and (ii) WHO'S Biennial Collaborative Agreement with M O H for CY 04-05. Accordingly, both the EU and the Bank will share information regarding the scope of their work, and tendering and procurement o f goods and consultant services for the MOLSS to prevent any duplications and to ensure that their respective investments complement each other. Similarly, WHO has agreed to providetechnical assistanceto M O H for the M&Eofthe PTHwhichwill also receive financial support under Component A. 2. Institutionaland implementationarrangements The Project will be implementedjointly by the M O H andthe MOLSS. The existingInter Agency Steering Committee (IASC) will remain in force, and will be responsible for project oversight, project performance and inter-agency coordination. A Technical Working Group (TWG) for each component and/or subcomponent will address technical issues such as preparation o f TORS, review o fproposals, andtechnical advice and assistanceto the Project Manager and IASC. Component B and sub-components D.l and E.2 will be implemented by the MOLSS, and Components A, C and D and Subcomponent E.l will be implemented by the MOH, with assistance from the PMSU. A Project Implementation Unit (PIU) in each o f the two ministries will be established and be responsible for procurement, disbursement, and financial management for ministerial-levelactivities. A PMSUheadedby aProject Managerwill have overallresponsibilityfor project implementation, including liaising with the World Bank and coordinating project implementation with both ministries through the project officers in each ministry's PIU. The PMSU will also have overall fiduciary responsibilityfor the project, be basedinthe MOH, and report to the IASC on a regular basis. An Inter Agency Working Group (IAWG), composed o f six technical staff from the two ministries will be appointed for full time technical support to Project Manager. The IAWG will be responsible for the preparation o f workplans, timing o f activities and preparation o f TORSin coordination with TWGs. Each TWG will have a focal point, a civil servant from the relevant technical unit o f the responsible ministry for the component or sub-component, who will liaise with the IAWGfor technical input and coordination. The budget for the project (both the counterpart funding and the World Bank financing) will be included in the annual budgets o f the respective ministries. There will be one Special Account (SA) for the project at the Central Bank o f Turkey, and the PMSU will be responsible for managing this account. Respective ministries will be responsible for managing the counterpart funds. 3. Monitoringand evaluation of outcomes/results The M O H and the MOLSS will be the main sources o f data for monitoring o f outcomes and results. In addition, the project will finance evaluation surveys that will produce additional data independent from the regular administrative data systems of the Borrower that are directly 8  evaluating the impact o f the project. These evaluation surveys include: (i) physician, health, and users surveys; and (ii) evaluation surveys o f the various pilot programs to be financed under the project. Finally, the PMSU will provide regular implementation progress reports, especially the Financial Monitoring Reports (FMR) that will provide quantitative data and information on the status o f project implementation on a quarterly basis and projections for the next reporting period's implementation and financial resource requirements. 4. Sustainability Past reform efforts in the health sector in Turkey have been marginally successful in terms o f improving the health status o f the population because o f reasons related to overall political economy. The current government came to power, based on a platform o f reform in the public sector and with a parliamentary majority to implement it. One important piece o f legislation, the Public Administration Reform Law, i s the organic law that will set the stage for reforming all ministries and government institutions. A series o f laws on individual agencies, including the MOHandMOLSS, andtheir affiliated agencies are also under preparation. Inthe healthsector proper, the commitment to reformhasbeenmadepublic throughthe launching of the PTH. A series of bills are now beingreviewed by the National Assembly. The passage o f the law on the UHI, and the subsequent adoption o f its regulatory base, will be critical in ensuring a fiscally and institutionally sustainable health and social security reform in Turkey. However, before the adoption o f the law by the National Assembly, the MOLSS and the MOH will need to carry out studies and actuarial analyses to estimate future revenues and costs under various scenarios. The MOLSS will also design, develop and pilot the information platform for an effective implementation o f the universalhealth insurance and social security schemes. 5. Critical risksand possiblecontroversial aspects Undertaking a large project inthe health sector inTurkey presents risks to the proposed HTP that need to be carefully assessed. The key potential risks and proactive and remedial measures include the following: Risk Risk RiskMinimizationMeasures Rating Generic Risks S Macroeconomic: While the macroeconomic indicators are (e.g., Macroeconomic constantly improving, the GOT has significantly curtailed its and structural reform investment budget, and needs to maintain a primary surplus o f risks, political 6.5% of GNP duringthe current FY. The overall debt/GDP ratio instability, etc.) i s still high, with a large portion o f government budget servicing the debt. The Bank strongly recommends that a full evaluation o f the fiscal and institutional sustainability o f the proposed UHI be carried out. and a financing plan be discussed before it becomes effective. A preliminary study has already been carried out by the Bank. Political: Several internal and external political issueswill likely test the government's resolve and political will to effect large 9  scale reform inthe health sector. The HTP tries to mitigate this risk through triggers for Phase 11, and is designed as a self- containedinvestment operation. Coordination between M Coordination between the MOH and the MOLSS i s much M O H and MOLSS improved, compared with the situation under the previous government. However, it is possible that some o f the initial goodwill and desire for collaboration may be lost, as laws are drafted and/or amended, roles and responsibilities are changed. This needs to be closely monitored during implementation. The project design tries to mitigate the risk through separation o f components to eachMinistry. Resistancefrom S Resistancefrom some stakeholders,especially from the Turkish Stakeholders Medical Association (TMA) i s likely to remain, especially from those who favor maintaining the status quo, namely keeping physicians on the public payroll. The project will engage such stakeholders through discussions and dialogue, public awareness campaigns and physician surveys to assess the degree of, and reasons for, resistance, and will conduct pilots to demonstrate that family medicine i s a viable option in Turkey. Another potential source o f resistance will be various health insurance institutions which may be reluctant to a merger and to the consequent consolidation and streamlining o f staff and operations. InstitutionalCapacity M Institutional capaciq i s limited, especially in the MOH. Moreover, the MOLSS does not have any previous experience with the Bank. The project design includes the recruitment o f a MCF that will assist the PMSU inthe implementation (fiduciary Risk Rating -H (High Risk), (Substanti, Risk), A4 (Modest Risk), N (Negligible or Low Risk) 6. Loadcredit conditions and covenants Conditions of negotiations: The following conditions were met prior to negotiations: (i) Main PMSU (Project Manager, Procurement Officer, Financial Management Officer) and Ministerial PIU Project Officers appointed and office spaces readied; (ii) Project Operational Manual the (POM) prepared; and (iii)the Request for Proposals for the Management Consultant Finn prepared. The following conditions were also met prior to Board presentation: (i) the Project Operational Manual adopted by the PMSU and the PTus; and (ii) a functional financial management system established by the PMSU and the PIUs. Disbursement conditions: (i)Criteria for application and eligibility for funding under the Population Health Grant agreed with the Bank and adopted before loan proceeds could be disbursed under Sub-component C.4; (ii) Law o f the School of Public Health enacted before the procurement o f goods under Sub-component D.2; and (iii) the Bank has to review and provide its no objection for the Pilot sub-projects before loan proceeds can be disbursed under Part C.l, 2, 3 andEo fthe project. 10  Other conditions: (i)the PMSU and the PIUs will be maintained throughout the Project with qualified staff and adequate resources; (ii) IASC will be maintained throughout the Project the with satisfactory terms of reference; (iii) POMwill be maintained throughout the Project; (iv) the a mid-term review will be conducted not later than March 31, 2006; and (v) Population Health Grants will be implementedunder terms and conditions as agreedwith the Bank. D. APPRAISAL SUMMARY 1. Economic and financial analyses As has been notedpreviously, the HTP supports GOT'Shealth reform initiatives as enunciated in the UAP and PTH, which outline the key policy issues inthe health sector and targets all aspects o f health care and health systems, including financing, delivery, management and organization. The HTP i s expected to have a positive impact on access to and utilization o f health services, and thus a positive impact on the health status of the population. The implementation o f UHI is expected to provide financial coverage for health to the entire population, particularly the estimated 22 million or so presently without any form o f insurance. The implementation o f family medicine modelwill not only improve continuity o f care but also increase emphasis on prevention and education. An additional benefit is the potential for cost reduction, since it is expected that some o f the present expenditure on expensive specialist care and inpatient care will be reduced following more comprehensive coverageunder family medicine. Improvedstewardship andbetter policy-making will facilitate priority setting in the allocation o f scarce resources in the health sector. In addition, better coordination and collaboration between M O H and MOLSS has the potential for cost reduction and avoidance o f duplication, as patients enjoy greater access and choice among all public facilities. Modernization o f information collection and analysis through an expanded and comprehensive network covering not only health but also social security institutions will facilitate more informed policy-making and better patient management. In the longrun, significant savings are expecteddue to lower overall administration costs. At the same time, it is useful to bear in mind that there are some areas that pose a particular challenge. In particular, as the analysis o f expenditures under UHI demonstrates, the increased costs associated with extending UHI pose a serious resource challenge. If the number o f the presently uninsured i s indeed 22 million, then the fiscal impact o f Component B: Building Capacity of the Universal Health Insurance and Social Security Institutions i s likely to be adverse inthe short-to-medium term, considering that the increasedburdenofinsuringso manypresently uninsuredwill behigh, irrespective ofthe level andscale ofthe measuresadopted. A preliminary exercise carried out by the Bank in collaboration with M O H and MOLSS finds that the introduction o f UHIwill require additional state outlays o f between 3,826 trillion TL and 6,462 trillion TL for 2002, depending on which other reform measures are adopted and implemented along with UHI. The study concludes that, final details pending, the introduction o f UHIcan be a fiscally viable proposition only ifthere are markedimprovements on the revenue side o f the social security system inaddition to efficiency-enhancing reforms inthe health sector. Overall, the potential benefits o f the project (Phase Ionly; components and activities under Phase I1can be evaluated only after the Phase Iis satisfactorily completed) are significant, and to the 11  extent that the project components facilitate access and utilization and help in mitigating some of the known market failures inhealth, this is an economically viable project. On balance, the results o f the economic analysis show that the project makes sound economic sense, subject to the general caveats o f passage o f the necessary supporting legislation and sound implementation of all the project components. Fiscal impact The project itself will have a net positive fiscal benefit over the long run, since it supports implementation o f systemic health reforms aimed at increasing efficiency in production and delivery o f health services. The introduction o f the UHIwill have a fiscal impact inthe short run, largely because it involves extending financial protection to the presently uninsured. Inthe long run,however, efficiency gains from measures accompanyingUHI- like the introduction offamily medicine and autonomization o f hospitals, both o f which are supported by the project - are expected to yield substantial returns and the health system with UHI is expected to become fiscally sustainable. The Government o f Turkey will be contributing 11.86 million toward project costs, spread over 3.5 years. The maximumcontribution is expected to be inyear 3 o f the project (ie., in2006), and is expected to be about 4.0 million. This is almost a negligible amount interms o f the expected total MOHbudget (<1%), andi s therefore not expected to be a fiscal burden for the government. 2. Technical The conceptual and technical foundations o f the project have been around for many years, discussed ad infinitum andreported inwhite papers, policy notes and national conferences. Inthis sense the project does not experiment with any new ideas in Turkey, but rather goes to scale in including all the building blocks o f a comprehensive reform initiative overdue for about two decades, using a rare window o f opportunity opened by current Government's UAP, and the subsequent launching o f the PTH. It has to be noted that the proposed design concurs filly with the recommendations o f the Sector Note "Reforming the Health Sector for ImprovedAccess and Efficiency" inits drive for an overhaul o f the entire system. Internationally, most health sector reform initiatives involve changes in four levels: (i) systemic, to reduce inequalities in access to care and increase system efficiency; (ii) institutional, to ensure an adequate distribution o f roles and responsibilities on the basis of key functions o f health care such as financing and service delivery; (iii) programmatic, to improve technical efficiency in the way services are produced and provided; and (iv) instrumental, to build or strengthen the information and intelligence base of the system. HTP's design follows similar approaches inother countries that have undergone similar large-scale sectoral reforms. The PTH, made public in early 2003, makes explicit reference to growing inequalities in health and health care inTurkey and the lack o f long-term fiscal sustainability o f the highly fragmented financing and service delivery structure, and advocates for a real change inthe way the system is designed by proposing interventions and activities at all four levels. First, it supports 12  Government's political will to introduce UHIfor full coverage of the population. However, such a sudden extension of (almost) free healthcare from the an estimated 66% population coverage requires considerable preparation including legislative changes, institutional realignment, fiscal sustainability assessment and redefinition o f entitlements and obligations. The project will support all these activities, but also finance the "infostructure" necessary to operate such a large- scale health and social security system Second, the Program advocates for a change in the realm o f the responsibilities of the MOH, expressedinthe motto "more steering, less rowing". The Ministry would shed most o fits hitherto considered primary functions o f financing and service provision, and concentrate on system stewardship, limiting its functions to policy makingin health and health care; regulation o f heath workforce, pharmaceuticals, medical devices and other health related matters; quality assurance and control; provision o f population health programs; and informal training of health professionals. Equally important, i s the proposed profound reform in public administration, including MOH, which would also devolve key functions o f planning, resource allocation and management to provincial and/or local administrations, possibly to some municipalities where capacity i s greater. Hence, M O H would no longer own, manage and operate health facilities, nor would it have abudget for doing so. Theproject will support this process. As for the MOLSS, significant changes inits current structure are also proposed inthe package of draft Bills for each o f the pillars o f social security. For health insurance, the existing four institutions would be mergedto create a new NHIF with its own management structure. Similar changes would be made to Pension, Social Assistance and Unemployment schemes. Each would be runindependently without any cross-subsidization, and be overseenby a new and autonomous Social Security Institute. As in the case o f MOH, MOLSS would ideally no longer operate and finance hospitals, but rather would specialize, through its agencies, invarious insurance functions, namely risk assessment, actuarial analysis, strategic purchasing and contracting with providers. The project, together with the proposed PPSAL, supports this process. Third, there would be a fundamental change inthe way preventive, primary and in-patient health care services are delivered. The introduction o f family medicine would: (i) general make practitioners and familyphysicians gate keepers and independent providers o f preventive and out- patient curative services; (ii)streamline the service use andpatient referral; and (iii) families allow to choose their own provider. It is expected that eventually family physicians, through their representatives, would engage in a contractual agreement with the NHIF for the provisiono f their services. A similar change would occur inthe hospital sector whereby all public hospitals would eventually become autonomous entities under the management o f provincial and local authorities. Theproject will support this process. Finally, the project will invest heavily inbuildinghealthcare system's informationandintelligence base by: (i) setting up a Monitoring and Evaluation Unit; (ii) supporting the establishment o f central laboratories for quality assurance and control; (iii) reactivating the School of Public Health; and (iv) buildingthe health and social security management information"infostructure". 3. Fiduciary 13  Financial Management. A financial management assessment was carried out at appraisal. The proposed PMSU staffing structure includes a Financial Management Coordinator. Hehhe will work together with the PrUs finance officers. The Coordinator has been appointed with TORS satisfactory to the Bank. The Special Account will be opened at the Central Bank of Turkey, and the PMSU will be responsible from managing this account. Respective ministries will be responsible for managing payments o f the counterpart funds and obtaining approval of the MOF's Payment Office for payments from the Special Account. A copy o f the payment documents related to the counterpart funds will be submitted to the PMSUfor project accounting purposes. The PMSU will maintain separate project accounts for each implementing ministry on a cash basis. An accounting system with technical specifications satisfactory to the Bank will be installed no later than project Board date with the necessary Chart o f Accounts to allow for the timely submission of the quarterly FMRs bythe PMSU. The format and the contents ofthe FMR have been discussedbetweenthe Bank andthe PMSU, and an agreement hasbeenreached as to its format, content and periodicity of reporting. A financial management manual i s also being prepared, andmadeready for use byBoardpresentation. Procurement Management. Each ministry's PIU will coordinate its procurement fiduciary functions with the PMSU's procurement coordinator. Both the PMSU and PIUs will be assisted bylocalandinternational consultantsincontract managementand supervision. Although the M O H has implemented two health projects, the procurement performance i s less than satisfactory. Both ministries have limited capacity to carry out Bank's procurement procedures. To buildtheir institutionalcapacity, the civil servants assignedfor procurement inthe implementingagencies would be sent to a training programto become familiar with procurement procedures and requirements under Bank-financed projects. In addition, a Consultant Management Firm and a procurement specialist will be employed by the Borrower to assist and support the civil servants appointed to the PMSUandPIUs. 4. Social Social Impact. During project preparation a social assessment was carried out in four provinces (Ankara, Istanbul, Erzurum, and Osmaniye). The main findings o f the assessment were: (i) lack of coherent and sustainedhealth policy; (ii) lack ofplanning, coordination andmanagement o f the health sector; (iii)the centralistic structure of the health sector is hindering service delivery; (iv) inadequate education and training o f the health workforce; (v) lack o f investment in preventive care; (vi) non-functional referral system; (vii) services providers are underpaid; (viii) current system is prone to abuse and informal payments; (ix) lack of financial access to health services for the poor; and (x) lack o f access to quality health care services, especially for the poor. Since these four provinces are not entirely representative o f Turkey, the GOTagreed that the assessmentwill beexpandedto include four additional provinces (Rize, Malatya, MuglaandDiyarbakir). The HTP will directly or indirectly address all of the above-mentioned issues. However, it is important to understand that it will mainly lay the foundation for the transition in the health system, which will be implemented in full during Phase I1with the introduction o f the UHIand 14  the roll-out of Family Medicine. Thus Phase Iwill have minimal direct social impact. However, the overhaul o f the whole healthcare system inPhase I1i s expected to affect the entire population as a result o f universal financial access to an essential package o f preventive and curative health care services. Stakeholders and Participatory Elements. InJuly 2003, the GOTcarried out a consultative stakeholder workshop with the participation of some 150 stakeholders prior to the last revision o f the project concept note. Inaddition, the GOTis carrying out a stakeholder assessment using the "policy maker" tool, and a physician survey that are financed under the PHRD grant. These will help design the public awareness campaigns under Phase I. Monitoring. The social impact will be monitored by the M&E Unit that is going to be set up under Component A. Furthermore, the pilots will also have built-inmonitoring and evaluation. 5. Environment Category: C The project involves no civil works, or use o f natural resources, and is not expected to have any negative impact on the environment. 6. Safeguard policies Safeguard Policies Triggered by the Project Yes N o Environmental Assessment (OP/BP/GP 4.0 1) [I [XI Natural Habitats (OP/BP 4.04) [I [XI Pest Management (OP 4.09) [I [XI Cultural Property (OPN 11.03, beingrevised as OP 4.1 1) [I [XI Involuntary Resettlement (OP/BP 4.12) [I Ex1 Indigenous Peoples (OD 4.20, being revised as OP 4.10) [I [XI Forests (OP/BP 4.36) [I [XI Safety o f Dams (OP/BP 4.37) [I [XI Projects inDisputed Areas (OP/BP/GP 7.60)* 11 [XI Projects on InternationalWaterways (OP/BP/GP 7.50) [I 1x1 The Phase Io fthis Program will not trigger any safeguard policies. 7. Policy Exceptions andReadiness There will not be any policy exceptions for this project. Most o f the applicable readiness criteria have already been met, namely: (i) counterpart funds, already budgeted; (ii) establishment of the PMSU, and assignment o f the main project staff, completed by negotiations; (iii)first year procurement plan, already drafted; and (iv) financial management and procurement arrangements, again completedbynegotiations. * By supporting theproposedproject, the Bank does not intend toprejudice thefinal determination of theparties'claims on the disputed areas 15  Annex 1:Country and ProgramBackground TURKEY: HealthTransition Project While Turkey has made considerable progress in expanding healthcare coverage and improving on key health indicators, the country continues to rank far behind most middle-income and the EU accession countries interms of health status and access to healthcare. Whereas Turkey is the world's 17thmost industrialized nation, it ranks only 96th out o f 175 countries in the 2003 UNDP human development index. Its current rankingis at 16 ranks below o f what it should have been according to its GDP per capita, estimated at PPP US$ 5,890 in 2001. Life expectancy i s nearly ten years below the OECD average, and infant and maternal mortality rates are among the highest of middle-income countries. By most accounts, the health sector in Turkey is under-performing in achieving health outcomes commensurate with its level of socio-economic development. Substantial and sustained efforts will have to be made in the coming years if the country i s to meet the objective of improving the health status o f its people, including meeting the health targets o f the Millennium Development Goals (MDGs) bythe year 2015. MDGsfor Reproductive and ChildHealth; Turkey's Challenge Goal: Reduce Child Mortality Target: Reduce by two-thirds, between 1990 and 2015, the under-five mortality rate Indicators: (i)Under-fiveMortality Rate (from 67/1000 in 1990downto 22/1000 in2015) (ii) MortalityRate(from58/1000in1990downto19/1000in2015) Infant (iii)Proportionof 1year olds immunized against measles (82% in2002) (iv) Proportionofchildren immunizedagainst DPT3 andOPV3 (78% in2002) Goal: Improve Maternal Health Target: Reduce maternalmortality ratio by three quarters between 1990-2015 Indicators: (i) MaternalMortality Ratio; (from 55/100,000 in 1995 down to 14/100,000 in2015) (ii) Proportionofbirths attendedby skilled health personnel (81% in 1998) A recent World Banksector study "Reforming the HealthSector for ImprovedAccess andEfficiency" (Report No.: 24358-TU released in March 2003) looked into the determinants o f underperformance andfound out that: Inequalities in health and access to health care: 0 There are wide gaps between urban and rural populations and regional disparities in outcomes across almost all health indicators. 0 The poor are muchmore likelyto not get treatment when illthan the non-poor. 0 The distribution of public expenditures on health is not equitable; the richer regions spend more public moneyperperson on health care compared to the poorer regions. 0 There are wide gaps in the distribution of health personnel across the provinces and regions; inparticular, there is a concentration of physicians in the big cities and towns while rural areas are significantly understaffed. 16  0 Large segments of the population do not have adequate health insurance or any other form o f financial protection; in particular, over 50 provinces have 10 percent or more o f their population not covered under any insurance or Green Card scheme. Inefficiencies in resource allocation: Very little is spent on preventive care and on maternal and child health; in fact, allocations to preventive activities on a per capita basis have fallen in real terms over the last five years. The primary health care system is under-funded and ineffective; most people avoid public primaryhealth care facilities and either directly seek care at outpatient facilities o f hospitals or, ifthey canaffordit, fromthe private sector. A large number of health centers are understaffed and many do not have even one physician; the situation is particularly grim in rural areas in general and in the Eastern and South Eastern Anatolia regions o f the country in particular where a great number o f health posts are not operating for lack o fpersonnel (mid-wives). The majority o f general hospitals are operated inefficiently, wasting resources. Limited system stewardship and governance: 0 Ministry o f Health has largely been preoccupied with administering its own hospitals, personnel issues and constantly seeking ways to get more funds to cover its deficits. Key stewardship and regulatory functions, namely setting health policies, criteria and standards for population health, curative care, public health intelligence; regulating and enforcing all matters related to private healthcare financing and delivery; pharmaceuticals policy; accreditation o f health facilities; and assessment o f health technologies constantly get either short shrift, or are handledineffectively due to limited institutional capacity. 0 There has traditionally been little coordination between the MOH and the M O L S S which, between them, are responsible for most financing and provision o f health care in Turkey; in particular, even though their activities overlap across most services and they have facilities in the same towns and cities. Until recently there was little sharing of resources and complementarities between them and almost no planningor collaboration at any level. To meet the ultimate objective o f improving the health status o f the population, fundamental and systemic changes will be required in the ways that health care is financed, delivered, organized and managed. Piecemeal changes at the marginare unlikely to reform the health system. Indeed, the very same Sector Note, the most recent Country Assistance Strategy, and the Policy Notes, "Turkey: Greater Prosperity with Social Justice" prepared by the Country Team inNovember 2002 to assist the incoming new government all advocate for a comprehensive reform strategy to cover at least the following five areas: (i)separation offinancing andprovision functions; (ii)improvements in resource mobilization and allocation; (iii) universal access to health services, especially for the rural and the poor; (iv) improvements in efficiency inproduction and delivery o f health services; and (v) improvements insystem stewardship and governance. It is noteworthy that World Bank's diagnosis and recommendations concur entirely with the "Urgent Action Plan" (UAP)o f the government released in January 2003. The Plan outlines the 17  key policy issues in the health sector under the heading o f "Healthy Society", addressing all aspects o f health care- such as financing, delivery, management and organization, and thus representing a significant step in the country's ongoing efforts to improve the health outcomes. The comerstones o f UAP's Healthy Society and its more expanded sectoral spinoff PTH are the separation o f provision and financing o f health care so as to achieve a more efficient resource allocation and use; introduction o f universal public health insurance so as to ensure equity and access to health services; financial and administrative autonomy for public hospitals in order to improve technical efficiency and strengthenmanagement; introductiono f family medicine so as to integrate and streamline delivery o f primary health care with inpatient care and ensure comprehensiveness and continuity in health care; and an increased emphasis on improving matemal and child health. Inadditionto the ambitious agenda, the UAPandPTHalso set a tight deadline for the legislative and institutional reforms that are necessary to bring about the desired Transition in health. Accordingly, both M O H and MOLSS have begun in earnest to draft new or amend existing laws. Indeed, early drafts have already been either released for public review and comments, or are underinternalreview. Theseinclude: 1. Draft law on the establishment o f the Universal Health Insurance (UHI) which would merge and integrate premium collection (SSK, budgetary support to MOH, Bag-Kur Scheme for the self-employed, Pension Fund, and financial outlays under civil servants health planand GreenCardprogram for the poor andthe indigent) and all hnctions related to health financing, contracting and service purchasing, except for population health activities. Based on the principles o f solidarity and risk pooling, all citizens o f the country will be covered under one health insurance scheme, with the state making premium contributions on behalfo f the indigent andothers unable to do so on their ownbehalf; 2. Draft law on Social Security Reform which will restructure the four pillars o f health, pension, social assistance and unemployment under one Social Security agency while making each autonomous in its management, without allowing for cross subsidization betweenthe four schemes; and 3. A package o f seven draft laws on: (i) re-structuring of the MOH and its affiliates, the School o f Public Health, the Hygiene Institute, the Health Institute for Coastal and Border Areas and the Higher Health Council; (ii)establishment o f the NPMDA; (iii) the amendment o f the Medical Professions Law; and (iv) the revision o f the Public Health Law. These legal and structural changes will strengthen MOH's ability to increase its policy oversight, regulate the private sector, health care technologies andpharmaceuticals, andhlfillits public healthandquality assurance functions more effectively. The separation o f provision and financing provides an opportunity to introduce innovative methods in management o f health facilities, and this will be achieved by granting financial and administrative autonomy to public hospitals. For instance, the distinctionbetween SSK and MOH hospitals and health centers has already been removed and patients are now free to go to hospitals of their choice. The introduction o f hospital autonomy will require appropriate legislation that will allow for public assets to be managed outside the direct purview o f the government, and 18  related laws and regulationwill be amended inorder to facilitate the transition o f M O H and SSK facilities to autonomous bodies. Inorder to improve health several changes are proposed on the delivery side as well. Preventive and health services will receive high priority. They will be integrated with individual curative health care services and be provided under a newly established family medicine scheme, which will shift the emphasis from treatment of the sick to the promotion of health and prevention of illness. This new outpatient organization modelwill bringthe physician and family members into closer and more personal contact, enabling the physicianto play an important role inthe family's health and the preventiono f illness. Onthe curative care side, most outpatient diagnostic services and consultations will be provided by family practitioners with post-graduate training and new competencies across a broad spectrum o fmedicaldisciplines, includingintemalmedicine, surgery, obstetrics and gynecology and pediatrics. Special emphasis will be placed on continuity and comprehensiveness of care, as well as on both psycho-social and technical quality o f health services. Restructuring o f primary health care on the basis o f the main tenets o f family medicine, together with the necessary changes in physician compensation schemes and incentives, are expected to: (i) uploading hospitals and tertiary care services with morbidity that can prevent easily be dealt with at the primary care level; (ii) streamline case mix; and (iii) strengthen the patient referral system. To bring about significant reductions inmaternal and infant mortality inthe shortest time period, UAP's Healthy Society proposes to focus especially on infant and maternal health care. Complications o f pregnancy and childbirth are the leading cause o f deaths among women o f reproductive age, andthis problemi s particularly acute inrural areas andpoorer regions where full access to appropriate obstetrical care is not always available, and where utilization o f available maternal and child health services is low. Special measures will be introduced to make motherhood safer, and special importance will be placed on prenatal care, safe delivery, post-natal care, obstetric emergencies, family planning and good nutrition in the context of family-based primaryhealthcaremodel. The transition of the health sector will result in broad-spectrum structural changes, not only in health sector financing, management and organization, but also in the delivery o f services and in patient-provider interaction. Inorder to manage these changes effectively as well as to oversee the functioning o f the transformed system, the Minister o f Health has indicated numerous times that he is keen to strengthen Ministry's stewardship and regulatory functions while letting go o f the burdensome functions o f service delivery, financing and management of health facilities. He and his counterpart in the MOLSS have both indicated that they would need World Bank's technical and financial support inorder to implementthe ambitious andtime-bound agenda set by the UAP (please see attachedLetters o f SectorPolicy). 19  REPUBLIC OF TuRKlYE MINISTRY OF HEALTH Health Project General Coordination Unit Mr.James Wolfensolin Preside111 World Bank 1818 f.1 Strect, N.W. Washington, D,C. uSA 20433 Dear Mr. Wolfensuhn, Over the last fiftccn years: various govcmments in 'Iurkey have made considcrablc efforts lu restructure heallh servicc delivey and finaricing so as to respond to the evolving hcalth and heallhcarc nccds and expectations of the Turkish society. During the wmc timc y p a i , the World nank provided financial suppon lo hrcc hcahh projects to improvc the hcalthcare system, and these Iiavc been implemcntcd satisfactorily, albeit with some problems. Iiowever; Ibelie*c that the Turkish healthcare system needs a major nverlmd as soinc chmgcs aid impmvcmcnts on the edges will not TCSO~VCthe intractable prvblems of weaker systcm governunceand stewardship, chronic financiul dcficits. inefficiencies in thc allocatioii or limited rcsoun-es. inequalitics in access to care and populzltion's dissatisfaction wilh ils overall performancc. The "IJrgent Action Plan" (1JAP) prepated by thc 5gth and 59"' Ciovertirnenlv intends to significantly cnhance the standards of living and qualityof life ofthe 20  REPUBLICOF TURKIYE MINISTRY OF HEALTH Health Project General Coordination Unit NUMBER : BlOOSPK SUBJECT : `l'urkish pupulatioii, of which good hcalthis an integralpart. To achieve this goal, thc U D envisages major changes in the way hcalthcare will be financed, managed and delivered. I.lenc.e,my Ministry, incooperationwith the Ministry o fLabor and Sociatl Security(MOLSS), launched a new programcalled `-I'ranslbmationinHealth" which aims at: Redefining the roles and responsibilities of the Ministry of Heiillh (MOH) tind restructuring its institutional setup in line with its new inaiidatc and political and administrative functions; Providing universal healthinsurance lor ht:ciitirc population; CniCqrinyhcalth financing under a singlc and universal heafth insurance scheme; Allowing finaiicial aid administrative uuii~noiiiyfor all hospitals; Introducing family medicine as an organization model for first linr; senkc delivery.; Improvingmotherandchildhealth; Rcinforcingpreventive care services; Promotingprivatescctor investments inthe health sector; 'I'mistkrrjlig most tcchtikd andadministwliveauthority to sub-national levels; Srrmgthcning healthworkforce, and reducing distributioiml inequalities in regions with development priori&; and Execulinp c-transformation in the fields of heallhcarc andlicalth insurance. Withiii this framework. Itake pleasure in sharing with you my views on the scope mid purpose of a new project in support of Govermenl's Program '`Transformation in IIealth". and an how I see World Hank's technical and financial assislunca to hclp us achieve our programohjeclivcs. 21  REPUBLIC OF ThKiYE MfNlSTRY OF HEALTH Health Project General Coordination Unit NUMBER : BIOOSPK SUBJECT : The drive hehindthe Project isto narrow h e gap inaccess to, quality aridutilizalioii o f hcalth services between Turkcy and olher middle-income countries and the European Union by extmding health invurancc coverage to all Turkish population and by mducing inequalities in accessto healthcwe, cspccially for lhe poor and those living inrural and peri- urban areas. Tn cn-dcr to reach its goal: the Projcct will have four building blucks, which altogether constilulc thc core of Ciwernmcnt's Program for TransTomation inHealth: Strengthening and re-shaping MOH's capuily for more effective sectoral governance and stewardship; Building the institutional, humaii and iilfbrmation basis fa the inlnductinn of 1JnivcrsalHealth Insurance; 1ntrodur;iny thc principles uf Family-based pima.ty heallh care and autonomous in- puticiit service delivcry; and Competent ,and highly motivated health work5xce to provide care nf staiidards at par with rlicise ofthe European Unionmember states. Full implementationof boththe Program and thc Project will obviously require ncw lcgislationas well HS ancndments or sumc existing laws, decrees and ordiimces in force. In addition to the Drdt Public Adminisiration Framework Law, which is bcing read in the Parliamenl, and which redefines the functions and adminivtrativc setup of all government agencics, my ministry has alsv prcpareda packagc of bills that are necessary hthc inception of the `-TransTomation", subsequent to the passage or, und in compliance with, the Framework Law. We hopc that the legislutivo process will bring aboul CL profoundchange in that the MOH will nu longer cxpcnd its energy in rowing, but rather will sct the course and steer the healthcare systcm inthe light direction. W e believe tliat a two-phased Adjustable Program Lending is thc right instrument to sitpprt the programand Llic processof change, and we anticipate that it will last fnr about -- 22  REPUBLIC OF TURKIYE MINtSTRY OF HEALTH Health Project General Coordination Unit NUMBER :B100SPK SUBJECT : five io sevcn years. Accordingly, the first phuse, which will probably last two years, will mainly focus on restructuring the Ministry of Health mid setting up the Iegislativc and orgaiiimlioii infrastmc.turc: fur thc introduction of f m i l y pmdcc in Turkey. The Second phase will primarily invnlvc investment in establishing the inliastwciurc for e-heaIrh, together withUniversal f lealthlnsurance andthe Social Security. This project i s also rather unique, in that fir the first timc, it sets up a partnership helween the MOH and ,MOL.SS as two implementing agencies aspiring to work in parhiemhip tu reachthe same goal. Accordingly, my Ministry will be incharge o fproject components on sectoral stewardship, sencice provision and hu"i resources develrqmcnt and c-hcalth, whereas rhc MOLSS will assume the responsibilityfor those related lo Lhc introduction of the Universal Health liisurarice and the institutional setup for Social Security. In &is contcxt, wc h w c joiiitly established an Intcr-Agency Steering Commitlee (IASC), composed of seniot officials from our ministries and other state agencies (Undersccrctaries uf SPO and 'I'reasury) for leadership to the Inter-Agency Working Grtiup (IAWG), in charge of project prcparation. We inlendto keep MSC' and L4WGfunctionul oncc thc projecr becomes et'fcctive, inaddition to the Ptojaci Management and SupportUnitthat will be established, again with pnrticipation lioin cach Lfinistry. 1 wtiit1J.like to einphasizc how important it is to benefit from Wortd t3mdc's financial mid tcchlical support and how much wc value our collahoration as we move towards full iiiip1cmsnt;rtiuno fow proyamor'rransformatioii inHealth. 23  REPUBLICOF TURKIYE MINISTRY OF HEALTH Health Project General Coordination Unit NUMBER :BlOOSPK SUBJECT : Invcstments and services provided through technical and financial support from the World Bank within the scope of the First and Second Health Pru-jcctshaw made important contributinns to public health sen-iccs of our country ~ 1 % wcll as to tlie effectiveness and efficiency of these services. I bclicvc that World Bank's continuous financial and technical support wider this new projcct will consolidate and add value to what has hitherto been acquired, and thus fbfihcr our efforts to reach thc goal we set for ourselvev to complctc Turkey's integrationto lhc EuropeanUnion. Yours Sincerely Prof. Dr. Rccep AKDAG Minister ofHealth 24  0510312004 Mr.James Wolfensohn President World Rank 1818 H Street, N.W. Washington, D.C. 20433 USA SOClAL SECURlTY LETTER Dear Mr. Wolfensahn. Re:Lelter of Secbr Poky in Supportof Governmenf of Turkey'sPmgfZtamfor T"3fOf???&fon in Health This letter of sector poljcy describes the principal features of Government`s Social Security Reform and the proposed structure, and provides information on the national priorities of the Social Security Projectfor whichwe are seeking World Banks financial and technical support. In Turkey, it is difficult to talk about a single social security system as various schemes have evolved over the years into different regimes with various structures. and rules and criteria for entitlements, rights and obligations.This process had the unintended consequence of bringing about considerable inequities and inequalities in access to social services and duplication and wastage of limited resourcesand administrativecapacity. As a result,it isvery difficult to sustain social security services, a5 they are no longer amenable to fiscal discipline and administrative simplicity. Indeed, all current schemes face insurmountable problems of pmmium collection, fund management and realistic actuarial forecasting of future expenditures. Consequently, despite the system's ability to collect contributions amounting to about US$ nine billion, sustenance of health and social services require significant outlays from Government budget to finance the deficit. Indeed, during the (ast decade these outlays were the main reasons behind intractablebudget deficits, reaching In 2003 4.54 % of the GNP. or corresponding to about 10% of the general budget. Health expenditures will typically account for about one third of total social security expenditures, totally US$ 17 Billion accarding to the 2002 prices. On the service provision side, there has been an escalation of costs and complaints from beneficiaries about the accessibility to and quality of health services. At present, health services are predominantly provided in government health facilities, and all activities ranging from resource utilization to pricing are governed by the central authority. The Ministry of Health [MOH) plays a major role in the provision of health services besides its regulatory, supervising, licensing and pricing roles, followed by the Social Insurance Institution (SSK), although the latter either provides services in its awn facilities, or purchase them from other private or public health establishments. As for other social insurance schemes such as the Emekli Sandigi (Retirement Fund) and Bag-Kur, senrice purchasing is the norm. Either way significant improvements have to be made in system management and govemence, based on the principles of managed competition and quality control in order to improve pertormance and efficiency in sewice provision and fiscal sustainability of all insurance agencies. This is all the mote important given the current activelpassive ratio af 1,86 and a dependency ratio of 3,86, and our objective to increasecoverage from the current 60 million insured to the enitre Turkish population. While serious efforts have been made to gradually leave populist policies and inLroduce actuarial accounting to ensure fiscal discipline. these remained palliative due to the insiutional disorber and fragmented structure ofthe government and the lack of unity in standards. Cognizant of the inherent weakness of the Social Security system, the 58* and 5gthgovernments have, in their EmergencyAction Pian, adopted the following principles: 0 separationof service provisjon from financing in healthcare; establishmentaf a Universal Health Insurance scheme and its agency; uniformity af norms acrossall social security institutions; establishmentof a unified social security network and its institutional setup: separationof long and short term insurance senrjces; 25  c consolidation of all public pension schemes undera new Pension fund; establishment of a unified social services and assistance network and its institutional structure; abolition of non-contributorypayments for eiigibili!y for and accessto insured services. Consequently. a legislative process has been initiated by my Ministry to either draft new or amend existing faws on Sociat Security, Draft laws have been submitted to other Ministries and nearly 150 non-govemmentalorganizations for review and feedback, and are being reviewed for submission to the Parliamentin the very near future. It is expected that the new legislative and institutionalframeworkwill: increase competitivenessamong service providers; improveeMciency in remurce allocation and use; improveequality in contributionsand entitlements; * extend health care coverage to the entire population; bring about administrative simpticity through uniformity in contracting, regulating and setting servicestandards and a common*infostructure"; reduceduplications and wastage thanks to consolidation of various schemes: establishment of objective criteria for entitlement to social services and increase users' and providers' satisfaction with streamlined and transparent contracting and provider payment methods; limitgovernment contributionsto transfersfor thoseWho cannot affordto pay their premiums: increase fiscal sustainability thanks to actuarial premium setting, realistic service costing and reducedoverhead costs; and increase capacity in and campfiance with premium collection under the responsibility of a single collection agency for all social security services. Obviously. our legislativeefforts are carried out in close collaboration with the Ministryof Health given the linkagesbetween healthinsuranceand health service provision. Successful implementation of the sociat security reform hinges on technological and informational improvement in two crucial areas. First, there is an urgent need to establish a common database and a management information system to coordinate all related activities and provide fast, reliable, effective and efficient health and social services. We believethat this is the most important step inour reform endeavor. Second. it is equally important to set up an efficient, safe, objective, replicableand sustainable "means testing" mechanism that can be used to identify those citizens whose health insurance premiumsshall be paid by the State, Investment in the social security "infostructure"described above will require envisaged financial and technical assistance.lt is of utmost importance to establish a social security information system that can be integratedwith health information system so as to successfully implement a projected modern universal health insurance scheme up to standards of similar institutions In the countries of the European Union. I think that it will positively assist such a large investment to be closely coordinated between my Ministry and the Ministry of Health and I believe that World Bank's financial and technical support under the Health Transformation Projectwill be invaluablein this respect. Yours Sincerely, ,-Q?p' Murat 8aves~iolu The Minister%fLabarand Social Security 26  Annex 2: Major Related Projects Financed by the Bank and/or other Agencies TURKEY: HealthTransition Project The First Health Project (FHP) Loan No 3057 - TU, was Bank's first experience in the HNP sector in Turkey. The FHP was approved on May 11, 1989 and became effective on October 1990. The loan amount was US$ 75 million. The objectives o f the FHP were to: (i) improve the health status o f people in eight underserved provinces by extending geographic access and improving the quality o f services; (ii)enhance the efficiency o f service delivery and improve financial sustainability; and (iii) strengthenthe management capacity o fthe Ministry o fHealth. The project was closed on December 31, 1998, with US$ 3.84 million undisbursed. According to the ICRo f the FHP "the project was partially successhl inachieving its objectives". The Second Health Project (SHP ) Loan No. 3802 - TU, was approved on September 22, 1994 and became effective on January 31, 1995. The specific objectives of the SHP were to: (i) improve equity of access to essential health services in23 Eastern low income priority provinces and five provinces affected by the August 17 and November 12 1999 earthquakes; and (ii) improve the quality o f health care management in the M O H and in selected institutions. In particular, the project aims at decreasing fertility rates, and improving life expectancy in the participating provinces. The original total amount o f the loan was US$ 150 million, later revised downward to US$ 130 million after restructuring. The original closing date o f the loan was December 31, 2001. The Loan has been extended three times. The present loan closing date is December 31, 2004. According to the latest PSR, project development objective and implementation progress are rated as satisfactory. The Primary Health Care Services Project (PCHSP) Loan No. 4201 - TU was approved inJune 1997 andbecame effective inDecember 1997. The specific objectives o f the PHCSP were to: (i) develop a primary health care system based on family physician and an effective referral system supportedby financial incentives and improvedinfrastructure; (ii) evaluate the developed primary care system with a view to nationwide replication; and (iii) capacity for economic analysis develop inthe MOH. The loan amount was US$ 14.5 million. After 21 months o f inactivity and no disbursement, the project was restructured and the loan's entire amount was reallocated towards financing emergency health interventions in the earthquake provinces. The loan was closed in June 2001, with anundisbursedbalance ofUS$ 14million. Inaddition to the above Bank-financed activities inthe H" sector, the European Commission has granted 55 million for reproductive healthinTurkey. The project is managed by the MOH's Directorate General o f Mother and Child Health and FamilyPlanning, and it i s in early stages o f implementation. 27  Annex 3: Results Framework and Monitoring TURKEY: HealthTransition Project Results Framework Program Purpose End-of-Program Indicators Use of End-of-Program Information Program Purpose (FYO5-FY11) Maternal Mortality Ratio is on 1. Evaluate the magnitude of Phase I:(FYO5-FYO7) course to reach the target o fYi change inmeeting the reductionby 2015. MDGs. f i e objective o f Phase Iis to 2. Determine the impact o f :nable the Government to Child mortalityrate is on course MOHprograms inreducing strengthen the institutional to reachthe target o f2/3 reduction the geographic andsocio- znvironment for the by2015. economic inequalities inthe implementationo f its Program for provisions o f quality health hnsformation inHealth that will Significant reduction in care. improve system stewardship, discrepancy inMMR, IMRand 3. Monitor and evaluation the streamline financing andservice byregon, urbdrural and income fiscal sustainability o f the delivery, and buildthe institutional quintiles. newUniversal Health capacity to extendhealthinsurance Insurance. coverage to the whole population Economic barriers to accessto 4. Determine the progress o f inafiscally sustainable manner. and use o f essential health meetingthe EUaccession services covered by UHIare criteria Phase11:(FYOS-FY11) eliminated. The objective o f Phase I1is to Outpatient and inpatient service enable the Government to use indicators converge towards complete its fiscal and institutional EUaveragebyendo fproject. readiness for nationwide transition to family medicine and the Physicians' choice o f family implementation o funiversal health medicine as a mode o fpractice insurance. increased. Increase intotal andpublic health expenditures inline with country's economic development. Reliance on subsidy from the consolidated budget for balancing the UHIFbudget reduced. Institutional and legal framework o f the health andsocial security sector is infull compliance with the acquis communautaire as a pre-condition for EUaccession. 28  I PDO Outcome Indicators Use of Outcome Information (APL I) Governance o f the - 1. M O Hno longer involvedin health care system is realigned, service provision except for and the roles o fresponsibilities o f public healthprograms. key government agenciesare 2. MOLSS no longer involved in redefined along the functional lines service provision. of stewardship, financing, service 3. Evidence o fpublic hospitals provision, and health andsocial operatingunder a new security informationmanagement. autonomous model. 4. Evidence of increased user and provider satisfaction as a result o f family medicine pilot. 5. Evidence o f capture anduse o f health, service use and financing data generated inthe I family medicine pilot bythe newlyintegrated information system. Intermediate Results Results Indicators for Each Use of Results Monitoring One per Component Component Component A: Restructuring Component A: Component A: the MOHfor Effective Stewardship 1. MOHrestructured 1. Determine the degree o f 2. NPMDA established success inrestructuringthe M O Hrestructured inline with the 3. Quality Assurance and MOHto meet its new reform agenda and the amended Accreditation systems mandates. Law on M O H institutional setup. established 2. Determine the impact o fthe 4. Monitoring andEvaluation success o f the PTH. System operational Component B: Building Component B : Component B: Capacity of the Health Insurance and Social Security Institutions 1. Universal HealthInsurance 1. Determine the institutional A new institutionalbasis for established. capacity o f the universal universalhealth insurance set up coverage o fhealth insurance for the whole population. Component C: Reorganizing the Component C: Component C: Delivery of Healthcare Services A new (i) medicine family 1. Family MedicineModel 1. Lessons learned from the organizationalmodel for primary definedandpilot tested. pilot family medicine model health care piloted; (ii) 2. Autonomous hospitalmodel will assist inthe design o fthe autonomizationo fhospitals i s developed and first phase national roll out. designed; (iii)referral system put hospitals selected. 2. Lessons learned inthe pilot inplace; and(iv) Population 3. Effectivereferral system autonomization o fhospitals HealthGrantprogramestablished. established will determine "best practice" 4. Innovative new initiatives to for national coverage in promote population health Phase 11. carried out 3. "Best practice" from the new 5. Planfor new surveillance referral systemwill be system developed applied nation-wide. 4. Innovative new health promotion andpreventive 29  healthprograms will be expanded ifthey are found to be cost-effective. 5. Improvedsurveillance system will provide early waming system for disease preventions. Component D: Strengthening ComponentD: ComponentD: Human ResourcesCapacity A new humanresourcespolicy and 1. Humanresourcesplan 1. The humanresource planning plan developed and adopted. developed andready for will allow balancingthe implementation. country's requirements and supplyinthe health sector 2. School of Public Healthis thereby adjusting incentives ready to conduct courses in for longterm equilibrium. health management and administration, health 2. The country's institutional economics andfinancing, capacity to carry out health flagship programs, rational sector policy andplanning druguse, epidemiological canbe enhancedthat will intelligence service, and also be financially population health. sustainable. Component E: Building ComponentE: Component E: Infostructurefor Health and Social Security The newly developed health and Successful testing o f the social security informationsystems infostructure systems at the MOH A newhealth and social security are successfully tested. and MOLSS will lead to a single informationplatformdesigned and processing institution (MOLSS) piloted. for data andinformationto support informationneeds o f the PTH. 30  I 2 *4 0 P s kI *B I L E l E l  e U U  m m I J  Annex 4: Detailed Project Description TURKEY: HealthTransition Project This project is designed to support the Government to implement its Program for Transformation inHealth, and as such its components are designed and sequenced to correspond and contribute directly to PTH's eight main objectives. The overall objective o f the program is to improve the governance, efficiency, user and provider satisfaction and long-term sustainability o f the healthcare system inTurkey. The program will be implemented intwo phases, each with its own objectives. Phase Iwill be o f a duration o f about three years, and geared towards the institutional restructuring o f the M O H for more effective stewardship, whereas Phase 11,which is expected to last about four years, will mostly involve the large-scale implementation of the family medicine model and the establishment o f the infostructure for both health and social security. Below i s a detailed description o fproject components. By Component: Project Component A - Restructuring the MOH for Effective Stewardship (Base Cost of 9.60 million) This component will assist the MOH to redefine its roles and responsibilities and complete its institutional transformation fiom a mainly provider o f services to a policy maker andregulator o f service provision, while retaining key public health functions, including disease prevention and health promotion. The component has four sub-components, namely: (i) restructuring MOH and building its capacity to lead the sector, especially with regards to health and healthcare policy design and development, and the necessary legal and regulatory support, and capacity building; (ii) establishment o f a regulatory agency for pharmaceuticals and devices which are increasingly becoming o f concern as major expenditure items, but also because o f their inappropriate use; (iii) a new agency for quality control and assurance, and the accreditation o f health facilities (both public and private hospitals, laboratories, out-patient clinics, pharmacies, etc; and (iv) establishment o f a new MAE agency within the MOH to track progress with the implementation o f the PTH, but also to become the key unit to provide key evidence in line with MOH's revised mandate and functions. Consequently, the scope and nature o f the activities will encompass organizational restructuring, setting-up o f new units, training o f MOH personnel and public information campaign. MOHwill be the implementing agency. A.1. Restructuring o fthe MOH (Base Cost of 3.12 million). This sub-component will support the reorganization o f the functional and administrative structure o f the MOH; provide executive management and in-service training; build its strategic planning capacity; and design a public awareness campaign. It will finance consultant services for organizational change, capacity assessment and public information campaign and both external and intemal training o f managerial staff. A.2. Establishment o f the National Pharmaceuticals and Medical Devices Agency (Base Cost o f 2.14 million. This sub-component will support development o f the legislative and regulatory framework; in-service training o f new staff; procurement o f startup equipment and furniture; identifying equipment needs and revision o f the technical specifications for the main quality 34  assurance and control laboratory; and carrying out environmental impact assessment. The equipment itselfwill be procured inPhase I1(to be cost separately). It will finance purchase o f office equipment; consultant services for organizational set up and identification of training needs and technical specifications for equipment; and both external and internal training o f Agency staff. A.3. Oualitv Assurance and Accreditation o f Health Facilities (Base Cost of 2.59 million). This sub-component will support the development of an accreditation and licensing system; establishment o f a new Unit within the MOH; public information o f the roles and functions o f the Unit; identification o f in-service training needs; and accreditation o f the National Hygiene Laboratory. It will finance procurement o f limitedamount o f equipment, consultant services to set up the new Accreditation System and its Unit, and training of Unit and Hygiene Laboratory personnel. A.4. Establishing;Monitoring and Evaluation Capacity (Base Cost o f 1.74 million). This sub- component will support development o f a Monitoring and Evaluation Framework for the Program for Transformation inHealth; establish a Unit within the M O H and develop its human resources capacity. Itwill finance consultant services and local and foreign training. Project Component B - Building Capacity of the Health Insurance and Social Security Institutions(Base Cost of 3.00 million) This component will assist MOLSS to carry out technical work to assess and project UHI medium- and long-term costs and revenues, build the actuarial basis for revenue and cost projections, strengthen institutional capacity for strategic purchasing and contracting; develop new provider payment systems for family physicians andhospitals; complete the legislative and regulatory requirements to set up the NHIF;andtrain its staff on various health insurance related functions and tasks in line with their new functions, roles and responsibilities. It will finance consultant services for the needed technical assistance, namely, institutional design o f the NHIF, actuarial analysis to assess fiscal sustainability; estimation o fpremiumrates, deductibles and co- payments; identification o f eligibility/exclusion criteria; and definition o f the minimum service package. Once the necessary legislative work i s complete and the new social security law i s enacted MOLSS will embark on a major restructuring which will realign its organizational structure along functional lines (health, unemployment, pension and social assistance). This new setup will introduce administrative autonomy to each agency with its own management board, and prevent transfer o f funds from one to another for deficit reduction. Therefore this component also includes technical assistance for the social security reform in general, as it pertains to UHI and the NHIF which will be carried out in accordance with the conditionality o f the proposed PPSAL operation. Accordingly, it will also finance assessment of human resources and skills mix needs and preparation o f training programs and packages. MOLSS will be the responsible implementingagency 35  Project Component C - Reorganizing the Delivery of Healthcare Services (Base Cost of 15.67million) This component will assist M O H to design, develop and pre-test new organizational models for service delivery by (i) introducing the tenets o f family medicine as the basis for the provision o f outpatient or primary health care services; (ii) doing away with the distinction between MOH and SSK hospitals and eventually making them autonomous; and (iii) building a new patient referral mechanism to reactive system hierarchy. Such a change can only be executed gradually, and will require cooperation and collaboration o f the two line ministries and the cooperation of various stakeholders (professional associations, trade unions active in the health sector, associations o fprivate health institutions, hospitals and insurance companies). A fourth and final sub-component will focus mostly on population health programs, namely maternal and child health, tobacco control, NCDs, etc., to help Turkey reach the related MDGs. The scope and nature o f the activities will include technical assistance for in-service training, licensing and institutionalizationo f family medicine; design o f a capitation-based reimbursement scheme; and possibly low interest loans to prospective family physicians to set up and refurbishtheir practice settings. The latter may include capital investmentto upgrade family practitioners' offices and equipment, hardware and software procurement for cost accounting and health information network requirements. Because o f the nature o f the reform, pilot sub-projects will be carried out to test the various models to ensure that the new set-up inthe provision and financing o f health care services, i.e., family medicine, hospital autonomy, and referral system, i s functionally integrated, including the proposed infostructure. This component will be carried out by the MOH. C.l. Introducing Family Medicine for Primary Health Care (Base Cost o f 9.98 million). This sub-component will support the design and development o f a family medicine based primary health care organization, including definition o f task profiles for family physicians, piloting the model in a few cities; and identifying resource needs for full-scale implementation. Such a model entails family physicians working intheir private settings and beingpaid on a capitation basis. It is hoped that the model would streamline patient referral thus leading to more appropriate care, reduced patient load inhospitals and elimination o f bottlenecks inthe referral hierarchy. Such an organizational change require financial and technical support in both the design and implementation phases and could include, on the formal training side, review of curriculum, certification standards and institutionalizationo f family medicine and, on the organization side, legal and regulatory framework for contracting out and change in the mode o f payment, definition of the standards in terms o f optimal number o f familiedpatients on family doctors' lists, services which need to be paid on a fee-for-service basis to ensure total coverage (e.g., immunization, ante-natal care, etc.), pricing o f per capita based payment, and possibly low interest loans to prospective family physicians to set up and refurbishtheir practice settings. It will finance technical assistance for system design, training of physicians in pilot areas, actual piloting, andpublic informationcampaign. 36  C.2. Autonomization o f Public Hospitals (Base Cost of 2.89 million). This sub-componentwill support development of a autonomous hospital model; assessment of the current financial and management capacity o f the public hospitals; development o f accounting and performance monitoring models; training of managerial cadre; projection o f future resource needs; and development o f a financing plan. This sub-component will mainly finance consultant services and local and foreign training. C.3. Developing an Effective Referral System (Base Cost o f 0.29 million). This sub- component will support the design and development o f a registration system for referral and counter-referral; identificationo f the guidelines for patient referral andthe incentive mechanisms for compliance. It will also determine the roles and responsibilities of the family physicians and assess their training needs. It will finance consultant services andtraining activities. C.4. Strengthening Population Health (Base Cost o f 2.50 million). This sub-component will support assessment of health and service needs and the resources required to meet them; establishment o f a small grant program for community-based initiatives; strengthen the disease surveillance system; and carry out innovative school- and community-based child health and tobacco control initiatives. It will finance consultant services for needs assessment and surveillance system setup, a small grants program and its public awareness campaign, and training activities. Project Component D - Strengthening Human Resources Capacity (Base Cost of 8.72 million) This component aims at strengtheningthe competencies o f future family practitioners and other allied health professionals, including healthcare managers. It will also support the re-activation o f the school o f public health which will act as an advisory and training institutionto MOH, and fulfill the functions of training, research and consultancy covering the topics of public health, health policies and strategies, health services management and health financing and economics. This component will beimplementedbythe MOHandthe MOLSS. D.l. Health and Social Security HumanResources Policy and Planning (Base Cost of 1.30 million). This sub-component will support establishment o f an interdepartmental working group; technical work for long term human resources needs projections and identification o f training needs and other development needs. Itwill mainly finance technical assistanceto carry out these activities. D.2. Strengthening the School o f Public Health (Base Cost of 7.42 million). This sub- component will support the development o f the capacity o f the SPH to conduct training courses inthe field of health management and administration, health economics and financing, rational use of drugs, flagship programs, epidemiological intelligence service and population health; establishment o f a training facility and library within the School o f Public Health. It will finance procurement of equipment, librarymaterial, consultant services for curriculum development and trainingmodules for eachdiscipline and training activities. 37  Project Component E - Building Infostructure for Health and Social Security (Base Cost of 15.13 million) This component aims at building and expanding the information platform, network and user endpoints for all o f the four social security agencies. DuringPhase I, scope and nature o f the the activities will encompassdesign, development and piloting o f the "infostructure", and training of cadres. The pilotingof the "infostructure" will be alignedwith the piloting o f the sub-projects in Component C to ensure a fully integrated system. E.l. Buildingthe HealthInformation System (Base Cost of 6.71 million). This sub-component will support the development of data architecture andplatform; system design; development and pilot testing o f software; and assessment o f training needs. Procurement o f all IT equipment will be carried out inPhase 11. The sub-component will finance MOH's limitedequipment needs for pilot testing, consultant services for system and software design and local and foreign training. E.2. Buildingthe Social Security Information System (Base Cost of 8.42 million). This sub- component will support the development of data architecture and platform; system design; development and pilot testing of software; and assessmento f training andresource needs for the social security system. Procurement o f all IT equipmentwill be carried out inPhase11. The sub- component will finance MOLSS's limited equipment needs for pilot testing, consultant services for system and software design, development and local and foreign training. Project Component F- Project Management (Base Cost of 2.60 million). This component will support the establishment and functioning o f the PMSU and the two PIUS, technical and oversight work o fthe IAWGandIASC and the hiringo f a Project Management Consulting Firm. It will finance consultant services, workshops, publication and dissemination activities and training o fprojectmanagement staff. 38  Annex 5: Project Costs TURKEY: Health Transition Project Project Cost Summary by Component ( Million) Component and/or Activity Local Foreign Total A. Restructuringthe MOHfor Effective Stewardship 1. Restructuring o fthe MOH 2.43 0.70 3.12 2. Establishment of the NPMDA 0.59 1.55 2.14 3. Quality Assurance and Accreditation of Health Facilities 1.54 1.06 2.59 4. EstablishingMonitoringand Evaluation Capacity 0.71 1.03 1.74 B. BuildingCapacity ofthe HealthInsuranceand 0.82 2.18 3.00 Social Security Institutions C. Reorganizingthe Delivery of Healthcare Services 1. IntroducingFamily Medicine for Primary Health Care 9.09 0.89 9.98 2. Autonomization o fPublic Hospitals 2.48 0.41 2.89 3. Development of an Effective Referral System 0.13 0.17 0.29 4. Strengthening PopulationHealth 2.10 0.40 2.50 D. Strengthening HumanResourcesCapacity 1. Health and Social Security Human Resources 0.64 0.66 1.30 Policy andPlanning 2. Strengthening the School o fPublic Health 4.33 3.09 7.42 E. BuildingInfostructure for Healthand Social Security 1. Buildingthe HealthInformationSystem 3.05 3.66 6.71 2. Buildingthe Social Security Information System 4.44 3.98 8.42 F. ProjectManagement 1.63 0.97 2.60 Total Baseline Cost 33.95 20.75 54.70 Physical Contingencies 3.14 2.05 5.19 Price Contingencies 0.57 0.30 0.88 Total Project Costs' 37.66 23.10 60.76 Front-endFee 0.49 0.49 Total Cost to be Financed 37.67 23.59 61.26 (Totals may not add-up due to rounding errors.) 'Identifiable taxes and duties are 6.78 million, andthe total project cost, including taxes andthe front-end fee, i s 61.26 million. The share oftaxes inthe project cost is estimated at 11%. 39  Annex 6: ImplementationArrangements TURKEY: HealthTransitionProject The program will be implemented jointly by the Ministry of Health and the Ministry of Labor and Social Security. The existing Inter Agency Steering Committee (IASC) will remain in force, and will be responsible for project oversight, inter-agency coordination at the national level and overall performance. The IASC will be chaired by a designate of the MOH and will be composed o f six senior officials, one representative from each SPO and the Treasury, and two from each MOH and MOLSS, the key implementing agencies involvedinthe project. The IASC will also be responsible for ensuring the achievement o f project goals, and review of project progress in line with the objectives of the PTH. The IASC should meet at least four times a year duringproject implementation. In addition, a National Advisory Board (NAB) will be set up from nationally reputable academidexperts and will include no more than seven members. The NAB will be chaired by the Minister of Health, andwill meet 2-3 times a year on matters related to MOH's own Program for Transformation in Health and its linkages with the HTP (TORs to be defined). Technical Working Groups (TWGs) will address technical issues such as preparation of TORs, review of proposals and technical advice and assistance to the IASC and the Project Manager. Each TWG will be composed of up to five experts, either from Ministry staff, or from outside, as needed (TORSto be defined). A ProjectManagementSupportUnit (PMSU) headedbya ProjectManagerwith appropriate qualifications and experience will be jointly appointed by the MOH and the MOLSS. The P M S Uwill be located inthe MOH, andwill have the overall fiduciary responsibilities for project implementation. The P M S U will be accountable to the IASC inproject management with TORs satisfactory to the Bank. Besides the Project Manager, the P M S U will comprise: (i) a FinancialManagementSub-unit, composed of three MOH staff, a financial management coordinator, with overall oversight on all financial management activities, an accountant, and a disbursement officer; (ii) two procurement specialists, a civil servant ProcurementCoordinator, with oversight on all procurement inboth ministries, and responsible for overall project procurement, and a consultant Procurement Specialist; (iii) two IT specialists, one I T integrator, in charge of ensuring harmonization between the two MOH infostructure development and piloting, and an IT assistant (both consultants, TORs to be defined); (iv) a Monitoring and Evaluation Officer, to be solely in charge of all aspects of project's monitoring and evaluation (TOR to be defined); (v) two translators; (vi) two administrative officers; and (vii) two team assistants. A Project Implementation Unit (PIU) will be established by each Ministry and will be responsible for procurement, disbursement, and accounting for ministerial level activities. Each PTU will have five staff, a Project Officer, a Procurement Officer, a Financial Management Officer and two team assistants, all civil servants. Each PIU will coordinate its fiduciary hnctions with the respective P M S Uprocurement and financial management coordinators. 40  An Inter Agency Working Group (IAWG), composed o f six technical staff from both Ministries will be appointed for full time technical support to Project Manager. The IAWG will be responsible for the preparation o f workplan, timing of activities, TORS,etc., in coordination with the focal points in the TWGs, as appropriate, and with technical support from the ManagementConsultantFirm(TOR to be defined) to be hiredunderthe project. ProjectManagementOrganizationalChart r---------- -----------I 1I I I ProjectOfficer ProcurementOfficer FinanceOfficer \ '. Legend: Coordination 41  Annex 7: FinancialManagementandDisbursementArrangements TURKEY: HealthTransitionProject ProjectFinancialManagement Summary of Financial ManagementArrangements The table below summarizes the findings andobservations o fthe assessment o fthe adequacy and readiness o f the project financial management arrangements at Board (please see the detailed report on file). Insummary, the current financial managementarrangements for the project meet the minimum Bank requirements. An Action Plan to bring the arrangements that were not fully satisfactory to the Bankhas also been agreedwith the PMSU. 30,2004. OVERALLFMRATING Satisfactory Country Issues A Country Financial Accountability Assessment (CFAA) for Turkey was carried out in 2001. The CFAA report identifiedmajor weaknesses inthe Turkishfinancial accountability, inboththe public and the private sector. The CFAA concludes that to ensure that Bank funds are used for their intendedpurposesring-fenced financial management arrangementsare more appropriate for the implementation o f Bank-financed investment projects rather than relying upon government systems. InDecember 2003, the National Assembly enactedthe public financialmanagement and control law which establishesthe legal framework for harmonizingand modernizingbudgetary practices across all government agencies. It will reduce fragmentation and provide for a more comprehensive presentation of the budget. The law which will come to force in January 2005 will also allow for future decentralization offinancial controlto spendingagencies. There has also been an initiative to introduce modified accrual accounting in compliance with GFS requirements. However this took more time to complete than initially envisaged. Based in 42  part on the experiences fkom the pilots, the revised timetable for the accounting reform i s as follows: (i) introduce modified accrual accounting in consolidated budget entities in 2004; (ii) begin introduction of the full accrual basis in entities outside the consolidated budget in 2004; and (iii)introduce full accrual accounting for consolidated budget entities by 2007. The government accounting standards board to be established through the PFMC law will be responsible for transforming the framework standards included in the accounting regulation into full-fledged accounting standardsover time. Audits of most Bank-financed projects in Turkey are camed out by the Treasury Controllers (TCs). R I S KANALYSIS Risk Comments INHERENTRISK Risk mitigation strategy The changes in national financial accounting rules and practices mentioned above are not expected to affect HTP's financial management, at least inthe short run. The integration o f the project accounting into Government's accounting will be considered at a macro level and will not be within the scope of HTP. Therefore inorder to compensate for the weaknesses identified inthe CFAA, the projectwill becontrolled andaccounted for by a separateProject Management andSupport Unit. Implementing Entity The project implementation will be carried out by the M O H and MOLSS. A PIU will be established by each Ministry, and will be responsible for daily implementation o f the project, 43  including procurement, disbursement of counterpart funds and accounting for ministerial level activities. Overall project coordination will be carried out by the PMSU. The PMSU will have the fiduciary responsibilities for overall project implementation and will be accountable to the IASC who will be responsible for project oversight, interagency coordination at the national level and overall performance. The PMSUwill be headedby a Project Manager with appropriate qualifications and experience. The PMSU will have the following sub-units: (i) Financial Management Sub-Unit (FMSU); staffed with a financial coordinator, an accountant and a disbursement officer, and will be responsible for all project financial management activities. The FMSUwill have oversight on all financial management activities carried out by their counterparts at the PIUS;(ii) Procurement Sub-Unit (PSU) will have oversight on all procurement activities in both ministries and be responsible for overall project procurement; (iii) Monitoring and Evaluation Sub-Unit (MESU) will be appointed to be solely incharge o f all aspects o fproject's monitoringand evaluation. Funds Flow There will be one Special Account for the project at the Central Bank o f Turkey. All payments to the contractors, suppliers and consultants will be made from this Special Account with the authorization o f the Project Manager and the Financial Coordinator o f the FMSUbased on the payment orders o f the implementingministries. Payments will be made directly from the loan account for amounts over 20% o fthe authorized special account allocation. Usingthe project funds (both Bank financed andcounterpart financed) depends onhavingyearly allocations in the general government budget. These funds could be used only after they are made available by the Ministryo f Finance. The responsibility for ensuring that sufficient funds are provided in the institutions budget belongs to each ministry. The payments for the counterpart finds will be made directly bythe MOF's payment office at the implementing entity. The FMSUwill get a copy of the payment document relating to the counterpart finds so that they are includedanddocumented inthe overall project accounting. The PMSU could authorize the payment from the special account only after the approval of the MOF's Payment Office at the spending institution. The financial officers at the PIUs will be responsible for obtainingthe approval o f the MOF Payment Office at their respective ministries. They will then send a payment order to the PMSU to initiate the payment from the special account. The PMSU will have the overall responsibility for the management of the special account and will make the required payment from the special account based on the approval of the spending institution and the MOF payment office. The PIUs will be given a copy o f the payment documents and the PMSUwill make the required accounting entries into the financial management system. There i s already an allocation o f US$ 2 million and o f US$ 1 million for the HTP inthe 2004 budgetsofthe M O H andthe MOLSS, respectively. 44  The PMSU under the direct responsibility o f the IASC will work as a specialized organizational unit of MOH and will act as a service provider to the implementingentities. The Financial Management Sub Unit o f the PMSU will have a Financial Coordinator, a Disbursement Officer andan Accountant. The TORSfor these positions are attached to the assessmentreport. Given the fact that there already is a Project Coordination Unit at the MOH for the on-going Health I1project, the PMSU will operate inthe same premises, and benefit from the roll-over of the fiduciary system and procedures into its own management. As the current P C U staff do not have the requiredqualifications and the experience needed to assume the fiduciary responsibility under the HTP, they would have to receive training on World Bank financial management procedures. Moreover, a Financial Officer needs to be assigned on a full time basis. Accounting Policies and Procedures The project accounting will be maintained separately within the PMSU and will be on a cash basis. The Health I1 PCU has a computerized Financial Management Information System (FMIS) capable of recording project transactions by project components, disbursement categories and sources o f funds. Different modules within the FMIS could be used for accounting for more than one project, with some minor software updates. The PMSUhas hireda short-term consultant to ensure that all financial and accounting aspects of HTP are satisfactorily administered. The consultant has developed the Chart o f Accounts (COAs) suitable for HTP and will install the COAs into the current computerized financial management system by April 30,2004. The system willalso generate the quarterly FMRs. The consultant has prepared the draft Financial Management Manual for the project. The Manual includes: (a) the financial management system o f the project including the accounting and auditing policies; (b) the role o f the financial management system in the project implementation; (c) the accounting arrangements for the project, including the format and contents o fthe project reporting; (d) the auditing arrangements; and (e) budgeting andplanning. Internal Audit The newly enacted Public Financial Management Law (PFMC) requires establishment o f an intemal control unit in each ministry. The internal control unit in each ministry will be established after an Internal Control Coordination Board is established and designated internal controllers are certified by the Board. These articles o f PFMC become effective on January 1, 2005. However, at present there is not an intemal control department which carries regular audits o f the departments in either Ministry and therefore no reliance will be placed on intemal audit . 45  Reporting and Monitoring The PMSU will maintain records and ensure appropriate accounting for the hnds provided. Financial statements for the project will be prepared by the PMSU. The Financial Monitoring Reports (FMRs) will be prepared quarterly, and will be submitted to the Bank no later than 45 days after the end o f the quarterly period. The FMRswill be submittedwith a cover letter explaining the activities ofthe quarter andwill include the following tables: Statement o f Sources andUses ofFundsby categories; Statement o f Sources andUses ofFundsby Project Components; Special Account Statement; A detailed schedule for tracking disbursements against specific consultancy contracts. The data to be included inthis report will be agreed during negotiations. It is expected that the monitoring and evaluation department o f the PMSU will be responsible for the preparation o fthis report andthe PMSUwill provide the requiredfinancial data; and w Procurement reports. It i s expectedthat the Procurement department o f the PMSUwill be responsible for the preparation o f procurement reports and the FMSU will provide the requiredfinancial data. The financial accounting software will be capable of producing the financial reports of the FMRs. The first draft financial reports using dummy data, satisfactory to the Bank will be preparedbythe PMSUby April 30,2004. Information Systems The existing accounting software that i s used successfully by other PIUs in Turkey. Due to staffing problems, the PCU has not been able to use the software satisfactorily for the last two years. Currently the staff in the financial management department o f the PCU are receiving training on the software. The same software will be used for HTP and the consultant who is responsible for the customization o f the software for HTP will also provide continuedtraining to the financial management staff. It i s also required that the contract with the consultant will cover maintenanceo f the systemfor at least one year after customization is completed. Strengths and Weaknesses The main strength of the project financial management system is the centralization of all payments and their accounting at the PMSU in the project design. This will reduce the main weakness of the project which is having for the first time a new implementingagency, MOLSS, with no prior history of Bank financing, and establishing a PIU therein with no previous experienceinBank procedures. 46  Action Plan At present, the financial management arrangements for the project satisfy the Bank's minimum requirements. The following action plan i s proposed to address the issues that are not yet completed.: Action Deadline 1. Consultant withTOR satisfactory to the Bankwill be Done hired for setting up a financial managementsystemat the PMSU. 2. The current financial management software will be April 30,2004 customized for HTP 3. Draft FMRswill bereceived from the financial April 30,2004 management software 4. A full time financialperson will start working at the Done Supervision Plan During project implementation, the Bank will supervise the project's financial management arrangements as follows: (i) Project's quarterly financial management reports as well as review its annual audited financial statements and auditor's management letter; and (ii)during supervision missions, review the project's financial managementanddisbursement arrangements to ensure compliance with the Bank's minimum requirements. As required, a Bank-accredited FinancialManagement Specialist will assist inthe supervision process. B. Audit Annual project financial statements for the project will be audited bythe Treasury Controllers in accordancewith International Standardson Auditing (ISA) and under TOR that i s cleared bythe Bank. C.Disbursement Arrangements The loanproceedswillbedisbursed over aperiodofthree years, under the Bank's traditional procedures including SOEs, direct payments and special commitments. Becauseo fthe uniquenature ofthe Pilot sub-projects, full documentation will be required for all disbursementunderthis disbursementcategory. Table 6 sets forth the Categories o f items to be financed out o fthe proceeds o fthe loan, the allocation o f amount of loanto eachcategory andthe percentageo f expenditures for items so to be financed ineachcategory. 47  Table 6 Allocationof Loan Proceeds (EURO) Amount ofthe Loan Category Allocated YOofExpendituresto beFinanced (ExpressedinEURO) (1) Goods (a) under Parts A, B, C, D.1, E 2,050,000 100%foreign expenditures, 100% of andF ofthe Project local expenditures(ex-factory cost), (b)underPartD.2 350,000 and 85% of localexpenditures for other itemsprocuredlocally (2) Consultant Services 23,750,000 78% (3) Training 15,650,000 100% (4) PopulationHealthGrants 1,630,000 100%of amount disbursed underPartC.4 ofthe Project (5) Pilotsub-projectsunderPart 700,000 80% C.l, 2,3, andPartE ofthe project (6)IncrementalOperatingCosts (a) under PartsA, B, andFo f 500,000 80% the Project (b) underPartD.2 ofthe 160,000 50% Project (7) Fee 494,000 (8)Unallocated 4,126,000 TOTAL 49.400.000 D.SpecialAccount The GOTwill open and maintain a Special Account inEuro at the Central Bank of Turkey. The Special Account will be used following procedures to be agreed with the Bank, andwill have an authorized allocation of 4.0 million. The Project Coordinator and the Financial Manager will be authorized to sign the withdrawal applications, with two signatures required. At the start of the project, the initial deposit will be limited to 42 2.0 million, and the remaining portions o f the authorized allocations will be requested only after cumulative disbursements from the loan reach a level of 10.0 million. The minimum application size for payments directly from the Loan Account for issuance o f Special Commitments is 20% of the Special Account authorized allocation. 48  Applications for replenishment o f the SA will be submitted to the Bank on a monthly basis, or when the balance o f the SA is equal to about half o f the initial deposit or the authorized allocation, whichever comes first, and will include a reconciled bank statement as well as other appropriate supporting documents. Use of Statements o f Expenditure (SOEs): the disbursements will be made against SOE for: (i) goods costing less than US$ 100,000 equivalent per contract, except the first contract under IS andNS; (ii) consulting contracts with firms, costing less than US$ 200,000 equivalent each; (iii) consulting contracts with individual, costing less than US$ 50,000 equivalent each; (iv) training, population health grants and incremental operating expenses, costing less than US$ 100,000 equivalent each. Full documentation in support o f SOEs shall be retained by the PMU for at least one year after the Bank has received the audit report for the fiscal year in which the last withdrawal from the Loan Account was made. This information shall be made available for review during supervision by Bank staff and for annual audits which will be required to specifically comment on the propriety o f SOE disbursements and the quality of the associated record-keeping. 49  Annex 8: Procurement TURKEY: HealthTransition Project Procurement Procurement o f goods and technical services will be done in accordance with World Bank Guidelines: Procurement under the IBRD Loans and IDA Credits (issued in January 1995, revised January and August 1996, September 1997, January 1999). Consulting Services, technical assistance and training would be procured in accordance with the Guidelines - Selection and Employment of Consultants by World Bank Borrowers, January 1997, revised September 1997, January 1999, and May 2002. The Bank's Standard Bidding Documents, Request for Proposals and Forms o f Consultants' Contract will be used. A General Procurement Notice (GPN) will be published inthe U.N.Development Business inMay 2004. The PMSU will have the fiduciary procurement responsibilities including monitoring, supervision and reporting. Aside from the Project Manager and Financial Coordinator, a Procurement Coordinator, together with a Procurement Officer, will oversee all procurement in both ministries. Each of the PIUs established inthe ministries will have their own procurement officer who will coordinate the fiduciary functions with the PMSU's procurement coordinator. These PIUS' procurement officers and the PMSU procurement coordinator will have TORS satisfactory to the Bank. The minimum TOR requirements for the procurement consultant will be "to be familiar and experienced with World Bank procurement guidelines andprocedures, and procurement under internationally financed projects". The civil servants assigned for procurement in the implementing agencies will be sent to a training program, preferably to a program conducted by the International Labor Office (ILO) in Turin, Italy, according to their needs for further development o f procurement knowledge and qualifications to ensure that all those involved in project implementation become familiar with procurement procedures andrequirements under Bank-financed projects. Ingeneral the PrUswill havethe followingresponsibilities: implementationo f the respective project components; implementationmonitoring, including compliance with the relevant Bankpolicies, and evaluation; developments o f Terms of Reference for the activities under their jurisdiction; preparationo fbiddingdocuments and contracts for works, goods andconsultancy services; evaluation of bids; signingo fthe contracts; monitoring andmanagement o f contracts certification and/or commissioning o f delivered products; and making payments to the contractors from their respective SA andproject accounts. 50  Thresholds The following thresholds are recommended. The aggregate amounts for each procurement methoddiscussedbelow are showninthe footnotes to Table A: (i)Goods and Equipment: Goods and equipment costing US$lOO,OOO and more will be procured through ICB. Goods estimated to cost less than US$lOO,OOO each may be procured through international shopping on the basis of three written quotations obtained from at least two different countries, or through IAPSO of the United Nations Development Program. Small contracts for supplies and minor equipment such as, but not limited to, fumiture, locally manufactured IT hardware and software, stationeries, printingo f public campaign materials and similar locallymanufactured or available goods estimated to cost less thanUS$50,000 eachmay be procured under national shopping on the basis of three written price quotations obtained from local suppliers. In the procurement o f IT hardware and software by IS or NS, when soliciting bids, the firms operating in Turkey registered to the Bank's Web site should be solicited in addition to the other available firms. The procurement o f software licenses andmedicalreference materials may be conducted under direct contracting. The procedures set forth inparagraphs (a) through (e) of Article 3.7 to the Guidelinesshall apply. (ii)CivilWorks :There is no civil works inthe context ofthe project. (iii)Consultant Services, TA and Training: Consultant's services will be selected in accordance with the Bank Guidelines issued in January 1997 and revised in September 1997, January 1999, and May 2002, and for this project, will include Quality and Cost Based Selections (QCBS), Consultant Qualifications (CQ), Least Cost Selection (LCS), and Individual Consultants (IC). QCBS selection over US$200,000 will be advertised inDevelopment Business on-line version DG-market (Gateway) and inlocalmedia (one newspaper o f national circulation, or the official gazette, and/or electronic portal o f free access) from which a short list of six firms will be drawn. For contracts estimated to cost less than US$200,000, short lists may be based solely on national firms unless international firms expressed interest. Assignments o f a standard or routine nature where well established practices exist will be procured following the LCS method. Contracts estimated at less than US$lOO,OOO each for technical assistance, preparation and review o f concepts notes, legal advice, study tours, quality control, publicity campaigns and similar activities agreedby the Bank will beprocured following the CQ. Individual consultants will be selected in accordance with Part V of the Consultants Guidelines. Training for the PMSUand PIU staff will be conducted in accordance with a biannual training program that the PMSUandPIU will submit to the Bank for its agreementbefore implementation. (iv) Incremental Operating Costs: The Loan will finance the incremental operations costs of the PMSU, the PIUs and those incurred by the School o f Public Health, the National Advisory Board and the Health Insurance Fund. These will be incurred in accordance with an annual budget that the PMSU and the PIUs will prepare and submit to the Bank for its approval before any expenditures are incurred. The operating costs o f the PMSU and PWs will cover office equipment and supplies, utilities, communication, maintenance o f equipment at PMSU and PIU offices, the cost o f advertisement for procurement under the Project, travel expenses, accommodation and per diem during field trips of the above-listed agencies, workshops for 51  project launch and implementation, and subscription fees to international institutions; provided, however, that such expenses shall have been previously budgeted in the MOH's and MOLSS's annual budget. Prior Review The following prior review requirements would be applicable: Goods (a) All ICB packages. (b) First IS, N S packagesunder eachcomponent ofthe Project. (c) Each contract to be procured on the basis of direct contracting will be processed as follows: (i) totheexecutionofthecontract,theBorrowershallprovidetotheBankacopyofthe prior specifications and the draft contract for its approval; (ii) the contract shall be awarded only after the Bank's approval shall have been given. Consulting Services (c) Consulting Firms: For each contract estimated to cost $200,000 or more, all TORs, draft RFPs, short lists, technical and financial evaluation reports, and negotiated draft contracts will be submitted to the World Bank for itsprior review. (d) Individual Consultants: All TORs, consultant's qualifications and experience, and draft contracts, for consulting assignments above US$50,000 each. Post Review All contracts not subject to the Bank's prior review would be subject to ex-post review, on a selective basis. One out o f five contracts for goods, works, technical services and consulting services would be subject to ex-post review. Supervision missions would include a procurement specialist especially in the first year, whose main responsibility would be to conduct ex-post reviewso fthe procurement process anddocumentation, andprovide his or her findings. 52  Table A: Project Costs by Procurement Arrangements' ( Million) Category ICB NCB Others' N.B.F. Total 1. Goods 2.06 0.62 2.68 (2.01) (0.59) (2.60) 2. Services 33.62 0.09 33.71 (26.06) (26.06) 3. Training 17.16 17.16 (17.16) (17.16) 4. PopulationHealthGrants 1.63 1.63 (1.63) (1.63) 5. Pilot sub-projects 0.91 0.91 (0.73) (0.73) 6. RecurrentCost 1.04 3.63 4.67 (0.73) (0.73) Total 2.06 54.98 3.72 60.76 (2.01) (46.89) (48.91) Front-end Fee (0.49) Loan Total (49.40) '`I Figures in parentheses are the amounts to befinanced by the Bank Loan. All costs include contingencies. Includes goods to beprocured through shopping, consulting services, services of contracted staff of theproject management ofice, training, technical assistance services, and incremental operating costs. Table B: Thresholds for Procurement Methods and Prior Review' Contract Value Contracts Subject to Threshold Procurement Prior Review Expenditure Category (US$ thousands) Method (US$ millions) 1.Works NIA NIA N/A 2. Goods >or equal to $100,000 ICB 2.47 <$100,000 I S 0.30 <$50,000 N S 0.50 <$100,000 DC 0.42 3. Services >or equalto $200,000 QCBS 41.23 <$200.000 LCS 0.29 <$100.000 CQ 0.30 'Total value of contracts subject toprior review: US$45.51 million (63% of the totalproject cost). `Overall Procurement Risk Assessment: High `Frequency ofprocurement supervision missionsproposed: Once every 6 months (includes special procurement supervision for post-review/audits) 53  CapacityAssessment Capacity o f the ImplementingAgencies inProcurement and Technical Assistance requirements The MOH - PrcT will be responsible for implementingthe project components A, C, D.l, 0.2 and E.l. MOLSS-PIU will be responsible for implementing the project components B, D.l and E.2. The MOLSS has no experience inWorld Bankprocurement. Although the MOHhas been exposed to the World Bank procedures during the implementation o f the First Health and Second Health Projects; the procurement performance o f the Ministry was not fully satisfactory to the Bank. Bothministries are considered limited concerning Bank's procurement procedures. It has been agreed that a Management Consultant Firm will be engaged to assist and support the civil servants working for the PIUs and the PMSU. There exists a concern in launching the goods and consultant contracts until the supporting consultant firm employed after the loan effectiveness which is estimated to take six to nine months. It is suggested to employ a procurement specialist and an FMS for the P M S U and PIUs during this transition period in order to support the public officers until the consultant firm is in place. The civil servants to be assigned to the P M S U and PIUs should have proficiency in English language, and be trained in World Bank procurement procedures particularly for goods and consultant services. The P M S U and the two PIUs will: (i)appoint one procurement officer for each, with suitable educational background and experience in procurement and familiarity with World Bank procurement guidelines before loan effectiveness; (ii) aworkshopwiththeBankforallcivilservantsinvolvedinprojectimplementation. launch At the workshop, adequate time wouldbe spent onprocurement training, the procurement book would be discussed and explained, and a half-day session would be held for those responsible for procurement decision making under this project. Immediately after Board approval, the Bank staff will prepare a procurement book containing all procurement related documents, including Standard BiddingDocuments, both inhard and soft copies, and send it to the PMSU. The contents o f the procurement book will be discussed during the project launch workshop; and (iii)establish a computerized procurement monitoring system within six months of loan effectiveness. Country Procurement Assessment Report or Country Procurement Strategy Paper status: CountryProcurement Assessment Report dated June 2001. Are the bidding documents for the procurement actions o f the first year ready by negotiations? No. Training, Informationand Development on Procurement Estimateddate o fProject Launch Workshop: June 2004 Estimated date o f publicationo f General ProcurementNotice: May2004 Indicate ifthere i s procurement subject to mandatory SPN inDevelopmentBusiness: YES 54  Domestic Preference for Goods: Yes Domestic Preference for Works: N/A Retroactive financing: No Advanceprocurement: No Explain briefly the Procurement Monitoring System: The PMSU and PIUs will establish a computerizedprocurement monitoring system. Co-financing: No Procurement Staffing Indicate name of Procurement Staff or Bank's staff part of Task Team responsible for the Procurement inthe Project: IbrahimSirer, Sr. Procurement Specialist (ECSPS). 55  Annex 9: Economicand FinancialAnalysis TURKEY: HealthTransitionProject Background As noted extensively in the main body o f the document (see, for example, Sections Al, B3, B4 and D2) and in Annexes 1 and 3, the HTP supports the health reform initiatives o f the Government o f Turkey as enunciated in the UAP and its sectoral spin-off, the Program for Transformation in Health. The UAP outlines the key policy issues in the health sector and targets all aspects o f health care and health systems, including financing, delivery, management and organization. The comerstones o f the UAP are the separation o f provision and financing o f health care so as to achieve a more efficient resource allocation and use; introduction o f universal social health insurance so as to ensure equity and access to health services; financial and administrative autonomy for public hospitals in order to improve efficiency and strengthen management; introduction o f family medicine so as to integrate delivery of health care and ensure continuity; and a special emphasis on maternal and child health. The goals o f the UAP are beingrealized through a series o f focused measures o fthe government inthese key areas, and the HTP is designed to support these measures in two phases spread over six years. Phase 1 o f the HTP will provide support for: (i) restructuring o f the MOH for effective stewardship; (ii) design o f family medicine as a model for the provision o f primary health care services; (iii) introduction of financial and managerial autonomy for public hospitals; (iv) establishment o f the UHIfund; and (v) design ofthe "infostructure" for the health and social security system. This phase is estimated to cost 49.40 million. Subject to the passage o f laws related to UHI, establishment o f all required social security agencies, infostructure for all social security agencies being tested, and the family medicine model being developed and tested, Phase 11o f HTP will be triggered, which will support full expansion o f family medicine, UHI, hospital autonomy and computerization o f information system for health and social security. The economic analysis o f Phase Io fthe HTP is presented below. EconomicAnalvsis Methodology Given the technical assistance and advisory support nature o f the activities in Phase I, conventional cost benefit analysis or cost effective analysis are not considered the appropriate tools for determining the economic rationale and need o f the proposed project. Further, even though the benefits o f the project can be qualitatively substantiated, it is difficult to assign a quantitative value, as such estimates as disability-adjusted-life-years (DALY) or quality- adjusted-life-years (QALY) cannot be determined without making very far-reaching assumptions. For all these reasons, we use the approach developed by Devarajan, Squire and Suthiwart-Narueput (DSS) and elaborated inHammer (1996), inwhich the economic rationale o f a health project i s determined on the basis of: (i)identifying a rationale for public involvement in the project; (ii)determining what would happen in the sector if the project were not implemented; (iii)identifying the fiscal impact o f the project; and (iv) acknowledge the fungibility o f resources and examine the incentives facing public servants. Accordingly, the 56  project components are briefly described below and are evaluated according to one or more of the above-mentioned criteria. ComponentA: Restructuring theMOHfor Effective Stewardship MOH and MOLSS betweenthem control most financing and provision o f health care inTurkey. They have facilities in the same towns and cities, conduct very similar kinds o f procedures, their personnel enjoy the same civil servant status, and they are both core government ministries. Yet there is almost no coordination among them. With insufficient demand for multiple providers that offer the same range of services, especially in the smaller cities and towns, the net result is that many hospitals are substantially underutilized, and investment made in buildings and equipment is underused. There is no doubt that both MOH and MOLSS have critical roles to play in the health care system in the country, given their experience, their existing investments and their respective influence inthe health sector. Yet, the present responsibilities and relationships, which result in much duplication and waste in the use of resources, are the least efficient of all possible configurations and need to be altered forthwith. It is widely agreed that improved stewardship and policy-making should be the key functions of MOH, botho fwhich are given relatively low priority at the moment. MOH is organized along specific vertical programs and specific service delivery functions inprimary and secondary care, and tends to be absorbed inrunningday-to-day curative services. As a result, it has neither developed the capacity to focus on policy making and priority setting for the health sector, nor does it leave itself enough resources and time to focus on quality monitoring and regulation, accreditation of institutions and licensing of professionals, insurance regulation and oversight and leading public health functions and epidemiological surveillance. Redefining the role and responsibilities of MOH and equipping it carry out these functions are important prerequisites for sustaining a broad-based health sector reform. In sum, this component has very strong justification for public involvement. If it were not implemented, the result would be absence of coordination between agencies and ministries, and absence of priority setting inplanning. The fiscal impact of this component is difficult to judge. And finally, while it is difficult to judge whether the public servants will have the appropriate incentives to effectively implement this measure, we do note that it is included inthe UAP and PTH, which is likely provide the necessary support for committed implementation. ComponentB: Building Capacity of the Health Insurance and Social Security Institutions Despite the well-documented inefficiencies on the production and delivery side of the existing health system in Turkey, government justification and rationale for continued and increased involvement in health financing are very strong. Besides the general theoretical appeal of a greater role for the government infinancing, the existing financial coverage for health in Turkey provides a particularly compelling case for scaling-up of public efforts to ensure universal coverage. At present, insurance coverage is provided through three social security institutions: SSK, Bagkur and Emekli Sandigi, and through the Green Card program for those who do not have the financial means to purchase health insurance through any of the above. Active civil servants andtheir dependents are funded directly from general revenues. Private health insurance 57  coverage in the country is small, reaching only about 500,000 people. This system o f insurance leaves many without any coverage, and with inadequate coverage for many of those who are nominally covered. Additionally, there are many who enjoy multiple sources o f coverage, either by design or by circumstances. Health insurance is also a strong determinant o f seeking care when ill,and those without any form o f financial protection are far less likely to seek care when illrelativetothosewhodohavesomeformoffinancialprotection. Notallthosewhoareillare able to get treatment for their illness; in particular, the poor are significantly more likely to not get treatment when illcompared to the non-poor. The result is that there are huge disparities in health outcomes, and the health status of Turkey's population remains poor, both in absolute terms as well as incomparison with other countries at same levels ofincome. An important first step toward providing financial coverage for health is the creation of a universal health insurance fund that would integrate all functions and premium collections related to health in the existing insurance agencies such as SSK, Bag-Kur and Emekli Sandigi. Inaddition, thehealthinsurancefundwouldalso combine allother financialflows offundinthe health sector, including budgetary support to MOH (except for public health care activities), financial outlays for the existing Green Card program, and health expenditures of civil servants; only annex budget flows to university hospitals will remain outside the health insurance fund. Based on the principles of solidarity and risk pooling, all citizens o f the country will be covered under health insurance, with the state making premium contributions on behalf of the indigent and others unable to do so on their own behalf. Insum, this component has very strong justification for public involvement. If it were not implemented, universal access to health services cannot be ensured. The fiscal impact of this component is likely to be adverse in the short-to-medium term, considering that the increased burden of insuring an estimated 22 million or so presently uninsured (ifthis estimate is, indeed, accurate) will be high, irrespective of the level and scale of the measures adopted. And finally, while it is difficult to judge whether the public servants will have the appropriate incentives to effectively implement this measure, we do note that it is included inthe UAP and PTH, which i s likely provide the necessary support for committed implementation. Component C: Reorganizing theDelivery of Healthcare Sewices (i)Introducing Family Medicine for Primary Health Care There is general agreement among policy makers that, in principle, primary care should be the basis of a well-designed and performance-focused health care system. Well-designed and functioning primary care system can contribute significantly to improving health and reduced humansuffering byreducing epidemiological risks of avoidable illnesses and premature deaths, and to alleviating poverty by minimizing lost production due to avoidable illnesses and premature deaths. In addition, an effective primary care system can prevent the health system from getting on to a high-cost trajectory in which enormous resources would be required for treating preventable illnesses. In practice, however, this is often not the case, simply because primary care is not organizationally situated to have power and control over other levels o f care. Inmany countries, 58  as inTurkey, specialists tend to occupy a senior position inthe hierarchy o f medical specialists, and primary care providers do not have the necessary standingto play a leading role inpatient care and in delivery of basic health services. Any reform in the delivery of primary care would have to start by improvingthe relative position o f primary care providers inboth the medical as well as the patient community. In other words, in reaching appropriate health services to the entire population in Turkey, primary care professionals would need to be given the necessary levers to steer patient treatment, either in home-care setting or in the hospital setting, so as to ensure integrationof the different health service delivery sectors. One such way is by adopting the concept and practice o f "family medicine". Family medicine physicians provide health services for the whole family, treating common illnesses across such medicine domains as internal medicine, gynecology, pediatrics, prevention and health propagation. Patients are provided with diagnostic services, laboratory services, and consultations, so that almost all services are provided under a "single-window" system. Family medicine brings the physician and members o f a family into closer and more personal contact, andredefines their relationship. The physician gets to know all members o fthe family and their healthconcerns, andplays an important role intheir health education, preventionof diseases, and generalbetterment o fhealth. A common characteristic of major non-communicable diseases is their multi-factorial etiology, and a few risk factors (smoking, dietary, obesity, sedentary lifestyles, excess alcohol consumption, hypertension, hypercholesterolemia, and diabetes) account for the bulk o f heart disease, stroke, chronic obstructive pulmonary disease, common cancers, and accidents. For this reason, population-based interventions that integrate action on risk factors for cardiovascular diseases (e.g. smoking, diet) can have beneficial effect in the reduction o f other non- communicable diseases (e.g. colon, lung cancers), and obtain economies in the cost o f health care delivery. Family based medicine, with its emphasis on health promotion, prevention and education, can provide the required integration of preventive efforts. Treatment in family practice i s based on complete and comprehensive diagnosis and not only depends on the immediate illness, but also on the general patient profile as well as on the general population profile. In sum, this component has very strong justification for public involvement. Existing inefficiencies in the delivery side o f the health system would likely continue if it were not implemented. As far as the fiscal impact o f this component is concemed, there i s potential for some savings. And finally, while it is difficult tojudge whether the public servants will have the appropriate incentives to effectively implement this measure, we do note that it is included inthe UAP andPTH, which is likelyprovidethe necessarysupport for committed implementation. (ii)Autonomization o fPublic Hospitals The hospital sector in Turkey suffers from much inefficiency, and although some gains have been achieved during the 1990s- average hospital occupancy rate increased from 53 percent in the mid-1980s to 60 percent in 2000, while the average length o f stay dropped from 6.7 days in 1985 to 5.9 days in2000 - a large number o f hospitals remain substantially underutilized. There are a large number o f facilities that are too small to allow for efficient operation and effective 59  provision o f care. The occupancy ratio o f M O H district hospitals (generally hospitals with below 50 beds in a district center) and o f M O H health center hospitals is particularly low and they have very long bed turn over interval, indicating that there is little justification for these small and rarely used hospitals. Many hospital managers lack the skills necessaryto effectively carry out their job, and neither are they given any incentives to strive for efficiency improvements at the facilities they manage. The absence o f administrative and financial autonomy, coupled with a budgeting system that largely ignores the actual amount o f services provided substantially prevents hospital managers from undertaking steps to achieve efficiency gains. Healthsystem reforms inTurkey need to focus on improving hospitalefficiency, andwhile some gains inefficiency can be brought about simplyby reducing the number o f hospital beds inmany provinces, further gains will come about only by improving efficiency inthe use o fresources and overall management and accountability. One way to achieve this i s by granting administrative and financial autonomy to all public hospitals. It i s neither feasible nor desirable to simply privatizepublic hospitals. ComponentD: Strengthening Human Resources Capacity The health care industry is one o f the largest employers in Turkey, and employs physicians, nurses, dentists, pharmacists, psychologists, health services administrators, therapists, laboratory and X-ray technicians, social workers, and other alliedhealth workers. Yet, there is no specific Human Resources Management Program in the health sector in Turkey, and there i s no consistent program of updating skills and training for new ones. Other problems include inappropriate distribution o f health workers, low ratios o f non-physician health workers to physicians, inadequate basic training o f the health workers for service, insufficient numbers o f teachers and academicians in the professional schools, inadequate supply o f training materials, low professional status o f non-physicianprofessionals, inadequate salaries, promotions unrelated to performance, lack o f incentives for working in rural areas and underserved areas, centralized health worker recruitment, inadequate staffing norms based on population and bed numbers rather than workload, outdated legislation on the responsibilities and authority o f health personnel, absence o f sufficient job descriptions, and inadequate coordinationand monitoring o f in-service training programs. These problems assume even more serious implicationsinview o f the widespread changes that the health sector reforms are likely to trigger, since both UAP and PTH will result in broad-spectrum structural changes, not only in health sector financing, management and organization, but also inthe delivery o f services and inthe interaction between patients andproviders. Inorder to improvethe capacity inthe health sector at all levels to provide the necessarysupport and meet the demands o fthe ongoing reforms, this component will support the development and strengthening o f a human resources policy to ensure that a flexible and responsive health workforce is inplace to carry the benefits o f the reform to the people. Inaddition, the School o f Public Health will be reinvigorated and strengthened to become a center o f excellence in advocacy andtraining andresearchinthe MOH. 60  In sum, this component has very strong justification for public involvement. If it were not implemented, the resulting disconnect between the training o f providers and demands o f the new system after transformation would likely result in widespread patient discontent. The fiscal impact o f this component i s difficult to judge. And finally, while it is difficult to judge whether the public servants will have the appropriate incentives to effectively implement this measure, we do note that it is included inthe UAPandPTH, which is likely provide the necessarysupport for committedimplementation. Component E: Building Infostructure for Health and Social Security The development of a comprehensive information system i s the key to better management, responsive policy makingand effective regulation. It will also enable the health insurance fund to better fulfill its purchasing and regulatory functions, and will link the network o f health providers to purchasers and appropriate regulatory institutions. This component will support the development o f an infostructure strategy, including the development o f necessary supporting legislation (related to mandatory exchange o f information, confidentiality, and privacy), and the essential integration tools. It will facilitate the development o f standards, regulations and other mechanisms to support the integration o f health information at all levels, so that common definitions and data structures are usedand necessaryinformationcan be exchanged. It will also support the development and creation o f a nationalhealth data center within M O H to collect and analyze key health information from all health providers and the health insurance fund. This development and integration o f the information system will support the policy making and analysis role o f the MOH, inadditionto synchronization and standardization o f informationfrom all other health sub-systems. The effective use of health information technology in all parts o f the health care sector will ensure that highquality, consistent andtimely information i s provided, both to support effective care and treatment as well as to inform management and decision- makingprocessesat all levels. Insum, this component hasvery strongjustification for public involvement. Ifnot implemented, policy-making would likely remain uninformed and patient management would likely be compromised. As far as the fiscal impact o f this component i s concemed, there is potential for some savings in the long term. And finally, while it i s difficult to judge whether the public servants will have the appropriate incentives to effectively implement this measure, we do note that it is included in the UAP and PTH, which i s likely provide the necessary support for committedimplementation. Evaluation To the extent possible, all o f the above components are evaluated against each o f the DSS criteria, andthe results are summarized inthe table below. We note that it i s difficult tojudge the fiscal impact o f Component A: Restructuring the MOH for Effective Stewardship; and Component D: Strengthening Human Resource Capacity. At the same time, we note that the fiscal impact of Component B: Building the Institutional Capacity of the Health Insurance Fund i s likely to be adverse in the short-to-medium term, considering that the increased burden o f insuringestimated22 million or so presentlyuninsured(ifthis estimate is, indeed, accurate) will be high, irrespective o f the level and scale o f the measures adopted. An exercise carried out by 61  the Bank in collaboration with M O H andMOLSS finds that the introduction o f UHIwill require additional state subventions of between 3,826 trillion TL and 6,462 trillion TL in 2002 prices, depending on which other reform measures are adopted and implemented along with UHI. The study concludes that final details pending, the introduction of UHI can be a fiscally viable proposition only if there are marked improvements on the revenue side o f the social security system inadditionto efficiency-enhancing reforms inthe health sector. Overall, the results o f the economic analysis show that the project makes sound economic sense, subject to the general caveats o f passage o f the necessary supporting legislation and sound implementation of all the project components. .-ija u a B - L m .n c) m L Component A: Restructuring the Very strong Absence o f coordination Difficult to MOHfor Effective justification for between agencies and judge, but Stewardship public ministries, and absence o f measure involvement priority setting in supportedby planning UAPandPTH B: Building Capacity Very strong Universalaccess will not Very high Difficult to of the Health Insurance justification for be ensured and adverse judge, but and Social Security public measure Institutions involvement supportedby UAPandPTH C: Reorganizing the Very strong Existing inefficiencies Potential Difficult to Delivery of Healthcare justification for likely to continue for savings judge, but Services public measure involvement supportedby UAPandPTH D: Strengthening Very strong Disconnect between Difficult to Human Resources justification for providers training and judge, but Capacity public demands o fthe new measure involvement system after supportedby transformation likely to UAPandPTH result inwidespread patient discontent E: Building Very strong Policy making likely to Potential Difficult to Infostructure for Health justification for remain uninformed; for savings judge, but and Social Security public patient management likely inthe long measure involvement to be compromised. term supportedby U A P and PTH 62  Annex 10: Safeguard Policy Issues TURKEY: HealthTransition Project Not Applicable 63  Annex 11:Project Preparation and Supervision TURKEY: HealthTransition Project Planned Actual PCNreview 09/22/2003 InitialPID to PIC 10/22/2003 InitialISDS to PIC 10/03/2003 Appraisal 03/15-26/2004 031'1 5-26/2004 Negotiations 04/7-9/2004 04/7-9/2004 Board/RVP approval 05/20/2004 Planneddate o f effectiveness 07/05/2004 Planned date o fmid-termreview 03/31/2006 Planned closing date 12/31/2007 Key institutions responsiblefor preparation of theproject: MinistryofHealth, Turkey, includingSchoolofPublicHealth, MOH MinistryofLabor andSocial Security, Turkey StatePlanning Organization, Turkey The Undersecretariat o f Treasury, Turkey Bank staff and consultants who worked on theproject included: Name Title Unit EnisBaris Sr. Public Health Specialist, Team Leader ECSHD MukeshChawla Sr. HumanDev. Economist ECSHD Antonio Lim Operations Officer ECSHD IbrahimAkcayoglu Operations Officer ECSHD Nicole Klingen Sr. HealthSpecialist MNSHD IbrahimSirer Sr. Procurement Specialist ECSPS Ayse Seda Aroymak Sr. Financial Management Specialist ECSPS DilekBarlas Senior Counsel LEGEC Rohit R. Mehta Senior Finance Officer LOAGl Jennifer Manghmang ProgramAssistant ECSHD SelmaKaraman ProgramAssistant ECCU6 Daniel Kress Peer Reviewer MNSHD Christian Baeza Peer Reviewer LCSHD Shiyan Chao Peer Reviewer AFTH1 Bankfunds expended to date onproject preparation: 1. Bankresources:US$ 504,9003 2. Trust funds: US$338,538 spent or committedout o f a US$800,000 PHRD grant 3. Total: US$ 843,438 Estimated Approval and Supervision costs: 1. Remaining costs to approval: US$25,000 2. Estimated annual supervision cost: US$ 100,000 Including preparationcosts incurred prior to change o f Government (US$ 162,300). 64  Annex 12: Documents in the Project File TURKEY: HealthTransition Project A. Draft Project Implementation Plan Project Implementation Plan, March 2004 B Bank Staff Assessments . Proposal for PHRD Grant (January 24,2003) PHRD Grant (TF051488) PCNPackage (September 5,2003) Minutes o f the PCNReviewMeeting (October 3,2003) Statement o fMissionObjectives Back-to-Office Reports, Aide Memoires andFollow-upLetters to the Government Summary o f comments from Peer Reviewers Country Assistance Strategy (CAS) (Report No. #26756-TU, Oct. 3,2003) Paper on Preparing for UniversalHealthInsurance inTurkey: Estimationo f CostsUnder Different Scenarios (January 2004) C. Others Social Assessment Study (2003) Report on the ConsensusBuildingConference (August 2003) Concept Note on HealthTransition Project (June 2003) MOH's Program for Transformation inHealth(June 2003) Draft Law on UniversalHealthInsurance (2003) Draft Law on Social Security Institutions (2003) Draft Law on Ministryo f HealthRestructuring (2003) Draft Framework Law on Public Administration (2003) 65  Annex 13: Statementof Loansand Credits TURKEY: HealthTransition Project Differencebetween expected and actual Original Amount in US%Millions disbursements Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev'd PO82801 2004 EXPFIN2 303.10 0.00 0.00 0.00 0.00 303.10 0.00 0.00 PO59872 2003 BASIC ED2 (APL #2) 300.00 0.00 0.00 0.00 0.00 293.00 118.58 0.00 PO70286 2002 ARIP 600.00 0.00 0.00 0.00 0.00 411.22 331.22 0.00 PO74408 2002 SRMP 500.00 0.00 0.00 0.00 0.00 382.55 157.66 0.00 PO69894 2001 PRIV SOC SUPPRT 250.00 0.00 0.00 0.00 0.00 159.28 122.78 0.00 PO44175 2000 BIODIV/NTRL RES MGMT (GEF) 0.00 0.00 0.00 8.19 0.00 5.86 3.37 0.00 PO68368 2000 MARMARA EARTHQUAKE EMG 505.00 0.00 0.00 0.00 0.00 300.13 299.93 52.70 RECON PO68792 2000 ERL 759.60 0.00 0.00 0.00 0.00 375.00 375.00 375.00 PO09073 1999 INDUSTRIAL TECH 155.00 0.00 0.00 0.00 0.00 55.12 55.12 0.00 PO09072 1998 PRIV OF IRRIGATION 20.00 0.00 0.00 0.00 0.00 1.82 1.82 1.82 PO48852 1998 NAT'L TRNSM GRID 270.00 0.00 0.00 0.00 27.79 185.93 213.72 -3.60 PO08985 1998 CESMEWS & SEWER 13.10 0.00 0.00 0.00 2.70 5.56 8.26 0.00 PO09076 1995 HEALTH 2 150.00 0.00 0.00 0.00 20.17 27.03 52.76 52.76 Total: 3,825.80 0.00 0.00 8.19 50.66 2,505.60 1,740.22 478.68 TURKEY Statement Of IFC's HeldandDisbursedPortfolio InMillions ofUS Dollars Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. 2001 TurkishPEF 0.00 10.00 0.00 0.00 0.00 1.26 0.00 0.00 1999 Unye Cement 14.59 0.00 0.00 0.00 14.59 0.00 0.00 0.00 1999 Uzel 9.48 0.00 0.00 5.69 9.48 0.00 0.00 5.69 Ol70171/98 Viking 8.18 0.00 0.00 0.00 8.18 0.00 0.00 0.00 1995 YalovaAcrylic 2.50 0.00 0.00 1.33 2.50 0.00 0.00 1.33 1997198 Yapi Kredi Lease 0.48 0.00 0.00 0.00 0.48 0.00 0.00 0.00 0 ALease 1.11 0.00 0.00 0.00 1.11 0.00 0.00 0.00 1998 Adana Cement 2.50 0.00 0.00 0.00 2.50 0.00 0.00 0.00 2001/03 Akbank 25.00 0.00 0.00 0.00 25.00 0.00 0.00 0.00 0198 Altematif Bank 1.11 0.00 5.00 0.00 1.11 0.00 5.00 0.00 1995196/01103 Arcelik 17.21 0.00 0.00 0.00 17.21 0.00 0.00 0.00 2000 Arcelik LG Klima 13.79 0.00 0.00 4.72 13.79 0.00 0.00 4.72 1994197102 Assan 25.00 0.00 0.00 0.00 25.00 0.00 0.00 0.00 66  Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. 2002 Atilim 6.50 0.00 0.00 0.00 5.49 0.00 0.00 0.00 2000 Banvit 15.00 5.00 0.00 0.00 15.00 5.00 0.00 0.00 0194196 BayindirbankA.S 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2002 Beko 29.08 0.00 0.00 29.08 29.08 0.00 0.00 29.08 2001 Bilgi 11.oo 0.00 0.00 0.00 11.oo 0.00 0.00 0.00 Borcelik 10.00 3.21 0.00 0.00 10.00 3.21 0.00 0.00 1994/95/96/97 1995196 CBS BoyaKimya 0.00 0.65 0.00 0.00 0.00 0.65 0.00 0.00 1994 CBS Holding 4.00 0.00 0.00 0.00 4.00 0.00 0.00 0.00 1996101 CBS Printas 0.00 0.01 0.00 0.00 0.00 0.01 0.00 0.00 1992 CayeliBakir 3.15 0.00 0.00 0.00 3.15 0.00 0.00 0.00 1990193102 Conrad 3.50 0.00 0.00 0.00 3.50 0.00 0.00 0.00 1997198 Demir Leasing 1.11 0.00 0.00 0.00 1.11 0.00 0.00 0.00 2002 EKS 12.16 0.00 0.00 0.00 12.16 0.00 0.00 0.00 1988193196 Elginkan 0.40 0.00 0.00 0.00 0.40 0.00 0.00 0.00 1995 Entek 21.25 0.00 0.00 14.91 21.25 0.00 0.00 14.91 1997198 FinansLeasing 1.11 0.00 0.00 0.00 1.11 0.00 0.00 0.00 0199 Finansbank 5.56 0.00 0.00 5.18 5.56 0.00 0.00 5.18 1994198100 GarantiLeasing 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1999 GumussuyuKap 4.00 0.00 3.25 0.00 4.00 0.00 3.25 0.00 2001 Gunkol 6.70 0.00 6.70 0.00 6.70 0.00 6.70 0.00 1998 IndoramaIplik 6.25 0.66 0.00 0.00 6.25 0.66 0.00 0.00 1998lOOlO2 IpekPaper 16.06 0.00 0.00 0.00 16.06 0.00 0.00 0.00 1990 KepezElektrik 6.48 0.00 0.00 0.00 6.48 0.00 0.00 0.00 0188190 Kiris 10.06 0.00 0.00 0.00 10.06 0.00 0.00 0.00 1990192 Koy-Tur 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1991 Kula 4.93 0.00 0.00 0.00 4.93 0.00 0.00 0.00 2003 MESAGroup 11.oo 0.00 0.00 0.00 5.50 0.00 0.00 0.00 1993196 Medya 0.00 0.00 4.99 0.00 0.00 0.00 4.99 0.00 2002 Milli Re 50.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1998102 Modem Karton 10.00 0.00 0.00 0.00 10.00 0.00 0.00 0.00 1991 NASCO 10.18 0.00 0.00 3.55 10.18 0.00 0.00 3.55 0198 Pasabahce 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1983194198 Pinar ET 6.29 0.00 0.00 0.00 6.29 0.00 0.00 0.00 1994100 Pinar SUT 16.09 0.00 0.00 0.00 12.82 0.00 0.00 0.00 1999 SAKoSa 19.95 0.00 0.00 14.43 19.95 0.00 0.00 14.43 0186190 Silkar Turizm 2.65 0.00 0.00 3.01 2.65 0.00 0.00 3.01 1993196lO2lO3 Sise Ve Cam 62.93 0.00 0.00 39.33 62.93 0.00 0.00 39.33 1998102 Soktas 3.50 0.00 0.00 0.00 3.50 0.00 0.00 0.00 1999 TEB Finansal 2.22 0.00 0.00 0.00 2.22 0.00 0.00 0.00 1979182/83/89/91/96/99Trakya Cam 0.00 1.18 0.00 0.00 0.00 1.18 0.00 0.00 1995199102 Turk EkonBank 20.00 0.00 15.00 0.00 20.00 0.00 15.00 0.00 Totalportfolio: 514.06 20.71 34.94 121.23 454.28 11.97 34.94 121.23 67  Approvals PendingCommitment FY Approval Company Loan Equity Quasi Partic 2001 Akbank 0.03 0.00 0.00 0.00 2004 Akbank BLoanInc 0.00 0.00 0.00 0.02 2003 Cayeli Expan2 0.02 0.00 0.00 0.00 2000 Erbakir 0.01 0.00 0.01 0.00 2002 Milli Reasurans 0.00 0.01 0.00 0.00 2004 Oyak Bank I1 0.05 0.00 0.00 0.00 2003 SisecamExp. 0.00 0.00 0.00 0.01 2002 TEB I11 0.00 0.00 0.00 0.05 Totalpendingcommitment: 0.11 0.01 0.01 0.08 68  Annex 14: Country at a Glance TURKEY: HealthTransition Project Europe 8 Lower- POVERTY and SOCIAL Central middle- Turkey Asia income Development diamond+ 2002 Population. mid-year(millions) 69.6 476 2,411 Lifeexpectancy GNIper capita (Atlas method, US$) 2600 2,so 1,390 GNI(Atlas method, US$ billions) 774.0 $030 3,352 - Average annual growth, 1996-02 Population (%) 17 0.1 20 Laborforce (%) 2.2 0.4 12 GNI Gross M o s t recent estimate (latest year available, 1996-02) per primary capita nroilment Poverty (% ofpopulation belownatlonalpo vertylifle) Urban population (%of totalpopulation) 67 63 49 Lifeexpectancyat birth (pars) 70 69 69 1 Infant mortaiity(per ~ooolivebirths) 33 25 30 Childmalnutrition (%of chiidrenunder5) 8 11 Access to improved water source Access to an improvedwatersource(%ofpopulation) 82 91 81 llliteracy(%ofpopulationage 159 14 3 13 Gross primaryenrollment (% of school-age population) xJl a 2 in 1 -Turkey Male xJ5 xJ3 in Lowr-middle-income groUP Female 96 XI1 lxJ ~ KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1982 1992 2001 2002 1 GDP (US$ blllionsj Economic ratios' 64.4 158.9 145.2 182.8 Gross domestic investmentiGDP 77.0 23.9 6.8 213 Exports of goods and servicesiGDP 119 14.4 33.7 28.8 Trade Gross domestic savingsiGDP 13.8 20.9 8.2 8.6 Gross national savingslGDP 18.5 24.4 20.7 20.7 T Currentaccount baianceiGDP -15 -0.6 2.3 -0.8 InterestpaynentsiGDP 18 2.0 3.6 3A Total debUGDP 30.6 35.6 78.4 719 Total debtservicelexports 29.4 32.1 44.0 49.0 Present value of debUGDP I I Presentvalue of debUexports I Indebtedness 1982-92 1992-02 2001 2002 2002-06 (average annualgrowth) GDP 5.1 2.8 -7.5 7.8 4.7 -Turkey -GDP.percapita. . . . 2.7 10 -9.0 6.1 3.6 c Lower-middle-incomegrouD STRUCTURE of the ECONOMY Is82 1992 Growth of investment and GDP (%) (%ofGDP) Agriculture 227 253 P 8 130 50- industry 251 299 261 254 Manufacturing 777 s 9 158 6 0 0 Services 522 547 611 616 Private consumption 763 662 666 663 .so - Generalgovernment consumption 9 9 P 9 142 $40 Imports of goods andservices 250 77.3 313 305 -GDI +GDP - zoo' 1 (averageannualgrowth) 1982-92 1992-02 2o02 Growth of exports and imports ("A) Agriculture 14 11 -6 0 industry 7 2 2 6 -7 2 Manufactunng 7 2 3 3 -8 0 Services 4 2 3 1 -6 2 Pnvateconsumption 4 3 2 2 -9 2 Generalgovernment consumption 3 4 4 4 -8 5 5 4 -40 1 Gross domestic investment 5 0 11 -420 357 imports of goods and services 8 8 8 3 -248 157 - -Exports -1nports 69  PRICES and GOVERNMENT FINANCE 1982 1992 2001 2002 Domestic prices Inflation (Oh) (%change) 100 * Consumer prices 70.1 53.9 44.8 ImplicitGDP deflator 28.2 63.7 54.8 43.5 Government finance 25 - (%of GDP, includes current granfsj 0 Current revenue 29.0 29.3 28.2 97 98 99 0-3 01 Current budgetbalance -13 -14.7 -4.7 Overallsurplus/deficit -0.7 -20.9 -9.3 -GDP ddlator -CPi TRADE 1982 1992 2001 2002 (US5 millions) export and import levels (US$ mill.) Total exports (fob) 5,890 14,891 34,373 39,827 eo 000 Tex&iies T 1145 5,603 0,344 9,066 Processed agricultural products 1571 2293 1876 1705 Manufactures 4,655 13,440 28,695 32,673 140000 Total imports (cif) 8,843 22,871 41399 51270 Food 9 3 1398 848 1211 20 000 Fueland energy 3,943 3,903 8,36 8.955 I Capital goods 2214 7,970 7.344 8.949 Exportprice index(S95=lOO) 95 76 75 90 97 98 99 M) Import price index(s95=lOOj 90 81 80 Exports Terms of trade @95=lOO) 3 irrports O1 O2 0 5 94 93 I BALANCE of PAYMENTS I/ 1982 1992 2001 2002 (US5 millions) Current account balance to GDP (%) Exports of goods and services 7,86 23,343 50,403 54,608 Imports of goods and services 9,592 26,706 45,86 55,095 *i Resourcebalance -1774 -3,363 4.587 -487 Net income -1455 -1670 -5,000 -4,549 Net currenttransfers 2277 4,059 3,803 3,496 Currentaccount balance -952 -974 3,390 -1540 Financingitems (net) 190 2,458 -6.314 1328 Changesin net reserves -68 -1484 9,924 2 9 Memo: Reserves includinggold (US5 millions) 2,027 25252 30,82 38.067 Conversion rate (DEC,local/US5) 62.9 6,8813 1228,367 1509,471 EXTERNAL DEBT and RESOURCE FLOWS 1982 1992 2001 2002 (US5 millions) Composition of 2002 debt (US$ mlll.) Total debt outstanding and disbursed 8J6 56,554 113806 131407 I IBRD 1962 5,564 4,707 5,367 A 6.367 IDA 6 7 148 95 89 B 89 Total debtservice 2,968 9,086 24,623 28,632 21,503 iBRD 209 GO7 723 708 IDA 3 6 7 7 Composition of net resourceflows D x),400 Official grants 307 506 0 334 Official creditors 762 -509 74 797 E8.433 Privatecreditors 146 3,604 -2,187 3811 Foreigndirect investment 55 779 2,769 862 Portfolio equity 0 -284 -4,611 -160 F 7 World Bank program Commitments 648 686 2200 1650 A . IBRD E- Bilateral Disbursements 500 286 1537 1,031 8 IDA - D 01k nuitliateral - F Prlvate - 70