Philippines - Health Development Project

Document of The World Bank FOR OFFOCIAL USE ONLY Reprt No. P-5019-PH MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN IN AN AMOUNT EQUIVALENT TO US$70.1 MILLION TO THE REPUBLIC OF THE PHILIPPINES FOR A HEALTH DEVELOPMENT PROJECT MAY 25, 1989 This document bas a restricted distribution and may b used by recipients only In the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS (November 1988) Currency Unit = Philippine Peso (P) US$1.00 = P21 FISCAL YEAR January 1 - December 31 ACRONYMS DOH - Department of Health NGO - Non-governmental Organization UNFPA - United Nations Fund for Population Activities USAID - United States Agency for International Development  FOR OFFICIUL USE ONLY PHILIPPINES HEALTH DEVELOPMENT PROJECT Loan and Project Summary Borrower: Republic of the Philippines Amount: US$70.1 million equivalent Terms: Payable in 20 years including five years of grace at the Bank's standard variable interest rate. Cofinancings Government of Italy. a grant of US$8.1 million equivalent Government of Japan, a grant of US$4.3 million equivalent Financing Plan: Local Foreign Total -----(US$ million)----- Government of the Philippines 25.9 -- 25.9 Government of Japan 2.5 1.8 4.3 Government of Italy 0.2 7.9 8.1 IBRD 39.2 30.9 70.1 Total 67.8 40.6 108.4 * Economic Rate of Returns Not Applicable Staff Appraisal Report: Report No. 7665-PH Maps: IBRD 21388 and 21389 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF THE PHILIPPINES FOR A HEALTH DEVELOPMENT PROJECT 1. The following memorandum and recommendation on a proposed loan to the Republic of the Philippines for US$70.1 million equivalent is submitted for approval. The proposed loan would be repayable in 20 years including five years of grace at the Bank's standard variable interest rate and would help finance a health development project. The Government of Italy would provide a grant of US$8.1 million equivalent and the Japan * Grant Facility would provide US$4.3 million equivalent to cofinance the project. 2. Background. During the 1970s, the Government of the Philippines made significant progress in improving the health and nutrition status of the population, and some success was also achieved in reducing fertility. However, economic stagnation and decline in the early 1980s undercut earlier progress, resulting in increased prevalence of communicable and preventable diseases, malnutrition and sustained high fertility. These problems were compounded by weakened health sector in3titutions and reduced budgetary allocations to the sector. Sector constraints include: (a) inequitable distribution of services by income and region, as well as a trend towards an urban and curi.tive bias of care; (b) unclear policies, procedures and lack of technical guidance for decentralizing the health sector and providing community-level health services, especially for underserved areas and high-risk groups; (c) limited capacity of the Department of Health (DOH) to plan, manage, monitor and evaluate the health sector; and (d) inadequate expenditures and financing arrangements to meet priority health needs. 3. The Government's Medium-Term Development Plan, updated in July 1988, articulates a health policy which aims to: (a) expand and improve communicable disease control, with emphasis on targeting areas with the greatest needs; (b) strengthen decentralization of the health network and collaboration among the DOH, local governments, private providers of health services, and non-governmental organizations (NGOs) in the development of effective community-based services; (c) strengthen planning, management, communication and evaluation capacities of the health sector; (d) strengthen the regulatory functions of Government and balance public and private sector roles in the provision of curative care; (e) expand investments in the sector and broaden the mechanisms of financing health services; and (f) promote responsible parenthood and strengthening of family planning. To address this broad range of needs, the Government's strategy is to allocate an increasing share of budgetary resources to the sector while seeking efficiency improvements, and to emphasize improvements in preventive and primary health care in the near term, while laying the groundwork for improvements in curative care service delivery and financing in the longer term. 4. The Government has already taken a number of initial steps towards meeting its health development objectives. In 1987, a family planning pol *.y was adopted that promotes responsible parenthood and recognizes individual choice in controlling fertility among medically safe methods, except for abortion. More recently, DOH has been assigned  - 2 - responsibility as lead agency for the provision of all family planning service delivery, including coordination with NGOs providing such services. Budgetary allocations for DOH have been increased each year since 1987, and the 1989 budget provides an estimated 52 increase over 1988 in real terms. A new drug policy has been adopted that is expected to improve significantly cost eificiency in drug use and procurement. A new health information system has been developed with assistance from the United States Agency for International Development (USAID) and the World Health Organization, and DOH has revised its program budgeting and management information systems. DOH has also developed a new community health strategy under which (a) targeted area development programs would focus on expanding services to areas where the health and nutrition status is below the national average, and (b) priority impact programs for malaria, tuberculosis, schistoscG.'Isis and maternal and child health would address the most urgent health needs. In addition to targeting areas and groups in greater need, both of these programs seek more effective health outcomes and sustainability through greater community self reliance in undertaking projects to reduce health risks to their own communities. An essential part of this process would be increased collaboration between DOH, local governments and NGOs. The proposed Bank-assisted project is designed to build upon and extend the Government's initial efforts to implement its sector development policy and strategy, and is intended to complement assistance expected to be provided by other donors, especially as regards maternal and child health, and family planning services supported primarily by the United Nations Fund for Population Activities (UNFPA) and USAID. 5. Rationale for Bank Involvement. Through its involvement in two population projects (Ln. 1035-PH and Cr. 923-PH), the Bank has played an important role in the health sector, not only as a provider of resources for the expansion and improvement of the Government's family planning and health improvement programs, but also as an active participant in the policy dialogue with the Government and other major donors. These two projects showed the need for an increase in the number of midwives and the enhancement of their role in outreach services and for additional attention to the flow of funds. These issues have been addressed in the proposed project. The proposed project would continue to expand the policy dialogue and would serve as a vehicle for absorption of substantial grant assistance through cofinancing. 6. The proposed project also supports recommendations of a recent Bank report, The Poverty Challenge in the Philippines (Report No. 7144-PH, October 1988). Among the priority areas for action identified by the report are expansion and improved targeting of public health and nutrition expenditures, and measures that would support maternal and child health, fertility reduction and community-based health initiatives. The proposed project would thus assist the Government in addressing priority needs in its poverty alleviation efforts. 7. Project Objectives. The objectives of the proposed project would be to: (a) support the Government's priorities to expand and improve public and primary health care, especially to high risk groups; (b) strengthen the efficiency Lnd effectiveness of DOH; (c) promote collaboration among the Government, local governments and NGOs in meeting community health needs; and (d) establish improved mechanisms for future  health policy development. The project would aim to achieve improvements in the control of major communicable and endemic diseases, reduce infant and child deaths and reduce maternal mortality and fertility. It would also seek to promote health equity through the extension of services to presently underserved areas and target groups by targeting high-risk communities and individuals and stratifying services according to the degrees of risk and/or disease density. 8. Proiect Description. The project would be carried out over six years and would comprise four components: (a) four priority programs for improvements in the control of major diseases (malaria, tuberculosis and schistosomiasis) and in maternal and child health; ib) institutional strengthening of DOH through improvements in management information systems, planning and budgeting procedures, central laboratory support, service delivery capacity, commw..cations, training and evaluation mechanisms; (c) establishment of a program to provide grants for organizing and implementing provincial-level collaboration among the DOH, local governments and NGOs for community health collaboration and (d) establishment of a national health policy council and a secretariat within DOH and provision for studies. To carry out these activities, drugs, pesticides, materials, vehicles, equipment, community health grants, training and technical assistance would be financed under the project. 9. Total project costs are estimated to be US$108.4 million equivalent, net of taxes and duties, with a foreign exchange component of US$40.6 million equivalent. The Bank loan of US$70.1 million would finance 65Z of total costs, net of taxes. A grant of USeO,1 million equivalent would be provided by the Government of Italy to cofinance the tuberculosis program. A grant of US$4.3 million equivalent would also be provided by the Japan Grant Facility for project start-up, training and technical assistance. Total external financing for the project would amount to 76Z of total project costs, net of taxes. A breakdown of costs and financing is shown in Schedule A. Amounts and methods of procurement and of disbursements, and the disbursement schedule, are shown in Schedule B. A timetable of key project processing events and the status of Bank Group operations in the Philippines are given in Schedules C and D, respectively. Maps are also attached. The Staff Appraisal Report No. 7665-PH, dated May 25, 1989, is being distributed separately. 10. Agreed Actions. Prior to negotiations, the Government selected a project coordinator. During negotiations, the Government provided assurances that it would issue regulations concerning: (a) procedures for approval and distribution of grant funds within the project, and (b) appropriate documentation of DOH's expenditures to permit such expenditures to be eligible for reimbursements under the Bank loan. Assurances were also received during negotiations that: (a) a Community Health Policy Committee would be established by January 1, 1990; (b) a DOH directive would be issued by January 1, 1990, establishing operational guidelines and procedures for a community health fund including criteria and procedures satisfactory to the Bank ftr selecting NGOs and other community-level organizations to receive grants from the fund; (c) a DOH directive would be issued by March 1, 1990. requiring provincial authorities to develop a plan to target services to priority communities by October 30, 1990; (d) a National Council for Health Policy Development with terms of reference agreed with the Bank  - 4 - would be established by March 1, 1990; (e) an annual review of programs and activities supported by the project would be carried out no later than October of each year; and (f) annual audits, semi-annual reports and a project completion report wodld be submitted to the Bank. A condition of effectiveness of the loan would be the establishment of a project coordinating unit in DOH with adequate staffing, formal appointment of a project coordinator and designation of officers responsible for project implementation in each implementing DOH division. 11. Benefits. The project would result in reduction of the prevalence of malaria, tuberculosis and schistosomiasis in the areas of the country identified as meeting high-risk criteria. The project would also assist in the reduction of mortality among women and children in high-risk communities targeted under the project, and would support lowering of fertility through improved maternal health services. The capacity of DOH to identify and monitor high-risk households within the highest risk communities would be improved, which would increase both equity and efficiency of resource use. The probability of Government reaching the highest risk communities would be enhanced through the NGO partnership process and this would help set the stage for broader application to additional communities. DOH planning, management, communication, support and evaluation capacities would also be improved which would lead to more effective and efficient del;very of services. Community resources would be mobilized through partnerships of local governments and NGOs with DOH, permitting communities to meet their own critical health needs better. Finally, the project would lay the groundwork for future policy development. 12. Risks. There is a risk that communities targeted under the project as having high disease prevalence and high maternal and child mortality risk would be in areas of potential instability, and efforts to reach these communities could be affected by future political developments. Sufficient flexibility exists in the selection by DOH of communities to be supported by the project to overcome the risk that such developments might affect project scope, although some deserving communities might not receive support under these circumstances. Also, strong involvement of local NGOs in project design and preparation reduce this risk. There is also a risk of slow implementation due to delays in counterpart funding and to the general complexity of fund flow procedures. These risks would be minimized through an annual review of project performance and financial requirements by the Government and the Bank; through the arrangements regarding the flow of project funds; and througb the establishment of a Project Coordinating Unit and designation of individuals responsible for monitoring and problem solving in each of the implementing units of DOH. 13. Recommendation. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank and recommend that the Executive Directors approve the proposed loan. Barber B. Conable President Attachments Washington, D.C. May 25, 1989  -5- Schedule A PHILIPPINES HEALTH DEVELOPMENT PROJECT Estimated Costs and Financing Plan Estimated Costs la Local Foreign Total S---(US million)------ Strengthening Impact Programs Malaria Control 9.2 10.6 19.8 Tuberculosis Control 7.6 7.3 14.9 Schistosomiasis Control 4.8 3.5 8.3 Maternal and Child Health 0.7 2.3 3.0 22.3 23.7 46.0 Strengthening DOH Institutional 25.6 12.8 38.4 Capacity Community Health Development 8.6 0.3 8.9 Policy Development 0.6 -- 0.6 Total Base Costs 57.1 36.8 93.9 Price Contingencies 10.7 3.8 14.5 Total Project Costs 67.8 40.6 108.4 Financing Plan Government of the Philipiines 25.9 25.9 Government of Japan 2.5 1.8 4.3 Government of Italy 0.2 7.9 8.1 World Bank 39.2 30.9 70.1 Total 67.8 40.6 108.4 la Does not include duties, taxes and fees estimated at US$2.6 million.  -6- Schedule B Page 1 of 2 PHILIPPINES HEALTH DEVELOPMENT PROJECT Procurement and Disbursement Procurement Method Tied Total Category of Expenditure ICB LCB Italian Other Cost Grant --------(USS million)------------- Drugs and pesticides 13.8 0.7 6.9 1.5 La 22.9 (13.8) (0.7) (1.5) (16.0) Equipment, vehicles 15.1 5.5 1.0 - 21.6 and materials (15.1) (5.5) (20.6) Grants - - - 9.1 9.1 (9.1) (9.1) Training, Technical - - 0.2 16.1 16.3 Assistance and (14.4) (14.4) Planning Seminars Contract staff - - - 15.9 15.9 (10.0) (10.0) Project Preparation) Start-up - - - 2.9 2.9 Staff Travel - - - 5.4 5.4 Salaries - - - 14.3 14.3 Total 28.9 6.2 8.1 65.2 108.4 (28.9) (6.2) (35.0) (70.1) Note: Figures in parentheses are the respective amounts financed by the Bank. la DDT by limited international bidding.  -7- Schedule B Page 2 of 2 Disbursements (US$ million) Category Amount 2 of expenditures to be financed (US$ million) Goods 30.0 1002 of foreign expenditures, 1002 of local expenditures (ex-factory cost) for locally manufactured items and 802 of local expenditures for other items procured locally (off-the- shelf) Consultants' and 25.0 0OO2 other services (including salaries of contractual staff) and training Grants for community 8.1 1002 health development services Unallocated 7.0 Total 70.1 Estimated Bank Disbursements (US$ million) Bank PY 1990 1991 1992 1993 1994 1995 1996 Annual 5.0 7.0 9.4 16.2 12.4 12.0 8.1 Cumulative 5.0 12.0 21.4 37.6 50.0 62.0 70.1  Schedule C PHILIPPINES HEALTH DEVELOPMENT PROJECT Timetable for Key Project Processing Events (a) Time taken to prepare: 12 months (b) Prepared by: Department of Health (c) First Bank mission: October 1987 (d) Appraisal mission departure: November 1988 (e) Negotiations: May 1989 (f) Planned date of effectiveness: September 30, 1989 (g) List of relevant PCRs and PPARs: Population I project, PPAR No. 5544  -9- Schdule D TE STATUS OF 2AW GROW' OPERATIONS IN THE PHILIPPINES A. sTATEmENT OF OAW LOANS AND IDA CREDITS fI As orVirfWITE DIng Loon or credit Filcal Amount (ls concollations) number Year Borrower Purpose Wnk IDA UdlabUreed Seventy-nine loans and five credits fully disbursed 2,912.74 72.N 928 1979 Rep, of the Phitippines Population II - 84.40 2.86 1t0o 1980 Rep. of the Philippines Medium-Scale Irrigation 80.98 - 11.84 1614 1980 Rap. of the Philippines Manila Seworago & Sanitation 46.05 - 1.48 1690 1981 Rep. of the Philippines Watorshed Manage-nt 85.54 - 4.*2 2080 1961 Rep. of the Philippines Elementary Educ. Sector Loon 60.50 - 11.12 2040 1962 Rep. of the Philippines Agric. Support Services 22.00 - 6.45 2156 1992 Rep. of the Philippine National Fisheries Developmnt 2.10 - 0.83 2169 1682 Rep, of tho Philippines SUM III 67.45 - 4.47 2178 1982 Rep. of the Phillppines Communal Irrigation 61.00 - 24.9# 2200 1998 Rap. of the Philippines Education VIII 16.40 - 0.24 202 1968 Republic of Phil. A PNOC Petroleum Explonrtion Promotlon 6.44 - 1.14 2206 1968 Rep. of the Philippines Water Supply and Sanitation 29.00 - 6.41 2267 1983 Rep. of the Philippines Regionol Citles Development 47.00 - $1.81 286o 1984 Rep. of the Philippinos Central Vl*ayas Regionol Developmnt 26.60 - 15.60 2419 1904 Rep. of the Philippines Highways V 102.00 - 65.10 2485 1984 Rep. of the Philippines Municipal Development 40.00 - 88.26 2495 1986 Rep. of the Philippines Telecom. Tech. Asslotnce 4.00 - 1.86 2670 1996 Centrol bank of the Phil. Agricultural Credit 100.00 - 48.06 2676 1986 Rep. of the Philippines Manila Water Distribution 86.00 - 28.19 2716 1966 Rap. of the Philippineo Rural Roads II 02.00 - 70.85 2767 1967 Rep. of the Philippines Economic Recovery Loan 800.00 - 100.00 2798 19611 Rep. of the Philippines Economic Recovery Loan TA 5.00 - 4.00 2928 1967 Rep. of the Philippine* Provincial Ports 82.00 - 22.55 2946 1960 Rep. of the Philippines Irrigation Operations Support 46.00 - 46.00 2956 1906 Rep. of the Philippines Progrm for Oovernment Reform 200.00 - 125.00 2969 1906 Philippine Nat'l Oil Co. Bacon-Manito Geothermal Power 41.00 - 40.68 2969-1 1960 Phil. Nat'l Power Corp. Bacon-Msnito Geothermal Poster 69.00 - 59.00 2974 1960 Rep. of the Philippines Housing Sector 160.00 -