China - Integrated Regional Health Development Project

Document of The World Bank FOR OFFCAL USE ONLY C*O. ;Z4,o X - C 44AH. Report No. P-4997-CIA MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT OF SDR 39.4 MILLION (US$52.0 MILLION EQUIVALENT) TO THE PEOPLE'S REPUBLIC OF CHINA FOR AN INTEGRATED REGIONAL HEALTH DEVELOPMENT PROJECT APRIL 11, 1989 Tbis document bas 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 Worla Bank authorization.  CY E1WOULIMS US$1.00 - Yuan (V) 3.71 V 1 - US$0.27 (as of April, 1989). FISCAL YEAR janmary 1 to December 31 ABBREVIATIONS KOPH - Ministry of Public Health  FOR OFFICIAL USE ONLY INTEGRATED REGIONAL HEALTH DEVELOPMENT PROJECT CREDIT A.D PROJECT SUMMAR Borrower: People's Republic of China Beneficiaries: Zhejiang, Jiangxi and Shaanxi Provincial Governments; Jinhua, Jiujiang and Baoji Regions; and Ministry of Public Health (MOPH) Credit Amount: SDR 39.4 million (US$52 million) Terms, Standard with 35-year maturity Onlending Terms: The Government would onlend SDR 38.6 million in equal shares to the three provinces at an interest rate of 2.5%. repayable over 20 years, including a 5-year grace period. The provinces would assume the foreign exchange risk. SDR 800,000 would be made available to the Ministry of Public Health. Financing Plan: IDA 36.3 15.7 52.0 Central Governrent 0.3 - 0.3 Local Governments 60.7 - 60.7 TOTAL 97.3 15.7 113.0 Rate of Return: Not Applicable Staff Appraisal Report: Report No. 7632-CHA flu: IBRD No. 21329 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 DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE PEOPLE'S REPUBLIC OF CHINA FOR AN INTEGRATED REGIONAL HEALTH DEVELOPMENT PROJECT 1. I submit the following memorandum and recommendation on a proposed credit of $52.0 million equivalent (SDR 39.4 million) to the People's Republic of China to help finance an Integrated Regional Health Development Project. The proposed credit would be on standard IDA terms with 35 years maturity. 2. Background. Childhood immunization programs, accessible primary health care, better sanitation and nutrition, and control of many infectious diseases have contributed to remarkable improvements in health status. Life expectancy has increased from an estimated 35 years in 1949 to 69 years in 1986, a figure closer to the average of 76 years for industrialized countries than to the 61 years estimated for low and middle-income countries. A Bank study in 1984, Ihe Health Sector in China (No. 4664), examined the policies and programs which have led to China's achievements. 3. As a direct consequence of its public health successes, China is now facing disease patterns typical of more developed countries. Infectious diseases have declined in significance as a cause of death, although they remain a leading cause of morbidity. Heart disease, stroke, cancer and injury accounted for 63 percent of mortality in China in 1986. These higher rates of chronic disease are attributable in part to the population's increasing exposure to risk factors such as smoking, dietary change, environmental and workplace hazards. In addition, longer life expectancy, success in family planning and the resulting increase in the proportion of adults in China's total population have increased demand for health services among the middle-aged and elderly. These demographic and epidemiological trends present a new challenge for health planners in China to develop affordable but effective policies for chronic disease care and prevention while addressing the lingering problems of infectious disease. 4. The Government's current health policy objectives are: (a) to strengthen and consolidate health services through improving management of health institutions; (b) to promote prevention and health maintenance by strengthening disease prevention, surveillance, occupational health and maternal education and by integrating prevention programs with basic health care services; (c) to strengthen the training and increase the numbers of middle-level health professionals by targeting enrollment to under-served areas and by expanding curricula and improving education and training courses; and (d) to reform the health service financing system by adjusting prices, implementing insurance schemes and undertaking other changes to control costs and encourage efficient delivery and use of health services. 5. Project formulation. A Bank study on China's health sector, now nearing completion, looks prospectively at China's changing epidemiological pattern and the need to realign strategic planning in health infrastructure. technology, manpower and finances. Work on this report has proceeded in parallel with the proposed project, and many of the policies and approaches to health services that would be implemented under the project stem from the conclusions therein.  - 2 - Experience from other countries facing epidemiological shifts similar to China's suggested that a regional approach had many strengths. The overall trend in China toward decentralization implied that the project should center on the role of provincial and local governments, at the same time supporting the leadership role of the MOPH in establishing health policy and providing technical guidance. Broad sectoral issues--of medical technology, management efficiency and effectiveness, institutional coordination, human resource development and changes in pricing and payment of health services brought about through economic reform--suggested the project should address the need for integrated planning and improvements in services across a variety of institutions and types of health care. 6. Rationale for IDA Involvement. The Bank Group's strategy for assistance to China in the health sector is to help the MOPH and its counterpart bursaus at the provincial level to bring about the reforms needed in policy and institutional structures to address the changing health needs of China's population. The proposed operation would introduce approaches that experiment with translating the Government's health policy objectives into program initiatives in a small number of regions which could eventually serve as models for development of health systems in other parts of China. The Association would bring to the project the experience of its staff and that of international and national planners and managers to improve health planning methodology, to design policies to reduce inefficiencies in health services, and to focus attention on future trends and their implications for health care. Initial assistance in these areas was provided to MOPH and the participating project areas during project preparation. 7. Prolect Concent and ObJectives. Combining features of a traditional project loan and sectoral investment, the proposed project is aimed toward providing a systematic framework for integrating health services in a given region, introducing new approaches to health policy and planning, and improving the delivery and evaluation of health services. The framework is established through detailed policy guidelines to stimulate and direct local decision-making and a system of regional health planning with emphasis on annual reassessment and budgeting in light of experience. The Policy Guidelines stress the need to set priorities for health investments and programs, formulate reforms and incentives to reduce waste and mismanagement, develop institutions capable of sustaining improvements in service delivery, and monitor progress and outcomes of efforts to improve the quality of health services. Regional health planning under the project would move beyond the current approach of amalgamating upward the budgets and proposals of various health units without a strategic perspective, toward an approach that is analytically based and integrates the objectives and roles of health-related institutions of different levels, both within and outside the formal health sector. 8. Project Description. Preparation of the proposed project culminated in the drafting of indicative, five-year regional health plans and design of supporting components at the provincial level for three project regions. The project comprises the establishment of health regions at Jinhua (Zhejiang province), Jiujiang (Jiangxi province), and Baoji (Shaanxi province) to experiment with new ways to improve capability for planning and delivery of health services by establishing policy criteria and systems for financing investments in the regions and supporting investments in the provincial capitals. The regional and provincial project components are: (a) health planning, management and reform; (b) disease prevention and surveillance; (c) health education; (d) maternal and child health services; (e) emergency  -3. services; (f) hospital services; (g) rehabilitation; (h) medical education and training; and (i) equipment management. Medical education, health educatiou and emergency service investments at the provincial level will receive additional support beyond that needed to just support the project region, in order that provincial capabilities in these key areas will be improved. Appraisal of the project was based on the overall soundness of the indicative five-year plans, their compliance with the Policy Guidelines, the apparent commitment and capacity of the regions to sustain regional health planning and the specific budgets for the first year of the plans (1989). As appropriate to each component, the project would support construction, purchase of equipment and vehicles, technical assistance, training, incremental operating costs for new and expanded programs of health services, maintenance and additionally required staff. (Detailed project costs are in Schedule A). 9. A national component would strengthen management capabilities of the MOPH through policy evaluation, development and dissemination of cost-effective strategies and technical guidance in each of the project components. The specific objectives would be to enable MOPH: a) to provide leadership, policy and technical support to the regions and provinces in experimentation and reform of health service planning and delivery in the implementing regions; b) to review and approve the annual plan and budget proposals from each region and province and to supervise implementation of the project; c) to undertake studies and policy research on health system development issues for the three provinces and regions; and d) to distill and disseminate the experience during implementation of the five-year regional plans, with a view toward policies and practical, cost-effective approaches that could be replicated across the project regions and in other areas of the country. The total cost of the project is estimated at $113,0 million equivalent, with a foreign exchange component of $15.7 million (14%). Costs eligible for financing under the Credit and incurred after January 1, 1989 would be retroactively financed up to 10% of the credit amount. A breakdown of costs and the financing plan are 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 China are given in Schedules C and D, respectively. A map is also attached. The Staff Appraisal Report, No. 7632-CHA dated April 11, 1989, is also attached. 10. Agreed Actions. The Government has agreed on the following actions: (a) the provinces will make available to their respective regions part of the proceeds of the credit for carrying out the project on terms and conditions acceptable to the Association; (b) the Provincial Project Offices would be maintained throughout project implementation with appropriate functions and staffing; (c) the Government would maintain the World Bank Loan Off'ce within MOPH throughout the project implementation period with appropriate functions and staffing; (d) the Government and the Association shall annually prior to the beginning of each of China's fiscal years exchange views on the progress achieved in carrying out the Policy Guidelines, the Regional Health Plans and the provincial components under the project; the Government shall ensure that during it's fiscal year disbursements by each of the implementing regions and the provinces out of the proceeds of the Credit will be made only after the broad parameters of such fiscal year's program and budget under each of the regional health plans and provincial components shall have been reviewed and found to be generally acceptable by both MOPH and the Association. Conditions for credit effectiveness would include signing of Project Implementation Arrangements between MOPH, the provinces and the regions with terms and conditions acceptable to the Association.  -4 11. Bsnefits. The programs and investments unde- the project would improve the quality of health services available to an estimated 10-12 million people in the three project regions and provincial capitals. Officials in the regions and provinces would gain experience in new approaches to health planning, budgeting and coordination. Experience at the regional level with implementing policy reforms to strengthen health sector management would encourage better use of scarce resources and increased responsiveness to local needs and should provide many lessons relevant to the replication of approaches in other parts of China. At the national level, the project would strengthen the capability of MOPH to formulate and use polizy guidelines, rather than direct budgetary con_rol, tc influence development of the health sector at the regional level. A wide range of health institutions and government health bureaus would develop capacity to design and conduct chronic disease preventior. programs, increase efficiency in management and develop better coordinated systems for delivery of health services. In addition, the project would help to improve the relevance of medical education and training to priority needs for health care in China. Most importantly, China would gain experience with the use of health regions as an approach to the problems facing future development of the health sector. 12. Risks. The main risk of the project is that it will take some time for planning and finance agencies and for other sectors to understand and adequately support health sector reforms at the local levels. However, based on the experience of the project preparation during the last year, there is little doubt about the MOPH's commitment to carry out an experimental project of this kind, and local level interest and support for new approaches to health programs. Complexity of the issues and bureaucratic inertia, however, may result in gradual change in strategies, including some which may take longer than the project life to materialize fully. Regular, joint supervision by the MOPH and by IDA will be important to ensuring continuous domestic and external monitoring, evaluation and reformulation of project activities in the context of the annual reviews of the regional health plans. 13. Reconmepdatio . I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association, and recommend that the Executive Directors approve the proposed credit. Barber B. Conable President Attachments Washington, D.C. April 12, 1989  SchedAxle A INTEGRATED REGIONAL HEALTH DEVELOPMENT PROJECT ESTIMATED COSTS AND FINANCING PLAN Estimated Cost; Local Foreign Total - ($ million) Health Management and Reform 4.7 0.2 4.9 Disease Prevention and Surveillance 14.8 1.8 16.5 Health Education 7.5 1.0 8.6 Maternal and Child Health Services 7.4 0.5 7.9 Emergency Services 11.4 2.3 13.7 Hospital Services 22.7 6.1 28.8 Rehabilitative Medical Services 4.2 0.2 4.4 Medical Education and Training 20.1 2.2 22.3 Equipment Management 3.3 0.6 3.9 National Component 1.2 0.8 2.0 Total Project Costs /a 97.3 15.7 113.0 Financing Plan: IDA 36.3 15.7 52.0 Central Government 0.3 - 0.3 Local Governments 60.7 - 60.7 IOTAL 97.3 IiLQ 113.0 /a Project-financed goods are exempt from import duties and taxes.  Schedule B Page 1 of 2 ITEMgRAED REGIONAL HEALTH DEVELOPMENT PROJECT PROCUREMENT METHOD AND DISBURSEMENT Procurement method Project Element ICB LCB Other N.A. Total .------(US$ million) ---- Equipment & Vehicles 10.0 18.0 8.9 - 35.9 (10.0) (5.0) (7.0) - (22.0) Corstruction - 27.9 6.0 - 33.9 (12.3) (2.7) (15.0) Technical Assistance 2.9 - 2.9 - - (2.0) (2.0) Training - - 5.3 5.3 - . .g(4.7) - (4.7) Program Support Costs - - 16.7 16.7 - - - (8.3) (8.3) Incremental Operating - - - 6.1 6.1 Cost - - (0.0) Maintenance - - 6.4 6.4 - - {.(0.0) New Staff - - - 5.8 5.8 (0.0) Total 10.0 45.9 36.8 18.3 113.0 (10.0) (17.3) (24.7) - (52.0) Note: Figures in parentheses are the respective amounts financed by IDA.  Scw11dtil y PB Page 2 of 2 ]DlsbuXggmen&s CategoryAmut (US$ Million) a. Proiect Province Civil Works 15.0 45% Equipment & Vehicles 8.3 100% of local expenditures (0*2factory) and 40% of local expenditures for other items procured locally Consultant's Service 3.1 70% Training Costs 1.2 70% Program Support Costs 8.5 50% b. einfstry of Publig Health Equipment & Vehicles 13.6 100% of foreign expenditures, 100t of local expenditures (ex-factory) and 40% of local expenditures for other items procured locally Consultant service 1.3 100% Overseas fellowship and Training Costs .5 100% Program Support Cost .5 75% Total224 Estimated IDA Disbursements IDA FY 90 21 22 2i 25 ...---- (US$ million)-------------- Annual 11.0 12.0 13.0 7.0 5.0 4.0 Cumulative 11.0 23,0 36.0 43.0 48.0 52.0  RIgpAL HEALTH SERVICUS PROJECT Itmetable of Key PXgoeet Preeessing Events (a) Time taken to prepare: 30 months (b) Prepared by: Ministry of Public Health, project provinces. regions, Bank staff, local and foreign consultants (c) First Bank mission: June, 1986 {d) Appraisal mission departure: November, 1988 (s) Date of negotiations: March 20, 1988 (f) Planned date of effectiveness: August 15, 1989 (g) List of relevant PCRs: None to date  Schedule D Page 1 of 3 STATUS OF BANK GROUP OPERATIONS IN THE PEOPLE'S REPUBLIC OF CHINA A. STATEMENT OF BANK LOANS AND IDA CREDITS (as of September 30, 1988) Loan/ Amount (US$ million) Credit Fiscal (less cancellations) Number Year Borrower Purpose Bank IDA Undisbursed * One loan and two ctedits have been fully disbursed 2021/1167 81 PRC University Development 100.00 100.00 0.00 1261 82 PRC North China Plain Agriculture - 60.00 0.00 2207 83 PRC Three Ports 67.97 - 0.77 1297 83 PRC Agric. Education & Research - 75.40 3.45 2226/1313 83 PRC Industrial Credit I (CIB I) 40.60 30.00 4.89 2231 83 PRC Petroleum I (Daqing) 162.40 - 20.43 2252 83 PRC Petroleum II (Zhongyuan-Wenliu) 100.80 - 28.68 2261/1347 83 PRC State Farms I (Heilongjiang) 25.30 45.00 1.24 1411 84 PRC Polytechnic/TV University - 85.00 27.02 1412 84 PRC Technical Cooperation - 10.00 1.12 1417 84 PRC Rubber Development - 100.00 22.53 2382 84 PRC Lubuge Hydroelectric 145.40 - 45.28 2394 84 PRC Railway 220.00 - 34.82 1462 84 PRC Rural Credit I - 50.00 0.17 1472 84 PRC Rural Health & Medical Educ. - 85.00 21.80 2426 84 PRC Petroleum III (Karamay) 99.50 - 27.89 2434/1491 84 PRC Industrial Credit II (CIS II) 105.00 70.00 21.22 244411500. 84 PRC Agricultural Education II 45.30 23.50 16.02 1516 85 PRC Agricultural Research II - 25.00 10.66 1551 8S PRC University Development II - 145.00 63.78 2493 85 PRC Power II 117.00 - 38.07 2501 85 PRC Changcun (Luan) Coal Mining 120.50 - 107.09 1577 85 PRC Seeds - 40.00 15.00 1578 8S PRC Rural Water Supply - 80.00 61.41 2S39-i594 85 PRC Highway I 42.60 30.00 32.39 254o 8S PRC Railway II 235.00 - 197.21 2541 85 PRC Fertilizer Rehabilitation & 97.00 - 28.44 Energy Saving 1605 85 PRC Forestry Development - 47.30 34.92 2579/1606 85 PRC PiShiHang-Chaohu Area Development 17.00 75.00 54.36 2580 85 PRC Weiyuan Gas Field Technical 25.00 - 14.93 Assistance 1642 86 PRC Rural Credit II - 90.00 26.41 2659/1663 86 PRC Industrial Credit III (CIB III) 75.00 25.00 20.79 1664 86 PRC Technical Cooperation Credit II - 20.00 19.34 1671 86 PRC Provincial Universities - 120.00 71.23 2678/1680 86 PRC Third Railway 160.00 70.00 219.98 2689 86 PRC Tianjin Port 130.00 - 119.65 1689 86 PRC Preshwater Fisheries - 60.00 30.07 2706 86 PRC Beilungang Thermal Power 2z5.00 - 184.32 2707 86 PRC Yantan Hydroelectric 52.00 30.52 2708 86 PRC Liaodong Bay Petroleum Appraisal 30.00 - 17.31  Schedule D Page 2 of 3 Loanl Amount (US$ million) Credit Fiscal (les cancellations) Number Year Borrower Purpose Bank IDA UVdisbursed * 2723/1713 86 PRC Rural Health & Preventive Ned. 15.00 65.00 69.56 1733 87 PRC Red Soils 40.00 20.92 2775 87 PRC Shuikou Hydroelectric 140.00 - 118.47 278311763 87 PRC Industrial Credit IV (CIS IV) 250.00 50.00 235.60 2784 87 PRC Shanghai Machine Toole 100.00 - 98.99 1764 87 PRC Xinjiang Agricultural Development - 70.00 68.29 281111792 87 PRC Beijing-Tianjin-Tanggu Expressway 25.00 125.00 131.48 2812/1793 87 PRC Gansu Provincial Development 20.00 130.50 158.S2 1835 87 PRC Planning Support & Special Studies - 20.70 19.10 2794/1779 87 P?C Shanghai Sewerage 45.00 100.00 137.10 2838 87 PRC Fertilizer Rationalization 97.40 - 96.90 2852 87 PRC Wujing Thermal Power 190.00 , 190.00 1871 88 PRC Rural Credit III 170.00 119.67 2877/1845 88 PRC Huangpu Port 63.0 25.00 88.55 2907/1875 88 PRC Dalian Port 71.0 25.00 94.49 1885 88 PRC Northern Irrigation - 103.00 93.81 292411887 88 PRC Coastal Lands Development 40.00 60.00 96.78 1908 88 PRC Teacher Training - 50.00 47.49 2943 88 PRC Pharmaceuticals 127.00 - 127.00 295111917 88 PRC Sichuan Highway 75.00 50.00 121.58 2952 88 PRC Shaanxi Highway 50.00 - 50.00 1918 88 PRC Dazing An Ling Forestry - 56.90 53.04 2955 88 PRC Beilungang II 165.00 - 165.00 2958 88 PRC Phosphate Development 62.7 - 62.7 2967/1932 88 PRC RSAL 200.00 100.00 109.06 2968 88 PRC Railway IV 200.00 - 200.00 Total 4,374.47 2,822.30 of which has been repaid 83.82 - Total now held by Bank and IDA 4,290.65 2,822.30 Amount soldt Of which repaid - Total Undisbursed 2,946.46 1,503.25 4,449.71 * As credits are denominated in SDRs (since IDA Replenisbment VI), undisbursed SDR credit balances are converted to dollars at the current exchange rate between the dollar and the SDR. In some cases, therefore, the undisbursed balance indicates a dollar amount greater than the original principal credit amount expressed in dollars. Notest 1) The status of the projects listed in Part A is described in a separate report on all Bank/IDA financed projects in execution, which is updated twice yearly and circulated to the Executive Directors on April 30 and October 31. 2) Since the date of this Statement (September 30. 1988). the following credits and loans have been approveds Ningbo and Shanghai Ports. $76.4 million; Xiamen Port. $36.0 million; Highway Vi, SDR 44.7 ($61.0 million equivalent); Tianjin Light Industry loan, $154.0 million and Shaanxi Agricultural Development, SDR 78.8 million ($106.0 million equivalent).  Schedule D Page 3 of 3 B. STATEMENT OF IFC INVESTMENTS (as of September 30. 1988) Invest- Fiscal Type of Loan Equity Total ment no. year Obligor buslness -- (US$ million) -- 813 1985 Guangzhou and Peugeot Automobile 15.00 2.00 17.00 974 1987 China Investment Co. Investment 3.00 04 3.04 1020 1987 Shensen China Bicycle 5.00 - 5.00 Bicycles Co. Ltd. Manufacture Total Gross Commitments 23.00 2.04 25.04 Less cancellations, terminations repayment and sales - - - Total Commitments now Held by IPC 23.00 2.04 25.04 Total Disbursed 6.50 0.04 6.54 Tot*l Undisbursed 16.50 2.00 18.50  ISRO 21329 U. S.SR. f<'~- LIAONING D.P.R. 2 L y Se a( JAPAN > , {t rS \ 9 $ / HE/l ONCltANC / rANJIN5ff 8FllN~~~~~~elo t r~~~~ \ se IC DEVEOPMN PRJC GCVf <GMOGOIA_5L bDdlN,G z MONGoz < ~~~~PIUPINES< f HANOI SSANXI uth ~~~~~~ - Povic on.s X t N J PMNCE' ,-.- KUMhi . 1 ooo .KOo a _ 6 < f t \ / JJ ' ~~~~~~~~~~~~~~HENs_,AN/NS ) o THAIlAND HA IM4N i ;< HANDONC )SANGA S A_- C.n 9 > t ' < ' ,, AMN HUBEI W1989 a E PAL th- (ar CHINA 0UGzlz, - ' /fW~ PA CIFIC INTEGRATED REGIONAL HEALTH L *i/S DEVELOPMENT PROJECT Gi@ 1 ,UANCOONG ' gOCA WNNAN ~ / CUA.VCA I f Prted Pr0r O Ssl T- w r m aOGmG U.K. P