China - Ninth Health Project

Document of The World Bank Report No. 19141-CHA PROJECT APPRAISAL DOCUMENT ONA PROPOSED LOAN OF US$10.0 MILLION AND A PROPOSED CREDIT OF SDR 36.8 MILLION TO THE PEOPLE'S REPUBLIC OF CHINA FOR A HEALTH NINE PROJECT April 14, 1999 Human Development Sector Unit East Asia and Pacific Regional Office  CURRENCY EQUIVALENTS (Exchange Rate Effective December 1998) Currency Unit = Renminbi (RMB) RMB 1.00 US$0.12 US$1 Y 8.3 FISCAL YEAR January 1 to December 31 ABBREVIATIONS AND ACRONYMS AIDS - Acquired Immune Deficiency Syndrome BBI - Blood Borne Infections CAPM - Chinese Academy for Preventive Medicine CAS - Country Assistance Strategy DALY - Daily Adjusted Life Year DCD - Disease Control Department, of MOH EPI - Expanded Program on Immunization EPS - Epidemic Prevention Station FLO - Foreign Loan Office, of MOH HIV - Human Immunodeficiency Virus IBRD - International Bank for Reconstruction and Development ICB - International Competitive Bidding IDA - International Development Association IEC - Information, Education and Communication IMR - Infant Mortality Rate IRR - Internal Rate of Return MAD - Medical Administration Department, of MOH MCH - Maternal and Child Health MIS - Management Information System MMR - Maternal Mortality Rate MOF - Ministry of Finance MOH - Ministry of Health NCB - National Competitive Bidding PIP - Project Implementation Plan PMO - Project Management Office RMC - World Bank Resident Mission in China SDR - Special Draxving Right SDPC - State Development and Planning Conmmission SOE - Statement of Expenditure STD - Sexually Transmitted Disease U5MR - Under Five Mortality Rate UNICEF - United Nations Children's Fund WHO - World Health Organization Regional Vice President: Jean-Michel Severino, EAPVP Country Director: Yukon Huang, EACCF Sector Manager: Alan Ruby, EASHD Task Team Leader/Task Manager: Jagadish Upadhyay, EASHD  CHINA HEALTH NINE PROJECT TABLE OF CONTENTS Project Financing Data ............... .1 A. Project Development Objective .2 1. Project Development Objective and Key Performance Indicators .2 B. Strategic Context .2 1. Sector-related Country Assistance Strategy (CAS) Goal Supported by the Project . 2 2. Main Sector Issues and Government Strategy .2 3. Sector Issues to be Addressed by the Project and Strategic Choices .3 C. Project Description Summary ...........................................4.......................4 1. Project Components .4 2. Key Policy and Institutional Reforms Supported by the Project .6 3. Benefits and Target Population .7 4. Institutional and Implementation Arrangements .8 D. Project Rationale .9 1. Project Alternatives Considered and Reasons for Rejection .9 2. Major Related Projects Financed by the Bank and Other Development Agencies .10 3. Lessons Learned and Reflected in the Project Design .11 4. Indications of Borrower Commitment and Ownership .11 5. Value Added of Bank Support in this Project .12 E. Summary Project Analysis .12 1. Economic .12 2. Financial .12 3. Technical .13 4. Institutional .13 5. Social .13 6. Environmental Assessment .14 7. Participatory Approach .14 F. Sustainability and Risks .15 1. Sustainability .15 2. Critical Risks ............................................................................................ 15 3. Possible Controversial Aspects .16  G. Main Loan Conditions ...................... 16 1. Effectiveness Conditions ..................... 16 2. Other Conditions ..................... 16 H. Readiness for Implementation ..................... 18 I. Compliance with Bank Policies ..................... 18 List of Annexes Annex 1: Project Design Summary ...................................... 19 Annex 2: Project Description ...................................... 27 Annex 3: Estimated Project Costs ...................................... 36 Annex 4: Economic Analysis ...................................... 37 Annex 5: Financial Summary ...................................... 45 Annex 6: Procurement, Disbursement and Finance ...................................... 49 Table A: Project Costs by Procurement Arrangements ...................................... 53 Table B: Thresholds for Procurement Methods and Post Review ....................... ............... 54 Table C: Allocation of Loan/Credit Proceeds ...................................... 55 Annex 7: Project Processing Budget and Schedule ...................................... 58 Annex 8: Documents in the Project File ...................................... 59 Annex 9: Status of Bank Group Operations in China ...................................... 60 Annex 10: China at a Glance ...................................... 62 IBRD MAP No. 30065  China Health Nine Project Project Appraisal Document East Asia and Pacific Regional Office Human Development Sector Unit Date: April 14, 1999 Task Team Leader/Task Manager: Jagadish Upadhyay Country Manager/Director: Yukon Huang Sector Manager: Alan Ruby Project ID: CN-PE-36953 Sector: HNP Program Objective Category: Lending Instrument: SIL Program of Targeted [X] Yes [ ] No Interventions: Project Financing Data [X] Loan [XI Credit [I Guarantee [I Other [Specify] For Loans/Credits/Others: Amount (US$m/SDRm): IBRD Loan $10 million/IDA Credit SDR 36.8 million ($50 million equivalent) Proposed Terms: [ ] Multicurrency [XI Single currency, specify [X] Standard Variable [ I Fixed [X] LIBOR-based IBRD Loan IDA Credit Grace period (years): 5 10 Years to maturity: 20 35 Commitment fee: 0.50% Contractual rate: 0.75% Service charge: 0.75% Financing plan (US$m): 93.91 million Source Local Foreign Total Government 33.87 -.- 33.91 IDA 30.60 17.43 50.00 IBRD 7.65 4.36 10.00 Total 72.12 21.79 93.91 Borrower: The People's Republic of China Responsible agency: Ministry of Health Estimated disbursements (Bank FY/US$m): 1999 2000 2001 2002 2003 2004 2005 Annual 0.92 4.88 7.44 10.85 15.03 12.42 8.46 Cumulative 0.92 5.80 13.24 24.09 39.12 51.54 60.00 Project Implementation Period: 6 years Expected effectiveness date: August 15, 1999. Expected closing date: June 30, 2006  Project Appraisal Document Page 2. China Health Nine Project A: Project Development Objective 1. Project development objective and key performance indicators (see Annex 1): This project has two distinct main components. Component A, Improved Maternal Health and Child Development, would reduce maternal and child mortality and morbidity and improve child survival and development in the poorest areas of China. Component B, Improved Prevention and Control of Human Immunodeficiency Virus, Acquired Immune Deficiency Syndrome, Sexually Transmitted Diseases (HLV/AIDS/STDs) and Other Blood Borne Infections, would prevent and control these diseases by implementing comprehensive and multi-sectoral public health programs at the provincial levels, and by building technical capacity at the Central level. B: Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project (see Annex 1): CAS document number: R98-107 Date of CAS progress discussion: May 28/29, 1998 1.1 The project directly responds to two main recommendations of the CAS: (a) targeted interventions in poor areas with priority on maternal and child health and disease prevention; and (b) adoption of multi- sectoral approaches to prevent and control non-communicable diseases, sexually transmitted diseases, and Human Immunodeficiency Virus in high-risk areas. The project is also consistent with the Bank's most recent health sector report in China, China: Issues and Options in Health Financi n, (Report No: 15278- CHA, dated August 12, 1996), which emphasizes the need to strengthen public health programs and ensure essential health services to the poor. 1.2 The project responds to the targeted intervention goal of CAS by replicating the successful experience of the Comprehensive Maternal and Child Health Project (Cr. 2655-CHA; Health VI), to reduce the negative effects of poverty by improving maternal and child health status indicators in an additional 113 low income counties in five relatively rural and low income provinces covering nearly 51 million persons (four percent of China's population). It would respond to another CAS objective of spearheading efforts in preventing and controlling emerging diseases like HlV/AIDS and STDs by implementing bold and effective programs in 31 prefectures in four provinces, which are considered to be high risk areas, with a combined population of 94 million, and by strengthening the capacity at the level of the Central Government. 2. Main sector issues and Government strategy: 2.1 Despite remarkable improvements in the health status of its population, China still faces serious disparities between rich and poor regions. For example, the national maternal mortality ratio (MMR) was 61.9 per 100,000 live births and the average rural MMR was 76 per 100,000 in 1995. However, in 1996 and 1997, the MMR in the counties of the five project provinces were: 62.7 in Hainan, 79.9 in Hunan, 262.3 in Guizhou, 68.5 in Jilin, and 462.8 in Xinjiang. Similarly, the national infant mortality rate (IMR) was 36.4 per 1,000 live births, but the comparable IMR in the project provinces was: 45.0 in Hainan, 39.3 in Hunan, 72.3 in Guizhou, 49.7 in Jilin, and 84.3 in Xinjiang. Special surveys indicate that these rates are likely to be considerably underestimated (50 to 100 percent) in the poorer provinces. Access to health care is also significantly inequitable, with deep divisions between the urban and rural population. While China's total public and private health spending per capita was RMB1 110 per year in 1993, the average health spending of RMB 235 per capita in urban areas was almost four times the average of RMB 60 per capita in rural areas, and the poorest quartile of the rural population only accounted for about four percent  Project Appraisal Document Page 3. China Health Nine Project of all health spending.1 To improve the situation, the Government has been implementing targeted interventions in designated poorest counties. 2.2 After fast and steady progress until the middle of the 1980s, the rate of improvement in China's health status has slowed and may have reversed in certain cases. This is attributed mainly to reduced access to health services among poorer families after the collapse of the cooperative medical system in the late 1970s, and inadequate resources allocated for public and preventive health. The Government has realized this problem and has started promoting various risk-sharing and subsidy schemes. Recently, the Government has also asked the provinces to substantially increase allocations for health, especially for preventive health activities. 2.3 Rapid economic growth, reform measures, growing openness, and the country's epidemiological transitions have brought new health problems, including a major increase in chronic diseases, the emergence of HIV/AIDS infections, and the reemergence of STDs. Perhaps no new health problem in China is more critical than the accelerating speed of the spread of lI-V coupled with rapidly increasing STD infections. The first AIDS case in China was reported in 1985. This was followed by increasing number of HIV cases among drug-users in southwest Yunnan Province with the identification of 149 cases in 1989. By late 1997, over 8,000 HIV infections were officially reported, and the actual number is believed to be much larger. Using stratified analysis, it was estimated that there were 10,000 HIV infections by 1993, and scientists at the Chinese Academy of Preventive Medicine (CAPM) and selected provincial epidemic prevention centers estimated that there were between 150,000 to 200,000 HIV infections in China by the end of 1996.2 It is currently estimated that there are over 300,000 HIV infections in China. Exacerbating this situation, while STDs were believed to have been eliminated from China by the 1970s, they have increased alarmingly since then. In 1995, reported STD cases numbered 362,000, but experts estimate that real figures may be ten times greater. 2.4 In response to the first HIV infections diagnosed in China in 1985, a National AIDS Committee was set up in 1986, followed in 1987 by the establishment of a National Programme for AIDS Prevention and Control. MOH adopted a plan for AIDS prevention and control in 1990, in line with global policies modified to reflect Chinese characteristics. In October 1996, State Councilor Ms. Peng Peiyun delivered a speech at the National Conference on HIV/AIDS Prevention and Control, asserting that the "Government has placed AIDS prevention and control among the priorities of the Ninth Five-Year Plan and China's Twenty-first Century Agenda." China recently elaborated its multi-sectoral plan for AIDS prevention and control, to give guidance to national and international partners in matters of AIDS prevention strategies and activities well into the next century. 3. Sector issues to be addressed by the project and strategic choices: 3.1 The Improved Maternal Health and Child Development Component, or the MHCD Component, would address the critical sectoral issue of improving the health status of the poorest sections of the population and help correct the serious regional imbalances persisting in China. The strategic choices, which are consistent with the Government strategy and the CAS, are to: (a) improve the quality and effectiveness of maternal and child health services in the poorest and least developed areas of the country; (b) improve access for the poorest families by helping to remove the economic and cultural barriers to essential obstetric and child care, building on the experience under previous Bank health projects; and (c) I China: Issues and Options in Health Financing, August 12, 1996. 2 China Responds to AIDS. HIV/AIDS Situation and Needs Assessment Report, MOH and Joint UN Progranune onHIV/AIDS, October 1997.  Project Appraisal Document Page 4. China Health Nine Project cause the provinces and counties to significantly increase resources available for preventive health, especially for maternal and child care. 3.2 The Improved Prevention and Control of HIV/AIDS/STDs and Other Blood Borne Infections Component, or the HIV/AIDS/STDs Component, would assist the Government to substantially improve the prevention and control of the new health problems arising from emergence of HIV/AIDS and the reemergence of STDs in China. The main strategy would be to implement comprehensive multi-sectoral approaches based on successful experiences in various parts of the world and the experiences already gained in China, including the strengthening of the national capacity to plan and implement such programs, and the carrying out of comprehensive programs in selected high-risk populations of the country. C: Project Description Summary 1. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown): M.~. Project activities are grouped into two main components, covering: A. Improved Maternal Health and Child Development; B. Improved Prevention and Control of HIV/AIDS/STDs and Other Blood Borne Infections; and a third, Component C, for Project Coordination and Support by provincial and central levels. A. Improved Maternal Health and Child Development (MHCD) Al. Improved Quality of Basic MHCD Care Services. This Policy, 25.1 26.7 subcomponent will support: (i) basic mothtr and child health package; (ii) Physical, improved matemal care through systematic prenatal care, appropriate obstetric Institution care, labor and delivery care, and effective management of high-risk Building pregnancies; (iii) integrated sick child care through effective management of childhood illness, malnutrition, and newborn care; and (iv) improved well-child and systematic newborn care through nutrition interventions and preventive care. A2. Improved Family and Community Participation and Education. Policy 6.6 7.0 This subcomponent will support: (i) premarital counseling services; (ii) action- oriented health education materials for families; (iii) prevention and treatment of priority diseases; (iv) promotion and monitoring of nutrition; (v) parenting skills to foster children's psychosocial development; and (vi) design and production of child development and maternal health information, education, and communication materials.  Project Appraisal Document Page 5. China Health Nine Project A3. Improved Management of MCHServices. This subcomponent will Institution 6.7 7.1 support: (i) imnproved planning and coordination of MCH services; (ii) Building improved quantity and quality of supervisory support between levels; (iii) improved function and use of MCH management information and surveillance systems; and (iv) operational research. A4. Improved Health Workers' Training. This subcomponent will Policy 12.1 12.9 improve the technical and clinical competence of MCH staff through a comprehensive training program. A5. Improved Access to MCH Care Services. Through poverty relief Policy, 2.8 3.0 funds for the very poor, this subcomponent will develop and implement a Institution program of medical financial assistance, including an essential package of Building services and use of finance mechanisms. B. Imoroved Prevention and Control of HIV/AIDS/STDs and Other Blood Borne Infections B 1. Improved and Expanded Policy Environment. This subcomponent Policy, 4.3 4.6 will: (i) raise awareness and commitment at all levels; (ii) strengthen multi- Institution sectoral collaboration; (iii) build capacity of public and private sectors, and Building non-government institutions; (iv) integrate HIV/AIDS/STDs and other blood bome infections (BBI) programs into other health services; and (v) support policies on syndromic management. B2. Improved HIVIAIDSISTDs Interventions and Support. This Policy 13.5 14.4 subcomponent will support: (i) innovative and cost-effective programs to prevent and control HIV/AIDS/STDs; (ii) changes in behavior to reduce risks; (iii) improved STDs management; (iv) condom social marketing; and (v) patient care and support. B3. Improved HIVIAIDS/STDs Surveillance System. This Policy 6.6 7.0 subcomponent will develop and expand a surveillance system to monitor epidemic and behavioral trends, influence policy, inform project design, and measure the impact of interventions.  Project Appraisal Document Page 6. China Health Nine Project B4. IprovedManagementofBlood Transfusion Services. This Policy 8.9 subcomponent will support: (i) transition from a voluntary paid donor supply of blood to a quality assured programn of voluntary unpaid blood donations; (ii) quality assurance for blood testing, processing, storage and delivery; (iii) development, dissemination, and promotion of clinical guidelines for good transfusion practice by clinicians; (iv) training of blood service and clinical staff, and (v) increased resources to support the voluntary blood donation programn. Increasing the availability of a safe blood supply will not only reduce transmnission of BBIs but should increase availability of blood for critical transfusion requirements such as trauma and maternal hemofhage. C. Proiect Coordination and Suppor Institution 7.3 7.8 Building, T'his national level component will help to: (i) develop and implement policies Project necessary to attain project objectives; (ii) provide necessary coordination and Management support to the provinces to plan, supervise, monitor and report on project progress; (iii) facilitate and provide technical assistance to the provinces; (iv) implement research and other activities best suited to be implemented at the Central level; (v) replicate successful practices to non-project areas; and (vi) support the establishment of a National AIDS Reference Laboratory (NARL). . PROJECT TOTAL _93.9 10-0.01 Note: Differences due to rounding. 2. Key policy and institutional reforms supported by the project:- T'he proposed project includes strong policy and institutional reform measures. 2.1 Under the MHCD Componen, the project would: (a) revise and improve the case management protocols for maternal and child care and health workers' training on improved methods and materials; (b) introduce early child development progrwns; (c) strengthen MCH management at all levels; and (d) establish a system to improve the access of the poorest families. 2.2 The HIV/AIDS/STDs Component would include a number of policy measures, including the training and licensing of private practitioners dealing with STD patients, maintaining anony*lity of HIV/STD patients, provide outreach to sex workers and their clients, and drug users, harmn reduction measures, and school health and sex education. This component will also support a national reference center to improve the technical capacity in this new field. 2.3 The blood transfusion services subcomponen would assist the Government in initiating a major change in China's practice of blood collection, testing, and clinical use. Specifically, in addition to helping the Government implement the 1997 Blood Donation Law by moving to a voluntary unpaid system of blood donation, the project would also improve safety in testing, storage, and transport of blood, and initiate training and education to improve the use of blood.  Project Appraisal Document Page 7 China Health Nine Project 3. Benefits and target population: 3.1 Through the MHCD Component, the project will most directly benefit about one million mothers and their newborns each year in 113 of China's poorest counties located in five relatively poor provinces (Guizhou, Hainan, Hunan, Jilin, and Xinjiang) from higher quality and greater access to health services, which have been tested in China and are known to contribute to reductions in MMR and IMR. The Mid- term Evaluation of the Comprehensive MCH Project (Cr. 2655-CHA; Health VI) has shown that the project can be expected to result in significant reductions in the IMR, U5MR, and MMR in the targeted poverty designated counties to levels approaching the national average rates. In addition to these health status benefits, households will also benefit in the following ways: (a) ensuring economic productivity of the families by saving the lives of adult women; (b) ensuring the continuation of non-market produced household goods and services; and (c) reducing medical care costs for MCH related services (especially hospital delivery care) for the most impoverished families in these poor counties via the locally administered poverty relief funds. 3.2 While the direct benefits of the HIV/AIDS/STDs Component will benefit those at highest risk of contracting HIV, STDs, or BBIs in 3 1 prefectures in the four target provinces (Fujian, Guangxi, Shanxi, and Xinjiang), it is expected that effective dissemination of successful strategies and practices developed in the project provinces will significantly strengthen the capacity of the Central level to oversee the prevention and control of these diseases, thereby benefiting the whole country. The reported cases of HIV in the four project provinces are nearly 2,000 but the real numbers are estimated at ten times higher. The reported cumulative STDs cases were 218,089 since 1993. Considerable benefits will be realized for those households and families which do not become infected with or can be successfully treated for HIV/AIDS/STDs. The international research findings documented in the recently published World Bank book, Confronting AIDS: Public Priorities in a Global Epidemic, 1998, show that these benefits can be considerable. 3.3 In addition to those already infected with HIV/AIDS/STDs and other BBIs, many people are at risk of infection, especially those who engage in high risk behavior such as intravenous drug use, use or provide commercial sex. Commercial blood and plasma donors have also infected or placed at risk patients, through unsafe blood or plasma collection practices. This population size varies from province to province as the modes of transmission differ in each province, but it is likely that, at a minimum, one to two percent of the population in these four provinces are at risk of HIV/STDs, amounting to 1.3 to 2.6 million persons. In addition, to the extent that a number of persons involved in inter-provincial or international trade within the borders of the four provinces have high risk behaviors, they will also be direct beneficiaries. Since there are many internal migrants within China today, especially to the provinces of Fujian, Guangxi, and Xinjiang, this target population could amount to additional millions of persons. The ultimate impact of the prevention program, and the replication of successful models of intervention, is expected to reach the general population, far beyond the targeted high-risk populations. 3.4 The blood transfusion services subcomponent would contribute to help the Government make dramatic changes in the collection, handling, and use of blood in medical care. The present collection is overwhelmingly through mandatory and commercial methods, which the Government wants change in favor of voluntary methods, and the magnitude of blood product use in medical care in China is considered to be too high, which the Governnent wants to rationalize. The most direct beneficiaries of improved management of blood transfusion services under the project are those who obtain blood products during the treatment of their health problem(s), at the risk of transmission of BBIs, including hepatitis and HIV. Since HIV/AIDS, Hepatitis B, Hepatitis C, and many other infections can be transmitted via untested blood, and since the cases of AIDS in Shanxi Province (and to a lesser extent Xinjiang Province) were infected by  Project Appraisal Document Page 8 China Health Nine Project unsafe blood collection practices, the most direct beneficiaries would be those residing in those two localities. Improved blood supply will directly benefit women in the project areas by addressing the number one cause of maternal mortality and morbidity, which is post-partum hemorrhage. As project experience spreads, residents of other provinces will also become beneficiaries, especially where there is a significant share of blood donated from commercial donors. 3.5 There are seven main institutional benefits of the project. First, the MHCD Component will help to increase public resource allocation for basic preventative health services. Second, it will introduce an improved health workers training program. Third, it will introduce improved management practices into the system of maternal and neonatal care. Fourth, it will introduce participatory methodology for the development of health education materials, counseling, and communications strategies, which will also strengthen program evaluation. The HIV/AIDS/STDs Component will strengthen central and provincial government capacity to plan and implement effective programs to prevent and control these diseases. Fifth, improved management of blood transfusion services will develop effective national policies to improve the collection, quality, and use of blood products. Sixth, it will also strengthen provincial and local efforts to rationalize blood products use in health service provision. Finally, the national HIV/AIDS laboratory will develop irnproved testing methods and procedures to improve HIV testing accuracy and train provincial and local personnel in implementing them. 4. Institutional and implementation arrangements: 4.1 Implementation. The project will be implemented over six years, beginning in early FY00. The Ministry of Health (MOH) will be responsible for overall coordination of project implementation and conduct of national level activities. MOH has established a Project Leading Group chaired by the Minister of Health with representatives of the MOH Foreign Loan Office (FLO) and the Departments of Maternal and Child Health (MCH), Disease Control (DCD), Medical Administration (MAD), and Finance and Planning. FLO will act as secretariat of the Leading Group, coordinate project management, and hold responsibility for reporting requirements. The responsibility for technical coordination and direct supervision of implementation will lie with MOH departments, including MCH, DCD, and MAD. For each of the MHCD and HIV/AIDS/STD Components of the Project, MOH has also established one technical group for regular coordination and guidance of project implementation activities, one project implementation office responsible for day-to-day project work, and one panel of experts to provide technical guidance and review annual plans under the respective parts of the project. 4.2 Most project activities are expected to be implemented in the provinces and the counties. Their management and coordination will be the responsibility of the provincial government, primarily through the provincial bureau of health (BOH), under the guidance of FLO/MOH, and with institutional arrangements similar to that of the Center. Each participating health bureau will maintain a project office, under the direction of the Project Director, to handle the logistics of implementation, including procurement and disbursement, preparation of workplans, progress monitoring and reporting, coordination with the expert and leading groups, and other tasks as needed. Following the pattern of higher levels, project implementation in the counties is the responsibility of the bureau of health, with guidance from provincial level and from the county leading group. 4.3 Financial management. (See Annex 6 for detailed description). As for other Bank supported health projects, financial management will be the responsibility of the project units, the projects offices in MOH and BOH at each level, and the Ministry of Finance (MOF) and Finance Bureau (FB) at each level. There will be five Special Accounts for the project located in commercial banks acceptable to the Bank, and managed by MOF: one for Component A and Component C; and one for each province under Component B. The internal disbursement procedures will involve the Project Management Offices (PMOs)  Project Appraisal Document Page 9 China Health Nine Project and FBs at each level. Separate project accounts will be kept in the project units and offices at each level. Each project unit and project office will prepare regular financial reports to submit to the higher level project office. FLO will consolidate provincial reports and prepare the final financial report for the whole project. The project accounts and financial reports will be audited by the State Audit Admninistration or its local offices, in accordance with standard practice in China, which has been found acceptable to the Bank. 4.4 Procurement and disbursement. (See Annex 6 for detailed description). FLO will oversee project procurement and will be responsible to ensure that the Bank Guidelines are followed. Details of the procurement arrangements are provided in Annex 6. The project will use the same arrangement as in other health projects for submission and validation of claims through the project office at each level, with review by the BOF at each level before being passed to the level above. Funds are transferred from level to level through commercial banks nominated by the BOF at each level. 4.5 Monitoring and supervision. Two Project Inplementation Plans (PIPs) have been prepared by and agreed with MOH and the provinces, which detail implementation arrangements. The project will be monitored through twice yearly progress reports containing essential data on the implementation of the project components and project management. Baseline data for the project monitoring indicators will be collected and reported by June 1999, and then included in the regular progress reports. This monitoring will be supplemented by supervision visits, conferences, and progress reviews led by the Central level. Achievement of development objectives will be assessed through a Mid-term Evaluation scheduled for 2002, and through a project completion review jointly produced by the Borrower and the Bank. D: Project Rationale 1. Project alternatives considered and reasons for rejection: 1.1 MCH service improvement without program to improve access. The main rationale for this component was to help the Government accelerate the replication of the successful experience under the Health VI Project to additional areas with poorest population. There was a question whether access improvement measures should be left out of the project for the sake of simplicity. However, based on the results of the Functional Coordination Study and the Mid-term Evaluation carried out under the Health VI Project, the technical team felt that the objectives of reaching the poorest families would not be realized without assistance to improve their affordability. Therefore, it was felt that project preparation should proceed to include access improvement measures already tested under the Health VI Project. 1.2 HlV/AIDS/STDs prevention and control mainly through information, education and communication (IEC). There was a proposal to focus mainly on IEC activities on the grounds that HIV/AIDS/STDs were not yet very severe in China. This was rejected because, to avoid an impending crisis as evidenced by recent years' rates of spread, it was felt important to also implement all other aspects of a successful prevention and control program with full-scale multi-sectoral involvement. 1.3 HlV/AIDS/STDs prevention and control throus-h Government agencies only. There was a proposal that prevention and control of these diseases should only be handled by government agencies. This was rejected on two grounds. First, private practitioners were already treating a very large number of STD patients in China, reportedly larger numbers than the government clinics in many areas. Many patients prefer to avoid Government clinics but would not mind visiting private practitioners. Including private practitioners in the progran would help improve their skills and establish an appropriate surveillance program. Second, although not very significant in China at this time, non-governnent agencies have the potential to be even more effective in reaching high-risk groups.  Project Appraisal Document Page 10 China Health Nine Project 2. Major related projects financed by the Bank and other development agencies (completed, ongoing and planned): Bank-Financed Upgrading rural health services. China: Rural Health and Medical Completed in Education Project (Cr. 1472-CHA) December 1991. lmnprovement of China's capacity to design China: Disease Prevention Project S S and implement health promotion (Cr. 2794-CHA) programs, including HIV/AIDS and STDs. Prevent and control vaccine- preventable diseases through improved immunization. Improvement of quality and access of China: Comprehensive Maternal and HS HS MCH care in China's poorest provinces. Child Hcalth Project (Cr. 2655-CHA) Basic health services as part of poverty China: Southwest Poverty Reduction S HS alleviation. Project (Ln. 3906-CHA.Cr. 2744-CHA) Safe blood transfusion services. Vietnam: Safe Blood Project Comprehensive support for Govers nent's India: National AlDS Control Prdi ect Completed i March efforts to control HIVEAIDS epidemic. (Cr. 2350-IND) 1999. Support to implement Government policy Indonesia: HIVIAIDS and STDs S S to reduce the incidence and effects of Prevention and Management Project HIVp AIDS and STDs. (Ln. 3981-ND) Other Development Ancencies MCH care in poor rural areas China: UNICEF supported Project to Improve MCH Services at the Grass Roots in 300 Counties. Rural health insurance reformn China: World Health Organization (WHO) supported Participative Study of Cooperative Medical System Schemes in 14 Counties. China: Harvard/UNICEF supported Project on "Health Care FBiehresrfvyChi: Sou Pvrna's Rural Poor H IP (Implementation Progress); DO (Development Objective). Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory).  Project Appraisal Document Page 11. China Health Nine Project 3. Lessons learned and reflected in the project design: The main lessons learned from previous projects are summarized below. 3.1 The Comprehensive MCH Project (Cr. 2655-CHA: Health VI) has demonstrated that a carefully selected package to improve MCH services and increase access can result in dramatic reduction in maternal and child mortality and morbidity. In addition to improving training for health workers and providing basic equipment and additional management resources, under this project China piloted public funding of measures to improve financial access for the very poor, using an earmarked fund and a carefully designed benefits package, with defined standards for services eligible for reimbursement. This link between service quality and provider payment has proved to be an important tool for improving care and containing costs, and will be used in the new project. 3.2 The Disease Prevention Project (Cr. 2794-CHA: Health VII), which is currently implementing smaller programs for the prevention and control of HIV/AIDS/STDs, has provided a number of lessons toward the development of the H[V/AIDS/STDs Component in this project. Main models came from the design of the behavior risk surveillance, for the policies toward the private practitioners of STD care, outreach for sex workers, and the design of the community-based interventions. 3.3 Previous experience in the implementation of Bank supported health projects in China confirms the high level of commitment and ownership of the project by local governments and health bureaus, and the strong motivation for success. But the experience also highlights difficulties faced by implementing units in poor and remote counties, due to their own shortage of resources and to constraints imposed by Bank and government procedures applied through four or five administrative levels. These difficulties include: (a) late or inadequate mobilization of counterpart funds; (b) slow fund flow from higher levels (including Bank reimbursement) to county and township implementing units; and (c) some dissatisfaction with the costs, delays, and rigidity in obtaining equipment for low level health facilities through large procurement packages at national level. This project's implementation, management, and reporting arrangements will address these issues. 4. Indications of Borrower commitment and ownership: 4.1 The level of Borrower commitment is evident from the long-standing attention paid to the project by the core central agencies, the high level of involvement of participating provinces and counties in the steps of preparation, preparation by the Borrower of the PIPs, financial commitments made by the participating provinces before appraisal, and readiness to commence activities which are eligible for retroactive financing. In each project province, the project proposal was prepared based on individual counties' contributions and with their full participation. Each of the four workshops held between the Bank missions and the clients included representatives of planning, finance and health bureaus of each of the eight project provinces included under the two components, in which their participation was enthusiastic and supportive. 4.2 China's commitment to improve the population's basic and preventive health, especially maternal and child health, has always been well-known. The Government's resolve to confront the problems of HIV/AIDS was amply demonstrated during the international donors' conference, held in Beijing in November 1997, in which the Government openly addressed issues of concern, and requested international assistance.  Project Appraisal Document Page 12 China Health Nine Project 5. Value added of Bank support in this project: 5.1 While the project is based on the Government's concept and policy priorities, the Bank's support has numerous benefits. Bank involvement affords three important contributions: (a) technical expertise and inputs; (b) policy backing and promotion; and (c) possibility of large investment and experience with large, integrated health projects. First, the Bank's worldwide experience helps bring the best international technical practices to China in both maternal and child health and in the prevention and control of HIV/AIDS/STDs. This aspect of the Bank relationship is valued most by China's health officials. Second, the Bank can be most effective in raising national awareness, commitment, and policy improvements that are required to implement early child development activities, and prevent and control H1V/AIDS/STDs. It is also essential to carefully handle China's sensitivity on HIV/AIDS/STDs issues with mutual trust, which the Bank is capable of doing because of the excellent current relationship. Third, China has implemented a large number of very small activities through other external agencies to control HIV/AIDS/STDs. However, the HIV/AIDS problem is complex and exponentially greater given the country's size, and China now needs a large-scale integrated program. In addition, China requires external technical assistance working in close coordination in a number areas. The proposed IBRD/IDA blend of lending can also help finance any equipment need, and the technical assistance can be financed from the project as well as from other sources that are expected to join in the Bank's efforts. E: Summary Project Analysis (detailed assessments are in the project file, see Annex 8) 1. Economic (see Annex 4 for a detailed analysis): 1.1 The economic analysis covers the following: (a) linkage to the CAS; (b) benefits and target population; (c) rationale for public sector investment in the project; (d) benefit-cost and cost-effectiveness analysis; and (e) poverty assessment. The project's three main components are estimated to have a potential internal rate of return (IRR) of a minimum of 39 percent for the benefits derived from the MHCD Component, at least 36 percent for the HIV/AIDS/STDs Component, and at least 5,000 percent for the blood transfusion services subcomponent. It is estimated that all three components are highly cost-effective relative to many other intemationally investigated health sector investment options. 2. Financial (see Annex 5 for a detailed analysis): 2.1 The financial analysis covers the assessment of (a) Affordability and Sustainability, and (b) Financial Management. Financial reporting arrangements are in Annex 6. 3. Technical: 3.1 Attention has been given to ensure that the technical design follows the established intemational best practices adapted for the specific needs of China's conditions. The MHCD Component follows the approach successfully applied in the ongoing Health VI Project, which was developed following the model under the programns supported by UNICEF, WHO and UNFPA. Special attention was paid to ensure that the case management protocols complied with the most appropriate practices recommended by WHO and UNICEF and adapted for China. The design of the HIV/AIDS/STDs Component has been based on the well-accepted successful intemational experience suitably adapted for the conditions prevailing in China. The experience gained under the pilot activities implemented in the Health VII Project provided important insights for the technical design. Finally, the blood transfusion services subcomponent has emphasized increasing voluntary collections of blood since current practice of heavy dependence on mandatory or paid collection was not considered appropriate. Similarly, the best international practices were considered and used to design the improvements in the handling of blood.  Project Appraisal Document Page 13 China Health Nine Project 4. Institutional: 4.1 Borrowing Agencies. The Ministry of Finance and provincial bureaus of finance are well experienced in the use of Bank funds in investment projects, have taken an active role in project preparation, and have the competence to manage project special accounts and related responsibilities. Although the recent reorganization and staff reductions have strained MOF's coordination and overseeing capacity, MOF has assured continued adequate support. The Ministry of Health has over 15 years of successful experience in preparing and supervising the implementation of Bank supported projects. In 1997, the Bank's Quality Assurance Group cited the Comprehensive MCH Project (Cr. 2655-CHA) as an example of outstanding project supervision, which is, in part, a testament to this capability. All provinces participating in this project, as well as many project counties, have previous experience of implementing Bank supported health projects. 4.2 The main challenges or risks to successful and timely project implementation of the MHCD Component would be inadequate supervision of the project activities especially at the lower levels and in the most remote areas. Early implementation of the management training subcomponent at the county levels should reduce such risks. On the HIV/AIDS/STDs Component, the main constraint could be inadequate commitment and leadership from the high-level officials and insufficient inter-sectoral coordination. This concern should continue to receive high attention from the Bank and the Central Ministries. 5. Social: 5.1 A social assessment and stakeholder analysis have been integrated into both the preparation and design of both project components, MHCD and HIV/AIDS/STDs, with particular attention to the following social aspects. 5.2 First, for the MHCD Component, project activities have been targeted to the poorest counties in the project provinces, which were primarily selected based on their poverty index, using national and provincial poverty data. Women and children will be the major beneficiaries. For the HIV/AIDS/STDs Component, project activities have been targeted to the high-risk populations for these diseases in the project provinces, who would be the primary beneficiaries. Eventual benefits would also accrue to residents of other areas as the project experience spreads. 5.3 Second, a social inquiry of health issues was conducted, combining a baseline survey of local traits (demographic, social, cultural, and ethnic factors) with an assessment of income, health care status, and accessibility to health care facilities. Third, the participatory approach adopted for preparation of other Bank supported China health projects has been applied and strengthened, to effectively target the poor, appropriately design project activities, and effectively provide incentives for beneficiary performance. For the MHCD Component, a problem-oriented, strategic planning approach has been followed which aims at addressing the needs of villages and families in the project proposals. Under the HIV/AIDS/STDs Component, involvement has been maximized of social organizations, NGOs, and other relevant groups in project preparation and implementation. Stakeholder consultation and participation have been detailed in the project proposals and are summarized below. Fourth, the project includes a comprehensive sample survey of project beneficiaries (conducted at the start, mid-term, and close of the project) to systematically monitor project impact on local public health. 5.4 Minority nationalities in the project areas. National minorities make up approximately six percent of China's total population, but the needs and concerns of minority nationalities have been identified as a specific topic of the social assessment and minorities have been identified as specific  Project Appraisal Document Page 14 China Health Nine Project stakeholders during project preparation. The proportion of minority nationalities is particularly high in the Xinjiang Uygur Autonomous Region. To the extent that members of these minority nationalities are represented among the very poor in the project counties, they will particularly benefit from project initiatives. Issues of concern to minorities will continue to be monitored and addressed through the participatory aspect of project implementation. The inclusion of "nationality" as a specific data variable in the project survey instruments for baseline, mid-term, and project completion assessment, will enable comprehensive and comparative analysis of issues for minority nationalities. In summary, the project has been designed to ensure that the minority nationalities in the project areas fully benefit from the project in accordance with O.D. 4.20.' 5.5 Resettlement. No resettlement is anticipated in the project or as a consequence of the project. However, in case any new land acquisition is found necessary during project implementation, a set of resettlement guidelines was agreed during the negotiations, following recent practices. 6. Environmental assessment: Environmental Category [C]. The project is expected to have no adverse environmental impact. Attention will be given to issues of disposal of medical waste and use of energy saving technology. 6.1 Medical waste. Medical waste hazards in small health facilities are not generally of high volume or toxicity. All facilities will collect and dispose of medical waste, including needles and syringes, separately from household waste, and in accordance with WHO's recommended policy and the national infection control procedures. 6.2 Energy saving. Energy saving stoves are now available in China and will be introduced into the health facilities improved by the project. Solar water heaters will be introduced in those areas where the technology is known. 7. Participatory approach: 7.1 MOH and the project provinces have conducted consultation with a range of stakeholders at each adlministrative level, as well as exchange of views with other relevant groups. Apart from many health institutions and agencies, the sectors consulted included planning, finance, poverty alleviation, education, women's association, and international public health agencies such as UNAIDS. Targeted community consultation and participation have been intensively carried out in both project components. In the MHCD Component, selected families and villages have been mobilized in a process of consultation and feedback for project activity planning, and will participate in extensive education and training programs during project implementation. Under the HIV/AIDS/STDs Component, project design includes community intervention in project areas and high-risk groups. Moreover, all relevant sectors have been involved in intervention activities, including social organizations, NGOs, local governments, public security, schools, entertainment places, as well as AIDS prevention associations. 3For this project, the tenn "ethnic minorities" as used in O.D. 4.20 has the same meaning as the term "Minority Nationalities" referred to in the Chinese Constitution.  Project Appraisal Document Page 15 China Health Nine Project Beneficiaries/community groups IS/CON IS/COL Academic institutions and experts CON/COL CON/COL Local govemment COL COL Intermediary NGOs CON/COL COL Other donors IS/CON IS/CON IS: Information sharing; CON: Consultation; COL: Collaboration. F: Sustainability and Risks 1. Sustainability: 1.1 Institutional sustainabilitv. The main emphases of the project are on the methods and the best practices to accomplish those activities that are already a high priority for the Central as well as for the local levels in the project areas. To ensure lasting effects, the project focuses on policy development, institutional strengthening, technical assistance, and training, instead of hardware items. It is unlikely that the project will suffer from a lack of continued interest or the inability to maintain and further improve on the practices and technical know-how introduced and further strengthened by the project. 1.2 Financial Sustainabilitv. The financing of implementation and maintenance of project activities will require significant increases in the budgetary resources from the provincial and county levels, but these requirements are small and quite affordable compared to present budgetary allocations, and the growth- trends of the concerned entities' budgets. 2. Critical risks (reflecting assumptions in the fourth column of Annex 1): 1. Failure to provide necessary S This has been a chronic risk in all health projects in counterpart financing to China requiring continuous efforts to resolve, and it is implement the project. expected to continue to a certain extent in this project. To minimize this risk, the project design takes this into account and allocates appropriate levels of counterpart funding. 2. Failure to provide adequate S Adequate allocations for the poverty relief funds are a allocations to funds designed to condition of the project and will be strictly monitored improve poorest families' during implementation. access to MCH services. 3. Failure to implement M Since the stated policy measures are critical, their essential policy reform institution and implementation will be strictly measures to enable effective monitored. control of HIV/AIDS and STDs.  Project Appraisal Document Page 16 China Health Nine Project 4. Failure to timely develop M This created a considerable problem under the Health and distribute clinical VI Project but the past experience, and the already protocols and health-workers' accomplished development of protocols/materials, training materials should reduce this risk to an acceptable extent. Overall Risk Rating: M I____________________ Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N (Negligible or Low Risk). 3. Possible controversial aspects: 3.1 The blood supply may fall to critical levels during the transition phase between the current paid donors program and a truly voluntary unpaid donor program, due to a decline in paid donations and a slow rate of increase in voluntary donation. This risk is being managed by prioritizing development of the voluntary blood programn and providing adequate resourcing. There will be a phasing of the introduction of the volunteer program and in these ways it is hoped to minimize the risk. 3.2 If early in this project more blood components are processed before the assurance that there is a safe blood supply and these components are transfused without strict clinical guidelines, then an increase in the transmission of all blood borne infections, including HIV/AIDS, is a likely outcome. This risk is being managed by strict regulations on the funding for this part of the project. G: Main Loan Conditions 1. Board Conditions: There are no Board conditions. 2. Effectiveness Conditions: 2.1 Project Implementation Agreements shall have been executed between the Borrower and at least two Part A provinces and two Part B provinces. 3. Other Conditions A. Conditions Concerning: the Whole Project 3.1 The Borrower shall maintain throughout the project period a Project Leading Group, a Project Coordination Group, and a Project Management Office for the whole project. In addition, for each of the MHCD and HIV/AIDS/STDs Parts of the project, the Borrower shall maintain a Panel of Technical Experts. 3.2 The Borrower shall prepare and furnish to the Bank semi-annual progress reports covering all aspects of the project in accordance with the performance monitoring formats and indicators acceptable to the Bank. 3.3 The Borrower shall, no later than December 31, 2002, carry out a Mid-term Evaluation of the Project, in accordance with the mutually agreed terms of reference and arrangements, and provide the report to the Bank within six months thereafter.  Project Appraisal Document Page 17 China Health Nine Project 3.4 Signing of the Project Implementation Agreement with the Borrower will be an additional condition of disbursement for each province participating in the project. B. Conditions Concerning Component A (MHCD) of the Project 3.5 Each project province shall ensure that all project counties implement and operate the medical financial assistance program, to subsidize at least five percent of the county's poorest populations, in a manner satisfactory to the Bank. 3.6 Each project province shall ensure that operational research on MCH service financing to the poorest families and MCH service utilization, is carried out in at least three of its project counties, in accordance with guidelines acceptable to the Bank. 3.7 Each project province shall submit its civil works plan to the Bank for review prior to commencing any civil works under Component A. C. Conditions Concerngn Component B (aIV/AIDS/STDs) of the Project 3.8 By October 31 of each year, each project province shall submit to the Borrower, for review and approval, a detailed annual plan and proposal for implementation of HIV/AIDS/STDs related interventions. The Borrower would appraise these plans and proposals through the Panel of Technical Experts and, by November 30 of each year, submit to the Bank a summary of these plans, proposals and comments for the Bank's review and no objection before these are implemented. 3.9 Each project province shall establish policies to: (a) provide training for the private practitioners treating STD and HIV patients; (b) license trained and qualified practitioners; (c) take strict measures to prevent the treatment of STDs by unlicensed and unqualified practitioners; and (d) treat HlV/AIDS/STD patients based on a policy of maintaining the confidentiality of the patients. 3.10 Each project province shall implement measures designed to ensure that: (a) no project fund shall be used for the expansion of blood fractionalization beyond the levels established by the baseline survey conducted by each province of blood center practices in blood collection, processing and use; and (b) the project-supported blood centers shall not sell blood or blood plasma for commercial fractionalization or other commercial uses. 3.11 Each project province shall: (a) tabulate a baseline status of the situation, in a manner agreed with the Bank, and carry out annual audits of blood center activities; and (b) maintain enforcement actions against the illegal collection of blood. D. Conditions Conceming Component C of the Project 3.12 By November 30 of each year, the Borrower shall submit to the Bank, for review and no objection, an annual plan and programs to be implemented under the National AIDS Reference Laboratory included under Component C of the Project.  Project Appraisal Document Page 18 China Health Nine Project H: Readiness for Implementation [XI The procurement documents for the first year's activities have been prepared. [X] Project Implementation Plans have been prepared and reviewed for both main project components. I: Compliance with Bank Policies [X] This project complies with all applicable Bank policies. Task Team Leader/Task Manager: Jagadish Upadhyay bt ' - ' < ? < Sector Manager- Alan Ruby n Country Director: Yukon /7  Project Appraisal Document Page 19 China Health Nine Project Annex 1 Annex 1 Project Design Summary L Sector-related CAS Goal: (Goal to Bank Mission) 1. Promote human development through meeting the basic health needs of the rural poor, with priority on maternal and child health care and priority diseases. 2. Implement programs for prevention and control of communicable and non- communicable diseases, including health and education. II. Project Development Objective: (Project Development Objective to Sector-Related The project will assist the government to: CAS Goal) (1) Reduce maternal and child mortality * Improved service quality and * Health Assumption: and morbidity and improve child access to poor families. information * Improved Government survival and development in the * Reduced maternal and child system and commitment and poorest areas of China. mortality and morbidity. special surveys. allocations for preventive care. * Implementation of programs to improve affordability of the services. * Multi-sectoral cooperation. (2) Prevent and control morbidity and * HIV seroprevalence. * Surveillance * Funds will be allocated and mortality due to the human * STD prevalence. reports used for this intended immunodeficiency virus (HIV), purpose. acquired inunune deficiency syndrome * Adequate management of (AIDS), and sexually transmitted central and provincial diseases (STDs), by implementing government funds. comprehensive and multi-sectoral * Timely and adequate public health programs at the availability of counterpart provincial levels, and by building funds. technical capacity at the Central level.  Project Appraisal Document Page 20 China Health Nine Project Annex I m1. ODutputsl: * Regular (Outputs to Project morutoring of Development Objective3 Component A. Improved Maternal Health inputs and other and Child Developmnent (MHCD) results by each Assumption: of the project * Timely provision of agreed levels, i.e., counterpart financing. counties, * Establishment of an provinces and effective Central level n sthe Central project monitoring system. level * Regular supetrision by * Semi-annual different Goverment levels progress reports and the Bank. * Bank missions * Mid-term Evaluation _______ ____ Al. Improved quality of basic maternal and child health (MCH) care services, including: (a) maternal care; (b) sick child management; and (G) well-child care and svstematic newborn care, including nutrition and cognitive development. (a) Maternal care. * # (%/a) pregnant women with * Progress reports Assumption: three or more prenatal * Improvement in supply will examinations, increase utilization. * # (.) hospital delivery rate of * Health education and normal and high risk access components will be r:egnancies, respectively, effectively implemented. * # (%) postnatal visits for post- partum examination within 42 days of delivery. (b) Sick child management. * # (/) village doctors * Progress reports Assumption: Adequate conducting health education on management of supply and and care for sick child resupply of dougs, and other management in their critical supplies and communities, equipment, and that upgraded training has reached village doctor level. lcEnd-of-project statement of milestone reached through the implementation of each component (each output corresponds in number to its respective component).  Project Appraisal Document Page 21 China Health Nine Project Annex 1