world bank document · health status of the population, and to empower communities to improve their...

Document ofThe World Bank

Report No: 18980-BO

PROJECT APPRAISAL DOCUMENT

ONA

PROPOSED

ADAPTABLE PROGRAM CREDIT

IN THE AMOUNT OF SDR 17.8 MILLION(US$25 million equivalent)

TO

THE REPUBLIC OF BOLIVIA

FORA

HEALTH SECTOR REFORM PROJECT

March 31, 1999

Human Development DepartmentBolivia, Paraguay, Peru Country Management UnitLatin America and the Caribbean Region

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CURRENCY EQUIVALENTS(Exchange Rate Effective January 15, 1999)

Currency Unit = Boliviano (Bs)US$1 = Bs 5.66

FISCAL YEARJanuary 1 to December 31

ABBREVIATIONS AND ACRONYMS

APL Adaptable Program LoanIDA International Development AssociationCAS Country Assistant StrategyCDF Comprehensive Development FrameworkDHS Demographic and Health Survey (Encuesta Demografica de Salud)EPI Expanded Program on ImmunizationFARAH Financial Accounting, Reporting and Auditing HandbookFIS Social Investment Fund (Fondo de Inversi6n Social)HIPC Highly Indebted Poor CountriesIEC Information, Education and CommunicationIDB Inter-American Development BankIMCI Integrated Management of Childhood Illness (Atenci6n Integral de las

Enfermedades Prevalentes de la Infancia)LACI Loan Administration Change InitiativeMAR Resource Allocation Mechanism (Mecanismo de Asignaci6n de Recursos)MBP Mother-Baby Package (Paquete Materno-Neonatal)MSPS Ministry of Health (Ministerio de Saludy Previsi6n Social)NCB National Competitive BiddingNGO Non-Governmental Organization)PA Perfonnance AgreementsPAHO Panamerican Health OrganizationPES Strategic Health Plan (Plan Estrategico de Salud)PIDI Integrated Child Development Project (Proyecto de Desarrollo Integral del Nino)POA Annual Operating Plan (Plan Operativo Annual)PPF Project Preparation FacilityPROISS Integrated Health Development Project (Proyecto Integrado de Servicios Salud)SBS Basic Health Insurance (Seguro Basico de Salud)SNMN National Matemal-Child Insurance (Seguro Nacional de Maternidady Ninez)SNIS National System of Health Information (Sistema Nacional de Informaci6n de

Salud)UGSBS Administrating Unit of SBS (Unidad de Gerencia del Seguro Bcisico de Salud)UNICEF United Nations Children's FundURS Health Reform Unit (Unidad de Reforma de Salud)USAID United States Agency for International DevelopmentWHO World Health Organization (Organizaci6n Mundial de la Salud)

Vice President: Shahid Javed BurkiCountry Manager/Director: Isabel GuerreroSector Manager/Director: Xavier CollTeam Leader: Daniel Cotlear

BoliviaHealth Sector Reform Project

CONTENTS

A. Program Purpose and Project Development Objective ......................................................... 2

1. Program purpose and program phasing ............................. 2..............................22. Project development objective ............................................................ 3

B. Strategic Context ............................................................ 3

1. Sector-related Country Assistance Strategy (CAS) goal supported by theproject ............................................................ 32. Main sector issues and Government strategy ............................................................ 33. Sector issues to be addressed by the project and strategic choices ................................. 4

C. Project Description Summary ............................................................ 7

1. Project components ...................................................... 72. Key policy and institutional reforms supported by the project ....................................... 83. Benefits and target population ........... 8..........................................84. Institutional and implementation arrangements ...................................................... 8

D. Project Rationale ........................................................... 10

1. Project alternatives considered and reasons for rejection .......................... ................... 102. Major related projects financed by the Bank and/or other developmentagencies ........................................................... 103. Lessons learned and reflected in the project design ...................................................... 114. Indications of borrower commitment and ownership ............................................ ....... 125. Value added of Bank support in this project ........................................................... 12

E. Summary Project Analysis ........................................................... 12

1. Economic ........................................................... 122. Financial ........................................................... 133. Technical ........................................................... 134. Institutional ........................................................... 135. Social ........................................................... 146. Environmental assessment ........................................................... 147. Participatory approach ........................................................... 14

F. Sustainability and Risks ........................................................... 15

1. Sustainability ..................................................... 152. Critical Risks ..................................................... 15

G. Main Loan Conditions ......................... 16

H. Readiness for Implementation ......................... 16

I. Compliance with Bank Policies ......................... 16

Annexes

Annex 1. Project Design SummaryAnnex 1 a: Performance BenchmarksAnnex 2a. Detailed Project DescriptionAnnex 2b. Project Management and Operational ManualAnnex 3. Estimated Project CostsAnnex 4a Cost-Benefit Analysis SummaryAnnex 4b Public Expenditures in Health (Table)Annex 5. Financial SummaryAnnex 6. Procurement and Disbursement Arrangements

Table A. Project Costs by Procurement ArrangementsTable B. Thresholds for Procurement Methods and Prior ReviewTable C. Allocation of Loan Proceeds

Annex 7. Project Processing Budget and ScheduleAnnex 8. Documents in Project FileAnnex 9. Statement of Loans and CreditsAnnex 10. Country at a GlanceAnnex 11. Letter of Sector Policy from the Government of BoliviaAnnex 12. Participation and Social Communication Strategies

Map

BoliviaHealth Sector Reform

Project Appraisal Document

BOLIVIALCC6C

Date: March 31, 1999 Team Leader: Daniel CotlearCountry Manager/Director: Isabel Guerrero Sector Manager/Director: Xavier CollProject ID: BO-PE- 60392 Sector: HNPLending Instrument: APL Theme(s):

Poverty Targeted Intervention: [X] Yes [ NoProgram F ia p

APL indicative Financin Plan Etmated ImplmtiWB r...______ _______________ Perod .( ank F-Y)

IDA Others Total Commitment ClosingUS$ m % US$m US $ m Date Date

APL 1 25 57% 19 44 FY1 999 FY2002 Republic of BoliviaLoan/C redit _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

APL 2 25 50% 25 50 FY2002 FY2005 Republic of BoliviaLoan/Credit _____

APL 3 25 42% 35 60 FY2005 FY2009 Republic of BoliviaLoan/C redit _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Project Financing Data[ X] Credit

For Loans/Credits/Others:Amount (US$m): SDR 17.8 m (US$25 m equivalent for APL l); US$75 m for full programProposed terms: [X] MulticurrencyGrace period (years): 10Years to maturity: 40Commitment fee: NAService charge: 0.75

Financing plan:Source Local Foreign TotalGovernment 13.5 13.5IDA 6.2 18.8 25.0Other 1.4 4.1 5.5

Total: 21.1 22.9 44.0

Borrower: Republic of BoliviaGuarantor: N/AResponsible agency(ies): Ministry of Health and Social Prevention

Estimated disbursements (Bank FY/US$M):FY 2000 2001 20.02Annual 7.6 10.7 6.7

Cumulative 7.6 18.3 25.0Project implementation period: 3.0 yearsExpected effectiveness date: September, 1999 Expected closing date: October, 2002Implementing agencies: Ministry of Health and Social Prevention and Social Investment Fund

Contact person: Fernando Lavadenz, General ManagerAddress: Calle Batall6n Colorados, Edificio Batall6n Colorados, piso 3, La Paz-Bolivia

Tel: (5912) 363-401 Fax: (5912) 350-706 E-mail: [email protected]

OCS APL PAD Form: November 4, 1998

Bolivia: Health Sector Reform Project Page 2

A: Program Purpose and Project Development Objective1. Program purpose and program phasing: (see Annex 1)

This Adjustable Program Loan (APL) supports the first phase of the Health Reform Program described inthe Bolivian Government's letter to the World Bank, attached to this PAD (Annex 11). The purpose ofthe program is to help reduce the infant mortality rate by complementing other interventions in education,rural productivity and water and sanitation described in the equity pillar of the Bolivia CAS. The baselineand targets for the infant mortality rate are shown below. The target for 2001 is the target for the CAS asrevised in agreement with the Bank on February 23, 1999 (see details in Annex 1):

,~~~~ ~~~ "'~ '''2O'''O1''' End End Pwgnam

Infant Mortality Rate (per 1,000 births) 67 60 48

The APL would have three phases, lasting approximately three years each. The first phase, initiating in1999 and ending in 2002 with the end of President Banzer's administration, would require a credit ofUS$25 million equivalent. The "End of Project" indicators refer to 2001 to allow time for evaluation tofeed the preparation of a second phase (expected to begin in mid-2002). Phases II and III (if approved)would require about US$25 million each. At the end of phase III, the mortality rates of infants andchildren under 5 years of age in Bolivia would be substantially closer than they are today to the averagerate for Latin America.

The two main Health Reform Program strategies are:

* to increase coverage and quality of health services and related programs that would improve thehealth status of the population, and to empower communities to improve their health status; and

* to strengthen local capacity to respond to health needs.

Many of the Program's elements make the APL the appropriate financing mechanism: (i) the goal ofreducing infant mortality rates requires changes that can only be achieved over the long-term; (ii) theintroduction of new management instruments (described below) requires experimentation, learning-by-doing and adjustment over time; and (iii) the program's success requires that successive governmentscontinue to assign priority to reducing child and maternal mortality, postponing competing objectivessought by politically powerful groups -the Bank's active presence in the sector for the long run mayhelp secure this commitment.

During Phase 1 (1999-2002), (i) the immunization program will be revamped, and new vaccines will beintroduced, (ii) the Seguro Basico de Salud (Basic Health Insurance-SBS) -recently created to expandand refine the Mother and Child Insurance- will be established, and (iii) three new instruments would beput into use: performance agreements (PA), treatment protocols for mothers and children (MBP andIMCI), and a demand driven investment mechanism (MAR). During Phase I, these instruments would beutilized in their most simplified form, closely supervised, and adjusted as necessary. Project support forthose programs would be provided at the national level, except for MAR which would be initially testedin five departments which together represent 81 percent of the Bolivian population and include four fifthsof child deaths.

During phases II and III, the MAR would be implemented nationally, and depending on the successfulimplementation of the SBS, PAs, MBP, IMCI and MAR, more elaborate forms of these instruments


would be incorporated. These might include, for example, extending the use of performance agreementsto municipalities, the introduction of more market-based payment mechanisms under the SBS, the use ofmultiple providers, maternal and child interventions with greater emphasis on third level interventions,and a menu of subprojects with greater emphasis on integrated health interventions.

Triggers for the transition to APL I. The achievement of the performance benchmarks for 2,001 inAnnex la would act as "triggers" to initiate a new stage. These triggers have been chosen to measure: (i)physical implementation indicators, to demonstrate tangible progress in project-related outputs; and (ii)progress in the five areas mentioned in the previous paragraph. Additionally, credit disbursements willneed to be sufficiently high to indicate a need for second phase funding. At the end of Phase I'sexecution, compliance with the APL's objectives and strategies would be reviewed; next steps would beproposed, as would any adjustments necessary for Phase II. The development of a new set of impact andprocess indicators would be among these adjustments.

2. Project development objective: (see Annex 1)

The phase I objectives reflect the program goal of helping to reduce the infant mortality rate. Duringphase I the two strategies of the overall program will be used, namely: (i) to increase coverage and qualityof health services, and to empower communities to improve their health status; and (ii) to strengthen localcapacity to respond to health needs.

B: Strategic Context1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1)

Document number: 17890-BO Date of latest CAS discussion: June 16, 1998

Bolivia's National Action Plan - the basis of the current Bolivia CAS - has poverty reduction as thecenterpiece of the present Governments' development program up to the year 2002. The strategy forattaining this ultimate goal is to implement actions within a framework of four pillars: opportunity,equity, institutionality and dignity. The strategy requires a comprehensive view of attaining the pillarobjectives, working closely with development partners and being accountable for results. Along theselines, the proposed Bolivia Health Sector Reform Project will be the first operation in Bolivia to test aresults-based approach to lending: if intermediate outcome indicators are not achieved, IDA will reviewthe situation with the borrower in an effort to determine the most appropriate remedial measures but willretain the option to suspend disbursements.

This project will contribute to strengthening two of the CAS pillars: (i)equity, by improving access andquality of social services and by reorienting and improving the quality of public expenditures-it willcomplement activities in education, water and sanitation and rural productivity described in the equitypillar of the CAS-; and (ii) opportunity, by introducing reforms that will improve the return ofinvestments in the creation of human capital. The project would directly contribute to improving one ofthe four variables that constitute CAS Core Benchmarks (infant mortality rate), and would indirectlycontribute to the other three core benchmarks (malnutrition, poverty and poverty gap). Project keyperformance indicators (Annex 1) have been built on the basis of the health sector World Bank GroupSelf Evaluation Indicators (CAS Annex B 1).

2. Main sector issues and Government strategy:

Bolivia lags in many sectors in relation to LAC, but in no sector is this as dramatic as it is in health. Whencontrolling for income and education, Bolivia has the worst health performance in LAC, as measured byinfant, child and maternal mortality rates.


Under-5 mortality: While this indicator improved by 40% during the last 15 years, the rate estimatedfor 1994-98 is still a very high 92 per 1,000 (Infant mortality rate, IMR is 67 per 1,000). Most of thechild deaths continue to be due to acute respiratory infections (perhaps 40% of deaths, of which afourth may be due to Hib disease) and diarrehal infections. The improvement was least in perinataldeaths (0 to 1 month), which are often related to insufficient obstetric care.

* Maternal Mortality: While the 1994 DHS estimates the maternal mortality rate for 1984-94 at around400 deaths for 100,000 births, technical reviewers from WHO and UNICEF raised this estimate to630 deaths per 100,000 in 1997. Part of the problem lies with the lack of use of skilled attendants atdelivery (contrast Bolivia's 46% to Nicaragua's 61%). Many births in Bolivia take place at home andare attended by family members. This pattern is stronger in rural areas (70% of births at home), butprevails even in cities such as El Alto or Sucre. Part of the problem is in the high fertility rate thatresults from weak contraception. In 1994, 65% of women declared that their last birth was notplanned; women wanted 2.7 children and have 4.8. In 1998, only 25% of women (11% in rural areas)use modern contraception; this group constitutes only a part of the number of married women who donot want more children. Women who do not have access to family planning often resort to abortion.Unsafe abortion is one of the factors contributing to Bolivia's high maternal mortality ratio.

The Government has made the reduction of child mortality and of maternal mortality a central part of itshealth sector strategy. This is reflected in the Strategic Health Plan for Poverty-Reduction published inJune 1998 (PES), and in the five year National Action Plan of November 1997. To this aim, thefollowing areas of intervention will receive special government support:

* National implementation of the IMCI package (Integrated Management of Childhood Illness). IMCI,is a set of guidelines developed by WHO, adapted to LAC by PAHO, and further adapted to Boliviaby the Government in 1996-98, when it became the official strategy for the reduction of childmortality. It integrates improved management of prevalent childhood illness with aspects of nutrition,immunization and maternal health. The new system is expected to improve case management skillsand communication and counseling skills of health workers, to improve the organization of work atthe health facility level, and to simplify monitoring and supervision;

* Development and initial implementation of a mother-baby package (MBP) to improve matemal andneonatal care. The MBP strategy is not as developed as IMCI, but there have been valuable pilotexperiences, including a carefully evaluated experience by Mother Care (an USAID-financed NGO).These experiences are feeding the development of a MBP strategy.

* Strengthening of the public health functions and of surveillance, especially the immunization programand programs to control endemic diseases (with emphasis in chagas, tuberculosis and malaria); and

* Implementation of an improved financing system of public health to give sustainability to the 3 areasmentioned above and of a system of performance agreements to encourage accountability andstrengthen monitoring of interventions.

* Increased support for intersectoral local level interventions, especially for these that combine waterand sanitation, education and health.

3. Sector issues to be addressed by the project and strategic choices:

Health sector issues can be grouped into two categories; (i) low coverage of services; due to problems ofaccess of quality of supply and of lack of community and beneficiary involvement; and (ii) low capacityto respond to health needs. The poor health situation is partly due to the weakness of key basic services,especially water and sanitation and the education of girls, the project (through subprojects) will developinstruments to ensure coordination of health service initiatives with interventions to improve these keyservices at the local level.


Problems of coverage, access, quality, and lack of community empowerment

There has been substantial construction of health centers, which increased by 50% during the 1990s;around 110 new centers will be inaugurated in the next 12 months (together with 7 hospitals). Thisexpansion has included many previously isolated rural areas. However, there remain important problemsof: (i) quality of the supply, related to the weakening of public health interventions -especially theimmunizations program and the endemic diseases programs- and to the lack of a strategy to provide carefor children and mothers; (ii) lack of instruments to implement the strategy to decentralize execution ofhealth interventions. These problems are discussed below.

The immunization program. Since 1996, immunization coverage has fallen in Bolivia due to institutionalweaknesses in the Expanded Immunization Program (EPI), to insufficient and inconsistent allocation offunds by the government, and to a lack of a sustained social communications strategy. Field activitieshave also suffered because of a lack of support from the regional authorities. Informnation on coverage isnot reliable: official SNIS data estimates of coverage are double those of survey estimates. Additionally,Bolivia lags behind in the incorporation of new vaccines now used in much of Latin America, whichcould contribute significantly to the reduction of infant mortality. The introduction of a vaccine againstinvasive diseases due to Haemophilus influenza type b, could reduce the number of dead children per yearby 450-3,100. The vaccines against hepatitis B and yellow fever could also have a rapid and significantimpact in endemic areas. As part of the project's preparation, the Government-with support fromIDA, PAIIO, and other donors supporting immunization programs-has prepared a medium-termimmunization plan that responds to the problems mentioned above.

Endemic Diseases. The incidence of communicable diseases has increased in recent years. Vector-transmissible diseases such as chagas, malaria and yellow fever have increased their share of the burdenof disease, reaching 40% in recent years. The incidence of chagas is higher than anywhere else in LatinAmerica, 60% of the territory is endemic, and almost 2 million people are reported as infected. Theincidence of malaria and other has also increased reaching 64 thousand cases and covering 8 of the 9departments in 1996. Bolivia has the second worse incidence of tuberculosis in the continent. InFebruary 1999, the IDB approved a loan of $45 million for the control of endemic diseases,including strengthening of the surveillance system.

Quality of Care. Even when treatment is sought at a health care facility, it is often not adequate. Healthworkers are often poorly trained and supervised or lack the essential drugs and equipment needed toprovide good care. There is an urgent need to ensure that children and mothers who reach a health careprovider are correctly evaluated, classified and treated, and that appropriate preventive counselingmessages are provided to improve mother's home care. A strategy developed by WHO and UNICEF forthe Integrated Management of Childhood Illness (IMCI) has been adapted for use to Bolivia. A strategyis also under development for Safe Motherhood interventions. These strategies, which cover casemanagement, improvements in health workers' performance, management of drug supplies, evaluationand changes in family behaviors, hospital care and community and family action now need to beimplemented.

Effective Demand and community and beneficiary participation. Even where health centers exist, manywomen and children get no attention. This is due to: (a) cost (direct fees, transportation, drugs andsupplies, opportunity costs - the poor are thought to assign an average 10% of their consumption tothese costs); (b) lack of empowerment on the part of women, especially of indigenous women, bothwithin the household (e.g. to decide where to have birth or how to react to obstetric complications) and inrelation to the health services; (c) cultural/ethnic barriers -these work in several ways to difficult accessand use of health care services by the indigenous population. Cultural factors include believes and habitsthat make the indigenous population uncomfortable with western technology. They are also a reflectionof the lack of "voice" and empowerment of beneficiaries; and (d) lack of community outreach, healthservices in Bolivia are "overmedicalized"-health workers are only responsible for patients that enter


their office seeking curative care and neglect the extramural activities that are high in the agenda ofprimary health facilities in other countries. Activities such as water safety (in rural areas), vector control,vaccinations, control of pregnant women, dissemination of reproductive health messages to girls, shouldbecome programmed activities of the primary care providers. Implementation of these activities willrequire strong management tools for extramural activities, adaptation of infrastructure design and carepractices, good information, participation of local governments and a clear strategy of supervision byhigher levels of health authority.

Problems of capacity to respond to health needs

The new Bolivian health system seeks to decentralize execution of health interventions within astrengthened policy framework. The effective implementation of this framework, requires more and betterquality of financing, improved incentives and stronger systems of information, monitoring andaccountability. These systems today are weak:

Public financing. There are problems with the availability and with the quality of public funding. Publicspending in health is insufficient. It has recently been estimated by a team of Harvard and PAHOspecialists to be equivalent to about 0.8% of GDP, a fourth of the Latin American average in terms offiscal effort, and less than US$8 per capita - the 1993 World Development Report recommended between$12 and $15 for the poorest countries. The GOB's emphasis in health has been falling over recent years:as a proportion of total public expenditure, expenditures in health in 1997 were half of what they were in1989. The quality of spending also needs to be improved. Large increases in the payroll without links tobetter performance (such as occurred in 1994-95) or large increases in sophisticated hospital equipmentwill not lead to improved basic indicators.

An important step forward toward improving the quality of public spending was the creation in 1995 ofthe Seguro Nacional de Niniez y Maternidad (SNMN), aimed at reducing the economic barrier for poorwomen and children by eliminating copayments for a few key interventions. This led to a substantialincrease in the use of some services (e.g. institutional births grew by 44% after 1995). The greaterdemand and the elimination of copayments created supply bottlenecks which the Government now wantsto overcome through the creation of a Seguro Basico de Salud (SBS). The SBS would be aimed atimproving coverage, providing timely financing for key medical supplies, providing incentives for greatereffort by providers and simplifying the bureaucratic procedures for the effective delivery of a basicpackage of services similar to that recommended by the WDR 93.

Information, monitoring and accountability. Information systems are weak due to lack of use andduplication as every program attempts to develop its own information system. Accountability is weakdue to lack of clarity of responsibilities following the 1994-6 decentralization process, and due to lack oflinkages between financing and responsibilities. The government plans to streamline and strengthen thehealth information systems and reinvigorate the use of information for decision making at the local level.It also attempts to pilot -through this project-the use of performance agreements that would clarifyaccountability and link funding with results.

Financing of the program. The Ministry of Health estimates that it will require investments of around$150-200 million over 8-10 years in three priority areas: Immunizations, endemic disease control andprimary health care. Estimated available funds for the next five years are enough to cover theserequirements. Potential contributions include $50 million from IDA (phase I and phase II of an APL),$45 million from IDB (7 years), $30 million from the European Union (this is at an early stage ofidentification), and $30 million from bilaterals (an average of 6 years). If all of these projects come tofruition, expected annual disbursements would be around US$25 million. This is twice as much as thepeak investment received by the sector in any year during the 1990s.


C: Project Description Summary

1. Project components: (see Annex 2 for a detailed description and Annex 3 for a detailed costbreakdown)

I. Coverage and quality improvements of the health services and empowerment of communities

1. Support the implementation of a new medium term plan for immunizations that will: (i) create thecapacity to develop and implement immunization policies; (ii) strengthen health services to improvevaccination coverage and introduce new vaccines; and (iii) strengthen the information andsurveillance systems.

2. Implement new strategies for the Integrated Management of Childhood Illness and for the Mother-Baby Package through: (i) strengthening program management to plan, coordinate and superviseactivities; (ii) development of norms, protocols and supervision instruments; (iii) training of regionaland local level staff; and (iv) use of conventional and new mechanisms to enhance two-waycommunications with indigenous populations.

3. Provide resources to finance demand-driven local subprojects to strengthen inter alia the quality ofmaternal and child services; the development of social communication activities to strengthen theinformation, voice and empowerment of beneficiaries; and the implementation of new instruments ofhealth sector management.

II. Strengthening local capacity to respond to health needs

1. Support the implementation of a basic health insurance system (SBS) by: (i) supporting the creationof a unit to administer and modernize the system; (ii) developing and managing the informationsystem; and (iii) providing technical assistance to municipalities.

2. Strengthening the development of the management information system by: (i) supporting the designand implementation of new modules related to the programs supported by the reform; and (ii)invigorating the analysis and use of MIS reports at the local level.

3. Strengthening the capacity and accountability of the health districts to manage and supervise theimplementation of project activities. The activity will include the introduction of performancecontracts that will quantify targets, assign specific responsibility for achieving those targets andassign resources to achieve those results.

III. Coordination, Monitoring and Evaluation

Finance the establishment and operation within the Ministry of Health of a management structureappropriate for the coordination of all project activities and the monitoring and evaluation of the project inaccordance with the project performance benchmarks.

Indicative Bank- % of Sank-Component Sector Costs % of financing financing

W(US$M Total (US$M)I. Increasing coverage and quality ofthe health services and empowermentof communities. HB/HT 36.6 83.18 18.4 73.6II. Strengthening local capacity torespond to health needs HBIHT/HE/BB 5.0 11.36 4.3 17.2Ill. Coordination, Monitoring andEvaluation HE 2.4 5.45 2.3 9.2

Total 44.0 100% 25.0 100%HB: Basic Health; HE: Health; BB: Public Sector Management


2. Key policy and institutional reforms supported by the project: The project supports theimplementation of recent reformn legislation that decentralized the health sector and established a newsystem of health sector financing. Specifically it will support: (i) the legislation that decentralized thehealth sector (Ley de Participacion Popular and Ley de Descentralizaciin Administrativa) and the decreewhich fine-tuned the structure and role of the Departmental Health Authorities and re-created HealthDistricts; and (ii) thel999 decree of the Seguro Bdsico that expands the coverage of the SNMN, andmodernizes payment mechanisms.

3. Benefits and target population: The project would benefit all Bolivian children under 5 and allmothers using public health services. The immunization, IMCI and MBP sub-components will have anational scope and directly reduce the likelihood of death and illness among children and mothers. Theimmunizations subcomponent will also benefit approximately one third of the population which live inareas of high incidence of yellow fever and hepatitis B. During phase I of the APL, the subprojects willbenefit the population of 5 departments (La Paz ,Cochabamba, Santa Cruz, Oruro and Chuquisaca), thatinclude about 80% of the mothers and children of the country. Local government would also benefit fromthe component to strengthen local capacity to respond to health needs. This component will increase theeffectiveness and efficiency of the health services by reinforcing the decentralization process, improvingthe problem-solving capacity at the department and district level and improving the systems of financing.The main long-term benefits would be improved welfare arising directly and indirectly from the reductionof mortality and the burden of disease. Benefits would also include a more effective use of public anddonor funds. The benefits would be concentrated among the poor as: (i) the project interventions aim toexpand services that are already available to the better-off (hence the expansion will go to those as yetunserved), and (ii) the subprojects will be targeted using a poverty index.

4. Institutional and implementation arrangements:

Implementation period: 3.0 years (APL I)

Executing agencies: The Ministry of Health through the Health Reform Unit (Unidad de Reforma deSalud -URS) would carry out the project in accordance with an operational manual satisfactory to IDA.Key instruments for the execution of the project would be: (i) annual operating plans to be used by alldepartmental and district level implementing agencies; and (ii) performance agreements to bind alldepartmental agencies to the achievement of agreed upon health results. The Bolivian Social InvestmentFund (FIS) would carry out the execution of health subprojects in accordance with a SubsidiaryAgreement between the Ministry of Finance, the Ministry of Health and FIS under terms and conditionswhich shall be approved by IDA. It was agreed at negotiations that the agreement would be renewedyearly contingent upon FIS's satisfactory performance. The immunizations activities will receivetechnical assistance from PAHO.

Operational Manual. The project would use an operational manual that covers all aspects of projectimplementation, including but not limited to: organizational and management structures, supervision andevaluation mechanisms; targeting and other criteria for resource allocation; eligibility criteria for healthsubprojects and the measures to be taken to ensure that the environment will not be negatively affected;procedures for the formulation of annual implementation plans; financial, accounting and auditingprocedures; procurement procedures and standard bidding documents; and a menu of eligibleinvestments. The subsidiary agreement to be signed with FIS will require FIS to utilize the operationsmanual.

Monitoring and Evaluation Arrangements. This project is piloting aperformance-driven DevelopmentCredit Agreement (DCA). The agreement is flexible in relation to the use of inputs and processes, but isstrict in the achievement of targets in the eight performance criteria of annex 1. In order to convey themessage about the need to obtain results, the MSPS will sign and monitor Performance Agreementsfocussing on the eight criteria with Prefectos. The URS will be responsible for project monitoring.Progress reports, including monitoring indicators, will be sent by the URS to the Bank every six months.


Impact Evaluation. The Demographic and Health Survey (DHS) of 1998, provides a strong baseline forphase I of the APL. Infant and child mortality estimates from this survey will be compared with results ofa survey to be carried out in 2001. At negotiations, the government gave assurances that data for 2001using a methodology comparable to that of the 1998 DHS, would be available in the first quarter of 2002.To measure subproject impact, a baseline and control group would be established during the first year ofimplementation. In the last year of execution, a representative sampling study would be carried out forthe different types of subprojects to measure the impact of investments on selected indicators. Thepreparation of the baseline would take into account: (i) ethnicity and gender; (ii) recommendations ofimpact evaluations of the FIS, PROISS and PSH projects; and (iii) studies of coverage and quality inservice delivery and service demand carried out during project preparation.

Procurement. The procurement of works, goods and consultant services would be carried out inaccordance with IDA's Guidelines for Procurement (dated January 1995, revised January and August,1996, September 1997 and January, 1999), and the Guidelines for Selection and Employment ofConsultants (January 1997, revised September 1997), as well as by the provisions stipulated in the CreditAgreement. These procedures are detailed in Table A of Annex 6. The supervision of procurement andhiring processes would be the responsibility of the Reform Unit and the FIS (in the case of the healthsubprojects), for all resources transferred under its administration. The specific procedures would bedetailed in the Operational Manual and would include the use of Standard Bidding Documents,previously approved by IDA for each procurement method to be used.

Accounting, Financial Reports, and Auditing. For the purposes of carrying out the project two SpecialAccounts would be opened and maintained in US Dollars at the Banco Central de Bolivia on terms andconditions satisfactory to IDA. One of the accounts would be for the use of the URS, the other for FIS(the latter for health subprojects). Deposits into the special accounts and their replenishments, up to theauthorized allocations set out in the Disbursement Letter, will be made initially on the basis ofApplications for Withdrawals (Form 1903) accompanied with the supporting and other documentation asspecified in the Disbursement Handbook. Once the accounting and financial management systems of theURS and of FIS are deemed compliant with LACI requirements, and are certified as such by IDA, amigration to a PMR-based type of disbursements may be implemented as described hereafter.

The Financial Management Specialist for Bolivia conducted a review of the accounting, controls overdisbursements and resources, planning and budgeting as well as the level of administrative staff of theURS and FIS. It was determined that both entities have in place accounting and internal control systemsthat accord with such accounting standards or agreed format and that reliably record and report all assetsand liabilities and financial transactions of the project, and the entity in the case of the FIS, includingthose transactions involving the use of Bank funds; and provide sufficient financial information formanaging and monitoring project activities.

Migration to LACI. During negotiations it was agreed that within a year from the date of effectivenessthe URS and FIS would complete their action plans for both entities to prepare quarterly ProjectManagement Reports (PMRs). Each of these reports would show: (i) actual sources and applications offunds for the project, both cumulatively and for the period, and projected sources and applications offunds for the project for the following six-months; (ii) list separately expenditures financed out of thecredit during the period covered by the report and expenditures proposed to be financed during thefollowing six-month; (iii) describe physical progress in project implementation, both cumulatively and forthe period covered, and explain variances between the actual and previously forecast implementationtargets; and (iv) set forth the status of procurement under the project and expenditures under contractsfinanced from the credit, for the period covered.

Audit Arrangements. An independent external auditing firm, satisfactory to IDA, would be hired to carryout annual audits of the project (both the URS and FIS). IDA's Financial Accounting, Reporting and


Auditing Handbook (FARAH), published in January 1995, would be used by external auditors. Auditreports would be presented to IDA no later than six months after the closing date of the previous fiscalyear. It was agreed at negotiations that the audit for the first year should be contracted before projecteffectiveness.

D: Project Rationale

1. Project alternatives considered and reasons for rejection:

Lending Instrument. The team and the Government considered different options. As the needs are large,the option of a traditional investment operation was initially favored by some in the Government (therewas talk of a PROISS II), the option of an adjustment operation to introduce new refonns was alsoexplored. An APL was preferred because it offers greater flexibility for implementation. The reformssought by the project in the near term require the willing participation of municipalities and communities- an adjustment operation creates incentives for Central Government but does not provide incentives forthe participation of local governments and communities. Instead, MAR will give preferential access toreformers.

Front-loading of reforms. Some issues in the sector require legislative reform and important changes inthe operation of social security and of human resources management. The team considered the option offront-loading these reforms. This option was rejected for two reasons. First, the proposed project alreadycontains the most crucial reforms (establishment of IMCM, MBP, the SBS and the health districts), andoverloading the project could distract attention and effort from them. Second, reforms in social securityand human resources management are "second generation" reforms and are better dealt with as part of the"second phase" of the APL. The IDB loan will finance all required studies in the areas of social securityreform and reform of human resource management to identify the needed reforms.

2. Major related projects financed by the Bank and/or other development agencies:(completed, ongoing and planned)

Implementation DevelopmentProgress (IP) Objective (DO)

Bank-financed . Integrated Health Development Project (PROISS) - S SCr. 2092. (Closed December 1998)

. Integrated Child Development Project (PIDI)- Cr. S S2531

a Education Reform Project - Cr. 2650 S S. Rural Water and Sanitation Project (PROSABAR) -

Cr. 2806 U SOther development . PSF (Basic services and institutional strengthening program).agencies Total of $44 million. The project was paralyzed for over a year for fiduciary andIDB programmatic reasons and is expected to reinitiate activities soon.

* PROAGUAS (Basic Sanitation Small Municipalities)Total of $55 million. Under preparation.

* Escudo Epidemiol6gico y Apoyo a /a Refoirna de Salud (Endemic Disease Project). Total of$45 million. Begins implementation in 1999.

USAID * CCH (Infant and Community Health Project). Total of $28 million; annual disbursements of$2 million. The project was stopped in 1998 and is being restructured to align it better withthe new institutional setup of the health sector. Wiill reinitiate activities in 1999.

IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory)


3. Lessons learned and reflected in the project design:

The project design reflects lessons learned from international interventions in countries with highmortality rates, from IDA's experience with the Bolivian health sector (under PROISS) and from theexperience of other large projects that are supporting the public health sector (PCF, CCH and FIS).

A. International Lessons

Child Mortality. Every year about 12 million children under 5 die, 70 percent from diarrhea, pneumonia,measles, malaria, malnutrition, or a combination of these conditions - all of them preventable or treatable.An Integrated Management of Childhood Illnesses (IMCI) is increasingly being adopted in manydeveloping countries to address child mortality problems. The IMCI aims to reduce mortality fromprevalent illnesses in children under 5 years of age; through integrated case management of the 5 mostimportant causes of childhood deaths: acute respiratory infections (ARI), diarrhea, measles, malaria, andmalnutrition. The IMCI strategy combines improved management of childhood illnesses with aspects ofnutrition, immunization and several other important influences on child health, including maternal health.The IMCI guidelines are a simplified system of diagnosis and treatment that is designed for use by healthworkers with limited training and little or no laboratory support.

Safe Motherhood. The Safe Motherhood initiative, launched in 1987, a global partnership sponsored byUNICEF, UNFPA, the World Bank, WHO, IPPF, and the Population Council emphasize the followinglessons: (i) Complications of pregnancy and childbirth are the leading causes of disability and deathamong women 15-49 in developing countries; (ii) third of pregnancies world-wide are unwanted. Themost common reason leading to unwanted pregnancies and to unsafe abortion is non-use of contraception;(iii) every time a woman is pregnant she risks a sudden and unpredictable complication. At least 40% ofall pregnant women will experience some type of complications; (iv) high quality services must beprovided by health professionals with midwifery skills; (v) women do not seek services because of:distance, cost, multiple demands over their time; women's lack of decision making power; and the poorquality of services. The Baby-Mother Package recommended by the Safe Motherhood Partners includes:(i) before and after pregnancy: Family planning; (ii) during pregnancy: Antenatal care and counseling;(iii) during Childbirth: Skilled care during labor and delivery. Skilled attendants should have access to afunctioning emergency and transport system so that they can refer women to an appropriate health facilityfor higher level medical care such as Cesarean delivery or blood transfusion when necessary; (iv) afterDelivery: Postpartum care, including immediately after childbirth and a visit within six weeks; (v)throughout the reproductive life span: management of complications from unsafe abortions. Servicesrequire staff who are trained to treat complications; appropriate equipment; protocols for care; andeffective referral networks.

Special program for Vaccines and immunization. PAHO established the Expanded Program onimmunization in 1977 and has achieved great successes, including raising coverage in, Latin America, forbasic vaccines from 25% to over 80% and eradicating poliomyelitis. Lessons learned include: (i)countries with a weak capacity need support for program management and for procurement; (ii)commitment by national governments is key for success; (iii) effective surveillance, including by theprivate sector and community groups is crucial for notification and instilling a culture of prevention; (iv)effective immunization programs can rapidly reduce mortality especially when the initial rate is veryhigh.

B. Lessons learned from PROISS - CR.2092 BO (from ICR): (i) projects should be simple toadminister and to supervise; (ii) project objectives should be well defined and should be clear to allinvolved; there should also be early agreement on and dissemination of performance indicators; (iii)successful implementation requires: Client orientation; flexible management; involvement of all levels ofstaff in planning; decentralization of decision making, financial resources and procurement capabilitieswithin clear operational plans with strong lines of communication; use of reward systems linked to


performance; (iv) management contracts require very strong commitment from high levels of Governmentto be successful; (v) salary supplements must be managed within a clear and transparent policy linkingthem to performance or location to be successful.

C. Lessons learned from PROISS, PSF, CCH and FIS: PROISS and the other two main health sectorprojects had a rigid and top-down design. All planning was made centrally, and communities participateonly at the execution stage. The projects have been slow to implement, and many investments areunderutilized (e.g. health centers unnecessarily built in the proximity of a hospital). The construction ofalmost 100 PSF-financed clinics has been paralyzed for almost two years. FIS on the other hand has builton demand by communities and has been agile, but its investments suffer from problems of sustainability,and are often insufficiently connected with the MOH's policy framework. The new project will use abottom-up approach, with the requirement that municipalities provide for the financial sustainability ofinvestments (through enforceable arrangements based on voluntary earmarking of future transfers) andthe development of new instruments (SBS and Management Contracts) for the exercise of the MOH'snormative and regulatory role.

4. Indications of borrower commitment and ownership:

* the Government has given a high priority to this project in the context of the CAS discussions. It hasapproved two supreme decrees setting the legal stage for project implementation;

* the Ministry of Health has put together a strong team of counterparts for the implementation of thisproject;

* The Ministry of Finance has made a firm commitment to increase financing for vaccines and willopen a budget line to make this financing transparent (see Annex 11);

* FIS has also assigned strong counterparts and has shown flexibility to deal with project preparationneeds;

* Health Authorities from 5 Departments have shown great interest to participate in the project byorganizing workshops, and preparing implementation plans. Three of the prefects have alsoexpressed their support for the project in written correspondence and by assigning counterpart fundsfor 1999.

5. Value added of Bank support in this project:

* strengthening coordination of interventions across sectors and ensuring a holistic view of health statusdevelopment based on results;

* ability to leverage project results in the overall development objectives;* networking and knowledge management capabilities to learn from other countries undergoing similar

processes and other sectors of the Bolivian economy;* mobilization of high-quality technical assistance for institutional improvements;* ability to mobilize resources and encourage donor coordination.

E: Summary Project Analysis: (detailed assessments are in the project file, see Annex 8)

1. Economic: (supported by Annex 4a)

Provided that the project is able to meet its performance targets, the internal rate of return is estimated tobe 40 percent. The main source of the benefits, by far, is from an expected reduction in the number ofdeaths of children under 5 from acute respiratory infections, severe diarrhea and perinatal causes. Overthe course of the project period, a little over 24,800 deaths are expected to be averted, which works out toa yearly reduction of a little over 9 percent from the 67,000 deaths that occur each year in Bolivia fromthese causes. The child mortality rate would be expected to decline as a result of this program from 96


per thousand to 91 per thousand. While there is expected to be some reduction in maternal mortality, theabsolute number of deaths averted is small (maternal mortality being a rare event).

The cost-benefit analysis contains two noteworthy features. First, the calculation of the economicbenefits attempts to link the value of the benefits to achievement of the performance targets. Second, theanalysis takes note of the inherent uncertainty concerning key assumptions by specifying probabilitydistributions for the key assumptions and performing a monte carlo simulation of 1,000 iterations. Thisgenerates not a single value for the internal rate of return and the deaths averted, but a distribution ofvalues. Following this approach, one can conclude that the mean value of the estimated internal rate ofreturn is 40 percent. For 80 percent of the 1,000 iterations, the estimated internal rate of return exceeds28 percent and the deaths averted exceeds 23,900.

2. Financial (Fiscal impact-See Annex 4b))

Public health expenditures in Bolivia, at less than 1% of GDP, are low compared with a Latin Americanaverage of 3-4 percent. Over the medium run, the project and the policies supported by it, will increasepublic expenditures by 0.1 to 0.2 percent of GDP. Increase public expenditures fall under three maincategories: (i) vaccines: the project will rebuild the immunizations component and the Treasury willstrongly increase its participation in financing reaching US$4 million in 2002 - this amount is expected tobe maintained over time, and to suffice for the purchase of all needed vaccines; (ii) SBS: Municipalitiesfinance these expenditures; they spent an estimated US$6 million during 1998 and are expected toincrease their expenditure reaching US$14 million in 2001 and over US$20 million in 2009; (iii)Operations and Maintenance of subprojects: these expenditures depend on funds from municipalities,departments and communities. Funding from municipalities is included in the SBS, and is enforceablethrough the requirement that all municipalities receiving subprojects should sign an agreement with theTreasury requesting that a larger fraction of transfers be earmarked for health (and deposited in a health-only account). Funds from regional governments are less likely to be available, and have not beenincluded in the estimation.

The estimates are presented in Annex 4b and are based on projections by UDAPE for the growth of GDPand of fiscal expenditures. Project activities are found to have a small and manageable fiscal impact.Total public health ratios remain low in comparison with other Latin American countries.

* Central Government health expenditures (net of non-health expenditures currently found in thebudget of the MSPS) remain approximately constant as a fraction of GDP and increase only slightly(by about one percentage point) as a fraction of central government expenditures;

* Total government expenditures (including municipal expenditures) in health remain approximatelyconstant as a fraction of GDP;

* Municipal spending in health grows as a fraction of total government spending in health.

3. Technical:

The appropriateness of (i) the protocols for mother and child care; (ii) the coverage and paymentmechanisms of the SBS; and (iii) the proposed logistics of the immunizations program were analyzed andfound to be satisfactory. Details are in the project files.

4. Institutional:

Significant project management capacity has been developed during the Integrated Health DevelopmentProject and several Social Investment Fund projects. Project management capacity is strong at theCentral level and variable at the departmental level. Departmental planning and management capacitywill be strengthened as needed. Technical assistance will be provided to strengthen the capacity ofdepartments, municipalities, and communities to prepare, appraise and supervise subprojects.


Institutional capacity is particularly weak in relation to the proposed work program in the EPI, PAHO willprovide technical assistance in the form of six long-term consultants.

5. Social:

During project preparation, two substantive studies were carried out to detect the relevant cultural patternsof users and of providers of health care, and to understand gaps that impede the improvement and use ofhealth services generally, and particularly for Quechua and Aymara populations. These studies included abibliographic review of prior work carried out in Bolivia, surveys and focus groups of beneficiaries andhealth personnel. The recommendations of the studies were incorporated in the Social Communicationstrategy (see annex 13), and in project design especially in the investment and training areas. Operationalexperiences and lessons learned in the FIS and the PROISS in relation to indigenous populations werealso taken into account. These aspects of the project design, and the fact that the majority of the projectbeneficiaries are indigenous peoples, made it unnecessary to prepare a separate Indigenous PeoplesDevelopment Plan. However, a national Indigenous Peoples Development Plan is now being prepared bythe Borrower and its implementation will be financed by a Learning and Innovation Loan.

6. Environmental assessment: Environmental Category [ ] A [X ] B [ ] C

Justification/Fundamental .eason for the classification by category: The project does not present anysignificant environmental risk. The immunizations component will improve environmental practices byintroducing practices for the disposal of syringes and needles (these do not exist in Bolivia). Subprojectseligible for financing will be subject to an environmental evaluation criteria as part of its technicalevaluation. Subprojects should comply with measures to minimize environmental impact. TheOperational Manual for the project includes the steps to minimize impact, and the criteria to be adoptedfor each type of subproject.

Procedures for Environmental Evaluation. The FIS would carry out the technical evaluation ofinvestment subprojects, and has Environmental Evaluation Specialists with capacity and terms ofreference acceptable to IDA. These specialists would carry out environmental evaluations forsubprojects. Beneficiary organizations submitting subprojects for financing would fill out the checklistfor project preparation, which should be used as a guide. This checklist centers around environmentalmatters and raises any issues of potential environmental impact. In cases in which the proposed projecthas a potential environmental impact, the EA Specialist would review the project and recommend actionsto be taken by the beneficiary organization and/or the municipality, to carry out: (i) a projectenvironmental impact analysis, along with a methodology to identify the impact; (ii) a discussion ofexisting options to minimize adverse impacts and adapt the project to its environment; (iii) an analysis ofthe trade-offs between different options; and (iv) a general vision of any doubts arising from theinformation.

Status of other environmental studies. IDA has reviewed the proposed criteria for environmentalevaluation, which is contained in the FIS's Operational Manual (which, in turn, has been found to besatisfactory to IDA). Community training activities would include an orientation for beneficiaries inenvironmental issues; training for personnel in the use of the environmental evaluation criteria would alsobe provided, along with educational activities for the communities, both within the support that theproject would provide in Environmental Health.

7. Participatory Approach:

Primary beneficiaries have been consulted through focus groups and through satisfaction surveys toindigenous women in areas of high child mortality. These instruments will be used annually to monitorsatisfaction with the services supported by the project. Communities, municipalities, departments, donors


and NGOs have also been consulted in numerous meetings (around 20 in La Paz and participatingdepartments) where the objectives and proposed procedures of the project were discussed.

F: Sustainability and Risks

1. SustainabilityThis project builds up on the heritage of previous Bank projects (such as several projects in support of theSocial Investment Fund and its predecessors) and other operations and policies that have left behind astrong base from which Bolivia can continue to carry on its primary health care. These projects havestarted a culture of management and accountability which did not exist before. A second element in favorof sustainability is the consultation undertaken during preparation with the various stakeholders involvedat the national, departmental, municipal, and community level who will have key roles in projectimplementation. The treasury has now acknowledged its responsibility to finance the immunizationsprogram. A third element is the requirement of counterpart funds from beneficiaries. This policy isapplied rigorously by FIS for all subprojects and is now well accepted by the communities who areaccustomed to contributing a counterpart for investment costs, and by local governments. For theimplementation of the SBS, the approval of the Supreme Decree of the SBS allows municipalities thatvoluntarily join the scheme to earmark a fraction of the transfers received from the treasury to pay forrecurrent costs; it also allows the treasury to deposit the earmarked funds into a special account.

2. Critical Risks: (reflecting assumptions in the fourth column of Annex 1)

Risk Rfttfhg Risk MFinhiaftin Step'sRisks _:

Deterioration of the macroeconomic and M The HIPC initiative and agreements with thepolitical situation that could compromise IMF and the CAS provide a strong incentiveresources for the sector or decrease the to maintain the macroeconomic course andgovernment's presence in the-sector. dedicate resources to the sector.Insufficient coordination among Bolivian H Development of a strong partnership betweeninstitutions to achieve a holistic approach Reformers in Bolivian Government, Bank andto health status development. other donors.Significant delays in national, prefectural M A permanent dialogue with the MOF and theor municipal counterpart funds, leading to approval of the two Supreme Decrees willlimits on investment levels which in turn facilitate counterpart financing.adversely affects the achievement ofindicator targets.Weak capacity of EPI. M Emphasize the need to maintain the newly

formed team.Emphasize donor coordination.

Lack of active participation by H From the outset, emphasize the developmentDepartments and Prefects in project of management teams at the local level, andmanagement. enforce PAs with Prefects.Effectiveness of IMCI, MBP, SBS, PAs M Utilize the flexibility of the APL to allowand MAR are unknown. modifications as lessons become available.

High rotation of key personnel in the S Maintain dialogue to minimize the rotation ofMinistry and the PCU. Ministry personnel and to maintain high

technical standards for staffing of URS.

TOTAL RISK Ws I_

Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N (Negligible or Low Risk)

3. Possible Controversial Aspects: None


G: Main Loan Conditions

To reflect the new results-oriented approach for the Association's operations in Bolivia, the DevelopmentCredit Agreement (DCA) reflects increased emphasis on results and their monitoring and on simplifiedprocedures. Performance benchmarks are set out in the DCA (Schedule 4); failure to meet 5 out the 8benchmarks would allow the Association to suspend disbursements (Section 5.01). Conversely,obligations with respect to inputs and procedures have been de-emphasized. Implementationrequirements have been kept to a minimum, with key project implementation provisions set out inSchedule 5. The schedule on the withdrawal of the proceeds of the Credit has been streamlined byshifting a number of its provisions to the Disbursement Letter (including the amounts of the authorizedallocations for the two special accounts), which has been incorporated into the DCA by reference(Schedule 1, Part B, para. 1). The Procurement Schedule (Schedule 3) has been streamlined by theintroduction of a tabular presentation.

H: Readiness for Implementation

T'he project implementation plan has been appraised and found to be realistic and of satisfactory quality.

1: Compliance with Bank PoliciesThe project complies with all relevant applicable Bank policies.

Team LEder: Daniel Cotlear

Sector Manager/Dir : Xavier Coll

Country Manager/Dire4 r: Isabel Guerrero


Annex 1: Project Design Summary

Bolivia: Health Sector Reform Project

Narrative Summary Proposed Targets and Monitotoing and Critical AssumptionsKey Indicators Evaluation

I. Sector-related targets: * Accelerated reduction in ENDSA * Macroeconomic* Poverty alleviation, as the infant mortality rate stability.

measured by * Accelerated reduction in * Continuity andimprovements in the the maternal mortality consistency in thehealth situation, rate development of healthparticularly that of policy.indigenous womenand children under 5.

II. Program Development . Infant mortality rate ENDSA 1998 and 2001 * Allocation of sufficientObjectives. (1998- 2008): reduced from 67 per resources from* Accelerated reduction 1,000 live births in 1997 national, prefect, and

of infant and maternal to 48 per 1,000 live births municipal counterpartmortality rates. by the end of the funds.

program.. Maternal mortality rate ENDSA 1994 and 2001

reduced from 390 per100,000 live births to290 per 100,000 by theend of the program.

Ill. Project Development * Coverage of institutional SNIS * Government interest inObjectives (1999- 2002) births attended by the health sector(see targets, definitions trained health personnel reform is maintained.and baseline in Annex la) increased.

* Retention of pregnant SNIS . Effective coordinationwomen in prenatal in technical assistancecontrol increased and cofinancing,

* Early neonatal hospital Special Surveillance in especially of the EPI.mortality reduced 10 largest maternity

* Number of cases of hospitals. * IMCI will develop anpneumonia attended in important positiveservice increased SNIS experience at the

* Number of cases of global level that willdiarrhea treated in SNIS provide synergy withservice increased the Bolivian

* Coverage of DPT, 3 SNIS experience.doses increased (n.b. to * New instruments arebe replaced by new successfully launched,vaccine in the year 2000) including SBS, MAR,

* Pentavalent vaccine PAs.introduced and coverage SNIS * Satisfactory donorexpanded coordination.

* Number of municipalities SNISwith coverage of DPT 3less than 80% reduced.

* Number of municipalities SNISwith coverage ofPentavalent vaccine lessthan 80% reduced.


* Financing of Expanded Review of budgetProgram of execution.Immunization throughnational resourcesincreased.

IV. Results of the * Percentage of health * Human resourcesProject's Phase 1(1999 - service supervisions MBP available in a timely2002) carried out by SEDES manner.I. Increased coverage Mother-Child Units from * Low rotation of keyand quality of health 1% to 50% personnel in theservices network, * Percentage of SEDES MBP Ministry and PCU.promoting health health personnel trained . Medium to highcommunities. in MBP from 20% to commitment by

60% prefects.* Percentage of SEDES iMCI

health personnel trainedin IMCI from 8.8% to60%

. Percentage of healthestablishments with IMCIIMCI essential drugsfrom 3% to 50%

* Proportion of FISsubprojects executed ina timely manner to 80%.

* Drop out rate BCG-Polio3 from 12% to 7%. SNIS

* Acute flaccid Paralysis Surveillancesamples per 100,000children from 0.70 to 1.0.

. Proportion of suspectedmeasles cases with 1 Surveilanceadequate bloodspecimen collected from95% to 100%.

II. Local capacity . Periodic analysis reports UGSBS Adequate localstrengthening to provide of SBS produced management by theresponses to health . SBS funds fully UGSBS Ministry of Health andnecessities executed, from 29% of Social Security.

municipalities to 50%* Percentage of SEDES Administrative records

and Districts withcomputer equipment

* Percentage of districts Administrative recordspresenting MAR projects

* Percentage of SEDESand districts that carry Administrative recordsout a CAI each semester

* Percentage of SEDESthat sign performance Administrative recordsagreements with MSPS

* Percentage of Districts Administrative recordsthat sign performanceagreements with SEDES


T <aiid M-! : -oring and Criical Assumptions

* Number of SEDES with Administrative recordsa PA compliance ratehigher than 80%

* Number of districts with Administrative recordsa PA compliance ratehigher than 80%

IV. Project Components Progress Reportand Subcomponents: Disbursement ReportI. Increase the coverage

and quality of service $US18.4 millionnetworks, promotinghealthy communities.

* Subprojects toimplement IMCI, MBPy perinatal obstetricnetwork (MAR)

* Technical assistancefor the implementationof IMCI - MBP

* Technical assistancefor the EPI

II. Strengthen localcapacity to respond to US$4.3 millionhealth necessities

* Basic HealthInsurance and itsfinancing mechanisms(SBS)

* Support for themanagement of theNational HealthInformation System(SNIS)

* Support formanagement andsupervision capacity

* StudiesIll. Project Coordination US$2.3 million POAs evaluated and

._____ _approved by IDA


Annex la: Project Design Summary


Performance Benchmarks

The project's success in meeting its objectives will be based on the achievement of the performancebenchmarks described below. Given the uncertainty with the use of new programs, it is expected thatsome of these benchmarks will not be reached in any given year. At negotiations it was agreed that theproject would be successful if for the year under review at least 5 of the 8 indicators reach their target. Ifthey do not, the Bank and the Government would need to decide on the corrective actions required andthe Bank would have the right to suspend disbursements.

Performance Indicators Performance Benchmarks

Baseline 1999 2000 2001 20021. Coverage of births attended by

trained health personnel 36% 38% 40% 43% 46%2. Complete prenatal care attendance 28% 30% 32% 36% 40%3. Early neonatal hospital mortality 14.40 14.00 13.00 12.00 11.00

(per 1,000 live births)4. Number of pneumonia cases 68,346 85,000 95,000 105,000 115,000

attended in health services5. Number of diarrhea cases attended 292,417 310,000 340,000 370,000 400,000

in health services6(a). Three doses DPT coverage 75% 82%6(b). DPT/Hib/Hepatitis B vaccine 65% 75% 85%

coverage7(a). Number of municipalities with 212 200

three doses DPT coverage less than80%

7(b). Number of municipalities with 180 119 83DPT/Hib/Hepatitis B vaccinecoverage less than 80%

8. National financing of vaccines 0.5 2.5 3 3.5 4(millions of $)

Complementary Provisions

1. Scope: The coverage for all indicators is national, except for Indicator 3 which is based on the 10public hospitals with the highest number of births.

2. Source and methodology: the source of all indicators is SNIS except for Indicator 3 (which isdirect surveillance) and for Indicator 8 for which the source is the Ministry of Finance's executed budget.If any change is introduced to the methodology for measuring an indicator in any given year, the samechange must be introduced in the data for the previous year to establish the correct increment.

3. Adjustment to Baseline Data: The Perfornance Benchmarks are calculated on the basis ofbaseline data which was estimated as an average for 1996-98. If at a future date the Borrower shows tothe satisfaction of the Association that it is necessary to adjust the baseline data, the correspondingPerformance Benchmarks may be adjusted in such manner as shall be acceptable to the Association.


4. Definitions:

1. Coverage of births attended by trained health personnel:

Numerator: Births attended by trained health personnel.Denominator: Total number of expected births.

2. Complete Prenatal Care Attendance:Numerator: Number of pregnant women with four prenatal care controls.Denominator: Number of pregnant women with first prenatal care control.

3. Early neonatal hospital mortality (per 1,000 live births):Numerator: Number of deaths during the first seven days of life.Denominator: Total number of live births reported at the second and third health facility level.

6 (a) Three doses DPT coverage:Numerator: Number of children less than one year of age who received three doses of DPT

vaccine.Denominator: Total number of children less than one year of age.

6 (b) DPT/HiblHepatitis B vaccine coverage:Numerator: Number of children less than one year of age who received three doses of

DPT/Hib/Hepatitis B vaccine.Denominator: Total number of children less than one year of age.

8. National financing of vaccines: expenditures on vaccines and syringes financed by the Borrowerfrom sources other than external grants or loans.


Annex 2a: Project Description


By Component:

Project Component I - US$ 36.6 million

Component 1: Coverage and quality improvements of the health services and empowerment ofcommunities.

A. Demand -driven subprojects for the reduction of child and maternal mortality

This subcomponent would finance investment subprojects and social communication, training ormanagement strengthening activities. Its objective is to increase the coverage and quality of servicenetworks, while promoting communication, health education and the development of "voice" to empowercommunities. Subprojects types include those for the reduction of cultural barriers, promotion of safemotherhood, child protection, improved access to services, community participation, outreach services,communications, service extension and transport in remote areas, and improvements to the environmentand environmental health through small interventions. Some of the subprojects would address specificlocal needs to ease implementation of the EPI, IMCI, Basic Health Insurance, and the Maternal NeonatalPackage (including obstetric networks). In view of capacity constraints during stage I of the APL, thisactivity will be restricted to five departments.

B. Strengthening the implementation of IMCI and of the Mother-Baby Package (MBP)

IMCI is the strategy developed by WHO and UNICEF to reduce child mortality and improve healthconditions for children under 5. Its objectives are to: (i) improve the quality of health service attentionfor children under 5, with emphasis on primary care; and (ii) integrate all child health services, includingprevention, promotion and community health services. At the national level, the Mother and Child Unitwould receive assistance to strengthen program management, as well as for the development of norms,protocols, and supervision instruments-including norms to strengthen referrals between first and secondlevel facilities, to monitor maternal and neonatal mortality in health facilities, and to develop anaccreditation system for maternity wards. At the regional level, the capacity of health service personnelwould be improved through training activities; the existing clinical training network would also beexpanded to include some rural secondary level hospitals. The development and implementation of thecommunity component of the IMCI would also receive support.

The Maternal-Neonatal Package is the strategy proposed by WHO to reduce maternal and neonatalmortality rates. Its objectives are to: (i) improve the quality of care in the obstetric network: prenatal,deliveries, postnatal, and newborn care, with emphasis on first and second levels; and (ii) increase supplyand demand for obstetric services. At the national level, the Mother and Child Unit would be assisted indefining a policy for safe Motherhood, in strengthening its management, programming of activities, andimplementing a monitoring and supervision system. At the regional level, training would improve thecapacity of health service personnel to initiate the MBP. At the district level, there would be intensivesupport to information, education, and communication activities, all of which would be developed withextensive community participation. The credit would finance technical assistance and informationequipment for the central level; it would finance training, supervision, and IEC for regions and districts.


C. Support for the medium-term immunization plan (Expanded Program of Immunization-EPI)

Since 1996, immunization coverage has fallen in Bolivia due to institutional weaknesses in the ExpandedImmunization Program (EPI), to insufficient and inconsistent allocation of funds by the government, andto a lack of a sustained social communications strategy. Field activities have also suffered because of alack of support from the regional authorities. Information on coverage is not reliable: official SNIS dataestimates of coverage are double those of survey estimates. Additionally, Bolivia lags behind in theincorporation of new vaccines now used in much of Latin America, which could contribute significantlyto the reduction of infant mortality. The introduction of a vaccine against invasive diseases due toHaemophilus influenza type b, considering its impact on a number of pneumonias, could reduce infantmortality by 4,000-5,000 live births in the second year of its introduction. The vaccines against hepatitisB and yellow fever could also have a rapid and significant impact in endemic areas. As part of theproject's preparation, the Government-with support from IDA, PAHO, and other donors supportingimmunization programs-has prepared a medium-term immunization plan that responds to the problemsmentioned above with three lines of action:

1. Institutional strengthening of the expanded immunization program to improve adoptionand implementation of immunization policies. The Finance Ministry is committed to asubstantial increase in its support for immunizations, beginning in 1999, and to the creationof a budget line specifically for vaccines. During the next three years, lines of periodic directreporting will be established from the PAI to the Health Minister. A Technical AdvisoryCommittee will be formed with the participation of Scientific Societies. The EPI team at thecentral level will be strengthened: two professionals will be added to the one now in place (tobe financed by MSPS), and short-term technical assistance will be provided. Fiveepidemiologists (four of which will be financed by PAHO) will be detailed to criticaldepartments. Training and supervision activities will be carried out at all levels. Newadministrative and procurement processes will be established. With immunization targetsincluded within performance agreements, lines of communication between the center anddepartments will be strengthened, and specific responsibilities will be established to reinforceaccountability. Social communications systems will be established, including theidentification of communication problems with indigenous groups. Basic norms andpractices for biosecurity will be implemented for the management and disposal of syringesand needles.

2. Strengthening of health services to improve coverage and to introduce new vaccines. Aspart of general support to health services, local technical administrative capacity will bestrengthened (see subcomponent TI-C). Systems will be established to identify and respond tothose municipalities with low coverage. The national vaccination scheme will be expandedto include vaccinations against Haemophilus influenza type b (Hib), and Hepatitis-B; inendemic zones, vaccinations against yellow fever will be included. The measles vaccinewould be replaced by a combined vaccine against measles, mumps, and rubella (MMR).Simultaneously, depending on cost, the Hib, DPT and hepatitis-B vaccines would be replacedby a new five-way vaccine that covers against the same illnesses but is much less traumaticfor mothers and children, and produces less wastage. The cold chain would be renovated,including the construction or renovation of a national warehouse and five departmentalwarehouses. Where necessary, local equipment would be renovated, and storage capacityincreased as required by the new vaccines (which taking individually, are bulkier). Basicbiosecurity practices would be implemented with the acquisition of safe boxes for thedisposal of syringes and needles and with the introduction of the five-year vaccine (whichwould reduce the production of waste).


3. Strengthening of information and vigilance systems. The weaknesses of the currentinformation system would be closely studied, a more precise system for registering coveragewould be implemented, and available information would be put to greater practical use.These actions would be coordinated with other projects and other subcomponents investing inthe surveillance system and with the Seguro Basico de Salud which has the capacity ofimproving incentives for the implementation of better information systems.

The implementation of the new immunization plan will be cofinanced by the government, donors, andIDA. IDA would finance technical assistance, training, and supplies for institutional strengthening andfor improving information systems; part of the renovation of the cold chain; and the initial introduction ofsome new vaccines (prices fall rapidly, and the government will assume this responsibility during thethird year of the project).

Project Component 2 - US$ 5.0 million

Component 2: Strengthening Local capacity to respond to health needs

A. Basic Health Insurance (SBS)

The objective of the SBS is to improve the access of mothers and children to a group of essential servicescontributing to the reduction of maternal and child mortality. The SBS will finance materials,medications, and other non-salary recurrent expenditures. The current National Maternal-Child Insurance(SNMN) is financed with municipal contributions, equivalent to 3.2 percent of transfers received fromCentral Government.

To improve coverage, the government plans to implement the SBS, which includes increased financing,new economic incentives and improved financial and administrative management. Prices (reimbursementrates) would be improved to provide incentives for increased supply. Likewise, new services necessaryfor implementing IMCI and MBP would be added to the services currently covered by SNMN, such as:family planning, treatment of STDs and complications of pregnancy, and the diagnosis and treatment oftuberculosis and malaria. The SBS would also include incentives for improved access through design ofmechanisms for outreach services, thus bringing health services into the community. The SBS would alsostrengthen referrals and counter-referrals between primary and secondary levels by paying a premium forservices properly referred. Additionally, the project proposes to define new management and informationmechanisms; these mechanisms would improve community utilization and financial execution. Amongother measures, explicit control and supervision mechanisms will be introduced, including the creation ofa Management Unit for the SBS.

The project would support the design and introduction of: payment mechanisms-including pricecalculations, product definitions, copayment calculations, processes of receipt and payment, etc.;information systems (see SNIS subcomponent); establishment of groups (mancomunidades)ofmunicipalities and health districts; and the creation of the SBS Management Unit at the ministerial level.During the design phase, the project would finance technical assistance, training, and study tours. Duringthe implementation phase, the project would finance training, information systems (hardware, software,and communications), as well as supervision and monitoring costs. Information systems, paymentmechanisms, and SBS monitoring and supervision should all be put in operation by the project. Further,the SBS's information systems must be integrated with those of the EPI, IMCI and MBP components, forefficiency of information collection at the local level (for example, with regard to the vaccination cardand the identification of SBS users).


B. Management Information Systems

An adequate information system is required not only to improve decentralized management, but also toeffectively supervise progress in project implementation. The Ministry of Health has worked for anumber of years with the support of various donors in the construction and improvement of the nationalsystem of health information (SNIS). A network for the national collection and management ofinformation already exists; the strengthening of this network will complement and improve the SNIS, aswell as the local and Ministerial units which administer and use the system. Current problems include theexcessive aggregation of information, the failure to identify users, low utilization at the local level, andlow quality of registries and SNIS reports.

The project's activities will include: (i) financing the redesign of the SNIS, adding new informationmodules to the existing system (specifically, to support the implementation of the SBS, performanceagreements, and monitoring subsystems for the EPI, IMCI, and MBP). Reports will be generated forlocal level decision making (District Information Analysis Councils and SEDES), and instruments fordata collection will be simplified; (ii) support for the creation of and training for the new SNIS atdepartment and district levels, including the purchase of new computer equipment; and (iii) supervisionfor the operation of the above-mentioned information subsystems at local levels, (including collection andthe production of municipal, district and departmental level periodic reports).

C. Strengthening of supervision and local management systems

Most project activities will be executed at the local level. The project will support the development ofmanagement and supervisory capacities at local and (as necessary) departmental levels.

The planning and supervisory capacity of SEDES will be strengthened in the 5 departments where theproject will support field activities. Each SEDES Planning Unit will be provided with one consultant,reporting to the Director, who will act as Technical Coordinator. This consultant will facilitatecoordination of SEDES staff who will organize and supervise project-supported activities. Districts inproject areas will receive support to carry out project related activities and to improve local levelsupervision. This component will finance regional level technical assistance, training, equipment andoperational expenditures. At the district level it will finance training, equipment, and in select cases,small civil works operational expenditures.

Project Component 3 - US$ 2.4 million

Component 3: Coordination, monitoring, and evaluation of the Project

The project will be executed at local levels of the health system, particularly in SEDES, districts,municipalities and health establishments. Project coordination is described in Annex 2b. Monitoring andevaluation will be key activities in this project. The URS will maintain a system (based on the SNIS) tomonitor project progress. Specialized studies will also be carried out as needed. Impact evaluation willbe based on Performance Agreements (PA) have been designated as the primary instrument ofsupervision and strategic control, as represented by contracts signed between authorities seeking toachieve shared objectives. These PAs will allow authorities from distinct levels of the health system tocoordinate their actions for sectoral and project objectives and will strengthen supervision mechanismsby: (i) operationalizing ministerial policy directives to the SEDES and health establishments, particularlywith regard to the SBS and the fortification of local health networks; and (ii) explicitly assigningresources to expected results. The activities to support PA implementation include: (i) training of agentsinvolved in the system of contracts-Ministry, SEDES, districts, health establishments, municipalities,NGOs and other actors and relevant organizations; and (ii) support for the supervision and monitoring ofthese instruments.


Annex 2b: Project Description


Project Management and Operational Manual

Executing Agencies. The execution of the Health Subprojects would be the responsibility of the FIS.The FIS would carry out the invitation and evaluation of bids, contracting, and disbursements inaccordance with its amended Operational Manual. For each health subproject, contracting would beundertaken for civil works, goods, and consultants, using procurement procedures and SBDs satisfactoryto the Bank. The remainfing components would be carried out by the Unit and its departmentalrepresentatives through annual operating plans (POAs in Spanish) and annual budget ceilings as specifiedin the Operational Manual.

Project Coordination. The project would be coordinated by the URS of the Ministry of Health. TheURS Director would be directly accountable to the Minister of Health. The Unit would have anAdministrative-Financial Manager responsible for the management of financial, physical and humanresources and a Technical Manager responsible for coordinating the specialized and technical work of thespecialists for each component. The specific roles and responsibilities of URS staff, as well as operativeprocedures for project management and implementation are detailed in the Operational Manual,presented to IDA during negotiations.

The Unit would coordinate with the SEDES (departmental health services), health districts,municipalities, and other sector-related local actors and institutions. To facilitate these relations withinthe project's five departments (health regions), each department will have a technical coordinator(working under the SEDES Director) and an administrator financed by the project as part of the ReformUnit. More specifically, the Reform Unit would have the following responsibilities:

* Promote the project nationally and locally;* Carry out the project's management, including maintaining a monitoring system for impact, physical

progress and financial management and preparing implementation reports twice a year;- Supervise, the execution of the investments component to be carried out by FIS;* Prepare terms of reference, for the hiring of consultants who will assist in implementing the project

components (other than the subprojects), and supervise their work;* Ensure compliance with Bank procurement guidelines;* Ensure the auditing of project accounts and other audits required by the Bank (including FIS's);* Coordinate Bank supervision missions, and* Organize the impact evaluation of the project.

Targeting Resources for Health Subprojects. Investment resources for subprojects would be allocatedduring the first year of implementation for each participating health district and SEDES (health regions).To ensure that a substantial amount of resources is allocated at the local level 40% of the investmentresources would go to the health districts, 40% to the municipalities and 20% to the SEDES. Thefinancial ceiling for each locality would be calculated on the basis of municipal population figures andhuman development indicators with a 30/70 weight, respectively. To ensure that funds are notunderutilized, and to provide an incentive for effective implementation, if despite reasonable support fromthe Project Management the participating health districts and SEDES do not program their full allocationor are not capable of executing fully the programmed resources, upon review, funds can be reallocated tostronger performers. The allocation criteria, formula, review and reallocation procedures are part of theOperational Manual.


Direct Beneficiaries. Direct beneficiaries would be ultimately the population in the target areas asimproved access, coverage and positive behavioral changes would result in better prevention and controlof diseases. Subprojects can be requested by district and departmental service providers (private andpublic), health districts and SEDES, NGOs and community groups.

Service Providers/Contractors (ejecutores). Certified health providers at the district and departmentallevel; health sector professionals, consultants and private contractors at the national level (whenapplicable) are eligible to carry out subprojects funded.

Cofinancing. Minimum cofinancing in the amount of 20% of the total subproject cost to cover therequired administrative and supervision costs would be part of the eligibility requirements. To encourageinvestments other than infrastructure and equipment cofinancing requirements for these types ofsubprojects would be higher (up to 30%). It is expected that municipal or departmental governments (inthe case of SEDES) in accordance with the Leyes de Descentralizaci6n Administrativa y Ley deParticipaci6n Popular would cofinance the majority of subprojects. FIS would be responsible for theregistration of subprojects with the Secretariat of Public Investments and for handling municipal anddepartmental counterpart for subprojects.

Subproject Cycle. In close collaboration with the IDA team and the Reform Unit, FIS has adapted itsproject cycle to incorporate project and Ministry requirements. Following is a summary of key aspects.

Promotion. The project will begin with a national communications campaign to inform the targetpopulation about the project objectives, activities and components. Following this campaign, the Unitand FIS, through a team of consultants and health specialists carefully selected and trained to assistparticipating health districts and SEDES during the process, would assemble a portfolio of eligiblesubprojects or investment ideas in accordance with project objectives and the menu contained in theOperational Manual. Based on the Decreto Supremo 25233 which specifies their roles and actions, thehealth districts and SEDES would use as a starting point the district health plans contained in theMunicipal Development Plan (PDM in Spanish) or, when applicable, the Municipal Annual InvestmentPlan (POA in Spanish). Representatives from the Unit working closely with local FIS representativesand health personnel would visit project areas to transmit and explain subproject eligibility and appraisalcriteria. Technical assistance would be available to health districts, as needed, for subproject formulation.

Technical Criteria for Evaluation. Subprojects eligible for funding would need to be clearly associatedwith project goals, components and activities within the target areas in accordance with the menucontained in the Operational Manual; respond to specific maternal and infant mortality needs identifiedand prioritized at the local level in accordance with the Leyes de Decentralizaci6n Administrativa y deParticipaci6n Popular, be formulated as sustainainable, cost-effective technical solutions to localproblems in maternal-child care, and meet other financial and environmental criteria contained in theOperational Manual.

Appraisal/Approval of Subprojects. In accordance with the Decreto Supremo 25233 subprojects orinvestment profiles would be evaluated and approved by the local District Health Council (ConcejoDistrital de Salud). Subprojects approved by the Council would be referred to the corresponding FISregional office for funding as agreed with the Ministry. Subprojects presented by the SEDES would beevaluated and approved by the Ministry and the FIS at the departmental level.

FIS/MSPS Agreement. The Ministry of Health will delegate the execution of the investments componentto the FIS through an inter-institutional agreement. The agreement, which will be reviewed once a year,based on the performance of FIS, establishes the rights and obligations of both agencies for this project,including processing times for the processing and delivery of subprojects. It is expected that themaximum amount of time a subproject would take from beginning to end would be 18 months.


Project Supervision. Technical supervision may be contracted out to specialized consultants(individuals or firms). The Unit would supervise the execution of project components, analyzingcomponent and subcomponent activities, and guiding implementation through annual plans, budgets, andreports. The Unit would carefully monitor the utilization and transfer of technical and financial resources,using a Management Information System. This will be used as the basis for operational decision making,and for assuring the timely and efficient compliance with project objectives. It would also assure thatrelevant information is available for any adjustment of procedures, strategies, or resource use duringproject implementation, or for future investments. Supervision would be integrated and horizontal innature, such that project implementation should meet the terms and timelines established in the annualoperating plans. Specific procedures and mechanisms will form part of the project's Operational Manual.

Annual Review of Project Implementation. IDA's supervision schedule for the project will include aminimum of three missions during the first year of implementation, of which one will be theAnnualReview of Project Implementation, to be carried out in conjunction with the Ministry, the Reform Unit,the FIS and PAHO (for the EPI component). The project will require extensive and detailed supervisionby IDA, as well as by PAHO for the immunization program, particularly during the first year. During thesecond and third years of project execution, at least two missions will be carried out; one of which will bethe Annual Review. The Annual Review for the third year will also include a review of trigger indicators,an evaluation of the entire project as part of the APL Program, and the preparation of recommendationsfor the commencement and execution of Phase II of the Reform Program.

Project Monitoring and Evaluation. Project monitoring and evaluation will measure not onlyprocedures but also results, thereby allowing the project to learn. A monitoring program is underdevelopment and will include all output and input variables detailed in Annex 1. For subprojects,performance will be measured, and evaluations will be used to make recommendations for future annualex-post evaluations using random samples of concluded subprojects, as well as beneficiary evaluations.Annual ex-post and beneficiary evaluations will include physical audits of a sample of investmentsubprojects, with size and characteristics acceptable to IDA. Project funds will be utilized for thispurpose: recommendations and lessons learned will be included in the following annual operating plan.Periodic surveys of supervision within the same components will also be carried out according tospecified indicators.

The principal tool of project evaluation will be the comparison of 1998 DHS results with those of the2001 DHS, along with the impact indicators agreed upon for each year of project subcomponentexecution. To measure subproject impact, a baseline and control group would be established during thefirst year of implementation. In the last year of execution, a representative study would be carried out forthe different types of subprojects, randomly selected, to measure the impact of investment on selectedindicators. The preparation of the baseline would take into account: (i) ethnicity and gender; (ii)recommendations of impact evaluations of the FIS, PROISS, and PSF; and (iii) studies of coverage andquality in service delivery and service demand carried out during project preparation. To measure theprogress in indicators for other subcomponents, reports prepared by the SNIS (the National InformationSystem) will be taken into consideration. At the end of the third year of the project, depending on thefinal evaluation, these indicators may be revised.


Annex 3: Estimated Project Costs


; -- 0 ~~~~~~~~TotalProjectd Cost-By Component US $ thousands

i. Increasing coverage and quality of the health servicesand promotion of health communities

A. Implementation of the new medium term plan for theExpanded Immunization Program (EPI) 20.6

B. Implementation of the IMCI strategy and MBPPackage 1.2

C. Subprojects for the reduction of child and MaternalMortality 14.8

Subtotal 36.6II. Strengthening local capacity to respond to health needs

A. Implementation of the Basic Health Insurance 1.0B. Impulse to the Management Information Systems 0.7C. Strengthening of local management systems 3.3

Subtotal 5.0Ill. Coordination, Monitoring and Evaluation 2.4

Total Cost 44.0

TotalProject Cost by Category .US $ mMion

Civil Works 1.0Goods 22.0Consultant's services 6.0Health Subprojects 14.0Operating costs 1.0

Total Project Costs 44.0


Annex 4a: Cost Benefit Analysis Summary


Economic Costs

Costs (as well as benefits) are calculated for a 10-year period. The costs of the project up to the end of2002 are as presented in Annex 5. After 2002, the recurrent costs include $4 million a year for theexpanded immunization program and between 25 and 35 percent of the final year investment of $12million. The relatively high percentage of recurrent costs reflects the need for the Government tocontinue the activities programmed in this project so as to achieve an impact. The assumption concerningthe proportion of final year investment likely to be needed in subsequent years is the only factor thatgenerates a distribution of costs. This proportion is assumed to be unifornly distributed between 25 and35 percent.

Economic Benefits

The calculation of economic benefits involves five steps:

a) Selecting the key performance indicators to be used in the analysis (shown in Annex 1);b) Specifying the relation between performance indicators and deaths averted;c) Attributing an economic value to deaths averted;d) Assigning a range of plausible values for the key assumptions, including the values that the

indicators would take on in the absence of the program;e) Performing a monte carlo simulation to generate a distribution of estimated values of the internal

rate of return and deaths averted.

These steps are discussed below.

Specifying the relation between performance indicators and number of deaths averted

Each one of the key performance indicators in Table A.4. 1 relates to coverage or cases treated. The effectthat a change in the value of an indicator has on the number of deaths depends upon the prevalence of theillness in the population and the mortality rate for those who do not receive attention - either for births orillnesses as the case may be. In the analysis, deaths of children due to pneumonia or acute diarrhea areassumed to occur only if they are not treated. Maternal deaths can occur whether or not the birth isattended by trained personnel, but are assumed to be substantially lower for institutional births. Inaddition to the positive effect on maternal mortality, having an institutional birth is assumed to reduceinfant deaths from perinatal causes.

The prevalence rate for ARI is estimated to be approximately 15 percent in the population under 5 and theprevalence rate for episodes of diarrhea is 25 percent. The mortality rates for those who do not receiveattention for ARI is estimated to be 29 percent. This prevalence rate and mortality rate for those notreceiving attention, combined with the current coverage rate of approximately 55 percent, generates the28,000 deaths that are currently considered to be attributable to ARI. For the case of diarrhea, childrenare assumed to have on average three episodes a year. Thirty percent of the cases result in dehydrationand 5 percent of these 30 percent result in severe dehydration. The mortality rate for cases of dehydrationthat are not treated is assumed to be 10 percent, while that of severe cases not treated is assumed to be 80percent. This pattern of prevalence and mortality for those not treated, combined with the currentcoverage rate of approximately 33 percent, generates the roughly 24,000 deaths a year that are currentlyconsidered to be attributable to diarrhea.


The introduction of the expanded vaccine is expected to lead to a reduction between 6,196 and 12,392cases of IRA. This is a new vaccine and there has not yet been a lot of experience on the effect ofintroducing such a vaccine into a population like Bolivia's. The range reported above lies between a lowcase (of 1,899 cases averted), based on the pattern observed in Chile, and a high case (of 19,333 casesaverted) based on the pattern observed in a Navajo population. The Navajo case is probably an extremeone as that population had some of the highest estimates of meningitis ever recorded. In the simulation,meeting performance targets related to immunization coverage is linked directly to a reduction in IRAprevalence.

Having traced out the effect of the value of a key performance indicator on the number of deaths, thecalculation of deaths averted is obtained by comparing the number of deaths with and without theprogram. This follows directly from the difference in the values of the key performance indicators withand without the project.

Note that all the economic benefits are related to deaths averted. No attempt to calculate the benefitsfrom a reduction in morbidity was made. This was justified on two grounds. First, given the high level ofmortality in Bolivia, scaree resources should first go to averting deaths before they are directed toreducing morbidity. Second, the calculation of economic benefits only from deaths averted can beinterpreted as representing a lower bound on the true benefits. If the estimated internal rate of returnappears sufficiently high to justify the project even at this lower bound, it is not necessary to undertakethe more complicated analysis of determining the benefits from the reduction in morbidity.

Attributing an economic value to deaths averted

The economic benefits of averting a death of a mother or a child are assumed to be the present discountedvalue of the income that person would earn during their added lifetime. In both cases, the discount ratewas set at 10 percent.

The particular assumptions used to calculate the economic benefit to averting the death of a mother are asfollows. To account for lower female incomes, the base income is assumed to be 70 percent of per capitaGDP. Per capita CiDP is currently around $1000. To account for the probability that lower incomewomen are more likely to be the ones benefiting from the reduction in maternal mortality, the baseincome is multiplied by a factor that varies uniformly from 60 to 75 percent. Over the course of thewoman's lifetime income is assumed to grow from between 1 to 3 percent. Women are assumed to beworking and to have an additional 29 years of earning income (reflecting the assumptions that the womanwould otherwise have died at age 31 and would be expected to work until age 60).

The assumptions used to calculate the economic benefit to averting the death of a child are as follows.The children are assumed to begin work at age 18 and work until age 60. To account for the probabilitythat it is children from lower income families that are likely to benefit from the reduction in childmortality, the base income is assumed to vary uniformly between 60 and 75 percent of per capita GDP.The base income is assumed to grow between 1 and 2 percent per year.

Assigning a range of plausible values for the key assumptions

There are three sets of variables where assumptions must be made. As discussed above, there arevariables such as the prevalence of the illness in the population and the mortality rate when the child doesnot receive attention that affects how setting values of key performance indicators translates into numberof deaths. There are the assumptions made on the variables affecting the economic valuation of a deathaverted. Finally, there are assumptions concerning the values that the key performance indicators couldbe expected to attain in the absence of the program. Holding all other assumptions constant, it is thedifference between the values of the key performance indicators with and without the program that leadsdirectly to the estimates of the number of deaths averted.


The cost-benefit analysis assumes that the values of the key performance indicators would still improve,even without the project as a result of other improvements taking place in the health sector and in theeconomy as a whole. In general, the indicators are assumed to improve by between one half and onepercentage points per year, depending on the indicator in question. For example, in the absence of theproject the percentage of cases of acute respiratory infections not treated is expected to decline from 55 to50 percent over the ten year period. This compares with an average reduction from 55 to 40 percent withthe project.

Performing a monte carlo simulation to generate a distribution of estimated values of theinternal rate of return and deaths averted.

The following table presents results obtained from a monte carlo simulation where the values of the keyperformance indicators of Table A.4. 1 are assumed to lie between the target set forth in Table A.4. 1 and alower bound set at 75 percent of the difference between the specified target and its baseline value.

The range of values obtained in the monte carlo simulation is due not only to the variance of the keyperformance indicators between the two targets, but also to the range of values assumed in the variablesthat are used to calculate the deaths averted and the economic benefits associated with the deaths averted.The percentiles provide information on the distribution of results. For example, in 20 percent of the trials,the estimated internal rate of return was less than 28 percent. Conversely, in 80 percent of the trials theestimated internal rate of return was over 28 percent. The table suggests that there are sizable returns tothe project with plausible ranges of the key variables. The results are conservative in that the simulationsdid not assume that all the performance targets were met, but that performance between 75 and 100percent of the target was achieved. Of course, any performance below that level would result in fewerdeaths averted and correspondingly lower internal rates of return.

Table A.4.1: Results from Monte Carlo Simulations

Internal Rate of Return Deaths Averted to Children less than5 (1999-2002)

Mean 40% Mean 24,826Standard deviation 14% Standard deviation 1,083

Percentiles0% 7 _ 0% 21,44010% 23 10% 23,44320% 28 20% 23,91930% 31 30% 24,25140% 35 40% 24,54650% 39 50% 24,81860% 42 60% 24,09970% 46 70% 25,34280% 52 80% 25,73790% 60 90% 26,282100% 94 100% 28,591

Number of trials 1,000 Number of trials 1,000

Bolivia: Health Sector Reform Project Paae 33

Annex 4b: Public Expenditure in Health


1997 1998 1999 2000 200i 2002 2003 2004 2005 2006 2007 2008

Without Project

A. Central Government Expenditure in Health (excludes immunizations) 63.2 64.4 79.5 80.0 83.5 89.0 95.2 101.9 109.1 116.7 124.9 133.7

B. Immunizations 2.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5

C. Municipal Government Expenditure in Health 5.1 5.6 6.1 6.5 7.0 7.7 8.6 9.5 10.5 11.7 13.0 14.4

D. Total Public Expenditure in Health 70.8 71.5 87.1 92.0 92.0 98.2 1053 112.9 121.1 129.9 139.4 149.6

With Project

A. Central Government Expenditure in Health (excludes immunizations) 63.2 64.4 85.0 90.0 93.0 98.0 104.2 110.9 118.1 125.7 133.9 142.7

B. Immunizations 2.5 1.5 9.0 8.0 7.0 6.5 6.1 6.1 6.1 6.1 6.1 6.1

C. Municipal Government Expenditure in Health 9.1 10.0 12.0 15.4 17.1 19.0 21.1 21.2 21.3 21.4

D. Total Public Expenditure in Health 65.7 65.9 103.1 108.0 112.0 119.9 127.4 136.0 145.2 153.0 161.3 170.2

Increased Expenditures

A. Central Government Expenditure in Health (excludes immunizations) 5.5 10.0 9.5 9.0 9.0 9.0 9.0 9.0 9.0 9.0

B. Immunizations 7.5 6.5 5.5 5.0 4.6 4.9 5.2 5.5 5.8 6.1

C. Municipal Government Expenditure in Health 3.0 3.5 5.0 7.7 8.6 9.5 10.5 9.5 8.3 7.0

D. Total Public Expenditure in Health 16.0 16.0 20.0 21.7 22.1 23.1 24.1 23.1 21.9 20.6

Of which:Financed by the Credit and cofinanciers 8.4 9.0 8.5 8 8 8 8 8 8 8

Financed by Central Government 4.6 3.5 6.5 6.0 5.6 5.6 5.6 5.6 5.6 5.6

Financed by the Municipalities 3 4 5 8 9 9 11 10 8 7

Memo Items in million $US (from UDAPE)

Gross Domestic Product (GDP) 7,953.0 8,558.0 9,233.0 9,930.0 10,573.0 11,612.0 12,308.7 13,047.2 13,830.1 14,659.9 15,539.5 16,471.8

Total Public Expenditures (TPE) 2,265.7 2,412.5 2,590.8 2,734.2 2,720.0 2,895.0 3,096.3 3,311.7 3,542.0 3,788.4 4,051.9 4,333.7

Without Project

A+B / GDP 0.83% 0.77% 0.88% 0.86% 0.80% 0.78% 0.79% 0.79% 0.80% 0.81% 0.81% 0.82%

AtB I TPE 2.90% 2.73% 3.13% 3.13% 3.13% 3.12% 3.12% 3.12% 3.12% 3.12% 3.12% 3.12%

D / GDP 0.89% 0.84% 0.94% 0.93% 0.87% 0.85% 0.86% 0.87% 0.88% 0.89% 0.90% 0.91%

With Project

A+B / GDP 0.83% 0.77% 1.06% 1.00% 0.92% 0.89% 0.90% 0.90% 0.90% 0.90% 0.90% 0.90%

A+B / TPE 2.90% 2.73% 3.78% 3.63% 3.59% 3.56% 3.56% 3.53% 3.51% 3.48% 3.46% 3.43%

D/GDP 0.83% 0.77% 1.16% 1.13% 1.06% 1.02% 1.04% 1.04% 1.05% 1.06% 1.07% 1.08%

Increased Central Government expenditure/TPE 0.18% 0.13% 0.24% 0.21% 018% 0.17% 0.16% 0.15% 0.14% 0.13%

lIncreased Public expenditure/GDP _________ 0.17% 0.16%. 0.19%, 0.19% 0.18%. 0.18%. 0.17% 0.16% 0.14%1 0.12%

Sources: PCU based on UDAPE and MOF.

Notes: Central government expenditures exclude "pensiones vitalicias" and pensions. It is projected to grow at the same rate as total pubic expenditure.

"Without project" is a scenario where (i) the immunization program remains at a very low level; and (ii) the Seguro Basico is not established (and the Seguro materno y de la Ni0ea continues to operate). The "With project" scenario

includes those two policies, s, strengthens the quality ot mother-child services and provides sub-projects (These are assumed to add little to recurrent costs).


Annex 5: Financial Summary


2000 2001 2002 TOTALProject CostInvestment cost 13,301.3 17,015.3 12,816.3 43,133.0Recurrent cost 275.0 265.0 255.0 795.0TOTAL COST 13,576.3 17,280.3 13,071.3 43,928.0Financing SourcesIDA 7,611.0 10,724.0 6,665.0 25,000.0Other Donors 1,810.3 1,810.3 1,810.3 5,431.0Government 4,155.0 4,746.0 4,596.0 13,497.0TOTAL FINANCING 13,576.3 17,280.3 13,071.3 43,928.0

BolMa: Health Sector Reform Project Page 35

Annex 6: Procurement and Disbursement Arrangements


Procurement

Works, goods and services as well as the contracting of consultants will be carried out in accordancewith IDA Guideline for Procurement (January 1995, revised in January and August 1996, September1997 and January 1999), the Guidelines for Selection and Employment of Consultants (January 1997,revised in September 1997 and January 1999), and the provisions stipulated in the Credit Agreement.Procurement arrangements are summarized in Table A. The Ministry of Health through the PCU and theFondo de Inversi6n Social (FIS) will supervise all procurement action under the project, based on agreedprocurement procedures as defined in the Operations Manual. The Procurement Operations Manual willinclude, in addition to the procurement procedures, the Standard Bidding Documents to be used in eachcase, as well as contracts to be awarded on the basis of quotations. Where no relevant standard contractexists, other standard forms acceptable to IDA shall be used.

Procurement of Civil Works

(a) National Competitive Bidding, NCB: will be used for all contracts, for the rehabilitation ofbuildings, in an amount greater than US$50,000 equivalent. NCB procedure must not discriminateagainst foreign bidders;

(b) Price comparison: at least three quotations will be used for contracts in an amount less thanU$50,000 equivalent.

Procurement of Goods

(a) International Competitive Bidding, ICB: contracts for security boxes, supplies for the cold chainand women medical kits in an amount greater than US$180,000 equivalent will be awarded using ICB;

(b) Limited International Bidding, LIB: contracts for supplies for the cold chain in the amount greaterthan US$150,000 equivalent will be conducted through LIB from suppliers offering technical andmaintenance services in Bolivia.

(c) UN Agencies (PAHO/WHO): procurement of contracts for vaccines and syringes in an amountgreater than US$200,000 equivalent will be conducted through PAHO/WHO. On the basis of packageswith a variety of vaccines estimated to cost less than US$1 million equivalent annually or such amountotherwise agreed by IDA pursuant to a procurement plan. PAHO/WHO will acquire the vaccines in anopen unrestricted competitive way consistent with Bank procedures and will charge a fee to cover thecost of the service. PAHO will submit market surveys to IDA on an annual basis;

(d) National Competitive Bidding, NCB: contracts for vehicles, computers, printers, software, officefurniture and equipment, educational materials, furniture, video-cameras, syringes, and miscellaneous inan amount less than US$180,000 equivalent will be awarded using NCB.

(e) Price comparison (local and international shopping) LS, IS: contracts for vehicles, computers,printers, software, office furniture and equipment, educational materials, furniture, video-cameras andmiscellaneous items in packages costing more than US$50,000 equivalent but less than US$180,000 willbe awarded using international price comparison, with quotations obtained from several suppliers, andcontracts less that US$50,000 equivalent will be awarded using local price comparison, with quotationsfrom at least three qualified suppliers.


Procurement of Technical Assistance

Consulting services and training will be procured following IDA's Guidelines and using standardcontracts, as follows: (i) Procurement for IEC (Publicity and preparation of education programs),Information Systems, Design and Revision of Norms and Protocol will be done according to quality andcost selection; (ii) feasibility studies, work supervision, financial and procurement audits, impacts andtraining will be done according to quality and cost selection and/or least cost selection; (iii) consultingservices including long-term consultants in the PCUs, will be awarded to individuals on the basis ofconsultants' qualifications as described in chapter V of the Guidelines, and contracts for other personalservices will be awarded on the basis of "Service Delivery Contractors".

Procurement of Health Subprojects

The project will finance subprojects to benefit communities, districts, and departments. Subprojectsconsist of investments that combine inputs such as small civil works, purchases of medical supplies andequipment, other equipment, social communications, and management strengthening. The communitiesthemselves would be responsible for procurement actions on these contracts using procedures,specifications and contract packaging agreed with the Bank and specified in the Orientation Manual.The subprojects would emphasize community participation in project execution and the use ofappropriate local technologies.

Subprojects will be procured as follows:

(a) Subprojects for works estimated to cost between US$250,000 and US$500,000 equivalent, will beprocured through National Competitive Bidding (NCB).

(b) Subprojects for works estimated to cost less than US$250,000 equivalent each, will be awarded onthe basis of mechanisms for community participation in procurement using three quotations.

(c) Goods for subprojects estimated to cost less than US$180,000 equivalent each, will be procuredthrough National Competitive Bidding (NCB).

(d) Goods for subprojects estimated to cost less than US$100,000 equivalent would be awarded usingintemational price comparison (International Shopping), with quotations obtained from several suppliers,and contracts less than US$50,000 equivalent will be awarded using local price comparison, withquotations from at least three qualified Suppliers. Supply of goods consisting of construction materialslocal government and other local organizations may be used.

(e) Community Subprojects consisting exclusively of technical assistance and/or training (capacitybuilding activities) will be procured using Selection-Based-on-Consultant Qualifications (SBCQ) forfirms; financial and technical audits will be procured using Selection-Based-on-Consultant Qualifications(SBCQ) for individuals and Least-Cost Selection (LCS) for firms. Consulting services (i) for individualswill be procured following IDA Guidelines and using standard contracts as described in chapter V of theguidelines, and (ii) for other personal services will be awarded on the basis of 'Service DeliveryContractors'.

(f) Operating costs include operation and maintenance of computing equipment, vehicles, office, costof supplies, materials, support services, communications and electricity for the PCUs, as well as travelcosts for supervision. An average of US$8,300 per month for the PCU in La Paz and US$2,150 for eachof the five Regional PCUs has been agreed.


Procurement Review

Prior review by IDA (Table B) will include: (i) all International Competitive Bidding; (ii) all LimitedInternational Bidding; (iii) the first two contracts in works and goods awarded on the basis of NCB bythe PCU and FIS every year; (iv) the first contract in works under Quotations procedure by PCU everyyear and simplified prior review for the first two works contracts by FIS every year; (v) simplified priorreview for the first contract of goods using International Shopping (IS) (PCU-SIF), and the first twocontracts using NCB procedure (PCU, FIS) every year; (vi) procurement arrangements in accordancewith Appendix 2 of the IDA Guidelines.

The rest of the procurement of works and goods will be subject to ex-post review by IDA. Regardingreview of consultant services: (i) all Terms of Reference and contracts greater than US$80,000equivalent for consultant services provided by firms and financial and procurement audits, and (ii) forindividual consultants less than US$50,000 equivalent twice yearly program and based on the programselection of TORs to be reviewed, (iii) for individual consultants and personal services less thanUS$7,000 equivalent twice yearly program.

To facilitate the process, the PCU/FIS will submit to IDA a plan for the contracting of consultants withrelevant TORs and cost estimates as part of the Operation Plan every six months. A procurement planfor the first year of the project, indicating the needs, procurement methodology, time frames and otherrelevant details will be presented during negotiations. Such a plan will be updated on an annual basis"every January" during the entire life of the project, and whenever it is considered necessary by IDA.

Under these arrangements, the prior review of approximately 35% of the estimated value of project itemsis expected. Although the expected level of prior review is be relatively low, this will be compensatedfor in several ways: (i) as part of the annual ex-post review of subprojects, external procurement auditors,contracted by the PCU and FIS under the credit, will conduct quarterly performance audits coveringtechnical, environmental, managerial and procurement aspects of a sample of sub-projects satisfactory toIDA; (ii) the audit of procurement aspects will include both physical audits and the procurementprocedures used, so that IDA can judge whether procurement implementation is satisfactory; (iii) theproject information and monitoring system will be used to compare costs of similar sub-projects in orderto detect possible discrepancies which might indicate procurement problems and the need for furtheranalysis; accuracy of data in the project information system will also be checked through the audits; and(iv) IDA supervision missions will conduct random reviews, including frequent field visits and review ofprocurement documentation. Additionally, the systematic review of the first two contracts for NCB, andthe first contract for other methods, every year will help monitor quality and consistency in theapplication of IDA Guidelines and procurement procedures agreed for the project. Efforts would bemade for a procurement specialist to be part of the supervision missions, which are expected to be aminimum of three the first year.

Disbursement

Allocation of Credit proceeds (Table C)

The proposed IDA credit would be disbursed over a period of about three years (plus six months todisburse on outstanding commitments), to be completed by September 30, 2002. The project closing datewould be March 30, 2003 (six month after completion date).

Disbursements would be made against the following categories:1. Civil Works - Expansion and rehabilitation of health services, micro drinking water systems, coldstore rooms for vaccines, solid and liquid waste disposal systems for health service centers and markets.85%.


Goods - Vehicles, computers, medical instruments and equipment, general furniture, administrative andeducational equipment, furniture and vaccines. 100% foreign expenditures and 85% local expenditures.

2. Technical Assistance - Information, education and communication, general and specializedconsulting, evaluation and monitoring systems, studies and investigation, long-term consultants, andInstitutional and Communities training. 100%.

3. Health Subprojects Small investments consisting of any combination of goods, small works forminor rehabilitation or expansion of health facilities, training and technical assistance. 100% foreignexpenditures and 85% local expenditures.

4. Operating Cost.

Retroactive Financing

The approximate amount to be financed retroactively is US$2.7 million (10 percent of the Creditincluding the PPF)

Use of Withdrawal Applications (WAs)

Quarterly PMR-based disbursement procedures using the Special Account will be adopted for theimplementation of this project in accordance with procedures established in The Loan AdministrationChange Initiative (LACI) tmplementation Handbook of September 1998 and its later revisions.

Special Account

Two Special Accounts would be opened for this project, one to be used by the PCU, the other by FIS,and both in accordance and compliance with IDA and LACI requirements. All project disbursementswould be paid from these Special Accounts. The Special Accounts would be replenished quarterly at theBorrower's request and using Withdrawal Applications (WAs). The PCU and FIS would be responsiblefor preparing WAs, and in charge of the Special Accounts. Disbursements would be based on ProjectManagement Reports countersigned by the Task Manager and IDA's Financial Officer. Documentationsupporting WAs would be retained by the PCU and FIS at their headquarters in La Paz and madeavailable for examination by IDA staff during project supervision missions.

Local Currency Account

In addition to the Special Accounts in US dollars, both the PCU and FIS would create and maintain intheir accounting system a separate account for the counterpart funds needed for all payments anticipatedfor each year of the implementation of the project. All project accounts would continue to be managedin accordance with generally accepted international accounting standards, as confirmed by the annualfinancial-management audits for the project during implementation.

Audits

The government would contract independent auditors, acceptable to IDA, to audit Project Expenditures,the Special Account(s), the project accounts, and the WAs, in accordance with terms of referenceacceptable to IDA. Certified copies of the audit reports would be furnished to IDA within four monthsafter the close of the Borrower's fiscal year. The audit reports would include a separate opinion by theauditor on disbursements against certified WAs. Auditors would review individual contracts, ascertaincompliance with the terms of the contracts, inspect progress of works and reconcile the physical progresswith financial expenses incurred, and verify that procurement guidelines are being respected.


Annex 6, Table A: Project Costs by Procurement Arrangements for Bank-Financed Purchases'(in US$million equivalent)

Total CostExpenditure Category Procurement Method (confingencies

including)

ICB LIs NC8 Other N. _.F

1. Civil Works 441.4 50.0 491.4

2. Goods 154.4 500 1,000.0 3,400.0 5,054.4

3. Consultant's Services 4,492.8 4,492.8

4. Health Subprojects 10,108.8 10,108.8

5. Incremental 982.8 982.8Administrative Costs I

6. Refunding of cost- 1,404.0 1,404.0preparation advance

7. Unallocated 2,465.8 2,465.8

Total 154.4 500 1,441.4 22,904.2 25,000.0

Note: N.B.F. = Not Bank-financed (includes elements procured under parallel cofinancing procedures,consultancies under trust funds, any reserved procurement, and any other miscellaneous items).The procurement arrangement for the items listed under "Other" and details of the items listed as"N.B.F." need to be explained in footnotes to the table or in the text.

l For details on presentation of Procurement Methods refer to ODI 1.02, "Procurement Arrangements for Investment Operations."Details on Consultant Services can be shown more easily in the Table Al format (additional to Table A, where applicable).


Annex 6, Table B: Thresholds for Procurement Methods and Prior Reviewv

1. Civil Works>US$50,000 NCB Prior-review of first two contracts every

year

sUS$50,000 Three Quotations from Qualified Prior-review of first contractContractors

2. Goods

2.1 General 2 US$180,000 ICB Prior-review of all contracts

<US$180,000 NCB Prior review of first two contracts everyyear

>US$50,000 Shopping (International) Simplified prior-review of first contractevery year

sUS$50,000 Shopping (Local) Simplified post-review: random sampleof contracting documents

2.2 Cold chain Ž US$ 150,000 LIB Prior-review of all contracts

2.3 Vaccines and >US$ 200,000 UN Agencies (PAHO/WHO) PAHO to submit to the Associationsyringes market surveys annually

3. Consultant'sServices

3.1 Firms 2 US$80,000 QCBS Prior-review: all TORs, short lists(including full review of technical andcombined evaluations)

<US$80,000 Least Cost Selection Prior-review: annual program andTORs for financial and procurementaudits

3.2 Individual s US$50,000 Individuals Prior-review: twice yearly review ofConsultant's and program of contracting. Program to

> US$7,000 specify which TORs will be reviewed.Post-review: random sample ofcontracting documents.

Prior-review: Twice yearly review ofs US$7,000 program of contracting. Post-review:

random sample of contractingdocuments

2 Thresholds generally differ by country and project. Consult OD 11.04 "Review of Procurement Documentation" and contact theRegional Procurement Adviser for guidance.


P'rocuNoiodt Rtem as ntotVi0PQUelOIVOhd Reviewpoer the Procurenient (hesho. .

Plan LI$$4. Health Subprojects

4.1 Civil works •US$500,000 NCB Prior Review of first two contractsevery year

<US$250,000 Three Quotations from Qualified Simplified Prior Review of first twoContractors contracts every year

4.2 Goods 2US$180,000 ICB Prior Review of all contracts

sUS$180,000 NCB Prior review of first two contracts everyyear

sUS$1 00,000 Shopping (International) Simplified Prior Review of first twocontracts every year

<US$50,000 Shopping (National) Simplified Post Review of a randomsample of contracting documents

4.3 Consultant'sServices and training

4.3.1 Firms 2 US$80,000 QCBS Prior Review: all TORs, short lists(including full review of technical andcombined evaluations)

<US$80,000 Least Cost Selection Prior Review: annual program andTORs for financial and procurementaudits

4.3.2. IndividualConsultants sUS$50,000 individuals Prior Review: twice yearly review of

and program of contracting. Program to<US$15,000 specify which TORs will be reviewed.

Post-Review: random sample ofcontracting documents.

Prior-Review: annual program ofsUS$15,000 contracting under agreed standard

TORs. Post-Review: random sampleof contracting documents.

Total Value of Contracts subject to Prior Review = 35%

Overall Procurement Risk Assessment:HighAverageLow

Frequency of procurement supervision missions proposed: One every 6 month(s) (includes special procurement supervision for post-review/audit


Annex 6, Table C: Allocation of Loan Proceeds

Rpn.o tM Ira WSMIRM F i Pen7entag.

1. Civil WorksExpansion and rehabilitation of health 491.4 85%services, micro drinking water system,cold store rooms for vaccines, solid andliquid waste disposal systems for healthservice centers and markets

2. GoodsVehicles, computers, medical 5,054.4 100% of foreign expendituresinstruments and equipment, general 85% of local expendituresfurniture, administrative and educationalequipment and fumiture and vaccines

3. Consulting Services Information,education and communication 4,492.8 100%General and specialized consulting,Evaluation and monitoring systemsStudies and investigation and long termconsultants.Institutional and communities.

4. Health Subprojects 10,108.8 85% goods and works,l___________________________________ 100% consultants' services5. Incremental Administrative Costs 982.8 85%Total Project Costs 21,130.2

Refunding of Project Preparation 1,404.0Advance _

Unallocated 2,465.8Total 25,000.0


Annex 7: Project Processing Budget and Schedule


-P ActSciaoPlne tual(At f-na POD st e) _ ____ ___e

Time taken to prepare the project (months) 10 monthsFirst Bank mission (identification) 02/1997 02/24/1997Negotiations 03/1999 01/25/99Planned Date of Effectiveness 05/1999 07/1999

Prepared by: Ministry of Health

Preparation assistance: PPF Q094-0-BO/Japanese Grant 25268

Bank staff who worked on the project included:

Daniel Cotlear Sr. Health Economist, LCHSDEvangeline Javier Sector Leader LCSHDRafael Flores Investments System Specialist, LCSHDHelen Saxenian Health Financing, HDD (PeerReviewer)Anne Tinker Safe Motherhood, HDD (Peer Reviewer)Mariam Claesom Integrated Management of Childhood Illness, HDD

(Peer Reviewer)Rudolf Van Puymbroeck Chief Counsel, LEGLAGenaro Alarcon-Benito Lawyer, LEGLADavid Varela Lawyer, LEGLAEstanislao Gacitua Social Participation Specialist, ESSDMaria Lucy Giraldo Procurement Specialist, LCSHDPatricia Bernedo Project Assistant, LCSHD


Annex 8: Documents in the Project File*


Area Financiera - Administrativa

FIN-01 Compromisos de Gestion Lic. Francisco Ardaya B. Sep-98 BI(Documento Te6rico)

FIN-02 Compromisos de Gestion suscrito Lic. Francisco Ardaya B. Oct-98 B_FIN-03 con Chuquisaca y en negociaci6n

con CochabambaFIN-04 Presupuesto por Componentes del Lic. Francisco Ardaya B. Nov-98 BI

Proyecto

FIN-05 Convenio Tipo para firma de Lic. Francisco Ardaya B. Nov-98 BICompromisos de Gesti6n

FIN-06 Compromisos de Gesti6n - Lic. Francisco Ardaya B. Nov-98 BlDocumento de Difusi6n

FIN-07 Organizaci6n Estructural y Procesos URS e Ing. Jorge Cavero Nov-98 B8FIN 08 Tecnicos del Proyecto

FIN-09 Estructura Financiera y Organizaci6n URS y Lic. Wilford Pacheco Nov-98 BIFIN-10 Tecnica del Proyecto

FIN-1 I Procesos Generales, Procesos de URS y Lic. Vvilford Pacheco Nov-98 81FIN-12 Compromisos de Gesti6n y Procesos

Administrativos del ProyectoArea lngenieria y Proyectos

INF-01 Documento Ejecutivo sobre Susy Bazan, Ximena Dic-97 ESlnfraestructura ffsica, equipamiento y Mendoza, David Mendoza,Recursos Humanos de Unidades de Malena Pino, LourdesSalud. Moncada y M6nica Saravia

INF-02 Criterios de asignacion de recursos Ing. Cristian Pereira S. FIS Ene-98 B8de FOCIS

INF-03 Analisis de la poblaci6n Boliviana por Ing. Cristian Pereira S. Mar-98 81municipios

INF-04 Proyecto de Fortalecimiento de Ing. Cristian Pereira S. Mar-98 81infraestructura y equipamiento de losservicios de primer nivel y hospitalesde distrito (Presentado a la Uni6nEuropea)

INF-05 Documento del Fondo Concursable Ing. Cristian Pereira y FIS Jun-98 B8de Inversi6n en Salud (FOCIS)

INF-06 Modificaci6n del documento del Ing. Cristian Pereira y FIS Oct-98 BlFOCIS a la propuesta deMecanismos de Asignacion deRecursos MAR

INF-07 Guia de Formulaci6n de Proyectos Ing. Cristian Pereira y FIS Jun-98 B1del FOCIS


Codigo Nombre de[ Documento Autor Aiio Tipo DobumentoEtaborac.

INF-08 Adecuaci6n de la Guia de Ing. Cristian Pereira y FIS Oct-98 BiFormulaci6n de Proyectos del FOCISal MAR

INF-09 Criterios de elegibilidad para el Ing. Cristian Pereira y FIS Jun-98 BIFOCIS

INF-10 Propuesta Preliminar FOCC Dr. Fernando Cisneros y Jun-98 ESFIS

INF-1 I Analisis de criterio de elegibilidad Ing. Cristian Pereira y FIS Jun-98 BI

INF-12 Detalle del ciclo de proyectos del Ing. Cristian Pereira y FIS Sep-98 BiMAR

INF-13 Resumen de Proyecto Piloto en hojas Ing. Cristian Pereira S. Sep-98 Blejecutivas

INF-14 Documento de Difusi6n y Ing. Cristian Pereira S. Oct-98 B!INF-15 Presentaci6n del MAR Mecanismos

de Asignacion de RecursosINF-16 Propuesta de Pilotaje Ing. Cristian Pereira S. Nov-98 BI

INF-17 Gufa de Presentaci6n de Proyectos Ing. Cristian Pereira y FIS Nov-98 81

Area Epidomiologia

PAI-01 Proyecto de apoyo a la Reforma de Tercera Misi6n del Banco Sep-98 BISalud - Sub componente Programa MundialAmpliado de Inmunizaciones

PAI-02 Informe Evaluaci6n de Programas Ministerio de Salud de Oct-98 ESAmpliado de Inmunizaci6n Bolivia y Organizaci6n

Panamericana de la SaludPAI-03 Informe de Asesoria Tecnica en el Ing. Victor G6mez - Nov-98 ES

Area de Cadena de Frio Organizaci6nPanamericana de la Salud

PAI-04 Plan Quinquenal del Programa Ministerio de Salud de Nov-98 ESAmpliado de Inmunizaci6n 1999 - Bolivia y Organizaci6n2003 Panamericana de la Salud

PAI-05 Evaluaci6n Programa Ampliado de Roberto Borht, Juan Nov-98 ESInmunizaciones Carlos Mallo y Virgilio

Prieto

Area Salud

SAL-01 Base de datos y Analisis de Carlos Juanes, Fernando Nov-97 ESestructura de costos en el area Rivero, Javier Linares,Materno Infantil Sandra Mercado y Ramiro

La FuenteSAL-02 Calidad de la atenci6n del parto en Miguel Angel Fernandez Jul-98 ES

los distintos niveles de resoluci6n en_ Bolivia

SAL-03 Propuesta de aspectos operativos Guido Monasterios Jul-98 ESesenciales para implementar unFondo Concursable en el marco delProyecto del Ministerio con el Banco .


Ninibre I Dotiie Wo!iv^ t bcuinwh

SAL-04 Tendencias y conductas en la Ramiro Mamani, Esther Jul-98 ESutilizaci6n de servicios de Salud Moldes y Fanny Cornejo

SAL-05 Tendencias y conductas en la Ramiro Mamani, Esther Sep-98 ESutilizaci6n de servicios de Salud - Moldes y Fanny CornejoTrabajo de complementacion -Satisfacci6n del usuario

SAL-06 Evaluaci6n del Sistema Nacional de Charles Pedregal, Milenka Nov-97 ESSalud - Nuevo Modelo Sanitario Rossel, Olga Soliz, MeryBoliviano Loredo, Henry Zabaleta y

Victor Zapata

Area Economia de la Salid

SBS-01 Coberturas del Seguro Basico de Lic. Marina Cardenas R. May-98 BlSalud

SBS-02 Proyecto de Decreto Supremo Lic. Marina Cardenas R. May-98 BISeguro Basico de Salud

SBS-03 Analisis Tecnico-Financiero del PAI Lic. Marina Cardenas R. May-98 BI

SBS-04 Estimaci6n de Costos de las Lic. Marina Cardenas R. Ago-98 Biprestaciones del Seguro Basico deSalud

SBS-05 Seguro Basico de Salud - Lic. Marina Cardenas R. Oct-98 BlSBS-06 Documento de Difusi6n y Documento

de Discusi6nSBS-07 Municipios Lic. Marina Cardenas R. Oct-98 BI

SBS-08 Convenio Tipo para Prefecturas y Lic. Marina Cardenas R. Oct-98 BISBS-09 Gobiernos Municipales con SBS

SBS-10 Convenio tipo para autonomizaci6n Lic. Marina Cardenas R. Oct-98 Bide hospitales con SBS y RS

SBS-11 Calculo Financiero del Impacto del Lic. Marina Cardenas R. Nov-98 81Seguro Basico de Salud

SBS-12 Estudio Cuentas Nacionales de Equipo HARVARD Jun-98 ESGasto en Salud en Bolivia - ProyectoHarvard

SBS-13 Mejoramiento de la Calidad de Equipo UNICEF y MSPS May-98 B1Atenci6n: Estandares e Indicadores -SBS

SBS-14 Programa de Comunicaci6n Equipo UNICEF y MSPS May-98 81Educativa - SBS

SBS-15 Diez primeras causas de notificaci6n Equipo UNICEF y MSPS May-98 BlEnfermedades transmisibles y dahosde salud - SBS

SBS-16 Manual de normas Tecnicas de Equipo UNICEF y MSPS May-98atenci6n a la ninez -SBS

SBS-17 Instrumental y equipo de laboratorio Equipo UNICEF y MSPS May-98 81necesario por nivel de atencion - SBS


Codigo Nounbre dd tfiihiento Ahto Trpo Oceumento-___-___-___-___._ Elaborac.

SBS-18 Estimaci6ndelcostodelinstrumental Equipo UNICEF y MSPS May-98 B8y equipo medico - SBS

SBS-19 Manual de normas Tecnicas de Equipo UNICEF y MSPS May-98 BIatenci6n a la poblaci6n en general -SBS

SBS-20 Manual de normas tecnicas de Equipo UNICEF y MSPS May-98 BIpromoci6n y rehabilitacion nutricional- SBS

SBS-21 Paquete de medicamentos e insumos Equipo UNICEF y MSPS May-98 81-SBS

SBS-22 Manual de Normas Tecnicas de Equipo UNICEF y MSPS May-98 B1laboratorio, Manual deprocedimientos Administrativos -yManual del Comite Nal. DeCoordinaci6n SBS

SBS-23 Manual de normas tecnicas de Equipo UNICEF y MSPS May-98 BIatenci6n a la mujer - SBS

SBS-24 Determinaci6n de costos de Equipo UNICEF y MSPS May-98 B1medicamentos e insumos del SeguroBasico de Salud

SBS-25 Guia para los Usuarios - Seguro Equipo UNICEF y MSPS May-98 81Basico de Salud

Area Salud Publica

SP-01 Informe sobre Constituci6n de Redes Victor Zapata, Olga soliz, Nov-97 ESde Servicios y coberturas alcanzadas Lisbeth Rossel y Meryen los programas priorizados del LoredoModelo de Atenci6n

SP-02 Guia de implementaci6n perfil de Lic. Maria Luisa Salinas Mar-98 - Bproyecto

SP-03 Esquema de implementaci6n de Lic. Maria Luisa Salinas Abr-98 B1distritos modelos

SP-03 Perfiles de proyectos Chagas, Lic. Maria Luisa Salinas May-98 BlSP-04 Malaria y TBSP-05SP-06 Plan Estrategico de Salud Warnes, Lic. Maria Luisa Salinas May-98 B1SP-07 Santa Cruz Plan Estrategico de SaludSP-08 Colcapirhua Cochabamba y Plan

Estrategico de Salud El Alto La PazSP-9 Plan Nacional IMCI Equipo Tecnico IMCI Jun-98 81

NacionalSP-10 Plan Regional IMCI, La Paz, Lic. Maria Luisa Salinas Jul-98 BISP-1 1 Cochabamba y Santa CruzSP-12SP-1 3 Apertura Programatica Paquete Lic. Maria Luisa Salinas Jul-98 B1

materno NeonatalSP-14 Plan Nacional Paquete Materno Equipo Tecnico Nacional Sep-98 B1

Neonatal (MBP) 1999 - 2001 Mujer - NihoSP-1 5 Plan Departamental Paquete Materno Equipo Departamental Sep-98 BISP-16 Neonatal La Paz, Cochabamba y Mujer - NinoSP-17 Santa Cruz (MBP) 1999 - 2001


SP-18 Plan Nacional Atenci6n Integral de Lic. Maria Luisa Salinas H. Sep-98 BlEnfermedades Prevalente de la

_ Infancia (IMCI) 1999 - 2001SP-19 Plan Departamental La Paz, Lic. Maria Luisa Salinas H. Oct-98 BlSP-20 Cochabamba y Santa Cruz Atenci6nSP-22 Integral de Enfermedades Prevalente

de la Infancia (IMCI) 1999 - 2001SP-23 Informe Preliminar "Estudio Red Equipo Consultores Nov-98 BISP-24 Obstetrica y Neonatal La Paz,SP-25 Cochabamba y Santa Cruz"

Otras ireas

OTR-01 Marco Institucional Lic. Marcelo Barr6n R. Oct-98 B1

OTR-02 Proyecto del Decreto Supremo Lic. Marcelo Barr6n R. Oct-98 BlSEDES 25060

OTR-01 Plan de Comunicaci6n Social Lic. Franco Clavijo C. Oct-98 ES

Menu de abreviaturasBI - Borrador InstrumentoES - EstudioFIN - Area Financiera AdministrativaINF - Area Ingenieria y ProyectosOTR - Fortalecimiento Institucional y otrosPAI - Area EpidemiologiaSAL - Area SaludSBS - Area Economia de la SaludSP - Area Salud Puiblica


Annex 9: Statement of Loans and Credits

Status of Bank Group Operations in BoliviaOperations Portfolio

As of 11-Jan-99

Difference Betweenexpected

Original Amount in US$ Millions and actualFiscal disbursements a/

Project ID Year Borrower PurposeIBRD IDA Cancellations Undisbursed Orig Frm Rev'd

umber of Closed Projects: 55

ctive ProjectsO-PE-57030 1999 REPUBLIC OF BOLIVIA REG REFORM ADJ CREDI 0.00 41.78 0.00 20.51 -22.30 0.00

O-PE-40085 1998 REPUBLIC OF BOLIVIA PARTICIP RURAL INV. 0.00 62.80 0.00 65.32 0.00 0.00

O-PE-40110 1998 MINISTRY OF FINANCE (MOF) FIN DECEN & ACCT 0.00 15.00 0.00 12.64 -.45 0.00

O-PE-55974 1998 GOVERNMENT OF BOLIVIA BO EL NINO EMERGENCY 0.00 25.00 0.00 18.81 2.43 0.00

O-PE-57396 1998 REPUBIC OF BOLIVIA REG REFORM TAC 0.00 20.00 0.00 20.93 0.00 0.00

O-PE-6204 1998 GOV OF BOLIVIA EDUCATION QUALITY 0.00 75.00 0.00 77.25 9.92 0.00

O-PE-6186 1996 REPUB. OF BOLIVIA ENV.IND.& MINING 0.00 11.00 0.00 9.41 3.05 0.00

O-PE-6191 1996 GOVERNMENT POWER SCTR REFTA& 0.00 5.10 0.00 1.89 2.13 0.00

O-PE-6202 1996 GOVERNMENT OF BOLIVIA RURAL COMMUNITIES DE 0.00 15.00 0.00 1.66 1.96 0.00

O-PE-6206 1996 GOVT OF BOLIVIA RURAL WTR & SANIT 0.00 20.00 0.00 11.42 10.22 0.00

O-PE-6181 1995 GOV OF BOLIVIA EDUCATION REFORM 0.00 40.00 0.00 20.87 6.71 0.00

O-PE-6197 1995 GOV OF BOLIVIA LAND ADMINISTRATION 0.00 20.40 0.00 8.85 -.51 0.00

O-PE-6205 1995 GOVT. OF BOLIVIA JUDICIAL REFORM 0.00 11.00 0.00 5.08 3.50 0.00

O-PE-6190 1994 GOVMT OF BOLIVIA MUNICIPAL DEV 0.00 42.00 0.00 15.23 13.54 0.00

O-PE-6196 1993 GOV OF BOLIVIA INTEGRATED CHILD DEV 0.00 50.70 0.00 39.40 28.34 0.00

D-PE-6180 1992 GOVT OF BOLIVIA A RD MAINT 0.00 80.00 0.00 24.84 21.83 4.77

3tal 0.00 534.78 0.00 354.11 80.37 4.77

Active Projects Closed Projects TotalttaM Disbursed (IBRD and IDA): 188.21 1,152.50 1,340.71

of which has been repaid: 0.00 291.24 291.24)tal now held by IBRD and IDA: 534.78 844.71 1,379.49mount sold : 0.00 .05 .05Of which repaid : 0.00 .05 .052taM Undisbursed : 354.11 8.93 363.04

Intended disbursements to date minus actual disbursements to date as projected at appraisal.

ote:

Disbursement data is updated at the end of the first week of the month and is currently as of 31-Dec-98.


BoliviaSTATEMENT OF IFC's

Committed and Disbursed PortfolioAs of 30-Nov-98

(In US Dollar Millions)

Committed DisbursedIFC IFC

FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic0 Minera 0.00 3.40 0.00 0.00 0.00 3.40 0.00 0.00

1976/88/90/91/95/98 BISA 12.00 4.70 0.00 0.00 12.00 3.16 0.00 0.001989/92/94/96 COMSUR 12.32 0.00 2.14 3.00 12.32 0.00 2.14 3.001991 Bermejo 0.00 5.90 0.00 0.00 0.00 5.00 0.00 0.001991 Central Aguirre .75 .35 0.00 0.00 .75 .35 0.00 0.001992 Inti Raymi 10.00 0.00 5.00 0.00 10.00 0.00 5.00 0.001993 GENEX .95 0.00 1.13 0.00 .51 0.00 .84 0.001996 Mercantil-BOL 10.00 0.00 0.00 0.00 10.00 0.00 0.00 0.001996 Telecel Bolivia 10.00 0.00 5.00 20.00 6.67 0.00 5.00 13.33

Total Portfolio: 56.02 14.35 13.27 23.00 52.25 11.91 12.98 16.33

Approvals Pending Commitment

Loan Equit Quasi Partic

1999 LOS ANDES 2.00 0.00 0.00 0.00

Total Pending Commitment: 2.00 0.00 0.00 0.00


Annex 10: Country at a Glance

Latin Lower-POVERTY and SOCIAL America middle- _ _ _ _ _ _

Bolivia & Carib. Income Developmentcdiamond-1997Population, mid-ear (mt/ons) 7.8 494 2,285 Life expectancyGNP per capita (Atlas method, US$) 950 3,880 1,230GNP (Atlas method, US$ billions) 7.4 1,917 2,818 TAverage annual growth, 1991-97

Population (%) 2.4 1.7 1.2 GNP GrsLabor force (%) 2.6 2.3 1.3 per primary

Most recent estimate (latest year avaliable, 1991-97) capita enrollment

Poverty (% o popuiation below national poverty line) 67Urban population.(% of total population) 59 74 42Lfe expectancy at birth (years) 61 70 69Infant mortality (per 1,000 live births) 67 32 36Child malnutrition (% of children under 5) 9 .. .. Access to safe waterAccess to safe water (% of population) 60 73 84Illiteracy (% of population.age 15+) 17 13 19Gross primary enrollment (% of siaool-age population) 91 t'11 111 -Bolivia

Male 95 .. 116 Lower-middle-income groupFemale 87 .. 113

KEY ECONOMIC RATIOS and LONG-TERM TRENDS

1976 1986 1996 1997Economic ratlos*

GDP (US$ billions) 2.2 4.0 7.2 7.8Gross domestic investrnentGDP . 1 13.6 16.6 19.8Exports of goods and serviceslGDP .. 21.3 22.9 21.0 TradeGross domestic savings/GDP .. .. 11.2 12.3Gross national savings/GDP .. .. 16.6 15.0

Current account balance/G DP -2,6 -8.1 -5.3 -8.3 Domestic I tInterest paymentsJGDP 1.8 2.5 2.3 2.2 D 5 t InvestmentTotal debt/GOP 58.6 140.8 72.1 67.6 SavingsTotal debt service/exports 21.5 35.0 29.8 30,5Present value of debUGDP .. .. 46.4Present value of debVexports .. .. 241.4

Indebtedness1976-86 1987-97 1996 1997 1998-02

(average annual growth)GDP -2.7 4.1 4.1 4.2 5.3 -BoliviaGNP per capita . 1.9 2.6 1.4 2.8 -- Lower-middle-income groupExports of goods and services -5.0 8.6 6.7 -0.5 8.7

STRUCTURE of the ECONOMY

(% of GDP) 1976 1986 1996 1997 Growth rates of output and Investment (%)

Agriculture .. 28.5 14.1 14.1 45

Industry .. 51.9 29.2 27.9 30

Manufacturing .. .. 17.0 15.7 1 jN,,Services .. 19.8 56.7 58.0 0o

Private consumption . 81.4 75.6 74.0 92 93 "' 95 96 97General government consumption .. 9.4 13.1 13.7 -GD1 - DPImports of goods and services . 25.7 28.3 28.5 G

(average annual growth) 1976-86 1987-97 1996 1997 Growth rates of exports and Imports (%)

Agriculture .. 3.3 3.6 4.9 20 -Industry 4.5 3.4 3.5 is _

Manufacturing .. 4.3 3.9 4.2 1' Services .. 3.9 4.4 4.5

Private consumption -0.5 3.0 2.4 3.9 0 _

General government consumption -4.4 2.9 1.0 3.8 92 95 96 97Gross domestic investment -4.1 7.8 20.9 23.8 .5 .Imports of goods and services 1.6 6.0 9.7 10.3 -Exports 6 ImportsGross national product .. 4.4 5.1 3.8

Note: 1997 data are preliminary estimates.

*The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond willbe incomplete.

Bolivia: Health Sector Reform Proiect Page 52

Bolivia

PRICES and GOVERNMENT FINANCE

Domestic prices 1976 1986 1996 1997 Inflatlon (%)

(% change) 20

Consumer prices .. .. 7.9 6.7 15

Implicit GDP deflator .. 211.4 8.9 7.9 10

Government finance s(% of GDP, includes current grants) nCurrent revenue .. 18.7 26.3 24.1 92 93 94 95 96 97

Current budget balance .. 1.4 6.3 3.0 -GDP deflator -S -CPIOverall surplus/deficit .. -3.3 -2.0 -3.3

TRADE

(US$ millions) 1976 1986 1996 1997 Export and Import levels (USS millions)Total exports (fob) .. 588 1,132 1,167 2.000

Tin .. 104 86 81Fuel .. 334 153 200 1,500-Manufactures .. .. 144 183

Total imports (cif) .. 674 1,568 1,810 1.000Food . .. 148 188 '_ _Fuel and energy .. .. 86 349Capital goods .. .. 586 734 o; 9 93 96

Export price index (1995=100) .. 156 104 106 91 92 93 94 95 96 97Import price index (1995=100) .. 50 109 110 *Exports a*ImportsTerms of trade (1995=100) .. 310 95 96

BALANCE of PAYMENTS

(UJS$ millions) 1976 1986 1996 1997 Current account balance to GDP ratio (%)Exports of goods and services 623 704 1,318 1,362 t

Imports of goods and services 658 816 1,779 2,050 BResource balance -35 -112 -461 -688 -2

Net income -36 -309 -168 -212 -4Net current transfers 14 99 245 252 " I 'llCurrent account balance -57 -321 -384 -648 6

Financing items (net) 113 432 726 751 -8Changes in net reserves -56 -110 -342 -103 lo -1

Memo:Reserves including gold (US$ millions) .. 505 1,125 1,192Conversion rate (DEC, local/USO) 3.OOE-5 1.9 5.1 5.3

EXTERNAL DEBT and RESOURCE FLOWS1976 1986 1996 1997

(US$ millions) Composition of total debt, 1997 (USS millions)Total debt outstanding and disbursed 1,290 5,575 5,200 5,284

IBRD 31 235 61 37IDA 53 97 843 930 3 i:930

Total debt service 137 251 413 453 F: 504IBRD 4 38 32 24IDA 1 2 8 10C:4

Composition of net resource flowsOfficial grants 11 147 394Official creditors 104 229 196 220 E: 1,421Private creditors 143 -4 44 -29Foreign direct investment -8 10 426 591Portfolio equitY 0 0 0 0 D. 1,71B

World Bank programCommitments 68 72 59 15 A - IBRD E - BilateralDisbursements 16 7 100 136 B -IDA D-Other multilateral F- PrivatePrincipal repayments 2 19 28 23 C - IMF G - Short-termN et flows 14 -12 72 113Interest payments 2 20 12 11Net transfers 12 -32 59 102

Development Economics 10/1/98


Annex 11: Letter of Sector Policyfrom the Government of Bolivia

La Paz, Bolivia, April 1, 1999

Mr. James WolfensohnPresidentThe World Bank1818 H Street, NWF 1227Washington, D.C. 20433

Dear Mr. Wolfensohn:

I am very pleased to present you with this health sector policy letter, containing the primary strategies thatour country seeks to implement through the first phase of the Health Reform Project, currently beingnegotiated with the World Bank.

The central tenets of the health reform program are framed by the Bolivian Government's anti-povertyplan (1997-2000), particularly the "equity pillar" of that plan. The objective of this pillar is to improvethe living conditions of the population, particularly those living in poverty. This improvement will bepursued through the generation of opportunities for all, with emphasis on generating access toopportunities for those with limited prospects.

Our relationship with the Bank is a close one, particularly as a result of the joint effort to produce theCountry Assistance Strategy (CAS). The Government's development strategy will be focused onevaluating the results of integrated efforts made by the country, as measured by five strategic variablesthat affect poverty. Interventions will be made in education, rural productivity, water, sanitation, andhealth. Among CAS variables is the accelerated reduction of infant mortality. The improvement in thisindicator constitutes a priority task of the health sector over the next few years. The targets expressed inthe Government's Strategic Health Plan are the following: infant mortality should fall from 67 deaths per1,000 live births in 1997, to 48 per 1,000 live births in 2008. Correspondingly, maternal mortality shouldbe reduced from 390 deaths per 100,000 live births in 1997, to 320 per 100,000 in 2008.

With regard to these indicators, the current situation is critical. The reduction of infant mortality requiresa multisectoral approach, with emphasis on: (i) water and environmental sanitation; (ii) education,particularly for girls; and (iii) health attention. The Government, through the corresponding ministries, isdeveloping actions along the first two lines. Regarding the third, the Ministry of Health and SocialSecurity has been charged with developing two large programs. The first is a program to control endemicdiseases (epidemiological protection), which will be financed with the assistance of other member of theinternational community. The second is a program to strengthen primary health care, both preventive andpromotional, which will be financed with the support of the World Bank and other development partners.This letter details the strategies for reforming the health sector, with the aim of strengthening primarypreventative and promotional health care.

In order to reach the objectives set forth, as well as to measure both effort and impact, Bolivia has andwill continue to place great emphasis on systematically monitoring results; the lessons learned will allowthe modification of interventions for the following phase. The priority areas to be implemented include:

Bolivia: Health Sector Reforrn Project Page 54

(i) Development of an integrated model of attention based on:

(a) integrated care for children;(b) a package of services for women and newborns; and(c) the establishment of a new, broader, and sustainable program of immunizations that

include new vaccines with greater impact.

(ii) Establishment of Basic Health Insurance, as a solid national system, financed by public resourcesfrom municipal governments. Through a group of essential services offered by multipleproviders, existing barriers to health service access will be overcome.

(iii) Creation of Performance Agreements to guarantee the progressive and systematic development ofefficient instruments for supervision and accountability. These agreements should create aninstitutional culture and commitment to health.

(iv) Development of new mechanisms for resource allocation, with a demand-based approach,prioritizing projects that will increase both low coverage and user satisfaction, and which willpromote greater community participation and empowerment vis-a-vis sanitary policy.

(v) Deepening of decentralization through the establishment of service networks within HealthDistricts and related to municipal governments. These networks will allow the Bolivian healthsystem to function with clear definitions of the scope of operations and greater local capacity.

The areas of intervention proposed by the Health Reform Program are aligned with Government-definedpolicies, as set forth in Supreme Decree 25233 (the Health Services Department regulations) datedNovember 27, 1998, and Supreme Decree 25265 (creation of the Basic Health Insurance) dated January25, 1999. The Reform Program is also included in the Protected Social Programs, defined by the Vice-Ministry of Public Investment and External Financing of the Ministry of Finance, which will assure localcounterpart funds for the implementation of the proposed project.

In order to facilitate a higher level of compliance with the Reform Program, the Government is committedto substantially increase its financing for vaccinations, steadily increasing its contribution until therecurrent costs of vaccinations are completely covered (by 2002). Over the next three years, theGovernment will finance, through its own resources, US$2.5 million in 1999, US$3.0 million in 2000,and US$3.5 million in 2001. With regard to the Performance Agreements and decentralization, Boliviawill assume, with great political commitment, the application of agreements and management contracts,reinforcing the effective supervision of compliance with these agreements. Likewise, the Governmentwill also support and deepen the process of decentralization, moving the system and its managementcloser to local levels and to the user.

The Bolivian Government has prioritized health as a core part of the work to be carried out under the"equity pillar". Our vision is of inter-sectoral action, seeking strategic alliances that allow goals andobjectives to be met, which in turn reduce the rates of infant, child and maternal mortality.

Within this framework, we ratify our regard for the World Bank, and our commitment to assume theproposals and obligations presented above. We thank you for your consideration of the foregoing.

Respectfully yours,

Herbert MullerMinister of FinanceRepublic of Bolivia


Annex 12: Participation and Social Communication Strategies

During project preparation a study of behaviors and tendencies in the utilization of health services, andinteraction with providers, was conducted among Aymara and Quechua Populations. The study combinedquantitative and qualitative approaches focusing on three areas: (i) A review and analysis of existing studiesand publications about the problems of clients, use of services, and the interaction between the serviceprovider and Quechua and Aymard populations; (ii) a survey of attitudes and behaviors of the Quechua andAymara populations with reference to their utilization of health services and their interaction with serviceproviders; (iii)Focus groups held among Aymara and Quechua populations to assess the use of healthservices and the behavior of the residents towards solving their health problems.

Among the key issues blocking access by Aymara and Quechua populations to health services are thefollowing:

* Medical barriers characterized by service providers' lack of knowledge about the problems of thepopulation that they attend, particularly those of women.

* Mistreatment and discrimination, directed mainly against migrant populations.* Lack of awareness among the population in the area of preventive health.* Limited response capacity of the health services, which is also frequently inappropriate, insufficient,

and delayed.* Lack of economic resources among the migrant population.* The migrant population's distrust of formal medicine and their use of ethnic medicineand household

remedies.* The functional instability of health service providers, particularly in the public sector.* The lack of incentives and low pay for medical personnel.* The scarce or nonexistent administrative and management capacity to organize efficient health

services.

Main Conclusions:

- Coverage cannot be increased without a corresponding increase in quality of service.= A clear under utilization of health services was noted, due to the lack of confidence in those services,

support and contributions to the user by health personnel and a lack of emergency service outside ofnormal hours.

* Habitual users of health services, when sick, continue to first seek family council. Others prefer to godirectly to the pharmacy and/or health center. As a result, many other variables should be taken intoaccount, such as healers, midwives, shaman, etc.

* Existing confidence in health services by users is fundamentally due to the lack of any otheralternative.

* Health service clients lack knowledge about their rights and obligations, which would allow: (i) theirinformed and active participation; (ii) their integration in problem solving; and (iii) information onhealth services maintenance and the surveillance of quality of attention.

* It is perceived that health personnel do not always understand the urgent necessity of solving thebarrier to quality of attention produced by a lack of materials and supplies; it is for this motive that alarge part of health service clients decide not to return to health services.

* One main problem in patient dissatisfaction is the delay in receiving attention, along with the shortduration of the consultation. Many patients were observed to wait up to 3 hours, only to receive avery brief medical consultation. This combination, aggravated by cultural and linguistic barriers,makes it impossible to address all of the patient's worries.

* The lack of capacity and goodwill among health service personnel leads to the perception amongservice users that health personnel frequently do not help patients.


* The high percentage of patient complaints about the attention received demonstrates that patientdissatisfaction is very high. Among the most frequent complaints is the lack of medical attention dueto poor organization.

Additionally, consultations with potential beneficiaries in the departments of La Paz, Cochabamba and SantaCruz were carried out during project preparation. The main purpose of the activities was to explain projectobjectives and components and to exchange ideas about the design of procedures for the identification,evaluation, selection and execution of health subprojects to be financed under the project. Participants in theconsultations included representatives from: public health providers from the departmental and district levels,municipal governments, the Social Investment Fund, the Church, NGOs, Universities, UNICEF, PAHO,GTZ, private providers, community groups and other local actors.

Participation and Social Communication Strategies for Key Project Activities/Components.

Pedagogical and informational materials (including videos and other audio-visual aids) produced as part ofthe proposed social communications strategy when appropriate will be translated into indigenous languages,including those used in the Eastern lowland regions (e.g., Guarani which is spoken in large parts of theDepartment of Santa Cruz).

EPI: The EIP International Evaluation was carried out from October 19-30, 1998, using a survey applied to148 potential users of vaccination services (mothers of children under 5 years of age that were found in or

just outside of the health establishment visited) in 21 districts of 4 departments selected for evaluation. Thesurvey found that the mothers interviewed perceived vaccines as a great health benefit, manifesting a highdegree of satisfaction when their children are vaccinated. However, when asked specifically about theillnesses avoided by the vaccines, and how many doses are required for the child to be protected, theirknowledge was limited. This demonstrates that the media and messages of mass dissemination do notalways reach the groups at greatest risk. A recommendation of this evaluation is that the prestige of theprogram be used to reach and provide incentives to the most marginal populations, with a focus on integratedattention. It was also recommended that a permanent social communications system be established forregular vaccinations, adapting messages and media to the type of user. With this objective in mind, focusgroups are planned for the beginning of the project, to apply the knowledge-aptitude-practice (KAP)methodology in each of the three ecological settings (high plains, plains, and valleys). The goal is to betteridentify the perceptions of indigenous populations and those populations without access to regularvaccination services. Their perceptions will be sought on believes related to vaccines, as well as in-servicevaccination and its strategies (regular vaccines and vaccination campaigns). These study results will providethe necessary inputs for designing an IEC strategy to better guide the work of health personnel located inthese populations, and should attain the participation of these communities in vaccination activities.

MBP: Based on the results of the diagnostic study, "Barriers and Facilitators in Attention to Obstetric andNeonatal Complications," and the study of "Utilization Tendencies in Health Services" (Mothercare and theHealth Unit), the MBP will incorporate important practical elements of traditional health of the communities.Additionally, through IEC, pregnant women, husbands, and the community at large will be counseled,informed and educated on how to recognize signs of obstetric and neonatal complications, and how torecognize the difference between a normal and a complicated birthing process. Simultaneously, serviceproviders will be sensitized on how to incorporate traditional medicine and knowledge of local customs andtraditions into health services.

IMCI: Studies promoted by BASICS are being carried out in the three ecological regions of the country,oriented toward identifying knowledge, aptitudes, and practices of childcare providers, with regard to theprevalent ailments within IMCI. These studies will serve as the basis to develop the community IMCI.

SBS: One of the conclusions evidenced by the evaluation of the SNMN, presented by Partnerships forHealth Reform in September 1998, was that urban residents have a greater and better understanding of access


to the Maternal-Child Health Insurance Scheme than rural residents have. Additionally, many ruralinhabitants know little of modern medical attention, and therefore lack the information necessary to permittheir use of the insurance scheme. Infornation dissemination about the existence of the Maternal-ChildHealth Insurance Scheme was not sufficiently intensive in rural areas. This experience points toward a moreintegrated orientation in the dissemination of the Basic Health Insurance Scheme in these regions.Furthermore, if mass media is not sufficient to improve popular access to the insurance scheme, then otherdetermining factors should be considered, including the implementation of strategies that incorporate qualityand cultural adjustments within proposals for community medical attention. These components will allowfor the creation of more equitable opportunities for access to health services. The Basic Health InsuranceScheme seeks to incorporate these elements to guarantee greater access and satisfaction by the clientpopulation. The permanent improvement of these services, both in terms of quality and accessibility, shouldbe realized with permanent participation and social control, channeled through grassroots organizations thatrepresent the community.

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