Document of The World Bank

Report No: 25294-IND

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED CREDIT

IN THE AMOUNT OF US$74.5 MILLION EQUIVALENT

AND LOAN OF US$3 1.1 MILLION

TO THE

REPUBLIC OF INDONESIA

FOR A

HEALTH WORKFORCE AND SERVICES

PROJECT

May 19,2003

Human Development Sector Unit East Asia and Pacific Region

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APBD APBN

BDHHR

BAPPEDA BAPPENAS BPKP

CFAA

CHS CPCU D A K DAU DFAM

DG DHC

DHO DIP DIU DPRD EM? FMR GO1 H W S IACC IDA

CURRENCY EQUIVALENTS

(Exchange Rate Effect ive January 2003)

Currency Unit = Indonesian Rupiah Rp 1 M i l l i o n = US$112.11

US$1 = Rp 8,919.81

F I S C A L YEAR Government of Indonesia January 1 -- December 3 1

ABBREVIATIONS AND A C R O N Y M S

Local Government Funds Central Government Funds

Board for Development and Empowerment of Human Health Resources Regional Development Planning Agency National Development Planning Agency State Audit Authority

Country Financial Accountability Assessment Consortium of Health Sciences Central Project Coordination Unit Special Allocation Funds General Allocation Funds District Funding Allocation Manual

Directorate General District Health Council

District Health Office Development Budget Allocations District Implementation Unit District Assembly

I M A IVPDS

JHC

JPKM KPKN MENPAN

MOE

MOF M O H MONE NGO NMEDRC

PCAR PCIU

PHO PHP P M M PMMP

Indonesian Medical Association Isolated Vulnerable Peoples Development Strategy Joint Health Council

Community Managed Health Care Program Treasury Office State Ministry for Utilization o f State Apparatus Ministry o f Environment

Ministry o f Finance Ministry o f Health Ministry o f National Education Non-Governmental Organization National Medical Education Development and Research Center Procurement Capacity Assessment Report Provincial Coordination and Implementation Unit Provincial Health Office W B Provincial Health Project Project Management Manual Pesticide Management and Monitoring Plan

Environmental Management Plan PMR Project Management Report Financial Monitoring Report SK Decree Government o f Indonesia SPM Payment Remittance Order Health Workforce and Services TRC Technical Review Committee Inter Agency Coordination Committee TRT Technical Review Team International Development Association

Vice President: Jemal-ud-din Kassum, EAPVP Country Managermirector: Andrew Steer, EACIF

Sector Managermirector: Emmanuel Jimenez, E A S H D Task Team Leader/Task Manager: Enis Baris, ECSHD

INDONESIA HEALTH WORKFORCE AND SERVICES

CONTENTS

A. Project Development Objective

1. Project development objective 2. Key performance indicators

B. Strategic Context

1. Sector-related Country Assistance Strategy (CAS) goal supported b y the project 2. Main sector issues and Government strategy 3. Sector issues to be addressed by the project and strategic choices

C. Project Description Summary

1. Project components 2. Key policy and institutional reforms supported by the project 3. Benefits and target population 4. Institutional and implementation arrangements

D. Project Rationale

1. Project alternatives considered and reasons for rejection 2. Major related projects financed b y the Bank and/or other development agencies 3. Lessons learned and reflected in the project design 4. Indications o f borrower commitment and ownership 5. Value added of Bank support in this project

E. Summary Project Analysis

1. Economic 2. Financial 3. Technical 4. Institutional 5. Environmental 6. Social 7. Safeguard Policies

Page

3 3

4 4

10

11 12 12 13

16 18 18 21 21

22 22 23 23 25 28 34

F. Sustainability and R isks

1. Sustainability 2. Critical r isks 3. Possible controversial aspects

G. Main Loadcredi t Conditions

1. Effectiveness Condition 2. Other

H. Readiness for Implementation

I. Compliance with Bank Policies

Annexes

Annex 1: Annex 2: Annex 3 : Annex 4: Annex 5: Annex 6: Annex 7: Annex 8: Annex 9:

Project Design Summary Detailed Project Description Estimated Project Costs Cost Benefit Analysis Summary Financial Summary Procurement and Disbursement Arrangements Project Processing Schedule Documents in the Project File Statement of Loans and Credits

Annex 10: Country at a Glance Annex 11: Environmental Review Annex 12: Isolated Vulnerable Peoples Development Strategy Annex 13: Anti-corruption Action Plan

35 35 37

37 37

40

40

41 51 67 69 80 81

103 104 106 108 110 113 118

INDONESIA Health Workforce and Services

Project Appraisal Document East Asia and Pacific Region

EASHD

Total:

____

Date: May 19, 2003 Sector Director: Emmanuel Y. Jimenez Country Director: Andrew D. Steer Project ID: PO73772 Lending Instrument: Specific Investment Loan (SL)

Team Leader: Enis Baris Sector(s): Health (70%), Tertiary education (15%), Sub-national government administration (15%) Theme@): Child health (P), Health system performance (PI, Decentralization (P), Vulnerability assessment and monitoring (S), Education for the knowledge economy (S)

1 [XI Loan [XI Credit [ ] Grant [ ] Guarantee [ ] Other: For Loans/Credits/Others: Loan Currency: United States Dollar Amount (US$m): US$31.1 mill ion (Loan)

US$74.5 mill ion (Credit) Borrower Rationale for Choice of Loan Terms Available on File: Yes Proposed Terms (IBRD): Variable-Spread Loan (VSL)

394.93 I 34.44 I 429.37

Grace period (years): 5 Commitment fee: 0.75%

Years to maturity: 10 Front end fee (FEF) on Bank loan: 1.00% Payment for FEF: Capitalize f rom Loan Proceeds

I Proposed Terms (IDA): Standard Credit I Grace period (years): 10 Commitment fee: 0-0.5%

Years to maturity: 35 Service charge: 0.75%

IBRD I D A I 40.06

Expected effectiveness date: 09/10/2003 Expected closing date: 12/3 1/2008

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A. Project Development Objective

1. Project development objective: (see Annex 1)

The primary development objective o f this project i s to support health sector decentralization in four provinces for sustainable financing and client-centered delivery o f health services. More specifically, the main objectives o f the project are to: (i) improve financing and delivery o f essential health services in the provinces of Jambi, East Kalimantan, West Kalimantan, and West Sumatera to enhance access to care, quality o f care and health outcomes at the district level; and (ii) strengthen health work force policy, management and development in a decentralized context in order to improve allocational efficiencies and equity in the distribution and use of health resources in the districts. A corollary development objective i s to empower the Ministry o f Health (MOH), the Ministry o f National Education (MONE), and the Indonesian Medical Association (IMA), the three key stakeholders in the sector, through: (i) assistance to redefine their roles and responsibilities vis-a-vis health work force policy, planning and management; and (ii) building their institutional capacity for effective stewardship in fulfilling the functions o f policy malung, legislation, regulation, quality assurance/control and technical assistance to provinces and districts.

2. Key performance indicators: (see Annex 1)

There w i l l be two sets o f performance indicators. Project-specific sector indicators include:

0 health outcome indicators of Infant Mortality Rate (IMR), Under-five Mortality Rate (USMR), Maternal Mortality Ratio (MMR), and other locally relevant disease-specific indicators (Tuberculosis, Malaria, HIV/AIDS prevalence rates); tracer health services indicators, including proportion of pregnant women receiving at least four ante-natal visits, proportion o f births attended b y slulled health personnel, immunization coverage rate; and health services utilization indicators, including outpatient visit rate, admission rate, average length o f stay, bed occupancy ratio.

0

Data to estimate these indicators w i l l be disaggregated b y sex and other socioeconomic variables (education, rurallurban, income quintile, etc.) for a thorough monitoring o f inequalities in health outcomes.

Project-specific indicators are largely institutional and organizational in nature, as follows:

1. preparation and use o f a Health Development Master Plan for a l l capital investment in human, financial and physical resources;

2. design and implementation of new provincial and district level institutional mechanisms (District Health Councils {DHC I, Joint Health Councils {JHC), Technical Review Teams { TRT}) for increased pluralism and client involvement in policy malung, planning and system management;

3. design and implementation o f financial mechanisms at the district level (block funding) for increased efficiency in resource allocation;

4. proportion o f districts reaching per capita health expenditures threshold o f Rp 51,000 in 2002 prices, or 15% o f the total local government spending, except in East Kalimantan where i t i s to reach 8%, excluding the resources allocated for c iv i l works and equipment;

5. increased provider and client satisfaction, as measured by surveys; 6. development and implementation o f new standards for licensing, certification, and

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registration o f health professionals and accreditation o f health facilities; adoption and implementation new medical school admission criteria, curricula, and licensing criteria: adoption o f policies and financial and non-financial incentives b y Provincial and District Health Offices (PHO and DHO) to increase productivity, performance and motivation o f health professionals;

9. redefinition of MOHs roles and responsibilities vis-a-vis health workforce policy, planning and management; and

10. strengthening o f MOHs institutional capacity through structural changes in organigramme, and increased allocation of human and financial resources for effective stewardship in fulfilling the functions o f policy malung, legislation, regulation, quality assurancekontrol and technical assistance to provinces and districts.

7.

8.

Please see Annex 1 and i t s attachment for details.

B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1) Document number: 24608-IND Date of latest CAS discussion: Progress Report, dated September 16,2002

This project i s about malung decentralization o f health services management, financing and delivery more effective by: (i) establishing new regional institutions and mechanisms for improved health sector governance; (ii) redefining accountability for regional decision malung and stewardship so that both clients and provider representatives can have a voice in system management; and (iii) allocating resources on the basis o f health needs and preferences through district health services planning. As such, i t s scope and purpose concur with the basic tenets o f the Indonesian Country Assistance Strategy and i t s latest progress report. The CAS draws on the importance o f equal opportunity and access for the poor to health and education services through greater community involvement, transparency and institutional strengthening in a decentralized setting. I t underscores the importance o f providing demand-responsive services, especially to the poor, to reduce poverty. EAP's Indonesia health sector strategy, also in line with the CAS, emphasizes decentralization as the new framework for, inter d i u : (a) raising the quality o f service providers in terms o f training and capabilities: (b) building accountability b y giving providers feedback; and (c) creating a facilitator function to help the poor articulate their voice. In addition, the Banks and the regional H N P strategies set two objectives that have direct bearing on the project idea, namely (i) enhancing performance o f health systems, and (ii) improving health outcomes of the poor. They also refer to the importance o f setting health policy agendas in times o f decentralization and of building appropriate incentive mechanisms to increase system performance, key recommendations in l ine with two o f the main components o f the proposed project.

2. Main sector issues and Government strategy:

health care financing and delivery, brought along two potential challenges, one internal and another external, that are likely to exacerbate inequalities in health and in access to health care, particularly in poorer regions. The internal challenge i s intrinsically linked with the nature o f decentralization: while in theory decentralization i s expected to provide a unique opportunity to bring accountability closer to people outside Jakarta, and to redefine the roles and responsibilities at each level o f government with regard to human resources development, financing, and service management and delivery, i t may also pose a threat to sustainability in the financing and delivery of social services without the oversight role o f a central authority and a regulatory framework that explicitly binds regions to finance a defined package o f essential health services. This i s especially true in remote and less wealthy districts where technical

Sectorul context. The decentralization of key government functions in January 2001, including

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s k i l l s , competences, and managerial capacities are scarce; and where inadequate financing, low quality o f care and lack o f consumer confidence have long been the defining features o f the publicly-run health services. Simply put, health services management and delivery at the grass-roots level are feared to be disrupted without political, financial and technical support.

As for the external challenge, Indonesia, as in many other low and middle income countries, i s l ikely to be overwhelmed with increased market pressure and expectations o f the well-to-do to import and use hard and soft health care technologies which are often perceived as synonymous with higher quality o f care. Further, the pending free movement of labor across ASEAN countries w i l l surely open new possibilities for capital, medical know-how and shl led professionals to enter the decentralized Indonesian health care market to serve the very same segment o f the population. The net impact on the long run i s l ikely to be more competition and better quality o f care. However, the short- and medium-term implications o f this, especially in poorer districts, i s not clear. Moreover, there i s an increased risk o f allocational inefficiencies, higher administrative costs and fragmented regulatory framework.

Proponents of decentralization argue that bringing decision makmg closer to where the services are produced and delivered would inherently increase pluralism and transparency in sectoral governance, and thus improve overall effectiveness and allocative efficiency. Indeed, the health system governance in Indonesia has traditionally been technocratic and highly centralized, with very little input from other stakeholders, thus not responsive to their needs and preferences. Others argue that decentralization i s not a panacea, and i t could be counter-productive if new responsibilities are not matched with equal privileges and if local management capacity i s not strengthened. The challenge, therefore, i s to capitalize on the opportunities that decentralization offers while avoiding or alleviating the r isks that it may entail.

In Indonesia, there are two key opportunities inherently linked with decentralization:

1. Moving away from a top-down and technocratic mode o f policy making and regulation to a more pluralistic mode involving c iv i l society and health care professionals while seizing the momentum to introduce and experiment with novel financing, management and service delivery models and mechanisms. This would entail: (i) laying the groundwork for tripartite health work force planning and management, including provincial/district health authorities, representatives o f the medical professions and o f the population/consumers; and (ii) setting up institutions and mechanisms for professional self-regulation and public oversight over ethical medical behavior and practice.

2. Aligning the scope and mix o f services to be produced locally in accordance with variations in health and health care needs across the country and the "purchasing power" o f regional authorities.

Burden of disease and inequalities in health and health care. L ike many countries o f South-East Asia in socioeconomic and epidemiological transition, Indonesia i s facing the dual burden o f communicable and non-communicable diseases. While health indicators in Indonesia have improved over the last 20 years, other countries achieved better health outcomes with the same level o f public spending (e.g., the Philippines), or with less spending (e.g., China). Infant mortality rate (IMR: 40.9 per 1000 live births in 2000), under-five mortality rate (USMR: 51.4 per 1000 l ive births in 2000) and maternal mortality ratio (MMR: 470 per 100,000 live births in 1995) remain over the regional average. While tuberculosis, malnutrition, malaria and anemia in pregnant women remain endemic, other problems related to changing lifestyles such as tobacco use, injuries and accidents, and HIV sero-positivity are on the rise.

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Despite considerable reductions over the last three decades, inequalities in health remain: national averages o f infant mortality or under-five mortality hide a more complex picture with large variations across provinces, but most importantly between the r ich and the poor: for instance the poorest/richest quintile ratio (p/r ratio) for infant mortality and under-five mortality rates are 3.4 and 3.7, respectively. Similar gradients exist by gender and area o f residence.

Inequalities in access to health care across different income groups are especially worrisome, though not surprising. First, Indonesia spends relatively less on health care, about 1.8% o f i t s GDP, or about US$17 per capita (US$54 in international dollars). Indeed, Indonesia i s one o f the least endowed in the region in terms o f physical and human resources for health care, with 0.7 bed per 1,000 population, and 0.13 physician and 0.7 nurse per 1,000 population, respectively. According to the baseline data collected in 37 districts in four provinces, in 21 districts ante-natal care coverage defined as four visits before delivery and birth attendance b y skilled health staff remain below 80%. The average number o f physician visits remains below one per capita annually. At present, the problem o f inequalities in health and health care i s further compounded by the increase in high-risk behaviors (smolung, commercial sex, alcohol abuse, etc.), food insecurity and inadequate nutrition, especially amongst the poor, and by the decrease in government outlays and/or inter and intrasectoral allocations despite higher unit prices and unit costs o f health services. Further, decreased demand for care, especially for private care, despite increasing needs i s likely to worsen i l lness outcomes in terms of higher co-morbidity, severity and mortality as a result of reduced affordability o f higher costs o f drugs and medical care.

Second, health spending i s not equitable, and most importantly not well targeted to the poor. One study showed that almost 40% of the subsidies benefit the richest 30%, while 30% assist the poorest 40%, all this in an environment where 75-80% o f health expenditures are private, 75% being out-of-pocket. Indeed, the wealthiest 20% o f the population were found to be 3 and 1.5 times more l ikely to use inpatient and outpatient public health services, respectively, than the poorest 20%. People, especially the poor, appear to have reduced the use o f preventive health care and/or are delaying seeking care in case o f illness, and/or resorting to self-treatment. The pooresth-ichest quintile ratio for immunization coverage stands at 0.56, and at 0.6 for access to treatment o f acute respiratory infections, 0.08 for ante-natal care visits to a doctor, 0.24 for delivery attendance by medically trained person and 0.8 for use o f modem contraceptives.

Third i s the under-utilization of public health services despite decades o f continuous investment to expand geographic accessibility. A proponent and avid follower o f the primary health care movement, Indonesia has over the last three decades endowed itself with a network o f health facilities, f rom Jakarta to the remotest areas, by building more than 7,000 health centers (approximately 25% with beds), 21,000 sub-health centers and about 240,000 health posts. Yet, increased availability o f health facilities has not resulted in increased utilization. The contact rate remains below 30%. This infrastructure i s complemented with some 400 public hospitals at a l l levels and numerous mobile health units. Nonetheless, there has been a steady decline in the bed/population ratio over the last decade, new investments not catching up with population growth and aging. More worrisome i s the fact that those who are more l ikely to get sick and to have been affected by the recent economic crisis (the poor, f ixed income, women and elderly) seem to have opted for self-treatment instead of using public health services despite reduced disposable income, a sign o f lack o f confidence in, or satisfaction with public health services, and perceived low quality. On the other hand, the wealthier and the better insured seek health care abroad: according to a new study on private health care in Indonesia, in 2000 approximately 160,000 patients received care overseas at an estimated cost o f US$300 million, more than the total public health budget for that year. This may also be partly due to limited development o f the capital intensive privately provided inpatient care, due to a number o f reasons including lack o f financial incentives, lack o f risk pooling through private insurance, high taxation and affordability.

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Many o f the health sector issues, such as unsustainable public health financing and inefficiencies in service provision mostly stem from the structural and organizational issues that have for long compromised system performance. The latter included: (i) full-scale commitment to developing a normative primary health care network without enough innovation, small-scale experimentation and adaptation through trial and error; (ii) too much reliance on putting together the hardware, with less emphasis on institutional mechanisms and "software"; (iii) chronic under-funding o f government health services; (iv) allowance for part-time private practice o f salaried health professionals on government payroll; (v) top-down planning and budgeting, partly because o f lack of s k i l l s and competence at lower levels; and (vi) high degree o f reliance on uniformly-applied, normative and rigid service delivery procedures/algorithms with limited flexibility for local tailoring.

Health workforce deployment: skills mix and distribution of doctors, midwives and nurses. There are approximately 44,000 doctors in Indonesia, including some 9,000 specialists, or about one doctor per 6,000 to 7,000 population. More than 80% o f graduates are absorbed by the PTT program, a three-year compulsory contractual arrangement whereby new doctors are assigned for practice in a primary health care setting. Salaries paid varied considerably according to locale, but they were in general very low. Since decentralization, salaries are higher but continue to depend on locales. In Jakarta a physician receives Rp 1.5 mill ion monthly, in Jambi Rp 1.2-1.3 million, in Kalimantan Rp 2-2.5 million. Despite the PTT policy, many remote localities remain under serviced, with less than one physician per puskesmas. The realities o f remote practice can be onerous: on-call responsibility - often 24 hours, seven days a week that can lead to bum out; an inadequate environment for service delivery including inadequate diagnostic and treatment equipment relevant to local population needs; isolation and insufficient access to other general practice doctors; lack o f specialist services and long distances and inadequate transportation to a referral center; and restricted mobility during personal time, poor l iving conditions and social amenities. While PTT doctors are allowed to supplement their salary income by seeing patients during off-hours in their private practice, the practice increases workload, distorts equity - especially in communities with high poverty levels, l i m i t s additional income doctors can earn, and does not address the non-financial issues that equally affect physician morale, motivation and desire to serve in remote areas.

The competence, quality and status o f first-line health service workers are critical. The ratio o f General Practice (GP) doctors to specialists in Indonesia i s about four to one. GPs have ill-defined roles that seem to depend on the situation. In health centers they are expected to assume the role o f a primary health care team leader, but typically spend most o f their time on administrative work. In hospitals, they may be left alone to do nothing more than triage, or be required to cover for or even replace specialty doctors. Their training does not equip them well for any o f these tasks. Nurses and midwives seem to have a more active practice than general practitioners (although nurses do not have license to practice). Health facilities are staffed b y nursing and midwifery personnel trained mainly below university level. Sixty percent o f the nursing work force comprises vocational level nurses with three years o f training post junior high school. This vocational level was initiated in 1975 and i s now being curtailed. The remaining 40% o f nurses - and significantly fewer midwives - graduated with a three-year diploma post high school and at the baccalaureate level. The overwhelming majority o f midwives (96%) are trained at a one-year diploma level and almost 4% are trained at the three-year diploma, professional midwife level.

Health workforce production. In Indonesia, there are 15 publicly and 25 privately financed medical schools, producing approximately 2,500 doctors and training around 500 specialists in some 24 specialties every year. Student fees comprise most o f the costs o f under-graduate education and post-graduate residency training. Nonetheless, despite its limited resources, GO1 s t i l l spends around US$13,000 per student enrolled in public medical schools, and about US$2,000 for those in private

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medical schools. Tuition fees for medical education range from about Rp 18 - 65 mill ion for the combined four-year education in basic medical sciences and two-year clinical training, depending on whether the training institution i s public or private.

At present, there exists l i t t le cooperation between the Faculties o f Medicine and M O N E which are the ‘producers’ o f health professionals and the Ministry o f Health and Provincial Health Departments which are the ‘consumers’ o f those professionals. Undergraduate medical education i s divided into two separate components: an academic one (pre-clinical) under the responsibility o f M O N E and delivered by basic sciences departments and a professional one (clinical) under the responsibility of the Ministry of Health and provided by specialists. Post-graduate education or specialty training i s under the authority o f professional associations. Until recently, the Consortium o f Health Sciences (CHS), composed o f representatives o f MONE, MOH, IMA and Faculties of Medicine, had a role in designing, implementing and monitoring medical curricula and programs. A joint MONE-MOH decree in March 2001 dismantled the Consortium o f Health Sciences, and delegated medical education to the Indonesian Medical Association and the Professional Associations o f Specialists who now exert considerable influence on training of undergraduate medical students. The future Medical Council - a draft law i s before the Parliament, albeit for quite a while -- i s expected to put in place adequate mechanisms to assure better communication between these stakeholders.

Until recently, graduates f rom privately-financed medical schools had to s i t through national examinations conducted by a publicly-financed medical school to obtain a license to practice. This policy was deemed unfair by some private medical schools where under-graduate training i s longer and/or more stringent than their public equivalents, and the requirement increased the workload and stretched the capacity of public medical schools, creating long waiting times and reports o f unethical practices in scheduling and tahng individual exams. However, the decision to remove the requirement le f t Indonesia without any national examination mechanism for ensuring a common standard for undergraduate medical education. Since public universities, with their medical schools, are moving toward autonomous board governance status, and private universities already have such status, the absence of a national examination to certify the competence o f new graduates i s a major stumbling block in assuring standardization in medical education and licensing.

Residency toward a specialist degree typically requires seven or eight semesters o f further training conducted at university teaching hospitals with input from the relevant Medical College of Specialists. The fees are estimated to amount approximately Rp 28-32 million, but i s markedly higher in more prestigious settings and for more coveted specialties. B y decree, certification i s awarded by the Colleges of Associations o f Specialists.

Despite high tuition fees, the requirement for compulsory service in remote areas, relatively modest official salaries of doctors and low prospects for specialty training, the demand for medical school education appears strong. T o be a GP, and more so, to hold a speciality designation, remains socially and economically valuable. The M O N E i s constantly pressed to approve the development of new medical schools. The establishment o f medical schools i s a major undertaking that requires extensive investment in human as well as physical resources. However, investments can only be effective i f they are accompanied by a nation-wide effort to regulate and assure quality o f production o f doctors through improved quality of training, in terms of both content and methodology, more stringent regulation of the medical profession that would require closer collaboration between MOH, MONE and IMA.

The health workforce issues need to be addressed for all health workers, not just for doctors, midwives and nurses. The way in which the full range of health workers i s treated affects the

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performance o f the sector and the ability of i t s workers to effectively treat and care for patients. In addition, strengthening capacity for human resource management in health needs to be linked with wider c iv i l service reforms. Reforms in health sector personnel administration require linkage to the larger context o f reforms in the civ i l service as a whole if they are to be acceptable. The M E N P A N (civil reform initiatives) has identified a number o f issues characterizing the personnel administration system in government, and proposed a framework for reforming the government-wide c iv i l service personnel system in the context o f decentralization which i s applicable to the health sector. In the meantime, however, there i s an urgent need to increase both the quality and quantity o f medical doctors given the current shortage, the inequalities in their distribution, and the increasing number o f medical faculties and the demands for establishing more since the onset o f decentralization.

Government strategy. In 1999 Ministry of Health has approved a new long te rm health strategy, "Healthy Indonesia 2010" based on four pillars for national health development: (i) the "healthy paradigm" reflecting a broader understanding o f health and emphasizing health promotion; (ii) "professionalism", focusing entirely on human resources development; (iii) Community Managed Health Care Program (JPKM) and what i s needed to lay the legal groundwork and adequate funding; and (iv) decentralization, particularly definition of boundaries, management guidelines and the associated human resource policies. Since the onset o f decentralization, M O H has begun the process of self-adjustment, or more specifically, of redefining i t s key responsibilities which w i l l include: (i) developing overall sectoral mission and vision; (ii) building up i t s advisory and technical capacity for support to provinces and districts; (iii) monitoring and safeguarding inter-regional equity in health financing and adequate funding o f essential health services; (iv) quality assurance and control through regulation; and (v) surveillance, prevention and control o f communicable diseases and food and drug safety. Understandably, such a major change in responsibilities brings along major institutional changes and restructuring. Key changes include: (i) closure o f provincial and district M O H offices; (ii) establishment o f a new autonomous agency for food and drug control; and (iii) creation o f a new Decentralization Unit to strengthen i t s technical and managerial support to provinces and districts, and to define performance indicators and minimum service delivery standards.

As for the Ministry o f National Education, two strategies need to be emphasized, both structural and in relation o f redefining the roles and responsibilities o f MONE, IMA and the Universities. First i s the intent to pursue self-govemance of Universities beyond the experimental phase whereby six universities were given autonomous status. Second, i s the increased delegation o f matters related to medical education to IMA, and i t s constituent organs. Hence the Collegium o f Medical Doctors, set up under IMA in 2001, w i l l be in charge o f designing, implementing and evaluating the new internship program for primary care physicians, and of setting up the national medical education for new graduates. In addition there are several reform attempts, a l l toward improved quality o f under-graduate and graduate medical education such as program-based learning for improved critical clinical skd ls and practice and standardized admission and licensing examinations.

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

obvious place to start i s b y improving health facilities where health sector workers provide treatment and care: f rom small rural puskesmas, to district and provincial hospitals. The reality i s that buildings and equipment alone do not provide treatment and care - people do. There i s no doubt that investment in physical capital i s required in many places. But treatment and care itself i s problematic. Infant and maternal mortality rates in Indonesia remain very high because there i s limited access to quality services f rom health professionals. Most maternal deaths occur in hospitals, not in the village. GPs have limited training and competency to manage obstetric emergency cases. Most o f the sick children are seen and treated by nurses who are not trained to diagnose and give prescriptions. The training and legally mandated division o f professional responsibilities and coordination of service provision between doctors, midwives and nurses i s very important for quality patient care, notably in integrated maternal and child healthcare services. The training o f health professionals needs significant modernization and strengthening, and central and local authorities and professional bodies have inadequate capacity to manage their health work force in the interest of better care. With or without improved facilities and new equipment, what truly makes a difference i s the knowledge and experience health workers bring to their patients, how they relate to them, their clinical practice methods and procedures, how their work i s organized within and across health disciplines, how they are paid, how they are treated as employees and professionals, how the quality o f their services i s ensured and how errors and mistakes are handled, how they advance their knowledge and professional interests while protecting the public interest, and how al l health professionals are produced, organized and managed in Indonesian society. Without priority investments that address these major human capital issues, investment in buildings and equipment alone w i l l not improve health. They w i l l only generate monuments that remind local communities and their elected officials o f their failure to improve health status, treatment and care, and burden taxpayers with ongoing and future operating cost obligations that benefit providers rather than consumers o f care.

There i s much to be done to achieve the vision of Healthy Indonesia 2010. For many, the most

As i t s predecessors Provincial Health Projects I (PHP-I) and 11 (PHP-II), this project i s set to make health sector decentralization successful and sustainable, institutionally and financially. Particularly important i s to avoid any shortage o f funds and disruption in the delivery o f the primary health care and public health services, including communicable disease control. I t also attempts to seize the opportunity provided by decentralization to strengthen regional governance. This w i l l include new planning and management mechanisms and tools, but also new institutions to increase transparency and client involvement. Among key issues to be addressed are: (i) enhancing performance and effectiveness o f local health services; (ii) meeting the newly emerging work force and training needs at the local level; (iii) doing away with normative and prescriptive system authority in favor of a more pluralistic and demand-driven mode of decision malung and management; and (iv) continuing and improving on various innovative practices such as the Jamkesnas, contract-based hiring o f doctors, health cards for the poor, clinical algorithms, deconcentration o f spending responsibilities, improvement o f health information system, and training and health education.

The key sectoral issues with implications across the three levels o f governance are human resources development and sustainable financing. A revision o f the human resources development policy governing doctors, nurses and midwives, in line with the c iv i l reform initiatives i s one component. Another i s the support for the establishment o f a Medical Council to regulate medical practice, a college o f family doctors for certification, and/or realignment o f the roles and responsibilities o f the existing institutions such as the new Collegium under JMA that has replaced the Consortium o f Medical Sciences. Finally, there i s a need to critically review the whole process o f medical education f rom entry to post-graduate practice, and identify the relative importance o f i t s various determinants, financial or otherwise, to determine the key factors amenable to policy change and intervention. This would require

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focusing on: (i) the input, or the selection process; (ii) throughput, or medical education program management and i t s components (faculty, curriculum, teaching methods and the infrastructure); (iii) output, or board examination and licensing; and (iv) management o f the teaching institutions themselves, including research as an integrated activity. As for health financing, the project w i l l explore, in addition to the JPKM model advocated by Healthy Indonesia, other options such as community-based and voluntary health insurance, in view of the more recent national health insurance initiatives.

Last but not least, i s to help the sector to find the right balance in the division o f responsibilities across the three levels o f governance, and to endow them accordingly with the right mix o f human, physical and financial resources and the mechanisms to implement a fluid interface in terms of advocacy, technical assistance and information. For instance, it i s particularly important, given the existing laws, that an adequate role for the provincial level be defined where economies o f scale are particularly promising for regulation and quality control o f the private sector, food hygiene, communicable disease control, health education, training, information management and health work force policy and planning.

C. Project Description Summary 1. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown) :

Kalimantan, West Kalimantan, and West Sumatera. These provinces are interested in alleviating the financial and managerial uncertainties o f the ongoing decentralization process, and in seizing the emerging opportunities for sustainable health care financing and equitable access to higher quality of care. Therefore, this project intends to improve access to and quality o f health services in selected provinces through institutional support, and increased investment in health financing and human resources. In this sense, i t w i l l build on PHP-I and PHP-II underway in other provinces while adding a new component o f human resources development. More specifically, the project w i l l have three components, each applicable to al l three levels o f governance: (i) improved health system stewardship, including policy and planning, management and system regulation; (ii) sustained and expanded health services financing and delivery; and (iii) strengthened health workforce policy, management and training. This combined platform w i l l be used to improve health workforce quality and effectiveness as well as to address service delivery and resource mobilization issues. The project's components and sub-components are as follows:

This project supports the process o f health sector decentralization in the provinces o f Jambi, East

Component A. District Health Offices and Health Facilities

A.l. A.2. Project management.

Improved access to and quality o f health services.

Component B. Provincial Health Offices and Health Facilities

B.1. Health workforce development. B.2. B.3. Project management.

Health system coordination, planning and management.

Component C. Central Level

C. 1. C.2.

Effective health system stewardship (MOH). Enhancing the quality o f medical education (MONE).

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B. Provincial Health Offices and Health Facilities B. 1. Health workforce development B.2. Health system coordination, planning, and management B.3. Project management C. Central Level C. 1. Effective health system stewardship (MOH)

22.93 3.91

2.12

11.34 C.2. Enhancing the aualitv of medical education (MONE) I 14.39

0.0 5.3 0.9

0.5 0.0 2.6 3.4

4.83 2.94

1.30

9.83 12.20

70.5 0.0 4.6 2.8

1.2 0.0 9.3

11.6

Front-end fee I 0.00 I 0.0 1 0.00 I 0.0 Total Financing Reauired I 429.36 1 100.0 1 105.60 I 100.0

Note: Differences due to rounding. (*) Includes project costs for both sub-components Al . Improved access to and quality o f health services and A.2. Project management.

2. Key policy and institutional reforms supported by the project:

specifically, i t wil l: This project w i l l support health reforms in conjunction with the ongoing decentralization. More

set up new institutional structures and mechanisms such as provincial and district level health councils for conjoined and pluralistic policy making and system management; reform the health workforce development policy and planning, involving MOH, MONE, IMA and provinces; reform the institutional setup for medical education, licensing, certification and registration; develop and test innovative health care organization models and financing schemes, including block funds or District Funding Allocations (DFA) for provincial and district level applications: and support MOH in redefining i t s new roles and responsibilities and i t s own institutional reorganization and capacity-building.

3. Benefits and target population:

in 47 districts and cities in four provinces by improving the availability and the quality o f health services and b y making them socio-culturally, geographically, organizationally and financially more accessible to the people. I t w i l l also benefit current and future health care providers through new and improved training opportunities and updated recruitment, retention and personnel management policies and practices, including financial and career incentive schemes. In addition, i t w i l l benefit medical students and faculties through improved management o f medical faculties, improved training of new medical graduates and post-graduates and development o f s k i l l s to use new communication and information technologies. Finally i t w i l l benefit the whole sector through increased allocational and technical efficiency b y institutionalizing a pluralistic mode o f system stewardship and management.

Primarily, the project w i l l benefit some 13.7 mill ion residents, including the three mill ion poor,

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4. Institutional and implementation arrangements:

be implemented during the f i rs t year at district, provincial and central levels were identified during project preparation and confirmed at Appraisal. Thereafter, a l l activities w i l l be based on plans developed and approved annually by regional authorities as follows: Components A and B o f the project w i l l be implemented by district and provincial health offices (Dinas Kesehatan), respectively, under the overall direction and oversight o f District Health Councils (DHC), Joint Health Councils (JHC), and Technical Review Teams (TRT). The funding mechanism to be used at the district level w i l l be block funding through District Funding Allocations. Component C o f the project w i l l be implemented by central M O H and MONE in partnership with IMA, and under guidance and oversight o f an Inter Agency Coordinating Committee (IACC) and a Technical Review Committee (TRC). See Annex 2, Attachments 2-3 for a detailed description o f the management structure for project activities at the district, provincial and central levels, and a project management organizational chart.

Project coordination w i l l be similar to that in PHP-I and PHP-II. A Central Project Coordinating Unit w i l l be established in M O H (CPCU-MOH), and headed b y a full-time Executive Secretary. I t s main role w i l l be implementation of the MOH components, and coordination o f all activities across central, provincial, and district levels. A sub-coordination unit w i l l be established in MONE (CPCU-MONE), headed by a Project Coordinator, to ensure proper project implementation and monitoring o f the M O N E component. Staffing o f both CPCUs include a planning officer, a procurement specialist, a financial officer, and a monitoring and evaluation officer. The CPCUs w i l l be responsible for procurement, disbursement, and accounting for the central level, but w i l l also oversee and coordinate project implementation by Provincial Coordination and Implementation Units (PCIU) and District Implementation Units (DIU).

Project launch i s expected to begin in September 2003, and last for five years. The activities to

Project implementation w i l l be guided by a Project Management Manual (PMM) detailing procurement and financial management, while implementation o f the DFA w i l l follow the District Funding Allocation Manual (see Annex 2, Attachments 4-6 for the DFA preparation and approval process chart, DFA manual outline, and a detailed description o f the criteria that districts w i l l use to prepare proposals for funding).

At the moment, GO1 has two options for channeling project funds to the district, i.e., either through the provinces, or directly to the districts. Channeling funds through the provincial level w i l l allow for stronger supervision o f project implementation as the province w i l l be able to transfer money to the district level in tranches, based on physical progress and cash flow requirements as indicated in the Project Management Report (PMR).

For activities at the provincial and central levels, the PCIUs and CPCUs w i l l provide financial, procurement, and implementation reports according to the agreed PMR format and with the same schedule as detailed in the Project Management Manual. The CPCUs w i l l also be responsible for compiling all PMRs for submission to the Bank. The State Audit Authority (BPKP) w i l l conduct an annual financial and implementation audit.

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Annual Planning and Budgeting.

District Level

District master plans have been prepared during project preparation. The plans are based on comprehensive situation analyses covering community health status, existing inputs for service delivery, public health problems, and public as well as private sector response to existing health problems. These master plans w i l l be updated each year, and w i l l be submitted for review along with yearly detailed work plans. The work plan w i l l document al l health interventions in the district in a particular year listing all funding sources. I t was agreed during Negotiations that the annual budget allocation for health w i l l follow a financing plan designed to reach Rp 51,000 per capita in year 2002 prices, or 15% o f the total APBD (local Government funds) o f the district, excluding the resources allocated for c iv i l works and equipment, as per the agreement in principle between MOH and the regions.

The District Health Office w i l l coordinate the work o f the districts in proposal development, and, upon approval b y the DHC, w i l l submit the proposal via the DIU and the PCIU to the JHC. The TRT w i l l review the suitability o f the proposals and w i l l prepare an executive summary o f i t s findings for JHC’s consideration. After the JHC gives i t s approval to the proposals, the PCIU w i l l send the proposals to the Bank for final approval. The whole process w i l l be elaborated in detail in the District Funding Allocation Manual, including careful timing to ensure that the process meets GOI’s time frame for DIP preparation.

Provincial Level

The provinces and the center w i l l prepare their annual plan according to the schedule prepared b y the Bureau o f Planning, MOH. The provincial planning unit w i l l work with the PCIU to coordinate the preparation o f the provincial proposal. The proposal w i l l reflect support to district level activities. Moreover, i t w i l l include activities that because o f economies o f scale and/or the systemic nature o f the activities should be implemented at the provincial rather than the district level. The provincial proposal i s subject to approval by the JHC.

Central Level

Central implementing units within M O H (including M A ) and M O N E w i l l prepare their annual plans and w i l l submit the plans via the CPCU to the TRC for review and comments. Based on the TRC inputs, IACC w i l l then approve the central plans.

Flow ofFunds. The Project Manager at the central level, Project Director at the provincial level and Executive Secretary at the district level shall be responsible for procurement and authorization o f expenditures under their respective components in accordance with the agreed budgets under existing government procedures. When expenditures are due for payment, they w i l l submit payment requests to the relevant Treasury Office (KPKN) who w i l l issue payment remittance orders (SPM) to the Bank Indonesia to credit the payee’s accounts at the latter’s respective banks and to debit the project Special Account for the Bank’s portion.

Immediately after credit effectiveness, DG Budget shall issue a circular letter to the relevant KPKN providing guidelines and criteria for eligible project expenditures in accordance with the Credit Agreement, including the expenditure arrangement for each implementing unit.

Financial Management, Procurement and Disbursement. (See Annex 6 for a detailed description. The detailed Procurement Assessment and Financial Management Assessment are on file.)

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As described above, financial management, procurement and disbursement responsibilities w i l l be integrated at district, provincial and central levels depending on the nature o f project activities being implemented at the respective level. This structure for project implementation and management i s in line wi th the design o f the project which emphasizes capacity building o f the MOH and M O N E and other government agencies at different levels.

The Indonesian Pilot for Enhanced Disclosure of Information being pursued in the context of the Bank’s revised Information Disclosure Policy. As part o f the implementation o f the Banks revised disclosure policy, a number o f countries were approached for piloting enhanced disclosure i f the governments o f these countries were interested in participating. During the CAS consultations and other discussions, both the GO1 and civ i l society expressed keen interest in substantially greater access to information on Bank activities to allow full public discussion o f project implementation and i t s findings in particular. An agreement has been reached to include Indonesia in the pilot for enhanced disclosure to enable c iv i l society oversight leading to greater transparency and openness. The Pilot for enhanced information disclosure being carried out in the context o f the Bank’s revised Disclosure Policy, as per an agreement with BAPPENAS on behalf of the Borrower on an approach to enhanced information disclosure. This approach consists o f the following arrangements:

(a) Agreement on building disclosure o f information during project preparation into project implementation arrangements for a set o f projects to be included in the initial phase o f the pilot. This agreed set consists o f four projects, including the proposed Health Workforce and Services Project. (The other three projects are the proposed Water Resources and Irrigation Sector Management Project, the proposed Private Provision o f Infrastructure Technical Assistance Project, and the proposed Third Kecamaten Development Project.) Annex 13 provides for more detailed information on these arrangements.

Specific issues that has been agreed upon regarding enhanced disclosure include: (i) final annual audit reports issued under pilot projects w i l l be made publicly available by both the Borrower and the Bank: (ii) the mid-term reports o f pilot projects w i l l be made publicly available b y the Borrower: and (iii) the procurement process, where the Borrower has agreed that additional information concerning parts o f the procurement process in pilot projects w i l l be made publicly available. The draft development credit agreement for the Health Workforce and Services Project includes specific undertalungs to effectuate these agreements. These undertakings would eliminate the need for GO1 approval to be obtained prior to the public release o f such information.

(c) For documents other than those referred to in sub-paragraph (b) above which are currently not disclosed without Borrower consent the Bank w i l l continue to consult GO1 prior to disclosure o f such documents. GO1 may consider moving to a more general practice o f automatic release o f such documents after the Government completes i t s review o f enhanced information disclosure concerning the public provisions o f services that i t i s currently undertaking. In this regard the anti-corruption guide for task teams and the anti-corruption annex (13) based on this guide (together with the covenants on disclosure of audits, mid-term review report and procurement documents) are expected to facilitate the adoption of enhanced disclosure, and more open and transparent practices.

Agreement to utilize an IDF grant to support activities for developing GO1 policies for increased information disclosure under all government projects in Indonesia. A GO1 implementation team has been established, and a Bank counterpart team has also been formed. Start-up activities for administrative arrangements and preparation o f terms o f reference o f consultants under this grant have been initiated.

(d)

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The pilot w i l l be reviewed after two years to lead to recommendations to improve upon Bank's disclosure policy.

On-granting Arrangements. This project i s considered b y GO1 as a non cost-recovery project, and as such districts w i l l be on-granted their appropriations by the central government.

Monitoring and Supervision. A baseline survey was conducted during project preparation. The PIPS provide the basis for project implementation, monitoring, and supervision. A l i s t o f outcome, output and input indicators have been prepared by al l districts with their respective baseline values. The monitoring and evaluation officers o f the DIUs, PCILJs, and CPCUs w i l l be responsible for coordinating monitoring and supervision activities. The project's implementation progress w i l l be monitored through the semi-annual project management reports. These reports w i l l contain essential data on the implementation o f the project components and sub-components, and additional analysis and information w i l l be gathered through field visits during review missions. Achievement o f project objectives w i l l also be assessed through a Mid-term Evaluation, to be carried out by June 30,2006, and through a final external evaluation, including an external survey, that w i l l be produced by the Borrower at the end o f the project. The Survey should be completed by September 30,2008, and the External Evaluation Report by December 31,2008, to be submitted in conjunction with the Borrower's Final Project Report.

Joint Project Supervision with PHP-II. The MOH has agreed to consider ways to enhance the coordination o f the PHPs with the HWS to increase both effectiveness and efficiency, and to better take stock o f the lessons learned from previous projects. One option i s to conduct supervision o f H W S ' s central MOH level activities together with the joint PHP-I and PHP-11 supervision missions. Another option i s to broaden participation in the supervision workshops to include provincial representatives f rom al l three projects to share experiences, especially with regard to JHCs and TRTs, and the way and means district budgets are allocated through the provincial filter. Finally, stocktalung o f progress with the institutionalization o f annual plans and district funding allocations could be jointly reviewed to identify bottlenecks and how districts have been able to resolve operational issues.

D. Project Rationale 1. Project alternatives considered and reasons for rejection:

1. Continue developing projects designed and implemented at the central level: This option i s no longer viable for three main reasons: (i) there i s no more a legitimate organizational and financing model which would allow top-down project design and implementation; (ii) decentralization seems to be tahng hold with consequent changes in the perceptions, attitudes and behavior o f public authorities at a l l three levels o f governance in terms of power sharing and roles and responsibilities which w i l l make i t very difficult to implement center-driven projects; and (iii) the Bank has already moved away from center-driven project design and preparation with the most recent provincial health project framework and change o f course at this stage w i l l not be politically acceptable.

2. Wait until "the dust settles": During the recent economic crisis i t has become clear that a l l levels w i l l be hard-pressed and unable to maintain an adequate level o f funding to provide health care services, let alone cover additional expenses brought about b y decentralization, such as increased in-service training needs and loss o f economies o f scale due to duplication o f some essential services at a l l levels. Therefore i t i s time to seize the momentum to: (i) introduce and experiment wi th novel policy development, financing, management and service delivery models and mechanisms; and (ii) redefine the scope and mix o f services to be produced locally in accordance with variations in health and health care

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needs across the country. Decentralization has provided a unique opportunity to do away with top-down and technocratic mode of policy making and regulation, and to adopt a more pluralistic mode involving c iv i l society and health care professionals.

3. tuned to the training o f health professionals, mainly physicians, i t has become increasingly clear that capacity-building alone could not improve quality o f health care i f i t i s not accompanied with concurrent changes in the organizational models and incentive schemes. Further, the recent decentralization has added an additional necessity for revisiting existing institutional mechanisms and establishing new ones for long-term sustainability and maximum yield from capacity-building activities. Therefore, in line with the ongoing decentralization process, i t was decided that the project scope be expanded to include the other two functions o f health services management and delivery. The benefits o f the Central Component, however, i s expected to accrue across Indonesia as i t focuses on human resources development with nation-wide implications.

Focus on and emphasize capacity building: While the original project concept was more

4. other provincial health projects to increase the total number o f provinces thus covered to nine. While in the future there may be more provinces interested in taking part, i t may prove difficult to include more provinces at this stage given the multiplicity o f the health care functions to be covered by the project, implementing agencies and the level o f authority/responsibility. One consequence w i l l be the added complexity o f having to deal wi th more than one counterpart. Another i s l ikely to be the added difficulty/complexity in enrolling provinces and districts one by one through a longer consultative process, albeit coordinated b y provincial authorities. Finally, the Asian Development Bank (ADB) i s also set to prepare another project on decentralization o f health services covering at least five other provinces.

Broaden geographic coverage: As mentioned before this project w i l l complement the two

5. Provincial Health Project 111: The PHP model has proven to be viable and i s readily embraced b y central, provincial and district authorities alike. In many ways, H W S i s alun to and follows the lead o f Provincial Health Projects I and II, i t s predecessors. In terms o f scope and purpose, both projects intend to protect essential health services for the poor and to strengthen decentralized management through institutional build-up. At the district and provincial levels, they are substantively similar in their focus on decentralized financing and delivery of health services, albeit covering different provinces. PHP-II, l ike HWS, also has a strong central component, focusing on institutional development, albeit mostly on strengthening o f communicable disease control, health research and capacities, and food and drug control. In addition to expanding PHP-like coverage to four more provinces and 47 districts and cities therein, H W S also goes further in building the institutional capacity at the Central level. However, H W S goes beyond the M O H and provincial and district health offices to include M O N E and IMA in i t s a im to strengthen human resources development on a longer time horizon through investment in formal higher education. Hence, in addition to supporting the Human Resources Empowerment Board o f MOH, i t expands to the Directorate General o f Higher Education in MONE and the M A , the other two key stakeholders in health workforce policy, development, management and empowerment. This added layer i s essential to design and carry out key human resources reforms and new regulations pertaining to vocational, pre-service and in-service training, higher education, licensing, certification and registration o f providers, setting professional standards o f medical practice, workforce deployment, retention, and financial and nonfinancial incentives, all key to building local capacity for successful decentralization with a longer horizon.

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2. M a j o r related projects financed by the Bank and/or other development agencies (completed, ongoing and planned).

Ban k-financed Strengthening Decentralized Management and Protecting Health Services for the Poor Strengthening Decentralized Management and Protecting Health Services for the Poor Fifth Health - Improving Efficiency and Quality o f Provincial Health Services Fourth Health - Improving Equity and Quality o f Care Safe Motherhood: A Partnership and Family Approach Other development agencies

I Sector Issue I Project

PHP-11 (Credit 3537-IND and Loan 4629-IND)

PHP-I (Credit 3381-IND)

HP-V (Loan 4374-IND)

HP-IV (Loan 390.5-IND)

SMP (Loan 4207-IND)

Capacity building to support health sector decentralization for improved service coverage, quality and utilization ADB i s currently envisaging a second DHS project which proposes to cover five provinces. Possible candidates include Central Kalimantan, South Kalimantan, South Sumatera, Bangka Beitung, South Sulawesi, East Nusa Tenggara, West Nusa Tenggara and Gorontalo .

Decentralized Health Services or DHS-I (ADB)

I I

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

3. Lessons learned and reflected in the project design:

Latest SI

(Bank-finance Implementation

Progress (IP)

S

0-R)

S

S

S

S

Highly Unsatisf,

ervision atings arojects only) Development

Objective (DO)

S

S

S

S

S

Two key lessons from previous experience are reflected in the proposed project design: (i) the need to have a broader system-wide approach (e.g., PHP-I and PHP-11) instead o f disease- or issue-specific (e.g., Nutrition, HIV/AIDS) approaches when designing health sector projects; and (ii) the need to emphasize local level and tailor project design accordingly for improved effectiveness (e.g., HP-IV and HP-V).

Provincial Health Project I (Credit 3381; effectiveness date: August 2000) and Provincial Health Project II (Loan 4629 and Credit 3537; effectiveness date: April 2002)

These two health projects passed over the course o f the last two years deal exclusively with

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safeguarding effective health services management and delivery during the period o f decentralization, and cover Lampung and Yogyakarta (PHP-I) and North Sumatera, West Java and Banten (PHP-II), respectively. An additional goal i s to help MOH restructure itself to carry out i t s roles in a decentralized setting. While i t i s too early to draw lessons f rom project implementation in a decentralized health care environment as such, these two projects have laid the ground work for the proposed project in terms o f project design and preparation, especially with regard to the functions covered (financing, delivery and capacity building), the level o f intervention (district level for planning, management and service delivery; provincial level for public health functions), the institutional mechanisms (joint and district health councils) and allocation of block funds.

PHP-I pursues health improvement goals within the institutional setup defined b y Laws 22 and 25 and accompanying measures and regulations. The PHP framework facilitates health sector decentralization, in part b y fostering cross district cooperation in health development through the establishment o f a Joint Health Council (JHC) and a Technical Review Team (TRT) in each province. The project adopts a sector-wide approach. About 70% o f the funding i s channeled to the districts through a block funding mechanism to support implementation o f district health improvement and reform proposals. The proposed project incorporates similar institutional design and funds channeling mechanism.

PHP-I also finances reform efforts through the work o f task forces established at the provincial level. The human resource development task force in Yogyakarta province, for example, has formulated alternative models for implementing regulatory functions, and drafting o f standards o f competence for doctors, midwives and nurses. I t has also established criteria for recruitment o f members o f a council for improved quality. An assessment o f Yogya’s health workforce indicated that the PHO was more than 40% overstaffed. Recommendations for downsizing were submitted to the Joint Health Council o f the province for follow-up. The proposed project w i l l adopt similar approaches in the four provinces.

The design o f PHP-11 follows that o f PHP-I. But unlike i t s predecessor, PHP-11 explicitly sets Rp 42,000 per capita (Year 2001 prices), as the desired spending level for health at the district level. This target i s based on estimation of a minimum spending needed to attain a significant improvement in health. PHP-11 also includes the training o f staff f rom the schools o f public health or equivalents in project provinces to improve the capacity o f the schools and their graduates in supporting health development efforts. Other features o f PHP-11 are strengthening o f communicable disease control, including epidemiological surveillance and outbreak response, food and drug quality assurance and control, upgrading o f regulatory framework for health services. This project also uses the same spending targets (Year 2002 prices) and similar training activities.

The Fifth Health Project (Loan 4374-IND; effectiveness date: September 1998)

The overall goal of the project i s to increase the efficiency and productivity b y improving the regulatory framework for both private and public sectors, and the autonomy and accountability o f health professionals through skill-building. I t also introduced quality assurance and control mechanisms such as licensing and support to professional associations in Central Java, Central Kalimantan and South Sulawesi. HP-V anticipated GOI’s decentralization initiatives in i t s focus on improving the capacity o f province and district health staff and introducing methods for staff performance review, service quality assurance, and workload assessment linlung i t with innovations in staff deployment. The project also empowers selected professional associations by strengthening organizations across levels, piloting new registration systems, designing continuing medical education systems, and drafting a law on health council. However, the initial design did not encompass local government involvement and district service reform as important elements for supporting the implementation of Law 22 and 25. The proposed

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project addressed similar health workforce issues with stronger emphasis on involvement o f provincial and district governments.

The Fourth Health Project (Loan 3905-IND; closed on 31 March 2001)

The main goal o f the Fourth Health project was to build the capacity o f provincial and district health offices and health centers to plan and implement health programs and deliver cost-effective and high quality services. The project was assessed satisfactory at closure, and i t s sustainability was deemed highly likely. One key lesson learned relates to the use o f the Special Assistance Fund, a kind o f block grant, which in theory was supposed to be linked to the preparation of development plans, but which in practice was used liberally on the basis o f ad hoc decisions. Another lesson concerns the use o f performance-based incentives which needs to be based on a broad range o f professional behavior rather than limiting i t to the most basic criteria such as attendance and time spent in the workplace. On the positive side, HP-IV introduced a number o f innovative experiments including private family practice, use o f non-medical administrators, managed care (JPKM), clinical algorithms and rational use o f drugs. The last two tools were particularly well received, and they are now part o f in-service training curriculum nation-wide with plans to introduce them to formal medical education, worthy o f consideration during review o f medical curricula in this project. I t i s also worth noting that although there were considerable variations in terms o f project implementation and impact across project sites, including East Kalimantan, one of the proposed provinces for this project, the latter's involvement in this project was very much conditioned b y their favorable experience with HP-IV.

Safe Motherhood Project (Loan 4207-IND; effectiveness date: September 1997)

This project aims at improving maternal health status through improved demand for and utilization o f quality maternal health services in Central and East Java. Two key features deserve attention: (i) integrated district plans because they are used to identify under-served population groups and training needs o f midwives, doctors and managers; and (ii) the use district block grants by the Central government and how i t affects project financing, including counterpart funds. The project has used different instruments to establish attractive and sustainable work conditions for village midwives, who are key providers o f services potentially beneficial to poor women. One o f the measures piloted has been performance contracts, in which private midwives at the villages were contracted by the district government to provide midwifery services for the poor through a voucher system, while at the same time they were given support to build up their private practices. This pilot scheme has proven to be effective in improving the quantity and quality o f services reaching poor clients. The project has also used different means to promote the acceptance o f these front-line health providers in local communities. For example, use o f coupons by poor households has been shown to be effective in inducing demand for healthcare and in empowering poor clients. These achievements are timely and relevant to challenges faced by budget-constrained districts that are responsible for providing services intended for the poor.

Broadly speaking, the proposed project w i l l take stock of, and build on the Fourth and Fifth Health projects, mostly concerning medical and in-service training and quality o f care, and the Provincial Health Projects with regard to financing and delivery o f health services in a decentralized context so as to buildstrengthen the organizational and institutional mechanisms to ensure service continuity and safeguard public health functions and activities. Finally, the Quality of Undergraduate Education (QUE) Project, an education sector project focusing on the quality o f higher education in Indonesia, has also been reviewed for potential lessons regarding the medical education component. While QUE project design has been assessed as appropriate, including strategies such as competency-based curriculum, early clinical exposure, community-oriented medical education and quality assurance, lack o f commitment and ownership appears to have hampered effective implementation. To prevent that from happening again,

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both Andalas and Mulawarman Universities have been directly involved in project preparation, and views and opinions o f both faculty and students have been sought through focus group discussions, student surveys and SWOT analyses.

4. Indications of borrower commitment and ownership:

i t s national development plan (PROPENAS). This project has generated high level of interest from central, provincial and district governments. "Healthy Indonesia 2010", the official health policy statement o f the GOI, has Human Resources Development as one o f the four pillars to achieve that goal. Accordingly, MOH i s very keen to overhaul i t s human resources policy and management, and has recently established the National Board for the Development and Empowerment o f Health Human Resources. The Ministry of National Education has for some time been advocating for Bank's involvement in reforming medical education. I t has also recently disbanded the Consortium o f Health Sciences (CMS), the semi-autonomous agency originally mandated to advise the Director General o f MONE on curriculum development, by shifting this responsibility to IMA and MOH. The central project proposals that have been prepared by M O H and MONE take account o f these recent developments.

GO1 has consistently emphasized Human Resources Development as a development objective in

At the sub-national level, the selection o f participating regions has thoroughly been a bottom-up process, including visits by the Bank project preparation team to governors, bupatis, DPRD health committees and Bappedas. Project preparation was only initiated in those regions where there was ownership, and a formal commitment expressed in the way o f a letter o f interest sent to Bank, each signed by governors and/or bupatis, and countersigned b y DPRD chairmen, indicating their willingness to pay their share o f loan repayment once the terms and conditions have been jointly agreed to b y MOF. Their commitment has been tested and confirmed through the establishment o f project preparation teams and drafting o f regional proposals and PIPS in all regions, and by active participation in project-related workshops and training sessions.

5. Value added of Bank support in this project:

This project follows the lead set by previous health and higher education projects in terms o f i t s design and key components such as district fund allocations, support to professional associations and competency-based medical curriculum development, to name a few. Furthermore i t expands i t s remit by combining health workforce and services in a new decentralized governance setting. I t also extends i t s outreach by introducing Jambi, a new comer to Bank's health operations in Indonesia.

The main value o f Bank's support lies in i t s systemic and sector-wide approach to decentralization, covering al l key functions o f health care, namely human resources development, financing and delivery o f basic health services. This support i s very much in line with the findings and recommendations of the Health Strategy note (Report No. 21319-IND) which focuses on policy choices in an era o f decentralization and economic constraints. In addition, Bank's support to the health sector in Indonesia remains consistent in i t s scope and coverage of policy issues, emphasis on strengthening local services, and cumulative and complementary in i t s coverage o f key provinces as evidenced by the preceding two PHPs. As such, this string of projects i s l ikely to foster a smooth transition to decentralized health services delivery and reduce the constraints in terms o f financial and managerial capacity.

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

1. Economic (see Annex 4): 0 Cost benefit 0 Cost effectiveness 0 Other (specify)

NPV=US$442250246 million; ERR = 76.5 9% (see Annex 4)

The economic analysis o f the project covers the following: (a) country assistance strategy goals and Indonesian health sector strategy goals supported by the project; (b) rationale for public sector involvement and poverty impact o f the project; (c) cost-benefit analysis o f project interventions; (d) risk-sensitivity analysis; and (e) fiscal impact of project interventions.

While the project i s expected to yield several benefits, many of which manifest itself in the long run, the benefit cost ratio for the project was calculated using a conservative estimate o f the benefits o f improved health status of the population in project provinces through improved use and quality o f health services at the district level. These conservative estimates yield a benefit cost ratio o f 16.9.

Several scenarios were considered which resulted in benefits which are 75%, 50%, 25%, and 10% o f the base case. For al l cases other than where very limited project benefits were assumed (10% o f the base case), the net present value o f project benefits was positive.

2. Financial (see Annex 4 and Annex 5): NPV=US$ million; FRR = % (see Annex 4)

The financial assessment addressed the following issues: (i) the current financial flows for health f rom various sources to districts; (ii) mechanisms in place to oversee and manage local funds and transfers for health; (iii) provincial and district health accounts, namely documenting past spending and estimating prospective outlays; (iv) an appraisal o f the affordability o f counterpart funds b y provincial and local governments during implementation; and (v) sustainability o f funding for project activities beyond the closing date in participating provinces and districts.

Fiscal Impact:

Currently, in the four provinces supported by the project, there i s wide variation both within and across provinces in health spending per capita. In most districts however, health spending i s low - in West Sumatera district health spending varies between 5% and 7% o f district budgets, in Jambi i t varies between 3% and 8%, in East Kalimantan between 1% and 4% and in West Kalimantan between 5% and 10%. In order to make substantial impact on key health indicators however substantial increase in health spending per capita would be required. The project w i l l provide funds to districts and provinces on a need basis to support development spending to achieve increased health outcomes.

To avoid a large project size and a sharp drop in spending in 2009, government health spending would have to increase during project implementation period in order sustain and deepen project benefits. Increase in government health spending in the project districts i s a key condition of the project. This w i l l be monitored closely as a key performance indicator through the development o f district health accounts on a biennial basis w i l l the district health accounts for 2002 providing a baseline. The actual increase needed per district w i l l be revisited during the mid term review based on the performance o f the

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district fund allocations and the experience o f the previous two provincial health projects.

3. Technical:

There are three technical aspects that the project w i l l mainly address:

(i) human resources development policy and management, through building capacity o f the key actors, namely the recently created Human Resources Development and Empowerment Board. This Board which has structured itself to meet the demands o f a decentralized health sector, and increased regionalization/globalization and information technologies and their use in education, training and medical practice. The project w i l l also help planning for human resources, especially medical doctors. Other professions, especially nursing, w i l l also be incorporated in the plan for a more thorough view o f health care in i t s entirety.

(ii) institutional foundation of the medical and other health professions, wi l l be reformed on the basis o f detailed analyses o f the roles and responsibilities o f all the institutions and stakeholders involved. As such, the establishment o f a medical council for regulating the profession, a revision o f the roles and responsibilities o f the existing institutions such as the erstwhile CMS and IMA i s planned to better respond to changing needs and preferences o f the medical community, mainly in the areas o f licensing, registration, certification and accreditation, especially with regard to private practice. Comparable initiatives w i l l be undertaken with the nursing and midwifery professions, according to their readiness, under the coordination o f the M O H and introducing self-regulation in a parallel way to empower all health professionals.

(iii) decentralized health sector management envisages a move away from top-down and technocratic system stewardship, regulation and management towards a more pluralistic management through setting up new institutions such as JHCs and DHCs which w i l l include representatives o f not only government agencies, but also professional associations and consumers. One key aspect o f the new setup i s the blurring o f distinction between public and private health care delivery which are to operate under the same regulatory framework and thus be subject to same criteria and standards in competing for service contracts in a level playing field. A prerequisite for the latter i s the intelligence function which would keep track o f the health and health care needs o f the local populations, and the epidemiology o f the determinants o f health and health care seelung behavior o f various population groups in participating provinces and districts, including Isolated and Vulnerable Peoples (IVP), and the comprehensiveness and quality o f healthcare services provided by both public and private providers. This i s a must, not only for planning and quality control o f the required services and the necessary human, financial and physical resources, but also for benchmarking and setting a baseline against the planned ex-post project impact evaluation.

4. Institutional:

Indonesia i s in the process o f decentralizing i t s administrative structure. According to Law 22, responsibility for health has now been devolved to district level. However, the roles and responsibilities of each level o f government with regard to various functions o f health care, especially for human resources, public health and health financing, are s t i l l unclear and need to be worked out. Further, this project involves multiple partners and beneficiaries f rom both the public and non-governmental sectors, including professional associations, and project activities are spread over three layers o f governance. Therefore, there i s a need for a thorough ongoing institutional assessment during the project to maintain clarity in the roles and responsibilities o f each of these organizations in the implementation and to assist

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the establishment of new structures such as health councils.

4.1 Executing agencies:

Key executing agencies include local governments in Jambi, West Sumatera, East Kalimantan and West Kalimantan, and MOH and M O M at the central level. Most o f the project activities w i l l be implemented by district governments.

4.2 Project management:

Management arrangements are designed to take into account institutional arrangements and lessons learned from other Bank financed projects, particularly the PHPs. The project w i l l have one management unit at each level with assigned implementation and management roles that are consistent with the mandates and roles o f the different implementing agencies. The project w i l l be implemented mainly at the district level.

The roles o f DNs, PCNs, CPCUs and advisory and control/oversight bodies at each level (DHC, JHC, TRT, TRC and IACC) have been defined. The composition and staffing o f these units w i l l be subject to Bank approval. The necessary technical assistance w i l l be provided to ensure that these units are able to perform the agreed functions effectively. The roles, responsibilities and s k i l l s o f the Project Directors, Project Managers, Executive Secretaries at each level are also well defined. The candidates selected for these positions w i l l be subject to World Bank approval, and no modifications w i l l be made to their roles without Bank approval.

4.3 Procurement issues:

(Please see Annex 6 for more details.)

arrangements under the project. A CPAR was recently conducted, and the final report was issued on March 27, 2001. The key procurement issues identified in the CPAR relevant the this project include differences in the required Bank procurement procedures and the applicable local procedures. The provisions suggested in the CPAR to address this issue w i l l be incorporated in the legal agreements. A procurement capacity assessment has been conducted during the preparation o f the project in accordance with the instructions issued b y OCSPR. A procurement action plan to mitigate as much as possible the fiduciary r isks has also been developed and included in the Project Appraisal Document (PAD). See Annex 6. Procurement plans have been developed and agreed as part o f the preparation o f the Project Implementation Plan (PIP).

A procurement accredited staff has been identified and w i l l be responsible for a l l procurement

4.4 Financial management issues:

out in 2000 concluded that the control and fiduciary environment in Indonesia remains weak despite a political commitment to improve fiduciary practices. Responsibilities are unclear, with legislative and regulatory instruments often vague and inconsistent, all the more so after the onset o f decentralization. According to Transparency International, Indonesia ranks amongst the most corrupt on the "Corruption Perception Index". A White Paper published in May 2002 b y the Ministry o f Finance on Reform o f Public Financial Management System in Indonesia recommended the establishment o f FM Reform Committee to lead the preparation o f the government regulation on treasury and accounting system.

Both the Country Financial Accountability Assessment (CFAA) and a fiduciary mission carried

The financial management assessment o f the Health Workforce and Services Project was carried out in accordance with Assessment o f Financial Management Arrangements in World Bank financed projects, and per the guidelines to staff issued by the Financial Management Sector Board on June 30, 2001. The Assessment reviewed operations of the: (i) Secretary General (Bureau of Planning and Human

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Resources Development o f MOH), including a visit to the Jambi Provincial Health Office; and (ii) Directorate General of Higher Education (DGHE), MONE, including a visit to the Medical Faculty, Andalas University. The assessment concluded that pending the resolution o f the issues mentioned in the Proposed Action Plan the project w i l l satisfy the Bank’s financial management requirements as stipulated in OP/BP 10.02. However, considering that the Implementing Unit has experience with Financial Monitoring Report (FMR) based disbursement, i t i s recommended that FMR be used by the project as the basis o f the disbursement since i t provides better monitoring o f project implementation. Below are the financial management risks, and how they w i l l be addressed per the lessons learned from the implementation and monitoring of PHP-I:

(i) Project Management Manual (PMM) and District Fund Allocation Manual (DFAM) play an important role in project implementation, especially in anticipating potential problems. The P M M w i l l include organizational structure, j ob description, budgeting, procurement, and guidelines for record keeping. The FMR w i l l constitute the basis for disbursement and w i l l cover preparation and recording o f financial statements, f ixed assets management, internal control, monitoring and evaluation mechanism for the project management system, auditing arrangements and governance and disclosure requirement for the project. DFAM describes funding allocation, proposal preparation process, organization structure and job descriptions, f low of funds and monitoring and evaluation, including the mechanism for interim audit.

(ii) Since P M M and DFAM are meant to be followed by al l project coordination and implementation staff, training on the P M M and DFAM wi l l also be carried out for proper project implementation. The training i s expected to cover both procurement and financial management, including the preparation of FMR for the relevant CPCU, PCIU and DIU staff.

(iii) The selection and proper compensation o f the Executive Secretary(ies), ProjecdSub-Project Manager(s) and treasurer(s) are also critical for the preparation and implementation o f P M M and DFAM.

(iv) Supervision o f project implementation at the DIU level i s equally important in instituting proper financial management practices.

5. Environmental: 5.1 Summarize the steps undertaken for environmental assessment and E M P preparation (including consultation and disclosure) and the significant issues and their treatment emerging from this analysis.

(Please see Annex 11 for more details.) Potential environmental and human health impacts examined in completing the environmental review (ER) corresponded to planned: (a) construction o f new small hospitals and health centers, and renovation of existing health care facilities (HCF); (b) health care waste management (HCWM) practices at HCF; and (c) possible use o f insecticides in malaria and dengue vector control programs. Findings are summarized b y activity as follows:

Environmental Category: B (Partial Assessment)

(a) Health Care Facility Civ i l Works - Review o f planned HCF construction and renovation confirmed that these activities do not pose any serious environmental concerns. New constructions are limited to two Class C hospitals with 50 beds and 15 healthhub-health centers. These would trigger additional full assessment under Indonesia’s environmental impact assessment (EM), or AMDAL, requirements. Recognizing that the majority o f c iv i l works w i l l involve only minor renovations to existing facilities at the district and village level and construction o f modest-sized new structures (Le., a typical village health care post has a total floor space o f approximately 36 m’), anticipated construction-related environmental impacts are expected to be minimal and are readily addressed through the application of available mitigation measures. Potential environmental and occupational health concerns relating to planned civ i l works at the district level (e.g., construction and or

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renovationhpgrading o f sub-health and health centers with a typical floor space of 120 m’) were also examined in completing the ER, and corresponding mitigation measures are incorporated into the Environmental Management Plan (EMP).

(b) Health Care Facility Operations - Potential human health and environmental threats associated with medical waste generated by HCF, particularly infectious waste, were subject to thorough review in completing the ER. I t was determined that r isks associated with medical wastes are well defined and can be readily addressed through the adoption o f best H C W M practices encompassing: (i) waste minimization, recycling, and reuse; (ii) proper handling, storage, and transportation; and (iii) treatment o f waste by safe and environmentally sound methods as detailed in the EMP. The need to address liquid waste in planning HCF construction and renovations was also examined as part o f the ER. Recommendations concerning appropriate waste water treatment practices necessary to minimize human health r isks associated with discharge o f untreated or inadequately treated sewage are incorporated into the EMP.

(c) a l l chemicals expected to be used as part o f the H W S project have successfully passed the World Health Organization’s Pesticide Evaluation Scheme (WHOPES). Insecticides favored for residual space spraying and larviciding in Indonesia have been selected primarily on the basis o f their relatively low toxicity and comparative effectiveness and are considered to pose a very low risk to humans if used correctly. In contrast, the environmental toxicity o f insecticides used in vector control programs represents a potential concern that must be considered in project planning and implementation. Detailed review o f occupational health and environmental safeguards in place for vector control programs in Indonesia provided assurances that existing stringent policies and procedures w i l l be effective in ensuring that r isks associated with possible improper handling or disposal o f chemical insecticides are negligible. Recommended enhancements to existing guidelines covering malaria and dengue vector control programs are contained in the Pesticide Management and Monitoring Plan (PMMP).

5.2 What are the main features o f the EMP and are they adequate?

(Please see Annex 11 for more details). Recommended mitigation measures intended for application during project planning and implementation are detailed in an EMP and PMMP. Recommendations contained therein were developed in close consultation with the implementing agencies, and w i l l be implemented and monitored together with the other project activities and evaluated both at mid-term and at final evaluation. GO1 adoption o f the EMP i s covenanted in the legal agreement. Main recommendations contained in the EMP and PMMP are summarized below:

Pesticide Use - Review o f planned malaria and dengue vector control activities confirmed that

Environmental Management Plan

Health Care Facility Civ i l Works - Best environmental and occupational health practices must be followed during civ i l works to minimize or avoid any potential adverse impacts. A comprehensive environmental managemendmonitoring plan (Le., referred to as a UKLAJPL) shall be prepared for al l new HCF construction andor renovation o f existing facilities to ensure that any potential construction and operational phase environmental issues are identified and that appropriate mitigation measures are adopted to minimize or avoid adverse impacts (see Annex 11).

Health Care Facility Operations - Environmental issues posed by health care waste (HCW) generated during hospital and health center operations are readily resolved through adoption o f appropriate H C W M systems encompassing al l aspects o f waste generation, collection and segregation, transportation, storage, and safe disposal. In implementing the H W S project, i t i s crucial that every

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participating HCF (i.e., comprising C and D hospitals, district health and sub-health centers, and village health posts) adopt adequate waste handling and disposal infrastructure and management systems that meet accepted standards for HCF in developing countries. Reflecting the broad range of c iv i l works proposed under the H W S project, i t i s recognized that responses to potential HCW-related concerns should be commensurate to the type o f facility concerned (e.g., minimal H C W M practices are appropriate for traditional village health posts whereas more sophisticated and comprehensive practices are essential for Class C and D hospitals). Particular attention shall be given to selecting H C W M systems that both fully comply with existing Indonesian regulations and guidelines and which reflect new developments in H C W M (e.g., although incineration i s currently the required method for solid medical waste treatment in Indonesia, autoclaving offers many advantages and i s recommended as an alternative method for treating infectious solid wastes in small hospitals and health centers which lack access to approved incineration facilities). Existing comprehensive guidelines for H C F operations promulgated by the MOH reflect current best practice and should be strictly adhered to. Health care facilities shall also demonstrate ongoing compliance with al l regulatory monitoring requirements (i.e., monitoring and reporting o f liquid wastewater discharges, air emissions from incinerators) and maintain proper documentation for audit and review purposes. To assist HCF in operationalizing best H C W M practices, i t i s recommended that additional resources be devoted to human resource development and institutional strengthening (e.g., awareness building training for all health and auxiliary staff, preparation of standard operating procedures, adoption o f environmental management systems to demonstrate good environmental performance, capacity building in compliance monitoring). I t i s further recommended that additional authoritative reference materials (e.g., guidance documents and training materials available f rom the World Health Organization represent an excellent resource) covering discrete H C W M topics be made available to health care practitioners and administrators.

Pesticide Management and Monitoring Plan

Review o f ongoing malaria and vector control programs in Indonesia indicated that existing occupational and environmental health safeguards are comprehensive and that best management practices are being followed in program implementation. For this reason, recommended mitigation measures are primarily intended to ensure that safeguards already in place are strictly adhered to in the delivery o f future vector control programs funded under the H W S project. Gap analysis was completed on existing guidelines pertaining to current pesticide use in the four participating provinces and specific aspects o f program planning and implementation with a view to identifying technical and administrative aspects that would benefit from selective enhancements. To this end, recommendations contained in the PMMP focus on reinforcing occupational safety and environmental protection through the incorporation o f additional safeguards encompassing: (i) pesticide procurement, storage and distribution; (ii) occupational safety and environmental protection training to health care workers involved in space spraying and larviciding; (iii) dissemination o f environmental awareness educations materials to local communities; and (iv) oversight o f safeguards application during field operations.

5.3 For Category A and B projects, timeline and status o f EA: Date of receipt of final draft: 3 1 March 2003.

Environmental analysis has been completed for the H W S project and environmental issues relevant to project activities are detailed in the body o f the ER report. Recommendations are made as to appropriate mitigation measures and monitoring programs with a view to guiding project design and incorporating appropriate management plans during project implementation.

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5.4 H o w have stakeholders been consulted at the stage of (a) environmental screening and (b) draft EA report on the environmental impacts and proposed environment management plan? Describe mechanisms o f consultation that were used and which groups were consulted?

impacts associated with the planned project activities and to solicit inputs with a view to crafting appropriate mitigation and remediation measures. Interviews were completed with key government agencies including the MOH, the Ministry o f Environment (MOE), and provincial/district health and environmental officials to identify potential environmental impacts o f planned new HCF construction, renovation o f existing facilities, and pesticide use in malaria and dengue vector control programs. Field visits to representative HCF at the provincial and district levels provided an opportunity to review current operational practices and assess potential site-specific environmental issues. Follow-up consultations with central government environment and health agencies and participating provinces/districts were held to review, discuss, and reach agreement on the project’s environmental issues and recommendations intended to prevent, minimize or mitigate any adverse impacts and to improve environmental performance. Additional consultations were completed with health care specialists f rom international organizations and representatives f rom nongovernmental organizations to solicit inputs on specific issues such as H C W M practices, and pesticide use in vector control programs. A complete l i s t o f contacts i s provided as an Annex to the E R report.

5.5 What mechanisms have been established to monitor and evaluate the impact o f the project on the environment’? Do the indicators reflect the objectives and results of the EMP?

Mtigat ion measures prescribed in the E M P and PMMP are expected to fu l ly address al l human health and environmental impacts associated with implementation o f project activities. Although no significant environmental impacts have been identified for planned H C F construction and rehabilitation, provisions have been incorporated into the E M P to document potential environmental r isks and to apply appropriate mitigation measures during project implementation. Follow-up assistance to the GO1 w i l l include review of their intended implementation strategy and approach to ensure that environmental safeguards are properly applied throughout. Ongoing technical feedback w i l l also be provided under the HWS project to ensure compliance with applicable environmental safeguards relating to planned H C F c iv i l works. Gap analysis o f existing guidelines and training materials for the malaria and dengue vector control programs revealed no concerns pertaining to project implementation. Adoption o f minor recommended revisions contained in the PMMP w i l l provide additional assurances that human health and environmental concerns relating to these programs are fully addressed. Satisfactory implementation o f a l l recommended safeguards w i l l be evaluated both at H W S project mid-term review and final evaluation.

6. Social: 6.1 Summarize key social issues relevant to the project objectives, and specify the project’s social development outcomes.

A Stakeholder Analysis identified the roles and responsibilities o f various consumer protection and community-based organizations, and existing health professional associations in health facilities management, curriculum development, self-regulation, peer-review, licensing, accreditation and sanctioning. A Study on Health Care Seelung Behavior was undertaken to identify community health-care seeking behavior, including the minoritiedethnic group in the project province areas, and identify basic health status indicators, which would be used to effectively design and target project activities and provide a basis to monitor and evaluate project impact. Additional social analysis was conducted by social development specialists f rom the World Bank Country Office, Jakarta, as well by a

Extensive consultations were sought in undertaking the ER to delineate potential environmental

Project preparation included a social assessment encompassing a wide variety o f social analysis.

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social development consultant. All documents related to the project’s social analysis are located in the project file. See Annex 12 for the Isolated Vulnerable Peoples Development Strategy. Key social issues related to the project objectives are decentralization, inequalities in access to health services, and quality o f health services.

Decentralization

The decentralization o f primary responsibility for the delivery of public health care f rom the central government to the districts has lead to profound changes in the way that these services are financed, planned and delivered. While decentralization presents an opportunity for government to become more accountable and responsible to local needs, many provincial and district level agencies lack the technical, managerial, and financial capacity to plan and manage health services. Without additional assistance in improving local capacity there i s the potential for degradation in health services and consequent reduced health status o f the population. Decentralization, if implemented properly, can improve the delivery o f services by bringing decision making closer to local communities, and by reducing the “leakage” o f government funds through corruption. I t i s expected that there w i l l be a greater role for consumers in health policy making, planning, and system management through the participation o f consumer organizations and other stakeholders in District Health Councils, Joint Health Councils, and Technical Review Teams, the latter two being provincial level organizations.

Access to Health Services

Despite many years o f investment in primary health care, large variations in access to health services between r ich and poor s t i l l exist, particularly with respect to Isolated and Vulnerable Peoples (IVP). Lack o f access to health services, inequitable distribution o f health care subsidies, and under-utilization o f public health care services all increase the burden o f disease on the poor. Government resources are not adequately targeted to the disadvantaged and poor.

During the field visits conducted as part o f the social review, NGO respondents and members o f the IVP communities reported that the principle barriers to accessing health services include the cost o f the service and geographic isolation. This i s compounded b y the perception among many o f poor service received at the local health care centers. A common issue voiced b y most o f the NGOs and community members consulted during this research was the cost associated with accessing government health services. Services that are supposedly offered for free to the poor are often subject to “informal” fees and charges, both for service and for medicine. Remote communities have difficulties in recruiting and retaining health care workers such as midwives (bidan), often the only source o f modem health care in isolated villages. Many government-trained midwives are reluctant to remain in isolated areas without family or other social connections, and receive inadequate compensation for remote posting.

Quality of Health Services

Many o f the stakeholders consulted during the social review reported a lack o f confidence in the quality o f care provided by the public health care system. Many indicated a preference for traditional methods (e.g., herbal remedies, spiritual ceremonies) over those offered by modem health care services, depending on the nature o f the illness. Typically the concerns about quality o f service focused on health centers. Issues include a lack o f staff, absence o f supplies and medicine, and ineffective treatment. Evidence suggests that often health center staff are engaged in some form o f private practice and place a low priority on providing health care to the poor. As a result, users often resort to the use of traditional medicine or private practitioners, if funding i s available. Contributing to the lack o f t rust in government

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health services i s the treatment of traditional methods by government officials. Often government health care workers frown upon the use o f traditional methods and i t s effectiveness i s dismissed. I t was also observed that government midwives, usually young women, do not have the confidence of pregnant women in traditional villages, who are more likely to place their trust in older, traditional midwives or healers.

The principle social development outcomes that w i l l be achieved by the project include the improvement o f health outcomes o f the poor, including communities o f IVP, and the development o f bottom up health planning mechanisms. This w i l l alleviate existing social tensions resulting f rom inequities in the health status and access to health services across economic groups. Health services w i l l be specifically tailored to the needs and goals o f local communities and these communities w i l l become empowered to participate effectively in health services planning. Through representation o f stakeholders including I V P and women's organizations on the DHC, JHC and TRC, i t i s expected that the interests o f IVP and women w i l l be integrated into overall health services planning and delivery.

The social r isks associated with this project stem from the potential for inadequate implementation o f the project leading to a further reduction o f confidence in the health care system among the poor. I f issues related to I V P communities and outcomes for women are not specifically addressed in the context o f project activities, the project could potentially increase existing inequalities o f access and outcome.

6.2 Participatory Approach: How are key stakeholders participating in the project'?

(ii) medical faculties and medical students; (iii) Indonesia Medical Association: and (iv) residents in project districts. Provincial Project Implementation Plans (PIPS) have been drafted by district and provincial authorities in consultation with health personnel and local communities in their respective areas. Isolated vulnerable peoples have been included in project planning and in consultations related to PIPS. Faculty in medical schools, IMA and students w i l l be involved in the review and upgrading o f curricula and pedagogy through workshops and focus group meetings. Table 6.2.1 summarizes the stakeholder groups identified through the course o f the social assessment work and their participation in the project.

In general, key stakeholders o f the project include: (i) district and provincial health personnel;

A stakeholder analysis was conducted to support the preparation o f the project. The objectives o f the analysis included the identification o f relevant stakeholders as well as their respective roles and responsibilities. Discussions were held with central, provincial, district, and village-level health and planning officials in Jakarta, West Kalimantan, East Kalimantan, Jambi, and West Sumatera. In addition to government officials, meetings were conducted with professional organizations including central and provincial midwife associations, nursing associations, associations o f environmental health experts, educational and training associations and institutes, and academic institutions. This information was supplemented b y consultations with community organizations involved in nutrition and health, reproductive health and consumer associations. The consultation wi th stakeholders included individual interviews and workshops.

A baseline survey o f health seeking behavior was also conducted to determine patterns o f health seeking behavior, willingness to pay, accessibility o f health insurance, and perceptions o f health services among people in the target provinces. Surveys were conducted o f families randomly selected among at least three districts in each province. Moreover, a household survey was conducted o f health status and health services among selected ethnic groups in the target provinces. Interviews and focus groups were conducted with households, health providers, and community leaders. Ethnic groups participating in the survey included Dayaks, Mentawaians, and the Kubu in East Kalimantan, West Sumatera, and Jambi,

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respectively. The study provided an overview o f health issues for the selected communities.

Stakeholder Group

An assessment was conducted o f components o f the Indonesian health workforce. The team consulted with stakeholders at: MOH and at its Board for Development and Empowerment o f Human Health Resources, MONE, IMA, the Consortium o f Health Sciences, the Midwifery and Nursing Associations, and the Ministry of State Apparatus Efficiency and the Civ i l Service Administration Board. Other stakeholders consulted included Parliamentary Commission VII and Province and District officials in Jambi. The assessment concentrated on five key stakeholder groups: (i) at MOH, the Board for Development and Empowerment for Human Health Resources; (ii) at MONE, the Director General o f Higher Education; (iii) for the medical profession, IMA and the erstwhile Consortium for Health Sciences; (iv) the Indonesia Midwifery Association; and (v) the Indonesia Nursing Association.

Roles I Involvement: Involvement: Key Issues Planning Implementation

Project preparation included an appraisal o f the professional tasks performed by physicians and their adequacy to health and health care needs o f the population, as well as evaluate the present training programs. Project preparation also included the following: (a) in West Sumatera, meetings with the Dean, Senate and staff o f the Faculty o f Medicine o f Andalas University, and observations o f University students in classrooms, labs and group discussions. Focus groups were held with heads o f department, lecturers, and students; and (b) in East Kalimantan, meetings with the Provincial Health Department and the Dean o f the Faculty o f Medicine o f Mulawarman University. Interviews and discussions were held with physicians, nurses, and midwives.

NGOs: Consumers (YPKKI, etc.) NGOs: IVP, environmental, other Religious organizations

Table 6.2.1: Project Stakeholders

Represent interests of health care consumers. Represent interests of IVP and can provide data about IVP communities. Community leadership. Often providers of health care.

Represents physicians and nurses. Concerned with improving professionalism, education and

Community Residents in target I Principal beneficiaries of project.

Participated in project planning. o f project.

Wi l l implement key components

districts

Isolated Vulnerable People (IVP)

Desire improvement in health services and health. Subset of local residents requiring specific measures to ensure they receive project benefits.

Women Potential gender based disparities in health outcomes and as key providers of health care in the home.

Indonesian Medical Association

Consultations conducted among selected residents in each of the four urovinces. Representatives of selected IVP communities have been included in project planning.

Women have been consulted during project planning.

Consulted during project planning. Consulted during project planning.

Not explicitly involved in planning but some of their issues identified through NGOs.

Health consumers will be represented in DHC, JHC and TRT . IVP representatives will participate in project implementation through DHC, JHC and TRT. Health outcomes of IVP will be tracked. The participation of women in DHC, JHC and TRT will be promoted. Gender specific health outcomes will be tracked. Participant in DHC and JHC.

Participant in DHC and JHC, and potentially other monitoring and evaluation activities. Participant in DHC and JHC, and potentially other monitoring and evaluation activities.

-31 -

delivery o f health services. Develop health workforce policy.

Indonesian Represent midwives and nurses. Consulted and participated Midwives Concerned with improving during Stakeholder Analysis Association and professionalism, education and and project planning. Indonesian Nurses Association Indonesian Represents nutritionists. Consulted during project Nutritionist planning. Association Medical, Nursing, Deliver medical and other health Participated in project and other Health related education in universities and planning. Faculties polytechnics. Village midwives

delivery o f health services.

Important provider o f health care in poor or remote areas. Issues include

Consulted during project planning.

Wi l l be involved in project implementation.

Wi l l have ongoing input into project.

Wi l l participate in project implementation.

Representatives wil l have ongoing input into project

Attendants and Healers

Public Health

Hospital Doctors

care in remote and poor areas. Often consulted first before people seek modem medicine. Publicly funded providers o f Health

I compensation and isolation.

traditional medicine. sought, including capacity

planning. ongoing input into project implementation.

I implementation.

and Staff Private practitioners

Medical Students

Students in Related Health Professions

Government Ministry o f Health

Ministry o f National Education

Parliament - Commission VI1

Provincial and District Health Departments Provincial and District Parliaments

- 32 -

Private health care providers. Often Representatives wi l l have perceived as providing higher planning. ongoing input into and quality service than the public participate in project system. implementation. W i l l be affected by reforms in Representatives wil l have medical education. planning. ongoing input into project

implementation. Wi l l be affected by reforms in health Representatives wil l have education. planning. ongoing input into project

implementation.

Consulted during project

Consulted during project

Consulted during project

Central government Ministry. Must Project proponent. W i l l implement key components define roles and responsibilities in the context o f decentralization. Central government Ministry. Project proponent. Wi l l implement key components Responsible for health education and curricula. Responsible for oversight o f government activities related to planning. project implementation. health. Responsible for planning and Project proponent. Wi l l implement key components delivery health care system.

Responsible for legislation and oversight of provincial and district planning. project implementation. agencies.

of the project.

o f the project.

Wi l l have ongoing input into Consulted during project

o f the project.

Wi l l have ongoing input into Consulted during project

6.3 How does the project involve consultations or collaboration with NGOs or other civil society organizations?

involved in various aspects of project implementation. A number o f NGOs have been consulted as part o f the social analysis and w i l l continue to play a part in the development o f the project. NGOs w i l l be involved as an interface with local communities and w i l l participate in gathering stakeholder data, project planning, and monitoring.

Consumer organizations such as Y P K K I and the Indonesian Medical Association w i l l be directly

In addition to YPKKI, NGOs consulted during project planning include the following:

0 0

0 0

0 0

0

Aliansi Masyarakat Adat Kalimantan Timur, Samarinda Yayasan Rio Tinto, Bigung Baru, Kutai Barat, East Kalimantan Aliansi Masyarakat Adat Peduli Mentawai , Padang, West Sumatra Heifer International, Bukittingi, West Sumatra Care International, Samarinda, East Kalimantan The Nature Conservancy, Jakarta, Indonesia Center for International Forestry Research, Bogor, West Java

I t i s expected that these and other NGOs w i l l participate in the project in a range o f capacities f rom acting as sources o f data to participating directly in DHC, JHC and TRT.

6.4 What institutional arrangements have been provided to ensure the project achieves i t s social development outcomes'?

decentralization that w i l l result in: (a) new policy and regulatory mechanisms for increased consumer involvement in decision-making in project provinces; (b) new organizational structures for regional and client-centered health services management; and (c) access to and coverage o f essential public health and primary care services for the poor.

The project w i l l effect organization changes at the provincial and district levels in the context of

The DHC, JHC and TRT w i l l be designed to ensure the interests o f the poor and vulnerable groups, I V P and women in particular, are addressed in the planning of specific project activities. Further work w i l l be done in identifying specific mechanisms to ensure that IVPs and women are included in project benefits and that institutional barriers to health services are reduced or eliminated.

6.5 How wi l l the project monitor performance in terms o f social development outcomes'?

related to I V P and women have been integrated with other indicators in Annex 1. A range o f performance indicators are identified in Annex 1 o f the PAD. Specific indicators

Consistent with the promotion o f participatory planning inherent in the project objectives w i l l be the design o f a rigorous and transparent monitoring system that involves local communities and stakeholders. This w i l l ensure that an effective feedback mechanism exists to provide for ongoing improvement in project implementation. Project progress in achieving social development outcomes wi l l be described in the following reports: (a) semi annual project management report; (b) mid-term evaluation report; (c) final evaluation survey; and (d) final evaluation report.

Specific sections in these reports w i l l be dedicated to issues related to IVP and women, identifying issues specific to I V P and women in each district, where relevant, and identifying whether there are discrepancies in outcomes based on I V P characteristics or gender, and measures planned to address these discrepancies if they are identified. These evaluations w i l l also include reviews o f the

- 33 -

make-up of DHC, JHC and TRT to evaluate whether there include adequate stakeholder representation, including gender balance and, where relevant, I V P communities.

Pest Management (OP 4.09) Cultural Property (OPN 11.03) Indigenous Peoples (OD 4.20) Involuntary Resettlement (OPBP 4.12)

7. Safeguard Policies:

Yes 0 NO

0 Yes NO

Yes 0 NO

0 Yes NO

Safety of Dams (OP 4.37, BP 4.37) Projects in International Waters (OP 7.50, BP 7.50, GP 7.50) Projects in Disputed Areas (OP 7.60, BP 7.60, GP 7.60)*

0 Yes NO

0 Yes NO

0 Yes NO

7.2 Describe provisions made by the project to ensure compliance with applicable safeguard policies.

Management; and (c) Indigenous Peoples. The following Safeguard Policies apply to the project: (a) Environmental Assessment; (b) Pest

Environmental Assessment and Pest Management. See Section E.5 above, Annex 11, and the Integrated Safeguards Data Sheet for a detailed discussion.

Indigenous Peoples. See Section E.6 above, Annex 12 (Isolated Vulnerable Peoples Development Strategy), and the Integrated Safeguards Data Sheet for a detailed discussion.

Znvoluntaly Resettlement. The project includes the continued development of primary health care facilities b y financing rehabilitation and new construction. A health infrastructure development plan i s under development for Bank assistance. This plan w i l l ensure that the siting o f health facilities to be constructed or rehabilitated i s decided on sound criteria (such as accessibility, utilization rates, health needs, and proximity to private facilities). Supported infrastructure projects w i l l be small in scale and are expected to cause litt le or no significant adverse impacts. The government has given i t s reassurances to the World Bank that there w i l l not be any land acquisition or resettlement related to health facility renovation and construction. Both M O N E and M O H have formally sent letters to the Bank to this effect.

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F. Sustainability and Risks 1. Sustainability:

build-up and strengthening. At present, the health sector in Indonesia i s under-funded, and has been so for most o f the 1990s, despite some year-to-year variations. Average per capita outlays f rom public sources remain very low, with wide variations across provinces, and a bias in favor o f inpatient care, increasingly so since mid 1990s. In project provinces, local public health expenditures also vary widely, between a very low o f Rp 18,400 and a high o f Rp 230,000 per capita in 2002, or in percentage terms, between a low o f 2% and a high o f 11% o f local revenues, mostly averaging 5-6%, unacceptably low compared with the recommended 15% by MOH.

In the context of this project sustainability encompasses both financial viability and institutional

M

M

S

All four provinces and the 47 districts therein have been directly involved in project preparation, and have expressed their willingness to participate b y providing letters o f commitment f rom bupatis endorsed b y the DPRD leadership. They have agreed to increase health spending relative to overall district public spending. Therefore, this project, l ike i t s predecessors (PHP-I and PHP-11), w i l l sustain their health funding at adequate levels, and help them allocate their resources on the basis o f local health priorities and needs. Provinces and districts w i l l estimate their total funding from local revenues and central grants against their project targets for revenue mobilization. Project funds w i l l be used to complement existing resources, albeit for use in accordance with the regional priorities and annual plans as approved b y DHCs. World Bank funding w i l l gradually decrease over project span with concurrent increase in district allocations with the outlay reaching 15% o f total district budget -- except in East Kalimantan where the proportion w i l l be 8%, or Rp 51,000 per capita in 2002 prices.

Short term: training o f district health managers in human resources: hiring o f local graduates; Longer term: improved quality in medical education and vocational training for the allied health personnel. Review and piloting o f incentive mechanisms: adjustments on the basis o f workload, location, responsibilities; bonus mechanisms; Introduction o f district based planning and priority setting tools for informed decision mahng; setting up DHCs and JHCs; establishing a package o f essential services and

In terms o f institutional build-up and strengthening, decentralization provides a unique opportunity for increased transparency and pluralism in priority setting, planning and resource allocation. The project w i l l assist district and provinces in particular, but also M O H and MONE, as well as IMA, to review their roles and responsibilities and set up institutional mechanisms at a l l levels o f govemance. Key innovations include the establishment and composition o f DHCs, JHCs and IACC for pluralistic health services management including all key stakeholders (consumers, professionals, managers, district authorities, women organizations, NGOs, etc.), and improved coordination across the three levels o f govemance. These new institutions are expected to have a l i fe o f their own beyond the end o f the project . 2. Critical Risks (reflecting the failure of critical assumptions found in the fourth column o f Annex 1):

Risk From Outputs to Objective Decentralized planning and management w i l l further complicate recruitment, deployment and retention o f skillful staff and result in large variations in terms o f sk i l ls mix. An improved health workforce may not result in higher quality o f care.

Increased local autonomy over resource allocation may distort inter and intra sectoral resource allocation towards revenue-generating sectors and curative

RiskRating I Risk Mitigation Measure

- 35 -

care, respectively. There i s no agreement on respective roles and responsibilities pertaining to health workforce policy issues across the three levels o f the health system.

The new institutional and financial mechanisms set up at sub-national levels may not function as expected in terms o f priority setting and community involvement because of lack o f expertise, transparency, and pluralism. M O N E may prove reluctant to collaborate with MOH, Provincial health authorities, IMA and local universities in health human resources planning and development. IMA may prove reluctant to cooperate with MONE and M O H in regulating licensing, certification, registration o f practitioners and accreditation o f health facilities.

defining explicit eligibility criteria for the poor. Province-wide JHCs and TRTs wi l l be set up to agree on those health care functions which are best managed and delivered at the provincial level for economies o f scale and critical mass. Assistance from M O H and the BDEHHR through IACC w i l l be secured. Setting up DHCs, JHCs and TRTs and. agreement on their TOR w i l l be a condition for effectiveness. Annual plans w i l l be subject to Bank review and no-objection.

M O N E w i l l be represented at the IACC. M O N E M O H has jointly set up a new Collegium to replace the disbanded CHS, and broadened i t s base to include a l l stakeholders including IMA. M A w i l l be represented at the IACC ,and w i l l receive financial support through MOH. I t w i l l have responsibility for coordinating the pilot project on family medicine. The new Collegium which replaced the CHS includes representation f rom MOH, MONE and IMA. Finally, the passage o f the bill on the establishment o f the Medical Council w i l l clarify I M A ' s area o f influence. Direct project support to the BDEHHR. Establishment o f TRC and I A C C for project oversight and technical support. Criteria w i l l be set for the preparation o f district funding proposals; a l l proposals w i l l be reviewed by TRTs and JHCs and be subject to Bank review and no objection.

MOH may not show leadership in health workforce issues, or may prove reluctant to assist provinces and districts. Districts may be tempted to allocate project funds to other non cost-effective or nonessential activities and services.

From Components to Outputs APBD wi l l not be released in a timely manner. Districts w i l l not be able to gradually increase the share o f health expenditures.

S

S

M District health professionals w i l l be reticent to change their behavior and practice in line with the new institutional

Risk Rating - H (High Risk), S (Substantial Ris

Transfer o f funds from provinces to districts w i l l be contingent on release o f APBD. Allocation o f district funds w i l l be contingent on gradual annual increase in the share o f health expenditures, relative to total district expenditures. Training and adoption o f financial and nonfinancial incentive mechanisms.

S

S

M

M

M

S

I

I

M I

M (Modest Risk), N(Negligib1e or Low Risk)

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3. Possible Controversial Aspects:

None expected.

G. Main Loan/CreditConditions 1. Effectiveness Condition

0

0

The Final Project Management Manual and District Funding Allocation Manual for the implementation of the project, acceptable to the Bank, have been issued. Budget proposals have been prepared and formally submitted to the Ministry o f Finance b y each of MOH and MOM, each Participating Province and each District within, for a l l Project activities to be carried out in Fiscal year 2004.

2. Other [classify according to covenant types used in the Legal Agreements.]

Accounting/A udits

0 The Borrower shall: (i) provide the Bank with annual financial audits conducted by an independent auditor and based on a TOR acceptable to the Bank; (ii) make publicly available the annual audit report o f the project; and (iii) conduct interim (semi-annual) audits o f implementation o f District Fund Allocations by an auditor and based on a TOR acceptable to the Bank.

Flow and Use of Project Funds

0 The Borrower shall, for the purposes o f Component A o f the Project, adopt, and thereafter cause each PCIU, TRT, JHC, D H C and DIU, to apply, a District Funding Allocation Manual, acceptable to the Bank (which manual the Borrower shall not amend, delete, suspend or waive the whole or any part thereof without the prior approval o f the Bank). The Borrower shall ensure that (a) by no later than September 30,2003 and each September 30 thereafter, each District shall have prepared in accordance with, and meeting the requirements of, the District Funding Allocation Manual, and submitted to the JHC o f each o f East Kalimantan, West Kalimantan, Jambi, or West Sumatera, for i t s evaluation: (i) a four-year health improvement framework program for such District covering the four fiscal years for such District following such date, and (ii) a one year detailed health services plan proposal for the fiscal year following such date, which plan shall include, without limitation, a procurement implementation plan in respect thereof; (b) by no later than October 3 1, 2003 and each October 3 1 year thereafter, each JHC shall have: (i) determined, on the basis o f a technical assessment provided b y the TRT for the relevant Project Province and pursuant to the procedures and the criteria set out in, and the requirements of, the District Funding Allocation Manual, which District health services plan proposals submitted in accordance with the agreed provisions and as may have been revised in accordance with the procedures o f the District Funding Allocation Manual, are appropriate for financing with the proceeds o f a District Health Funding Allocation; and (ii) submitted to the Bank for i t s review and approval such selected plans; and (c) promptly after such review, each JHC takes, in accordance with the provisions o f the District Funding Allocation Manual, a l l appropriate steps to award District Health Funding Allocations for those selected plans as have been approved by the Bank. Without limitation upon the requirements o f the District Funding Allocation Manual, a District health services plan proposal shall only be eligible for financing out o f the proceeds o f a District Health Funding Allocation: (i) where such plan proposal i s determined b y the Borrower, on the

0

- 37 -

basis o f guidelines acceptable to the Bank, to be technically feasible and cost effective, and to have been designed on the basis o f appropriate health indicators and priorities; (ii) for which plan proposal (A) an analysis o f i t s environmental effects has been prepared and (B) where applicable, an environmental impact assessment, satisfactory to the Bank, has been undertaken and mitigation measures designed, on the basis o f environmental standards acceptable to the Bank, in each case in accordance with the Environmental Management Plan; (iii) for which plan proposal the Borrower has confirmed that the Pesticide Management and Monitoring Plan w i l l be applied with respect to the handling and disposal o f any chemical insecticides to be acquired under such plan proposal; (iv) for which plan proposal, the Borrower has confirmed that the Isolated Vulnerable Peoples Development Strategy has been, and w i l l continue to be, applied with respect to Isolated Vulnerable People, if any, so as to ensure that the benefits to be received under such plan proposal are in harmony with their economic, social and cultural preferences; (v) for which plan proposal the Borrower has confirmed that no acquisition of land or assets, and n o displacement of any person, are contemplated under such plan proposal, or w i l l occur during the carrying out thereof; and (vi) where such plan proposal has been reviewed and approved by the Bank. Withdrawal o f proceeds o f the Loadcredi t shall only be made on the basis o f Financial Monitoring Report satisfactory to the Bank. The first Financial Monitoring Report shall be furnished to the Bank not later than 45 days after the end o f the f i r s t calendar quarter after the Effective Date, and shall cover the period f rom the incurrence of the f i rs t expenditure under the Project through the end o f such first calendar quarter; thereafter, each Financial Monitoring Report shall be furnished to the Association not later than 45 days after each subsequent calendar quarter, and shall cover such calendar quarter.

Project Management

The Borrower shall maintain, or cause to be maintained, as the case may be, until completion o f the Project, the following entitiedunits, each with terms o f reference acceptable to the Bank: (a) the Inter Agency Coordinating Committee and the Technical Review Committee; (b) the CPCU-MOH and the CPCU-MONE; (c) the PCIU, the JHC, and the TRT in each Project Province, which in each case shall report directly to the govemor o f said province; and (d) the D H C and the DIU within each District, each o f which shall report directly to the Bupati or the Walikota thereof, as the case may be. The Borrower shall also provide, or cause to be provided, as the case may be, each such unit referred to above at a l l times with adequate funds and other resources, and with qualified and experienced personnel in adequate numbers, acceptable to the Bank, and in al l cases as shall be necessary to accomplish i t s terms o f reference and objectives. The Borrower, through MOH, shall adopt and thereafter cause the CPCU-MOH, the CPCU-MONE and each PCIU and DlU to apply, a Project Management Manual acceptable to the Bank in the carrying out o f the Project or their respective responsibilities therefore, as the case may be. Such Project Management Manual shall include the description of, inter alia: (i) procurement procedures, including procedures for the public disclosure o f information concerning the procurement process; (ii) standard procurement documentation: (iii) reporting requirements, financial management procedures and audit procedures; and (iv) the Project Performance Indicators. Except as the Bank may otherwise agree, the Borrower shall not amend, abrogate or waive the Project Management Manual.

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Environmental Covenants (see also Flow and Use of Project Funds section above)

The Borrower shall carry out the project in accordance with the measures required under the Environmental Management Plan and Pesticide Management and Monitoring Plan, which shall be integral parts o f the DFAM.

Indigenous and Vulnerable Peoples (see also Flow and Use of Project Funds section above)

0 The Borrower shall carry out the project in accordance with the measures required under the Isolated Vulnerable Peoples Development Strategy, which shall be an integral part o f the DFAM.

Monitoring, Review and Reporting

The Borrower shall:

maintain policies and procedures adequate to enable i t to monitor and evaluate on an ongoing basis, and in accordance with the agreed performance indicators and with the PMM, the carrying out o f the project. (a) prepare, under TOR satisfactory to the Bank, and furnish to the Bank, by March 31 and September 30 of each year, commencing March 31,2004, and until completion o f the Project, a semi-annual report integrating the results o f the monitoring and evaluation activities performed on the progress achieved in the carrying out o f the Project during the preceding six months and setting out the measures recommended to ensure the efficient carrying out of the Project and the achievement o f the objectives thereof during the six months following such date, which measures shall include (i) in each report due by September 1 in any year, a detailed procurement plan for carrying out the Project during the next fiscal year following the date o f such report, and (ii) in each report due by March 1 in any year, an update of the detailed procurement plan for the fiscal year in which such month falls. by June 30, 2006 prepare, under TOR satisfactory to the Bank and furnish to the Bank, and make publicly available, a mid-term report integrating the results of the monitoring and evaluation activities performed on the progress achieved in carrying out the Project during the period preceding the date o f said report and setting out the measures recommended to ensure the efficient carrying out o f the Project and the achievement o f the objectives thereof during the remainder of the Project. cause to be prepared, on the basis o f TOR acceptable to the Bank, and furnish to the Bank by not later than the closing date (December 31,2008) an external evaluation report o f the project; and for the purposes o f preparing the external evaluation report, b y no later than three months prior to the closing date (September 30,2008), cause to be carried out an external evaluation survey o f the impacts o f the Project, under TOR acceptable to the Bank. prepare, on the basis o f guidelines acceptable to the Bank, and furnish to the Bank not later than six months after the Closing Date or such later date as may be agreed for this purpose between the Borrower and the Bank, a plan designed to ensure the continued achievement o f the Project’s objectives. prepare and submit to the Bank, in form and substance satisfactory to the Bank, a financial monitoring report that details sources and uses o f funds for the project, describes physical progress in project implementation, and details the status o f procurement under the project. The first financial monitoring report shall be furnished to the Bank not later than forty-five (45) days after the end o f the first calendar quarter after the Effective Date; thereafter, each financial monitoring report shall be furnished to the Bank not later than 45 days after each subsequent

- 39 -

calendar quarter, and shall cover such calendar quarter.

Project Implementation

0 The Borrower shall (a) by no later than October 31, 2003, prepare and review with the Bank a time-bound action plan and terms o f reference for all study tours, training and workshops to take place under Components B and C, respectively, of the Project, and (b) promptly after said reviews, take all measures required to carry out said action plan as such may have been modified as a consequence o f said review; provided, however, that only expenditures for such study tours. training programs and workshops the terms of reference for which have been approved by the Bank shall be deemed Eligible Expenditures.

H. Readiness for Implementation c? I. a) The engineering design documents for the f irst year's activities are complete and ready for the

1. b) Not applicable. start o f project implementation.

H 2. The procurement documents for the first year's activities are complete and ready for the start of

3. The Project Implementation Plan has been appraised and found to be realistic and o f satisfactory project implementation.

quality. c! 4. The following items are lacking and are discussed under loan conditions (Section G):

I. Compliance with Bank Policies 1. This project complies with al l applicable Bank policies.

0 2. The following exceptions to Bank policies are recommended for approval. The project complies with a l l other applicable Bank policies.

Enis Baris Edmanudf Y. Jimenez Team Leader Sector Director Country Director

- 4 0 -

Annex 1 : Project Design Summary INDONESIA: Health Workforce and Services

Sector-related CAS Goal: Promote broad-based growth ind income generation.

Support decentralization o f mblic sector services and the nvolvement o f the private iector in health care delivery.

:ontribute to improved health itatus o f the population.

ector Indicators: Increase in the financial contributions of central and local governments to health services.

Changes in roles, responsibilities, and accountability are adopted nationally for implementation o f health policy through legislation and decrees. Regulatory and administrative arrangements are clearly established for health sector. Increased commitment within MOH and MONE to assume a consultative or advisory role to provinces and districts on matters o f health workforce.

Health Indicators: IMR; USMR, MMR. Health Services Indicators: Percentage of immunization coverage disaggregated by IVP and gender; Percentage o f pregnant women using antenatal care; Percentage o f deliveries attended by a trained health professional. Poverty/Equity Indicator: Increased access to preventive and essential health services by the lowest income groups, including IVPs and gender.

3ata Collection Strategy

ectorl country reports: PERs and annual statistical reports.

Legislative, regulatory and administrative texts. Reports from project monitoring, mid-term review and research activities.

Primary Data: baseline and community and household survey data, needs assessment studies, user knowledge, attitude and practicehehavior studies, including separate studies for IVPs. Secondary Data: reports from project monitoringlsupervision; public expenditure reviews, institutional assessments, etc.

Political stability i s maintained. Current macro-economic policies are implemented and economic performance improves. Funds allocated to the sector are consistent, sufficient and predictably disbursed.

Political commitment i s maintained for the application of directives on decentralization. Key internavexternal stakeholders support decentralization of decisionmaking for health system organization. Bringing decision making in health care closer to where the services are delivered improves transparency, community involvement, priority setting, thus effectiveness and allocative efficiency.

Improved access to quality health care improves health status and productivity, thus leading to poverty alleviation. Access to quality public heath and essential curative care improves health status o f the poor. Reduction in disparities in health care outcomes and access between vulnerable groups and the general population.

-41 -

r Hierarchy of Objectives Project Development Objective: Support health sector decentralization in four provinces for sustainable financing and client-centered

I

Specific Objectives:

1. Improve financing and delivery o f essential health services in the provinces o f Jambi, East Kalimantan, West Kalimantan, and West Sumatera to enhance access to care, quality o f care and health outcomes at the district level.

i 1

htcome I Impact ndicators:

Organizational structure, financing and delivery mechanisms at the provincial and district levels changed.

1.1. Preparation and use o f a 3ealth Development Master ?lan for all capital investment n human, financial and 3hysical resources.

1.2. Design and Lmplementation of new xovincial and district level institutional mechanisms :District Health Councils, loint Health Councils, Technical Review Teams) for increased pluralism, 3articularly with respect to NGO and other civil society xganizations, and client involvement in policy making, planning and system management.

1.3. Design and implementation of financial mechanisms (block funding) for increased efficiency in resource allocation.

lata Collection Strategy - - Eject reports:

Reports from baseline, mid-term review, ex-post evaluation and research activities. Project monitoring, supervision and completion reports,

Project reports, Govemment health statistics.

Critical Assumptions 'om Objective to Goal)

There i s political commitment to decentralization at all levels. Introduction o f new modes o f institutional and financial structures and mechanisms at sub-national levels promotes pluralism and community involvement in health services management and thus increases effectiveness and efficiency in service delivery through improved access to and quality of care. Introduction of new modes o f institutional and financial structures and mechanisms at sub-national levels increases the poor's access to essential services through more rational priority settini and community involvement.

Sustainable financing and improved service delivery increase access, especially for the poor.

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2. Strengthen health workforce policy, management and development in a decentralized context in order to improve allocational Efficiencies and equity in the distribution and use o f health resources in the districts.

3. Empower MOH, MONE and IMA, the three key stakeholders in the sector.

2.1. New standards for licensing, certification, and -egistration o f health xofessionals and accreditation i f health facilities.

2.2. Adopted policies to Lncrease productivity, Jerformance and motivation.

3.1. Redefined roles and responsibilities vis-a-vis health workforce policy, planning and management.

3.2. Increased institutional capacity for effective stewardship in fulfilling the functions o f policy making, legislation, regulation, quality assurancelcontrol and technical assistance to provinces and districts.

Project reports.

Progress reports.

Improvement in the health workforce management and deployment increases access and leads to better quality and appropriate public health and curative services.

Increased coordination amongst MOH, MONE and IMA allows the center, provinces and districts more flexibility in identifying their workforce needs and in finding mechanisms to hire, retain and compensate adequately their health staff.

- 4 3 -

htput from each :omponent: Zomponent A. District lealth Offices and Health 'acilities

1.1. Imtxoved access to and palitv o f health services

1.2. Project management

Jomponent B. Provincial lealth Offices and Health racilities

I. 1. Health workforce evelopment

Output Indicators:

A. 1.1. Physiciadpopulation ratio. A.1.2. Physicidnurse ratio. A.1.3. Household health expenditures (absolute and relative to household income) reduced from x% to y%. A. 1.4. Perceived quality o f care by service users. A.1.5. User fees (amounts, applicability, implementation and exclusion criteria). A.1.6. Household health expenditures per income quintiles. A.1.7. Development and implementation of a system hierarchy, and referral arrangements for comprehensive, continuous family-based medicine. A.1.8. Percentage o f providers satisfied with reformed health care system.

A.2.1. Formative monitoring and supervision and technical assistance. A.2.2. Good procurement and financial management practiced. A.2.3. Timely delivery o f project reports.

B.l.l. Definition o f roles and responsibilities o f health personnel through adoption o f minimum service standards and standard operating procedures.

Data Collection Strategy - 'reject reports:

0 Household surveys, baseline, mid-term and ex-post.

0 Project progress, management and supervision reports.

0 Surveys targeted to IVP communities and disaggregated by gender.

0 District level progress, management, disbursement and financial management reports, post-reviews and audits.

0 Project progress, management and supervision reports. Satisfaction surveys o f medical and public health faculty and students.

Critical Assumptions - - from Outputs to Objective)

0 Decentralized planning and management bring about improved health workforce in terms o f numbers, distribution and sk i l ls mix in accordance with local health care needs.

workforce produces more services of higher quality.

0 Increased local autonomy over resource allocation benefits the poor through better priority setting and understanding of local circumstances, and thus defining the benefit package and eligibility criteria.

0 New institutional mechanisms and organizational procedures and tools set up by district level government and health authorities are effective in improving health system management and service delivery.

0 An improved health

0 New institutional mechanisms and organizational procedures and tools set up by provincial level government and health authorities are effective in improving health system management and public health services.

- 44 -

3.2. Health system :oordination. planning and nanagement

3.3. Project management

2omponent C. Central Level

:. 1. Effective health system ,teWardship (Mom

:. 1.1. Strengthened capacity or health workforce policy md planning.

l1.2. Managing lecentralization.

B. 1.2. Preparation o f a manpower development plan comprising demand and supply factors, productivity factors, and local health priorities. B .I .3. Improved quality o f in-service training.

B .2.1. Development and implementation of province-wide public health programs. B.2.2. Design and implementation of a province-wide management information and public health surveillance system. B.2.3. Design and implementation of public accountability/protection organdmechanisms.

B.3.1. Formative monitoring and supervision and technical assistance. B.3.2. Good procurement and financial management practiced. B.3.3. Timely delivery of project reports.

C. 1.1.1. Preparation o f a medium- and long-term humar resource policy and strategy document. C. 1.1.2. MENPAN civil service reforms implemented at the Board for Development and Empowerment of HHR.

(2.1.2.1. Leadership in public health and communicable disease control, regarding policy, planning, coordination with provinces, TA, and information sharing. C.1.2.2. Legislation empowering all health

0 Household surveys, baseline, mid-term and ex-post.

0 Project progress, management and supervision reports.

Provincial level progress, management, disbursement and financial management reports, post-reviews and audits.

0 Project progress reports, project management reports, and project disbursement reports and audits.

0 Agreement on the respective roles and responsibilities pertaining to health workforce management and training issues across all three levels of health systems.

0 Agreement on the respective roles and responsibilities pertaining to health workforce polic! issues across all three levels o f health system.

0 Commitment by M O H to strengthen provincial health care management and public health units.

0 Commitment by M O H to assume a stewardship and advisory role instead o f top down and technocratil mode of system management.

0 Commitment across central agencies to collaborate together and with provincial health authorities, I M A and loca universities in health

- 4 5 -

:.1.3. Strengthened nstitutional capacity o f IMA.

:. 1.4, Project management.

!.2. Enhancing the clualitv of iedical education (MONE)

1.2.1. Strengthened istitutional capacity.

.2.2. Improved quality o f mnal medical education.

professions implemented.

C.1.3.1. Reformed organizational structure. C.1.3.2. Increased membership base. C.1.3.3. Expansion to project provinces with local chapters. C.1.3.4. Institutional structure and instruments for a national medical examination and certification for formal, graduate and continuing medical education. ‘2.1.3.5. Establishment o f the National Standard o f Medical Practices and the National Medical Audit Joint Committee, at central, provincial, and district levels.

E. 1.4.1. Formative monitoring md supervision and TA. 2.1.4.2. Good procurement md financial management ?racticed. 2.1.4.3. Timely delivery o f Jroject reports.

3.2.1.1. Establishment o f an ndependent medical :ducation committee. 3.2.1.2. Strengthened capacity If the Collegium for ‘ndonesian Medical Doctors in :urriculum development. 3.2.1.3. Establishment o f dearly defined roles and ,esponsibilities, including ines o f accountability in natters o f medical education, icensing and accreditation.

J.2.2.1. Degree o f adequacy jetween the expected s k i l l mix .nd the content and pedagogy if undergraduate and graduate raining. :.2.2.2. Standardization o f the valuation o f students’ lerformance. :.2.2.3. Medical student

Project progress reports, project management reports, and project disbursement reports and audits.

Report by an independent accreditation committee.

0 National competency-based evaluation.

faculties.

faculties.

0 Annual reports by medica

e Annual reports by medica

human resources planning and development.

0 Commitment across central agencies to collaborate together on all matters relevant to physicians, from formal education and training, to their rights, responsibilities, deployment, public protection and grievances.

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:.2.3. Enhanced learning and eaching environment in mder-graduate and )est-graduate medical ducation and training.

:.2.4. Project management.

drop-out rate. C.2.2.4. Medical student graduation rate. C.2.2.5. Studentlfaculty ratio. C.2.2.6. Proportion of medical students in Mulawarman and Andalas Universities surveyed as satisfied with the curriculum and education provided i s at least 80%. C.2.2.7. Percentage o f new graduates licensed. C.2.2.8. Percentage o f faculty satisfied with the new curricula pedagogy and teaching environment.

C.2.3.1. Improved availability of library facilities. C.2.3.2. Improved access to library and laboratories. C.2.3.3. Number o f students per class, tutor, laboratory bench, microscopes, etc.

C.2.4.1. Formative monitoring and supervision and technical assistance. C.2.4.2. Good procurement and financial management practiced. C.2.4.3. Timely delivery of project reports.

0 Annual reports by medical

0 Student surveys. 0 Annual reports from

0 Faculty survey.

faculties.

DHOs.

0 Student surveys.

e Facility surveys.

e Project progress reports, project management reports, and project disbursement reports and audits.

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Hierarchy of Objectives Voject Components / Sub-components: L. District Health Offices md Health Facilities

i. 1. Imuroved access to and lualitv of health services

i.2. Proiect management

1. Provincial Health Offices ind Health Facilities

1 . 1 . Health workforce levelopment

1.2. Health svstem oordination. ulanning and nanagement

1.3. Proiect management

:. Central Level

:. 1. Effective health system tewardshiu (MOW

Key Performance Indicators -

nputs: (budget for each :omponent) JS$374.67 million

JS$22.93 million

JS$3.91 million

JS$2.12 million

JS$11.34 million

Data Collection Strategy - - koject reports:

0 Project supervision and progress reports, financial and technical audits.

0 Project supervision and progress reports, financial and technical audits.

0 Project supervision and progress reports, financial and technical audits.

0 Project supervision and progress reports, financial and technical audits.

Critical Assumptions from Components to

0 APBD wil l be released in a timely manner.

0 Districts wil l gradually increase the share o f health expenditures relative to total district expenditures.

professionals wil l adapt their behavior and practice in line with the new institutional set-up.

recognize and use health services of improved quality.

Iutputs)

District health

0 Communities wil l

0 Appointment o f qualified and motivated staff with the right incentives, power and accountability.

e Local higher medical and public health education institutions wi l l use project investment to upgrade their facilities capability.

0 Provinces wil l seize the opportunity to strengthen their managerial capacity and increase their funding base for improved service delivery and quality.

0 Appointment o f qualified and motivated staff with the right incentives, power and accountability.

0 M O H wil l support decentralization and assisl provinces and districts while assuming an advisory role. IMA i s committed to the betterment of physicians' professional practice environment and living standards, and to safeguard their prestige

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3.2. Enhancing the aualitv o f nedical education (MONE)

JS$14.39 million

and credibility as well as the welfare of the general public.

MONE i s committed to improving the quality o f medical education in Indonesia, and wil l collaborate with MOH, provincial health authorities, I M A and local universities towards this end,

- 4 9 -

Attachment 1

Key Performance Indicators (+)

Key Performance Indicators

Baseline Goal Timeline

In conformity with the Millennium Development Goals (MDGs) and the government's targets, listed below are five key performance indicators that are being proposed to monitor and evaluate the health impact o f the project.

, _* .

Under Five Mortality Rate (USMR) [per 1,000 live births] Maternal Mortality Ratio (MMR) [per 100,000 live births] Proportion o f births attended by slulled health personnel HIV prevalence among women o f 15-24 years of age

52'" 450** 43*** ?****

35 by end 2008 225 by end 2008 72 by end 2008 ? by end 2008

I Infant Mortalitv Rate (IMR) [Der 1,000 live births1 I 42* I 28 1 bv end 2008 I

Notes: (+) In Indonesia: (i) there i s a large discrepancy -- an underestimation o f about 30-40 percentage points -- between official mortality data and Demographic Health Survey Data; and (ii) there also i s a large variation between and within provinces. * 1999 data. Goal i s calculated on the basis of the desired 2/3 reduction between 1990 (IMR 60/1000 and U5MR 83/1000) and 2015, MDG target date. ** Data applicable to 1990-1999, thus 3/4 reduction i s aimed for 2015, M D G target date. *** 1997 data. Baseline data show that the proportion varies between 39% in Mentawai, Jambi and 100% in five districts in Jambi (2) and East Kalimantan (3). Overall, the rate i s lower than 90% in 30 o f 37 districts in four provinces. **** As o f end 2001, less than 0.1% o f adults (15-49 years) are infected, 22.5% o f them being female. There i s no specific data for the 15-24 age group. Needs to be estimated in each province on the basis of sero-prevalence data. However, in project provinces the latter has only covered female sex workers (UNAIDS Country Profile 2002). M D G target i s qualitative, Le., to halve and begin to reverse the spread o f HIV/AIDS by 2015.

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Annex 2: Detailed Project Description INDONESIA: Health Workforce and Services

Background

Since January 2001, when legislation decentralizing key government functions went into effect, the health system in Indonesia has faced serious challenges for the sustainability o f health financing and the delivery o f essential health services. The Bank supports the Government's decentralization process as a means to enable provinces and districts to: (a) strengthen the respective roles o f providers, consumers and other related stakeholders o f the health care system; (b) establish collaborative management of health care delivery through evidence-based analysis o f health needs and agreed-upon priorities for the allocation o f resources; and (c) institute mechanisms to ensure accountability for adequate services for the poor commensurate with their needs and service preferences.

Specifically, the Health Workforce and Services Project would: (i) improve financing and delivery o f essential health services to enhance access to and quality o f care and to promote improved health outcomes at the district level; and (ii) strengthen health work force policy, management and development in a decentralized context in order to improve allocational efficiencies and equity in the distribution and use of health resources within the provinces. A corollary development objective i s to enable key sectoral stakeholders, including the Ministry o f Health (MOH), the Ministry o f National Education (MONE) and the Indonesian Medical Association (IMA), to: (i) redefine their roles and responsibilities vis-&vis health work force policy, planning and management; and (ii) strengthen their institutional capacity for effective stewardship in fulfilling the functions o f policy making, legislation, regulation, quality assurancekontrol and technical assistance to provinces and districts. Attachment 1 summarizes the key functions for health services administration and indicates the institutional partnerships which are envisioned by the HWS Project. Attachment 2 provides a detailed presentation o f the project organization.

By Component:

Project Component 1 - US$374.67 million Component A: District Health Offices and Health Facilities (Loadcredi t amount: US$74.5 million)

Building on previous institutional arrangements and implementation mechanisms initiated by PHP-I and PHP-II, the project would extend decentralized approaches to health systems development to an additional four provinces (East Kalimantan, West Kalimantan, West Sumatera, and Jambi) comprising 47 districts (kabupaten) and cities (kota). Attachment 3 summarizes the proposed arrangements for overall health system governance and project implementation. Attachment 3 also describes the mechanisms for improving health service delivery at district level and for ensuring project management.

A.1. Improved access to and quality of health services. Bank support for improved service delivery at district level w i l l be based on: (a) the health development master plan and annual health plan developed by the district, endorsed by the District Health Council (DHC), and approved b y the Joint Health Council; and (b) the use o f block grants or District Funding Allocation (DFA) for increased efficiency in resource allocation and utilization.

Procedures for accessing and disbursing the DFA are contained in the District Funding Allocation Manual. Attachment 4 summarizes the DFA preparation and approval process and

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responsibilities. Annual proposals would be expected to address: (a) access and quality o f services; (b) mechanisms to ensure the equity and sustainability o f health care improvements: and (c) modalities for strengthening the decentralized management o f health administration. Proposal review w i l l adhere to two essential principles:

e The district allocation w i l l require that proposals demonstrate: (a) a strengthened evidentiary basis for evaluating the district's health status and priority problems; (b) improved planning practices to link annual updates o f the master plan to the annual planning; and (c) better financial information to ensure that all stakeholder contributions to the annual district plan are included in the proposed budget. The review criteria (which may evolve over the period o f the project) w i l l need to address: (a) the comprehensiveness o f the proposal; (b) i t s adherence to the principles o f equity, efficiency, quality, and sustainability advanced in the Government's PIP; (c) the feasibility o f the proposed activities and budgets on the basis o f past performance and current staffing; and (d) evidence o f consideration for the issues o f poverty, gender, and indigenous peoples.

e

Because these plans are expected to vary from district to district and to change with the evolving priorities o f the district, the range o f activities described in the sections below w i l l only provide an indication o f the lunds o f activities and inputs which may be funded b y the DFA allocation.

Immoved access and enhanced clualitv o f health services. The project would support development o f services to improve maternal and child health (including safe motherhood, immunization, nutrition, etc.); organize epidemiological surveillance and disease outbreak response; control communicable diseases (including malaria and dengue, tuberculosis, S T D M V , etc.); promote health information and education; and strengthen environmental health (including water and sanitation). The project would finance minor c iv i l works limited to sub-health centers (pustus) and health centers (puskesmas), appropriate medical equipment and transport, and incremental costs for supplies and operations. Through the DFA, the project would finance both pre-service training o f medical (S l ) and paramedical (D3 and D4) personnel and in-service training across a range o f subjects comprising health service delivery (preventive, curative, and emergency services) and health system administration and management.

In addition, to improve the quality o f hospital-based care, districts w i l l be encouraged to participate in a pilot program to train health care specialists (in the areas o f pediatrics, internal medicine, obstetrics and gynecology, and general surgery) and supporting specialties (radiology, anesthesiology, and pathology) in district hospitals. Under Component C, a competency-based curriculum and training program w i l l be: (a) developed in conjunction with the specialist Collegia under M A and (b) delivered with participation f rom specialists based in provincial training hospitals and rotations of district-based specialists in provincial hospitals. The pilot program w i l l be limited to selected districts which are expected to finance the scholarship costs o f staff to be trained through local funds or the DFA.

Finally, under Component C, the project w i l l pilot in two districts in West Sumatera and West Kalimantan, in partnership with M A , MOH, MONE and district and provincial level governments, a service delivery model based on the family physician practicing in an integrated and structured system with effective referral and payment mechanisms, in order to improve the quality and equity o f service delivery and meet population needs. To ensure integration into the health care system, the pilot demonstration project w i l l involve MENPAN on civ i l service reforms to facilitate recruitment and remuneration mechanisms. The project w i l l finance costs associated with the pilot project; expansion o f the pilot to other districts would be funded through the DFA.

Mechanisms to ensure equitv and sustainabilitv. The project would support efforts to develop sustainable financial arrangements (through a m ix o f local, central and external funding) and to promote schemes to improve overall equity and access o f the poor to health services. Districts would be expected to finance data collection on sustainability through the annual district health account exercise; through Component B, the project would finance districts' participation in studies (on utilization o f services, tariff levels, etc.) and pilot programs (on community financing, health insurance, etc.), study tours within Indonesia, and workshops to discuss the results o f studies, potentially innovative schemes, etc.

Decentralized management o f health services. The project would support the District Health Office's ability to promote cross-sectoral cooperation and stakeholder participation (including the District Health Council); to prepare strategic and annual health development plans; to analyze, negotiate, and convince Bupati and local parliament members to obtain adequate financing; and to strengthen health information systems to monitor health service outputs and evaluate performance. The project would finance minor c iv i l works and equipment for DHO, transport for supervision, training in health administration and management (including planning, HR management, procurement and financial management, health information systems, operations research, etc.), and incremental costs (for periodic meetings, supervision, etc.).

A.2. Project management. As indicated in Attachment 2, project management w i l l be the responsibility o f the District Implementation Unit. Supervised b y the District Bappeda, the DIU would function as the district level project secretariat and handle administration, procurement, financing, disbursement, and the reporting of project activities according to the project management manual. The project w i l l finance minor office equipment, training limited to project implementation, consultant services on a case by case basis, and operational costs (salaries, stationery, communications, etc.).

Project Component 2 - US$28.96 million Component B: Provincial Health Offices and Health Facilities (Loadcredit amount: US$9.07 million)

The Provincial Health Office has direct responsibilities for ensuring the capacity o f the district and provincial health workforce to respond to the population's demand for increased quality o f health services. The project w i l l support the PHO's new responsibilities under decentralization to provide technical and administrative support to the Districts for: (a) strengthening health workforce management and training capacities; and (b) improving the coordination, planning, and management o f health sector resources. As indicated in Attachment 3, the project would also provide resources for project management at provincial level through the Provincial Coordination and Implementation Unit (PCIU).

B.l. Health workforce development. The project w i l l support the objectives o f health work force planning and management by: (i) adapting the minimum service standards to local conditions and means; (ii) determining the numbers, sk i l l s , and specializations o f existing and future health work forces needed at provincial and district levels; and (iii) implementing measures to ensure appropriate numbers o f adequately trained staff in the health facilities. In addition, the project w i l l support studies, pilot tests, and operational research concerning incentives and motivation, performance appraisals, and other initiatives for improving workforce performance.

Minimum service standards. Based on minimum standards for service delivery currently being developed b y MOH, the project w i l l finance the analysis of epidemiological and service delivery data to adapt the minimum packages to the specific provincial and district context; and the dissemination o f these standards to health personnel and to interested health officials and local authorities. In addition, the project w i l l help provinces define standard operating procedures for service delivery in health facilities

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and use the service standards to define roles, responsibilities and functions o f health care personnel to ensure the quality o f services provided. The project w i l l finance consultant services, studies, workshops and instructional materials.

Workforce management systems. The project would support strengthening o f SIMKA, the existing personnel information and management system initiated under H P 5. The project would also develop the capacity to analyze the current and future requirements for health manpower development and to prepare scenarios (including retraining, redeployment, downsizing, etc.) for increasing the allocational efficiency and effectiveness o f human resources. The project would finance limited hardware and software, studies and consultant services, training, workshops, and operational costs associated with implementing measures which may be decided on.

Coordination o f long-term and in-service training. The project w i l l improve the PHOs' ability to assist DHOs in assessing health work forces training needs capacity and service gaps; finance appropriate measures to strengthen the training capabilities at provincial level; and provide regular, systematic, and quality training courses (many o f which are probably more appropriately and efficiently offered at provincial level). The project would finance civ i l works and pedagogical equipment for provincial training facilities (poltekes and bapelkes); fellowships; teacher, TOT and technical training; books and instructional materials; and operational costs (for stationary and supplies, f ield research, etc.). Potential training activities might include family health, emergency medicine, referral system, clinical s lu l ls, health services management, epidemiology, health insurance and health care financing, hospital management, autonomous public health care management, and other relevant fields.

In addition, the PHO w i l l also assist DHO's b y coordinating the implementation o f the pilot training program for the district hospital-based health care specialists.

Finally, the PHOs w i l l also be responsible for initiating contact with the various potential universities, both domestic and foreign, to obtain information about training programs (in public health, health policy, health economics, health services management, etc.) offered and available at the universities. The objective w i l l be to build a network with selected universities capable o f providing short or long-term training on a contractual basis. The project would finance operational costs (communications, travel, etc.) associated with establishing the network as well as fellowships or contractual services as needed to provide the training.

B.2. Health system coordination, planning and management. The project would support the PHO's role in a number o f areas o f importance for strengthening the performance o f the districts. Generally, the project would finance minor c iv i l works and equipment for the PHO, transport for supervision, training in health administration and management (including planning, HR management, procurement and financial management, health information systems, operations research, etc.), and incremental costs (for periodic meetings, supervision, etc.).

Specifically, while health manpower development i s a primary responsibility, the Province has other explicit authorities under Regulation 25 to: (a) determine guidelines for health information and education campaigns; and (b) monitor the epidemiological situation and prepare for outbreaks and epidemics. In addition, there are currently two areas where the project proposes to support the PHO (even in the absence o f explicit provincial authority) because provincial intervention should result in more effective and efficient operations at district level; (c) cross-sectoral cooperation and health development planning (where the district alone retains these authorities); and (d) health system financing (where central and district levels have authority but the provincial level does not).

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Health information, education, and promotion. In collaboration with other actors involved in health promotion, the provincial health education unit wil l: (a) manage province-wide advocacy efforts to promote awareness on health issues o f importance to local authorities, consumers, and providers: (b) coordinate health education campaigns on specific diseases and behaviors among schools and higher learning institutions, NGOs and community groups, and private sector associations and groups: and (c) organize efforts to strengthen consumer awareness and public accountability for the quality o f health services. The project would finance consultant services, training and workshops, materials production and dissemination, studies, and operational costs associated with implementing promotional campaigns.

Epidemiological surveillance and outbreak response. The project would promote the adaptation and implementation o f the integrated surveillance system currently being implemented in other provinces with ADB and PHP-II support. With guidance, support, and supervision f rom central level, PHO's would create or strengthen epidemiological surveillance teams (EST) and establish linkages with district (DEST) and health center (TEPUS) surveillance teams. Together these teams would provide information for greater evidence-based decision-making, detect trends and key determinants o f disease incidence, and provide leadership in planning prompt and corrective actions through the Early Warning Outbreaks Response System (EWORS). The project would finance equipment, transport, consultant services, training and workshops, studies, and operational costs associated with information gathering (forms, instructional materials), dissemination, and outbreak response planning.

Cooperation and health development planning. To strengthen the respective roles o f district authorities (Bupatis), public and private providers, consumers and other interested stakeholders in accordance with the decentralized health care system, the project w i l l support the establishment and operation o f the Joint Health Council. As indicated in Attachment 3, the role of JHC is: (i) to strengthen health system governance at the provincial level by instituting a new management structure for pluralistic decision-making for planning and resource allocation: and (ii) to provide overall guidance to project implementation. In addition to incidental meeting costs, the project would also finance workshops (to discuss the roles, responsibility, and mechanism o f the council) and field visits to various locations to familiarize the council with health conditions and related issues.

The JHC would rely on support f rom the Technical Review Team to: (i) determine district budget ceilings based on criteria agreed by the Bank: (ii) review and approve proposals to receive District Funding Allocations; and (iii) monitor implementation progress. To advance the work of the TRT, the project would finance operational costs associated with providing technical assistance in preparing and reviewing the proposals and with supervising implementation (travel and meeting costs, stationary, etc.). Training, annual implementation reviews, and planning workshops could also be financed.

To operationalize the decisions o f the JHC, the project wil l: (a) strengthen the medium-term and annual planning process with evidence-based planning and budgeting guidelines: and (b) improve the collection, analysis, and use o f information related to health services outputs and health status outcomes in decision-making about future directions for provincial health development. While DHO's would focus on annual planning, the PHO would emphasize medium-term, strategic planning issues (of infrastructure, finances and personnel) to mobilize additional financial resources, inform districts o f program priorities, and ensure that equity in the development of health services i s kept in mind. The project would finance training and workshops, and operational costs associated with planning (travel, forms and guidelines, etc.).

Health svstem financing. On balance, health services have been severely under funded in Indonesia, with the result that local governments have lacked the financial resources to attract key

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personnel (physicians, nurses and mid-wives) in adequate numbers, to initiate essential health programs and services to address local health needs, and to finance health services for the vulnerable groups such as the poor, women, children, and the elderly. The project would focus attention on health financing information, and specifically the district health account so as to better examine health financing issues and to identify gaps, inappropriate allocations (among primary, secondary, and tertiary levels), and populations (particularly vulnerable groups) deserving subsidies from central government. The project would participate in financing workshops and studies as well as annual training o f integrated health planning and budgeting to ensure that existing financial resources o f the province and districts are efficiently and effectively used.

B.3. Project management. As indicated in Attachment 2, the PCIU w i l l be established at the provincial level, and w i l l have responsibilities in the areas o f planning, procurement, financial management, and monitoring and evaluation. The project w i l l finance consultant services, office equipment and supplies, workshops, project management related training, and operational costs associated with routine activities and supervision as well as biannual monitoring o f project performance.

Project Component 3 - US$25.74 million Component C: Central Level (Loadcredit amount: US$22.03 million)

At central level, the project w i l l support three institutions (MOH, MONE, and IMA) with key roles in the improvement o f health service delivery through their involvement with: (a) the regulatory framework for medicine and other health professions: and (b) strengthening the quality of formal pre-service education provided by the national training institutions. In addition, the project w i l l finance project management at central level.

C.l. Effective health system stewardship (MOH). To strengthen the decentralization o f health workforce management institutions, the project w i l l support the Board for Development and Empowerment o f Human Health Resources (BDEHHR), including the Board Secretariat and the different centers (for Health Human Resources Management, Health Manpower Education, Health Training, and Empowerment o f Health Profession and International Workforce). Because o f the critical role o f the Indonesian Medical Association in evolving self-regulation o f the medical profession, the project w i l l also provide funds to IMA through MOH. The project would also support institutional capacity building in health policy and regulation and would finance project management at central level.

Health work force Dolicv and planning;. The project w i l l strengthen MOHs capacity to: (i) carry out i t s human resource development responsibilities within the context o f decentralized workforce management: (ii) strengthen the quality o f pre-service education programs: (iii) ensure the quality o f in-service training provided at district level; and (iv) promote self-regulation of the nursing and midwifery professions.

To strengthen the institutional capacity o f the BDEHHR, the project w i l l support the Boards strategic planning and corporate development and preparation and implementation o f a plan to devolve the four polytechnics currently under Board jurisdiction. The project w i l l finance equipment, short-term and long-term training, technical assistance and workshops to carry out strategic planning and the development o f an information system. The project w i l l also finance technical assistance as well as jo int consultations and planning with MENPAN to introduce civ i l service reforms in the Board itself and ensure the smooth transfer o f authority for the polytechnics to board governance.

To improve allocational efficiencies and equity in the districts, the project w i l l support the National Center for Health Human Resources Management (Pusgunakes) to carry out strategic planning

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for national human resource development; to field-test measures to improve productivity, social accountability and equitable distribution at provincial and district level; and to propose methods to improve the effective use of human resources for better coverage and quality o f health services. The project w i l l finance consultations by expert panels and consultations to prepare long-term scenarios for HR market projections; reviews and studies o f current HR policies and pilot projects as well as training and equipment.

Project support for strengthening health manpower education w i l l finance efforts by the National Center for Health Manpower Education (CHME) to review admission criteria, improve curricula and teaching methods, and enhance the learning and teaching environment for (i) existing training programs for nurses, midwives, nutritionists, and sanitarians, and (ii) development o f a bachelor degree program (D4) for nurses and midwifes. The project would finance limited renovations and equipment, technical assistance, teacher and TOT training, and development o f training guidelines and modules for distance learning.

To provide high quality short-term health training courses which are responsive to the needs of health workforce and meet the needs o f a l l levels o f government, the project would support the Center for Training o f Health (Pusdiklatkes) to become a reference center for district level training o f health professionals using methods o f adult education and training. The project would support development o f training needs assessment techniques, and establishment of a national learning laboratory to develop training technologies and learning methods for district personnel and TOT. The project w i l l also support training programs to improve hospital emergency services by providing training to Brigade Siaga Bencana (Medical Emergency Brigade). The project would finance equipment, technical assistance and training, and production of instructional materials.

The project w i l l support the Center for the Empowerment o f Health Professions and International Workforce (Puspronakes) in i t s objective to empower health professions generally, and nursing and midwifery specifically, by developing self-regulation and appropriate organizational arrangements to carry out certification, advocacy and regulation so as to strengthen accountability to the public and to the profession. The project w i l l also support the development and promulgation o f systems for registration, licensing, and certification, and foster professional growth and competence through continuing education for nurses and midwives. The project w i l l finance minor equipment, study tours, and operational costs associated with working groups and meetings.

Comuetencv-based training of district hospital specialists. In collaboration wi th the professional Collegia, the Directorate General for Medical Care w i l l design and implement a pi lot program promoting competency-based training o f specialists for deployment in district hospitals. Specifically, the project w i l l finance development o f curricula, admission and deployment criteria, teaching process and supervision methodologies, and testing and certification. Other partners (including the Asian Development Bank) as well as the faculties o f Andalas University and Mulawarman University in the project area w i l l also participate in the pilot program that w i l l be tested in a limited number of districts.

SUDUO~~ to the Indonesian Medical Association. In parallel to the support for the empowerment o f nurses and midwives, to be coordinated b y the BEDHHR, the project w i l l support comparable development o f self-regulation and empowerment o f the medical profession through the Indonesian Medical Association. The project w i l l assist IMA to strengthen i t s institutional roles and responsibilities regarding membership, regulation o f the medical practice and i t s environment, mechanisms to handle grievances and professional malfeasance through peer review; develop i t s capacity to provide in-service training, networking and dissemination o f current information on medical practice; set standards for medical education, practice and ethics; and reinforce i t s position o f advocacy in regulatory matters,

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licensing and accreditation issues. The project w i l l finance equipment o f the joint secretariat, study tours, technical assistance, leadership training seminars, and workshops.

In addition, as mentioned under the District component, M A w i l l also play a coordinating role in strengthening district-based health services by piloting a model family medicine program in two districts in West Sumatera and West Kalimantan.

Managing decentralization. The project w i l l support M O H s efforts to build i t s analytical, advisory and advocacy capacity in accordance with i t s new role o f stewardship vis-&vis both public and private health care functions. The project w i l l strengthen the links between policy development and regulation through capacity building for Center for Health Policy Development and the Bureau for Law and Organization. The project w i l l finance limited office equipment, training, consultant services, and workshops. In addition, the project would provide funds for specific studies to be coordinated through the Center for Health Policy Development. For each o f the studies eventually selected, the Decentralization Unit would be expected to coordinate the development o f terms o f reference with the appropriate MOH Directorate and PHO teams, the recruitment (as needed) o f consultants, and the monitoring o f progress.

Central project management. See Attachment 2 for details.

C.2. Enhancing the quality of medical education (MONE). To adapt to constantly changing conditions and consumer expectations, M O N E must: (a) increase i t s institutional capacity to organize and manage medical education; (b) improve the quality o f formal medical education; and (c) enhance the learning and teaching environment for both undergraduate and post-graduate medical education and training.

Increased institutional capacity. To support the proposed innovations and improvements in medical education, the project would help M O N E develop the appropriate implementing structures and processes, including: establishment o f the National Medical Education Development and Research Center (NMEDRC), creation o f a higher education management training program, and institution o f a national monitoring and evaluation system.

NMEDRC w i l l assume responsibility for implementing the new paradigm in medical education and w i l l have the dual role of improving the study program and building the management capacity o f the medical faculties. The project w i l l finance technical assistance and degree training in medical education management, studies and research, and curriculum development activities.

In order to increase the educational management capabilities within the regional medical faculties, the project would promote collaboration among the medical education unit and the faculty. The project would finance technical assistance and workshops to organize and launch the management component .

Finally, the project would finance degree training in educational policy, technical assistance to establish the appropriate technical regulations for the new medical education paradigm, and workshops to address selected regulation issues and monitoring o f program implementation.

Improved aualitv o f formal medical education and enhanced learning and teaching environment. To improve the quality o f formal medical education, the project w i l l promote a competency-based medical education. Specifically, the project w i l l support efforts to link the specific tasks o f primary care

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physicians to specific competencies and to develop a curriculum and study program based on these competencies. The project w i l l finance: (a) consultant services and workshops to define the competencies and curriculum: (b) a series o f workmg group meetings to develop the medical education programs for each o f the five regional medical faculties; and (c) a national workshop for validating the draft study program. The project would also finance the development o f an internship program for primary care physicians, including consultant services, a study tour, and provincial and national workshops.

To enhance the academic environment for both undergraduates and post-graduates, the project w i l l support MONE's efforts to strengthen admissions, learning methods, and evaluation and the development of an improved standardized admission test. The project would finance consultant services and workshops to construct the test; implement and evaluate the proposed admission test in five pilot faculties: and elaborate and validate the new national admission test.

In addition to improving admissions, the project would support development o f new pedagogical attitudes and methods to promote critical thinlung among medical students. Overall, the project would finance a limited number o f study tours and policy studies to propose improvements in the academic atmosphere in medical faculties, degree and non-degree training in cross-cultural management for faculty and academic staff, TOT on managing medical education, and consultant services to conduct quality control and develop quality assurance procedures. More specifically, the project would introduce problem-based learning at Andalas University and a clinical sk i l ls laboratory at Mulawarman University.

Finally, the project would support efforts to construct a national competency-based examination to standardize the results o f medical training in the different faculties and to contribute to the accreditation of the study programs (both internally and externally). The project w i l l finance non-degree training in a specialized institution, local s l u l l s training for examination writers, and workshops to prepare the examination.

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Sector in Indonesia (*)

Key Health Care Level of Primary Public Agency/ Extent of Private Sector Functions Statutory Institution involvement by Involvement

Authority Other Agencies/ Institutions

Legislating (laws, by-laws Central Parliament/ NIA N/A etc.) Health Commission

MOH MONE

Main sources of financing Central MOF, BAPPENAS District ++ (**I Governments (+)

District DPRDs/DHO (+++) Health facilities ++ Bappedas (+++) (+I

Policy making Central MOH (+++) N/A N/A

S tewardship/Regulation Central MOH (++) MOIT (***) (+) N/A

Planning and resource District DPRDs/ MOH (+) N/A allocation at the district DHO (+++) MENPAN (+) level (human, financial, Bappedas (+++) capital investment) Management

MONE (+++)

MONE (+++)

- personnel policy Central MENPAN (+++) MOH(+) + -budgeting and District Local government/ BoP/MOH (+)

- procurement, Bappedas (+++) expenditures District DHO (+++)

maintenance Public Health, including Al l PHO MOH (++) N/A intelligence DHO

Formal Education - vocational Central MOH PHO ++ - higherlprofessional Central MONE Autonomous +++ Pre-service training Province PHO, DHO MOH (+) NIA

District In-service training Province PHO, DHO NI A CBOs (++)

District NGOs (++) Health services delivery District Hospitals NIA ++ Outpatient Sub-Puskesmas Research and A l l three Universities MOH(+) NGOs (+) Development levels Schools of Public Health

Health Education and Al l three PHOs, DHOs MOH (+) NGOs (+) Promotion levels Project Management and Al l three CPCU MOH, MONE, CBOs (++) Implementation levels PCIU BAPPENAS, IMA, NGOs (++)

Universities

Inpatient Puskesmas +++

PHOs, DHOs

DIU PHOs, DHOs through their representatives

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H W F S Anchoring and Institutional Setup

MOH, MONE, BAPPENAS and I M A through IACC and TRC

Government (MOF) through APBN (DAK) and APBD (central government funds) (DAU) Creditnoan funds through APBN Local government funds through APBD (DAU, PAD and ST) Creditnoan funds through APBN MOH, MONE through IACC and TRC MOH, MONE through IACC and TRC DHOs through DHCs and JHCs

MOH and MONE through IACC DHOs through DHCs and JHCs,

MOH through IACC and TRC PHOs and DHOs through DHCs and JHCs

MOH through IACC and HR Board MONE, IMA, MOH and Universities through IACC PHOs, DHOs through JHCs and DHCs DHOs through DHCs and JHCs

DHOs through DHCs and JHCs

TRC, PHOs, DHOs through DHCs and JHCs

PHOs through TRTs, DHOs through DHCs and JHCs Project Management Manual District Funds Allocation Manual, IVPDS, FMR, PCAR, Anti-Corruption Action Plan, Training, Supervision, MONEV, Auditing

Legend:

NIA: not applicable + limited power and responsibilities ++ significant power and responsibilities +++ extensive power and responsibilities See PAD back cover for acronyms and abbreviations

(*) Reference to MONE and other GO1 agencies are only in reference to their involvement with the health sector. (**) Main source o f financing: The central government allocates money for the districts through DAU, but the size o f money for health i s determined by the district government. Contributions f rom regional budgets i s usually small, except in areas rich in natural resources, i.e., East Kalimantan. (***) Regulation o f pharmaceuticals.

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Attachment 2

Project Management Structure

This section summarizes the management structure for project activities at the district, provincial and central levels.

District level

1. A District Health Council, DHC, would be established by the respective Bupati in each District. The D H C would consist o f 8 to 10 people and would comprise members o f Dinas Kesehatan, NGOs and Community-based Organizations (CBOs) including woman organization representatives, the private sector, and DPRD from commissions o f social welfare, budget and development. The role of D H C i s two-fold: (i) to strengthen health system governance at the district level by instituting a new management structure for pluralistic decision-making for planning and resource allocation; and (ii) to provide overall guidance to project implementation. D H C w i l l act as a forum for raising health issues, determining broad health policies, and seeking consensus on and endorsing health priorities and how best to use district’s health resources as per the annual proposals for district funding allocation. I t w i l l meet at least four times a year.

2. District Bupatis. DIUs would be headed b y the head o f the District Bappeda and managed by an Executive Secretary in hisher capacity as head o f the district health office. Starting in FY 2004 and for each subsequent fiscal year, a major task o f the DIUs would be to coordinate the development o f a consolidated annual district health plan within the framework o f a five-year master plan. The DIUs would function as the district level project secretariats and handle administration, procurement, financing, disbursement, and the reporting o f project activities according to a Project Management Manual. Afinal Project Management Manual is a condition for Project EfSectiveness. The DIUs would consist o f one procurement officer, one financial officer, one planning officer, and one monitoring and evaluation officer.

District Implementation Units, DIUs have been established prior to Negotiations by the

3. by the district, and submitted by the head o f the district health office after endorsement by the District Health Council (DHC). Proposals would be in a format specified in a District Funding Allocation Manual. This manual would detail eligible expenditures under the District Funding Allocations, the proposals procedure and schedule, responsibilities for preparation and the review process including evaluation criteria, contracting procedures, procurement and financial management, and reporting and monitoring requirements. An attachment to the manual w i l l detail safeguard policies on environmental management, indigenous peoples, and pest management. I t w i l l also include as attachment an evaluation score sheet which would include guiding principles and broad criteria (equitable access in relation to gender, vulnerable peoples, etc.) against which district proposals w i l l be assessed for no-objection b y the Bank.

Proposals for District Funding Allocations would be based on the annual health plans developed

4. Allocations by entering into sub-project contracts with eligible providers, public or private (both for-profit and not-for-profit, such as some NGOs). The DIUs would handle the invitation and evaluation o f bids, or sub-contract the process to qualified procurement agents chosen through a competitive process. Detailed procedures would be specified in the Project Management Manual. Regardless o f size, contracting would be undertaken for c iv i l works, goods, services and consultants, using procurement

The DIUs would be responsible for procuring goods and services under the District Funding

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procedures and standard bidding documents acceptable to the Association/Bank.

Provincial Level

5. A Joint Health Council, JHC, would be established by the respective Governor in each participating province. The JHC would be a standing committee, meeting a minimum o f four times a year as a forum for raising health issues and determining broad health policies for the province. The JHC would consist o f 15 to 20 people and would comprise o f Bupatis or their designates, members o f c iv i l society, including woman organizations, local health experts, representatives o f professional organizations, and local health professionals including those from the private sector. Members o f the JHC would be funded b y non-AssociatiodBank sources. As with DHC, the role o f JHC i s two-fold: (i) to strengthen health system governance at the provincial level by instituting a new management structure for pluralistic decision-making for planning and resource allocation; and (ii) to provide overall guidance to project implementation. In addition, JHCs w i l l act as a forum for raising health issues at the provincial level b y identifying those which are not properly dealt with at the district level, or others which are dealt with in an inefficient way, either because of duplications in financing and service provision, lack of proper referral mechanisms, or lack o f economies o f scale at lower levels. As for project implementation proper, the tasks o f the JHC would include: (i) determining district budget ceilings based on criteria agreed by the Bank; (ii) review and approval o f proposals for District Funding Allocations; and (iii) monitoring implementation progress.

6. provincial health department, would review district proposals. In addition to the review function, the TRT in the provincial health office (Dinas Kesehatan Propinsi) would provide technical support to the districts in the development o f proposals. The TRT would be reinforced as needed b y health specialists to be hired as consultants to supplement the available expertise and s l u l l mix.

A Technical Review Team, TRT, comprised of 8 to 10 health professionals and located in the

7. the ceiling to be determined b y the JHCs according to criteria accepted b y the AssociatiodBank. To ensure funds were not underutilized and to act as an incentive to good proposal preparation and implementation, funds would be reallocated to stronger performers when proposals for a lesser amount than the agreed ceiling were presented, or when the review of a district proposal recommended not funding al l proposed activities, or recommended funding the proposed activities with a reduced budget. Detailed procedures for reallocation w i l l be contained in the District Funding Allocation Manual.

The JHC acting on the advice o f the TRT would award annual District Funding Allocations up to

8. participating provinces. This unit would be chaired b y the head o f the provincial Bappeda, with the head o f the provincial health office as Deputy Project Director. The PCIU would be supervised b y a full-time Executive Secretary with appropriate sector and management experience. The PCIU would employ at least one procurement officer, one financial officer, one planning officer, and one monitoring and evaluation officer. Training in procurement, finance and reporting procedures would be the f i rs t activity after project effectiveness. Annual Procurement Plans would be prepared under the guidance o f the Bank Procurement Specialist. The PCIU would provide for Bank review biannual consolidated implementation, procurement and financial reports as specified in the District Funding Allocation Manual. Finally, the PCIU w i l l act as the conduit between DIUs, JHCs and the Bank for review o f DFAs and project supervision.

A Provincial Coordination Implementation Unit, PCIU, would be established in each o f the

9. which economies o f scale and/or the systemic nature o f the activities indicated that greater efficiency

The PCIU, upon advice by JHCs, would also coordinate the implementation o f activities in

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and/or effectiveness would be achieved by implementation at the provincial rather than district level. Finally, in East Kalimantan and West Sumatera, PCIU w i l l also serve as coordinator between Mulawarman University and Andalas University, respectively, and the respective JHC and TRTs.

Central Level

10. An Inter Agency Coordinating Committee, IACC, would be established in Jakarta, chaired by the Deputy for Human Resources, Bappenas, whose members are Echelon I representatives f rom the key implementing agencies in M O H and MONE, and the President of IMA. The IACC w i l l be responsible for inter-agency coordination at the national level, project stewardship and policy guidance. I t w i l l ensure the achievement o f project goals and, in coordination with the TRC, w i l l monitor and review project progress. The IACC should meet at least twice a year during project implementation.

11. established by the Secretary General, M O H to provide assistance and advice on project-related technical issues. The committee would be responsible for reviewing central project implementation plan, and overseeing provincial TRTs in reviewing district proposals. The TRC may establish ad hoc task forces to address specific technical needs and/or hire consultants for additional expertise and ski l ls .

A Technical Review Committee, TRC, consisting of four to six health experts, would be

12. direction o f the Secretary General, with the Director o f the Center for Health Development Policy serving as Project Manager. The CPCU-MOH would be responsible for coordinating central level activities including those conducted by IMA, and for coordinating project management across levels. The CPCU-MOH would be managed b y a full-time Executive Secretary with appropriate sector and management experience and act as Bank’s counterpart on all project related activities. The CPCU-MOH would be staffed b y procurement, finance and planning and monitoring and evaluation specialists working full time for the project.

A Central Project Coordination Unit, MOH, CPCU-MOH, would be established under the

13. decree o f the Director General o f Higher Education. The CPCU-MONE w i l l be managed by a Project Coordinator working full time for the project. The Project Coordinator w i l l be assisted b y one procurement officer, one financial management officer and one planning and monitoring and evaluation officer. Responsibilities o f the unit w i l l include (i) coordination with CPCU-MOH, (ii) coordination with the Andalas University in West Sumatera and Mulawarman University in East Kalimantan to ensure implementation o f the MONE provincial component, and (iii) procurement, financial management, and reporting o f activities under the M O N E component.

A Central Project Coordination Unit, MONE, CPCU-MONE, would be established under a

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Attachment 3

Central

GraDh 2.1: Project Management Structure - Organizational Framework

I I I

District

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Attachment 4

Grauh 2.2: District Fund Allocation - Preparation and Approval Process

. . . . 1 ;

. :

. :

I i I t . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i I : . . . . . : : : : ....................

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Legend Coord TA Info-Flow - - - - *

ApprPrcs -

..........

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Annex 3: Estimated Project Costs INDONESIA Health Workforce and Services

A. District Health Offices and Health Facilities (*) B. Provincial Health Offices and Health Facilities B. 1. Health workforce development B.2 Health system coordination, planning and management B.3. Project management C. Central Level C. I. Effective health system stewardship (MOH) C.2. Enhancing the quality o f medical education (MOM) Total Baseline Cost

Physical Contingencies Price Contingencies

289.05 0.00

16.95 2.40 1.50 0.00 6.32 7.36

323.58 13.82 57.53

20.20 0.00 2.10 0.98 0.24 0.00 3.34 5.25

32.11 0.60 1.73

309.25 0.00

19.05 3.38 1.74 0.00 9.66

12.61 355.69

14.42 59.26

Total Project Costs' 394.93 34.44 429.37 Front-end fee 0.00 0.00

Total Financing Required 394.93 34.44 429.37 (*) Inclusive o f sub-components A. l and A.2

roj District Funding Allocation Government Support for Health Services at District Level Government Support for Health Services at Provincial Level Civil Works Goods (excluding vehicles) Training and Workshops Consulting Services and Studies Incremental Operating Costs Vehicles Operation and Maintenance

Total Financing Required

53.20 300.20

18.30

1.80 2.50 9.34 6.45 1.70 0.14 1.30

21.30 0.00 0.00

1.10 1.30 4.84 5.40 0.20 0.30 0.00

74.50 300.20

18.30

2.90 3.80

14.1 8 1 1.85 1.90 0.44 1.30

394.93 I 34.44 I 429.37 Note: Differences due to rounding.

- 6 7 -

District Funding Allocation Government Support for Health Services at District Level Government Support for Health Services at Provincial Level Civil Works Goods (excluding vehicles) Training and Workshops Consulting Services and Studies Incremental Operating Costs Vehicles Operation and Maintenance

75.14 0.00 0.00

1.64 3.03

12.35 11.84

1.50 0.00 0.00

1 Identifiable taxes and duties are 0 (USSm) and the total project cost, net of taxes, IS 429.37 (1JS$m). Therefore, the project cost sharing ratio is 24.59

% of total project cost net of taxes.

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Annex 4: Cost Benefit Analysis Summary INDONESIA: Health Workforce and Services

Introduction

This annex presents the economic analysis o f Health Workforce and Services Project. The project supports districts in four provinces in their efforts to set up and adopt institutional and financial mechanisms for client-centered and sustainable health services financing and delivery in the context o f decentralization. More specifically, the main objectives o f the project are to: (i) improve financing and delivery of essential health services in the provinces o f Jambi, East Kalimantan, West Kalimantan, and West Sumatera to enhance quality of care and health outcomes at the district level; and (ii) strengthen health work force policy, management and development in a decentralized setting in order to improve allocational efficiencies and equity in the distribution and use o f health resources. A corollary development objective i s to assist the Ministry o f Health (MOH) and the Ministry o f National Education (MONE) to redefine their roles and responsibilities vis-&vis health work force policy, planning and management.

The economic analysis o f the project covers the following: (a) country assistance strategy goals and Indonesian health sector strategy goals supported by the project; (b) rationale for public sector involvement and poverty impact o f the project; (c) cost benefit analysis o f project interventions; (d) risk-sensitivity analysis; and (e) fiscal impact o f project interventions.

CAS and Health Sector Strategy Goals supported by the Project

One of the priority areas for Bank assistance to Indonesia as outlined in the CAS i s “delivering better public services to the poor, which involves assistance to help define government roles and responsibilities as functions are decentralized, support for improved public service delivery b y sub-national governments which have demonstrated pro-poor and growth reform, as well as promoting community development”. The CAS also underscores the importance o f providing demand-responsive services, especially to the poor, to reduce poverty. In addition, i t acknowledges that development o f human capital at all levels i s critical to sustain economic recovery and growth in Indonesia and emphasizes that decentralization o f the delivery o f most government services makes capacity building at al l levels a priority. The project supports these goals by developing and implementing institutional and financial mechanisms at the district level to enhance quality o f care and health outcomes as well as by defining the roles and responsibilities o f each level - center, province, district and below and for private sector involvement and b y building the capacity o f health service managers at district and provincial levels to provide quality health services in the new decentralized environment.

The Indonesia health sector strategy emphasizes decentralization as the new framework for, inter alia: (a) raising the quality o f service providers in terms o f training and capabilities; (b) providing workers with more demanding professional tasks and adequate facilities; (c) providing adequate compensation for those who perform; (d) building accountability b y giving providers feedback; and (e) creating a facilitator function to help the poor articulate their voice. The project aims at addressing these issues in a coordinated fashion by: (i) building up new and strengthening existing regional structures and institutions for improved health sector governance; (ii) reshaping accountability in decision making by including clients and providers through various mechanisms; (iii) bringing forth consumer needs and preferences explicitly into health services planning; and (iv) attuning health work force training and performance issues to regional context and imperatives.

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Rationale for public sector investment and poverty impact

Province

The project focuses on improving the role o f government in the sector in the new decentralized context. I t assists the government in i t s stewardship role in policy, planning, management and regulation o f the sector as well as a provider and financier of public health services and essential health services for the poor. In service provision, i t focuses on improving the quality o f primary health care and public health services at the district level, especially targeting the poor. In addition, the project w i l l also address the increasingly important role that the private health sector, the professional associations, and civ i l society play in the organization and governance o f the health system. This w i l l be achieved at the various levels o f the Government through various means. At the central level, the project w i l l assist IMA to strengthen i t s institutional roles and responsibilities regarding membership, regulation o f the medical practice and i t s environment, mechanisms to handle grievances and professional malfeasance through peer review: develop i t s capacity to provide in-service training, networking and dissemination o f current information on medical practice; set standards for medical education, practice and ethics; and reinforce i t s position o f advocacy in regulatory matters, licensing and accreditation issue. At the district level, while health services w i l l be financed largely through a mix o f central, local and extemal funding, the project w i l l encourage the use of alternative means of providing health services including contracting with private doctors.

Urban Rural Total

The economic crisis in 1997 resulted in a deterioration in the welfare o f the people o f Indonesia. While since then the country has been experiencing reductions in expenditure poverty, recent analyses indicate that almost half the population i s s t i l l very vulnerable. A study o f the measurement o f poverty (Pradhan, Suryahadi, Sumarto and Pritchett, 2000), indicates that al l provinces in Indonesia experienced an increase in poverty incidence in between February 1996 and 1999. The poverty incidence in February 1999, in the project provinces were -West Kalimantan (30.76%), East Kalimantan (21.67%), Jambi (22.18%) and West Sumatera (9.47%) - respectively, with a national average o f 27.13%. Recent poverty figures indicate that poverty incidence in Indonesia has declined from the peak crisis level to 16% in February 2002. The percentage point increase in poverty incidence for the four provinces between February 1996 and February 1999 i s illustrated in Table 4.1. The project w i l l provide targeted subsidies to poor areas in the four provinces covered under the project, and assist in the development o f a new health care financing system for the poor.

West Kalimantan 0.45 12.39 9.44 East Kalimantan Jambi West Sumatera Indonesia

7.99 22.71 15.15 8.09 16.98 14.18 6.39 5.73 5.87 9.12 13.55 11.39

A traditional static benefit- incidence analysis o f public spending in health (Lanjouw, Pradhan, Saadah, Sayed and Sparrow 2001), found that spending on primary health care tends to be pro-poor. In addition the marginal and average incidence analysis show that the greatest benefit to the poor would come from an increase in primary health care spending which i s what the project supports.

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Analysis of Alternatives

Several alternatives were considered, including maintaining the status quo and maintaining the design o f the provincial health projects.

Maintaining the status quo could not be an alternative in times o f change - this would lead to a loss in the momentum for reforming the sector to improve effectiveness and service quality. Decentralization provides a unique opportunity to do away with top-down and technocratic mode o f policy making and regulation, and to adopt a more pluralistic mode involving c iv i l society and health care professionals. In addition, during the recent economic crisis i t has become clear that a l l levels w i l l be hard-pressed and unable to maintain an adequate level o f funding to provide health care services, let alone cover additional expenses brought about b y decentralization, such as increased in-service training needs and loss o f economies of scale due to duplication o f some essential services at a l l levels. Therefore the project aims to seize the momentum to: (i) introduce and experiment with novel policy development, financing, management and service delivery models and mechanisms; and (ii) redefine the scope and mix o f services to be produced locally in accordance with variations in health and health care needs across the country.

In fact, the project expands on the existing design of the provincial health projects. I t contains al l the main components o f the provincial health projects necessary to protect essential health services for the poor and to strengthen decentralized management through institutional build-up. In addition, i t includes an added component o f human resources development policy and planning aimed at achieving a critical mass o f s k i l l mix in health system management and service provision. Work force issues, ranging from training through deployment, retention, compensation to incentives are key to building local capacity for successful decentralization.

Project Benefits

The project i s expected to yield several benefits. These include: improved health status in the four provinces through increased spending, better prioritization o f health care needs and subsequent increase in the supply o f preventive and primary level health services; provision o f essential health services to the poor, improved allocational efficiency with reference to health workforce and financial inputs; improved technical efficiency through enhanced service quality and increased productivity through improved health.

The Indonesian health strategy showed that even prior to the economic crisis o f 1997, the Government was spending approximately US$23,000 per health center delivering 18 programs and activities. Using information on actual inputs for each program activity in a typical health center revealed that about 25% o f health expenditures could not be attributed to identifiable activities. The main source o f the gap was staff time - only 40% o f the staff time could be accounted for. This implies that efficiency gains could be made through improved use o f staff time.

The project w i l l yield significant institutional benefits through improved health work force planning and management, improved quality o f health personnel through improved pre-service education programs, and quality in-service training at district level. I t w i l l also promote self-regulation o f the nursing and midwifery professions. Through support to the Center for the Empowerment o f Health Professions and International Workforce (Puspronakes) i t w i l l empower health professionals in general, and nurses and midwives in particular, b y developing self-regulation and appropriate organizational arrangements to carry out certification, advocacy and regulation so as to strengthen accountability to the public and to the profession.

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The main benefit o f the project i s that i t w i l l improve the health status o f the population of the four provinces. I t w i l l also increase use of public facilities especially b y the poor through targeted subsidies and improved quality o f services. Thus, through i t s support o f development o f services to improve maternal and child health (including safe motherhood, immunization, nutrition, etc.): organize epidemiological surveillance and disease outbreak response: control communicable diseases (including malaria and dengue, tuberculosis, STD/HIV, etc.); promote health information and education: and strengthen environmental health (including water and sanitation), the project w i l l result in a significant reduction in prevalence o f risk factors related to childhood and maternal undernutrition (such as underweight, Vitamin A deficiency, zinc deficiency and iron deficiency) and environmental factors related to unsafe water, sanitation and hygiene, among the project population.

At present, health status o f the population in these provinces i s low. West Sumatera has an infant mortality rate o f 49 per thousand live births, a under-five mortality rate o f 66 per thousand live births and maternal mortality ratio of 328 per hundred thousand live births. More than a quarter o f children under five years of age suffer f rom calorie-protein deficiency, 20.5% suffer f rom goiter. In addition, 57% o f pregnant mother suffer f rom iron deficiency and 10% o f babies born are o f low birth weight. Poor access to quality o f health services and poverty are among the main causes o f the low health status.

In 2001, in Jambi, where the population density i s relatively lower than West Sumatera, infant mortality rate in 2001 was 33 per thousand live births, while under five mortality rate was 45 per thousand live births. The maternal mortality ratio was 220 per hundred thousand live births and l i fe expectancy at birth was 67 years.

In West Kalimantan, the infant mortality rate i s 47 per thousand live births. Almost a third o f the children under five years o f age are malnourished and more than half o f pregnant mothers are anemic. Morbidity rate i s also high - results o f the 2001 SUSENAS show that 22.2% o f the people surveyed complained that they had at least one clinical symptom in the previous month. Geographical access to health facilities i s poor for people residing in rural areas. This could explain why over 60% o f those who suffered from an illness treated themselves without visiting any health care facility.

Although East Kalimantan i s a high-income region and often linked with good health status, i t s infant mortality rate i s 33 per thousand live births. There are, however, wide disparities in health status among urban and rural populations.

These provinces also suffer f rom either a lack o f adequate human resources as i s the case in West Sumatera, or unequal distribution of human resources across hospital with many health centers without any doctors as in the case o f Jambi. The project i s expected to improve the service quality through better training, coordination and management and improve the s l u l l m ix and distribution o f human resources in the sector.

Currently, in the four provinces supported b y the project, there i s wide variation both within and across provinces in health spending per capita. Health spending per capita in year 2002 varies between Rp 20,000 and Rp 72,000 in W. Sumatera, Rp 20,000 and Rp 39,000 in Jambi, Rp 23,000 and Rp 62.000 in West Kalimantan and 16,000 and 90,000 in East Kalimantan. Thus, in order to make substantial impact on key health indicators substantial increase in health spending per capita would be required as i s proposed under the project.

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Summary of Benefits and Costs:

The project w i l l result in an annual increase of 5% in healthy l i fe years which would have otherwise been lost due to morbidity and mortality caused by risk factors related to childhood and maternal undernutrition (such as underweight, Vitamin A deficiency, zinc deficiency and iron deficiency) and environmental factors related to unsafe water, sanitation and hygiene. Under these assumptions, the average annual healthy l i fe years gained under the project w i l l be 10,152 for East Kalimantan, 14,950 for West Kalimantan, 9,198 for Jambi and 17,240 for West Sumatera. The per capita income o f each province i s used to obtain the monetary value o f each healthy l i fe gained - Rp 26.7 mill ion for East Kalimantan, Rp 4.9 mill ion for West Kalimantan, Rp 3.6 mi l l ion for Jambi and Rp 5.4 mill ion for West Sumatera. The value o f healthy l i fe years gained in one year under the project w i l l be Rp 358.8 bil l ion for East Kalimantan, Rp 104.4 bil l ion for West Kalimantan, Rp 47.4 bil l ion for Jambi and Rp 132.9 bi l l ion for West Sumatera.

Project costs for improvements in service delivery in the district level through direct investments under the credit (not accounting for government funding for district health services which w i l l have considerable costs and benefits) are Rp 595.9 billion. The benefit cost ratio for the project i s 16.9 and the net present value o f project benefits discounted at 10% i s Rp 3,538 bi l l ion with an internal rate of return o f 76.5%.

Main Assumptions:

Cost-Benefit analysis: While the project through improved management and delivery o f services and bringing services closer to the population w i l l have substantial impact on both health status and efficiency o f service delivery, most o f these impacts are diff icult to quantify. In addition, improved sk i l ls o f health personnel especially doctors through improvements in medical education w i l l improve quality o f service delivery but this impact w i l l not manifest itself in the short term. The following analysis attempts to develop a conservative estimate o f the value o f the project benefits during the implementation period and ten years after project completion.

I t i s expected that significant improvements in service delivery accompanied b y a significant increase in use o f preventive and public health services by the poor w i l l result in reduction o f morbidity and mortality among vulnerable populations such as the poor, women and children. Data from the 2002 World Health Report for countries in South-East Asia region i s used to estimate the benefit o f reductions in risk factors related to childhood and maternal undernutrition (such as underweight, Vitamin A deficiency, zinc deficiency and iron deficiency) and environmental factors related to unsafe water, sanitation and hygiene. According to the WHR 2002, almost 93 DALYs are lost per thousand population due to these risk factors. I t i s assumed here that the project w i l l result in an annual increase o f 5% in healthy l i fe years which would have otherwise been lost due to morbidity and mortality caused by these risk factors. Under these assumptions, the average annual healthy l i fe years gained under the project w i l l be 10,152 for East Kalimantan, 14,950 for West Kalimantan, 9,198 for Jambi and 17,240 for West Sumatera. The per capita income o f each province i s used to obtain the monetary value o f each healthy l i fe gained - Rp 26.7 mi l l ion for East Kalimantan, Rp 4.9 mill ion for West Kalimantan, Rp 3.6 mill ion for Jambi and Rp 5.4 mi l l ion for West Sumatera. The value o f healthy l i fe years gained in one year under the project w i l l be Rp 358.8 bil l ion for East Kalimantan, Rp 104.4 bi l l ion for West Kalimantan, Rp 47.4 bil l ion for Jambi and Rp 132.9 bil l ion for West Sumatera.

I t i s assumed that the gains in health w i l l be negligible in the f i rs t year o f the project. In the second, third, fourth and fifth years the project benefits w i l l be lo%, 30%, 50% and 75% respectively.

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One hundred percent of project benefits w i l l be realized from the sixth year onwards for another ten years. Based on these assumptions, the monetary value o f project benefits after ten years after project completion w i l l be Rp 10,054.4 billion. Project costs for improvements in service delivery in the district level through direct investments under the credit (not accounting for government funding for district health services which w i l l have considerable costs and benefits) are Rp 595.9 billion. The benefit cost ratio for the project i s 16.9 and the net present value o f project benefits discounted at 10% i s Rp 3,538 bi l l ion with an internal rate of return o f 76.5%.

Costs in billion Rp

Sensitivity analysis I Switching values of critical items:

595.9 595.9 595.9 I 595.9

Several factors such as delay in implementation o f project activities could lead to a delay in accruing project benefits and could result in lowered project benefits. Several scenarios are considered which result in benefits which are 75%, 50%, 25% and 10% o f those assumed in the case presented above and the results are in Table 4.2. Only in the last scenario where very limited project benefits are assumed, the net present value o f project benefits becomes negative.

Benefits in billion Rp BenefidCost Ratio

Internal rate o f retum Net present value of benefits in billion Rp.

Table 4.2: Sensitivity Analysis Using 75 Percent, 50 Percent, 25 Percent, and 10 Percent Benefit Flows

7,540.8 5,027.2 2,513.6 1,005.4 12.7 8.4 4.2 1.7

61.6 44.7 24.3 2,536.5 1,535.0 533.5 -67.5

Fiscal Impact:

Size of district funding allocation. Currently, in the four provinces supported b y the project, there i s wide variation both within and across provinces in health spending per capita. Health spending per capita in year 2002 varies between Rp 20,000 and Rp 72,000 in West Sumatera, Rp 20,000 and Rp 39,000 in Jambi, Rp 23,000 and Rp 62,000 in West Kalimantan, and Rp 16,000 and Rp 90,000 in East Kalimantan. In most districts however, health spending i s low - in West Sumatera district health spending varies between 5% and 7% o f district budgets, in Jambi i t varies between 3% and 8%, in East Kalimantan between 1% and 4% and in West Kalimantan between 5% and 10%. In order to make substantial impact on key health indicators however substantial increase in health spending per capita would be required. The project w i l l provide grants to districts and provinces on a need basis to support development spending to achieve increased health outcomes. This section attempts to discuss the amount o f increased district health spending over the project period required to achieve these benefits and the extent to which the increased spending should be financed through the credit.

The expected health spending per capita for the four provinces was derived using average district health spending as a percentage o f district budgets for each province. Using current spending percentages o f 6% o f district budgets for West Sumatera and Jambi, 2% for East Kalimantan and 8% for West Kalimantan, the estimated per capita health spending for 2004 and 2009 were calculated (see Tables 4.3 a, b, c and d). The district budgets were estimated using 2001 figures f rom the Regional Public Expenditure Review (draft, 2002). I t i s assumed that the various components o f the district budget namely the DAU and the shared revenues w i l l grow at 4% (estimated future GDP growth rate) per annum and that the local revenues, i.e., P A D w i l l grow at 6% per annum.

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ab. Sawah Lunto ab. Tanah Datar ab. P. Pariaman

ota Sawah Lunto

Table 4.3b: Jambi: Estimated health spending per capita 2004 and 2009

ab. Merangin (S.Bangko) ab. Muaro Jambi

ab. Tj. Jabung Timur

Table 4.3~: West Kalimantan: Estimated health spending per capita 2004 and 2009

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Table 4.3d Health spending kealth spending per per capita 2004 capita 2009

Kab. Berau 60,559 69,721 Kab. Bulungan 93,278 107,297 Kab. Kutai 74,613 85,877 Kab. Kutai Barat 50,862 58,546 Kab. Kutai Timur 58,683 67,503 Kab. Nunukan 70,385 80,948 Kab. Pasir 30,107 34,641 Kota Balikpapan 20,029 23,192 Kota Bontang 58,240 67,159 Kota Samarinda 16,439 18,971 Kota Tarakan 47,142 54,284

- Note: These estimates are constructed using 2002 health spending levels and then estimating per capita health spending in 2004 based on current spending percentages of 6 percent of district budgets for West Sumatera and Jambi, 2 percent for East Kalimantan and 8 percent for West Kalimantan. Assumption: the various components of the district budget namely the D A U and the shared revenues will grow at 4 percent (estimated future GDP growth rate) per annum and that the local revenues Le. PAD wil l grow at 6 percent per annum.

The above figures indicate that per capita spending in health i s low. T o determine the adequate level and allocation patterns for per capita outlays several options were considered. One option developed for the previous provincial health projects was to cost a package o f 18 public health services provided at the health center level including some out-patient curative services for the poor estimated to account for 20% o f households (Table 4.4). This very basic set o f measures i s estimated to cost Rp 42,000 per capita in year 1999 prices to deliver. In 2003 prices, the package costs approximately Rp 5 1,000. The package does not include in-patient care for the poor in hospital or environmental health interventions.

In principle, the Rp 51,000 per person target can be reached through project-financed increases in development spending. However, the resulting investment would be large, e.g. roughly US$117.6 million. If in-patient care for poor in hospitals and maintenance costs are added this number would be significantly higher. In addition, health spending would drastically fa l l at the end o f the project period to pre-project levels o f public health spending.

To avoid a large project size and a sharp drop in spending in 2009, government health spending would have to increase during project implementation period in order to sustain and deepen project benefits. The Ministry o f Health has recommended that government health spending should be about 15% o f local government spending. I t i s assumed that al l project districts w i l l achieve this level o f spending (except for East Kalimantan where current health spending i s only 2% of local government spending and an increase to 8% o f local government spending i s assumed as it i s more realistic than an increase to 15% with a five year period) by the end o f the project period. If the project provides approximately 50% o f funds for development spending in the project districts at the beginning o f the project and reduces this amount to zero percent b y the end o f the project approximately US$82 mill ion would be required in project funds to meet increased outlays in health spending at the province and district levels during the project period. During the project period to ensure that project grant funds are not used for ongoing health recurrent budget requirements o f the district, the total funds allocated to each district annually w i l l be reviewed b y the Joint Health Council, when approving the district grant allocation proposals. The proposals would clearly indicate of the use of project funds in each district and these w i l l be monitored.

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T o sustain these levels o f spending beyond the project period, government health spending o f many districts would have to increase b y 40% than what would be the case if current percentages o f local health spending to local government spending were maintained. One remedy might be to borrow additional amounts for a longer period, the feasibility o f which would be dependent on the terms of the credit. The post-loan risk o f a drop in spending unless the health share rose to 15% or higher would s t i l l persist and this would further heighten inter-sector competition for funds. An alternative would be an intra-province solution using special health taxes to cross-subsidize between well o f f and poor areas. While this may be feasible in East Kalimantan, in others i t could present political hurdles. Thus, in reality raising DAUs and to inject resources through other channels would appear to be the best alternative. The MOH would need to press the case for a linkage between DAUs and health conditions and service access. T o help the MOH in achieving this, ensuring increased health funding at the district level (based on the formula of 51,000 per capita) w i l l be a key condition and a key performance indicator o f the project. These increases w i l l be monitored annually through the development and insitutionalization o f district health accounts in the project provinces. The experience o f the previous two provincial health projects in reaching the goals o f increasing district health allocation, w i l l also be monitored closely and the projects targets w i l l be adjusted based on the lessons learned from these projects.

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Table 4.4: Recommended Package of Health Services and Curative Care for Poor Individuals (in 1999 prices")

Program Services Provided Coverage Total per District (pop 600,000)

EPI Basic Immunization 90% of infants 4,282,279,35 1

Lung Tuberculosis

Malaria

Dengue

Diarrhea

ARI

STD

Curative Care

MCH

NUTRITION Iron

Vitamin A

Iodine

School Health

PHN Family Planning Water and Sanitation IMCI

TOTAL

Per Capita

Hepatitis vaccination Pregnant women vaccination Elementary School (Grade I) Elementary School Grade VI) Case Finding Cure Rate

Case Finding

Larva control Mosquito control Case Finding

Fogging Abatisasi Environment manipulation Case finding

Case finding

Case finding

Basic Services to the Poor

K4 Birth Delivery by Health Staff Post Partum Care

Pregnant Women Coverage Child Coverage Child Coverage Lactating Mother Coverage Iodine Capsule Coverate Salt Monitoring Coverant Deworming Student Screening Coverage of Home Visit Active Participants

Sick Children (0-4)

90% of infants 90% of pregnant women 100% of Students (Gr 1) 100% of Students (Gr 2-6) 70/100,000 pop 91% Curative care for 20% poor 300/100,000 pop curative care for 20% poor 100 % of targeted vill. 100% of targeted vill.

curative care for 20% poor 50% of target 10% of target 10% of target 2811,000 pop curative care for 20% poor

curative care for 20% poor

curative care for 20% poor 20% of population

101100,000 pop

11/1,000 pop

1211,000 pop

85% of pregnant women 80% of pregnant women 805 of neonates

80% 100% 80% 100% 100% 100% of schools 100% 100% 100% 60%

80%

115,948,591

334,442,104

2,953,904,274

1,050,185,998

687,8 13,85 1

233,939,381

1,113,856,683

2,759,339,727

1,888,814,976

353,071,552

2,505,518,244 2,326,362,506

335,315,403 3,772,445,850

24,713,238,491

41189

Note: No inpatient

* at 2003 levels this would be valued at Rp. 51,000 Source: World Bank (1999).

Inefficiency i s controlled

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References

1, World Bank, 1999. “Indonesia - Health Strategy in a post-crisis, decentralizing Indonesia”. Report No. 21318.

2. Pradhan, M., A. Suryahadi, S. Sumarto, L. Pritchett, 2000. “Measurements o f Poverty in Indonesia: 1996,1999, and Beyond.” SMERU Working Paper.

3. Lanjouw, P., M. Pradhan, F. Saadah, H. Sayed, and R. Sparrow. 2001. “Poverty, education, and health in Indonesia: who benefits from public spending ?” Policy research worhng paper: 2739.

4. The World Health Report 2002. “Reducing risks, promoting healthy life.” World Health Organization.

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Annex 5: Financial Summary INDONESIA: Health Workforce and Services

Years Ending December 31 *

IMPLEMENTATION PERIOD I Year1 I Year2 I Year3 I Year4 I Year5 Year6 I Year 7

Total Financing Required Project Costs Investment Costs 1.1 16.1 18.8 27.4 24.2 19.9 0.0

Recurrent Costs 3.2 48.3 56.3 82.0 72.4 59.5 0.0 Total Project Costs 4.3 64.4 75.1 109.4 96.6 79.4 0.0

Front-end fee 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Financing 4.3 64.4 75.1 109.4 96.6 79.4 0.0

Financing IBR Dll DA 1.5 29.0 28.2 25.5 14.5 7.0 0.0 Government 2.8 35.4 47.0 84.0 82.1 72.5 0.0

Central 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Provincial 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Co-f i nanc iers 0.0 0.0 0.0 0.0 0.0 0.0 0.0 User FeeslBeneficiaries 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Project Financing 4.3 64.4 75.2 109.5 96.6 79.5 0.0

Notes: Differences due to rounding. * Figures represent annual amounts by calendar year.

Main assumptions:

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Annex 6: Procurement and Disbursement Arrangements INDONESIA: Health Workforce and Services

Procurement

Procurement Guidelines

1. Guidelines on Procurement Under IBRD Loans and IDA Credits (January 1995, revised January and August 1996, September 1997, and January 1999). Procurement o f services w i l l be done in accordance with the World Bank's Guidelines on Selection and Employment of Consultants by World Bank Borrowers (January 1997, revised September 1997, January 1999, and May 2002).

Procurement o f goods and works w i l l be carried out in accordance with the World Banks

Standard Bidding Documents

2. for project procurement. A model bidding document for National Competitive Bidding, a quotation solicitation form, and contract form for very small c iv i l works and goods, that are acceptable by the Bank, have been developed for use under the project. For consulting services, the Banks Standard Request for Proposals, sample evaluation report, and standard contracts w i l l be used.

The World Bank's standard bidding documents for goods and works w i l l be used, as appropriate,

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3. A General Procurement Notice (GPN) w i l l be published in the United Nations Development Business, announcing al l procurement o f goods and works on the basis o f International Competitive Bidding (ICB) and major consulting services to be procured under the project. The GPN w i l l be updated annually for a l l outstanding procurement over the l i fe time o f the project. Specific Procurement Notices for specific contracts for ICB and NCB for works and goods w i l l be advertised in at least one newspaper o f national circulation in the country. Invitation for Expression of Interests for all consulting assignments to firms w i l l be advertised in a newspaper o f national circulation and for assignments at and above US$200,000 per contract w i l l also be published in the Development Business. The use of Development Gateway (advertising electronically) i s encouraged and arrangements for i t w i l l be discussed during project launch workshop.

Summary of the Assessment of Agency's Capacity to Implement Procurement and Suggested Measures for Strengthening

4. available in the project file. This covered legal issues, project cycle management, organization and functions, support and control systems, record keeping, staffing, the general procurement environment, and overall risk assessment in accordance with the instructions issued by OCSPR.

A Procurement Capacity Assessment Report (PCAR) was conducted for the project and i s

5. reasons: (i) the main bulk of procurement activities w i l l be in the target provinces, districts and the universities. However, there i s limited experience in the provinces and no experience in the districts and universities with Bank financed projects; (ii) there are inconsistencies between Keppres 18/2000 and the Bank Guidelines; (iii) there are limited staff available with sufficient procurement capacity in general; and (iv) the general procurement environment i s weak and collusive practices have been found in past projects. Sanctions for collusive practices are rarely enforced in any way that deters further collusion;

The assessment has rated the proposed project's procurement risk as "high" for the following

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and (v) the new decentralization laws and the rising power of districts w i l l place added pressure on project staff to favor local f i r m s and individuals even though these are expressly forbidden by project rules.

6. The following actions to mitigate “high“ risk are included in the action plan:

(a) Capacity enhancement by adding capacity -- Project Implementing Units, which include an Executive Secretariat at the Central, Provincial and Districts levels, w i l l be established. This would include the appointment o f a qualified Procurement Specialist at the central level and appointment of procurement officers at the provincial and district levels;

(b) Procurement Training -- A Procurement and Financial Management Training for Trainers was conducted on January 13-16,2003 for procurement and FM officers for the Central and Provincial Units. This training was arranged by M O H and the Bank provided staff as trainers. Follow-up training i s planned to be conducted at the provincial level for the Districts tentatively in June - July 2003. A Project Training Plan has been established which includes: (i) Annual Procurement TrainingNorkshop at the beginning o f the 4th quarter o f each year, and (ii) Procurement training provided by Bank staff prior to effectiveness, and during supervision; and

(c) Enhanced planning and controlling mechanisms -- The draft procurement plan for the overall project and the first year implementation has been prepared and finalized with the implementing units. The updated Procurement Plan for the second and following fiscal year w i l l be submitted to the Bank annually before disbursements can be initiated. Clarifications on NCB procedures are included in the Loan Agreement. The draft Project Management Manual (PMM) was prepared to document procedures to be followed by all implementing units, covering job descriptions, procurement, financial management, record management, fixed assets and inventory management, bookkeeping, reporting, monitoring and evaluation, and the mechanism for the FM system. The Procurement section includes: (i) Procurement methods and procedures that reflect the clarifications/modifications on NCB and N S procedures, acceptable b y the Bank; (ii) TOR o f procurement specialist/officers; (iii) Standard Bidding Documents, RFP, and RFQ form for NS; and (iv) Reporting requirements complete with standard reporting forms in line with the FMR. Standard Bidding Documents and Standard RFP w i l l be used for the project and the Bidding Documents and RFPs for the first year implementation should be ready before Project Effectiveness. For Project Organization and Staffing, the organizational structure has been established.

Clarifications on NCB of Keppres 18/2000 Procedures to be Acceptable by the Bank

7. The procedures to be followed for NCB shall be those set forth in Presidential Decree No. 18/2000 o f the Republic o f Indonesia with the clarifications and modifications described in the following paragraphs required for compliance with the provisions o f the “Guidelines for Procurement under IBRD Loans and IDA Credits” (the Guidelines). These clarifications w i l l be included in the Procurement Section of the Credit Agreement:

(a) registration i s required, bidders (1) shall be allowed a reasonable time to complete the regstration process, and (2) shall not be denied registration for reasons unrelated to their capability and resources to successfully perform the contract, which shall be verified through post-qualification,

Repistration: (i) bidding shall not be restricted to pre-registered firms; and (ii) where

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(b) (not for simple goods and works): (i) eligible bidders (both national and foreign) shall not be denied pre-qualification; and (ii) invitations to pre-qualify for bidding shall be advertised in at least one widely circulated national daily newspaper a minimum o f 30 days prior to the deadline for the submission o f pre-qualification applications.

Pre-qualification: When pre-qualification shall be required for large or complex works

(c) required to form a jo int venture or to sub-contract part of work or part o f the supply o f goods as a condition o f award o f the contract.

Joint Ventures: A bidder declared the lowest evaluated responsive bidder shall not be

(d) regulations issued by a sectoral ministry, provincial regulations and local regulations, which restrict national competitive bidding procedures to a class o f contractors or a class o f suppliers shall not be applicable to procurement procedures under the Credit or the Loan.

Preferences: (i) No preference o f any kind shall be given to national bidders; and (ii)

(e) national daily newspaper allowing a minimum o f 30 days for the preparation and submission o f bids and allowing potential bidders to purchase bidding documents up to 24 hours prior the deadline for the submission o f bids; (ii) bid documents shall be made available, b y mail or in person, to al l who are wil l ing to pay the required fee; (iii) bidders domiciled outside the area/district/province of the unit responsible for procurement shall be allowed to participate regardless of the estimated value o f the contract; and (iv) foreign bidders shall not be precluded from bidding. If a registration process i s required, a foreign firm declared the lowest evaluated bidder shall be given a reasonable opportunity for registering.

Advertising: (i) Invitations to bid shall be advertised in at least one widely circulated

(f) or bank guarantee from a reputable bank.

Bid Security: Bid security, at the bidder’s option, shall be in the form o f a letter o f credit

(8) the deadline for submission of bids, and if bids are invited in two envelopes, both envelopes (technical and price) shall be opened at the same time; (ii) Evaluation of bids shall be made in strict adherence to the criteria declared in the bidding documents and contracts shall be awarded to the lowest evaluated bidder; (iii) bidders shall not be eliminated from detailed evaluation on the basis of minor, non-substantial deviations; and (iv) no bidder shall be rejected merely on the basis o f a comparison with the owner’s estimate and budget ceiling without the AssociationBank’s prior concurrence.

Bid Opening and Bid Evaluation: (i) Bids shall be opened in public, immediately after

(h) Reiection o f Bids: (i) All bids shall not be rejected and new bids solicited without the AssociationBank’s prior concurrence; and (ii) when the number o f responsive bids i s less than three, rebidding shall not be carried out without the AssociationBank’s prior concurrence.

Procurement methods (Table A)

8. Procurement Methods are summarized in Tables A and A.1.

(a) Procurement of Civil Works

Considering the decentralized nature of this project and the wide spread location and variety o f activities at the different levels o f Implementing Units, the following procurement method arrangements are proposed:

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International Competitive Bidding (ICB): Construction and rehabilitation o f hospitals with contracts at and above US$200,000 per contract w i l l follow ICB procedures. N o pre-qualification of bidders i s proposed for any o f the ICB works procurement. A margin o f preference w i l l be granted to domestic contractors.

National Competitive Bidding (NCB): Construction and rehabilitation o f hospitals, health centers and learning facilities below US$200,000 per contract w i l l follow NCB procedures. Foreign contractors f rom eligible countries shall, if they are interested, be allowed to participate without being required to associate or formjoint ventures with local contractors. The aggregate amount for works procured through NCB i s US$2,570,000. This includes an estimated US$l,OOO,OOO under the District Funding Allocation demand-driven subprojects for 47 districts. Under these allocations, annual aggregates w i l l be reviewed as part o f the Borrower’s annual procurement plans for each project year from FY04 until project completion.

Procurement of Small Works (PSW): Rehabilitation and repair o f hospitals, health centers, learning and accommodation facilities below US$25,000 per contract w i l l be procured under lump-sum, fixed-price contracts awarded on the basis o f quotations obtained from three (3) qualified domestic contractors in response to a written invitation. The invitation shall include a detailed description o f the works, including basic specifications, the required completion date, a basic form o f agreement acceptable to the Bank, and relevant drawings, where applicable. The award shall be made to the contractor who offers the lowest price quotation for the required work, and who has the experience and resources to complete the contract successfully. The aggregate amount for PSW i s US$820,000. This includes an estimated US$720,000 under the District Funding Allocation demand-driven subprojects for 47 districts. For procurement of small works in the Districts through the District Funding Allocation demand-driven subprojects, annual aggregates w i l l be reviewed as part o f the Borrower’s annual procurement plans for each project year f rom FY04 until project completion.

(b) Procurement of Goods

Considering the decentralized nature of this project and the wide spread location and variety o f activities at the different levels of Implementing Units, goods including equipment, medical supplies, drugs, furniture, and office equipment and supplies to be financed by the project w i l l be procured under the following procedures:

International Competitive Bidding (ICB): Procurement o f goods with values at and above US$200,000 per contract w i l l follow I C B procedures.

National Competitive Bidding (NCB): Procurement o f goods below US$200,000 per contract w i l l follow N C B procedures which are acceptable to the Bank and where any interested international suppliers shall be allowed to participate. The aggregate amount for goods procured through NCB i s US$11,170,000. This includes an estimated US$8,900,000 under the District Funding Allocation demand-driven subprojects for 47 districts. Under these allocations annual aggregates w i l l be reviewed as part o f the Borrower’s annual procurement plans for each project year f rom FY04 until project completion.

National Shopping (NS): Procurement o f off-the-shelf goods, e.g., simple office equipment and supplies, which are easily available in the local market, with estimated costs o f less than US$25,000 per contract, w i l l follow National Shopping. The aggregate amount for goods procured through NS excluding the goods under the District Funding Allocation subprojects i s US$6,000,000. This includes

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an estimated US$5,500,000 under the District Funding Allocation demand-driven subprojects for 47 districts. For the procurement of goods through N S in the Districts through the District Allocation Fund demand-driven subprojects, annual aggregates w i l l be reviewed as part o f the Borrower’s annual procurement plans for each project year f rom FY04 until project completion. National Shopping w i l l be conducted on the basis o f a comparison o f at least three written price quotations as stated in Articles 3.5 and 3.6 o f the Guidelines on Procurement under IBRD Loans and IDA Credits.

Direct Contracting (DC): Procurement o f medical education text books and teaching materials that are o f a proprietary nature and obtainable f rom only one source w i l l follow Direct Contracting with prior approval by the Bank. Based on present estimates. The aggregate amount for D C i s US$770,000. This includes an estimated US$500,000 under the District Funding Allocation demand-driven subprojects for 47 districts. Under these allocations annual aggregates w i l l be reviewed as part of the Borrower’s annual procurement plans for each project year f rom FY04 until project completion.

(c) Consultant Services

Quality and Cost Based Selection (QCBS): Consulting services for construction design and supervision, project management, studies and researches, surveys, and capacity building through selected training assigned to firms, w i l l follow the QCBS method.

Selection Based on Consultant’s Qualifications (CQ): CQ method may be used to select firms with estimated contract value to cost less than US$lOO,OOO equivalent per contract. The aggregate amount for CQ i s US$6,860,000. This includes an estimated US$1,860,000 under the District Funding Allocation demand-driven subprojects for 47 districts. Under these components annual aggregates w i l l be reviewed as part o f the Borrower’s annual procurement plans for each project year f rom FY04 until project completion.

Least-Cost Selection (LCS): This method w i l l be used for selection o f audit f i r m s for project audits, with contracts estimated to cost less than US$lOO,OOO. The aggregate amount for LCS i s US$150,000, which includes contracts under the District Funding Allocation demand-driven subprojects. Under these allocations annual aggregates w i l l be reviewed as part o f the Borrower’s annual procurement plans for each project year f rom FY04 until project completion.

Individual Consultants (IC): Individual consultants for project implementation including procurement, financial management, coordinators, c iv i l works engineers, and technical specialists to prepare major bidding documents and technical specifications, and medical specialists, w i l l be contracted to Individual Consultants following the provisions in clauses 5.1 to 5.4 o f the Consultant Guidelines wherein i t i s stated that individual consultants are selected on the basis o f their qualifications for the assignment through comparison o f qualifications o f at least three candidates. However, in exceptional cases where sole source selection i s justified, the Borrower could select the consultant on sole source basis with Bank’s prior approval. The aggregate amount for I C i s US$5,360,000. This includes an estimated US$1,860,000 under the District Funding Allocation demand-driven subprojects for 47 districts. Under these allocations annual aggregates w i l l be reviewed as part o f the Borrower’s annual procurement plans for each project year f rom FY04 until project completion.

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Other Expenditure Categories (Table A)

9. health work force development. Expenditures for training materials (printing), rental facilities, transportation, food and board, tuition for trainees, and study tours w i l l be conducted using GO1 procedures acceptable to the Bank. Content o f training, estimated costs for workshops and l i s ts o f trainees w i l l be approved by the Bank before any expenditure occurs. Training o f MOH, MONE, and provincial, and district level health staff, including those who have responsibilities for project implementation, w i l l be provided in country and abroad. Selection o f training courses, estimated cost, and l i s t of candidates shall be prior reviewed and agreed by the Bank. The l i s t o f candidates for study tours and the estimated cost shall be prior reviewed and agreed b y the Bank. The amount for Training in Table A, US$32.82 million, includes training activities at the District level through the District Funding Allocation with an estimated amount o f US$18.62 million.

Training: Training i s an integral element of the project's institutional capacity building and

10. Incremental Operating Costs: These include both: (i) costs to cover incremental costs incurred by the Implementing Units at the Central, Provincial and District Level for project staff travel, per diem, communications, consumables, web page establishment and maintenance, advertisement o f procurement/selection processes, printing and publications of Project information, and rental of meeting facilities, but excluding project staff salaries, which expenditures would not have been incurred absent the Project; and (ii) operational costs related to service provision in district health facilities under the District Funding Allocation. These expenditures w i l l use GO1 procedures acceptable to the Bank. The allocated amount of US$35.4 mill ion in Table A for incremental costs includes an estimated amount of US$33.52 mill ion for operational costs at the District Level under the District Funding Allocation.

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Table A: Project Costs by Procurement Arrangements (US$ million equivalent)

Procurement Method ‘ Expenditure Category ICB NC8 Other’ N.B.F.

Civil Works * 3.19 2.57 0.82 0.00

Total cost 6.58

Goods *

I 3.95 I 13.74 I 91.38 I 320.30 I 429.37 I

(2.95) (2.26) (0.80) (0.00) I (6.01) 0.76 11.17 6.77 0.44 I 19.14

I I (3.56) I (12.98) I (89.06) I (0.00) I (105.60) I 1/ Figures in parenthesis are the amounts to be financed by the Bank Loan. All costs include contingencies. 21 Includes civil works and goods to be procured through national shopping, consulting services, services o f contracted staff o f the project management office, training, technical assistance services, incremental operating costs, and project activities under the District Funding Allocations. * Includes the following estimated amounts for District Funding Allocation demand-driven subprojects: Civil Works, US$3.72 million; Goods, USS14.90 million; Consultant Services, US$3.72 million; Training, US$18.62 nillion; and Incremental Operating Costs, US$33.52 million. Under these allocations annual aggregates wil l be reviewed as part o f the Borrower’s annual procurement plans for each project year from FY04 until project completion.

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Table A1 : Consultant Selection Arrangements (optional) (US$ million equivalent)

B. Individuals

Total

(3.20) (0.00) (0.00) (0.15) (6.86) (0.00) (0.00) (10.21) 0.00 0.00 0.00 0.00 0.00 5.36 0.00 5.36 (0.00) (0.00) (0.00) (0.00) (0.00) (5.36) (0.00) (5.36) 3.20 0.00 0.00 0.15 6.86 5.36 0.00 15.57

(3.20) (0.00) (0.00) (0.15) (6.86) (5.36) (0.00) (15.57) 1\ Including contingencies

Note: QCBS = Quality- and Cost-Based Selection QBS = Quality-based Selection SFB = Selection under a Fixed Budget LCS = Least-Cost Selection CQ = Selection Based on Consultants’ Qualifications Other = Selection of individual consultants (per Section V of Consultants Guidelines), Commercial Practices, etc. N.B.F. = Not Bank-financed Figures in parentheses are the amounts to be financed by the Bank Loan/Credit.

Prior review thresholds (Table B) 12. The thresholds for the Bank’s review are summarized in Table B.

Contracts for Civ i l Works with estimated contract value at or above US$lOO,OOO equivalent (all ICB and NCB with contracts at or above US$lOO,OOO) and the first contract for NCB with estimated contract value o f less than US$lOO,OOO by each of the Implementing Units, w i l l be subject to prior review.

Contracts for Goods with estimated contract value at or above US$lOO,OOO equivalent (all ICB and NCB with contract at or above US$lOO,OOO) and the f i rs t contract for NCB with estimated contract value o f less than US$lOO,OOO by each o f the Implementing Units, w i l l be subject to prior review.

Contracts for Consulting f i r m s valued at or above US$lOO,OOO equivalent (all QCBS) and the first contract for CQ and LCS b y each implementing units w i l l be subject to prior review.

Contracts for Individual Consultants valued at or above US$50,000 equivalent and the f i rs t contract by each implementing units w i l l be subject to prior review.

All TORS for consultants services to f i r m s and individual consultants, TORS and l i s t o f candidates for overseas training and study tours, w i l l need the Bank’s prior agreement.

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Table B: Thresholds for Procurement Methods and Prior Review ’

Expenditure Category I. Works

!. Goods

Contract Value Threshold

(US$ thousands) 200andabove

100 to 200 25 to 100

below 25 200 and above

100 to 200 25 to 100

below 25 All value

1. Consultant Services:

Q. DFA - Beneficiary Subcxoiects

Firms: US$lOO and above

Below US$lOO

Below US$100

Individuals: US$50 and above

Below US$50

*) see note

Procurement Method

ICB NCB NCB

PS w ICB NCB NCB

N S DC

QCBS CQ

LCS

I C IC

*) see note

Contracts Subject to Prior Review (US$ millions)

Yes (3.19) Yes (0.2)

First contract by each implementing unit (0.4)

No Yes (0.76) Yes (1.2)

First contract by each implementing unit (0.4)

No All (0.3) Yes (3.4)

First contract by each implementing unit (0.3) First contract by each

implementing unit (0.1)

Yes (3.1) First contract by each

implementing unit (0.1) *) see note

I Total value of contracts subject to prior review: I US$13.45 million

*) Note: Procurement of Works, Goods, and Consultants Selection under the DFA sub-projects wil l be subject to the same procurement methods and thresholds as in the above table. The annual procurement plans of the demand driven DFA subprojects wi l l be reviewed by the Bank as a condition of disbursement.

Overall Procurement Risk Assessment: High

Frequency of procurement supervision missions proposed: Once every 6 months (includes special procurement supervision for post-review/audits once a year).

Sampling ratio of contracts subject to Post Review: 1 of every 5 contracts or 20%.

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Procurement Planning

13. monitored and implemented in accordance with the Bank’s guidelines and the project Legal Agreement. The aggregate amount for each procurement method i s discussed agreed and recorded in this annex as well as in the project’s legal documentation. Should there be a need to change the procurement method or the aggregate amount for a particular contract or method before the annual review o f the procurement plan during project implementation, the Borrower shall seek the Bank‘s prior approval. The draft procurement plans for the first year implementation have been prepared and finalized prior to Negotiations.

The Procurement Plan shall be reviewed and approved annually b y the Bank and i t shall be

Procurement Action Plan to mitigate risks

14. included in the Procurement and Financial Management Action Plan provided in Attachment 2.

The action plan to mitigate the “high” r isks based on the procurement capacity assessment are

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Disbursement

Expenditure Category

Allocation of loankredit proceeds (Table C) 1. I t i s expected that the IBRD loan o f US$31.1 mill ion and the IDA credit of US$74.5 mill ion would be disbursed over a period o f approximately five years. The closing date i s December 31, 2008. The allocation of loan and credit proceeds according to expenditure category i s outlined in Table C.

Loan Credit Financing Percentage Amount in Amount in US$million US$million

2. available for payments made for eligible expenditures incurred after February 1,2003.

To ensure timely start-up o f the project, retroactive financing o f up to US$5.0 mill ion would be

Table C: Proposed Allocation of Credit and Grant Proceeds

(*) Inclusive o f a l l c iv i l works, goods, consultant services, training and operational costs that constitute the block funding under DFA.

3. Financial Management Report based Disbursement

In order to facilitate disbursements f rom the Loadcredi t a Special Account denominated in US dollars w i l l be opened in the Central Bank or a commercial bank acceptable by the Bank under the name o f Ministry o f Finance. The Bank’s disbursement to the Special Account would be for the six months projected expenditures as reported in the FMR. The management o f the Special Account would essentially be under the responsibility o f the CPCU. Disbursements f rom the Bank Loadcredi t would be made to the Special Account based on the submission o f the FMR prepared b y the CPCU. All documentation for the expenditures as reported in the FMR would be retained at the relevant CPCU and shall be made available to auditors for the annual audit and to the Bank during the supervision missions.

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Attachment 1

Financial Management and Disbursement

A. Risk Analysis

Below are the financial management risks, and how they w i l l be addressed as per the lessons leamed from the implementation and monitoring of PHP-I:

(i) Project Management Manual (PMM) and District Fund Allocation Manual (DFAM) play an important role in project implementation, especially in anticipating potential problems. The P M M w i l l include organizational structure, j ob description, budgeting, procurement, and guidelines for record keeping. Financial Management Report (FMR) w i l l constitute the basis for disbursement, and w i l l cover preparation and recording o f financial statements, fixed assets management, intemal control, monitoring and evaluation mechanism for the project management system, auditing arrangements and governance and disclosure requirement for the project. DFAM describes funding allocation, proposal preparation process, organization structure and job descriptions, f low o f funds and monitoring and evaluation, including the mechanism for interim audit.

(ii) Since P M M and DFAM are meant to be followed b y al l project coordination and implementation staff, training on the PMM and DFAM wi l l also be carried out for proper project implementation. The training i s expected to cover both procurement and financial management, including the preparation o f FMR for the relevant CPCU, PCIU and DIU staff.

(iii) The selection and proper compensation o f the Executive Secretary(ies), Project/Sub-Project Manager(s) and treasurer(s) are also critical for the preparation and implementation o f P M M and DFAM.

(iv) Supervision o f project implementation at the DIU level i s equally important in instituting proper financial management practices.

B. Strengths and Weaknesses

Strengths

The design and implementation arrangements of the project (organization structure, proposal preparation, f low o f fund, accountability process) i s familiar to M O H due to prior experience with Provincial Health Projects I and 11, and ADB's Decentralized Health Services I Project.

Especially for DGHE, MONE, the design o f the project i s also similar to three other Bank-funded projects, namely Global Development Learning Network Project, which has just been signed, Development of Undergraduate Education Project, which just closed, and the ongoing Quality Undergraduate Education Project.

Weaknesses

Please refer to Risk Analysis.

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C. Implementing Entity

Please refer to Attachment 2 of Annex 2 (Project Management Structure).

D. Flow of Funds

The Project Manager at the central level and provincial levels shall be responsible for procurement and authorizations o f expenditures under their components in accordance with the agreed budgets under the existing government procedures. When expenditures are due for payment, they w i l l submit payment requests to the relevant Treasury office (KPKN) who w i l l issue payment remittance order (SPM) to Central Bank or commercial bank acceptable b y the Bank to credit the payee’s accounts at the latter’s respective banks and to debit the project Special Account for the Bank’s portion.

Immediately after credit effectiveness, DG Budget shall issue a circular letter to the relevant K P K N Offices providing guidelines and criteria for eligible project expenditures in accordance with the Credit Agreement. The channeling o f fund to the districts under the District Funding Allocation (DFA), would be made through the Provincial’s budget mechanism which allow better supervision of project implementation and consistent with PHP I and II. Each district would prefinance expenditures in accordance with the agreed DFA which w i l l then be accounted to the PCIU on monthly basis using FMR. Once verified, the PCIU w i l l forward them to K P K N to reimburse DFAs expenditures f rom the Special Account or directly f rom the Bank i f practicable. A summary o f the proposed flow o f funds agreed at negotiations provided in Attachment 3 o f this Annex.

E. Organization and Staffing

M O H as one of the proposed implementing agencies, has experience with Bank financed projects through Health IV, Health V, PHP I and II. However, Jambi and West Sumatera provinces and their districts, especially the DHOs and PHOs have no experience with Bank financed projects. Moreover most o f the proposed staff in CPCU, PCIU and DIU have not been trained and experienced in project management (including procurement and financial management). This limitation i s proposed to be addressed by: (i) providing guidelines and criteria for the CPCU, PCIU and DIU staff; (ii) requiring al l the CPCU, PCIU and DIU staff who are going to be involved in the project to take government project management and treasurer (administration) training before the Loadcredi t becomes effective; (iii) involvement o f the proposed project management and executive secretariat a in the preparation of P M M and DFAM (using PHP I and II as the basis); (iv) providing project management training for trainers including, procurement, internal control, record management, fixed assets management and reporting system based on the PMM and DFAM; and (v) ensuring annual training on the PMM and DFAM conducted for every staff involved in the project implementation.

Role o f the Project Manager at the central level i s not significant since most o f the management work w i l l be handled by Executive Secretariat Team who w i l l assist the Project Director. However, the role o f the Project Manager in provinces and districts i s crucial where most project activities are implemented. TORS for each member o f the teams (including the Executive Secretariat) w i l l draw on the definition o f roles and responsibilities set for PHP-I and PHP-II.

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Position Project Manager

Treasurer

Executive Secretary

Planning Officer

Requirements * Staff of the agency

A minimum University degree (S 1) A minimum staff level m / c

* Attainment o f project management course certificate or equivalent At least five years work experience in government projects Staff o f the agency A minimum three year diploma (D3)

* A minimum staff level m/a . Attainment o f treasury course certificate or equivalent

At least five years work experience in government projects A minimum University degree (SI), preferable in management Attainment o f Project Management Course Certificate or equivalent At least five years work experience in a project management team as a team

A minimum three-year diploma (D3) preferable in public health At least two years working experience in government project as a planning staff or

*

coordinator .

consultant

Detailed job descriptions and qualifications w i l l be covered in the PMM.

Financial Officer

Procurement Specialist (only in CPCU level)

Procurement Officer

Monitoring and Evaluation Officer

F. Accounting Policies and Procedures

A minimum three-year diploma (D3), preferable in accounting * Attainment o f Treasury Course Certificate . At least three years workmg experience in government project as a financial or treasurer staff or consultant . A minimum University degree (S l), preferable in civ i l engineering, economics, finance or similar degree from a recognized university

At least five years working experience in World Banks financed project * A minimum three-year diploma (D3) * At least two years working experience in the procurement, preferable in World Banks financed project. . A minimum three-year diploma (D3) preferable in public health * At least two years working experience in government project as a monitoring and evaluation staff or consultant

Accounting policies and procedures for this project w i l l follow the government procedures Following are the main procedures.

1. Budgeting;

Project budget i s considered to be the development budget. Preparation o f the budget i s initiated b y an effort f rom the planning bureau under MOH at the central level. The objective o f the effort i s to obtain early indication on the next year program. This effort starts in February through June with also putting into account the budget circular f rom DG Budget, and M O F containing guidelines to be used for costing operational expenses. The budget proposals are submitted to the Director General (DG) Budget in June o f the year preceding the budget year. Following receipt o f budget proposals, negotiations take place between the DG Budget and M O H on costing issues. DG Budget allocates budget ceilings in

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September. MOH then proceeds to prepare their budget in detail, CPCU specifically handling the project budget. The draft budget i s then submitted to DG Budget and the Bappenas, and requires clearance from both agencies. DG Budget advises Bappenas on the total ceiling for the development budget. Following this, consultations take place between Bappenas and the M O H to finalize the development budget within this ceiling. The final budget for the project w i l l then be ready for submission to the World Bank as the Annual Work Plan o f the project. The budget of the country i s presented to the Cabinet in September and following Cabinet approval i t i s presented to Parliament.

Budget monitoring systems within the project w i l l be conducted by CPCU through FMR and the agreed supervision/training schedule. CPCU and PCIU w i l l visit DIU periodically for monitoring purposes. This mechanism builds in the project for FMR confirmation and ensures that FMR i s reliable for monitoring purposes. This mechanism also enables early indication on any problem, especially shortcomings in budget execution processes such as under-spending o f budget allocations

2. Expenditure process

Activities

Based on the assigned budget, CPCU, PCIU would be able to request for an advance (maximum o f a month o f projected cash need) f rom KPKN. This advance i s maintained on an impress fund basis. The advance then would be able to be used by CPCU, PCIU for the project activities. The advance should be accountable to K P K N in a month, otherwise the amount available for next month advance w i l l be reduced by KPKN. The accountability submitted to K P K N in the form o f a payment request (SPP) after reviewed by the treasurer and project manager for i t s eligibility to the budget and sufficient supporting documentation. The SPP w i l l be reviewed b y KPKN (for i t s eligibility to the budget and documentation completeness) and followed by issuance o f SPM (payment remittance orders) to the Central Bank or commercial bank acceptable to the Bank. Central Bank or commercial bank then w i l l transfer the fund to the CPCU’s bank account. Each SPP should at least 90 percent o f the advance amount, otherwise the amount o f the advance approved for the coming month w i l l be reduced based on the project ability to absorb fund. In addition to that, excessive fund available should be return to KPKN. At the end o f the fiscal year, the unused fund should be return to KPKN.

Sumlier/Consultant Contracts

Payment made for procurement and consultants selected i s paid based on the payment arrangement on the contract with supplier and consultants. The payment transferred directly to the respected vendor or consultant. When CPCU or PCIU enter into a contract agreement, for payment, CPCU or PCIU prepare SPP to K P K N based on the payment arrangement on the contract. The SPM then w i l l be issued by KPKN to the Central Bank or commercial Bank acceptable to the Bank and the payment transferred directly to the respected vendor or consultant.

DIU w i l l enter into a contract with Project Manager in province level for implementation of District Fund Allocation. Slightly different from the above, when DIU enters into a contract agreement, for payment, DIU makes the transfer directly to the respected vendor or consultant. The fund (maximum for four months activities) for the DIU activities (including contract) was available on DIU account.

3. Record Keeping

CPCU, PCIU and DIU w i l l maintain a general cashbook, supported by a petty cash book, bank book, tax book and budget monitoring books for each Tolok Ukur and MAK (government chart o f

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account). All cash transactions (cash basis) i s recorded in the general cashbooks and i t ’ s respected supporting books b y CPCU, PCIU and DIU treasurers. All books are closed on a monthly basis and subject for review b y CPCU, PCIU and DIU Project Manager. Reports on cash and bank monthly positions o f the project to the project manager’s supervisor are compulsory for CPCU, PCIU and DIU. KPKN also maintains a budget realization records card specifically for the project. The card i s supported b y advance and contract monitoring cards (one cards for each contract). Funds for DIU based on District Fund Allocation are considered as a contract in KPKN level, therefore the card i s exists for each DIU for monitoring.

4. Reporting

To enable budgeting and report preparation according to component and expenditure categories efficiently, harmonization between project component and expenditures category (as per Loadcredi t agreement) with the GO1 chart o f accounts (Mata Anggaran Keluaran- MAK and Tolok Ukur) i s prepared as part of the Project Management Manual (PMM) to be issued by Secretary General, MOH. CPCU, PCIU and DIU w i l l be required to record their expenditure and submit quarterly report. The quarterly report w i l l be used as a basis for their contract disbursement. The quarterly report w i l l indicate (i) sources and use o f fund (ii) bank reconciliation and (iii) six months forecast o f fund required. All reports received f rom PCIU and DIU w i l l be compiled by CPCU in an FMR format acceptable by the Bank and submitted in quarterly basis to the Bank through MOF. The FMR w i l l be used as a basis o f disbursement. The quarterly report i s accumulated annually for annual audit purposes.

G. Project Management Manual (PMM)

The P M M w i l l document the system and procedures to be followed by CPCU, PCIU and DIU staff who involved in the project to ensure that the project has sound financial management practice. The PMM w i l l include organization structure, job description, budgeting, procurement, guidelines for record keeping, FMR preparation and i t s use for the disbursement based, financial statements preparation, record and fixed assets management, internal control, monitoring and evaluation mechanism for the project management system, auditing arrangements and governance and disclosure requirements for the project.

DFAM wi l l document the description on the District Fund Allocation, organization structure and the j ob description specifically dealing with District Fund Allocation, District Fund Allocation Proposal preparation process, F low of Fund and Monitoring and Evaluation (including the mechanism for interim audit). An outline o f the PMM and DFAM i s plan to be discussed with the proposed CPCU, PCIU and DIU staff during the Procurement and Financial Management training in January 2003.

H. Internal and External Audit

Internal Audit

MOH and MONE have their owned internal audit unit (IG) who has a right to conduct an audit assignment to the project. The IG mostly conducts operational audits to al l units under MOH and MONE, including Loandcredits financed by donor agencies.

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External Audit

Interim Audit

As part o f the project control and monitoring, a requirement to have an interim audit for the District Fund Allocation implementation i s set for the project. The TOR for the assignment has been agreed with the CPCU during the negotiations. The audit shall be conducted b y auditor acceptable by the Bank.

Annual Audit

The proposed project audits w i l l be based on annual project accounts to be prepared based on the quarterly FMRs. Auditors shall audit the CPCU, PCIU and DIU accounts, and w i l l submit their reports to the Auditors’ head office for consolidation. CPCU shall prepare the consolidated project account including special account and SOE, based on FMR, for audit by the Auditors head office. The annual audit reports shall be furnished to the Bank no later than six months after the end o f the government fiscal year. The audit w i l l be conducted in accordance with the Terms o f Reference provided to the government and Audit Manual for World Bank financed project (EAP, July 1998). The auditor w i l l also audit the attainment o f objectives according to the agreed performance indicators.

In support to the transparency effort, the Bank would l ike to have an agreement with MOH and M O N E on the mechanism for public (including media and NGO) access to the annual audit report o f the project. The mechanism has been agreed at negotiations. After the auditor issues the annual audit report, M O H and M O N E w i l l be required to provide public access read and comment on the audit report.

I. Reporting and Monitoring

Financial Monitoring Report (FMR). The FMR format would cover: (i) Financial Report, (ii) Output Monitoring Report, and (iii) Procurement Management Report, which includes the following documents:

(i) Financial Report Report 1-A Report 1-B Report 1-C Project Cash Forecast Report 1-D Special Account Statement Report 1-E Report 1-F Report 1-G

Project Sources and Uses o f Funds Cumulative Use o f Funds by Project Activity

Disbursements and Expenditures Status for Loan Fund Summary Statement Expenditures for Contract subject to Prior Review Summary Statement Expenditures for Contract NOT subject to Prior Review

(ii) Output Monitoring Report Report 2-B Output Monitoring Report (Unit o f Output by Project Activity)

(iii) Procurement Management Report Report 3-A Report 3-B Report 3-C Report 3-D

Procurement Process Monitoring (Goods and Works) Procurement Process Monitoring (Consultants’ Services) Contract Expenditure Report (Goods and Works) Contract Expenditure Report (Consultants’ Services)

The FMR has to be submitted to the Bank on a quarterly basis within 45 days o f the quarter end

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starting with the submission of only the planning part o f the report, including Report l-E Project Cash Forecast for the amount o f the initial deposit required on the f i r s t six months o f the project implementation.

J. Information Systems

No computerized accounting system i s available in the project level. The Project Management Reports w i l l be prepared by the CPCU using Microsoft Excel, and the CPCU w i l l provide the format to be used by both PCIU and DIU. The report w i l l be sent in the form o f diskette by post or with fi le when internet access i s available to the CPCU. The CPCU w i l l compile the report for submission to the Bank.

K. Disbursement Arrangements

In order to facilitate disbursements from the Loadcredi t a Special Account denominated in U S dollars w i l l be opened in the Central Bank or commercial bank acceptable to the Bank under the name o f Ministry o f Finance, Republic of Indonesia. The maximum ceiling o f this account w i l l be discussed with the Implementing Unit and M O F but w i l l be proposed to be equivalent to about six months average disbursements in the peak period. The management o f the Special Account would essentially be under the responsibility o f the CPCU. Disbursements from the Bank Loadcredi t would be made to the Special Account based on the submission o f the F M R prepared by the CPCU. All documentation for the expenditures as reported in the FMR would be retained at the relevant CPCU and shall be made available to auditors for the annual audit and to the Bank during the supervision missions. The Bank’s disbursement would be for the six months projected expenditures as reported in the FMR.

L. Financial Management Action Plan

The Procurement and Financial Management Action Plan i s provided as Attachment 2.

M. Supervision Plan

This project i s expected to be supervised at least twice a year. Especially during the first year o f project implementation, additional time w i l l be needed for project supervision to ensure smooth implementation. The knowledge available in the Secretary General, M O H and Directorate of Higher Education, M O N E from the previous projects i s also expected to be utilized for supervision. The supervision i s expected to be coordinated with the CPCU and PCIU own supervision and in conjunction with PHP-I and PHP-II. The supervision plan including i t s strategy ( s k d l mix, etc.) w i l l be covered in the PMM.

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Attachment 2

Procurement and Financial Management Action Plan

Action Plan ~~

A. Project Organization and Staffing 1. An organization structure proposal should be initiated and discussed between M O H and MONE, Higher Education DG

2. L i s t of candidates of Procurement and Financial Officers at all level that are acceptable to the Bank. 3. Establishment o f all Project Implementing Units which include an Executive Secretariat at the Central, Provincial, Districts levels and appointment o f all ProjecVSub Project Manager should be established. This would include: (i) the appointment o f a qualified Procurement Specialist, Financial Officer at the central level and appointment o f procurement and financial officers at the provincial and district level; (ii) information on experiences in handling donor financing project; and (iii) history o f project management and or treasury training taken. B. Project Management Manual (PMM) and Financial Monitoring ReDort (FMR) 4. A Manual to document procedures to be followed by all the implementing unit, covering job description, procurement, financial management, record management, fixed assets and inventory management, bookkeeping, reporting (FMR), monitoring, evaluation mechanism for the FM system, The Procurement section should include: 0 Procurement methods and procedures that reflect the clarifications/modifications on NCB and NS procedures acceptable by the Bank

TOR of procurement specialist/officers

Model bidding documents, RFP, and RFQ form for N S

5. FMR format

Expected Output

Proposed Organization Structure

Final Organization Structure List of proposed Financial Management staff o f the project (at all level) Decree on the establishment o f CPCU, PCIU, DIU staff and appointment o f all Project/Sub Project Manager (Project Manager, Treasurer, Executive Secretary, Planning staff, Financial Management staff, Procurement staff and Monev Staff).

Draft PMM acceptable to the Bank.

Final draft o f P M M acceptable to the Bank Draft o f FMR format acceptable to

Resp. Member

GO1

GO1

GO1

GO1

GOI, WB

Status

)one

lone

lone

Done

Done

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C. District Fund Allocation Manual

6. A Manual that documents procedures to be followed for proposal preparation and review, flow of block fund, procurement and uses o f block fund, accounting and reporting and monitoring procedures for the block fund.

(DFM)

D. Training 7. A Procurement and Financial Management Training for Trainers wil l be conducted before Appraisal Mission for Procurement and FM officers for the Central and Provincial Units. This training wi l l be arranged by M O H and the Bank wil l provide staff as trainers. 8. Training on Government Project Management and Treasury for CPCU, PCIU, DIU staff, Project Manger and Treasurer. 9. Training by which key staff within the CPCU, PCIUs and DIUs (including the projecthub-project managers and treasurer who wil l be involve in this project) wi l l acquire the necessary s k i l l s to carry out their respective duties as described in the PMM 10. Socialization and training on the District Fund Allocation Manual for JHC, PCIU and DIU (including the projecthub-project managers and treasurer who wil l be involve in this project). 11. Annual Training Plan which wil l cover the update on P M M and DFM, including procurement, financial management and progress in project implementation.

E. Flow of Fund

F. Enhanced Procurement planning and controlling mechanisms 13. The draft procurement plan for the overall project and the f i rst year implementation should be prepared and finalized.

the Bank

Final draft o f F.WI format

Draft DFM acceptable to the Bank.

Final draft o f DFM acceptable to the Bank

Training

Training

PMM training

DFM socialization and training

Draft

Final draft o f Proposed annual Training Dlan

Discussion of the project flow of fund Agreed o f Flow o f Fund

Draft Procurement Plan o f 1st Year

TTL, DPS md FMS)

GO1

GO1 & W B

GO1

GO1

GO1

GO1

GO1

GO1

GO1

Done

Done

July 2003

The first program after the Credit effectiveness

The first year after the project effectiveness

Done

Done

Done

- 100-

Agreed Procurement Plan o f 1st Year

3OVWB

GO1 14. Updated Procurement Plan for the 2nd and following fiscal year wil l be submitted to the Bank annually before disbursements can be initiated. 15. Clarifications on NCB procedures to

Annual Procurement Plan November :ach year

Loan Agreement with NCB SOVWB Done be included in the draft Loan Agreement. 16. Draft Bidding Documents and R F P s

Clarifications Bidding DocumentRFF GO1 September 30,

2003 -

for the 1st year implementation should be nrenared. G. Supervision Plan 17. The plan to supervise the project implementation has to be in place: (i) (ii) from PCIU to DIU.

from CPCU to PCIU and DIU

Draft on the supervision plan GOI/WB Done

Final draft o f sunemision nlan H. Auditing 18. Arrangement o f the district block fund Draft TOR for interim audit

(semi-annual) discussed. GO1 Done

interim audit (semi annual) in accordance with a specific TOR.

Final draft on audit arrangement and TOR

GO1

19. Arrangement o f the project annual audit in accordance with a specific TOR.

Draft audit arrangements and TOR discussed

GO1 Done

Final draft o f Letter to Auditor (including TOR) confirming the audit arrangements

I. Transparency PAD with Anti-corruption Action Plan and Loadcredit Agreement with enhanced procurement provisions on transparency and disclosure o f information.

GOINI3 Done - Refer to the Anti corruption Action Plan in Annex 13 o f PAD and Annex B of Schedule 3 o f the Loadcredit Agreement. Done

20. An anti-corruption action plan wi l l be prepared and included in the PAD. This wil l include the provisions on transparency and the disclosure of information o f procurement actions which wil l be included in the Loadcredit Agreement as an Annex to the Procurement Schedule.

21. Audit Report Publication. Draft of Acceptable mechanism for public for access to the annual audit reuort of the nroiect.

GO1

Placement o f annual audit report for public disclosure.

GO1

G O I N B

At the latest 30 days after the issuance o f the audit renort.

22. A l l cases o f collusion and other fraudulent and corrupt practices wil l be reported and investigated by the Borrower and the Bank, and remedial actions wi l l be taken whenever auurouriate.

Ongoing

- 101 -

Attachment 3

Commei

Health Work Force and Services Project Flow of Funds

I Bank funds transfer

IDNIBRD

audits National

FMR and a I for re lenishmen

DG BUDGET statement statement

t

DIU Bank Account

1 FMR Copies SPM

DIU withdrawals depOSltS

Central Bank or Guidelines I I Debit to

,

I 1

Jnds

Contracts between Project Manaoer and DIU

- 102 -

Annex 7: Project Processing Schedule INDONESIA: Health Workforce and Services

Project Schedule Planned Actual

ITime taken to prepare the project (months) I 18 I 26 I

Appraisal mission departure

Negotiations

I First Bank mission (identification) I 03/19/200 1 I 03/19/2001 I 04/01/2003 04/03/2003 04/23/2003 05/0 1/2003

/Planned Date of Effectiveness I 09/ 10/2004 I I Prepared by: Ministry o f Health; Ministry o f National Education

Preparation assistance: Canada TF030305; Canada TF030308; PHRD TF026831; PHRD TF050430; Singapore TF030338; New Zealand TF030399; Denmark TF0303 14

Bank staff who worked on the nroiect included: I Name Enis Baris Juliawati Untoro Puti Marzoeki Darren Dorkin R e b a Menon Firman Dharmawan Novira K. Asra Anthony Toft Janet Hohnen Benedicta Sembodo Chandra Chakravarthi Rosa Nadia Devi Michael Borowitz

Speciality Senior Public Health Specialist and Task Team Leader Operations Officer Health Specialist Operations Analyst Senior Economist Procurement Specialist Financial Management Specialist Senior Counsel HD Sector Coordinator Team Assistant Team Assistant Team Assistant Senior Public Health Specialist

Other specialists who worked on the project included:

Peter Bachrach, Planning and Capacity Building Specialist; Titie Hadiyati, Engineer; Pierre Jean, Medical Education Specialist; Myroslaw Kohut, Health Services Management Specialist; Gary Vigers, Environmental Review and Assessment Specialist; la in Watson, Environmental Specialist; and Brian Yates, Social Development Specialist.

- 103-

Annex 8: Documents in the Project File* INDONESIA: Health Workforce and Services

A. Project Implementation Plan

1. Project Implementation Plan for Health Workforce and Services Project: Ministry o f Health Component. March 2003.

2. Project Implementation Plan for Health Workforce and Services Project from Province o f Jambi. March 2003.

3. Project Implementation Plan for Health Workforce and Services Project from Province o f West Sumatera. March 2003.

4. Project Implementation Plan for Health Workforce and Services Project from Province of West Kalimantan. March 2003.

5. Project Implementation Plan for Health Workforce and Services Project from Province of East Kalimantan. March 2003.

6. Project Implementation Plan for Health Workforce and Services Project: Ministry o f National Education Component. March 2003.

7. Project Implementation Plan for Health Workforce and Services Project: Indonesian Medical Association Component. March 2003.

B. Bank Staff Assessments

1. Report No. 21318-IND, " Indonesia Health Strategy in a Post-Crisis, Decentralizing Indonesia". November 2000

2. PAD, ID-Provincial Health It, May 2001. 3. Identification, Preparation and Pre-Appraisal aide memoires and back-to-office reports. 4. Financial Management Assessment. December 2002. 5. Procurement Assessment. December 2002. 6. Corruption Mapping Matrix. April 2003.

C. Other

1. Boelen C. A new paradigm for medical schools a century after Flexner's report. Bulletin o f WHO,

2. Buchan J, D a l Poz MR. Ski l l m ix in the health workforce: reviewing the evidence. Bulletin o f WHO,

3. Cibulslus R. Monitoring Health Sector Investments. July 2002. 4. Gani A, Ndoen M and Fanggidae H. Health Workforce and Services Project: Provincial and District

Health Accounts, Public Health Expenditure Review and Tracking. November 2002. 5. Jean P and Millette B. Health Workforce and Services Project: Medical Curriculum and Training

Programs Analysis. University o f Montreal. Canada. June 2002. 6. Jusuf AA, Tjandra 0, Surjadi T, Sadili A, Permanasari E, Sumarningsih S and Fauzi A. Health

Workforce and Services Project: Medical Training Facility and Equipment Upgrade and Maintenance Inventory. Universitas Tarumanagara. October 2002.

7. Kohut M, Alleyne A, Perry D, Sharpe G and Strong R. Health Workforce and Services Project: Health Work Force Analysis. September 2002.

8. Kolehmainen-Aitken RL (Editor). Myths and Realities about the Decentralization o f Health Systems, Management Sciences for Health, Boston, 1999.

9. Kolehmainen-Aitken RL. Decentralization and Human Resources: Implications and Impact. Human Resources for Health Development Journal, 1998; 2( 10): 1-16.

2002;80: 592-593.

2002;80:575-580,

- 104-

10.

11.

12.

13.

14.

15.

16.

17.

18.

19.

20 *

21. 22.

23.

24.

LaFond AK, Brown L, Macintyre K. Mapping Capacity in the Health Sector: a Conceptual Framework. Int J Health Planning and Management, 2002; 17:3-22. Marzolf JR. The Indonesia Private Health Sector: Opportunities for Reform. An Analytical Inventory of Obstacles and Constraints to Growth. Consultant Report. April 2002. Nitayarumpong S and Wattanasirichaigoon S. Medical Education Curriculum Development and Family Medicine. June 2002. Oetarini S and Poespawardaja D. Health Workforce and Services Project: Medical Faculty Management. November 2002. PT Bahana Mitra Buana Management Consultant. Health Workforce and Services Project: Health Care Seelung Behavior and Base-line Survey. November 2002. PT Geosys Intipiranti Management Consultant. Health Workforce and Services Project: Stakeholder Analysis. November 2002. Ramelan W, Adjung S, Tambunan R, Pandjaitan T, Winarsih, Agustinus and Sutarman M. Health Workforce and Services Project: Physical Infrastructure and Equipment Needs Assessment. Lembaga Pengabdian pada Masyarakat, Universitas Atmajaya. October 2002. Van Lerberghe W, Adams 0, Ferrinho P. Human resources impact assessment. Bulletin o f WHO, 2002;80:525. Van Lerberghe W, Conceicao C, Van Damme W, Ferrinho P. When staff i s underpaid: dealing with the individual coping strategies o f health personnel. Bulletin o f WHO, 2002:80;58 1-84. Wang Y, Collins C, Tang S, Martineau T. Health Systems Decentralisation and Human Resources Management in L o w and Middle Income Countries. Wang Y, Collins C, Tang S, Martineau T. Health Systems Decentralisation and Human Resources Management in L o w and Middle Income Countries.Public Administration and Development,

Watson I. Health Workforce and Services Project. Environmental Assessment. December 2002. Whalen C. A review o f opportunities and r isks to core public health programmes in the context o f health sector reforms. February 2002. WHO. Human resources and national health systems: shaping agenda for action. Draft report o f a meeting. 2-4 December 2002, Geneva. Yates B. Health Workforce and Services Project: Social Assessment. December 2002.

2002;22:439-453

*Including electronic files

- 105 -

Annex 9: Statement of Loans and Credits INDONESIA: Health Workforce and Services

26-Mar-2003 Difference between expected

and actual disbursements' Original Amount in US$ Millions

Project ID FY Purpose IBRD IDA GEF Cancel. Undisb. Orig Frm Rev'd PO40578 2002 ID-Eastern Indonesia Region Transport 200.00 0.00 0.00 000 161.52 21.19 000

PO72852 PO73970 PO49539 PO40528 PO68051 PO68949

PO73025 PO59930 PO59477 PO49545 P 0 5 6 0 7 4 PO55821 PO401 96 PO63732 PO41 895 PO641 18 PO36049

P 0 0 3 9 6 7 PO39644 PO40061 PO40062 PO03993 PO4871 5 PO36956 PO36048 PO03987 PO42540 PO41894 PO36047 PO04026 PO03700 PO49051 PO401 95 PO37097 PO04008 PO04016 PO0401 1 PO04021 PO0401 0

2002 ID-URBAN POVERTY I/ 2002 ID-GLOBAL DEV LEARNING (LlL) 2001 ID-PROVINCIAL HEALTH II 2001 ID-W. JAVA ENVMT MGMT 2001 ID-GEF-W. JAVA ENVT MGMT 2001 ID-LIBRARY DEVELOPMENT PROJECT - LIL 2001 ID-SECOND KECAMATAN DEVELOPMENT PROJ 2000 DECNT. AGRICULTURAUFORESTRY EXTENSI 2000 ID-WSSLIC II

2000 ID-PROVINCIAL HEALTH I 1999 ID-MUNICIPAL INNOVS 1999 ID-URBAN POVERTY 1999 ID-SUMATRA BASIC EDUCUATION

1999 ID-CORPORATE RESTRUCTRG 1999 ID-SULAWESI BASIC EDUC.

1999 WATSAL 1999 ID-EARLY CHILD DEVELOPMENT 1999 ID-FIFTH HEALTH PROJECT 1998 ID-W. JAVA BASIC EDUCATION

1998 BENGKULU REGIONAL DEVELOPMENT 1998 CORAL REEF MGMT REHA 1998 ID-SUMATRA REG'L RDS 1998 Indonesia - IIDP

1998 ID-SAFE MOTHERHOOD 1998 CORAL REEF MGM REHAB 1997 ID-CENTRAL INDONESIASEC. EDU. 1997 ID-IODINE DEF. CONTROL 1997 ID-SUMATRA SECONDARY EDUCATION 1997 ID-BAL1 URBAN INFRA. 1997 ID-Railway Efficiency 1997 ID-Solar Home Systems 1997 BEPEKA AUDIT MODERNIZATION PROJECT

1997 ID-QUALITY OF UNDERGRADUATE EDUC (QUE 1996 IDEJAVA SEC.EDUC. 1996 NUSA TENGGARA DEV. 1996 ID-Strategic Urban Rds 1996 SULAWESI AGRl AREA 1996 POW.TRANS&DlSTII 1994 DAM SAFETY Project

29 50

2 66 63 20 11 70 0 00 0 00

208 90 13 00 0 00

0 00 5 00 0 00

54 50 31 50 47 90

300 00 21 50 44 70

103 50 20 50 0 00

234 00 34 50 42 50

6 90 104 00 28 50 98 00

11000 105 00

0 00 1640 71 20 99 00

27 00 86 90 26 80

373 00

55 00

70 50

0 00 40 00

5 75 0 00 4 15

111 30 5 00

77 40 38 00 0 00

100 00

20 10 0 00

15 93 0 00 0 00 0 00 0 00 0 00 0 00 0 00

0 00 0 00

0 00 0 00 0 00

0 00 0 00 0 00

0 00 0 00

0 00 0 00 0 00 0 00 0 00 0 00 0 00

0 00

0 00 0 00 0 00 2 54 0 00

0 00 0 00 0 00 0 00

0 00 0 00 0 00

0 00

0 00 0 00

0 00 0 00 0 00 0 00 4 10

0 00 0 00 0 00 4 10 0 00 0 00 0 00 0 00

0 00 24 30 0 00 0 00 0 00 0 00 0 00 0 00 0 00

0 00

0 00

0 00 0 00 0 00 0 00 0 00 0 00 0 00 0 00 0 00

0 00 0 00 0 00

24 50 0 00 0 00

10 65

5 00 3 76

5 00 0 00

50 00 8 50 9 15 0 00 0 00 9 70 0 23

36 03 47 33 1025 0 90 9 89 3 63 4 90

10 00 3 70

163 71 1980

103 01 2 63

100 15 16 92

2 58 3 97

306 50 9 25

87 02 29 19

1 07 23 54 34 51

117 39 27

15000 4 07

19 14 28 14 11 36 103

57 27

6 86 9 80 2 66

29 60 4 10

1607 15 81 34 37 7 57 7 10

14 12 20 47

131 115 126

11 00

0 04

3 29 0 51

29 73 4 52 2 22

1 76 -1792

2 86 -9 28 12 41

1 07 24 93 20 46 25 67 31 71

I50 00 14 32

1960 -8 93 12 40 0 98

63 61 1536 1629 2 66

29 60 1380 1630 39 94 81 69 20 15

8 00 20 15 2411

6 21 11 15

4 56 17471

1984

0 00

0 00 0 00 0 00 0 00

0 00

0 00 0 00

0 00 0 00 0 95 2 39 0 00 0 10 0 00 0 00

14 32

0 00 ow 6 19 1 48

-21 03

6 86 10 87 1 39

0 00 11 30 0 00

17 71 1 38

2 89 7 10

1045 0 00

131 -3 41

-0 43 64 71

-0 36

Total: 2676.76 488.13 35.04 436.64 1356.62 911.66 136.19

- 106 -

INDONESIA STATEMENT OF IFC's

Held and Disbursed Portfolio Jun 30 - 2002

In Mill ions U S Dollars

Committed Disbursed IFC IFC

FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic 200 1 1994 1991 1988 1997 1989 1997 198919 1/94 1997 1993196 1995 1997100 1997

1995 1991 199019 1193195199101 1992194196 1995 1997 1997100 1998 1993 1996 1993 1997 2001 1992195 1997 1997 1994 1991 1980187 2001

Dianlia KDLC Bali LYON-MLF-Ibis Manulife PT AdeS Alfindo PT Agro Muko PT Alumindo PT Astra PT Astra Graphia PT BBL Dharmala PT Bakrie Pipe PT Bank NISP PT Berlian PT Grahawita PT Indaci PT Indo-Rama PT KIA Keramik PT KIA Serpih PT Kalimantan PT Makro PT Megaplast PT Nusantara PT Pramindo Ikat PT Samudera PT Sayap PT Sigma PT Viscose PT Wings PTAstra Otopart Prudential Asia SEAVI Indonesia Semen Andalas Sunson

4.00 0.00 2.01 0.00 0.00 0.00

13.16 0.00 0.00

1 1.29 33.57 5.00 7.42 2.16 0.00 0.00

16.51 15.00 20.00 0.00 7.00 7.63

25.00 0.00 7.50 0.00

20.3 1 6.51 0.00 0.00 0.00 0.00

12.41

0.00 1.72 0.00 0.32 6.98 2.20 0.00 5.82 2.00 0.00 0.00 0.00

20.00 0.00 0.00 0.00 0.00 0.00

15.00 1.32 2.50 0.00 3.94 5.00 0.00 3.00 0.00 0.00 1.07 2.24 1.26 0.00 0.00

1 .oo 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 5.00 0.00 0.00 1.44 0.00 0.00 0.00 0.00 0.00 0.00 0.00

25.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 2.01 0.00 0.00 0.00

10.00 0.00 0.00

21.34 0.00 0.00

18.72 0.00 0.00 0.00

53.49 49.50

5.22 0.00 0.00 5.93

36.18 0.00 6.00 0.00

23.33 6.40 0.00 0.00 0.00 0.00 7.87

0.00 0.00 2.01 0.00 0.00 0.00

13.16 0.00 0.00

11.29 33.57 5.00 7.42 2.16 0.00 0.00

16.51 15.00 20.00 0.00 7.00 7.63

25.00 0.00 7.50 0.00

20.3 1 6.5 1 0.00 0.00 0.00 0.00

12.41

0.00 1.72 0.00 0.32 6.98 2.20 0.00 5.82 2.00 0.00 0.00 0.00

16.65 0.00 0.00 0.00 0.00 0.00

15.00 0.79 2.50 0.00 3.94 5 .OO 0.00 3.00 0.00 0.00 1.07 2.24 1.26 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 4.97 0.00 0.00 1.44 0.00 0.00 0.00 0.00 0.00 0.00 0.00

25.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 2.01 0.00 0.00 0.00

10.00 0.00 0.00

21.34 0.00 0.00

18.72 0.00 0.00 0.00

53.49 49.50

5.22 0.00 0.00 5.93

36.18 0.00 6.00 0.00

23.33 6.40 0.00 0.00 0.00 0.00 7.87

Total Portfolio: 216.48 74.37 32.44 245.99 212.48 70.49 31.41 245.99

Approvals Pending Commitment

FY Approval Company Loan Equity Quasi Partic 2001 PT BLT I1 12.00 0.00 0.00 0.00 2002 Wings Oil Palm 11.50 0.00 0.00 10.00 2002 NISP R I 0.00 0.00 3.64 0.00 1993 PT INDORAMA SWAP 10.00 0.00 0.00 0.00 2002 ManulifePrincipl 0.00 0.00 0.04 0.00

Total Pending Commitment: 33.50 0.00 3.68 10.00

- 107-

Annex 10: Country at a Glance INDONESIA: Health Workforce and Services

2 3 4 1 9 5 1 7 0 1 6 4 41 2 41 2 4 7 0 465 1 2 1 2 1 3 2 6 2 26 1

POVERTY and SOCIAL Indonesia

”

20

2001 Population, mid-year (millions) GNi per capita (Atlas method, US$) GNI (Atlas method, US$ billions)

Average annual growth, 1995-01

Population (%) Labor force (%)

Most recent estlmate (latest year available, 1995-01) Poverty (% of population below national poverty line) Urban population (% of total popuiation) Life expectancy at birth (years) Infant mortality (per 1,000 live births) Chiid malnutrition (% of children under5) Access to an improved water source (% of population) Illiteracy (% of population age 15+) Gross primary enrollment (% of school-age population)

Male Female

KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1981

GDP (US$ billions) 92.5 Gross domestic investmenVGDP 26.7 Exports of goods and services/GDP 29.0 Gross domestic savings/GDP 31.7 Gross national savings/GDP

Interest payments/GDP 1.5 Current account balancelGDP -0.6

Total debtIGDP 24.6 Total debt sarvicelexports 14.0 Present value of debVGDP Present value of debtiexports

1981-91 1991-01 (average annual growth) GDP 6.4 3.2 GDP Der caDita 4.5 1.6

General government consumption 1 1 0 9 1 7 1 7 4

213.6 680

144.7

1.6 2.5

13 42 66 41 24 74 13

113 115 110

1991

116.5 35.5 28.4 37.4 33.0

-3.7 3.2

68.3 34.3

2000

4.9 3.2

a m*YrGDI +GDP

East Asla & Pacific

1,826 900

1,649

1.1 1.3

37 69 36 12 74 14

107 106 108

2000

152.2 14.6 42.4 25.2 18.8

5.3 4.7

93.1 36.2 88.7

182.0

2001

3.3 1.8

2ooo 2o01 1981-91 1991-01 (average annual growth) Agriculture 3 6 1 6 1 7 0 6 Industry 8 1 4 1 5 9 3 3

Manufacturing 12 9 5 7 6 1 4 3 Services 6 6 2 9 5 2 4 4

Private consumption 4 5 6 0 3 6 5 9

Imports of goods and services 1 4 3 5 21 1 8 1

General government consumption 4 6 - 0 1 6 5 8 2 Gross domestic investment 8 1 - 3 8 -1 2 -0 7

LOW- income

2,511 430

1,069

1.9 2.3

31 59 76

76 37 96

103 88

2001

145.3 17.0 41.1 25.5 24.4

4.7 4.1

91.6 35.4

2001-05

4.4 2.4

Growth of exports and imports (%) 4o

20

0

20

40

6 0 -

*--Exports +imports

Development diamond’

Life expectancy

i ZNI Gross Der + + primary :apita enrollment

1 Access to improved water source

* # - * a Indonesia Low-income group

Economic ratios’

Trade

I indebtedness

* v * d - Indonesia Low-income group I Exports of goods and services 5 2 4 3 2 6 5 1 9 4 4

STRUCTURE of the ECONOMY

(“A of GDP) Agriculture Industry

Services Manufacturing

1981 1991 2000 2001 1 Growth of investment and GDP (“h) 1

- 108-

Indonesia

PRICES and GOVERNMENT FINANCE

Domestic prices (“A change) Consumer prices implicit GDP deflator

Government finance (“A of GDP, includes current grants) Current revenue Current budget balance Overall surplusideficit

TRADE

(US$ millions) Total exports (fob)

Fuel Estate Crops Manufactures

Total imports (cif) Food Fuel and energy Capital goods

Export price index (1995=100) Import price index (1995=100) Terms of trade (1995=100)

BALANCE of PAYMENTS

(US$ millions) Exports of goods and services Imports of goods and services Resource balance

Net income Net current transfers

Current account balance

Financing items (net) Changes in net reserves

Memo: Reserves including gold (US5 miiiions) Conversion rate (DEC, iocal/US$)

EXTERNAL DEBT and RESOURCE FLOWS

(US$ millions) Total debt outstanding and disbursed

IBRD IDA

Total debt service IBRD IDA

Composition of net resource flows Official grants Official creditors Private creditors Foreign direct investment Portfolio equity

World Bank program Commitments Disbursements Principal repayments Net flows interest payments Net transfers

1981 1991

.. 9.4 10.4 -1.1

.. 18.1

.. -4.3

1981 1991

.. 29,635

.. 10,895

.. 826

.. 10,679

.. 25,869

.. 1,081

.. 2,323

.. 11,631

1981 1991

23,797 32,457 21,540 31,398

2,257 1,059

-3,073 -5,581 250 262

-566 -4,260

192 5,788 374 -1,528

10,250 10,250 631.8 1,950.3

1981 1991

22,761 79,548 1,309 10,597

632 829

3,492 11,475 148 1,412

7 20

124 262 974 3,250

1,087 1,967 133 1,482

0 0

0 1,533 383 1,398

47 621 335 777 107 811 229 -34

2000

3.7 11.1

21.4 -0.7 -1.9

2000

65,408 14,386

1,111 22,287 37,087

2,782 6,071 9,212

2000

70,541 55,293 15,248

-8,440 1,190

7,996

-2,956 -5,042

29,268 8,421 .8

2000

141,691 1 1,623

695

26,868 1,970

30

0 1,627

-15,509 -4,550 -1,911

164 1,218 1,006

212 994

-782

2001

11.5 12.6

20.1 -1 .o -3.7

2001

57,365 12,648

872 22,275 31,328 2,497 5,523 9,050

2001

62,673 51,615 11,058

-8,143 3,985

6,900

-1,858 -5,042

28,018 10,260.9

2001

133,073 11,435

722

23,556 1,753

32

0 1,334

-13,590

0

845 585 853

-268 932

-1,200

Inflation (%) 1

1 96 97 98 99 00 01

I * * ** GDP deflator W C P I

I Export and import levels (US$ mill.)

ooo

I 40 000

20 000 l o 95 98 97 98 99 00 01

8 Exports .Imports I i

I ’ Current account balance to GDP (%)

Composition o i 2001 debt (US$ mlll.)

A 11 435

B 722 G 20029

F 33,271

E: 35,397

A . IBRD E .Bilateral B - IDA D -Other multilateral F - Private C - IMF G -Short-term

- 109-

Additional Annex 11 : Environmental Review INDONESIA: Health Workforce and Services

Note: The Executive Summary o f the Environmental Review i s provided below. The complete Environmental Review Report, including the Environmental Management Plan and Pesticide Management and Monitoring Plan, i s located in the project file.

1. This report documents the findings of an ER completed for the World Bank Indonesia Health Workforce and Services (HWS) project. The ER complies with the Bank’s environmental review policies and procedures and environmental assessment guidelines (OP/BP/GP 4.01 and OP 4.09). In addition, the ER references Indonesia’s environmental laws, regulations, policies and other relevant legislation to ensure that applicable environmental assessment and pollution control requirements are fu l ly addressed in project implementation.

2. The H W S project i s classified as a Category B activity where more limited environmental analysis i s considered appropriate to address specific environmental issues. Potential environmental and human health impacts of the project examined in completing the ER corresponded to: (a) planned construction and renovation o f health care facilities (HCF) at the district level; (b) health care waste management (HCWM) practices; and (c) pesticide use in malaria and dengue vector control programs. Environmental issues relevant to these project activities are detailed and recommendations made as to appropriate mitigation measures and monitoring programs with a view to guiding project design and incorporating appropriate management plans during project implementation.

3. Extensive consultation was sought with the MOH, the Ministry of Environment (MOE), provincial and district health planning and environmental authorities, and H C F involved in the provision o f health care in completing the ER to ensure that potential project impacts were fu l ly understood and appropriate conclusions and recommendations were reached.

Health Care Facility Civil Works

4. district HCF in two o f the four participating provinces confirmed that planned c iv i l works do not pose any serious environmental concerns. I t was determined that c iv i l works w i l l be limited to small hospitals (i.e., only two hospitals with less than 200 beds w i l l be funded under the H W S project) and health centers and as such w i l l not trigger full assessment under Indonesia’s environmental impact assessment (EIA), or AMDAL,, requirements. Notwithstanding, comprehensive environmental management/monitoring plans (UKLKJPL) shall be prepared for al l new HCF construction and/or renovation o f existing facilities, to ensure that any potential construction and operational phase environmental issues are identified and that appropriate mitigation measures are adopted to minimize or avoid adverse impacts. The UKL/UPL wi l l encompass: (i) screening o f proposed construction and renovation activities to evaluate the significance o f potential environmental impacts; and (ii) identification and implementation o f appropriate mitigation measures during c iv i l works planning, design and construction. Recommended minimum mitigation measures to be applied during renovation and construction activities include: strict adherence to occupational health and safety guidelines (e.g., international standards for removal and safe disposal o f asbestos during renovations: prohibiting use o f asbestos containing materials in new construction); controlling dust emissions and noise to minimize nuisance to neighbors; proper disposal o f demolition materials to landfills; and compliance with environmental safeguards for construction sites (e.g., control o f surface water run-off). Although not specifically required under Indonesia’s regulations, i t i s further recommended that UKLLJPL, at an

Discussions with M O H and M O E and findings o f f ield visits to representative provincial and

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appropriate level o f detail commensurate to the scale o f planned civ i l works, be prepared for al l planned HCF renovations to address potential human health and environmental issues which may arise (e.g., removal o f asbestos building materials). In addition, best environmental and occupational health practices should be strictly complied with to provide assurances that al l c iv i l works activities undertaken satisfy both Bank safeguards and applicable Indonesian environmental regulations.

Health Care Facility Operations

5. Activities undertaken to improve health services w i l l inevitably create waste that i s potentially hazardous. Health care wastes (HCW) are typically more hazardous than other types o f wastes and should be considered in assessing planned HCF c iv i l works. Exposure to hazardous H C W can result in disease or injury to: medical doctors and nurses: auxiliary and maintenance staff; patients and visitors; and workers at landfills and other waste disposal facilities. To address these concerns, i t i s essential to put in place safe and reliable methods for handling and proper disposal o f medical waste.

6. proper H C W handling, storage and transportation; and treatment of segregated wastes b y safe and environmentally sound methods. To ensure that best practices are promoted as part o f the H W S project, specific recommendations are made to:

Generally accepted H C W M strategies encompass: waste minimization, recycling, and reuse;

0 Adopt strict waste segregation practices at all H C F to ensure that wastes are properly separated, and that different waste streams are correctly treated and disposed of. Improve compliance monitoring and reporting by H C F to demonstrate full adherence to applicable environmental regulations. Strengthen existing H C W M guidelines available to H C F and ensure broad dissemination at the provincial and district levels. Provide capacity building to HCF and responsible regulatory agencies covering the topics o f proper H C W M and compliance monitoring practices.

7. construction and renovation activities as part o f the H W S project. Although liquid waste f rom H C F i s typically o f a similar quality to urban wastewater i t may also contain potentially hazardous components o f concern from a human health perspective. Typically effluents discharged b y H C F are greatly diluted and, as such, no significant health r isks should be expected if pre-treated liquid waste i s discharged to municipal sewer systems. Where connection to municipal systems i s not feasible, then appropriate precautions must be taken to avoid health r isks associated with discharge of untreated or inadequately treated sewage to the natural environment. I t i s recommended that, where possible, a l l H C F shall be connected to municipal systems and that pre-treatment o f potentially hazardous waste streams (e.g., infectious wastes) be undertaken. Where there are n o centralized sewage systems, proper on-site wastewater treatment systems shall be required.

Wastewater f rom HCF represents a sub-category of H C W that must be addressed in planning

8. Technical guidelines have already been developed by the MOH relating to the handling and disposal of solid and liquid HCW. Gap analysis completed on these guidelines found them to be comprehensive and representative of current best practices. Notwithstanding, recommendations are provided in the EMP with a view to assisting H C F in operationalizing available guidelines, including: (i) development o f standard operating procedures covering all aspects of physical plant operations; (ii) adoption o f environmental management systems to demonstrate good environmental performance; and (iii) development and dissemination of training materials in support of human resources development at the provincial and district levels.

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Malaria and Dengue Vector Control Programs

9. have successfully passed (Le., interim or final specifications) the World Health Organization’s Pesticide Evaluation Scheme (WHOPES) and are considered to pose a very l ow risk if used correctly. Pesticides currently favored for malaria and dengue vector control programs in Indonesia have been selected primarily on the basis o f their relatively low toxicity to humans (i.e., Class II, or moderately hazardous, chemicals such as Bifenthrin, Bendiocarb, Lamda-cyhalothrin, Deltamethrin, and Permethrin and Class 111 and IV, or only slightly or non-hazardous, chemicals such as Etofenprox and Malathion) and comparative effectiveness. Although risks to humans from these pesticides are considered negligible, i t i s noted that proper precautions must be taken to ensure safe handling and storage and to minimize exposure during actual use.

All products intended for use in vector control programs to be funded under the H W S project

10. and dengue vector control represents an important concern in program planning and implementation. Although their toxicity varies widely, chemical pesticides are typically highly toxic to non-target species, especially fish and aquatic invertebrates. Recognizing that the risk posed b y pesticides i s a product o f toxicity and exposure (Le., there i s little or no risk even at high pesticide concentrations if no exposure actually occurs), safeguard measures must be implemented to avoid the unintentional release o f chemical pesticides through improper handling or disposal.

The environmental toxicity, in contrast to their toxicity to humans, o f pesticides used in malaria

11. Recognizing that all pesticides are toxic to some degree, i t i s paramount to ensure that proper care and handling practices form an integral part o f any program involving their use. Gap analysis o f existing MOH guidelines and review o f ongoing malaria and vector control programs in Indonesia confirmed that occupational and environmental health safeguards are comprehensive and provide assurances that best management practices are being followed in program implementation. For this reason, recommended mitigation measures are primarily intended to ensure that safeguards already in place are fully adhered to in the delivery of future vector control programs funded under the H W S project. Recommended enhancements to existing guidelines and practices specified in the PMMP encompass: (i) review and strengthening, as appropriate, o f safeguards pertaining to pesticide procurement and inventory trackmg; (ii) strict oversight o f field operations to confirm that occupational and environmental health guidelines are fully adhered to during space spraying and larviciding activities (e.g., procurement and use of proper protective gear; training in application practices and environmental awareness); and (iii) broader dissemination of environmental awareness education materials and human health safety information to local communities.

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Additional Annex 12: Isolated Vulnerable Peoples Development Strategy INDONESIA: Health Workforce and Services

Note: The Isolated Vulnerable Peoples Vulnerable Strategy i s provided below. The complete Social Assessment, Stakeholder Analysis, and Study on Health Care Seeking Behavior are located in the project file.

Introduction

1. institutional and financial groundwork for sustainable health services financing and delivery in the context o f public sector decentralization. Specifically, project objectives are to: (i) improve financing and service delivery in the provinces o f Jambi, East Kalimantan, West Kalimantan and West Sumatera; and (ii) strengthen health workforce policy, management, and development and (iii) assist the Mmistry o f Health (MOH) and Ministry o f National Education (MONE) to redefine their roles and responsibilities vis-&vis health workforce policy, planning and management in a decentralized setting in order to improve efficiencies and equity in the distribution and use of health resources, and to enhance quality o f care and health outcomes.

The primary goal of the HWS project i s to assist selected provinces and their districts to lay the

2. in Indonesia: (i) improved health system stewardship, including policy and planning, management and system regulation; (ii) sustained and expanded health services financing and delivery; and (iii) strengthened health workforce quality and effectiveness as well as to address service delivery and resource mobilization issues.

The H W S project w i l l have three components, each applicable to all three levels o f governance

3. Isolated Vulnerable Peoples, or IVP, are individuals and communities including but not limited to indigenous people that share similar characteristics such as being outside the mainstream o f political and economic power, physical isolation, language and cultural barriers, or part o f an ethnic minority. There are communities o f I V P in each o f the target provinces with specific needs and issues with respect to the delivery o f health services. Typically they are among the poorest communities in each o f the provinces and b y targeting the welfare o f I V P the project i s addressing health care for the some of the poorest segments o f society.

Social Assessment

4. during project preparation and i s s t i l l underway. Current barriers to seelung health care have been identified and further research w i l l provide further information on IVP in each province. This research w i l l include a description o f IVP, their health status, additional information on access to heath care, and potential mechanisms for their participation in health services planning.

Social assessment o f the identity, location, and health seeking behavior o f I V P was initiated

5. project: decentralization, inequalities in access to health services, and quality of health services.

Current research identifies the following social issues as relevant to I V P in the context o f this

Decentralization

6. central government to the districts w i l l lead to profound changes in the way that these services are financed, planned and delivered. While decentralization presents an opportunity for government to

The decentralization of primary responsibility for the delivery o f public health care f rom the

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become more accountable and responsible to local needs, many provincial and district level agencies lack the technical, managerial, and financial capacity to plan and manage health services. Without outside assistance in improving local capacity there i s the potential for degradation in health services and consequent reduced health status o f the population.

7. decision making closer to local communities, and by reducing the “leakage” o f government funds through corruption. Past government programs have not been transparent and often communities were completely unaware o f projects and programs designed to benefit them.

Decentralization, i f implemented properly, can improve the delivery o f services by bringmg

Access to Health Services

8. services between r ich and poor s t i l l exist. Lack o f access to health services, inequitable distribution o f health care subsidies, and under-utilization of public health care services all increase the burden o f disease on the poor. Health care spending i s low relative to other countries in the region and expenditures are not targeted to the poor. Health care services are under utilized for a range of reasons from perceived low quality to geographic barriers.

Despite many years o f investment in primary health care, large variations in access to health

9. During the field visits, NGO respondents and members o f the local communities reported that the principle barriers to accessing health services include the cost o f the service and geographic isolation. As discussed in the following section, this i s compounded b y the perception among many o f poor service received at the local health care centers.

10. research was the cost associated with accessing government health services. Services that are supposedly offered for free to the poor are often subject to “informal” fees and charges, both for service and for medicine.

A common issue voiced b y most o f the NGOs and community members consulted during this

11. Remote communities have difficulties in recruiting and retaining health care workers such as midwives (bidan), often the only source o f modem health care in isolated villages. Many government-trained midwives are reluctant to remain in isolated areas without family or other social connections, and receive inadequate compensation for remote postings.

Quality of Health Services

12. Many o f the stakeholders consulted during this assignment reported a lack o f confidence in the quality o f care provided b y the public health care system. Many indicated a preference for traditional methods (e.g. herbal remedies, spiritual ceremonies) over those offered b y modern health care services.

13. include a lack o f staff, absence o f supplies and medicine, and ineffective treatment. Anecdotal evidence suggests that often health center staff members are engaged in some form o f private practice and place a l ow priority on providing health care to the poor.

Typically the concerns about quality o f public health service focused on health centers. Issues

14. remains widespread. The rationale can be summarized thus: Traditional methods are at least as effective, cost less, and are more familiar than government services, so why abandon them? In fact, one respondent during the Social Review made the comment that even if there were a health center nearby, a traditional healer would be her family’s f i rs t choice for health care. I t was also observed that government

Related to this, the use o f traditional medicine and treatment as a primary source o f health care

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midwives, usually young women, do not have the confidence o f pregnant women in traditional villages, who are more likely to place their trust in older, traditional midwives or healers.

15. methods b y government officials. Often government health care workers frown upon the use o f traditional methods and i t s effectiveness i s dismissed. Showing disrespect for what are perceived to be trusted methods undermines the community’s receptiveness to modern medicine, decreases the demand for government health services, and inhibits working with communities in areas o f preventative medicine.

Contributing to the lack o f trust in government health services i s the treatment o f traditional

Specific Measures to Safeguard IVP

Baseline Data Collection and Monitoring

16. The project w i l l build capacity in the central, provincial, and district governments to identify and monitor the health status o f IVP. Approaches to developing this capacity w i l l be incorporated into the implementation of the project. Surveys on access to health care and client satisfaction w i l l be carried out in targeted I V P communities during project implementation.

17. characteristics in relevant districts. The project w i l l monitor and report on outcomes and outputs specifically with respect to targeted IVP communities.

Project performance indicators w i l l be disaggregated based on ethnicity and other I V P

18. adequately represented in the health workforce. I t i s assumed that workers drawn from local communities wi l l be more effective in health education and delivering health care to IVP communities than outsiders.

The project w i l l collect data on the composition o f the health workforce to determine if I V P are

Participatory Planning

19. that measures are incorporated into proposals that involve stakeholders in project design and implementation. Through the network o f key stakeholders identified in the social assessment, N P can be engaged in the development o f project proposals assist in the design of specific measures to address their health issues. In particular, it i s expected that NGOs and other stakeholder groups w i l l participate on District Health Councils, Joint Health Councils, and provide input to Technical Review Teams.

In order to capitalize on the opportunities afforded by decentralization, the project w i l l ensure

20. The role o f traditional health providers in planning health care w i l l be evaluated and specific mechanisms for their inclusion w i l l be developed. This might take the form of consulting traditional healers through NGOs, or designing capacity building for traditional healers to integrate them with the public health system.

21. The proposed project w i l l enhance the participation o f client groups and other stakeholders in the planning of health services. Setting priorities based on local needs and designing a scope and range o f services appropriate to these priorities w i l l increase the efficiency o f health service delivery and improve health outcomes.

22. Opportunities for training stakeholders in participatory planning should be sought, as this w i l l improve the efficiency of bottom-up planning. This can include training in facilitation s l u l l s for local NGOs or training in project monitoring and evaluation.

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Notification and Monitoring

23. As activities are implemented in the districts, i t w i l l be important to provide public notification about the project, i t s objectives, and expected benefits. In this way local communities can better access the benefits of a proposed project as well as monitor the expenditures o f project funds. Communities and community groups should be provided with an opportunity to provide feedback directly to the bank on issues related to project implementation. In this way communities can participate more directly in project monitoring and transparency w i l l be enhanced.

24. information i s disseminated to them and to local communities on a regular basis. Community involvement i s being promoted in a number o f sectors, particularly the environmental sector, and examples can be drawn from related Bank supported projects (e.g., COREMAP; guidelines for community involvement in Environmental Assessment, etc.)

Specific measures w i l l be taken to ensure local media are aware o f key project activities and

25. the design o f a rigorous and transparent monitoring system that involves local communities and stakeholders. This w i l l ensure that an effective feedback mechanism exists to provide for ongoing improvement in project implementation. Project progress in achieving social development outcomes w i l l be described in the following reports:

Consistent with the promotion o f participatory planning inherent in the project objectives w i l l be

e e Mid-term evaluation report e Final evaluation survey e Final evaluation report

Semi annual project management report

26. rate, maternal mortality ratio, locally relevant disease specific indicators, tracer health services indicators, and health services utilization indicators. These data w i l l be disaggregated based on gender, ethnicity, geography (and other IVP dimensions) to identify differences between the general population and vulnerable groups.

Data w i l l be collected on key health indicators such as infant mortality rate, under-five mortality

27. Specific sections in these reports w i l l be dedicated to issues related to IVP and women, identifying issues specific to IVP and women in each district, where relevant, and identifying whether there are discrepancies in outcomes based on IVP characteristics or gender, and measures planned to address these discrepancies i f they are identified.

28. whether there include adequate stakeholder representation, including gender balance and, where relevant, IVP communities.

These evaluations w i l l also include reviews o f the make-up o f DHC, JHC, and TRT to evaluate

29. represent local communities, including IVP, and are gender balanced.

Characteristics o f the health workforce w i l l be described to evaluate whether they adequately

30. the monitoring and reporting activities w i l l feed into the deliberations o f the DHC, JHC, and TRT.

The above measures w i l l form a Participatory Monitoring and Evaluation System. The results o f

Financing and Physical Access

31. The project w i l l address these issues through the development o f innovative health care financing

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and incentive mechanisms. Options w i l l be considered for increasing participation in health insurance and other subsidies to the poor, including I V P communities. I t i s expected that improved transparency and community participation w i l l reduce the incidence o f “unofficial” charges and user fees.

32. communities. Options to be considered including the construction o f more health centers and the use of mobile health units.

Infrastructure w i l l be developed as appropriate in remote areas to improve access for isolated

Human Resources

33. As discussed above, the project w i l l consider options for increased recruitment and training o f health workers f rom IVP communities. I t i s hoped that by recruiting local people there w i l l be improved long-term retention o f health workers in remote areas. Among the options to be considered wil l be the training o f traditional health providers and developing culturally appropriate approaches to worhng with IVP.

34. B y improving the quality o f health care providers, i t i s expected that there w i l l be an opportunity to build trust among communities. Heath services can be designed in a way that i s culturally appropriate and w i l l facilitate confidence building among local communities. Improvements in the quality and professionalism o f health care providers w i l l increase the demand for health services as improved health outcomes among the poor are demonstrated.

Social Marketing

35. project w i l l support the development o f culturally appropriate communications materials in order to improve the access o f I V P to health information.

Cultural and language barriers prevent the dissemination o f health information to many IVP. The

36. training o f health care workers w i l l be considered. Anecdotal evidence suggests that an appreciation of and respect for traditional practices facilitates the communication o f modem information to traditional people.

Options for incorporation traditional beliefs, medicines, and health care practices into the

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Additional Annex 13: Anti-Corruption Action Plan INDONESIA: Health Workforce and Services

Executive Summary

1. highlighted the importance of developing an anti-corruption action plan as part o f project preparation to reduce fiduciary risks. The anti-corruption plan for Health Workforce and Services (HWS) Project was established in conjunction with the recently issued trial version o f “Anti-corruption Guide: Developing and Anti-corruption Program for Reducing Fiduciary R s k s for New Project”, dated February 14, 2003, through joint discussions between the project preparation team o f the Borrower and the Bank. The anti-corruption action plan for H W S i s the first without any precedent for a Health sector project. Following the guidelines, the adopted approach was through the identification o f elements or building blocks drawn from the design features and fiduciary arrangements o f the project, f rom which the anti-corruption action plan can be constructed.

Cases of fraud and corruption discovered recently in various Bank-financed projects, have

2. provinces o f Jambi, West Sumatera, West and East Kalimantan, comprising forty-seven districts (kabupaten) and cities (kota). This project intends to improve access to and quality o f health services in selected provinces through institutional support, and increased investment in health financing and human resources. In this sense, i t w i l l build on the Provincial Health Project (PHP) I and 11 currently underway in other provinces (PHP has a human resource development sub-component). One particular feature o f this project i s the bottom up beneficiary sub project activities at the district level (Component A) which w i l l be funded through the District Fund Allocation (DFA).

The main goal o f the H W S i s to support the process of health sector decentralization in four

3. (PMM) and District Fund Allocation Manual (DFAM) w i l l play an important role in project implementation. The PMM and DFAM provide a description on the systems and procedures to be followed by the staff o f the Central Project Coordination Unit (CPCU), Provincial Coordination and Implementation Unit (PCN) and the District Implementation Unit (DIU), who w i l l manage and implement the project activities to ensure that sound financial management practices are implemented. The PMM describes the organizational structure and functions and the guidelines for budgeting, procurement, record keeping and reporting using the Financial Monitoring Report (FMR) which constitutes the basis for disbursement. The P M M also covers preparation and recording o f financial statements, fixed assets management, internal control, monitoring and evaluation mechanism for the project management system, auditing arrangements, governance and disclosure requirements for the project. The DFAM provides details on the District Fund Allocation proceedings, the relevant organization structure and their functions, the guidelines for the District Fund Allocation Proposal preparation process, proposal outline, f low o f fund, and i t s monitoring and evaluation (including the mechanism for interim audit). The above documents reflected the agreements reached at negotiations and recorded in the Development Credit Agreement and Loan Agreement.

Given the decentralized and bottom up nature o f this project, the Project Management Manual

4. HWS, a Corruption Mapping Matrix was prepared and i s located in the project file. The matrix identifies project activities considered as having high corruption risks. These activities can be grouped into the various steps o f procurement process, the preparation of the DFA proposal and i t s budgeting, the appointment process o f the project manager and treasurer, withdrawal process o f advance payments, and project implementation.

To understand the various corruption r isks at each phase o f the project implementation cycle o f

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5. were expanded to anti-corruption measures as provided in the fol lowing paragraphs. These measures address the f ive key elements o f the anti-corruption action plan which are: i) Empowerment o f Recipients, ii) Building o f partnership fo r c i v i l society oversight and feedback, iii) Establishment o f procurement policies to mitigate collusion, iv) Building o f strong task t e a m w i th effective tools to pay increased attention to fiduciary risks, and v) Clear definit ion o f remedies to anticipate deviations. The details of this action plan w i l l be expanded in the PMM and DFAM.

By analyzing the incentives and disincentives, mitigation measures were defined, which in turn

No. Description of Action

Anti-Corruption Action Plan for Health Workforce and Services Project

Action by

6. Project to reduce the possibility of Fraud and Corruption under the Project:

The Borrower and the Bank have agreed that the fo l lowing actions w i l l be carried out under the

Empi -

2.

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erment of recipients To ensure End-User participation in procurement, the requestorher o f the goodslequipmentslworkslservices to be acquired, wi l l be included as a member o f the ProcurementISelection Committee. The criteria for the selection o f procurement committee members have been established and detailed in the PMM. This provision has been included in the Loadcredit Agreement as an Annex to the Procurement Schedule. The review and approval o f the DFA proposals wi l l involve representatives from community based and Non-governmental Organizations in the District Health Committees at the Distr ict Level and Joint Health Councils at the Provincial Level. Review o f the consolidated project Annual Work Plan (AWP - which wil l include itemized budget from the CPCU and PCIUs) wi l l be carried out by the Bank prior to D G Budget review. The approved AWP wi l l be made available to the public as part o f the public disclosure policy of this project.

Guidelines on disclosure o f information to the public on project and procurement activities have been incorporated in the P M M and the Loadcredit Agreement, which include the following actior plans: i) The implementing agency wil l make publicly available, promptly after completion o f a mid-term review of a project carried out in accordance with the loadcredit agreement, the mid-term review report prepared for this purpose. ii) The implementing agency wil l (and the World Bank can) make publicly available promptly after receipt o f all final audit reports (financial or otherwise, and including qualified audit reports) prepared in accordance with the loadcredit agreement, and all formal responses o f the government. iii) The implementing agency wil l (and the World Bank can): -make publicly available promptly after finalization all annual procurement plans and schedules, including all updates thereof;

p partnership for civil society oversight and feedback

-make available to any member o f the public promptly upon request all bidding documents and requests for proposals issued in accordance with the procurement provisions o f the loadcredit agreement, subject to payment o f a reasonable fee to cover the cost o f printing and delivery. In the case o f requests for proposals, the relevant documents wil l only be made available after notification of award to the successful firm. Each such document wi l l continue to be made available until a year after completion o f the contract entered into for the goods, works or services in question;

-make available to any member o f the public promptly upon request al l short l is ts o f consultants and, in cases o f pre-qualification, l i s t s o f pre-qualified contractors and suppliers;

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4.

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Estab 7.

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These provisions have been included in the Loadcredit Agreement as an Annex to the Procurement Schedule. The Implementing Agency wil l establish a website that provides regular updated information on

-disclose to all bidders and parties submitting proposals for specific contracts, promptly after the notification of award to the successful bidderlconsultant, the summary o f the evaluation o f all bids and proposals for such proposed contracts. Information in these summaries wil l be limited to a l is t o f biddersfconsultants, all bid prices and financial proposals as read out at public openings for bids and financial proposals, bids and proposals declared non responsive (together with reasons for such an assessment), the name o f winning bidderlconsultant and the contract price. Such summaries w i l l be made available to the public, promptly upon request;

GO1

-allow representatives of the end-users o f the goods or works being procured to attend the public bid openings;

project activities.

An independent monitoring mechanism by the media through regular updates on project development has been established by the Implementing Agency. A complaint handling mechanism, which include maintaining a project complaint log and filing to monitor status o f follow up o f each received complaints, has been established by the Implementing Agency and the Bank and incorporated in the PMMDFAM. The mechanism includes follow up investigations on substantial complaints by the Intemal Auditors or third party audit to ensure independency and reliability of the system.

-make publicly available and publish widely contract award information for all contracts for goods and works above USD100,OOO equivalent and all contracts for consultants above USD 50,000 equivalent, promptly after such award; and

GO1

GO1 - WB

- make available, promptly upon request by any person or company, a list o f all contracts awarded in the three months preceding the date o f such request in respect of a project, including the name o f the contractorlconsultant, the contract amount, the number o f biddersfmakers of proposals, the procurement method followed and the purpose o f the contract.

" - " The clarifications on NCB procedures following Keppres 1812000 to be acceptable by the Bank i s included in the Legal Agreements. Following such clarifications, the implementation plan include: i) wider advertisement in national newspaper, ii) removal o f geographic and other restrictions, iii) the use o f post-qualification which allows participation by bidders without any restrictions A standard format of advertisement and criteria for acceptable newspapers with sufficient circulation for placement o f advertisements have been defined in the PMM. The Implementing Agency may request the Bank for placement o f advertisement in the UNDB website. Guidelines for preparation o f specificatiodselection criteria in the Bidding DocumentsRequest for Proposals have been provided in the P M M to ensure compliance with Bank Guidelines. This include suggestions to conduct simple surveys on available product in the market and the alternative of hiring o f consultants for procurement of complex goodslequipmentslworkslservices to define the specificatiodterms o f reference. Guidelines to prepare owner estimates, particularly for consultancy work have been incorporated in the PMM. This include the requirement to provide a detailed breakdown o f estimates, suggestions to conduct simple market price surveys, maintaining data base o f survey results and previous purchases by the Central Project Coordination Unit that i s accessible to all Implementing Units. A narrative justification o f each o f the shortlisted firms wi l l be required for proposing shortlist for prior review contracts. Guidelines on preparing these justifications have been provided in the PMM. Pre-bid meetings for procurement o f simple goods and small works wi l l not be conducted. The

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specifications shall be defined clearly in the Bidding Documents. Clarifications can be sought through written correspondence and replies are sent to all bidderdshortlisted firms. Public openings for ICB and QCBS processes wil l be attended by the Procurement OfficermreasurerKJser and representative of the Internal Auditor.

to the Bank

clarificationstnegotiations that i s in line with the Bank Guidelines. The Implementing Agency has incorporated guidelines on monitoring contract implementation in the PMM.

The CPCU, and each PCIU and DIU include a qualified Procurement SpecialistIOfficer and a Financial Management SpecialistIOfficer The criteria and performance indicators o f Project Manager and Treasurer, CPCU, PCIU and DIU members agreed by the Bank have been incorporated in the P M M and wil l be used as the basis o f the annual performance review o f the relevant staff. The Implementing Agency has established procedures to maintain proper project and procurement filing in the PMM. This include filing o f advertisements, bidding documents, evaluation reports, contract award and final contract documents.

The reportstrecords o f public openings for all prior review contracts shall be submitted promptly

The Implementing Agency has provided guidelines in the P M M on how to conduct

g strong task teams with effective tools to pay increased attention to fiduciary risks

Timeline for procurement decisions have been agreed between GO1 and the Bank to establish

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GO1 - WB - service standards and avoid procurement delays to reduce chances o f corruption. The Implementing Agency has established in the PMM, procedures for regular review o f accountability reports including i t s supporting documents (i.e. travel reports, receipts, etc.) Guidelines for submission of complete documentation rewired for requests for payments (SPP) I GO1

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. . _ - to KPKN have been specified in PMM. The Implementing Agency shall conduct regular interim audits by third parties, which wi l l include review of procurement process and procurement results (end use checks, quality and quantity o f acquired goodstworkslservices, verification on made payments, price comparison between contract price and the market price. etc.).

?finition of remedies to anticipate deviations The clarifications on NCB procedures following Keppres 18t2000 to be acceptable by the Bank have been included in the Legal Agreements. Substantial deviations from such clarifications may be subject to misprocurement. Remedies for non-compliance to the agreed time-line o f procurement decisiondservice standard have been established in the PMM, which include the following remedies: i) evaluation reports must be submitted to the Bank within 6 weeks o f bidtproposal submission. Failure to do so wil l be deemed as lack o f due diligence; timely and appropriate action acceptable to the Bank wil l be required to remedy the situation. ii) request for extension o f bid validity for 8 weeks beyond the original validity wi l l require the Bank’s prior approval. Unless justified, such approval may not be given, and may be subject to misprocurement. Clear terms and conditions wil l be established in the DFA ‘contract’ between the provinces and the districts which wi l l include remedial actions and sanctions should deviations from the agreed ‘contract’ occur. Sanctions to substantial deviations may range from withholding o f DFA tranche payment to cancellation o f funding. The Implementing Agency has established the remedial actions and sanctions for cases of fraud and corruption that are reported and for which evidence are found. This include sanctions to staff proven to be involved in such cases.

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