Documentof The World Bank FOROFFICIAL USEONLY ReportNo: 40993-SB PROJECTAPPRAISAL DOCUMENT ONA PROPOSEDGRANT INTHEAMOUNT OFSDR 1.O MILLION (US$ 1.5 MILLIONEQUIVALENT) TO SOLOMON ISLANDS FORA HEALTH SECTOR SUPPORTPROGRAM TECHNICAL ASSISTANCE PROJECT February 19,2008 Human Development Sector Unit East Asia & Pacific Region This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosedwithout World Bankauthorization. CURRENCY EQUIVALENTS (Exchange Rate Effective January 17,2007) Currency Unit = Solomon IslandsDollars SBD 7.42 = US$1 US$ = SDR1 FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank AusAID Australian Agency for InternationalDevelopment CBO Community BasedOrganization FMP Financial Management Improvement Program GFATM Global Fundfor AIDS, Tuberculosis, andMalaria HIES HouseholdIncome and Expenditure Survey HISP Health Institutional Strengthening Program HSDP Health Sector Development Program HSTA Health Sector Trust Account ICB InternationalCompetitive Bidding M&E Monitoringand Evaluation MOFT MinistryofFinanceandTreasury M H M S Ministry o f Health and Medical Services MTEF MediumTerm Expenditure Framework N C B National Competitive Bidding N C D Non-Communicable Disease NERDP National Economic Recovery andDevelopment Plan NGO Non-Governmental Organization NHS National Health Strategy NHSP National Health Strategic Plan RAF Resource Allocation Formula RAMS1 Regional Assistance Missionto the Solomon Islands RETA Regional Technical Assistance SBD Standard BiddingDocuments S I Solomon Islands SIG Solomon Islands Government SWAP Sector Wide Approach Vice President: James W. Adams Country Director: NigelRoberts Sector Manager: Fadia M.Saadah Task Team Leader: Muhammad Ali Pate FOR OFFICIAL USEONLY SOLOMON ISLANDS HealthSector SupportProgramTechnicalAssistance Project CONTENTS Page I STRATEGICCONTEXTANDRATIONALE . ................................................................. 3 A. Country/sector issues and government strategy.................................................................. 3 B. Rationale for Bank involvement ......................................................................................... 5 C. Higher level objectives to which the project contributes.................................................... 5 I1. PROJECTDESCRIPTION ............................................................................................. 6 A. Lending instrument............................................................................................................. 6 B. Project development objective and key indicators.............................................................. 6 C. Project components............................................................................................................. 6 D. Lessons learned and reflected inthe project design............................................................ 8 E. Alternatives considered and reasons for rejection .............................................................. 9 I11. IMPLEMENTATION .................................................................................................... 10 A. Partnership arrangements .................................................................................................. 10 B. Institutional and implementation arrangements ................................................................ 10 C. Monitoring and evaluation o f outcomes/results ................................................................ 10 D. Sustainability..................................................................................................................... * . . 11 E. Critical risks andpossible controversial aspects............................................................... 11 F. Loadcredit conditions and covenants............................................................................... 13 IV . APPRAISAL SUMMARY: ............................................................................................ 13 A. Economic and financial analyses...................................................................................... 13 B. Technical........................................................................................................................... 14 C. Fiduciary ........................................................................................................................... 14 D. Social................................................................................................................................. 15 E. Environment...................................................................................................................... 15 F. Safeguard policies............................................................................................................. 15 G. Policy Exceptions andReadiness...................................................................................... 15 Annex 1: Country and Sector or ProgramBackground ......................................................... 17 I I This document has a restricted distribution and may be used by recipients only in the performance o f their official duties. Its contents may not be otherwise disclosed without World Bank authorization. Annex 3: ResultsFrameworkandMonitoring ........................................................................ 23 Annex 4: DetailedProjectDescription ...................................................................................... 27 Annex 5: ProjectCosts............................................................................................................... 33 Annex 6: ImplementationArrangements ................................................................................. 34 Annex 7: FinancialManagementandDisbursementArrangements ..................................... 36 Annex 8: ProcurementArrangements ...................................................................................... 41 Annex 9: Economicand FinancialAnalysis ............................................................................. 48 Annex 10: SafeguardPolicyIssues ............................................................................................ 50 Annex 11:ProjectPreparationandSupervision ..................................................................... 51 Annex 12: Documentsinthe ProjectFile ................................................................................. 52 Annex 13: Statementof LoansandCredits .............................................................................. 53 Annex 14: Country at a Glance ................................................................................................. 54 Annex 15: Map IBRD 35742 ...................................................................................................... 56 SOLOMON ISLANDS HEALTHSECTOR SUPPORT PROGRAMTECHNICALASSISTANCE PROJECT PROJECT APPRAISAL DOCUMENT EASTASIA AND PACIFIC EASHD Date: February 19, 2008 TeamLeader: MuhammadAli Pate Country Director: Nigel Roberts Sectors: Health (100%) Sector Managermirector: Fadia M.Saadah Themes: Healthsystem performance (P) Project ID: PO97671 Environmental screening category: Not Required LendingInstrument: Technical Assistance Grant [ ] Loan [ ] Credit [XI Grant [ ] Guarantee [ ] Other: For Loans/Credits/Others: Total Bank financing (US$m.): 1.50 ProDosed terms: FinancingPlan(US$m) Source Local Foreign Total BORROWEFURECIPIENT 0.00 0.00 0.00 IDAGrant 0.45 1.05 1.50 Total: 0.45 1.05 1.50 Recipient: Solomon Islands ResponsibleAgency: Ministry o f Health and Medical Services (MHMS) P.O.Box 349 Honiara Solomon Islands Estimateddisbursements(Bank FW/US$m) FY 8 9 10 11 12 0 0 0 0 4nnual 0.10 0.35 0.65 0.40 0.00 0.00 0.00 0.00 0.00 Zumulative 0.10 0.45 1.10 1.50 1.50 1.50 1.50 1.50 1.50 Project implementationperiod: Start March 31,2008 End: September 30, 2010 Expectedeffectiveness date: May 30, 2008 ExDected closing date: March 31.201 1 Does the project depart from the CAS incontent or other significant respects? Re$ PAD A.3 [ fies [XINO Does the project require any exceptions from Bank policies? Re$ PAD D.7 [ ]Yes [XINO Have these been approved by Bank management? [ ]Yes [ IN0 I& [ Yes [ ] N o Does the project include any critical risks rated "substantial" or "high"? Re$ PAD C.5 [XIYes [ ] N o Does the project meet the Regional criteria for readiness for implementation? [x [ No Re$ PAD D.7 Project development objective: Re$ PAD B.2, Technical Annex 3 The Project's development objective i s to improve the institutional capacity o f MHMS inthe areas o fpublic expenditure management and sector performance monitoring. Such capacity development would be critical to the overall success o f the Program inimprovinghealth services deliveryandoutcomes. Project description: Re$ PAD B.3.a, TechnicalAnnex 4 Component 1: Public Expenditure Management: This project component will contribute technical assistance to complete the first rolling sector MTEF, improve national MHMS and provincial health planningand budgeting systems and procedures, buildingon work done during preparation, so that priorities are set within a knownresource envelope and linkedto expected results. Component 2: Sector Performance Monitoring: This project component will provide technical assistance to improve the sector-wide program's M&E framework to focus on a core set o f indicators covering the key dimensions o f sector performance along key dimensions. Component 3: Training and Capacity Building:This component will strengthen the management capacity o f senior managers andprovincial healthdirectors to be more effective in strategic planning and execution. It will also finance part o fthe MHMS strategic humanresource training plan. Which safeguard policies are triggered, if any? Re$ PAD 0.6, TechnicalAnnex 10 N o safeguard policies are triggered. Significant, non-standard conditions, if any, for: Re$ PAD C.7 Boardpresentation: None Loadcredit effectiveness: None. Covenants applicable to project implementation: 0 Complete the first sector medium-termexpenditure framework by December 31,2009. Prepare and carry out annualjoint health sector reviews satisfactory to the Association by December 31o f each year. Prepare on annual basis a strategic training planthat includes training activities to be financed bythe Project. Maintain a procurement officer within the MHMSon terms and conditions satisfactory to the Association for the duration o f project implementation. I. STRATEGICCONTEXTANDRATIONALE A. Country/sectorissuesand governmentstrategy Country andsector issues 1. Following three years o f civil conflict and a three-year post-emergency period, the Solomon Islands (SI) shifted from emergency recovery to medium-term development planning. Duringthe conflict, government control o fthe economy collapsed, lawlessnesswas rampant, and social services were seriously disrupted. The situation on the ground improved during the three years post-conflict with good progress in restoring government functioning and improving law and order. This was supported by the Australia-led Regional Assistance Missionto the Solomon Islands (RAMSI), which continues upon request from the Solomon Islands Government (SIG). As the country phases out o f the "post-conflict" period, attention is turning to medium-term strategy and planning at the national and sectoral levels. For instance, the Ministry of Health and Medical Services (MHMS) has preparedits strategy document for the years 2006-2010. 2. Inhealth, improving priorityoutcomes inthe SolomonIslandsis anurgentneed. Health status, which deteriorated significantly during the conflict, remains poor with indicators among the worst in the Pacific. Maternal mortality (MMR) appears to have increased in recent years, reaching 141.5/100,000 live births in 2004, from a low o f 78.4 in 1997 and although no recent estimate for infant mortality (IMR) i s available, the 1999 Census IMR o f 66/1,000 was among the highest inthe region. Moreover, malaria incidence increasedby 30% duringthe conflict and has remained high at 160-190 cases/1,000 in 2004-2005. Tuberculosis (TB) rates have also increased, reaching 93/100,000 in 2005, the highest since 1995 and anecdotal evidence o f increasing diabetes and high HIV risk factors in a recent survey are emerging concerns. A recently conducted Demographic and Health Survey (DHS) i s in the process o f being finalized (as at November 5, 2007). Preliminary indications show some improvement in utilization, immunization coverage, infant mortality, family planning and supervised deliveries. If the preliminary results are confirmed the challenge will be to maintain the momentum towards continued improvement inthe outcomes. 3. There are challenges related to both technical quality o f services and the capacity o f the health system to deliver services effectively and efficiently. Foremost among these are resource allocations that do not align with preventive and primary health care priorities; poor quality o f services from chronic under-investmentinthe maintenance o f health infrastructure and recurrent shortages o f drugs; weak incentives to promote performance and to respond to demand-side factors; unclear division o f responsibilities between national and provincial health authorities; and weak management capacity compounded by an under-developed information system. Another long-term challenge is improving the sustainability o f sector financing as donors finance about 50% o f total sector expenditureand 50% o f recurrent expenditures. 3 Governmentstrategy 4. In2006, the Ministry of Health formulated a National Health Strategic Plan (NHSP) laying out the government's priority areas and actions for the health sector over the five-year period 2006-2010 (see Annex 1). The Plan covers eight priority strategic areas', seven o f which are focused on specific health issues or health service delivery issues currently affecting health outcomes, or that will impact health status in the future. In order to make the Plan operational, the SIG subsequently formulated a detailed program for the development o f the health sector in the period 2008-201 1, the Health Sector Support Program (HSSP) with technical assistance provided through AusAID and the World Bank. It is an over-arching program with complementary financing o f a single sector program led by the Government and in coordination with several partners namely AusAID - the major external donor, funding approximately 40 percent of the total program - the World Bank, WHO, UNFPA, UNICEF, SPC and The Global Fund. 5. In alignment with the NHSP, the HSSP's development objective is to support the Solomon Islands Government in achieving agreed priority health outcomes through effective, efficient, and equitable services responsive to the population's health needs. Its three focus areas2are a subset o f the government's priorities selected fkom the NHSP strategic areas. Annex 4 describes infurther detail the HSSP and shows the linkages between the NHSP and the HSSP. The key documents o f this sector program include the five-year NHSP, a draft monitoring and evaluation plan, a partial health sector medium term expenditure framework (MTEF), and an operational program (the Program Implementation Plan (PIP)), which address priority areas for donor assistance. Of the priority areas identified in the PIP, AusAID i s intending to focus specifically on malaria, healthpromotion, and health systems strengthening, with the latter being largely financing for operational costs. 6. Given the current state o f the HSSP's preparation and the areas identified inthe program for financing by AusAID, several aspects o f the overall program require continued development. Specifically, the sector's overall resource allocation picture i s not clear. The MTEF does not reflect the full sector envelope (government plus donors) and the government has yet to revise the MTEF to allocate resources across the sector in alignment with its strategy. Also, the possibilities for efficiency gains, equity concerns, the realignment o f expenditures with priorities, and the sustainability o f sector financing need to be explored. Finally, the monitoring and evaluation framework needs to identify a core set o f key perforhance indicators to measure the effectiveness, efficiency, equity, and sustainability dimensions o f sector performance. It i s with this in mind that the Bank proposes its support to the HSSP and the SIG through a Technical Assistance Grant to improve the capacity o f the MHMS in a few selected areas, namely public expenditure management, sector performance monitoring, and management training. Such capacity development would be critical to the overall success o f the HSSP. 'The Solomon Islands National Health Strategic areas are: (i) focus, (ii) healthprograms, (iii) people public malaria, (iv) common childhood diseases, (v) non-communicable diseases, (vi) HIV/AIDS and STIs, (vii) family planning and reproductive health, and (viii) health systems strengthening. The Health Sector Support Program's focus areas are: (i) community focus, (ii) healthprograms, and (iii) priority health systems strengthening. 4 B. Rationale for Bank involvement 7. There i s a strong rationale for the World Bank's technical assistance to the Solomon Islands' HSSP and its support i s specifically designed to address the gaps inthe existing program andbuildcapacity. The main constraints to improving health sector performance inthe Solomon Islands lie more in resource allocation and management and lack o f effective performance monitoring, rather than inthe level o f financing itself. Increased investment inthe health sector through HSSP would fall short o f achieving the desired impact if the SIG's capacity to allocate resources efficiently and equitably, and monitor sector performance were not strengthened. The World Bank,with its extensive comparative advantage inthe areas of health financing andpublic expenditure management, is uniquely qualified to oversee the technical assistance required for such capacity building. As a proposed Technical Assistance Grant supporting the wider health sector program, largely supported by AusAID, the Bank's modest financing contribution will effectively leverage the Bank's strengths and resources with the largest donor in the sector to improve health services and sector performance. Moreover, the HSSP i s consistent with the World Bank's Regional Engagement Framework FY2006-2009, which highlights the importance of improving the effectiveness o f public expenditure in the social sectors through strategic partnerships with key donors. 8. Furtherjustification for World Bank involvement lies inthe fact that the World Bank's sectoral expertise and experience insector wide operations and fragile and post-conflict countries are considered o f value by the client (SIG) and the key development partners, including AusAID, who are keen for the Bank's technical assistance contribution to the program. Finally, this Technical Assistance project will provide the groundwork for future World Bank involvement in a full sector wide approach (SWAp). Inparticular, the analytical work carried out as part o f this project will contribute to the design o f the SWAp, as well as allow the World Bank to engage in and add value to the overall policy discussions inthe health sector. C. Higher level objectives to which the project contributes 9. The project objectives are aligned with both the NHSP and the HSSP, which articulate a strategic vision for the health sector, that is, to improve priority health outcomes for the population through effective, efficient, and equitable health service delivery responsive to the population's needs, and to achieve the Millennium Development Goals. 10. Also, as mentioned above, the project corresponds with the first pillar o f the Bank's Pacific Regional Engagement Framework for FY2006-2009 by assisting the government on public expenditure management issues to improve the delivery o f basic services to communities andprovidingbroader sector policy advice. 5 11. PROJECTDESCRIPTION A. Lendinginstrument 11. The lending instrument i s a Technical Assistance (TA) Grant. TA Grants and Loans (TALs) are especially suited to buildinginstitutional capacity in entities directly concerned with implementing policies, strategies, and reforms that promote economic and social development. The project instrument will be used to assist in aligning health sector expenditures, policies, and performance in line with the SIG's priorities as laid out in the NHSP. Coordination among partners is essential to ensure productive use o f funds since development assistance to the Solomon Islands is substantial and has a major impact on budget planning and development. A T A L will therefore help the Recipient to develop the institutional capacity to plan, implement andmonitor the overall healthprogram. B. Projectdevelopmentobjectiveandkey indicators 12. The Project's development objective is to improve the institutional capacity o f MHMS in the areas of public expenditure management and sector performance monitoring. Such capacity development would be critical to the overall success o f the HSSP in improving health services delivery and outcomes. - 13. The proposed project's progress towards achieving its development objective will be assessed by a set o f quantifiable and qualitative indicators to measure institutional change, availability and use o f resources, effectiveness o f the processes and outputs resulting from the specific technical assistance supported by the project. The key indicators will include: (i) completion o f the first rolling medium term sector expenditure program linking resources with priorities; (ii) inthe proportion o f health sector budget expended at provincial level and increase on primary health care services; (iii) completion o f a health facility survey and use o f the results to improve health sector planning; and (iv) quality, participatory annual joint sector reviews conducted on schedule. C. Projectcomponents 14. The proposed project will provide complementary analytical, advisory and technical assistance to the health sector program in three key areas, hereafter referred to as the Project Components. These project components are integrated among each other and within the overall health sector program. The components deal with improving public expenditure management, performance monitoring, and provincial health service implementation and management capacity. Component1:PublicExpenditureManagement(US$545,000) 15. This project component will support strengthening o f national M H M S and provincial health planning and budgeting systems and procedures, building on work done during preparation so that priorities are set within a known resource envelope and linked to expected results. The project will provide technical specialists on provincial health planning and public 6 expenditure management, who will provide specific inputs to the M H M S and strengthen development o f the institutional capacity in the areas o f their expertise. Informed by World Bank knowledge, analysis and complementary economic and sector work products such as public expenditure reviews (PERs), the component will bring about improvements in public health sector expenditure management, from planning to budget execution, linking available resources to priorities for achieving the improved health outcomes. Component 1i s linked to the component 2 below in that sector performance monitoring will provide feedback mechanism to improve the public expenditure management. 16. More specifically, this component will focus support infollowing key areas: (i) Completing and then annually updating the health sector MTEF, which aligns SIG and development partner finances with stated NHSP priorities. (ii) Strengtheningplanningandbudgetingproceduresintheprovinces,includingexpenditure monitoring to provide feedback on subsequent planning. For both (i) and(ii), IDA grant will the be used to finance and oversee the provision o f local and international technical specialists to advise on this process. These specialists will build upon existing SIG systems and procedures, thereby strengthening institutional capacity within the MHMS. (iii) Improvingunderstanding ofthe costsandefficiencyofhealthfacilityperformance, as well as the effectiveness o f the deployment o f human resources and other inputs to health facilities. The project will support assistance by an external specialist agency to work with the M H M S Policy and Planning Division to design, implement and analyze a health facility efficiency study. (iv) Increasing community and household engagement in health care. The IDA grant will finance a short-term consultancy to develop operational models for effective engagement o f communities and households in efforts at positively modifying household health seeking behaviors. This will be in line with the SIG's Bottom-Up Approach to development. It is expected that such operational models for community engagement inhealth will subsequently be implementedwithin the wider healthprogram. 17. While the project-will not directly finance programmatic expenditures, it will contribute by guidingwhere the sector program resources are channeled, takinginto account identified gaps in areas such as pharmaceuticals, infrastructure, referral system, human resources and people- focus. Component 2: Sector Performance Monitoring (US$382,000) 18. This project component will support the M H M S in developing a monitoring and evaluation (M&E) framework for the HSSP covering the key dimensions o f sector performance (effectiveness, quality, efficiency, equity, sustainability) and integrating M&E into sector management. It will enable the M H M S to track achievement o f NHSP objectives, providing feedback through the annual budget planning and review processes so that adjustments in resource allocation are made to address the priorities. The component support provision o f technical specialist assistance to the M H M S to focus the existing draft M&E framework on a 7 selected set o f measurable, actionable indicators, to define data needs and sources, and to develop baselines for these core indicators to allow the tracking o f sector progress. The aim i s to have sector policy and management decisions based on better information and also to facilitate the sector's review process by collecting and analyzing indicators ahead o f the annual joint sector review meetings. A balanced scorecard will be developed for the provinces to assess progress in meeting the strategic objectives o f the NHSP. The work under this component will be coordinated with and complement the MHMS' existing Health Information System. Under this component, the IDA grant will finance short-term intermittent international technical assistance as well as the provision o f qualified national consultants to assist the M H M S in carrying out its performancemonitoring fbnction for the overall program. Component3: TrainingandCapacityBuilding(US$523,000) 19. This component will strengthen the management capacity o f senior managers and provincial health directors to be more effective in strategic planning and execution. More specifically, the IDA grant will: (i) Financethecontinuingmanagementeducationforofficerstargetedatsolvingimmediate program challenges, such as dealing with community participation in health, streamlining referrals system between health centers and provincial hospitals and the National Referral Hospital. (ii) Financeselectedtrainingactivitiesidentifiedwithinthesector's strategic trainingplan, which will annually update the MHMS' training needs in response to the priorities and will specify criteria for selecting trainees. Support for training under this window will include leadership skills for senior managers, such as negotiation and conflict resolution, in addition to technical subjects related to health service management. (iii) Support learningevents as part o f ongoing dialogue and supervision o f the operation. D. Lessonslearnedandreflectedinthe projectdesign 20. The project design builds on key lessons learned from analytical work carried out during preparation, experience gained during program preparation, the recently closed World Bank- supported Health Sector Development Project in the Solomon Islands, and extensive Bank- financed health sector projects throughout the EAPregion. Specifically: 21. Government Ownership - As the proposed TA will be providing an important support framework for the wider HSSP by aiming to improve public expenditure management and health sector performance - key elements for the overall success o f the HSSP - government commitment to develop its ability to analyze and effectively use TA advice i s even more critical. Therefore, it was important that the TA provided reflected the priorities identifiedby the MHMS. 22. Institutional capacity - Greater attention needs to be paid to building institutional capacity to plan, develop, manage, and administer the delivery o f health care services at both the national and provincial levels. Alternative mechanisms will be explored in order to 8 institutionalizecapacity as effectively as possible. Providing continuous support inthe context of a LICUS/fiagile state i s essential and Bank supervision has to be more intensive than normal in the LICUS context. 23. Knowledge transfer - The selection o f technical assistance should emphasize capacity building to ensure that knowledge is passed from the TA advisors/consultants to the beneficiary staff. This i s especially important given the high staff turnover. Also, it i s important to partner external technical advisors with national staff, who will own and champion the course o f the program. While external advisors bring external knowledge, national staff is a substantial repository o f country local knowledge that external advisors do not have. Therefore, selection o f technical assistance should be cognizant o f the local knowledge that already exists. 24. Monitoring and evaluation - For improved sector performance, provincial level planningand supervision must be strengthened to effectively analyze and use the data and other information collected for the HMIS system. Roles, responsibilities, and accountabilities o f provincial staff should be defined and clarified to ensure the systematic collection o f data and improvement inits quality while the role o f central staff should be one o f oversight and analysis. 25. Coordination - Close coordination with development partners to ensure coherence and complementary partnership i s critical. The Bank and development partners must work closely and seek to establish and maintain trust o f each other and the Government o f Solomon Islands. E. Alternatives considered andreasons for rejection 26. Stand-alone Specific Investment Loan (SIL): Given the very modest financing contribution o f IDA in the program, a stand-alone S I L was considered inappropriate. The SIL would have resulted inthe World Bank and AusAID having two separate investment operations supporting the same health sector inparallel. This was rejected given Government's expressed interest in following/moving towards a SWAp-type operation; the interest in building Government systems, and the opportunity costs associated with having to manage multiple donors inthe same sector, each with its own requirements. 27. TAL versusAusAID-IDA pooledfinancing model of SWAP - The full SWAPmodel was considered at the initial stages o f project preparation. It was subsequently acknowledged that in the Solomon Islands context, the institutional and political environment made the transaction costs associated with such a pooled fundingmodel onerous and inefficient at this time. The full SWAP approach then evolved to where the SIG and the key development partners adapted to the current model of complementary (parallel) financing o f a single sector program led by the Government and incoordination with several other partners including AUSAID, WHO, UNFPA, UNICEF, SPC, IDA and The Global Fund. This approach offered a way for the Bank to more effectively leverage its strengths to make constructive contributions through TA to the overall sector program largely financed by the Government and AusAID, and allow for the partnership arrangements to be stronger so that in subsequent phases external assistance may take the form o f pooled financing. 9 111. IMPLEMENTATION A. Partnershiparrangements 28. The overall health sector program was designed in partnership by a team comprising representatives from the World Bank and AusAID working with a SIG preparation team. WHO, UNICEF, UNFPA, SPC and the Global Fund representatives participated in various stages during the preparation. While a formal MOU has not been signed by the partners, an understanding has been reached by all partners on the need to work together collaboratively in the program, consistent with the Rome and Paris Declarations on Donor Harmonization. There will be two semi-annual joint development partner missions, with every alternate mission designated as the Annual Joint Review. The project will be implemented within the context o f this sector-wide partnership framework. B. Institutionalandimplementationarrangements 29. Project implementation, management and coordination - The institutional home for the project will be the Department for Policy and Planning inthe MHMS. The Department will be responsible for coordinating the implementation o f the Project at the national and provincial levels, preparing and submitting quarterly progress reports, and coordinating with the M H M S Executive on implementation and progress reviews. With the MHMS's newly appointed Chief Accountant, the Department will be responsible financial management o f the Project and will also handle procurement through the MHMS's newly created Procurement Unit. The Policy and Planning Division will lead administration o f the Project, reporting to the Permanent Secretary. Responsibilities for health service programming and delivery are shared between the central and provincial levels (Annex 6). Project implementation will be guided by work plans that will define the activity budget, deliverables and links to the HSSP. The work plans will be developed by the MHMS and agreed with the World Bank. Supervision andreviews o f the work plan will be carried out inconcert with the healthreview missions. 30. Project oversight - The M H M S executive will be responsible for strategic guidance and management oversight o f the Project, consistent with the oversight arrangements for the overall sector program. The MHMS Executive, headed by the Permanent Secretary, will provide guidance to the Policy and Planning Division on Project implementation and sector program strategy through its weekly and forthnightly Special Sessions, as may be needed. Participants in the Special Sessions include other key Departments and Ministries, i.e., the Department o f Finance & Treasury, the Department o f National Planning and Aid Coordination, and the Ministry of Education. Other key stakeholders within the health sector, such as development partners, NGOs, CBOs and churches may also be represented during the M H M S Executive Special Sessions. C. Monitoringandevaluationof outcomedresults 31. Project monitoring will be carried out within the framework o f the overall health sector program. Achievement o f objectives will be measured against a specified list o f indicators which aim to measure availability and use o f resources, effectiveness o f processes and outputs resulting fkom the specific technical assistance supported by the project (see Annex 3). While 10 supervision missions will review these indicators, the outcomes improvement aimed for in the overall health sector program will be jointly monitored by the partners-SIG, AusAID, World Bank and others-based on agreed output and intermediate outcome indicators specified in the core indicators for the sector monitoring and evaluation framework. The program indicators will include health sector effectiveness, equity, efficiency, quality and sustainability. There will not be separate M&E systems or reports prepared for each partner; instead, a joint review and reporting arrangement, based on existing health information system, will be developed to provide information needed for the respective partners, including SIG, AusAID andthe World Bank. D. Sustainability 32. The process o f developing a sector-wide program inthe health sector is evolving around the SIG's NHSP for 2006-2010 and the medium-term expenditure program that will be developed to align the resources with stated priorities. Mechanisms for joint planning, implementation, review and evaluation will be made operational as part o f the program. The use, to the extent possible, o f existing Government systems, and the provision of support to strengthen Government systems will assist in ensuring sustainability o f the investments in the program. 33. The sustainability o f the proposed project will depend critically on the extent to which local capacity i s enhanced and government takes ownership o f the reforms to resource planning and management. It is acknowledged that strengthening local capacity to effectively allocate and manage resources and monitor sector performance i s a challenging task, and likely to be constrained by a lack o f skilled personnel. Institutionalizing budget planning and management tools such as the MTEF and PER require identifying local personnel and making significant investments intheir skills and capacity to continue these activities within the M H M S long after technical assistance has ended. This project's strategy o f partnering international consultants with local consultants will contribute to this process. Government ownership o f the proposed reforms will ensure that the local capacity that i s created i s utilized effectively. Furthermore, the proposed project has a longer term outlook in that it will likely pave the way for more substantive additional contribution to the health program by IDA. Thus, the programmatic sustainability o f IDA'Scontribution i s likely in the medium- to long-term. However, it i s important to note that the goal o f achieving sustainability in health financing may be threatened by current and future fiscal constraints faced by SIG. The growth rate o f both GDP and government revenues i s expected to level o f f after 2008, particularly as a consequence of declining outputs from the timber industry. Recent improvements in GDP growth have largely been drivenby growth inthe forestry, sawmilling and loggingindustries. The growth rate o f this industryis expected to decline substantially after 2008. Given fiscal constraints, it maybeharder for SIG to hold on to its commitments to substantially increase its share o f health financing relative to the donors. E. Critical risksandpossible controversial aspects 34. Detailed risk assessment and mitigation measures are provided in the risk assessment framework that was discussed at the Decision Meeting and subsequently reviewed during the appraisal mission. The overall project risk i s rated high, given the country and sector contexts. Despite the mitigation measures in place, it i s likely that some o f the risks would be filly 11 understood during implementation. Therefore, the project leaves open scope for flexibility to adapt to additional project risks that may emerge during implementation. The following table summarizes some o fthe key project risks. Potential risk Mitigation measures Risksratings after mitigation measures Political instability inthe 1 RAMS1support i s expected to 1 Moderaternigh SolomonIslands affects program continue for at least the duration o f the implementation. implementation period; AusAID programhas been de-linked from RAMSI. 1 The supervision team will continue to work closely with central government agencies inadditionto political leaders to ensure continuity o f technical counterparts. Fiscal crisis leads MOFT to 1 The Sector Strategy is based o n 1 High reduce M H M S budget allocation. priorities and focuses on medium-term sustainability o f expenditures which should assist M H M S to maintain priorities. M H M S neglects 1 Supervision missions will indicate that 1 High recommendations arising from further IDA assistance will be technical assistance and analysis. consideredinlight o f responsiveness to recommendations from the TA. 1 Supervision missions will ensure that the TA provided continues to be complementary to the HSSP and is discussed with AusAID and various UNagencies involved inthe sector. Weak capacity at central and 1 Inthe short-term key TA willbe 1 Moderate Provincial levels impedes provided to buildlocal capacity. implementation and inability to Givenhighdonor dependence (60 finance recommendations. percent o f sector), donors have committed to support through the medium-term. Weak fiduciary capacity inthe 1 TA is beingprovided throughparallel 1 Moderaternigh center and the Provinces slows support. While this riski s highfor the implementation and leads to overall program, the focus o f this irregularities. particular project is to improve the institutional capacity. 1 The M H M S has establisheda procurement unit and training has been provided to selected M H M S officials; a procurement adviser and a procurement officer are on board and they shall be maintained throughout project implementation. Disagreement between HSSP 1 Collaboration during preparation, with 1 Substantial donor partners slows joint missions and use o f similar implementation. program documents to guide implementation as much as feasible. 12 F. Loadcredit conditions and covenants 35. In addition to the standard conditions and covenants, the following conditions and covenants are proposed: Conditions of Effectiveness None. Legal Covenants 0 Complete the first sector medium-term expenditure framework by December 31,2009. 0 Prepare and carry out annualjoint health sector reviews satisfactory to the Association by December 31o f each year. 0 Prepare on annual basis a strategic training planthat includes training activities to be financedby the Project by June 30 o f each year. 0 Maintain the procurement officer inthe M H M S on terms and conditions satisfactory to the Association for the duration o fproject implementation. IV. APPRAISAL SUMMARY: A. Economic and financial analyses 36. A traditional cost-benefit analysis is not undertaken as this is a technical assistance project that has only an indirect impact on actual health outcomes. However, it i s possible set out three mechanisms through which the economic benefits of this project are attained. 37. First, the project will increase the allocative efficiency o f public health expenditure by aligning resource allocations with priority needs. Second, the project will improve the technical efficiency o f public health expenditure by providing the tools and information needed to utilize given inputs optimally so as to maximise outcomes. In particular, the project will increase the capacity o f national and provincial healthplanners to generate and use information on unit costs, service indicators, and the deployment o f staff and other inputs across the country. Third, the project will improve equity inresource use by increasing the capacity o f national and provincial health planners to redistribute resources so as to alleviate inequalities across regions and income groups. 38. Under this grant, project financing will be allocated for technical assistance, training and the efforts to set up a monitoring and evaluation system. Project costs were estimated by comparing similar consultancy and other assignments supported by IDA and AUSAID in S I and elsewhere inthe region. 39. The design o f this TAL recognises that a longer term challenge for the health sector i s to improve the sustainability o f health financing. Although SIG has made real progress in this regard in recent years by increasing government allocations to the health sectbr, substantial increases inSIG share o f health fundingrelative to donors are unlikely. 13 40. The fiscal context in which the project i s being implemented i s not highly favourable with GDP growth expected to decline and recent increases in total revenues stabilising during 2008-2011. An important contributing factor to this i s the decline in outputs from the timber industry, a major source o f export income for the SI economy. These constraints are taken into account in the design o f HSSP which assumes a 5% nominal increase in the MHMS budget during 2008-2011. Moreover, the technical assistance and capacity buildingprovided through the TAL should leadto efficiency savings andpotentially contribute to reducing the fiscal burden associated with the health sector. B. Technical 41. The components o f the Health Sector Support Program are technically sound and outline a credible and appropriate health sector strategy, which will be supported through the technical assistance provided by the proposed project. The design o f the project builds on analytical and policy research into how best to improve the efficiency and equity (refer to Annex 12 for background documents). It identifies the leading causes o f mortality and morbidity in the population and seeks to reorient the health system to giving priority to these. The three components selected for the Technical Assistance Project are consistent with the goals o f HSSP. Strengthening public expenditure management capacity will be critical for ensuring that managers align resource allocations with the needs o f the population. Improving sector perfonnance monitoring will be vital for improving the efficiency and equity o f resource use. Training and capacity buildingare needed to ensure that investments inthe first two components are sustained beyond the timeline o fthis project. C. Fiduciary 42. Financial management. The financial management systems to be used under the HSSP have been evaluated by the Bank financial management specialist for compliance with the Bank's financial management policies and procedures. The M H M S finance division will have responsibility for overall financial management and will be assisted through the appointment o f international Technical Assistance (financed through the HSSP). Given the low volume o f transactions andnature o fprocurement disbursement methods will be limitedto Direct Payments and reimbursement -this will simplify FM arrangements considerably. Bank Financed activities will be reported on.as part o f HSSP and no separate reports will be required, again simplifying implementation for the recipient. Financial management risks have been assessed as low (see Annex 7 for details). 43. Procurement. Procurement for the proposedproject would be carried out in accordance with the World Bank's "Guidelines: Procurement Under IBRD Loans and IDA Credits" dated May 2004; and "Guidelines: Selection and Employment o f Consultants by World Bank Borrowers" dated M a y 2004, and the provisions stipulated in the Financing Agreements. The general description o f various items under different expenditure categories are described in Annex 8. For each contract to be financed by the Grant, the different procurement methods or consultant selection methods, the need for prequalification, estimated costs, prior review requirements, and time frame are agreed between the Recipient and the Bank project team inthe Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements ininstitutional capacity. The 14 procurement assessment o f the Recipient's capacity revealed a high procurement risk. Implementationo f the agreed action plan(outlined inAnnex 8) will provide sufficient mitigation to proceed with project implementation. D. Social 44. The positive social impact o fHSSP, which will be supported by this technical assistance project, is enhanced by its (i) focus on communities, (ii) to reorient the public health goal resources away from the centre and to the provinces and lower levels o f government, and (iii) emphasis on improving the equity o f health outcomes. The IDA grant will strengthen the focus on communities by exploring options to link the supply side with the needs o f specific communities and to positively influence communities' demand for health care. Efforts to improve public expenditure management capacity and performance monitoring will help achieve the goal o f reallocating resources to the lower levels and improving equity. 45. The project will not be financing any large civil works, so no resettlement or adverse social impacts are anticipated. In addition, the entire S I population i s considered "indigenous", and no adverse impacts are expected for indigenous groups. E. Environment 46. Given the focused nature o f this operation, there are no environmental issues o f relevance to the project design. F. Safeguardpolicies 47. The project is Safeguards Category C. There are no safeguards policies triggered by the project. Safeguard Policies Tripgered by the Project Yes N o Environmental Assessment (OP/BP 4.01) [I [XI Natural Habitats (OP/BP 4.04) [I [XI Pest Management (OP 4.09) [I [XI Cultural Property (OPN 11.03, beingrevised as OP 4.11) [I [XI Involuntary Resettlement (OP/BP 4.12) [I [XI Indigenous Peoples (OPBP 4.10) [I [XI Forests (OP/BP 4.36) [I [XI Safety o fDams (OP/BP 4.37) [I [XI Projects inDisputed Areas (OP/BP 7.60) [I [XI Projects on InternationalWaterways (OP/BP 7.50) [I [XI G. Policy Exceptions and Readiness 48. The Project complies with all applicable World Bank policies. Program documents and implementation arrangements are satisfactory; the Project i s ready for implementation. A 15 satisfactory procurement plan i s in place and draft terms o f references for technical assistance andthe healthfacility surveywere developed andreviewed duringproject appraisal. 16 Annex 1:Country and Sector or Program Background SOLOMONISLANDS: Health Sector Support ProgramTA Project Health Outcomes 49. Health outcomes in the Solomon Islands are amongst the poorest in the Pacific. The Solomon Islands i s one o f two Pacific Island countries that still has endemic malaria and has to deal with both an unfinished communicable disease and child & maternal health agenda whilst non-communicable diseases take hold inthe adult population. Malaria and ARI account for over 50% o fprimary care consultations and 77 percent o f consultations inchildren under one. A high rate o f childhood illnesses overall contributes to the highest reported IMR inthe Pacific (66 per 1,000 live births in 1999). Similarly, gains inreproductive health outcomes are proving difficult, with a persistentlyhightotal fertility rate (4.8 in 1999), low contraceptive prevalence (around 20 percent in the HIES, lower in the M H M S annual reports), and episodes o f high maternal mortality (estimated MMR o f 142/100,000 in 2004). However, there are recent preliminary indications that some o fthese outcomes may have started to improve. Findings from the recently conducted DHS when finalized would be informative on recent health outcomes. 50. HIV is an increasingly important concern for the sector. Although prevalence in the general population appears to be very low (0% in a recent antenatal survey), rates in at-risk groups are unknown. Evidence o f highbehavioralrisk factors inthese groups, highrates o f STIs -eveninthegeneralpopulation- andtheexperienceofneighboringPapuaNewGuineamake controlling HIV risk a priority. Increasing rates o f tuberculosis, which reached its highest incidence for ten years in2005 (93/100,000), pose an additional public health threat should HIV infections increase. 51. Non-communicable diseases are the other major, emerging challenge for the sector. Staff reports, likely to be confirmed by the recent.STEPSsurvey, suggest that diabetes mellitus and hypertension are increasing and so cardiovascular disease i s likely to be a major problem in coming years. Diagnosis o f these NCDs i s late; complications are common; and therefore the impact on quality o f life and cost of care i s high. In2004, 14 percent o f surgical admissions in the National Referral Hospital were diabetes related and lower limb amputations for diabetic ulcers are common. 52. The extent to which equity is a major issue inhealth inthe Solomon Islands is not yet clear. Differences appear to exist from province to province in some access indicators, with the lowest utilization o f health care when sick in Makira o f 82% compared with the highest in Western o f 94%. Differences are more marked in the proximity o f closest health facility, with the proportion o f the population living within one hour lowest inMalaita (52%), Makira (65%), and Choiseul (65%) provinces compared with Western Province (93%), the highest. There i s also some evidence o f provincial differences in other outcomes, such as modem contraceptive prevalence rate (lowest in Guadalcanal 11%, highest in Temotu 38%). However, the critical analysis o f indicators by household wealth quintile and by urban vs. rural categories is not yet available. 17 53. Although the health system suffered significantly during the civil conflict, the government has had considerable success inreestablishing services once the turmoil ceased. The tensions saw sector outcomes deteriorate owing to declining service quality, recurrent shortages o f drugs and equipment, unreliable public funds flows, and weakened support from the center to the provincial health authorities. However, efforts by government-with significant support from AusAID and other donors-have made considerable progress in rebuilding the system in recent years. Today, some o f the noteworthy achievements o fthe sector include: 0 Strong geographical coverage o f health facilities, particularly primary care services, which is significant given the scattered island geography o f the country. The recent HIESreportedthat 74percent o fthe population lives within one hour o fahealth facility; Seemingly few financial barriers to care, since public health services are provided essentially free o f charge and there i s no evidence o f significant informal payments. Although indirect costs are not yet known, access overall appears good with 89 percent o f people reporting illness in the last month in the recent HIES stating that they received care; 0 Minimum staffing levels inmost health facilities. Overall, the nurse per capita ratio is higher than in similar countries (although the midwife and doctor per capita ratios are relatively low); Good intermediate outcomes in some key service areas, such as vaccination coverage (ranging from 67 to 93 percent full DTP immunization throughout the country according to a recent survey), antenatal attendance (reported at over 90 percent), and increasing utilization rates o f primary care facilities overall. Recent estimates suggest that annual outpatient contacts per capitahave returned to pre-conflict levels; and 0 Relatively high annual public expenditure per capita on health, at about US$43. This i s higher than in other countries o f comparable national income, but should be seen inthe context o f the Solomon Islands' geography as it is also the lowest o f the Pacific Island countries. Health system constraints 54. With the essential elements o f the health system in place, the government has recognized the need to focus on selected key constraints to sector performance if it is to bring about further improvements in health and disease outcomes. These constraints, which relate to both the technical quality o f services and the capacity o f the system to deliver these services effectively and efficiently, include: 0 Health service quality is undermined by run down facilities and recurrent shortages of drugs and equipment. Sustained under-investment in the maintenance o f clinics and hospitals has eroded infrastructure and equipment and compromised the quality o f health care services. Also, despite improvements in recent years, stock-outs o f drugs in the 18 provincial clinics and the hospitals still occur. Concerns about drug storage and the cold chain raise questions about the effectiveness o fvaccines anddrugs even when available. Resource allocations in the sector do not align with sector priorities. Public expenditure favors the centre at the expense of the provinces, where service delivery takes place. The HER showed that provincial expenditures were only 32% o f total expenditure, although 85% o f the population lives in the provinces. Public expenditure also favors hospital services (estimated at 17% o f total) at the expense o f preventive and primary health care services, which does not match the primary-health care focus demanded by the country's priority healthproblems. Weak capacity and inadequate planning, budgeting, and monitoring systems undermine theprovincial authorities ' ability to deliver services. The operational plans of the health sector are not developed within an overall budget envelope to allow prioritization and costing, and monitoring o f plan execution and expenditures i s incomplete. Inparticular, the reporting system currently does not separate provincial hospital and primary health care expenditures. In addition, the capacity o f management teams in many provinces i s weak owing to inadequate skills and training, a shortage o f basic equipment, and a shortage o f some staffpositions. Staff capacity and performance to deliver priority programs effectively needs improvement. Although minimumstaffing i s largely inplace, staff does not always have up-to-date technical skills, guidelines, and training to deliver priority programs. Sporadic supervision from the centre to the provinces and from the provincial capital to the primary health care level contributes to this problem, as does the lack of an institutional performancemanagement system. The health sector is not effectively influencing households to reduce unhealthy behaviors or to use health services appropriately. Households appear to exercise considerable choice on when to use health care. An example i s the 20% drop o f f between attendance for antenatal care and delivering in health facilities in some provinces (UNICEF vaccination coverage survey). Related to this is that patients appear to mix between "kastom" and Western medicine for the diagnosis and treatment o f certain diseases and for obstetric care, without any systematic attempts to bring the two areas together. Community understanding o f health issues and involvement in health services are also weak, and community health committees, once functioning in some areas, have now largely disappeared. 55. Another longer-term challenge is improving the sustainability o f sector financing. Donors finance about 50% o f total sector expenditure, including approximately 40% by AusAID alone, and also cover about 50% o f recurrent expenditures. Although the major donors appear to be committed to supporting the sector inthe Solomon Islands for some time, this unusually high donor dependence for recurrent cost financing challenges the government and donors to start to address sustainability o f sector financing. This will require government to take on an increasing share of recurrent expenditures over time. 19 Recent government policy and the National Health Strategic Plan 2006-2010 56. The government has laid out its priorities and approach to addressing these constraints inits National Health Strategic Plan 2006-2010. The NHSP replacedthe earlier sector strategic plan, which dealt with the immediate post-conflict period and focused on restoring health services and finctioning o f the system in response to the impact o f the civil conflict on the sector. The NHSP was prepared through a consultative process involving the provincial authorities and the central divisions and drew from new analyses o f epidemiological and service utilization trends over recent years. The NHSP was endorsed by Cabinet inNovember 2006 and formed the basis for the MHMS's Corporate Plan, consistent with the broad policy directions for the sector laid out by the GrandCoalition for Change government elected inApril 2006. 57. The NHSP identifies eight areas as sector priorities and highlights the importance o f a combination o f demand- and supply-side interventions in addressing these. Its priority areas include six programmatic areas and two cross-cutting areas. The programmatic priorities are malaria, childhood diseases, reproductive health, HIV and STIs, essential public health programs, and NCDs. These reflect the disease and health outcomes on which the MHMS intends to focus over the next five years and will guide the technical packages o f care. The cross-cutting areas are "people focus", which addresses demand-side factors such as behavior change and community participation inhealth issues, and health systems strengthening measures. The core systems measures relate to human resource development and management; planning, budgeting, and financial management; infrastructure and maintenance; and organizational reforms. 58. As inmost Pacific countries, the public sector finances andprovides almost all curative, preventive, and health promotion services in the Solomon Islands. The backbone o f the public system is a network o f nurses' aide posts, rural health clinics, and area health centers which provide primary health care and outreach services for communities. This system i s backed up by one public provincial hospital in each province, aiming to ensure secondary level medical care and basic surgical capacity, and, at the highest level in the country, by the National Referral Hospital inHoniarawhich provides specialist medical and surgical services. 59. Management and operation o f the public health sector is separated into central divisions, based inHoniara, and provincial health departments. The central units are responsible for policy development and monitoring o f sector performance; human resource planning; technical support and supervision to the provinces; procurement o f drugs, goods, and other key service inputs; and operation o f selected programs, such as health promotion and disease surveillance. The provincial departments are responsible for health service delivery by managing the primary care clinic system and the secondary level hospitals, planningand budgeting o f activities, overseeing implementation, monitoring progress andresults, and managing humanand financial resources. 60. The non-public sector i s very small. The country has a few Church-operated clinics and two Church-run hospitals, in the Western and Malaita Provinces, whose operating costs are nonetheless heavily subsidized by government. The private sector proper consists only of three clinics and two pharmacies in Honiara. Some non-governmental organizations provide health 20 promotion services for specific areas, such as behavior change messages for HIV/AIDS, but the NGO sector is active inonly a few areas inthe country. 21 Annex 2: Major RelatedProjectsFinancedby the Bankand/or other Agencies SOLOMONISLANDS: HealthSector Support ProgramTA Project 61. Significant donors to the health sector include Australia and the Republic of China, which provides on-demand support. Financing of health activities is also being provided by UNDP, UNICEF, UNIFEM, and WHO. The Asian Development Bank (ADB) is supporting regional technical assistance (RETA) which aims to move forward the pro-poor policy and capacity development agenda in members of the Pacific development countries, including the Solomon Islands. A wide range o f NGOs and CBOs are also active inthe health sector, focusing primarily on HIV/AJDS, reproductive health in defined locations. The table below provides a snapshot ofthis support. Sector Issue Project I LATEST SUPERVISION (ISR) Ratings (Bank-financec projects only) Implementation Development Progress (IP) Objective (DO) Other communicable diseases (P); Health Sector Development M S Healthsystemperformance(S); Project M S Populationandreproductivehealth(P); Rural services and infrastructure(S) Other development agencies I AusAID HealthInstitutional Strengthening Project WHO UNICEF Global Fundfor AIDS, Tuberculosis, and Malaria JICA Republic of China On demand basis NGOs 22 Annex 3: Results Framework and Monitoring SOLOMON ISLANDS: Health Sector Support ProgramTA Project The Project's development The key indicators will include: objective i s to improve the (i) Completion o f the first rolling medium Outcome information will inform institutional capacity o f M H M S in term sector expenditure program linking M H M S management and the areas o f public expenditure resources with priorities; criteria to development partners supporting the management and sector indicate successful completion are: the HSSP on the effectiveness, performance monitoring. activities are aligned with clear objectives, efficiency and equity o f resource the activities are budgeted ina realistic allocation inthe sector program. manner and the MTEF is indeed used and reflected inthe budget discussion, as evidenced by the reallocation o f resources towards priority areas from year to the next; (ii)Increasedfrom 17%the proportion o f health sector expenditures on primary health services andprovincial health programs; (iii) ofcompletedhealthfacility Results survey used inhealthplanning; inefficiencies arising from inappropriate mix o f inputs would be identified and corrected by reallocation o f inputs; variations inunit costs and occupancy rates used to identify inefficiencies inproduction and reallocate resources appropriately; and (iv) Participatory annualjoint reviews are conducted on schedule and clearly identify the main issues and formulate actionable recommendations Component 1: Public Expei liture Management Improve resource allocation Percentage o f planned activities that Intermediate outcomes will enable and expenditure management are completed increased from 60% to M H M S Executive to monitor reflecting sector priorities. 75%. institutional changes as a result o f Increased community participationin technical assistance and capacity health services planning at provincial development contributions. level Health facility survey completed and analyzed Component 2: Sector Perf01 nanceMonitoring Improved performance Comprehensive sector performance M H M S Executive and development monitoring system. indicators and monitoring system partners will use M&E information developed to assess status o f the health M H M S Executive malung decisions program and make adjustments based on M&Ereports during programimplementation. Balanced score cards for Provinces and National Program 23 inthe sector throughtraining, implemented, human capacity development systems andbetter 0 Self-assessment by trained provincial approach, by linking training procedures. health directors 3 months after activities and changes o f people's completion of management training. behavior w i t h institutional context. 24 E 0 c-4 e4 E 4- r( E M 0 2 3 3 0 m g E 3 0 v, 13 N I 0 Annex 4: DetailedProjectDescription SOLOMONISLANDS: HealthSector SupportProgramTA Project A. ProgramDescription:The HealthSector SupportProgram(HSSP) 62. The HSSP was designed to support the implementation o f the government's NHSP (described inAnnex 1) inpartnership with internal and external stakeholders, including AusAID, the World Bank, UNICEF, UNFPA, WHO, SPC and the Global Fund. It represents the SIG's shift from urgent reestablishment o f health services following the end of the civil conflict to a phase looking towards medium-term objectives and sector reforms. It is a comprehensive program, identifying a full range o f priority technical areas and acknowledging the service delivery and resource allocation issues in moving the sector into this next phase. The key documents o f this sector program include (i) the National Health Strategic Plan 2006-2010, (ii) its accompanying monitoring and evaluation framework, and (iii) draft health sector Medium the Term Expenditure Framework (MTEF). These have all been prepared by the MHMS and undergonereview andagreement within the sector. 63. The NHSP has been approved by the Cabinet and lays out the government's priority reforms and actions for the health sector over the next five years. The table below summarizes the linkages between the NHSP and the HSSP. The monitoring and evaluation framework for the sector is a comprehensive document which contains a.range o f outcome, output, and process indicators for the NHSP's priority areas. Given the scope o f the sector's monitoring and evaluation framework, the results framework for the HSSP - to be used to evaluate progress in implementing the HSSP - i s a subset o f these indicators agreed between the M H M S and donor partners. The important next steps infinalizing the results framework i s to develop a focused set o f core sector indicators which represent the main elements of sector performance that are measurable on an annual basis and that can be used in management decisions and the joint annual review process. The expenditure side o f the government's health strategy i s laid out in the draft sectoral MTEF, developed during HSSP preparation. The MTEF aims to provide the overall picture o f sector financing and will be the basis for the medium-term budget allocations andprogram planning inthe sector. It includes government funds as well as all donor financing, to the extent that donor flows can be predicted. AusAID and World Bank financing through the HSSP, which together account for about 42% o f sector resource flows, are agreed for the period. The MTEF, which will be updatedon an annual rolling basis, will allow all the HSSP partnersto review and agree on the sector's overall expenditure and on allocations, using the alignment with the NHSP's priority areas as the basis. A key element o f efforts to improve alignment o f expenditures with priorities is the revised provincial resource allocation formula, which the MOHrevived andupdatedduringprogram preparation. 27 NHSP priority areas HSSP Area People focus Area 1: Community Focus Public healthprograms Area 2: Priority HealthPrograms Malaria 0 Common childhood diseases Non-communicable diseases HIV/AIDS and STIs Family planning and reproductive health Health system strengthening Area 3: Health Systems Strengthening 64. Although the three HSSP focus areas are structured to be consistent with the NHSP's priority areas, the MOH i s broadly organized along the lines o f provincial and national levels. Departments, budget codes, and management and reporting responsibilities all align with this division. Therefore, each HSSP focus area will be implemented and monitored at the provincial level, national level, or both depending on the level o f the health system at which activities are implemented. The three HSSP focus areas are described infurther detail below. Area 1: CommunityFocus 65. This program area aims to improve individuals' and households' understanding o f health issues and improve health-promoting behaviors as well as to strengthen community participation in the health system, consistent with first focus area o f the NHSP. As the area addressing the demand side of the sector, it will focus on: (i)health promotion and behavior change communication by reorienting and enabling the M O H staff at both central and provincial levels to design, develop and implement targeted programs. The program will strengthen the health promotion unit to develop policy and program guidelines, train staff and implement community-oriented activities such as the "healthy settings", social marketing, stepping stones approaches, socio-behavioral research on behavior change for NCDs, community empowerment for health, and the promotion o f awareness o f gender issues and their mainstreaming; and (ii) empowering communities to appropriately use the health services, through inter-sector collaboration, involving community-based organizations, non-governmental organizations, churches and other entities. This part o f the program area will also use competitive grants process, and the "healthy settings" approach, to engage with communities and improve health services utilization and outcomes. Other demand-side interventions such as community health transport grants could be tested for their effectiveness and efficiency. Area 2: Priority Health Programs 66. This area of the program aims to improve the technical quality o f delivery o f priority health programs responsive to the needs o f the population. Support will be provided through combination of inputs that are needed to implement the programs at the central and provincial levels. The following sub-areas are identified, derived from the NHSP priority program areas: 28 Childhealthprogrums-Support development o f guidelines, training and implementation in all provinces o f integrated management o f childhood illnesses, including immunization against preventable childhood illnesses andnutritional programs. Reproductive health programs-Provide targeted support to improve reproductive health services and increase uptake o f family planningservices through: skilled birth attendance by increasing pre-, in-, and post-service training o f nurses and mid-wives; delivery o f essential packages o f care; strengthening the referral systems; youth-friendly reproductive health services; and complementing the supply side with demand-side incentives to increase community involvement and linkages, including partnerships between traditional birth attendants andmid-wives. Malaria program-Support for epidemiologically sound approaches to reduce malaria transmission, such as treated bed nets, environmental measures, pyrethroid-based vector control measures, early clinical diagnosis and effective treatments. This will involve development o f guidelines, training o f staff, and provision o f vital inputs such as bed-nets, rapid-diagnosis, laboratory reagents, anti-malaria drugs and other supplies. Inter-sector collaboration with NGOs, CBOs, and Churches will be fostered. Sexually Transmitted Infections and HIV/AIDS programs-Support to develop and implement well-targeted awareness, prevention and advocacy campaigns at all levels; strengthening o f STI treatment, universal precautions and blood safety; strengthening the national HIV unit, capacity buildingfor implementation at provincial and lower levels; sero- surveillance and operational research; and cross-border initiatives with PNG. Tuberculosis controlprogrum-Support for finalization and implementation o f the TB/HIV collaboratiordco-infection policy; strengthening the DOTS service delivery through training, monitoring and supervision; provide equipped TB laboratory and diagnostic facilities in all provinces; strengthen external quality assurance and quality control capacity for sputum smear microscopy and culture at the national laboratory and in all provinces; improve surveillance and recording system for TB and TB-HIV co-infection; and community collaboration. Non-communicable diseases control-this sub-component will support the development and implementation of primary and secondary prevention programs to address N C D risk factors (tobacco use, physical inactivity and nutrition); expand clinical services for diabetes and hypertension through development and deployment o f clinical protocols, training and supervisory support; and improved surveillance. Area 3: Health Systems Strengthening 67. This program area aims to improve the effectiveness and efficiency o f the health system by improving its capacity to deliver priority programs. It focuses on the underlying and cross- cutting health system issues that are critical to translating the key inputs into service delivery for clients at all levels. Accordingly, there will be two sub-areas: Provincial health systems-this sub-area will support the operational management o f national health policies at the provincial levels, through improving operational planning and budgeting, capacity building, implementation o f priority activities, supervision, monitoring and evaluation, and complementary outreach to communities and non- governmental entities. Key to the success o f this sub-area is the provincial sub-grant 29 mechanism for channeling finds to enable provincial health teams to deliver the key services with the inputs provided by the central level and improving the information systems in the provinces so that expenditures on hospital vs. primary health care expenditures can be reported regularly. The program will support the development o f provincial capacity to improve health services operations and outreach activities through humanresource development, including training, systems improvement and provision o f equipment andneeded infrastructure. 0 Nationalhealth systems-this sub-area will focus on overall policy management, central level budget planning, regulation, monitoring and evaluation, human resource development, pharmaceuticals, infrastructure planning, financial management, procurement and supply chain management. These areas o f support are consistent with the essential public health functions, but will be prioritized based on availability o f resources. B. ProjectDescription:IDA'STechnicalAssistance Grant 68. The proposed Bank project i s a technical assistance operation within the SIG health sector support program (HSSP). The component design reflects key areas the SIG and development partners have identified for firther development o f the HSSP. For instance, the government has yet to revise the MTEF to allocate resources across the sector in alignment with its strategy. Also, the possibilities for efficiency gains, equity concerns, the realignment of expenditures with priorities, and the sustainability o f sector financing need to be explored. In addition, the monitoring and evaluation framework needs to identify a core set o f key performance indicators to measure the effectiveness, efficiency, equity, and sustainability dimensions o f sector performance. It is with this in mind that the Bank proposes its support to the HSSP and the SIG through a Technical Assistance Grant that will provide complementary analytical, advisory and technical assistance to the health sector program in three key areas, outlined below. To this end, the project's development objective is to improve the institutional capacity o f M H M S in the areas o f public expenditure management and sector Performance monitoring. Such capacity development would be critical to the overall success o f the HSSP in improving health services andoutcomes. Component1:PublicExpenditureManagement 69. This project component will support the M H M S inimproving resource allocation inthe sector, with a focus on ensuring financing aligns with the sector's priority areas and reaches the provincial health authorities. It will improve national and provincial planning and budgeting systems to ensure that sector priorities are addressed within a fixed, known resource envelope and linked tq expected results. To achieve this, the component will provide technical assistance to the MHMS inthe following areas: 0 Health sector MTEF - The MHMS made significant progress inpreparing its first health sector MTEF during project preparation, with support from the World Bank. The component will support a Sector MTEF Advisor to complete this MTEF, which will provide realistic cost estimates for the sector, link these to available financing, and demonstrate shifts in resource allocations towards priority health services and the provinces. 30 0 Planning and budgeting procedures in the provinces - The NHSP's priority health services are largely delivered by the provincial health authorities, but planning and budgeting procedures in the provinces are particularly weak. The component will support (i) o f the province's planning andbudgetingsystems, based on an annual revision stocktaking exercise; (ii)improving financial management processes so that the provincial authorities can monitor expenditures by level (e.g. primary health care, hospital services) and function (e.g. preventive services, curative care); and (iii) linking provincial budgeting with the rolling MTEF, ensuring that program priorities are reflected at the provincial level and adjusted through the joint annual reviews. 0 Health facility distribution and effectiveness - The M H M S knows little about the efficiency o f its current distribution o f resources across primary health care facilities and hospitals. The component will therefore support a one-off health facility survey to look at facilities distribution, staffing, supplies, and equipment. It will compare these findings with demand for services at different levels and provide recommendations for deployment o f the health workforce to improve effectiveness o f service delivery. 0 Community and household engagement in health care - The health system in the Solomon Islands does not have established mechanisms for linking the sector's supply side with community and household needs for modifyinghousehold's health-care seeking practices. The component will finance a review o f options to address this, with the goal o f developing operational models to involve communities and households in health care services andpositively influence behaviors inusing health care. Models arising from this review would thenbe piloted andimplementedwithinthe wider health sector program. Component2: Sector PerformanceMonitoring 70. This project component will support the M H M S in developing a monitoring and evaluation framework for the HSSP covering the key dimensions o f sector performance (effectiveness, quality, efficiency, equity, sustainability) and in integrating monitoring and evaluation into sector management. It will provide technical assistance to focus the existing draft monitoring and evaluation framework on a selected set o f measurable, actionable indicators, to define data needs and sources, and to develop baselines for these core indicators to allow the tracking o f sector progress. This aims to result in sector policy and management decisions based on better information and also to facilitate the sector's review process by collecting and analyzing indicators ahead o f the joint sector review meetings. A balanced scorecard will be developed for the provinces to assess progress in meeting the strategic objectives o f the NHSP. The work under this component will be coordinated with and complement the MHMS's existing Health Information System. Component3: Trainingand CapacityBuilding 71. The component will strengthen the management capacity o f senior national program managers and provincial health directors so as to increase effectiveness at the central and provincial levels in strategic planning and execution. The project will primarily finance 31 continuing management education for these officers targeted at solving immediate program challenges, such as dealing with referrals betweenhealth centers andprovincial hospitals and the National Referral Hospital. The project will finance training activities identified within the sector's strategic training plan. Support for training under this window will include leadership skills for senior managers, such as negotiation and conflict resolution, in addition to technical subjects related to health service management. The project will support learning events as part o f ongoing dialogue and supervision o fthe operation. 32 Annex 5: ProjectCosts SOLOMONISLANDS: Health Sector Support ProgramTA Project PROJECTBUDGET (INus$) CostEstimate ProjectComponent (IDA Grant) US$ Public Expenditure Management 545,000 Sector Performance Monitoring 382,000 Training. and CaDacitv Building: 523.000 Unallocated 50,000 33 Annex 6: ImplementationArrangements SOLOMONISLANDS: HealthSector SupportProgramTA Project MHMSNationalandProvinciallevels 72. The project will be embedded within the wider Health Sector Support Program. There will be no separate management unit as the MHMS Executive is expected to be the custodian o f the HSSP. Inthis instance the institutional home for the Project for administrative purposes will be inthe Policy and Planning Division, reporting to the Permanent Secretary. The Division will be responsible for coordinating the implementation o f the Project at the national and provincial levels, preparing and submitting quarterly progress reports, and coordinating with the M H M S Executive on implementation and progress reviews. With the MHMS's newly appointed Chief Accountant, the Department will be responsible financial management o f the Project and will also handle procurement through the MHMS's newly created Procurement Unit. Project activities and outputs will be coordinatedwith those inthe wider program. 73. Institutional arrangements for support to the health sector program have been definedby the MHMS, andthe proposed project will be aligned to these. The MHMS Executive will be the key management body o f the Program and the Project; the MHMS executive is responsible for management oversight o f expenditures and service delivery in the health sector. The Program direction will be guided through weekly MHMS Executive meetings, while strategic guidance and oversight will be provided by the semi-monthly MHMS Executive Special Sessions. Participants in the Special Sessions include other key Departments and Ministries, Le., the Department o f Finance & Treasury, the Department o f National Planning and Aid Coordination, and the Ministry o f Education. Other key stakeholders within the health sector, such as development partners, NGOs, CBOs and churches may also be represented at the M H M S Executive Special Sessions. Operationalplanning,budgetingandprogramimplementation 74. Implementation o f the Health Sector Support Program will be through operationalization o f the National Health Strategic Plan 2006-2010 (NHSP). M H M S has been successfully utilizing operational planning in recent years, with support from the Health Institutional Strengthening Program (HISP). National Divisions and Provincial Health Services are now familiar with the process, and there is universal acknowledgement that the system is a major step forward from previous approaches to planning. 75. The M H M S has started revising the operational planning and budgeting system processes, in response to the environment inwhich planning i s undertaken (Le., adoption o f the NHSP, the shift towards a SWAP versus a projects approach), as well as the achievements to date. The modifications are expected to: -- buildup operationalplans instages to allow for progressive approval by management; -- streamline the amount o f information that is sent up to MHMSmanagement; -- enable budget preparation to flow more smoothly from operational plans; and -- strengthen capacity to monitor andreport on implementationo f operational plans. 34 76. The revised template for operational planning was presented to the National Health Conference inNovember 2006, and workshops to familiarize National and Provincial level staff with the new template, and to commence preparation of the 2008 plans, took place starting in February 2007, inorder to closely align with the budget preparationprocess. ProjectImplementationArrangements 77. As indicated above, implementation of activities supported through the Project rests with the Policy and Planning Division, which reports to the Permanent Secretary. The Division will also be supported by the newly established Procurement Unit within MHMS which will be responsible for contracting the technical assistance, as well as the goods. The newly appointed ChiefAccountant inM H M S will be responsible for financial management aspects. SupervisionArrangements 78. Supervision o f the Project i s expected to be undertaken on a semi-annual basis, with one such review to coincide with Annual Joint Reviews which will be conducted to assess overall implementationprogress o fthe NHSP. 35 Annex 7: FinancialManagementandDisbursementArrangements SOLOMONISLANDS: HealthSector SupportProgramTA Project 79. The desired outcome/result o f project financial management (FM) arrangements is that project funds, including counterpart funds where applicable, will be used for the purposes intended. The identified financial management risk is o f the grant proceeds not being used for the purposes intended, and is a result o f a combination o f country, sector andproject specific risk factors. The Financial Management risk rating for this project is low due to the relatively small number o f transactions envisaged and the capacity building measures in place for the implementing agency. 80. The Financial Management Assessment was undertaken according to Financial Management Practices in World Bank Investment Operations (Guidelines to staff) issuedby the Financial Management Sector Board in November 2005. The proposed financial management arrangements would meet the minimumrequirements as stipulated inOP/BP 10.02. ImplementingAgency 81. The implementing agency will be the Ministry o f Health and Medical Services which i s subject to the Solomon Islands Government legislation on Public Financial Management. SIG operates a centralized environment with the MOFT being actively involved inthe processing o f budget, expenditure approvals, andtreasury (payment) functions. 82. The MOFT i s the Ministry authorizedto request and receive funds from the World Bank andwill retainthis role underthis project. 83. MHMS, through the Permanent Secretary, i s responsible for authorization and control o f expenditure. As part o f the preparation process for the HSSP joint missions were fielded from the Bank and AusAID which provided guidance to the M H M S in the preparation o f a Financial Management Manual - the current version o f the manual deals specifically with the flow o f AusAID funds but has been written in such a way that other development partners funds can be incorporated-the manual can be applied to the Bank funded activities (all be it that the intention is to rely on direct payment requests). The manual / PIP identifies a number o f capacity building and risk mitigation measures, many o f which are now inplace, which address weaknesses within the MHMS. These include: Appointment o fUnder- Secretary for Administration & Finance Appointment o f ChiefAccountant Appointment o f Procurement Officer "Audit Action Plan" (August 2006 updated April 2007) inresponse to audit findings which aims for significant improvement inlevels o f compliance by M H M S with SIG Financial Instructions inorder to ensure future audits are satisfactory. Provision under the HSSP for the engagement o f a financial adviser for an initial period o f twenty four months to assist with the implementation o f the HSSP andprovide transitional support to the ChiefAccountant. Agreement with the M H M S to recruit an Internal Audit officer Implementation o f Parallel Accounting System pending SIG wide improvements to FMIS 36 ProjectComponents andDisbursementCategory 84. The project will h d USD 1.5 million of technical assistance in a) Public Expenditure Management b) Sector Performance Monitoring and c) Training and Capacity Building. It is proposed that a single disbursement category (i.e. "Goods, Consultants' Services, Training and Incremental Operating Costs) be used for the project since there i s no operational requirement to monitor disbursements against components or expenditure type; control of activities across components will be through the AJR process rather than monitoring o f disbursements. "Incremental Operating Costs" means incremental expenses incurred on account o f Project implementation, support and management and reasonably related thereto, including communications, utilities, stationery, and transportation costs, but excluding salaries of the Recipient's civil servants. RiskAssessment 85. The table below summarizes the financial management risk assessment for the project. 1.INHERENT RISKS 1.1CountryLevel Country Public Financial Management Modest Frequency o f supervision missions None Systems will reflect overall weak Government capacity is dependent on environment expatriate support - Accountant General and Auditor General are increasingly effective Countrv Portfolio Indicators High Frequency o f supervision missions None Solomon Islands has two portfolio indicators will reflect overall weak flagged, country environment and country environment record. 1.2.Entity Level Low None None The MHMS is familiar with implementation of donor fundedprojects and is currently supported through the HSSP - this provides adequate FMcapacity. 1.3. Project Level Project Sue Low None None The total investment is 1.5 millionUSD Project Comulexitv Low None None The project consists of a small numbero f TA inputs 0VERALLINHERENTRISK Low 2. CONTROL RISKS Budget Low None SIG operates a recurrent and development budget, bothsubject to annual Parliamentary approval -the TAL will form part o fthe development budget and i s already reflected inforwardestimates. 37 Capacity o f Proiect Management and FM M H M S has now commenced Annual joint review o f staff Modest recruitment o f qualified staff and FMimplementation Capacity i s generally weak with key through the AusAID funded arrangements positions being left unfilled - financial activities permanent FMTA i s in management has not been a key priority in place for the M H M S the MHMS. The skills requiredto serve the FMneeds o fthe Bank financed activities are modest. Accounting Svstems Low None None MHMS, with assistance from AusAID, has developed an accounting system for the HSSP, this would serve the needs o f the bank financed activities. Giventhe very low volume o ftransactions expected alternates, such as simple cashbooks, would also be acceptable. Internal Controls Low None None The arrangements detailed inthe FMmanual for HSSP are satisfactory. FundsFlow Low None None The arrangements are simple and follow those o f other bank financed activities FinancialReporting Low Developmentpartner consensus on Annual joint review o f The requirements are simple but there i s a reporting on the whole o f HSSP FMimplementation riskthat reportingonbank financed regardless o f source o f financing - arrangements activities will become a low priority for the reports should clearly identify bank MHMS. financed activities. Interimunaudited financial statements Rigorous adherence to Bank policy can be part o f overall o n compliance with legal covenants HSSP report related to provision o f interim unaudited financial statements Auditing Low Audit opinion on The office o f the Auditor General has agreed HSSP financial to audit HSSP -provided that the Bank statement acceptable financed activities are clearly identified in providedbank the HSSP financial statement (including a financed activities are summary o f the designated account) there i s clearly indicated no merit inseeking a specific audit opinion o n a statement o fbank financed activities (which inanv event carrv a l o w risk). OVERALL CONTROLRISK Low OVERALLRISKRATING Low DisbursementandFundsFlow Arrangements 86. The nature o f the activities envisaged and the low volume o f transactions expected negate the need for the operation o f a Designated Account. The disbursement arrangements will allow the project to use all of the following methods: (a) direct payment from the grant account and(b) reimbursement. MHMS will be responsible for preparationo f all WA and the Ministryo f 38 Finance and Treasury will be the authorized signatories. The minimum application size will be USD 15,000. Although the need for costs such as training, printing, communications has been identifiedit is intendedthat these costs are incorporated into the contracts for consulting services as a reimbursable expense wherever this makes sense. 87. Country Financing Parameters for Solomon Islands allow for the Bank to finance up to 100% o f costs. It is recommended that the disbursement percentage be set at 100% as it is not expected that taxes will be financed and SIG i s providing its contribution through its overall support to the Health Sector Strategic Plan. Budgeting 88. The budget cycle formally commences with the launch o f the Budget guidelines to Ministries inabout May o f each year. The process o f the budget then follows the following steps. Calculation and circulation by the MOFT o f each ministry's baseline budget envelope. Ministries submit their estimates o fhow their Draft Baseline Budgets should bebroken up across their divisions and line items for MOFT agreement. Revenue Estimates for the forthcoming year are calculatedby MOFT Permanent Secretaries submit SummaryPlans for their ministryto MOFT for inclusion inthe Recurrent Estimates. MOFT inconsultationwith Ministries prepares options for the modification o fthe Baseline Budgetto ensure that it isbalanced and affordable. Cabinet considers the options presented anddecides upon the final makeup o f the Budget. The Budget and associated documents are presented to Cabinet for final approval. The Budget and associated documents are presented to the Public Accounts Committee for consideration. The Budget Appropriation Bills andchanges to the BaselineBudget are presented to Parliament. Bills get royalassent andrelatedwarrants are signed to implement the Budget. 89. An important feature o f the HSSP is an Annual Joint Review (AJR) process between SIG and development partners during which annual work programs would be agreed and which would be linked to eligibility o f expenditures (since the annual budgets would be included as part o f the financial monitoring reports). Timing o f the AJR needs to take into account the above budget preparation timetable and respect the final approval o f budgets through Cabinet and Parliament. AccountingSystems 90. As part o f the preparation for the HSSP a thorough review of the SIG accounting systems was made. The broad conclusion was that whilst the basic structures were sound problems were evident in compliance with regulations and lack of management information due to rigidity in the chart o f accounts. The HSSP includes measures to counter these problems through the building of internal audit capacity in the MHMS (primarily to oversee provincial operations and the national Referral Hospital) and implementation o f a parallel accounting system pending improvements to the SIG government wide FMIS. It i s fair to say that the 39 measures adopted are largely envisaged as a mechanism to provide assurance that HSSP fbnds for provincial activities can be properly accounted for and reportedon - a major risk area for the HSSP. Never the less the Bank financed activities (centrally procured technical assistance) will benefit from the increased capacity in the MHMS as a result o f the capacity building measures built into the HSSPprogram. ReportingandMonitoring 91. Under the HSSP it is a requirement that Interim un-audited financial reports [IFRs] be prepared every quarter and be submitted to development partners within 45 days (this i s in addition to a monthly cycle o f internal reporting). It has been agreed that the Bank financed activities will be separately identified in the financial report and that therefore the Bank will utilize the HSSP reports to satisfy reporting requirements under bank policies. ExternalAudit 92. The HSSPwill be audited under the supervision o fthe Auditor Generals office (which is an independent auditor acceptable to the Bank). The FMmanual for the HSSP provides for the audit arrangements and includes a timetable for the submission o f annual audited financial statements to development partners(the manual refers to a two month deadline after the year end which is likely to be challenging, therefore the Bank will use the standard 6 monthperiod within which to provide the audit opinion). The Audit will be conducted in accordance with acceptable standards and the scope o f the audit has been agreed (based on guidance included in the FM manual). It has been agreed that the Bank Financed activities will be included as part o f the HSSP annual financial statements and be separately identified, on this basis the audit o f the HSSP annual financial statements will satisfy Bank audit requirements. SupervisionPlan 93. This is a low risk project requiring supervision o f bank financed activities at most on annual basis - however it i s likely that the Bank will be asked to provide inputs into the supervision o f the overall HSSP program which may result in additional supervision missions beingrequired. 40 Annex 8: ProcurementArrangements SOLOMONISLANDS: HealthSector SupportProgramTA Project A. General 94. Procurement for the proposed project would be carried out in accordance with the World Bank's "Guidelines: Procurement Under IBRD Loans and IDA Credits" dated May 2004; and "Guidelines: Selection and Employment o f Consultants by World Bank Borrowers" dated May 2004, and the provisions stipulated in the Legal Agreements. The general description of various items under different expenditure categories are described below. For each contract to be financed by the Grant, the different procurement methods or consultant selection methods, the needfor prequalification, estimated costs, prior review requirements, and time frame are agreed between the Recipient and the Association project team in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementationneeds and improvements ininstitutional capacity. 95. Total project cost is estimated to be US$ 1.5 million over five years and would be financed by an IDA Grant. I.ProcurementofGoods(US$O.l million,Grant):Goodsrequiredfortheprojectwould comprise o f IT equipment and office equipment a. Shopping:Goods estimated to cost less than US$50,000 may beprocuredthrough Shopping. 11. Selectionof Consultants(US$1.1 million,Grant): The mainconsultants' services would consist o f international technical assistance to support the Recipient inimproving priority health outcomes through effective, efficient, and equitable services responsive to the population's healthneeds. The ceiling for short-lists o f consultants composed entirely o f national consultants would be $100,000. Inthe event that sufficient numbers o f qualified national firms are not available for effective competition, then the short-list would consist o f bothnational and internationalconsultants. a. QualityCost BasedSelection(QCBS): With regards to the assignments where the scope o fwork o f the assignment can be precisely defined andthe TOR are clear and well specified the recommended method i s QCBS. This would be the case for the following assignments: ProvincialManagement Capacity Improvement and Health Facility Survey (US$0.25 million and US$0.2 million respectively). b. SelectionBasedon Consultants'Qualifications(CQS): Regardingsmall assignments (below US$lOO,OOO) o f a routine nature, such as training, a qualified consultant firm may be selected through CQS method. c. IndividualConsultants: International consultants, as well as local ones, maybe appointedby M H M S to provide technical assistance. They shouldbe selected through a comparison o f qualifications o f at least three qualified consultants among those who have expressed interest inthe assignments or have been approached directly byMHMS. Inaddition, with appropriate justifications and after concurrence bythe Association, individual consultants maybe selected on a sole-source basis in 41 exceptional cases, such as: tasks that are continuation o fprevious work that the consultants have carried out and for which the consultants were selected competitively; assignments lasting less than six months; andwhen the individual consultant is the only consultant qualified for the assignment. A total o fUS$0.6 million i s estimated to beprocured under this selection method. MHMS has expressed the wish to proceed with the selection o f key individual assignments on advance contracting basis and those have been indicated inthe Procurement Plan. 111. IncrementalOperationalCosts (US$O.lS million, Grant): This itemwould include communications, utilities, stationary, andtransportation. The procurement o f such items would follow implementing agency's administrative procedures. IV. Others (US$O.lS million,Grant): Training (domestic andoverseas) will be necessary to strength the capacity o f MHMS's staff on technical areas, andpersonal effectiveness skills, including negotiation. B. Assessment of the Agency's Capacityto ImplementProcurement 96. An assessment o f the capacity o f the Implementing Agency (MHMS) to implement procurement actions for the Project was carried out by Cristiano Nunes in September 2007. The assessment reviewed the organizational structure for implementing the Project and the interactionbetween the Program's staff responsible for procurement and other national agencies. The overall Programrisk for procurement is "high". 97. The main reasons for this rating are: (a) the legal and regulatory framework lacks the operational detail necessary for efficient procurement implementation; (b) the organization structure and capacity i s insufficient, and expenditure control takes place in a fragmented arrangement; (c) there is an absence o f procurement planning and procedural tools; (d) a perception of widespread corruption; and (e) the limited number o f local contractors increases the possibility o f saturation, collusion and nepotism. The following action planhas been adopted: 42 Perceived Risk Action Timeframe Project implementation Preparation o f a Procurement Plan Completed delays as Procurement Planning i s not fully adopted by MHMS. MHMS's procurement Procurement Training Continuous and already under capacity is weak. way. Consultant to assist M H M S on procurement Throughout implementation (to be caveat inthe Grant Agreement) Widespread perception M H M S to establish inthe Procurement Manual Completed o f cormption and weak steps o f the membership selection process and capacity o f oversight minimumqualifications for members agencies constraints to carry their mandate. Specific risks: (i) selectionof Weak M H M S to establish inthe Procurement Manual Completed the tenderlevaluation steps o f the membership selection process and committees and other minimumqualifications for members teams responsible for decision making; and 43 Perceived Risk Action Timeframe (ii)Inadequate Establish guidelines for the preparation o f Completed preparation o f estimates owner estimates and other costing estimates in for procurement the Procurement Manual packages Frequently review estimates for (standard) costs for similar activities across the different project Duringimplementation components and locations. Require clear breakdowno f items, specifications and prices During implementation (iii)BidProposal Strong verification procedures, particularly in Duringimplementation evaluation: collusion the prior review o fpackages. between tender committee and bidders; Appropriate sanctions against tender delay inevaluation committees and others who have failed intheir process that would duties or deliberately abused their powers Duringimplementation benefit certain bidder(s)/consultant(s); proposals are rejected for reasons unrelated to the capacity o f the bidders incarrying out of the contracts/services; False information about the information providedby the bidders 44 (iv) Payment: fictitious Provide guidelines (as part o f the Procurement Completed report'supporting Manual) for monitoring claims of expenditures documents supportedby relevant documentation, including reports on activities, evidence o f participation, ticket, receipts, etc. Compare price reports indifferent locations giving due attention to actual variations caused byproblems o f access, scope o f activities, etc. Duringimplementation (v) Filing: Project Establish clear guidelines inthe Procurement Completed documents are Manual on filing and remedies for failure to intentionally not made maintain the records available Limited number o f M H M S to conduct detailed market research, Duringimplementation local contractors which would provide the basis for better increases the possibility contract packaging, oversight thresholds, -oand f saturation, collusion qualificationrequirements etc. nepotism 45 C. ProcurementPlan 98. The Recipient, at appraisal, developed a Procurement Plan for project implementation which provides the basis for the procurement methods. The draft plan plan has been agreed between the Recipient and the Project Team on September 2007. It has been finalized and agreed with the Association duringnegotiations and it will be available at MHMS'shead office. It will also be available in the Project's database and in the Bank's external website. The Procurement Plan will be updated in agreement with the Project Team annually or as required to reflect the actual project implementationneeds and improvements ininstitutional capacity. D. Frequencyof ProcurementSupervision 99. In addition to the prior review supervision to be carried out from Bank offices, the capacity assessment of the Implementing Agency has recommended once a year supervision missions. The rationale for this i s the limitednumber o f contracts. E. Prior Review Thresholds 0 Goods: (a) the first three contracts procured on the basis o f Shopping; Consultants (Firms): (a) all contracts estimated to cost US$lOO,OOO or more; Consultants (Individuals): any sole-source and selected contracts for individual consultants (on an exceptional basis and based on a specific request from the TTL and indicated inthe Procurement Plan). All the prior review contracts will be statedinthe Procurement Plan All other contracts will be subject to post review on a sample basis. 46 1. ATTACHMENT 1 - DETAILS OFTHE PROCUREMENTARRANGEMENT INVOLVING INTERNATIONAL COMPETITION. GoodsandWorks. (a) List o f contract Packages which will be procured following ICB: None. ConsultingServices. (a) List o f Consulting Assignments with short-list o f international firms. Bank's Expected Ref* Selection Review Date for No. Descriptionof Assignment EstimatedCost Method (Prior Contract /Post) Signature CF1 ProvincialManagement $250,000 QCBS Prior June 09 Capacity Improvement 1 CF2 Health Facility Survey $200,000 QCBS Prior -IJune 09 47 Annex 9: Economic and FinancialAnalysis SOLOMONISLANDS: Health Sector Support ProgramTA Project A. Economic analysis 100. A traditional cost-benefit analysis is not undertaken as this is a technical assistance project that has only an indirect impact on actual health outcomes. However, a brief assessment o f how the project's outcomes will enhance the effectiveness o f the overall health programme is provided below. 101. The total cost of the project over the five-year period i s US$1.5 million. The economic benefits o f the project are expected to be achieved in three ways: First, the project will increase the allocative efficiency o f public health expenditure by aligning resource allocations with priority needs. Second, the project will improve the technical efficiency o f public health expenditure by providing the tools and information needed to utilize given inputs more optimally so as to maximise outcomes. Inparticular, the project will increase the capacity o f national and provincial health planners to generate and use information on unit costs, service indicators, and the deployment o f staff and other inputs across the country. Third, the project will improve equity in resource use by increasing the capacity o f national and provincial health planners to redistribute resources so as to alleviate inequalities across regions andincome groups.. B. Financial analysis 102. The objective o f the TAL i s to help SIG develop the institutional capacity to plan, implement and monitor the wider health sector programme, HSSP. As such, this financial analysis takes into account the sustainability o f funding available for HSSP. 103. The fiscal context inwhich the project i s being implemented i s not entirely favourable. GDP growth is expected to slow down from 6.1% in 2006 to an average o f 4.1% per annum during2007-2010. A major contributing factor is the projected decline inoutputs from the timber industry, a major source o f export income for the Solomon Islands economy. Between 2003 and 2007, the forestry, logging and sawmilling industries combined had a real rate o f growth o f 23% per year on average. Between 2007 and 2010, the projected real rate o f growth o f incomes from the same i s projectedto be -5% per year3. 104. It is also likely that strong revenue growth experienced in recent years, thanks to improved revenue administration and some recovery in the economy will level out. Total revenues rose from 16.1% o f GDP in 2002 to 31.4% in 2007, but are projected to stabilise around 34% during 2008-20114. The decline in timber industry outputs will affect revenue growth because taxes on timber exports represent a major revenue stream for the S I economy. Growth in fisheries exports i s expected to make up for some o f the decline in revenues from timber exports, butmaynotbe sufficient. IMFestimates 4IMFestimates 48 105. The design o fthis TAL recognises that a longer term challenge for the health sector is to improve the sustainability o f health financing. SIGhas made realprogress inthis regardinrecent years by increasing the share o f government resources allocated to health, partly due to the increase in revenues. MHMS's recurrent budget increased from SI$87.1 million in 2005 to SI$114.3 million in 2007, representing a growth of 31% over the two year period. Yet, donors finance about 50% o f total health expenditures, with AUSAID alone responsible for about 40%. 106. The decline in GDP and revenues is likely to have implications for budgetary allocations to the health sector and the goal o f increasing the sustainability o f health financing. With the fiscal constraints that SIG is likely to face in 2007-2010, the planned increase in the government's share o f total health spending from 52% in 2007 to 58% in 2010 may represent a challenge. Part o f the assistance to be provided by the project will be to hrther develop the medium term expenditure framework takinginto account realistic estimates o f the SIG allocation to the sector. 107. Nevertheless, the assumptions made under HSSP with regard to the increase in government spending are justifiable in this fiscal context. The Programme Implementation Plan for HSSP considers a 5% increase per annum a reasonable rate o f increase inthe M H M S budget during the period 2008-2011. Discussions with the Budget Section o f MOFT confirmed that there were no objections on the government side to this assumption. 108. Inaddition, it ishopedthat thisTA projectwillleadto the design andimplementationof reforms that will increase health system efficiency. The associated resource savings will reduce the level o f government spending required to meet given objectives, and thus reduce the fiscal burden from health to the government. 49 Annex 10: SafeguardPolicyIssues SOLOMONISLANDS: HealthSector SupportProgramTA Project Project i s Category C. No safeguards related issues are triggered. 50 Annex 11:ProjectPreparationand Supervision SOLOMONISLANDS: HealthSector SupportProgramTA Project Planned Actual PCNreview May 9,2006 May 9,2006 InitialPID to PIC Initial ISDS to PIC Appraisal November 1,2007 November 1,2007 Negotiations November 6,2007 February 12,2008 Board/RVP approval February21,2008 March20,2008 Planned date of effectiveness May 30,2008 Planned date o fmid-termreview Planned closing date March 31,201 1 Keyinstitutions responsible for preparation ofthe project: MinistryofHealth, Honiara, Solomon Islands Bank staffand consultants who worked onthe project included: Name Title Unit Muhammad Ali Pate Task Team Leader EASHD David Evans HealthSpecialist EASHD David MichaelChandler Senior Financial Management EAPCO Specialist Cristiano Costa e SilvaNunes Procurement Specialist EAPCO Apamaa Somanathan HealthEconomist EASHD ReemHafez Junior Professional Associate EASHD LingzhiXu Senior Procurement Specialist EASHD Sheila Braka Musiime Legal Counsel LEGES Edward Daoud Senior Finance Officer LOAFC IanMorris Consultant, Public EASHD Expenditure Management A1Picardi Consultant, Environment EASHD Hope C. Phillips Volker Senior Operations Officer EASHD Juliana Williams Senior Program Assistant EASHD Bank funds expendedto date on programpreparation5: 1. Bankresources: US$343,293 2. Trust hnds: US$313,150 3. Total: US$656,443 EstimatedApproval and Supervision costs: 1. Remaining costs to approval: $15,000 2. Estimatedannual supervision cost: US$90,000 5The Bank assisted inconception, design and preparation of the overall sector-wide program, even though the IDA TA project is only complementary and small relative to the size ofthe program. 51 Annex 12: Documentsinthe ProjectFile SOLOMONISLANDS: HealthSector Support ProgramTA Project Draft MTEFreport by David Hamilton Draft Health Expenditure Review by M H M S andAusAID Report on M H M S annual planning andbudgeting system by David Hamilton Guidelines for operational planning andbudgetingbyM H M S Health Status Assessment Report by JTA for AusAID (2005) Note on Health Sector Strategy: Solomon Islands by James C. Knowles Making HealthCare Decisions inthe SI: A Qualitative Study Hospital Services inthe S I- Commentary on management and development issues - draft Project Concept Note Update note changingthe approach o f the original PCN Report from Quality Enhancement Review RiskAssessment Template Mission documents (BTOs and Aide memoires) 52 Annex 13: Statementof LoansandCredits SOLOMONISLANDS: HealthSector Support ProgramTA Project Differencebetween expectedand actual OriginalAmount inUS$Millions disbursements Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm.Rev'd PO89297 2008 SB-RuralDevelopmentProgram 0.00 0.00 0.00 0.00 0.00 3.38 0.00 0.00 Total: 0.00 0.00 0.00 0.00 0.00 3.38 0.00 0.00 SOLOMON ISLANDS STATEMENT OF IFC's HeldandDisbursedPortfolio InMillionsofUSDollars Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. Total portfolio: 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Approvals PendingCommitment FY Approval Company Loan Equity Quasi Partic. Total pendingcommitment: 0.00 0.00 0.00 0.00 53 Annex 14: Country at a Glance SOLOMONISLANDS: Health Sector Support ProgramTA Project East POVERTY and SOCIAL Solomon Asia 8 Low- Development diamond' Islands Paclflc Income 2006 Population, mid-year(millions) 0.49 1900 2,403 Lifeexpectancy GNlpercapita (Atlas method, US$) 660 1663 650 GNi(Atlas method, US$billions) 0.33 3,539 1562 Average annual growth, 2000-06 Population("/d 2.6 0.9 19 Laborforce (%) 3.1 13 2.3 GNI Gross per primary M o s t recent estlmate (latest year avallable, 2000-06) capita enrollment Poverty (%ofpopulation belownational PO verlyline) Urbanpopulation (%oftotalpopulation) n 42 30 Lifeexpectancyat birth(pars) 63 71 59 Infantmortality(per t0001ivebirlhs) 24 26 75 Childmalnutrition (%of childrenunder5) 15 Access to improvedwtersource Access to an improvedwter source (%ofpopulation) 70 79 75 Literacy(%ofpopulation age 59 91 61 Gross primaryenrollment (%ofschool-agepopulation) 97 114 n 2 ---Solomon Islands Male 99 115 l36 Loilncomagrouo Female 94 ID 96 KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1986 1996 2005 2006 Economic ratlos. GDP (US$ billlons) 0.14 0.36 0.30 0.34 Gross capitalformation/GDP 26.9 Exports of goods andServiceslGDP 57.9 59.4 Trade Gross domestic savings1GDP -0.6 Gross nationalsavings/GDP 2to Currentaccount baiance1GDP -2.0 3.3 -24.0 -26.4 interestpaynents1GDP Domestic Capital 12 0.6 13 savings formation Total debt/GDP 53.0 414 56.6 Total debt servicelexports 5.6 4.0 9.5 Present value of debt1GDP 44.0 Present valueof debtlexports 89.5 Indebtedness 1 1986.96 1996.06 2005 2006 2006-10 (averageannualgrorulh) GDP 4.6 -1.1 5.0 6.1 4.1 --Solomon Islands GDP percapita 19 -3.6 2.4 3.6 11 Lomncomeamuo Exports of goods andservices STRUCTURE of the ECONOMY I986 1996 2005 2006 (%of GDP) (Growtho f capital and GDP ('A) Agriculture industry Manufacturing Services Household final consumption expenditure 67.3 Generalgov't finalconsumptionexpenditure 33.3 Imports of goods andservices 85.5 69.6 -GCF -GDP 1986-96 1996-06 2005 2000 (averageannualgrorulh) Growth o f exports and imports ('A) Agriculture Industry Manufacturing Services Householdfinal consumption expenditure Generalgov't final consumptionexpenditure 01 02 03 W 05 OB Gross capitalformation -Exports -Imports Imports of goods andservices Note 2006data are preliminaryestimates This tablews producedfrom the Development Economics LDB database 'Thediamonds showfour keyindicatom inthe countfy(in bold) cornparedmth its income-groupaverage if data are mtssing,the diamondmll beincomplete 54 Solomon Islands ~ PRICES andGOVERNMENT FINANCE I I986 1996 2005 2006 lnflatlon (Oh) Domestlc prlces 1 I (%change) Consumerprices 13.6 118 7.2 ImplicitGDP deflator -110 0.1 8.3 6.8 Government flnance (%of GDP, includes current grants) Current revenue 39.9 30.3 34.9 Current budgetbalance 0.0 3.5 6.8 -GDPdeflator -CPI Overallsurplusldeficit 4.5 14 4.2 TRADE I986 1996 2005 2006 (US$ millions) Export and Import levels (US$ mill.) Totalexports (fob) 66 6 2 a 3 PO Fish 19 0 3 66 85 300 T Timber 30 44 P 19 Manufactures Total imports (cif) 151 185 251 Food 20 Fuelandenergy 43 Capital goods 8 "I 00 01 03 Exportprice index(2000=WO) 0 2 02 04 05 Import price index(2000=WO) PI 8iEXports mlnvorts Terms of trade (200O=WO) 85 BALANCE of PAYMENTS T 1986 1996 2005 2006 (US$ millions) Current account balance to GDP (Oh] Eqorts of goods and services 81 2 0 139 ff4 Imports of goods andsewices Iff 238 215 281 Resource balance -37 -29 -76 -07 0 Net income -6 -7 0 2 Net curent transfers 40 48 3 6 .IO Currentaccount balance -3 P -72 -89 -20 Financingitems (net) -6 -2 94 PI Changesin net reserves 9 -a -22 -32 Memo: Reserves includinggold (US$ millions) 30 33 95 0 4 Conversion rate (DEC,loca//US$) 17 3.6 7.5 7.6 EXTERNAL DEBT and RESOURCE FLOWS I986 I996 2005 2006 (US$ millions) jComposltlon of 2005 debt (US$ mlll.] I Total debt outstanding and disbursed 77 147 ff0 IBRD 0 0 0 0 IDA 7 29 43 45 G15 Total debtservice. 5 8 14 IBRD 0 0 0 0 IDA 0 0 1 1 Compositionof net resourceflows Official grants P 19 54 Official creditors 7 3 2 Privatecreditors 7 -4 -6 Foreign direct investment (net inflows) 3 6 1 Portfolio equity(net inflows) 0 0 0 D:64 Wolld Bank program Commitments 5 0 0 0 Disbursements A . IBRD E- Bllatral 1 4 1 0 B IDA - D. Other nultils+erd F Private - Principalrepayments 0 0 1 1 C-IMF G - Short-ler Net flows 1 4 0 -1 - Interestpayments 0 0 0 0 Net transfers 1 4 0 1 ec - = = . - _ e _ Note.This tablewas producedfrom the Development Economics LOB database. 9/28/07 55 Annex 15: Map IBRD 35742 SOLOMONISLANDS: HealthSector Support ProgramTA Project 156°E 158°E 160°E 162°E 164°E 166°E 168°E 170°E PAPUA Ontong Java Atoll NEW GUINEA 6°S 6°S Roncador Reef CHOISEUL Taro Island Choiseul SOUTH PACIFIC Sasamungga SOLOMON Shortland Is. OCEAN Luti M A L A I TA ISLANDS Mono N e w ISABEL Vella Lavella SosoloG e o r g iVaghena Kia a Santa Isabel Kolombangara 8°S S o u n d Dai Kundu 8°S Ranongga Buala Gizo New Georgia Dadale Hapai New Georgia Tatamba Vangunu San Jorge Daringali Group Rendova Seghe Tetepare Nggatokae Auki CENTRAL Malaita Florida Is. W E S T E R N Russell Is. Tulagi Su'u Maravova Tutumu Tarapaina Guadalcanal HONIARA Maramasike Solomon Mt. Makarakomburu (2,447 m) Ulawa Paruru Duff Is. 10°S Avu Avu 10°S Sea GUADALCANAL Heuru M A K I R A Reef Is. Kirakira Tinakula Apaora San Cristobal Noka Lata Nendo Mwaniwowo Santa Cruz Islands T E M O T U 0 50 100 150 Kilometers Bellona RENNELL AND Utupua Tigoa Anuta 0 50 100 150 Miles BELLONA Vana Vanikolo Rennell Tinggoa Fatutaka 12°S 156°E 158°E Tikopia Indespensable Reefs SOLOMON ISLANDS HEALTH SECTOR SUPPORT PROJECT Coral Sea SELECTED CITIES AND TOWNS VANUATU 14°S 14°S PROVINCE CAPITALS NATIONAL CAPITAL OCTOBER MAIN ROADS IBRD This map was produced by the Map Design Unit of The World Bank. PROVINCE BOUNDARIES The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank 35742 2007 INTERNATIONAL BOUNDARIES Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. 164°E 166°E 168°E 170°E