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                                                                        Document of
                                                                    The World Bank

                                                             FOR OFFICIAL USE ONLY

                                                                                                        Report No: 49599-VN
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                                                           PROJECT APPRAISAL DOCUMENT

                                                                           ON A

                                                                   PROPOSED CREDIT
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                                                        IN THE AMOUNT OF SDR 41.5 MILLION
                                                            (US$65 MILLION EQUIVALENT)

                                                                          TO THE

                                                          SOCIALIST REPUBLIC OF VIETNAM

                                                                          FOR A

                                               CENTRAL NORTH REGION HEALTH SUPPORT PROJECT
Public Disclosure Authorized




                                                                     February 25, 2010




                               Human Development Sector Unit
                               East Asia and Pacific Region

                               This document has a restricted distribution and may be used by recipients only in the
                               performance of their official duties. Its contents may not otherwise be disclosed without World
                               Bank authorization.
                                     CURRENCY EQUIVALENTS

                             (Exchange Rate Effective November 2, 2009)

                                     Currency Unit       =   Vietnamese Dong
                                         US$ 1.00        =   VND 17,856
                                      VND 10,000         =   US$ 0.56
                                         US$ 1.00        =   SDR 0.64
                                         SDR 1.00        =   US$ 1.57

                                     GOVERNMENT FISCAL YEAR
                                       January 1 – December 31

                                ABBREVIATIONS AND ACRONYMS

ADB      Asian Development Bank                                  INT       Department of Institutional Integrity
CHS      Community Health Station                                IPP       Indigenous People Plan
CFAA     Country Financial Accountability Assessment             IPPF      Indigenous People Policy Framework
CPAR     Country Procurement Assessment Report                   LCS       Least Cost Selection
CPS      Country Partnership Strategy                            M&E       Monitoring and Evaluation
                                                                 MCPMU     Nghe An Medical College Project Management
                                                                           Unit
CPMU     Central Project Management Unit                         MDB       Multilateral Development Banks
DA       Designated Account                                      MOH       Ministry of Health
DFID     Department for International Development (United        MOLISA    Ministry of Labor, Invalids and Social Affairs
         Kingdom)
DH       District Hospital                                       MOU       Memorandum of Understanding
DMEC     Department of Medical Equipment and Construction        MTEF      Medium Term Expenditure Framework
DOH      Department of Health                                    NCB       National Competitive Bidding
DOLISA   Department of Labor, Invalids and Social Affairs        NCD       Non-communicable Disease
DPHC     District Preventive Health Center                       NHSP      National Health Support Project
DPI      Department of Planning and Investment                   PPC       Provincial People’s Committee
FM       Financial Management                                    PPMU      Provincial Project Management Unit
GDP      Gross Domestic Product                                  QCBS      Quality and Cost Based Selection
GPN      General Procurement Notice                              RBF       Results Based Financing
GSO      General Statistics Office                               SOE       Statement of Expenditure
HCFP     Health Care Funds for the Poor                          SC        Steering Committee
HCWM     Healthcare Waste Management                             SEDP      Socioeconomic Development Plan
HIEC     Health Information and Education Centers                SIL       Standard Investment Loa
IBRD     International Bank for Reconstruction and Development   TA        Technical Assistance
ICB      International Competitive Bidding                       TOR       Terms of Reference
ICR      Implementation Completion and Results Report            VHW       Voluntary Health Worker
IDA      International Development Association                   VHLSS     Vietnam Households and Living Standards
                                                                           Survey
IFR      Interim Financial Reports                               VSS       Vietnam Social Security
IMR      Infant Mortality Rate                                   WB        World Bank

                                 Vice President:             James Adams
                               Country Director:             Victoria Kwakwa
                                Sector Manager:              Juan Pablo Uribe
                              Task Team Leader:              Bukhuti Shengelia
                                                      VIETNAM
                                      Central North Region Health Support Project


                                                                 CONTENTS

                                                                                                                                            Page

I.           STRATEGIC CONTEXT AND RATIONALE ............................................................. 1 
      A.  Country and sector issues ................................................................................................. 1 
      B.  Rationale for Bank involvement ......................................................................................... 4 
      C.  Higher level objectives to which the project contributes .................................................... 5 

II.          PROJECT DESCRIPTION ............................................................................................. 5 
      A.  Lending instrument ............................................................................................................. 5 
      B.  Project development objective and key indicators.............................................................. 5 
      C.  Project components ............................................................................................................. 6 
      D.  Lessons learned and reflected in the project design............................................................ 8 
      E.  Alternatives considered and reasons for rejection .............................................................. 8 

III.         IMPLEMENTATION ...................................................................................................... 9 
      A.  Partnership arrangements .................................................................................................... 9 
      B.  Institutional and implementation arrangements .................................................................. 9 
      C.  Monitoring and evaluation of outcomes/results ................................................................ 10 
      D.  Sustainability..................................................................................................................... 10 
      E.  Critical risks and possible controversial aspects ............................................................... 11 
      F.  Loan/credit conditions and covenants ............................................................................... 12 

IV.          APPRAISAL SUMMARY ............................................................................................. 13 
      A.  Economic and financial analyses ...................................................................................... 13 
      B.  Technical ........................................................................................................................... 14 
      C.  Fiduciary ........................................................................................................................... 15 
      D.  Social................................................................................................................................. 16 
      E.  Environment...................................................................................................................... 17 
      F.  Safeguard policies ............................................................................................................. 18 
      G.  Policy Exceptions and Readiness...................................................................................... 18
Annex 1: Country and Sector or Program Background ................................................................ 19 

Annex 2: Major Related Projects Financed by the World Bank and/or other Agencies .............. 29 

Annex 3: Results Framework and Monitoring.............................................................................. 30 

Annex 4: Detailed Project Description ......................................................................................... 36 

Annex 5: Project Costs.................................................................................................................. 59 

Annex 6: Implementation Arrangements ...................................................................................... 61 

Annex 7: Financial Management and Disbursement Arrangements ............................................ 64 

Annex 8: Procurement Arrangements ........................................................................................... 76 

Annex 9: Economic and Financial Analysis ................................................................................. 87 

Annex 10: Safeguard Policy Issues............................................................................................... 97 

Annex 11: Project Preparation and Supervision ......................................................................... 110 

Annex 12: Documents in the Project File ................................................................................... 112 

Annex 13: Statement of Loans and Credits ................................................................................ 113 

Annex 14: Country at a Glance ................................................................................................... 116 

Annex 15: Map IBRD 37148 ...................................................................................................... 118 
                                           VIETNAM

                CENTRAL NORTH REGION HEALTH SUPPORT PROJECT

                            PROJECT APPRAISAL DOCUMENT

                                 EAST ASIA AND PACIFIC

                                            EASHH

Date: February 25, 2010                       Team Leader: Bukhuti Shengelia
Country Director: Victoria Kwakwa             Sectors: Health (90%); Non-compulsory
Sector Manager/Director: Juan Pablo Uribe     health finance (10%)
                                              Themes: Health system performance (67%);
                                              Population and reproductive health (33%)
Project ID: P095275                           Environmental category: Partial Assessment
Lending Instrument: Specific Investment Loan Joint IFC:
                                              Joint Level:
                                  Project Financing Data
[ ] Loan [X] Credit [ ] Grant [ ] Guarantee [ ] Other:

For Loans/Credits/Others:
Total Bank financing (SDRm.): 41.50 (US$m. 65.00)
Proposed terms: Standard IDA terms with total maturity of 35 years including a grace period of
10 years
                                  Financing Plan (US$m)
                 Source                        Local            Foreign             Total
BORROWER/RECIPIENT                                10                 0.00               10
International Development Association            65.00               0.00             65.00
(IDA)
Total:                                            75                 0.00               75

Recipient: Socialist Republic of Vietnam

Responsible Agency:
Ministry of Health of Vietnam
138A Giang Vo
Vietnam
Tel: (84-4) 846-4416 Fax: (84-4) 846-4051
byt@MOH.gov.vn
                          Estimated disbursements (Bank FY/US$m)
FY            2011      2012      2013       2014     2015       2016
Annual          3        8        20         20       10          4
Cumulative      3       11        31         51       61         65
Project implementation period: Start: September 1, 2010 End: February 28, 2016
Expected effectiveness date: September 1, 2010
Expected closing date: August 31, 2016
Does the project depart from the CAS in content or other significant respects?
                                                                                 [ ]Yes [X] No
Ref. PAD I.C.
Does the project require any exceptions from Bank policies?
Ref. PAD IV.G.                                                                   [ ]Yes [X] No
Have these been approved by Bank management?                                     [ ]Yes [X] No
Is approval for any policy exception sought from the Board?                      [ ]Yes [X] No
Does the project include any critical risks rated “substantial” or “high”?
                                                                                 [X]Yes [ ] No
Ref. PAD III.E.
Does the project meet the Regional criteria for readiness for implementation?
                                                                                 [X]Yes [ ] No
Ref. PAD IV.G.
Project development objective Ref. PAD II.C., Technical Annex 3
The project development objective is to strengthen district level curative and preventive health
services and improve their accessibility for the economically vulnerable population in the
Central North Provinces.

Intermediate objectives are:
- Increasing health insurance coverage among the near poor population;
- Upgrading capacities of district hospitals and District Preventive Health Centers;
- Improving supply and quality of health care personnel.

Project description Ref. PAD II.D., Technical Annex 4

COMPONENT ONE: Supporting health insurance for the near poor population ($9.11
million) This component aims to expand access to health insurance for near poor households in
the Central North region and to improve the system’s capacity to manage health insurance. It
will do so by (i) subsidizing health insurance for the near poor, (ii) conducting a social marketing
and Information and Education Campaign, and (iii) strengthening institutional capacities for the
administration of health insurance.

COMPONENT TWO: Strengthening district health services ($32.2 million) This component
aims to: (i) improve the capacity of district hospitals to provide basic curative health services to
the population, and (ii) strengthen the capacity of District Preventive Health Centers to carry out
basic public health functions. This will be done through providing basic medical equipment and
ambulances to 30 district hospitals, and building and equipping 30 district preventive health
centers. The component will also include a Results Based Financing (RBF) pilot to improve the
performance of hospitals and preventive health centers in Nghe An province.

COMPONENT THREE: Improving supply and quality of human resources for health
($15.99 million) The objective of this component is to strengthen the capacity of existing
medical educational institutions and to improve skills and knowledge of already practicing
medical personnel. This will be done through providing teaching equipment to medical colleges
in selected provinces; supporting upgrading of Nghe An medical college to medical university;
training of trainers; and combination of short- and long-term medical training of health care
personnel.

COMPONENT FOUR: Project management, monitoring and evaluation ($7.71 million)
The aim of this component is to ensure adequate management structure, processes and human
resource capacities for the project, and to set up mechanisms for effective monitoring of
activities and evaluation of results.

Which safeguard policies are triggered, if any? Ref. PAD IV.F., Technical Annex 10
Environmental Assessment (OP 4.01)
Indigenous Peoples (OP/BP 4.10)
Involuntary Resettlement (OP/BP4.12)

Significant, non-standard conditions, if any, for:
Ref. PAD III.F.

Board presentation: None

Loan/credit effectiveness:

       Ministry of Health (MOH) has adopted an Operations Manual and a financial
       management system satisfactory to the IDA, including suitable chart of accounts
       acceptable to the IDA.
      MOH has established Memoranda of Understanding with project provinces setting out
       rules, responsibilities, and accountability of various parties in line with the project’s
       institutional, financial management and procurement arrangements.
      The Resettlement Policy Framework (RPF) has been duly approved by the Recipient’s
       Prime Minister. Even though the RPF was duly approved by the MOH (Decision
       4834/QD-BYT) on the basis of the authority granted by the Prime Minister’s Decision
       No. 551/TTg-QHQT, the MOH will seek a confirmation from the Prime Minister’s office
       on the acceptability of the “discrepancy clause”, which is an important provision of the
       RPF. As a result of such confirmation/approval by the Prime Minister, no changes shall
       be made to the RPF.

Disbursement conditions:

      Central Project Management Unit (CPMU), Provincial Project Management Units
       (PPMUs) and Nghe An Medical Colleague Project Management Unit (MCPMU) shall be
       fully staffed with accountants (one Chief Accountant and two accountants at CPMU, one
       Chief Accountant and one accountant at PPMUs, and one accountant at MCPMU) trained
       in financial management procedures acceptable to the IDA.
Covenants applicable to project implementation:

      The Recipient shall no later than May 1, 2010, establish and maintain throughout
       implementation a Project Steering Committee (PSC) within MOH to be chaired by the
       Vice-Minister of MOH and include, among others, representatives of the relevant MOH
       departments. The PSC shall be responsible for providing strategic guidance for the
       overall Project implementation.
      The Recipient shall establish, no later than August 31, 2010, and maintain throughout
       implementation of the Project a Joint Working Group on Health Financing with
       representation from MOH, Ministry of Labor, Invalids and Social Affairs (MOLISA),
       and Health Strategy and Policy Institute; and with terms of reference acceptable to the
       IDA.
      By June 30, 2010 CPMU has contracted an International Procurement Advisor,
       acceptable to the IDA, with extensive experience in medical equipment, civil works,
       technical specification development, and international bidding procedures.
      By June 30, 2010 CPMU and PPMUs have appointed procurement officers (local
       consultants) satisfactory to the IDA.
      By September 30, 2010, submit to the IDA bidding documents and technical
       specifications of medical equipment for district hospitals for at least two International
       Competitive Bidding packages specified in the first 18 month procurement plan.
      By June 30, 2010 submit to the IDA architectural design of all District Preventive Health
       Centers and by December 31, 2010 bidding documents for the construction of at least 10
       District Preventive Health Centers specified in the first 18 month procurement plan.
      By no later than December 1 of each year, commencing in 2011, prepare and provide to
       the IDA for its review and comment a consolidated annual implementation plan for the
       next succeeding calendar year, together with the procurement plan for each Central North
       region province.
I.      STRATEGIC CONTEXT AND RATIONALE

A. Country and sector issues

1.      Vietnam has significantly improved health outcomes over the past two decades,
particularly maternal and child health and the mortality from communicable diseases. These
improvements are the result of expansion of basic services and targeted programs as well as
improvements in socioeconomic conditions.

2.      Despite these positive developments, Vietnam faces serious challenges in modernizing its
health system, tuning it with overall socio-economic development and meeting the expectations
of the population beyond the health outcomes. The proportion of the population incurring
catastrophic health care expenditure rose to over 15%.1 As a way of modernizing its health
financing system, Vietnam chose the route of Social Health Insurance. A critical milestone in
this regard was the adoption of the Health Insurance Law in November 2008. Vietnam aims to
gradually reach universal coverage in the next six to eight years. This is a very ambitious and
challenging goal, particularly given that a decade after the introduction of Social Health
Insurance the population coverage is still only 44%. Capturing a very large informal sector
proves to be difficult without mandatory enrollment and subsidization of those who cannot
afford health insurance premiums. It is also understood that in order to scale up demand on
health insurance the Government has to fix the limitations on the supply side – improve the
availability, accessibility and quality of health services. In the short-term perspective, the
Government’s priority is to extend coverage quickly to the economically vulnerable population
and address some of the most pressing constraints on the supply side in order to meet health care
needs of this group and increase the population’s demand on health insurance. The poor
population tends to concentrate in certain geographic areas (Northern Mountains, Central
Highlands, and Central North Coast) where health service capacity also happens to be severely
constrained by lack of medical personnel and adequate infrastructure. Therefore the Government
resorts to region-specific development projects in order to deliver aid fast where it is needed
most, while the national level health sector reforms are being discussed and gradually introduced
for medium and long-term results.

3.      With the introduction of Health Insurance Law in November 2008, everyone under the
official poverty line was provided with free health insurance coverage thereby bringing the
coverage rate among this group to 100%. In addition to the poor, there is an estimated 10 to 30%
of the population (varying across provinces) classified as near poor. They have an average
income between 100 and 130% of the official poverty line. Enrolling the near poor into the
health insurance scheme is an important political goal for the Government to practically
demonstrate its genuine pro-poor orientation and make a tangible improvement to the well-being
of this population group. At the same time, the Government is very firm about differentiating
benefits for the poor and near poor and letting the latter at least minimally share the costs of
social benefits provided to them. Currently the Government provides a 50% subsidy towards the
cost of the premium to encourage the near poor to enroll. Despite the 50% subsidy, which will

1
 Catastrophic health care expenditure is defined as out of pocket health expenses that exceed 25 percent of non-food
consumption (Lieberman and Wagstaff, 2009). When the threshold is defined as 40 percent of non-food
consumption, the percentage of households affected exceeds 5%).

                                                         1
be retained after the health insurance becomes mandatory on October 15, 2010, the coverage rate
among the near poor remains below 10%. It is clear that 50% subsidy is not enough to motivate
the near poor to enroll in health insurance. The lack of the awareness of health insurance
benefits is another factor contributing to low coverage.

4.      Over the past decade, Vietnam has been increasingly decentralizing public
administration. Administrative and fiscal decentralization was accompanied by greater
autonomy granted to hospitals. Many hospitals managed to capitalize on their autonomy and
started to increase revenues at the expense of patients paying out of pocket, health insurance
agency paying on a fee-for-service basis, and the central government still continuing input-based
subsidies. The lack of performance-related payments has perpetuated inefficiency and low
quality. The Government is interested in testing performance-based financing options on a
limited scale, and if benefits prove convincing, in gradually moving away from input-based
financing.

5.       In 2007, Vietnam introduced Decree 172, which separated district hospitals from district
health administration and District Preventive Health Centers (DPHCs). This move was
motivated by an expectation of improved performance of more independent and autonomous
institutions. In many districts, this has left the DPHCs and district health administration without
adequate facilities to perform their functions. This can jeopardize the performance of public
health services, for which Vietnam has long been praised. For this reason, there is an urgent
need to strengthen preventive health services at the district level and provide them with adequate
infrastructure and resources.

6.      In the context of weak primary care, which is severely understaffed and poorly
equipped, district hospitals are the front-line facilities providing both primary as well as
secondary care to the population living far from the provincial facilities. District hospitals are
also the main providers of services to the poor. In fact, 42% of hospitalizations among the poor
take place in district hospitals, compared to 23% in provincial hospitals. By contrast, 33% of
hospitalizations among the general population take place in district hospitals and 35% in
provincial hospitals. In most settings, hospital care tends to be pro-rich. The same is true for
Vietnam when looking at the hospital sector in general, without disaggregation by provinces
and types of hospitals. There has been no rigorous benefit-incidence analysis done by various
levels of hospital care and by provinces to better understand the pro-poor nature of hospital
care. The limited data however, suggest that district hospitals, unlike provincial and central
ones are notably pro-poor. According to national data, which includes rich as well as poor
provinces, 47% of district hospital patients are poor and near poor, while the better-off and rich
constitute only 29%. In contrast to this, 28% of the provincial and central hospital patients are
poor or near poor, while the rich and better-off make up 52% of patients. The pro-poor nature
of district hospitals is likely to be much more pronounced in poor provinces, such as those in
Central North region.

7.     The majority of district hospitals are in poor physical condition; they lack medical
equipment and doctors. Therefore, patients who can afford to seek care at higher level facilities
bypass them. Such behavior, however, is not affordable for the majority of the poor. There are
financial deterrents in place (see Annex 1 for details) for the insured people to discourage them

                                                 2
from using higher level facilities, but the lack of trust in the quality of care at the lower level
seems to be a stronger driver affecting patient flow in the system. In 2008, the Government
started to mobilize resources for district hospitals by issuing State bonds. However these
resources are not enough to reach all the poor districts. The bulk of funding is used for fixing
physical infrastructure, and there is very little left for medical equipment and human resource
strengthening. The medical equipment for district hospitals is rather basic and their shortage
means that district hospitals cannot perform such simple procedures as appendectomy, treatment
of acute asthma and accidents, and management of obstetric complications, among other things.
Therefore, it is the Government’s priority to mobilize foreign donor investments to fill the gap in
available resources for improving the quality of district hospitals, which would benefit mostly
the poor population given the pro-poor nature of these facilities.

8.      In addition to the above mentioned problems, Vietnam faces human resource imbalance
as well. Most district hospitals lack Level 1 specialists (surgeons, obstetrician-gynecologists,
pediatricians, anesthesiologists, etc.). Due to the lack of adequate incentives, it is difficult to
attract and retain health professionals in remote areas, especially in district hospitals. The
Government tries to address the human resource imbalance by training more professionals
conditional on their placement in deprived locations after the training; by providing some
incentives for their retention; and by rotating medical personnel from the higher level facilities to
the lower level in order to transfer the knowledge and temporarily fill the skills gap.

9.      In order to address the health sector problems briefly outlined above, the Government
uses two types of approaches. On one hand, it formulates new policies to reform the
fundamental functions of the health system and tries to implement such policies on a national
scale. On the other hand, realizing huge disparities between the regions and provinces, it
supplements the nation-wide health sector reforms with regionally targeted programs to bring the
health system capacities in various provinces to more or less a similar level. The government
also uses this regional approach to pilot a number of innovative policy instruments. Lessons
from such pilots inform the content of nation-wide health system reforms and the strategy for
their implementation.

10.     The Central North Region Health Support project is designed to follow the government’s
regional approach to health system development by targeting the northern region of the central
coastal area, referred to as Central North region. The health sector problems outlined above are
more acutely manifested in this region than in other more developed regions of Vietnam. The
region, with a population of 10.7 million, is the second poorest among the eight regions of
Vietnam; 25% and 30% of the population is classified as poor and near poor respectively (2006).
Average per capita income in the Central North is 317,000 VND (2004) compared to the national
average of 445,000 VND (2004). The inhabitants of the region (approx. 85% of them) live in
rural areas and make their living from self-employed agriculture and fish farming; the share of
self employment is 79.5% in the total employment structure according to 2004 data. Overall, the
health status of the region is poor. Average Infant Mortality Rate is 22 (ranging from 15 to 36)
compared to the national average of 16, and Maternal Mortality Rate is 200 compared to the
national average of 75. The leading causes of morbidity are associated with respiratory
conditions and diseases of the digestive system.



                                                 3
11.      With its regional focus and design, the Central North region project is fully aligned with
the government’s strategy to strengthen the health systems in disadvantaged regions by relying
on three pillars: (a) reducing demand-side barriers to health services for the economically
vulnerable population, (b) improving the quality of pro-poor health services, and (c) reducing the
shortage of competent health care professionals in underserved areas. The project will reduce
demand barriers by increasing affordability of health insurance to the near poor population by
providing significant subsidies towards health insurance premiums, above what is currently
offered by the government. This will be complemented by a strong Information and Education
Campaign, social marketing, and a number of incentive mechanisms to increase enrollment of
the target population in the health insurance scheme. In order to improve the quality of pro-poor
health services, the project will invest in district hospitals and DPHCs in the most disadvantaged
districts, thereby making basic health care available at a lower cost and closer to the
communities. Most of the investment will go into equipping hospitals with most basic medical
equipment and refurbishing the DPHCs. This will be combined with a Results Based Financing
pilot to test some innovative mechanisms to promote better performance, accountability and
client-orientation of health services. The project will address the human resource constraint in
the Central North region by training specialists that are in short supply and creating stronger
local medical training institutions for more sustainable results.

12.     All these ‘building blocks’ of the project reinforce one another to achieve a common
objective – strengthen district level curative and preventive health services and improve their
accessibility for the economically vulnerable population. The project, due to its regional focus,
is limited in terms of its ability to achieve major policy changes and shape the way the health
system functions in Vietnam. This is beyond the scope of the current project. As a logical
evolution from regional projects, operations oriented towards high level reform remain on the
table for future engagements between Vietnam and the World Bank (WB).

B. Rationale for Bank involvement

13.      The World Bank’s comparative advantage includes its long-term engagement in
government delivery systems and disease control programs in several investment projects as well
as its leadership in health financing and health sector reforms. The World Bank also assists the
government in further developing and enhancing health reforms, where needed, through a series
of Analytical and Advisory Activities (AAA) and programmatic technical assistance. The
project design draws on best practice examples from World Bank-supported and other initiatives,
as well as the World Bank’s experience with decentralized health sector reforms, project
management issues in countries similar to Vietnam, and its ability to mobilize significant funds.

14.      It has to be noted however, that regional nature of the project provides limited leverage
for the World Bank to foster systemic health reforms and policy changes that are necessary to
deal with the health system constraints that all regions face. While the World Bank respects the
government’s strategy and choice regarding the mode of engagement and the use of the external
aid, it actively uses non-lending activities to promote health sector reforms, strengthen
institutional capacities and help the government of Vietnam to modernize its health care sector.
Many regional projects include learning elements (pilots) that are directly related to some
important national level health policy initiatives, mostly in the area of health financing. The

                                                4
Central North Region Health Support project will include a specific sub-component designed to
strengthen the link between the regional activities and the national level health financing
reforms, to open a door for policy dialogue, and encourage the participation of the provinces in
this process.

C.       Higher level objectives to which the project contributes

15.    The second pillar of the Country Partnership Strategy (CPS) for Vietnam (2007) calls for
“strengthening social inclusion” in order to ensure that growth continues to be equitable and pro-
poor. It recognizes the need to support marginalized groups by improving social services and the
key role this plays in poverty reduction in Vietnam. The proposed project is also fully consistent
with the global Health Nutrition and Population strategy for the World Bank that was issued in
April 2007.


II.      PROJECT DESCRIPTION

A. Lending instrument

16.     A Specific Investment Loan (SIL) instrument was selected because (i) the project is
focused on a specific set of activities and investments; (ii) a SIL is appropriate for district level
actions, institutional capacity building, and skills development; and (iii) a SIL is conducive to an
integrated approach to health care system development.

B. Project development objective and key indicators

17.     The project development objective is to strengthen district level curative and preventive
health services and improve their accessibility for the economically vulnerable population in the
Central North Provinces. The PDO will be measured through the following indicators:

        10% increase in the outpatient and inpatient services by (a) the poor and (b) the near poor
        at the level of district hospitals 2.
       30% reduction in the referrals for deliveries, pneumonia and appendicitis from district
        hospitals to provincial hospitals.
       90% of children under age 1 fully vaccinated according with national EPI program.
       20 new District Preventive Health Centers constructed with adequate facilities and
        equipment to provide the full range of preventive health services according to the
        government norms.




2
  Even though under Component One, the project provides demand-side subsidies only to the near poor, the PDO
indicators include the poor and general population as well, because the supply-side interventions at the district
hospitals are intended to benefit not only the near poor but the poor as well. Inclusion of the poor in the result
framework is also warranted by the need to more comprehensively assess the pro-poor impact of the project.

                                                        5
The project’s intermediate objectives and indicators are:

       Intermediate objectives:                        Indicators:
Increasing health insurance coverage                   40% of the near poor are covered by
among the near poor population                         the health insurance program
                                                       The share of near poor households
                                                       spending 25% or more of their non-
                                                       food consumption on health is
                                                       reduced to 12% or less.
Upgrading capacities of district hospitals             The share of district hospitals in the
and DPHCs                                              claims reimbursed by health
                                                       insurance (VSS) is 50% or more.
                                                       50% of patients satisfied with (a) the
                                                       overall quality of care at district
                                                       hospitals, (b) reduction of waiting
                                                       time, and (c) availability of services
                                                       and diagnostic facilities..
Improving supply and quality of health care            Nghe An medical College fully
personnel                                              meeting the national standards for
                                                       medical university.
                                                       175 Doctors from District Hospitals
                                                       trained for Level 1 specialization
                                                       and at least 680 health professionals
                                                       trained for MD degree.
                                                       80% of medical professionals return
                                                       to their original place of
                                                       work/residence after long-term
                                                       training supported by the project.

C. Project components

COMPONENT ONE: Supporting health insurance for the near poor ($9.11 million)

18.     This component aims to expand access to health insurance for near poor households in
the Central North region and to improve the system’s capacity to manage health insurance. It
will do so by (i) subsidizing health insurance for the near poor, (ii) conducting a social marketing
and Information and Education Campaign, and (iii) strengthening institutional capacities for the
administration of health insurance. Specifically, this component will finance the bulk of the out-
of-pocket price faced by near poor households with the objective of increasing the take-up of
health insurance among this group. In addition, it will entirely sub-contract the social marketing
component to a qualified local Technical Assistance (TA) firm that will provide technical
assistance on social marketing techniques to the Health Information and Education Centers
(HIEC) and Vietnam Social Security office (VSS). The project will also provide limited support
to VSS with additional administrative operating costs resulting from expected increased
enrollment of the near poor. This will start as a pilot incentive scheme whereby the VSS will
receive a fixed per-capita amount (2% of the premium) for each additional near poor enrolled in

                                                 6
the scheme. Finally, a Joint Working Group on Health Financing will be established in order to
foster national level engagement with key stakeholders on health reform issues, facilitate
dialogue and knowledge exchange between the project provinces and the center, and support
capacity-building.

COMPONENT TWO: Strengthening district health services ($32.2 million)

19.     This component aims to: (i) improve the capacity of district hospitals to provide basic
curative health services to the population, and (ii) strengthen the capacity of DPHCs to carry out
basic public health functions. The component will achieve its objectives by upgrading medical
equipment in the district hospitals, providing equipment and training to 30 DPHCs, building the
technical and administrative blocks of Preventive Health Centers (PHCs) and piloting
performance-based financing mechanisms to incentivize health care providers to perform better
and more efficiently. The component will focus only on the district level, except for Quang Tri
province, the poorest in the region, where the project will also invest in a provincial general
hospital. This hospital, unlike other provincial hospitals, has not received any investment from
either government sources or external donors, although its medical equipment stock is mostly
outdated and dysfunctional. The project will also support strengthening local capacities for
proper maintenance of medical equipment and facilities to ensure the sustainability of the
investment.

COMPONENT THREE: Improving supply and quality of human resources for health
($15.99 million)

20.     The objective of this component is to strengthen the capacity of existing medical
educational institutions and to improve skills and knowledge of already practicing medical
personnel. More specifically, it will support the transformation of Nghe An medical college into
a medical university, and the improvement of teaching facilities in four other medical colleges.
In addition, the component will support the training of clinical staff of district hospitals,
personnel of DPHCs as well as hospital administrators. In Quang Tri province, the training plan
will include the provincial general hospital, which will be upgraded. The Project will finance
four types of training modalities: short term training; Level 1 specialty training; on-the-job
training for assistant doctors and pharmacists to upgrade them to full-fledged doctors and
pharmacists; and Master’s degree training. Lastly, this component will provide support to the
implementation of a new high priority Human Resources policy of the Government, embedded in
Decision 1816 of MOH. This policy envisages rotation of qualified medical personnel from the
higher level facilities to district hospitals in order to temporarily address health personnel
shortage and at the same time ensure the transfer of knowledge and skills to district level hospital
personnel.

COMPONENT FOUR: Project management, monitoring and evaluation ($7.71 million)

21.     The aim of this component is to ensure adequate management structure, processes and
human resource capacities for the project, and to setup mechanisms for effective monitoring of
activities and evaluation of results. Under this component, the project will fund the operation of
project management units at the central and provincial levels. To the extent possible, existing

                                                 7
health information systems and data collection mechanisms in the MOH and in provinces will be
relied upon in order not to impose an unnecessary burden on the country. However for certain
statistics, it will be necessary to design specific data collection instruments and conduct
independent data collection and auditing (e.g. small scale household surveys, patient exit
interviews, hospital surveys). M&E will consist of two components: (i) monitoring of the
project’s implementation progress, and (ii) monitoring of the project’s results indicators and
performance of the pilot. Given the presence of a performance-based financing pilot in the
project design, requiring regular monitoring of the performance of health care providers
participating in the pilot, the project shall set up an adequate independent audit system to verify
performance. In order to ensure unbiased monitoring and evaluation of the pilots and monitoring
of the project result indicators, a local consulting firm will be engaged.

D. Lessons learned and reflected in the project design

22.     The project intends to build on key lessons learned from other health sector projects in
Vietnam. These lessons include the following: (i) decentralization of the procurement,
particularly of medical equipment, to provincial and district levels as well as capacity building
are gradual processes and could take at least two to three years, with intensive technical
assistance. It could be more efficient and economical to package similar medical equipment
requested by provinces and procure them through the Central Project Management Unit (CPMU)
through International Competitive Bidding (ICB) procedures; (ii) percentage of financing from
the Credit should be 100% for all components under all projects which support less affluent or
poor provinces and districts; disbursement against components instead of categories should be
adopted; (iii) involvement of provinces in the design of the project from the beginning is crucial
to ensure their support and commitment during implementation; and (iv) at the regional level, the
project design, which is premised on significant changes in the way health sector functions in the
rest of the country, is likely to cause serious delays and sometimes the project implementation
may be stalled. Any change requires approval at multiple levels (Provincial People’s
Committees, Ministry of Finance, Ministry of Health, Ministry of Homeland Affairs, etc.). This
limitation has been taken into account to avoid too ambitious of a project design and unrealistic
expectations. Design components that constitute a major change to the way the health system
functions in Vietnam will be introduced as a pilot in one province with possible rollout by mid-
term based on performance.

E. Alternatives considered and reasons for rejection

23.     Support provided to demand side interventions only. This approach would neglect that
demand for health care is a function of not only price and opportunity cost of seeking care, but
also of the perceived quality of services. Even if the demand for health services is increased by
removing financial barriers, the population will not be serviced unless the necessary
infrastructure, technology, drugs and medical personnel are in place.

24.     Support to supply side interventions only. Some provinces proposed investing only in
upgrading service delivery infrastructure and training of health care personnel. This option was
rejected on grounds that it would not ensure attainment of the project’s development objectives



                                                8
as the economically vulnerable population would continue to face demand-side barriers to health
services.

25.     Budget support under the Medium Term Expenditure Framework. This approach was
rejected because of the management capacity limitations at the provincial level, which would
increase the risk of implementation. Furthermore, budget support may not be the most suitable
assistance modality for the learning elements of the project.

26.    Human resource development project only. This idea was rejected because it would not
address the main demand side barriers of access to care and also other supply side constraints
such as lack of medical equipment. It would be difficult to target the poor population with this
approach.

27.     National operation. This was rejected as this is inconsistent with the current priorities of
the government. Nevertheless under Component One, the project includes a national level
activity – setting up a Joint Working Group on Health Financing, with the aim of fostering the
national level engagement with key stakeholders on health financing issues. The World Bank is
currently in discussion with MOH to complement the regional approach with national operations
focused on systemic health sector reforms in the future.

28.     Results Based Financing (RBF). The option of disbursing the bulk of the project
proceeds on per-capita basis in relation to achievement of specific results in terms of health
system outputs or population health outcomes was discussed. The option was rejected, as the
current institutional arrangements in Vietnam’s health sector and the local budget and financial
management rules would not allow such a design at the regional level unless there are major
changes instituted in the whole country, which is beyond the scope of the current project.

III.   IMPLEMENTATION

A. Partnership arrangements

Not applicable

B. Institutional and implementation arrangements

29.    The project will be implemented by the Ministry of Health through a CPMU at the
national level and a Project Management Unit (PPMU) in each of the six project provinces. In
addition, a PMU in the Nghe An Medical College will be set up to manage the investment and
capacity building activities designed for that college. There will be a Project Steering Committee
appointed by the Decree of the Minister of Health to exercise a strategic oversight on the project
implementation. The Steering Committee will be composed of various relevant departments of
the MOH upon the discretion of the Minister. Under Component One, a Joint Working Group on
Health Financing will be set up composed of various technical entities within and outside
Ministry of Health (MOH). The Joint Working Group will provide overall guidance on health
financing reforms. To ensure the project is implemented with full participation of and close
coordination between the CPMU, PPMUs, and MCPMU regular supervision will be conducted
by the CPMU managers, staff, and consultants throughout the year. The World Bank will carry
                                                 9
out its supervision every six months. There is adequate budget under the project management
component for communications, supervision, monitoring, evaluation, and travel.

C. Monitoring and evaluation of outcomes/results

30.     Monitoring and evaluation (M&E) is a critical function for the project. The project will
rely, to the extent possible, on existing health information systems and data collection
mechanisms in the MOH and in provinces in order not to impose an unnecessary burden on the
country. However, for certain statistics it will be necessary to design specific data collection
instruments and conduct independent data collection (e.g. small scale household surveys, patient
exit interviews, hospital surveys).

31.     M&E will consist of two components: (a) monitoring of project implementation process,
and (b) monitoring project results indicators and performance of the pilots. Monitoring of
implementation progress will be the responsibility of the project monitoring officers of Project
Monitoring Units (PMUs). The CPMU and each PPMU shall have a monitoring and evaluation
officer on staff. Nghe An PPMU’s monitoring and evaluation officer will also serve the
MCPMU. Central PMU in consultation with provincial PMUs will develop a set of
implementation progress indicators, which will be specified in the project implementation
manual. These indicators will be monitored twice a year and findings will be provided to the
World Bank two weeks prior to supervision missions. These indicators will be also used for
updating Implementation Status Reports (ISRs).

32.     Given the presence of Results Based Financing pilots in the project design, which
requires regular monitoring of the performance of health care providers participating in the pilot,
the project has to set up an adequate independent audit system to verify performance. Also, it
has to be recognized that data required for measuring some of the project result indicators are not
readily available and requires special data collection exercise and analysis. In order to ensure
unbiased monitoring and evaluation for the pilots and auditing of their performance, a local
consulting firm will be engaged. The same firm will be responsible also for the baseline survey
the purpose of which is to update the result indicators with the most recent data. If deemed
necessary a local consulting firm will be engaged for mid-term and final evaluation as well.
More details on monitoring and evaluation arrangements are provided in Annex 3.

D. Sustainability

33.     In recent years, the government has adopted several policy decisions addressing problems
of insufficient financial access, and quality of services; these decisions indicate that the MOH is
committed to the project’s objectives and will ensure its long-run sustainability.

34.     The project intends to subsidize the cost of social health insurance for the near poor, and
in so doing it helps the government to increase the demand on health insurance among the near-
poor and thus achieve a more sustainable basis for expansion of social health insurance. This
project intervention also helps the government to better understand the optimal level of subsidy
that can stimulate sufficient demand among the target group and at the same can be fiscally
sustainable.

                                                10
35.      Given the project’s aim to improve the quality of health services, a large emphasis has
been placed on human resource training and development. The project puts in place certain
elements that will increase the sustainability of the human resource strengthening activities: (i)
trained medical personnel will have to sign a binding agreement to return to the place of their
original practice; (ii) the focus will be placed on long term training to produce a new cadre of
medical professionals and thereby fill the human resource gap in a more sustainable manner; and
(iii) supporting transformation of Nghe An College into medical university will create a health
workforce production capacity locally and will reduce dependency of Central North region on
medical training institutions in Hanoi and Ho Chi Minh City.

36.     The sustainability of the RBF pilot must also be ensured. Once a system is set up to link
quality indicators to financing, it is hoped that the government will extend the pilot to other
hospitals and regions. The government indicated commitment to gradually move away from the
input-based financing towards the performance based financing which increases the
sustainability of the outcomes of the RBF pilot.

37.     The maintenance of infrastructure investment in district hospitals as well as district
preventative health centers also warrants attention. Increased hospital responsibility for
maintenance is entirely in line with the current trend of increasing hospital autonomy. The
project will provide training in the maintenance of medical equipment and facilities, and will
support medical colleagues in improving their training programs in this field. The Results Based
Financing pilot also encourages better maintenance practices by including maintenance in the list
of indicators which will affect hospital financing.

E. Critical risks and possible controversial aspects
Legend: L = Low risk; M = Medium Risk; H = High risk

                 Risks                                  Risk Mitigation Measures                     Risk Rating
                                                                                                    with Mitigation
To project development objectives
Better-off groups within each province     Demand-side support targeted exclusively at the                 L
may capture project benefits, leading to   economically vulnerable; health facilities receiving
increased disparities.                     investment are pro-poor and located in most
                                           disadvantaged districts; monitoring of service usage
                                           and mid-project survey will guide necessary
                                           adjustment of activities and targeting of benefits


Uneven implementation progress across      Monitoring of implementation with adjustments as                M
project components undermines the          needed, including reallocation of support for
achievement of PDO, which depends          problematic areas; supply-side equipment investment
on the synergy between demand and          linked to demand-side performance.
supply-side project activities.
Potential mismatch between timing of       Coordination and sequencing of investments at                   M
demand side interventions expected to      different levels for health facilities. Initiation of
boost demand for services and              procurement of equipment for hospitals and training
investments in health services             of personnel at early stages to ensure availability of
infrastructure                             improved services for target population enrolled in
                                           health insurance.



                                                         11
To component results
Component One
Identification of near poor population     Project to provide technical support to provinces in        M
can be delayed and existing tools for      streamlining tools for identification and registration of
means-based testing may not be             near poor. WB team/PMUs will coordinate activities
sensitive enough.                          with government bodies responsible for identification
                                           of poor/near poor
Uptake of health insurance may be          Strong Education and Information Campaign will be           M
lower than desired.                        designed by a professional local social marketing
                                           firm. Project will partially support VSS with
                                           additional administrative operating costs related to
                                           increased enrollment of near poor population.
Component Two
Equipment procured through project         Each health care facility receiving medical equipment       H
and District Preventive Health Centers     will have to develop a maintenance strategy and local
built are inadequately maintained          governments shall commit required funding. RBF
                                           pilot will include indicators related to maintenance.
                                           Project will invest in training maintenance staff.
Project activities may not affect          With increasing health insurance coverage achieved          M
inefficient referral pattern.              by project, incentives for self-referral will decrease;
                                           Government is contemplating introduction of stricter
                                           measures to enforce prudent referral practices.
Supervision of the construction of 30      In each PPMU civil works supervision consultants            M
preventive health centers may prove        will be appointed the number of which will be
difficult for the project management       determined by the number of construction sites. At
units.                                     each district a local government official with adequate
                                           expertise will serve as local supervision officer.
Incentives introduced by Results Based     Project will set up effective monitoring and evaluation     M
Financing pilot may not significantly      system is in place. Size of hospital revenues linked to
affect the performance of health care      results will increase if impact of incentives on
providers.                                 performance is found to be less than expected.
Component Three
Retaining medical personnel trained        Trained medical personnel will sign legally binding         M
under the project may prove difficult.     agreement to return to the place of original practice
                                           and remain for min. 3 years. Improved
                                           technologies/equipment at district hospitals will
                                           contribute to staff retention. Supporting upgrade of
                                           local medical training institutions will increase
                                           production of ‘locally grown’ health care personnel.
Component Four
Weak financial management due to           Detailed action plan to mitigate risks and improve          M
inadequate capacities.                     capacity is presented in Annex 7.
Capacity to manage procurement at          Detailed action plan to mitigate risks and improve          M
central level is limited posing risk for   capacity is presented in Annex 8.
procurement irregularities and delays.

F. Loan/credit conditions and covenants

Board presentation: None

Loan/credit effectiveness:
    MOH has adopted an Operational Manual and a Financial Management system
       satisfactory to IDA including a Financial Management manual, reporting format and
       suitable accounting software acceptable to IDA.
                                                         12
         MOH has established Memoranda of Understanding with project provinces setting out
          rules, responsibilities, and accountability of various parties in line with the project’s
          institutional, financial management and procurement arrangements.
         The Resettlement Policy Framework has been duly approved by the Recipient’s Prime
          Minister. Even though the RPF was duly approved by the MOH (Decision 4834/QD-
          BYT) on the basis of the authority granted by the Prime Minister’s Decision No.
          551/TTg-QHQT, the MOH will seek a confirmation from the Prime Minister’s office on
          the acceptability of the “discrepancy clause”, which is an important provision of the RPF.
          As a result of such confirmation/approval by the Prime Minister, no changes shall be
          made to the RPF.

Disbursement conditions:
    CPMU, PPMUs and MCPMU shall be fully staffed with accountants (one Chief
       Accountant and two accountants at CPMU, one Chief Accountant and one accountant at
       PPMUs, and one accountant at MCPMU) trained in financial management procedures
       acceptable to the IDA

Covenants applicable to project implementation:
    The Recipient shall by no later than May 1, 2010, establish and maintain throughout the
      implementation of the Project a Project Steering Committee within MOH to be chaired
      by the Vice-Minister of MOH and include, among others, representatives of the relevant
      MOH departments. The PSC shall be responsible for providing strategic guidance for the
      overall Project implementation.
    By June 30, 2010 CPMU has contracted an International Procurement Advisor,
      acceptable to the IDA, with extensive experience in medical equipment, civil works,
      technical specification development, and international bidding procedures.
    By June 30, 2010 CPMU, PPMUs and MCPMU have appointed procurement officers
      (local consultants) satisfactory to the IDA.
    By September 30, 2010, submit to the IDA bidding documents and technical
      specifications of medical equipment for district hospitals for at least two International
      Competitive Bidding packages specified in the first 18 month procurement plan.
    By June 30, 2010 submit to the IDA architectural design of all District Preventive Health
      Centers and by December 31, 2010 bidding documents for the construction of at least 10
      District Preventive Health Centers specified in the first 18 month procurement plan.
    By no later than December 1 of each year, commencing in 2011, prepare and provide to
      the IDA for its review and comment a consolidated annual implementation plan for the
      next succeeding calendar year, together with the procurement plan for each Central North
      region province.


IV.       APPRAISAL SUMMARY

A. Economic and financial analyses

38.    As is the case with most health sector projects, no attempt has been made to
quantitatively estimate the net present value of benefits resulting from the project through cost-

                                                 13
benefit analysis. Not only is it difficult to assign a monetary value to expected improvements in
health outcomes, it is also difficult to reliably estimate the impact of the project’s investments in
equipment and training on health outcomes. Instead of doing a cost-benefit analysis, the
Economic Analysis has tried to establish the economic case for the project’s investments by
presenting the mechanisms through which cost savings will be achieved, and by setting out the
potential benefits in terms of improved health outcomes and equity.

39.      The project is expected to result in cost savings in the health sector because it will
address inefficiencies both in the production and consumption of health services. In turn, the
cost savings will generate additional resources for the sector as a whole. The economic
justification for the Program is also driven by public finance criteria for public investments.
Government involvement in public financing of services is typically justified when market
failures exist. A primary objective of the project is to increase access to preventive care, a
service which has many public good characteristics and is hence justifiable on public finance
criteria.

40.     The fiscal impact of the specific activities included in the project hinge largely on the
costs arising from them to the government. There are two types of government expenditures that
will be incurred during the lifetime of the project: direct government outlays towards subsidizing
health insurance for the near poor; and the incremental recurrent costs arising out of the project’s
investments. The analysis of the fiscal impact shows that the incremental recurrent costs of the
project are relatively low at around 3% of the total health budget of the Central North region. An
upper bound estimate is 4%.

41.     The fiscal impact of the government subsidy for health insurance premiums is much
greater under the high take-up scenario whereby 65 % of the near poor are covered by 2016.
Under this scenario, up to 3% of the Central North region budget will be spent on this subsidy.
Under the government’s more conservative scenario, up to 1.9% of the region’s budget will be
spent on this.

B. Technical

42.     The project tries to achieve its objectives by a combination of demand and supply side
measures in order to ensure a more balanced approach for achieving its development objectives.
The project fits well with the government’s strategy (a) to strengthen provincial health systems
through regionally targeted programs; (b) to expand health insurance coverage gradually with the
priority given to the poor and near-poor; (c) to address those basic supply side-constraints that
also have impact on the demand of health services thereby creating a synergic effect; and (d) to
reduce human resource imbalance in favor of the disadvantaged and geographic areas.

43.     The project’s focus on near poor is warranted by the fact that this group of economically
disadvantaged population seems to be under the greatest risk. The government realizes the
limitations of the strategies currently in place for addressing the demand-side constraints for the
near-poor and looks for ways to streamline them. The project provides mechanisms and
resources for assisting the government in this endeavor.



                                                 14
44.     The project’s design builds on the lessons learnt in other regional operations in Vietnam
(Mekong, Northern Uplands, etc.) and also on the international experience. This reduces the
technical risks associated with the project design and increases the effectiveness of proposed
mitigation measures.
45.     The project has strong pro-poor focus by targeting district health services in the 30
poorest districts in the country. The district hospitals are predominantly used by the poor and
near poor which will ensure that the project investments will reach the most disadvantaged
population groups.

46.     The project proposes a number of innovative mechanisms which are well tailored to the
health system constraints faced by the country. Results based financing pilot, if successful, has
potential to have a significant policy impact on health financing system in Vietnam, particularly
on provider payment mechanism. While being innovative and inclusive of learning elements, the
project design still remains somewhat conservative and limits innovation to small pilots in one
province only to reduce the implementation risk.

C. Fiduciary

47.    Financial Management. An assessment of the FM arrangements for the proposed project
was conducted based on the November 3, 2005; guidelines issued by the FM Sector Board and
included discussions with the financial management personnel of the Central Project
Management Unit and Hue Department of Health (one of Provincial Management Units). The
assessment has concluded that the project meets the minimum World Bank financial
management requirements, as stipulated in BP/OP 10.02.

48.     Taking into account the risk-mitigation measures proposed under the project, a
“Substantial” FM risk rating was assigned to the project at the appraisal stage. The main actions
required are (i) appointment of qualified personnel for financial management at CPMU, PPMUs,
and MCPMU; (ii) development of Financial Management Manual for the project, (iii) training
for the FM staff of the CPMU, PPMUs and MCPMU on World Bank FM and disbursement
requirements and procedures, and (iv) development of Accounting Software for the project and
agreement on format of interim financial reports.

49.    The CPMU at the Department of Planning and Finance, Ministry of Health and PPMUs,
including MCPMU, will be responsible for project implementation and financial management of
their project component. Although the Ministry of Health, specifically the Department of
Planning and Finance, has implemented a number of World Bank funded projects, the CPMU
and all PPMUs, including MCPMU, are newly set up. Lack of experience with the World
Bank’s financial management and disbursement procedures required training to be provided to
CPMU, PPMUs and MCPMU.

50.    One Designated Account (DA) will be maintained by CPMU in US dollars at a
commercial bank with terms and conditions acceptable to the International Development
Association (IDA). Traditional disbursement method (with reporting method using Statement of
Expenditure (SOE)/ Summary Sheet) will be applied. The project is expected to be financed
100% by IDA. Funds for payments to be disbursed to suppliers and contractors at the provincial

                                               15
level will be transferred as advances to the PPMUs and MCPMU for disbursement, based on the
annual operational plan and financial plan approved by Provincial People’s Committee (PPC).
Every month or when the PPMU or MCPMU has disbursed 50% of the advance, PPMU or
MCPMU will submit the application for advance replenishment to CPMU.

51.    The project Financial Statements will be audited by independent auditors acceptable to
the World Bank in accordance with Terms of Reference (TORs) acceptable to the World Bank.
The cost of the audit will be funded by the project. In addition, quarterly Interim Financial
Reports (IFRs) will be prepared by CPMU based on report sent from PPMUs and submitted to
the World Bank quarterly, with format and contents acceptable to IDA.

52.     Procurement. A capacity assessment of the implementing agency to carry out
procurement was conducted at pre-appraisal (August 2009) and updated at appraisal. The
capacity to manage procurement at the central level is limited and needs to be supplemented by
consultants. The procurement risk after mitigation measures is assessed as substantial. Although
MOH has completed three World Bank financed projects and is currently managing four on-
going projects, it has few experts in procurement of medical equipment through ICB procedures,
or in preparation of technical specifications of medical equipment. Since the project finances a
large quantity of medical equipment to the district hospitals, the CPMU should hire one
international and at least two national procurement consultants to assist with procurement. The
procurement capacity at the provincial level is more limited than that at the central. This is
because the provinces under this project constitute one of the disadvantaged regions in Vietnam,
with limited experience in executing WB funded projects. In addition, human resource capacity
in these provinces is limited. It is difficult to attract and retain qualified staff or consultants if
there is no provision for higher salaries or fees. However, procurement of civil works under the
project has to be decentralized to PPMUs because management of large quantity of civil works
by the CPMU is considered less efficient, less economical and not good for capacity building at
the provincial and district level. Therefore, in addition to the generic issues discussed in the
Vietnam Country Procurement Assessment Report (CPAR) in 2004, this project will also be
challenged by the issues involved in the decentralization process in which various administrative
responsibilities from MOH are decentralized to the provinces. This is a sector issue which could
not be effectively dealt with at the project level, although lessons and experiences from the
project could be useful.

D. Social

53.     The World Bank’s safeguard policy on Indigenous People is (OP4.10) is triggered.
However, the project is expected to have no adverse impacts on ethnic minority groups. Ethnic
groups which are considered as minorities at the national level, making up 13.5% of Vietnam’s
population, constitute significant proportion in certain provinces. The largest ethnic groups
living in the project provinces include: Van Kieu, Pa Co, Chut, O Du groups (in Quang Tri, and
Thua Thien Hue provinces), and Thai, Muong, H‘mong, Kho Mu, Tho groups in other provinces.
It is expected that the project will help reduce demand and supply barriers to health care access
for the population of Central North Region, thereby benefiting the ethnic minorities as well.
Even though the project activities will have only positive impact on ethnic minorities, Ethnic
Minority Planning Framework (EMPF) or Ethnic Minority Plan (EMP) were still developed

                                                 16
based on a comprehensive Social Assessment study to ensure that ethnic minorities will benefit
from the project to the same extent as the rest of the population.

54.      As the project plans to build preventive health centers on the locations where there was
no health care facility before, OP4.12 on Involuntary Resettlement is triggered. The Recipient
received clear instructions on the procedures for land acquisition that would be acceptable to the
World Bank from the Social Safeguards policy perspective. Resettlement Policy Framework and
Resettlement Plans have been developed and due diligence was exercised to ensure that the
districts that have obtained land ownership certificate during the project implementation
followed the procedure acceptable to the World Bank’s social safeguards requirement.

55.    All the safeguards instruments and policies have been duly disclosed by the Recipient
and the Bank.

E. Environment

56.     The World Bank’s safeguard policy on environmental assessment (OP 4.01) is triggered.
The project will support construction of 30 preventive health centers in 6 provinces. The
construction work would generate noise, vibration, dust and wastewater during the construction
phase. However, these impacts are negligible and temporary. The project also supports the
medical equipment for district hospitals and preventive health centers. This is expected to result
in an increased level of activity at the targeted hospital and preventive health centers. Ensuring
proper disposal of the healthcare waste generated at these facilities is therefore of primary
concern.

57.    A healthcare waste management (HCWM) plan was developed by the Recipient to
address these issues, the main recommendations have been incorporated into the project design
for implementation. The HCWM plan has been duly disclosed by the Recipient and the Bank.

58.     The Plan found that although national HCWM regulations are in place and enhanced
recently, their application still remains weak. The regulations propose standards for healthcare
wastes segregation, collection, transportation (on site and off site) and storage. The regulations
also specify methods of treatment and disposal of health care waste, especially the hazardous and
infectious waste.




                                               17
F. Safeguard policies

    Safeguard Policies Triggered by the project                                               Yes                    No
    Environmental Assessment (OP/BP 4.01)                                                     [x]                    []
    Natural Habitats (OP/BP 4.04)                                                             []                     [x]
    Pest Management (OP 4.09)                                                                 []                     [x]
    Physical Cultural Resources (OP/BP 4.11)                                                  []                     [x]
    Involuntary Resettlement (OP/BP 4.12)                                                     [x]                    []
    Indigenous Peoples (OP/BP 4.10)                                                           [x]                    []
    Forests (OP/BP 4.36)                                                                      []                     [x]
    Safety of Dams (OP/BP 4.37)                                                               []                     [x]
    Projects in Disputed Areas (OP/BP 7.60)*                                                  []                     [x]
    Projects on International Waterways (OP/BP 7.50)                                          []                     [x]

G. Policy Exceptions and Readiness

59.     There are no policy exceptions to this project. A draft financial manual has been
prepared to guide the implementation. CPMU has prepared draft Terms of Reference (TOR) for
local procurement consultants, international procurement adviser, project accountants, and local
consultants for the architectural and engineering design of DPHCs. A preliminary design of the
PHC has been already developed. The first 18 month procurement plan was also prepared and
reviewed. The preliminary list of medical equipment has been prepared and organized in various
procurement packages. Key staff at CPMU and PPMU levels have been appointed. The CPMU
staff have been trained in procurement and financial management.




*
  By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the
disputed areas

                                                                18
                     Annex 1: Country and Sector or Program Background
                        VIETNAM: Central North Region Health Support

60.     The Central North region consists of six provinces: Thanh Hoa (population 3.65 ml),
Nghe An (population 3.17 million), Ha Tinh (population 1.29 million), Quang Binh (population
0.83 million), Quang Tri (population 0.62 million), and Thua Thien Hue (population 1.12
million). Although the North West is by far the most economically deprived of the 8 regions of
Vietnam, the Central North region has the second largest share of poor households: around 25%
and 30% of the region’s 10.7 million inhabitants are classified as poor and near poor respectively
(2006).

Table 1. Poverty status by region and provinces, NCCR, 2006, share of total population, %
 Poverty status   NCCR     Thanh Hoa     Nghe An    Ha           Quang Binh                   Quang Tri            Thua Thien Hue
                                                    Tinh
 Poor           24         26.85         26.25      23.76        19.73                        19.07                10.24
 Near poor      30         33.14         29.19      29.79        29.03                        29.29                27.26
 Non-poor       46         40.01         44.55      46.45        51.24                        51.64                62.50
Source: VHLSS 2006

61.     Average per capita income for the region is 317,000 VND (2004) compared to the
national average of 445,000 VND (2004), which makes it the second poorest in the country. The
inhabitants of the region live mainly in rural areas (about 85% of the population) and make their
living from self-employed agriculture and fish farming (the share of self employment is 79.5% in
the total employment structure according to 2004 data). Thanh Hoa and Nghe An provinces
have a large share of ethnic minorities, especially in the mountainous districts and near the
border with Lao PDR.
Table 2. Regional shares of poverty in 2004                 Table 3. Poverty rate by Region
        (Unit: %)

                                                                80
                                                                                              68
                                                                70
                                                                                               59
                                                                60                                                 52
                                                                50                                   44
                                                                                        38                                                2002
                                                            %




                                                                40                                    32             33
                                                                        29               29                                               2004
                                                                30             22                            25                     23
                                                                          20                                  19                     20
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62.     The health status of the region is poor. The Central North experiences comparatively
high rates of child mortality and maternal deaths. Average Infant Mortality Rate in the region is
22 (ranging from 15 to 36) compared to the national average of 16, and Maternal Mortality Rate

                                                    19
is 200 compared to the national average of 75. The leading causes of morbidity are associated
with respiratory conditions and diseases of the digestive system. Mortality in the region is
strongly driven by injuries, cardiovascular diseases, and certain types of cancer.

63.     Over the past 15 years Vietnam has been trying to scale up social health insurance but so
far has managed to cover only 44% of its population, which is rather low in light of the national
goal to reach universal coverage within the next six to eight years. Health insurance coverage in
the Central North region is 40%, which is lower than the national average. This is not surprising,
given that the majority of the region’s inhabitants is self-employed and thus represents the
hardest group to reach/enroll in a statutory insurance system.

              Table 4. Trends in insurance coverage through VSS, Vietnam 1993-2006




64.     In 2002, Health Care Fund for Poor was initiated, which was formalized in Decision 139
providing the poor (about 20 million people) with fully subsidized health insurance. This
resulted in a significant increase in health insurance coverage among the poor reaching about
65%3. The newly adopted law on Health Insurance (November 2008) granted free health
insurance coverage to everyone officially certified as poor. They constitute non-contributory
beneficiaries of the scheme. The Health Insurance Law requires a mandatory earnings-related
contribution for formal sector workers and civil servants (4.5% of the wage with employers’
share of 3.5%). Moreover, the law guarantees fully subsidized health insurance for retired
government officials, war veterans, members of Parliament, Communist Party officials, war

3
 Even though all the poor were entitled to free health insurance, not everyone received a health insurance card,
which explains a coverage lower than 100%.

                                                      20
heroes, and other “people of merit”. The non-contributory beneficiaries also include ethnic
minority households living in remote mountainous areas, households living in communes
officially classified as poor, and children under the age of 6. In addition, the law stipulates the
provision of partially subsidized insurance coverage for the near poor (the population with
income between 100 and 130% of the official poverty line). For the near poor, local
governments have to cover 50% of the health insurance premiums from the State budget and the
remaining 50% shall be paid by the beneficiaries out-of-pocket. In order to encourage family
enrollment among the near poor, the government offers an additional 10% discount for each
family member enrolled. At present health insurance is voluntary for the near poor, but it will
become mandatory from October 15, 2010.

    Table 5. Enrollment numbers by target group, 2006




    Source: Lieberman and Wagstaff, 2009

65.     Despite such a subsidized scheme, the health insurance coverage among the near poor
remains below 10%, although this figure is difficult to verify. Only two provinces (Can Tho and
Long An), which are covered under the Mekong Regional Health Support project, have achieved
full coverage of the near poor, while other provinces in the region will strive for between 40%
and 70% coverage. Low coverage among the near poor is due to the following: (a) the cost of
semi-subsidized insurance is still considered high by the near poor, (b) there is a lack of
knowledge of the benefits of health insurance and hence low demand, (c) there is no
appropriately incentivized ‘sales’ mechanism to increase the enrollment of the near poor into the
scheme, and (d) weak institutional capacity of VSS, the administrator of Vietnam’s social health
insurance scheme.

66.     The benefits package offered by health insurance is rather broad (but not very deep) and
includes most preventive and curative interventions, excluding rehabilitation, occupational
injuries, diagnosis and treatment of substance addiction, family planning services, medical

                                                 21
check-ups, treatment of refractive vision problem, etc. Health insurance covers 100% of the cost
of care provided at the Community Health Stations (CHS). Outside the CHS, a single episode of
care for the conditions included in the benefit package is covered at 100% if the cost of such an
episode does not exceed 15% of the minimum wage (VND 650,000 = $38). The poor have to
pay 5% co-payment at the point of service delivery. Co-payment for the near poor is 20%. The
annual financial cap for coverage for the most insured is the amount equal to forty-month
minimum wage (about $1,500).

67.     As a consequence of low coverage, the near poor are the least protected from financial
risks related to health care. This group spends on average 6.2% of the total household
expenditure on health, while the poor and non-poor spend 5.8% and 5.3% respectively. The ratio
of total health expenditures over a 12-month period to household non-food expenditures also
confirms the high burden of health care on the near poor – 23.9% compared to 15% national
average. There is strong concern about the vulnerability to impoverishment among the near poor
not covered by health insurance or other schemes should they face catastrophic health
expenditures.

68.     Although there is generally no big difference in the proportion of inpatient visits paying
entirely out-of-pocket between living standard quintiles, the near poor stand out as the group
with the highest share of visits paid entirely out of household funds (70%). The 2006 Vietnam
Poverty Update report suggests that protecting the near poor from falling into poverty is critical
to poverty reduction in the short to the medium term. Focusing on the near poor would not only
promote better health outcomes but also contribute to broader goals of poverty reduction.

Table 6. Illness within a 4 week reference period among people in working ages by living standard quintiles

                   % 35
                                                                                      Poor
                      30
                                                                                      Near poor
                      25                                                              Average
                      20                                                              Better-off
                      15                                                              Rich

                      10
                       5
                       0
                           Acute illness    Chronic      Accident/    Ill unable to
                                            illness       injury/    participate in
                                                         poisoning        normal
                                                                         activities
                Source: Vietnam National Health Survey 2001-02


69.     Besides fragmented pooling and ineffective resource mobilization, the health insurance
system also lacks a strong purchasing function. Vietnam Social Security, which runs the health
insurance, does not have sufficient human resource capacities and know-how to buy services
strategically and use its purchasing power to influence quality, access and cost of care. It acts
instead as a passive payer of bills. Its fee-for-service payment method encourages providers to
provide excess services, which often are of questionable quality or relevance. There is a poor

                                                       22
link, if at all, between payments and performance. As a result VSS’s financial deficit is
increasing from year to year and health care costs are escalating. In 2004, total revenues (for
both the voluntary and compulsory program) exceeded 2.5 billion VND while total outlays
amounted to little over 2 billion VND. By 2006, revenues exceeded 4 billion VND while outlays
amounted to nearly 6 billion VND. This change reflects a shift in the mix of enrollees toward
groups whose revenues are low relative to the revenues they bring to the fund as well as a
tendency for outlays per enrollee to outpace revenues per enrollee (especially for farmers and
Decision 139 beneficiaries). VSS’s payment system encourages inefficiency in the hospital
sector manifested among other things in high rates of C-sections (most districts have close to
30%), high length of stay, overutilization of expensive imaging and testing diagnostic services
(in 2006, the number of X-rays administered exceeded 11 million and the number of ultrasounds
was almost 8 million). These services are not always necessary.

70.      There is a big variation in the quality of district hospitals, leading some of them to be
very busy while the others are empty. Most district hospitals are poorly equipped and poorly
staffed. Those patients who can afford to travel further and pay more for services bypass district
hospitals and seek care at provincial and central hospitals. About 26% of outpatient visits by the
general population (and 13% by the poor) take place in provincial hospitals, making these
institutions crowded and thereby increasing waiting times, reducing patient satisfaction and
overall quality.

71.     According to information reported by provincial hospitals, at least 30% of self-referred
cases should have been treated at the district hospital level, had the latter had adequate capacities
and human resources. Health insurance law sets out certain regulations regarding medical
referrals to limit unnecessary utilization of higher level facilities. If the insured people seek
health care in a health facility different from their primary source of registration without official
referral (except for emergency cases), they face higher co-payments: 30% of the health
expenditure if the care is sought at Level 3 hospitals; 50% - if the care is sought at Level 2
hospital; and 70% - if the care is sought at Level 1 hospital. Co-payments however, should not
exceed the amount equivalent to 40 months of the minimum salary4.

72.     This mechanism to regulate referrals does not function effectively for various reasons.
Firstly and foremost, the referral rules apply only to the insured population, which as mentioned
earlier make up only 44% of the entire population. Secondly, the lack of confidence in the
quality of care at the lower level drives patients to upper levels of care despite the higher out-of-
pocket costs evolved. Thirdly, the shortage of medical equipment (especially the diagnostic
equipment) and qualified medical personnel at the lower level of care (especially at the
Community Health Stations and district hospitals) pushes the patients up to a higher level.
Increasing health insurance coverage is likely to make the existing referral regulations more
effective as the insured patients would face significant cost implications for unnecessary

4
  Note: The classification of hospital levels is based on MOH marking system, with 5 criteria groups: (1) Location,
function, and task; (2) Hospital size and activities; (3) Technical qualification, human resources; (4) Facilities; and
(5) Medical equipment, diagnosis and treatment technique. The highest level is 1. If an insured works on a mobile
basis or move in a different locality, he/she may seek primary care services at a medical establishment of
corresponding technical line on the locality where he/she works or resides under regulations of the MOH.


                                                         23
utilization of higher level health services. For an uninsured patient paying entirely out of pocket,
the existing referral mechanism is indeed meaningless.

73.     Inpatient care is a major contributor to households’ health expenditures. When it comes
to inpatient care, 33% of hospitalizations among the general population take place in district
hospitals and 35% in provincial hospitals (42% and 23% respectively among the poor). In most
settings hospital care tends to be pro-rich. The same is true for Vietnam when looking at the
hospital sector in general, without disaggregation by provinces and types of hospitals. There has
been no rigorous benefit-incidence analysis done by various levels of hospital care and by
provinces to better understand the pro-poor nature of hospital care. The limited data however
suggest that district hospitals, unlike provincial and central ones are notably pro-poor.
According to national data, which includes rich as well as poor provinces, 47% of district
hospital patients are poor and near poor while the better-off and rich constitute only 29%. In
contrast to this, 28% of the provincial and central hospital patients are poor or near poor, while
the rich and better-off make up 52%. The pro-poor nature of district hospitals is likely to be
much more pronounced in poor provinces, such as those in Central North region. Furthermore,
within these poor provinces the project focuses on the most disadvantaged districts with poverty
rates 30% or above.

74.    There is no doubt that improving the quality of district hospitals will improve the well
being of the poor and near poor by making better quality services available at a lower and more
affordable level. This will also improve the overall efficiency of the system by shifting patients
from the higher to lower levels of care, thereby saving private as well as public resources.

75.      Strengthening the capacity of district hospitals is the priority of the Government, which is
trying to mobilize funds from various sources and invest them in district hospitals. Under
Decision No. 225/2004/QD-TT and Decision No. 47, the Government raised funds by issuing
and selling State bonds. Additional resources mobilized from such bonds are being allocated to
district hospitals throughout the country. While this initiative provided much needed cash to
many provinces/districts, the needs are still greater than the available resources, and several
district hospitals have been placed on long waiting lists for funding. Altogether, there are about
30 districts throughout the 6 provinces of the Central North region that have not received
sufficient investment, and which are unlikely to receive Government funding for medical
equipment any time soon. Among them, 12 districts are on the official Government list of the
poorest and most disadvantaged.

76.     Provincial hospitals are fairly well equipped and funded either from government sources
or donor funds. Their capacities are much greater than those of district hospitals. If there were
appropriate arrangements and incentives set up by the government, the provincial hospitals could
provide support to the district hospitals in improving scope and quality of care and could thereby
bring services to the population at lower levels. Stronger district hospitals would be also in the
interest of provincial hospitals, as the latter could reduce patient crowding and focus more on
complex case mixes. In the recent years, most provincial hospitals in the Central North region
have received support from various donors, except for Quang Tri province, which also tends to
be one of the poorest with a population of 0.62 million.



                                                 24
77.     Vietnam’s health care system is marred by a series of bottlenecks which lower the quality
of health care provision. There are three easily identifiable constraints: (i) perverse health
financing incentives, (ii) the absence of coordinated policy implementation; and (iii) limitations
of existing evaluative regulatory structures. Hospital incomes are derived from the government
budget, payments from VSS, and payments from user fees, which account for at least 55% of
funds. High reliance on user fees decreases access for the poorest and a budget allocation largely
based on staffing levels and bed numbers sends perverse incentives to hospital management.
Moreover, central, provincial and district hospitals are reimbursed at substantially different rates.
Although there are differences in technology and staff skills between levels of care, this price
differential is not entirely warranted.

    Table 7. The current method of hospital payment


            Taxes                                                            Line-item budget subsidies
                                           Provincial and central
                                               governments
                                                                                                 




          Citizens              Direct payments (out-of-pocket) at time of service             Hospitals




                                         Health Insurance Funds (VSS)
            Health insurance premiums                                        Fee-for-service


78.    An output based funding system under which all providers are paid the same price for the
same condition would significantly improve the operational capabilities of the system as a whole.
With regards to the second bottleneck, it must be noted that the MOH’s policy areas are
fragmented into discrete areas of responsibility. The resulting silo structure of the Ministry’s
departments limits the impact of actions initiated by any one of them and slows any effort to
increase service quality. This issue is directly related to the limitations of existing evaluative
regulatory structures. The way assessments of hospital performance are currently undertaken
(under the auspices of MOH Decision 3145) are decoupled from resource allocation processes to
individual hospitals; this is to the detriment of Regional Health Bureaus’ capacity to influence
hospital performance on quality and efficiency. Switching to a more focused, useful and
externally assessed hospital performance system would significantly improve system efficiency
and, subsequently, quality of care.

79.    Vietnam has an extensive network of DPHCs at the provincial and district levels. These
are responsible for the implementation of major public health functions (e.g. epidemic
monitoring and emergency response, food safety, water and air safety, vector control, sanitary-
hygienic control, etc.), health education, disease prevention, as well as some vertical health
programs such as maternal and child health, TB, HIV/AIDS, malaria, etc. Until 2007, at District

                                                        25
Preventive Health Centers, hospital and district health administration were a single entity, which
was also running community health stations. Following Decree 172 and subsequently Decree
14, district health administration and DPHCs were split from the district hospitals, forming a new
entity called the District Health Center (DHC). DHCs have to be located on premises separate
from district hospitals. However, in most districts, it was not possible to allocate separate office
space to DHCs and provide preventive health teams with the necessary equipment and hardware
to carry out their functions. This situation has put preventive health services in the country at
risk. The implications of this for the Central North region are particularly serious. The region is
notorious for its natural disasters, which often creates public health emergencies and provoke
disease outbreaks. Composed of predominantly poor districts, the Central North region has not
been able to provide adequate funding for its DHCs. Without adequate buildings, equipment and
vehicles, DHCs cannot perform their functions property. Among the 85 districts of the Central
North region, 30 districts are in particularly dire need in this regard.

80.     Primary health care is supposed to be delivered by a network of Community Health
Stations (CHS). There are 1666 CHS throughout the Central North region. On average each
CHS serves a population of 6300. Staffing of CHSs varies significantly. Only about half of the
CHSs meet the MOH standard. More than 40% of them do not have doctors and many do not
even have assistant doctors (especially in remote mountainous communities). The CHS can
provide only minimal health care limited to treating minor injuries (bites, cuts, etc.),
uncomplicated cases of diarrhea, common cold, etc. They also provide immunizations, antenatal
care, and some other vertically-run public health programs. The population’s trust in the quality
of CHS is very low. Thus CHS are avoided unless the patient has no other choice, or if a CHS
referral is needed to seek care at a higher level, it is often disregarded.
     Table 8. Percentage of commune health centers with a doctor, by region (2001-4)
       Region / Number of               2001            2002     2003           2004
       communes
       Red River Delta (2,245)          77.6            85.4     86.1           88.6 (256)
       Northeast (2,084)                39.8            46.5     52.7           55.2 (934)
       Northwest (589)                  14.7            22.2     22.8           24.3 (446)
       North Central Coast (1,813)      45.1            45.9     51.0           52.3 (865)
       South Central Coast (848)        49.3            53.7     54.9           65.5 (293)
       Central Highlands (638)          47.8            51.9     52.7           52.1 (306)
       Southeast (1,010)                78.3            86.1     87.6           89.0 (111)
       Mekong Delta (1,505)             68.9            73.0     82.6           82.9 (258)
       Total (10,732)                   52.7            58.1     61.3           67.8
     Source: Health statistics yearbooks, Ministry of Health

81.    CHS can sell a limited number of drugs to the population and also dispense free drugs
(about a dozen generic compounds) to the officially registered poor. The Government
understands the seriousness of the need to strengthen the CHS and is committed to increasing
investment in CHS. The major limitations for CHS are the lack of qualified health workers,
which the government addresses by supporting training of nurses and conversion of assistant
doctors into full-fledged doctors. Once the CHS are appropriately staffed, the Government will
not have difficulty in providing them with adequate infrastructure, equipment and supplies, as
the needs of CHS are basic and costs relatively modest. Therefore, most donors operating at the
community level invest in training of medical personnel rather than upgrading CHS’

                                                      26
infrastructure, which the Government prefers to do from its own sources. Retraining of assistant
doctors to become full-fledged doctors is a priority area for provinces as far as the strengthening
of community health services is concerned.

82.   The Central North region, like other poor regions of Vietnam, experiences health
workforce shortage and imbalance.
Table 9. Health workforce distribution by profession (2002-2006)
Year     Doctors         Nurses      Pharmacists     Midwives          CHW          Others          Total
2002      45,073         46,339         6,025         15,388          46,634         74,895        234,354
2003      47,587         48,325         6,266         16,218          47,668         75,434        241,498
2004     48 ,215         49,534         6,360         17,610          49,358        122,125        244,987
2005      50,106         52,115        10,669         18,313          49, 589       128,380        259,583
2006      52,413         57,003        10,700         19,242          51,158         80,633        271,149
Source: Department of Planning and Finance, Ministry of Health (2006) Health statistics yearbook 2006

83.     In terms of doctor/population ratio, the region scores the second lowest (3.97 per 10,000
population) after the North West (4.2), while the national average is 6.23. Only 23.8% of the
health care workforce in the region has a university level education and graduate degree, and
only 58.5% of CHS are staffed with medical doctors (third lowest in the country on both
parameters). The shortage of health workforce is particularly severe at the district level. The
greatest shortage is among the university level doctors, particularly the ones with specialization,
college level nurses, and pharmacists. The retention of qualified health workforce in remote
areas seems an insurmountable challenge so far. Graduates prefer to seek work in big cities and
provincial centers. The government plans to increase salaries of health care professionals
working at the district level by 70% in the next two years. This is likely to increase retention of
medical personnel at the district level and reduce geographic imbalance.

84.     Universities are unevenly distributed. There are 11 universities in the Red River Delta,
but only one (the University of Medicine and Pharmacy in Can Tho) in the Mekong Delta, and
two in the Central North. There is no university in the North West region. The uneven
distribution constrains access, particularly for students who are poor or from remote and
mountainous areas. Central North region’s Hue Medical University cannot produce enough
doctors to cover the needs of the region with a population of 10.7 million. The region intends to
upgrade the Nghe An medical College, which currently trains only nurses, midwives,
pharmacists, and technicians, into a medical university in order to meet the health workforce
needs of the region.




                                                       27
               Table 10. Universities Involved in Preparation of the Health Workforce
                                                                                     Supervising
                Region                University
                                                                                       Agency
                North East Region     Thai Nguyen Medical University
                                                                                       MOET
                North West Region     None
                                      Hanoi Medical University
                                      Hanoi Pharmaceutical University
                                      Hanoi School of Public Health
                                      Hanoi Odonto-Stomotology University
                                      Traditional Health and Medicine University        MOH
                Red River Delta       Hai Phong Medical University
                                      Hai Duong Health Technical University No. 1.
                                      Nam Dinh Nursing University
                                      Thai Binh Medical University
                                      Military Medical University                       MOD
                                      Nursing College of Thang Long University         Private
                North Central Coast   Hue Health and Medicine University               MOET
                South Central Coast   Da Nang Medical University                       MOET
                                      Medical Faculty of Tay Nguyen University         MOET
                Central Highlands
                                      Nursing College of Da Lat Yersin University      Private
                                      HCMC University of Medicine and Pharmacy          MOH
                                                                                       HCMC
                South East Region
                                      Pham Ngoc Thach Medical University              People's
                                                                                     Committee
                Mekong River Delta    Can Tho University of Medicine & Pharmacy         MOH
                Source: MOH Vietnam Health Report 2006 and Draft Master Plan for Training Network, MOH 2008

85.     An integral part of quality improvement in hospitals shall be retraining of existing staff
through short-term training courses, internships to higher level health care institutions, and
specialty training. Training activities shall include doctors, nurses and technicians alike.

86.     In 2008, the government initiated a policy referred to as “Decision 1816” which
envisages rotation of qualified medical personnel from higher level facilities (i.e. provincial or
central hospitals) to lower level facilities for a limited duration of time (1-3 months). With this
policy, the government aims to address the shortage of qualified staff at lower levels of care and
transfer knowledge. Implementation of this policy has already started. The initial feedback from
provinces indicates that poor provinces are not in a position to provide sufficient funding for this
program in order to cover the per diem and other non-salary costs for doctors deployed at the
district level from the provincial and central level facilities. This may undermine the
implementation of this program in the localities where it is most needed. Provinces are seeking
external assistance to finance the funding gaps of this program.




                                                          28
   Annex 2: Major Related Projects Financed by the World Bank and/or other Agencies
                         VIETNAM: Central North Region Health Support

                                          World Bank-Financed projects
                                                Completed projects
        Sector issue                            Project name                                  IEG’s rating
Health (health care)          Population and Family Health project (Cr. 2807)     Satisfactory (S)
                              Duration: 1996 – 2003

Health (health care)          National Health Support project (Cr. 2808)          Moderately Satisfactory (MS)
                              Duration: 1996 – 2006
Ongoing projects
      Sector issue                              Project name                      Implementation      Development
                                                                                   Progress (IP)     Objective (DO)
Multiple components (i.e.,    Mekong Regional Health Support project (Cr.               S                   S
hospitals, training, HCFP,    4153)
and preventive health)        Duration: 2006 – 2011

Health (blood safety)         Regional Blood Transfusion Centers project (Cr.           MS                   MS
                              3631)
                              Duration: 2002 – 2008
HIV/AIDS                      Vietnam HIV/AIDS Prevention project (H. 1520)              S                   S
                              Duration: 2005 – 2011

Health (health care)          Northern Upland Health Support                          S                  S
                              project (Cr. 4398)
                              Duration: 2008-2014
                                   Other development agencies-financed projects
        Sector issue                             Project name                           Funding agencies
Multiple components (i.e.,    Health Care in the Central Highland              Asian Development Bank (ADB)
hospitals, training, HCFP,
and preventive health)

Hospitals                     Health Program Hospital project Phase I and 2       KfW

Primary and preventive        Rural Health project                                ADB
health care
Curative health care system   Health System Development project                   European Commission (EC)
and preventive health
Curative health care system   Healthcare Support for the Poor of the Northern     EC
and preventive health         Upland and Central Highlands
HIV/AIDS                                                                          PEPFAR
HIV/AIDS                      Preventing HIV in Vietnam                           DFID and NORAD
HIV/AIDS                      Strengthening Care, Counseling, Support to People   Global Funds to fight AIDS,
                              Living with HIV/AIDS and Related Community-         Tuberculosis and Malaria
                              Based Activities to Prevent HIV/AIDS in Vietnam     (GFATM)
Preventive Health             Strengthening of Preventive Health Services         ADB
DPL project on health                                                             ADB
education
Multiple components (i.e.     Central South Health Support                        ADB
Health insurance, etc.)



                                                       29
                                Annex 3: Results Framework and Monitoring
                              VIETNAM: Central North Region Health Support


               PDO                              Outcome Indicators                         Use of Outcome Information

Strengthening district level         10% increase in the outpatient and            Will be measured at baseline, YR 3, 4, 5 and
curative and preventive health       inpatient services by (a) the poor and (b)    6 to determine whether the demand and
services and improving their         the near poor at the level of district        supply side interventions have been effective
accessibility for the economically   hospitals 5.                                  in improving access and quality. No
vulnerable population in the                                                       measurement will occur in YR 2 as the
Central North Provinces.                                                           project investment will start to produce effect
                                                                                   only after YR 2

                                     30% reduction in the referrals for            Will be measured at baseline, YR 3, 4, 5 and
                                     deliveries, pneumonia and appendicitis        6 to determine whether the supply-side
                                     from district hospitals to provincial         interventions have indeed improved the
                                     hospitals                                     capacity of district hospitals and shifted
                                                                                   patients from higher level to lower levels of
                                                                                   care. No measurement will occur in YR 2 as
                                                                                   the project investment will start to produce
                                                                                   effect only after YR 2
                                     90% of children under age 1 fully             Will be measured at baseline and thereafter
                                     vaccinated according with national EPI        annually based on the official health statistics
                                     program.                                      for the selected districts of the project.


                                     20 new District Preventive Health Centers     Will be measured at baseline, YR 3, 4, 5 and
                                     constructed with adequate facilities and      6 to determine if the project has achieved its
                                     equipment to provide the full range of        objective to establish functional DPHCs. No
                                     preventive health services according to the   measurement will occur in YR 2 as the
                                     government norms                              project investment will start to produce effect
                                                                                   only after YR 2

      Intermediate Results           Results Indicators for Each Component                  Use of Results Monitoring

                                     40% of the near poor are covered by the       Will be measured at baseline and annually
                                     health insurance program                      thereafter to determine the effectiveness of
Component One:
                                                                                   the demand-side intervention of the project
                                     The share of near poor households             Will be measured at baseline, YR 3 and 6 to
Increasing health insurance
                                     spending 25% or more of their non-food        determine whether the demand-side
coverage among near poor
                                     consumption on health is reduced to 12%       interventions were effective in reducing out-
population
                                     or less.                                      of-pocket expenditures and improving
                                                                                   financial risk protection1




5
  Even though under Component One, the project provides demand-side subsidies only to the near poor, the PDO
indicators include the poor and the general population as well, because the supply-side interventions at the district
hospitals are intended to benefit not only the near poor but also the poor and the rest of the population. Inclusion of
the poor and general population in the result framework is also warranted by the need to more comprehensively
assess the pro-poor impact of the project and conduct a benefit incidence analysis.


                                                             30
Component Two:

Upgrading capacities of district   The share of district hospitals in claims        Will be measured at baseline and annually
hospitals and DPHCs                reimbursed by health insurance is 50% or         thereafter to determine whether investment in
                                   more.                                            district hospitals has resulted in a greater
                                                                                    utilization of services covered by health
                                                                                    insurance


                                   50% of patients satisfied with (a) the           Will be measured at baseline, YR 3, and 6 to
                                   overall quality of care at district hospitals,   determine whether the supply-side
                                   (b) reduction of waiting time, and (c)           interventions have improved responsiveness
                                   availability of services and diagnostic          of services to patient expectations,
                                   facilities.                                      (utilization of services is sometimes more
                                                                                    sensitive to perception of quality, rather than
                                                                                    actual quality). No measurement will occur
                                                                                    in YR 2 as the project investment will start to
                                                                                    produce effect only after YR 26


Component Three:                   Nghe An medical College fully meets the          Will be measured at YR 4 to determine
                                   national standards for medical university        whether the capacity of an existing medical
Improving supply and quality of                                                     educational institution has been strengthened
health care personnel                                                               to address the regional shortage of health
                                                                                    workforce7
                                   175 Doctors from District Hospitals              Will be measured at the baseline and YR 3, 4,
                                   trained for Level 1 specialization and at        5 and 6 to determine whether the investments
                                   least 680 health professionals trained for       in human resources were effective in
                                   MD degree.                                       improving the supply of medical personnel.
                                                                                    No measurement will occur in YR 2 as the
                                                                                    project investment will start to produce effect
                                                                                    only after YR 2
                                   80% of medical professionals return to           Will be measured at YR 4, 5 and 6 to
                                   their original place of work/residence after     determine whether the project is effectively
                                   long-term training supported by the              addressing the risk of attrition of medical
                                   project.                                         personnel after training. Due to the indicator’s
                                                                                    focus on long-term training there
                                                                                    measurement becomes meaningfully only
                                                                                    from YR 3 of the project implementation


87.     In addition to these results indicators, in order to monitor the implementation progress, a
set of process indicators will be developed as part of the Operational Manual. The indicators
will reflect the key recurrent actions required by project implementation units or specific
milestones under the components. The CPMU and each PPMU will have a designated
monitoring and evaluation officer who will be responsible for collecting data on process
indicators and reporting to the MOH and the World Bank8. The process indicators will be
updated twice a year two weeks prior to the supervision missions. The process indicators will be
revised as needed depending on the implementation of the project.

88.     For most of the results indicators specified above there are two sources of data available:
(a) routine information systems, based on the data generated from service statistics at hospitals,

6
  Since the measurement of this indicator requires a patient exit survey, it will not be feasible and cost-effective to
measure it more frequently than 3 times during the project duration.
7
  It is expected that by YR 4, the medical college will be fully equipped and transformed into a medical university
meeting all the requirements for accreditation.
8
  Monitoring and evaluation officer of Nghe An PPMU will also serve the MCPMU.

                                                             31
or VSS administrative records, or so-called “hospital inventory surveys”; and (b) population
surveys that collect data directly from the households. The routine health statistics are much
more readily available but often suffer from inaccuracy. The surveys, while more accurate, are
expensive and time consuming to administer, which limits their feasibility. The project will rely
mostly on the routine statistics and on the periodic “external” surveys such as Household Living
Standard Survey, and National Health Survey, which are already institutionalized and carried out
regularly. For the indicators which cannot be measured through these sources, the project will
design specific small scale surveys (e.g. patient exit survey to measure their satisfaction,
hospitals surveys to verify the referral patterns, etc.)

89.      As the project includes several small scale pilots, it is critical that appropriate monitoring
and evaluation arrangements are set up. For this purpose a local consulting firm will be engaged.
The firm will be tasked with updating project baseline, measuring the initial performance of the
facilities participating in the pilot, monitoring and auditing their performance, and evaluating the
effectiveness of the pilots.




                                                  32
                                                                    Arrangements for results monitoring
                                                                         Target Values                                         Data Collection and Reporting
    Project Outcome Indicators        Baseline   Y1      Y2        Y3          Y4             Y5      Y6       Frequency      Data Collection                  Responsibility
                                                                                                                  and         Instruments                      for Data
                                                                                                                Reports                                        Collection
1.     10% increase in the                                          2%          5%          7%        10%                     Vietnam Household Living         PPMUs – primary
       outpatient and inpatient                                  increase    Increase    Increase   Increase                  Standard Survey (VHLSS)          responsibility,
       services by (a) the poor                                    from      from the    from the     from                    in combination with district     CPMU –
       and (b) the near poor at                                  baseline    baseline    baseline   baseline                  hospital records (routine        checking the
       the level of district                                                                                                  health statistics). VHLSS is     quality of data
       hospitals                     a)                                                                                       conducted once every two
                                                                                                                              years. Therefore the indictor
                                     In-pat:                      2.39         2.47       2.51       2.58                     will be measured three times
                                     2.35/100                                                                                 – at baseline, mid-term and
                                                                                                               YR 3,4,5, 6    the end. During Y4 and Y5,
                                     Out-pat:                                                                                 supplementary interim data
                                     5.26/100                     5.36         5.52       5.63       5.79                     will be collected from
                                     b)                                                                                       district hospital records.

                                     In-pat:                      2.44         2.51       2.56       2.63
                                     2.39/100

                                     Out-pat:
                                     6.14/1009                    6.26         6.45       6.57       6.75
2.     30% reduction in the             6% 10                     5,5%         5%         4,5%       4%                       district hospital statistics     PPMUs – primary
       referrals for deliveries,                                                                                                                               responsibility,
       pneumonia and                                                                                                                                           CPMU –
                                                                                                               YR 3,4, 5, 6
       appendicitis from district                                                                                                                              checking the
       hospitals to provincial                                                                                                                                 quality of data
       hospitals
3.     90% of children under age          70%     At      At     At least    At least    At least   At least                  Routine health statistics from   PPMUs – primary
       1 fully vaccinated                        least   least    75%         80%         85%        90%        Baseline,     District Health Offices          responsibility,
       according with national                   70%     70%                                                      then                                         CPMU –
       EPI program.                                                                                             annually                                       checking the
                                                                                                                                                               quality of data
4.     20 new District Preventive          0     N/A     N/A      N/A           10            15      20                      Regular implementation           PPMUs – primary
       Health Centers                                                                                                         progress                         responsibility,
       constructed with adequate                                                                               YR 4,5, 6      monitoring/supervision           CPMU –
       facilities and equipment to                                                                                                                             checking the
       provide the full range of                                                                                                                               quality of data

9
    VLSS-2008
10
    Data collected from 8 selected district hospitals in the project provinces, 2008 data

                                                                                         33
    preventive health services
    according to the
    government norms
   Intermediate Outcome
         Indicators
Component One:                         10%               15%      20%         25%         35%    40%                    VSS statistics             PPMUs – primary
5. 40% of the near poor are                                                                                Baseline,                               responsibility,
    covered by the health                                                                                    then                                  CPMU –
    insurance program                                                                                      annually                                checking the
                                                                                                                                                   quality of data
6. The share of near poor              17%                       14% or                         12% or                  VHLSS                      PPMUs – primary
   households spending 25%                                        less                           less                                              responsibility,
                                                                                                           Baseline,
   or more of their non-food                                                                                                                       CPMU –
                                                                                                           YR 3, 6
   consumption on health is                                                                                                                        checking the
   reduced to 12% or less.                                                                                                                         quality of data
Component Two:                        40% 11                      42%         44%         47%    50%                    VSS statistics             PPMUs – primary
7. The share of district                                                                                                                           responsibility,
   hospitals in claims                                                                                    Baseline,YR                              CPMU –
   reimbursed by health                                                                                    3, 4, 5, 6                              checking the
   insurance (VSS) is 50% or                                                                                                                       quality of data
   more.
8. 50% of patients satisfied        a) 35%                        40%                            50%                    Patient exit interviews    Local consulting
   with (a) the overall quality                                                                                                                    firm
   of care at district hospitals,   b) 35%                        40%                            50%
   (b) reduction of waiting                                                                               Baseline,
   time, and (c) availability       c) 32%                        40%                            50%      YR 3, 6
   of services and diagnostic
   facilities 12

Component Three:                        No                                    Yes                                       Regular project            Nghe An PPMU
9. Nghe An medical College                                                                                              implementation progress
    fully meets the national                                                                                 YR 4       monitoring/supervision
    standards for medical
    university
10. 175 Doctors from District           0                       MD:100                          MD: 680                 District hospitals, PPMU   PPMUs – primary
    Hospitals trained for Level                                                                                         records                    responsibility,
    1 specialization and at                                      L1: 20                         L1: 174                                            CPMU –
                                                                                                            YR 3, 6
    least 680 health                                                                                                                               checking the
    professionals trained for                                                                                                                      quality of data
    MD degree.


11
     Data collected from five project provinces, 2008 data
12
     Statistics for this indicator reflect satisfaction rating “high” and “very high”.

                                                                                         34
11. 80% of medical               N/A        80%          District hospitals   PPMUs – primary
    professionals return to                                                   responsibility,
    their original place of                                                   CPMU –
                                                  YR 6
    work/residence after long-                                                checking the
    term training supported by                                                quality of data
    the project.




                                       35
                                  Annex 4: Detailed Project Description
                          VIETNAM: Central North Region Health Support

COMPONENT ONE – Supporting health insurance for the near poor ($9.11 million)

90.      The objective of this component is to expand access to health insurance for near poor
households in the Central North region and to improve the system’s capacity to manage health
insurance. Doing so will expand risk pooling and improve financial protection from the
catastrophic costs of illness for near poor households in the region, thus contributing directly to
the implementation of the new Health Insurance Law. Vietnam has already reached a few
important milestones on the road to universal coverage and implementation of the Health
Insurance Law, such as full coverage of children under age 6 and full coverage of people under
the poverty line. The next important milestone is to bring the near poor into the health insurance
scheme. The component intends to help the Government in achieving this specific milestone.
The expansion of such social safety nets for health care is timely given the global economic
crisis, and its implications for economically vulnerable households in Vietnam. However, in its
effort to improve health care access for the near poor, the Government is quite firm in its
intention to keep differentiation between the poor and near poor in terms of benefits they receive,
and to let the near poor partially contribute towards to cost of their health insurance.

91.     The near poor are defined as those having an average income between 100 and 130% of
the official poverty line. This threshold is expected to be revised upwards to 150% in 2010 and
this change will be reflected in the costing of the project. The number of the near poor ranges
from 10 to 30% of the population, with wide inter-district variations, and constitutes roughly
30% of the population of the Central North region (2004). Poverty lists are devised using
surveys at the community level through means-testing. These lists are validated at the local level
by the community leaders, and once final consensus is reached, VSS issues health insurance
cards to the eligible population. This process, which is repeated once every two years, can
equally be used to identify the poor as the near poor.

92.     The conditions of affiliation of the near poor with health insurance scheme are regulated
by the new Health Insurance Law. These conditions stem from earlier policies such as Decree
63 (2006) and the Prime Minister’s Decision 117 (2008). The State takes responsibility to cover
at least 50% of the price of a health insurance premium for the near poor, with the remaining
50% or less to be paid out-of-pocket by the beneficiaries. Currently participation in the health
insurance scheme is voluntary for the near poor. However from October 15, 2010 it will become
mandatory. In order to encourage family enrollment and faster expansion of coverage the
Government has decided to offer a 10% discount on a premium for each additional family
member enrolled in the scheme.

93.    Expansion of health insurance among the near poor has been constrained (a) because the
price of health insurance, even after subsidy, remains unattractive13 and unaffordable to most
13
  As anecdotal evidence suggests, the remaining 50% of the premiums that the near poor have to pay seem
unattractive considering that availability of quality health services is still limited at the lower level of care (e.g.
District Hospitals and CHS), which the insured population have to use as the first point of care unless they are
willing to face between 50 and 70% of copayments at a higher level facilities.


                                                         36
near poor households, and (b) because there continues to be limited awareness of the benefits of
health insurance and the entitlements of the insured.

94.     The component will seek to address both of these constraints. In the Mekong region, the
World Bank is financing a similar operation, where the State (contributing 50%) and the World
Bank (contributing 30%) together subsidize 80% of the premium, leaving households responsible
for the remaining 20%. The take-up of health insurance remains low in this project, due in part
to the unaffordability of the out-of-pocket component of the premium payment. The Asian
Development Bank (ADB) is testing a similar model in the Central South region of Vietnam,
complementing the government’s 50% support with a 20% subsidy. The experience with take-
up rates is similar to that of the Mekong region. The government is still searching for a better
way to subsidize the near poor (e.g. different combination of subsidy levels combined with other
incentive mechanisms) which will increase their enrollment in the scheme while at the same time
keeping them responsible for partially covering the cost of insurance premiums.

95.     The experience from WB’s Mekong project and ADB’s Central South Health Support
project indicates that subsidizing the premiums only is not sufficient to generate demand for
health insurance among the near poor. This effort has to be complemented with effective
Information and Education Campaign and incentives to motivate VSS’s agents to actively sell
the subsidized health insurance to the target population.

96.     Challenges that the provinces face in expanding health insurance coverage and ensuring
access to quality health services cannot be resolved only through provincial level actions. The
key to overcoming systemic bottlenecks is to engage effectively with national level stakeholders
within and outside the MOH, and seek policy change that facilitates the achievement of national
health system development goals throughout the country, including the Central North region. By
recognizing this, the component seeks to build capacity for implementing health insurance at the
national and provincial levels, and bridge these two levels. The project will set up an
arrangement through which a continuous policy dialogue can be carried out between national and
provincial levels, with the facilitation of the World Bank. Through such an arrangement, the
national level policy makers can gain a better understanding of the challenges faced by
provinces, and of the various innovative pilots that provincial health authorities may test.
Meanwhile, provincial level policy makers can better understand the strategic directions of the
‘Center’ and provide feedback on these developments.

97.     Sub-component 1.1 - Direct subsidy to support purchase of health insurance by the near
poor ($5.5 million) Activities under this sub-component will involve subsidizing health
insurance for the near poor, thus increasing its affordability. This component will finance the
bulk of the out-of-pocket price faced by near poor households with the objective of increasing
the take-up of health insurance among this group. Achieving this objective will depend critically
on guaranteed commitments from the Government budget for the 50% the premium that the State
is responsible for.

98.     The proportion of the premium that is financed by the project will depend on whether
enrolment is for an individual or as a whole family. For individual enrollees or in case of a
partial family enrollment (family defined as parents and children), the component will finance



                                               37
30% of the premium and the State will finance 50%14, leaving the individual responsible for the
rest. In case the entire family enrolls at once, the component will finance 40% of the premium
instead of 30%. The family will be responsible for the portion of the premium remaining after
50% subsidy provided by the State and 10% discount applied for each family member. This
distinction is made to encourage family enrolment by near poor households. Family enrolment is
preferred because it increases risk pooling and reduces the likelihood of adverse selection in the
insurance program. Encouraging family or group enrolment in the program by reducing the out-
of-pocket price of group enrolment by more than 90% is one way of reducing adverse selection.

99.      The ‘family enrollment’ scheme (subsidizing 40% of the premium instead of 30%) will
be piloted first in one province. If the impact evaluation demonstrates the effectiveness of the
scheme in increasing family enrollment, the scheme will be implemented in other provinces as
well. The project will initially allocate $250,000 for the pilot. Depending on disbursement, the
allocation will be revised if necessary after one year of implementation of the pilot.

100. During the first eight months of the project implementation the provinces will complete
the identification of the near poor. The project will provide technical assistance in this process.
During the same period the exact mechanism of supporting the near poor will be further
elaborated and streamlined through consultations with various agencies and appropriate
approvals and clearances will be obtained.

101. Increased enrollment of the near poor in the health insurance scheme will increase the
workload and administrative operating costs of VSS, which may discourage the provincial and
district branches of this organization to reach high enrollment rates. To ensure that (a) incentives
are in place to motivate enrolment and (b) district and provincial VSS offices have sufficient
resources to meet resulting increased incremental operating costs, the project will introduce a
performance-based financial incentive for district VSS offices: they will receive a fixed per-
capita amount (equal to 2% of the premium) for each individual near poor enrolled in the
scheme. Payment to VSS will be subject to the submission of audited list of new enrollees. As
the effectiveness of this measure is difficult to predict beforehand, it will be risky to allocate a
significant amount of resources to it. Therefore the incentive scheme will be piloted first in one
province and $250,000 will be set aside for it. After one year of implementation, the pilot will
be evaluated and if proven effective replicated in other provinces. Allocation of additional
amount of resources from contingencies will be decided if necessary. In order to conduct a
meaningful evaluation of the impact of the two pilots – ‘family enrollment’ and ‘VSS incentive’
– these two shall be set up in different provinces, so they do not interfere with each other.

102. Existence of adequate mechanisms of identification of the near poor is crucial for this
component. The project will not finance implementation of a new survey, and will instead build
on the existing mechanisms used by the government to identify and register poor and near poor
households. The project will, however, finance technical assistance to refine identification and
registration methods. Such support will be conditional on all provinces demonstrating clear
commitment to finance the surveys. The next government survey is scheduled for October 2011.
During the first year, the project will support the development of detailed support schemes,

14
  In case of the partial family enrollment, in addition to 50% State subsidy, the 10% discount on the price of the
premium will also apply for each family member enrolled.


                                                       38
refinement of the instruments for identifying the near poor and mechanisms for issuing health
insurance cards to them. The first year will be devoted also to the development of an
Information and Education Campaign and marketing strategy. Consultations will be carried out
with relevant authorities and ministries.

103. The actual enrollment of the near poor will begin during the second year. The aim is to
achieve 15% coverage by mid-term and 40% coverage by the end of the project. Premiums will
be collected on an annual basis. Households’ near poor status will be reviewed annually,
through the government’s own mechanism for implementing the health insurance program.

104. Monitoring the progress in enrolling the near poor and evaluating the impact of the
project activities will be taken very seriously. The project will collect enrollment date regularly
from the provincial VSS offices. At mid-term, surveys will be done to evaluate to what extent
enrolment rates responded to the premiums being subsidized, and to what extent access to health
insurance reduced the likelihood of financial catastrophe due to health care costs for near poor
households. If the evaluation shows that enrolment remains low and that the low enrolment is
attributable to the near poor not being able to afford the out-of-pocket share of the premium, the
financing arrangements will be modified for the remainder of the project. To this end, the
evaluation of the project will be carefully designed to distinguish between price and non-price
barriers to enrolment. In order to assess the effects of the two pilots under this component - (a)
promoting whole family enrollment and (b) supporting VSS for increased administrative
operating costs – a rigorous impact evaluation will be conducted.

105. This sub-component is designed to ensure that health insurance arrangements for the near
poor are sustainable, and to improve equity and efficiency. First, subsidizing health insurance
premiums will create demand for health insurance among a group that has proven difficult to
target. Exposure to the benefits of health insurance is expected to encourage households to
enroll in health insurance even beyond the lifetime of the project. If the project manages to
create a strong demand from near poor households for insurance, this may encourage provinces
to increase their contributions to the premium. Secondly, the project promotes sustainability by
relying, to the extent possible, on the existing infrastructure/mechanisms for implementing health
insurance. For instance, identification and registration of the near poor will be done using
existing survey mechanisms. In doing so, the project will help institutionalize these mechanisms
further. Thirdly, providing health insurance to the near poor will increase risk pooling, and thus
reduce equity in access to health care. Lastly, increasing health insurance coverage is likely to
increase utilization at public sector facilities (district hospitals in particular, which are targeted
by the current project), thus reducing unit costs and improving technical efficiency of services
provision.

106. Sub-component 1.2 - Social marketing to promote health insurance ($ 2.0 million) This
sub-component will promote awareness of and enrolment in health insurance by the near poor
through the use of social marketing. It is motivated by the fact that enrolment in health insurance
may remain low due to poor awareness about the benefits of insurance, even if the out-of-pocket
costs of purchasing insurance are fully subsidized. At present, Health Information and Education
Centers (HIEC) are tasked with promoting awareness of health insurance. While these
institutions have considerable experience in conducting public health campaigns, additional



                                                 39
resources are needed to strengthen their capacity to carry out social marketing campaigns to
promote health insurance. VSS will also need additional support to transition from being a
relatively passive seller of health insurance, to a more active seller which markets its insurance
products more effectively.

107. The social marketing component will be entirely sub-contracted to a firm that will
provide technical assistance on social marketing techniques to the HIEC and VSS. A local TA
firm will be selected, which has prior experience with marketing health insurance concept and
products in contexts where the idea is relatively new. During the first year of the project, the TA
firm will be responsible for designing and rolling out the social marketing campaigns, as well as
training HIEC and VSS. This will continue throughout the second year as well. Over time, it is
expected that from the third year the TA firm will gradually hand over the social marketing
campaigns to HIEC, with VSS playing a key implementation role as well. Some training and
capacity building may be needed for VSS and HIEC beyond the lifetime of the project to keep
their skills up to date. However, much of the knowledge transfer would have to occur during the
first 2-3 years of the project. In this way, technical capacity to carry out social marketing will be
institutionalized and housed in national institutions that will serve all of the regions in the
country. It is expected that the TA firm will periodically evaluate the effectiveness of its social
marketing strategy and make necessary adjustments.

108. Activities to be financed through the sub-component include behavior change
communication, such as the preparation and printing of promotional material, mass media
campaigns and focus group discussions. Given the instrumental role that communes can
potentially play in encouraging enrolment in health insurance, their cooperation will be elicited
early on. The sub-component will encourage innovative commune-based campaigns to promote
enrolment such as monthly or bi-monthly enrolment drives etc. The project will support non-
financial reward system for the communes that are able to significantly increase enrolment rates
during the first three years of implementation.

109. Sub-component 1.3 - Strengthening institutional capacities for administration of health
insurance ($ 1.61 million) This sub-component will improve the effectiveness of the health
insurance program for the near poor by strengthening the capacity of national, provincial and
district level institutions involved in the implementation of health insurance.

110. An important element of this will be the establishment of a working group in the first
year of the project to foster national level engagement by key stakeholders. The Joint Working
Group on Health Financing will include the VSS, the Health Insurance Department of the
Ministry of Health, the Ministry of Finance (MOF), Ministry of Labor, Invalids and Social
Affairs (MOLISA) and provincial representatives. The operational costs of the Joint Working
Group will be financed through the project, although the team will look for options to mobilize
additional grant support.

111. The Joint Working Group will discuss and provide guidance on technical and policy
issues related to the implementation of health insurance, such as the mechanisms for identifying
newly defined target beneficiaries, strengthening provider payment methods and improving the
purchasing function of the social health insurance agency more broadly. It will also provide a



                                                 40
forum for technical consultation on policy issues, such as the identification of the poor and near
poor, as well as the evaluation of pilots and constraints to achieving universal coverage. It is
expected that the Joint Working Group will play a critical role in translating the lessons learnt
from the Mekong and Central region projects to the national level, and thus contribute to the
scale-up of health insurance as the Health Insurance Law is implemented 2009 to 2014. The
objective of the Joint Working Group would be to establish a national consultation and
coordination platform (currently proposed as a working group) able to provide guidance and
monitoring to steer the implementation of WB program components that are linked to national
health financing policy implementation.

112. The group would meet on an intermittent basis, as necessary, and will be chaired by one
of the leading agency implementing health financing policy (co-chairs could be considered). It
will have a Secretariat embedded in the MOH department managing those World Bank programs
that support health financing components. Membership would be composed by senior
representatives from relevant departments and units from the main health financing stakeholder
organizations, including Ministry of Health (Department of Planning and Finance, Department of
Health Insurance, etc.), VSS, MOLISA, MOF, etc. and representatives from implementing
provinces. Membership could also include representatives from research organizations working
on relevant issues, and other national and/or international stakeholders. Continuity of
membership should be encouraged.

113. The policy areas that the group would cover include issues linked to a) enrollment of the
poor, near poor, other subsidized population groups as well as the informal sector; b) provider
payment methods to enhance effectiveness, quality and results (this may include linkages of
health insurance funding with proposals for Results Based Financing); c) strengthening the
institutional capacity of technical agencies implementing health insurance at national and sub-
national levels; and d) monitoring the impact of health insurance implementation on poverty and
health outcomes in the population as well as on provider utilization and care practices. The Joint
Working Group will commission analytical work in relevant areas, evaluate the implementation
of pilot initiatives, hold consultative and knowledge dissemination workshops, link national and
international networks, organize study visits to relevant countries implementing similar reforms,
etc.

114. In addition to instituting this multi-stakeholder working group, this sub-component will
finance a package of technical assistance and training to strengthen the capacity of agencies
involved in the implementation of health insurance. This will include: (i) three groups (about 10-
15 national and provincial policymakers) to be sent to one overseas study tour each year for the
first three years, to share lessons learnt in the implementation of health insurance (in countries
such as Thailand and the Philippines, as well as countries that have successfully expanded
coverage to the poor and established effective health insurance organizations as purchasers); (ii)
local training in each one of the districts in the Central North region; and (iii) hiring of
consultants to provide technical assistance on specific issues related to provider payment
mechanisms, setting co-payment and premiums, defining benefit packages etc. All training, both
overseas and local, provided under the project will be short term in nature.




                                               41
115. Expenditures to be financed from IDA: Under Component One, the following
expenditures will be financed from IDA: (a) partial costs of health insurance premiums for the
near poor (30% or 40% of the premium depending on the enrollment type); (b) social marketing,
health Information and Education Campaign, which involves local technical assistance
(consulting services), operating costs for conducting the campaign (e.g. workshops, print
materials, media promotions, etc.); (c) a portion of administrative operating expenses of the
district level Vietnam Social Security Services in the amount of 2% of the cost of premium per
each newly enrolled near poor conditional on submission of an audited list of new enrollments
by VSS; (d) technical assistance (consulting services) to streamline instruments for identification
of the near poor; (e) workshops; (f) in-country training; (g) study tours and related training fees,
travel cost and per diem; (h) office equipment and supplies.

COMPONENT TWO – Strengthening district health services ($ 32.2million)

116. The objectives of this component are to: (a) improve the capacity of district hospitals to
provide basic curative health services to the population, and (b) strengthen the capacity of
District Preventive Health Centers to carry out basic public health functions. The component
will achieve its objectives through investing in upgrading medical equipment in the district
hospitals, building and equipping District Preventive Health Centers where they do not have
adequate functional space, and piloting performance-based financing mechanisms to incentivize
health care providers to perform better and more efficiently.

117. The component will have three sub-components and will focus only at district level,
except for Quang Tri province, where the project will also invest in a provincial general hospital.
Quang Tri province is the poorest province in Vietnam. This hospital, unlike other provincial
hospitals, has not received any investment from either government sources or external donors,
although its medical equipment stock is mostly outdated and dysfunctional.

118. Sub-component 2.1 – Upgrading capacities of district hospitals ($19 million) The
Government of Vietnam is paying significant attention to district level health facilities because
they are physically most accessible and also pro-poor. In 2008, the government launched a large
scale investment of the funds generated from the sale of State bonds into district hospitals. This
amount (approximately seven thousand billion VND) has already been distributed among the
districts. However, the funding is not sufficient to address all equipment needs and to cover all
districts. The government funding was used mostly for civil works. In addition to these
resources, some district hospitals have received funding from international donors. For example,
KfW has invested in 18 district hospitals in Thanh Hoa and Nghe An provinces.

119. The Ministry of Health has carried out an assessment of investment needs and developed
a list of district hospitals to be financed from the project. In addition to the criterion of not
having received sufficient investment from the government or from external donors, the World
Bank and MOH have agreed on the following selection criteria to be applied:

   a) The district belongs to the officially recognized category of the economically
      disadvantaged districts, of which there are 61 throughout the country
   b) The district is in a remote location



                                                42
   c) The district has a large catchment area with a high proportion of poor
   d) The district is densely populated

Applying these criteria, the MOH and the World Bank have agreed on 30 districts hospitals:
    Provinces          Districts covered       Provinces             Districts covered by the
                       by the project                                project
                       Nhu Xuan                                      Nghi Xuan
                       Hoang Hoa                                     Duc Tho
                                               Ha Tinh
                       Ngoc Lac                                      Cam Xuyen
    Thanh Hoa          Tinh Gia                                      Ky Anh
                       Lang Chanh                                    Minh Hoa
                       Thuong Xuan             Quang Binh            Tueyn Hoa
                       Muong Lat                                     Bo Trach
                       Ky Son                                        Darkong
                       Tuong Duong             Quang Tri             Gio Linh
                       Que Phong                                     Hai Long
                       Nghi Loc                                      Phong Dien
    Nghe An
                       Yen Thanh                                     Phu Vang
                       Thanh Chuong            Thua Thien Hue        Huong Tra
                       Nam Dan                                       Phu Loc
                       Tay nam                                       Hue City

120. It was agreed that the project would not finance any civil works. Therefore the
government shall ensure that the hospitals proposed for upgrading shall be in satisfactory
physical condition to function and make use of the equipment received through the project.

121. The equipment list will be developed based on the standards of the MOH for district
hospitals. The project will finance only basic equipment. The size of the equipment package for
each district hospital is estimated to cost $500,000 provided that each hospital is more or less the
same size and requires the same set of equipment. When developing the list of medical
equipment, priority will be given to those equipments that are necessary to manage acute, life-
threatening conditions; diagnosis of commonly presented diseases; general abdominal surgery;
treatment of compound fractures; infectious diseases; intensive care; neonatal care; and
maternity care. The table below provides a summary of investments in district hospitals and
Quang Tri provincial hospital:

                   Province            No of hospitals         Costs (USD)
                   Thanh Hoa           7                       $3,500,000
                   Nghe An             8                       $4,000,000
                   Ha Tinh             4                       $2,000,000
                   Quang Binh          3                       $1,500,000
                   Quang Tri           3 (district)            $1,500,000
                                       1 (provincial)          $4,000,000
                   Thua Thien Hue      5                       $2,500,000



                                                43
                   Total               30(district)            $15,000,000
                                       1 (provincial)          $4,000,000
                                                               $19,000,000

122. The medical equipment will include medical waste treatment equipment as well. Each
hospital receiving investment from the project will have to develop a medical waste treatment
plan and implement it to ensure environmental safety of the investment funded by the World
Bank, in line with the World Bank’s environmental safeguards policy. In addition to medical
equipment, each hospital will benefit from clinical training and management capacity building
funded by the project. These activities will be managed under Sub-component 3.2.

123. The project also intends to pilot a Results Based Financing model in Nghe An province.
This scheme intends to improve the quality of services in hospitals by providing TA in
performance management and setting up a financial incentive scheme to encourage better
performance. This is discussed in detail under Sub-component 2.3.

124. Sub-component 2.2 – Upgrading capacities of District Preventive Health Centers ($13.5
million) The objective of this sub-component is to strengthen preventive health services in
districts and thereby scale up delivery of basic public health services to the population. The
project will achieve this by providing 30 districts with new facilities for DPHCs, equipment and
training. The project will also implement a performance-based financing pilot to improve the
effectiveness of DPHCs.

125. As mentioned earlier, after the separation of DPHCs from district hospitals, the former
found themselves without adequate building and equipment to perform their function. Most
District Preventive Health Centers are currently housed in district hospitals. Provinces are
supposed to provide funding to build a separate building for these centers and upgrade their
equipment. However, due to the lack of funding in poor provinces, District Preventive Health
Centers remain dysfunctional and marginalized. The government intends to increase financing
of preventive health programs, which is a positive development. However, if there are no
functional DPHCs, the districts will not be able to utilize the increased funding effectively for
delivering much needed public health services. Strengthening preventive health services is
undoubtedly pro-poor investment. As the international evidence suggests, it is the poor who
benefit most from population-based public health interventions.

126. The Asian Development Bank has developed a US$47 million project to support the
preventive health system, but the project focuses at the provincial level. The project provides
medical equipment, ambulances, and training to 46 out of 63 provincial Preventive Health Care
Centers and 4 Institutes of Hygiene and Epidemiology. About 60% of the project funding is
allocated to equipment. The rest is allocated to training (at the national and provincial levels),
development of the surveillance system, and the development of the national standard of the
provincial preventive care centers. The ADB project provides different modalities of training
such as post graduate training (both in country and abroad), in-service training, as well as short-
term courses. The six project provinces are included in the ADB project.




                                                44
127. This component of Central North Region Health Support project will complement and
built on the ADB’s project by improving the district level preventive health care and
strengthening the linkage between the district and provincial levels. The project will provide
support to 30 districts, which are not necessarily the same districts where the district hospitals
will be upgraded.

128. Previous World Bank experience has shown that unless the land title is officially
transferred to the institution and all potentially conflicting resettlement and ownership issues
have been addressed, the investment plan is likely to encounter serious delays and obstacles.
Therefore, the World Bank will require a satisfactory proof of ownership of the land by the
district preventive health center and full abidance to the resettlement plan that meets the World
Bank’s social safeguards requirements. The MOH has developed a Resettlement Policy
Framework and Resettlement Plan which has been reviewed and approved by the World Bank.
All cases of land acquisition which took place after the commencement of project preparation
(May 2008) have to be examined for their conformity with the World Bank’s safeguards
requirements and the approved Resettlement Plan. Failure to meet the social safeguards
requirement will result in the decision not to invest in the proposed district preventive health
center. The Ministry of Health has a standard design, list of essential equipment, and staffing
requirements for district preventive care centers (Decision 2367/QD-BYT, dated July 4, 2007).
According to this Decision, there are three scopes of preventive centers based on the local
population: (a) Type 1 with an area of 1000m2 for a population of less than 100,000 people; (b)
Type 2 with an area of 1200m2 for a population varying from 100,000 to 250,000 people; and (c)
Type 3 with an area of 1500 m2 for a population of more than 250,000 people.

129. It was decided that the project will only support construction of technical and
administrative blocks of District Preventive Health Centers with a size of 500-600 square meters.
These are the two essential functional blocks in district preventive centers. It is expected that the
local governments will finance building of supporting blocks, such as stores, gardens, garages,
etc. It is estimated that the construction of one administrative and technical block will cost
approximately $200,000. The project will provide equipment based on the MOH’s standard list
of essential equipment for DPHCs, the current stock of equipment, and the capacity of each
DPHC. After being separated from the hospital, no preventive center has had its own vehicle,
making it extremely difficult for it to perform epid-surveillance, sanitary control and other
functions. The project will provide one off-road vehicle to each DPHC under its ambit. It is
estimated that about $200,000 will be required to provide the necessary set of medical equipment
to each preventive health center.

130. The project will also finance training for all district preventive care centers in the region.
The main modality of training will be short-term training courses and upgrading assistant doctors
to full-fledged doctors with a specialization in preventive medicine. Since it is difficult to recruit
medical doctors to work at district preventive care centers, upgrading assistant doctors, who
already work at district preventive care centers, is more likely to ensure retention of staff.
Support from the project to upgrade an assistant doctor to a full-fledged preventive health doctor
will be conditional on the selected individual signing a legally binding agreement with the
provincial government that after the training, he or she will return to the original place of
practice and remain there for at least 3 years.



                                                 45
131. Other trainings such as 6-month specific training courses in preventive care for assistant
doctors and short-term training courses on specific subjects will be organized. Training will be
provided by teaching institutes such as National Institute of Hygiene and Epidemiology and
regional Pasteur Institutes. The ADB project also finances training of trainers at the provincial
level so that they can provide training to preventive center staff at the district level. The
following table summarizes investment needs for the District Preventive Health Centers in 30
districts:

Investment for district preventive care centers

132. Sub-component 2.3 – Performance-based financing pilots ($1.5 million). The objective
of the sub-component is to identify, develop, pilot and evaluate a limited performance based
   Province         Number of       Civil works       Equipment        Training  Total (USD)
                      districts
Thanh Hoa                 7          $1,400,000        $1,400,000      $350,000   $3,150,000
Nghe An                   7          $1,400,000        $1,400,000      $350,000   $3,150,000
Ha Tinh                   4           $800,000          $800,000       $200,000   $1,800,000
Quang Binh                4           $800,000          $800,000       $200,000   $1,800,000
Quang Tri                 4           $800,000          $800,000       $200,000   $1,800,000
Thua Thien                4           $800,000          $800,000       $200,000   $1,800,000
Hue
Total                    30          $6,000,000        $6,000,000     $1,500,000 $13,500,000
payment system for district level health services. The project will develop and test: (a) a set of
performance indicators to monitor and evaluate service provision within district hospitals and
DPHCs; (b) Methods whereby performance on these indicators can be incorporated into the
calculation of the government transfer to district health facilities.

133. Construed in these terms, the pilot will contribute to developing methods and approaches
for addressing identified shortcomings in the Vietnamese healthcare system in respect of:
perverse effects of existing approaches to hospital financing; limitations of the existing hospital
inspection system; absence of managerial incentives for improving hospital performance. That
these shortcomings need to be addressed is registered in the Politburo’s Resolution 46 (2005),
the MOH Master plan for 2006-2010 and government support for projects directed at testing the
implementation of a case-mix payment system for hospitals (ADB funded project number: TA-
7029 (VIE)).

134. The pilot’s success to a large degree will depend on the interest and commitment of staff
within the Provincial Health Bureau to (a) change the approaches they use in allocating funds to
hospitals and DPHCs, (b) adapt the indicators currently used to monitor performance and/or
design and develop new indicators. Also important will be the willingness of the province (with
technical assistance) to establish a RBF Taskforce and pursue a detailed five year service
improvement plan. This plan will specify indicators and services whose quality and efficiency
will be progressively improved by all hospitals and prevention centers within the province.
Equally, the Provincial Peoples Committee will need to agree to link a portion of the hospital’s
annual State budget to its previous year’s performance. Nghe An province meets all of these
criteria.


                                                46
135. Nghe An province has proposed the following hospitals and DPHCs for inclusion in the
pilot in its initial stage (Group 1):
                  District Hospitals            District Preventive Health Centers

                 Yen Thanh                                       Dien Chau
                Thanh Chuong                                    Thanh Chuong
                  Nam Dan                                         Nam Dan
                  Nghi Loc                                       Quynh Luu

136. The chosen hospitals are judged by the province to be of equal capacity. In each case,
however, while capacity is seen as being sufficient to support high quality service provision,
actual performance varies markedly between them. The selected District Preventive Health
Centers are recipients of investment from the project and two of them (Thanh Chuong and Nam
Dan) are located in the same districts as two of the selected hospitals.

137. The province has agreed that by the commencement of Year 4, the result-based financing
scheme will involve the remaining district hospitals planned to receive equipment under the
project, as well as their associated District Preventive Health Centers (Group 2). This will mean
that the project will include hospitals and DPHCs with different levels of capacity. This being
the case, the project will also provide a vehicle for designing and testing performance-based
funding mechanisms that are suited to these circumstances, i.e. situations in which the starting
capacities of service providers vary markedly. If the pilot proves effective by Year 4, the World
Bank in partnership with the Ministry of Health will seek additional grant financing to expand
the RBF model to other provinces participating in the project.

138. In relation to district hospitals, the pilot model will establish a mechanism through which
20% of the State budget, which comprises almost 40% of the total hospital revenue, will be
linked to performance (more precisely – performance in preceding year will determine the 20%
of the next year’s budget). Gradually, the share of the State budget linked to the performance
will increase from 20% to 30%. The link between the payment and performance will be
determined by a formula to be developed during the design of the pilot. In order to create a
stronger incentive for better performance, the project will allocate an additional bonus amount
from the credit to participating hospitals. The size of the bonus will be equal to 10% of the
planned State budget. Thus, well performing hospitals will have a chance to receive not only the
full State budget but an additional 10% as well. The amount received from the project cannot be
used for paying salaries of civil servants.

139. Involving VSS in the result-based financing scheme was also considered as an option to
link performance with some portion of the revenues received by the hospitals through health
insurance. However, it was decided that it would be best to defer this option, since the current
financial transaction mechanisms in VSS are not conducive to such arrangements and the local
branches of VSS have capacity constraints that would increase the risk of unsuccessful
implementation of the pilot. The possibility of expanding the RBF pilot to VSS will be revisited
at mid-term (end of YR 3).




                                               47
140. Following discussions with stakeholders in the MOH, the provincial Department of
Health (DOH) and directors of hospitals, it has been agreed that the performance indicators will
focus on 4 dimensions that are central to the implementation of the Hospital Function Chapter of
the hospital inventory survey instituted by Decision 3145: (i) efficiency of service delivery (i.e.
length of stay, patient occupancy rates, etc.), (ii) patient satisfaction (waiting times, cleanness
and convenience of amenities, attitude of staff, etc.), (iii) infection control, clinical governance
and patient safety, and (iv) building and equipment maintenance. The indicators will be
determined by the RBF Taskforce in consultation with staff in the Medical Services
Administration (with responsibility for hospital quality improvement) as well as in participating
hospitals. In performing this work, the RBF Taskforce will be supported by an external
consultant with detailed knowledge of a range of measures for mapping and improving hospital-
based service provision.

141. It is recognized that that if the penalties to poor-performing hospitals are too high, there is
a danger that the resulting reduction in their resource-base will further reduce their capacity to
improve performance. Alternatively, if payments for good performance were too low, there
would be fewer incentives for improving performance. In the design phase, a thorough
assessment of participating hospitals’ capacities will be conducted to establish baseline against
which performance improvement will be measured.

142. Disparities in underlying capacities of district hospitals will be revealed by the baseline
assessment that will be undertaken in each hospital during the design phase (Year 1).
Subsequent assessments of hospital performance will take account of these differences. Thus,
for certain indicators, the performance of a hospital will be judged not by using absolute
standards but via an assessment of its own planned improved performance on these indicators.
The RBF scheme will also provide incentives to the directors of the participating hospital.
However, no project funds will be used for this. The incentive to the directors will be covered
from the State budget. The inclusion of this dimension follows the strong recommendation by
provincial authorities that this should be included in the design of the pilot. Detailed
mechanisms for this will be elaborated during the design phase of the pilot.

143. In relation to District Preventive Health Centers, the RBF scheme will function somewhat
differently. The proposed scheme is in line with current orientation towards the “task-based”
funding that is planned in financial reforms of preventive medicine centers. The project
contribution to participating centers can only be used to extend their capacity in performing their
functions and to provide incentives for increased performance. Accordingly, the additional
funding should not be used to substitute the budget received by the centers from the provincial
DOH. The project funds cannot be used to pay for the salaries of civil servants.

144. Construed in these terms, the participating centers will prepare a costed annual work plan
of additional tasks which they are capable of delivering but for which they do not have sufficient
budget. Plans for individual programs should clearly specify the objectives that are to be
achieved, the tasks that will be performed and the output and outcome measures on which
performance will be assessed. The plans will be reviewed by the RBF Taskforce, provincial
PMUs and the World Bank. Once approved, the centers will receive 50% of the total budget for
additional tasks in advance to commence the implementation of activities. Block grants will start



                                                48
at $5000 and gradually increase depending on performance, but will be capped at a ceiling,
which in Year 4 or 5 of the project may reach $10,000.15 After 6 months of implementation,
performance of individual centers will be reviewed and deliverables audited (outputs). Payment
of the remaining 50% will be conditional on satisfactory performance. The centers can receive
incremental increases above their base allocation if they perform well. Likely criteria to be
measured include: (i) quality of plan; (ii) level of disbursement, (iii) extent to which targets are
met (output) and the extent to which outcomes have been achieved. District centers that do not
achieve the outputs projected in their yearly plan run the risk of having their funding reduced in
the following year. By contrast, district centers that both achieve their outputs and which can
demonstrate improved outcomes will be eligible for increased funding

145. Implementation arrangements – The RBF pilot will be implemented over a five-year
period. First year will be the design phase. During the design phase, a detailed list of indicators
and payment mechanisms will be elaborated, an implementation manual will be developed
specifically for the pilot and auditing and evaluation mechanisms set up. In parallel, each
participating hospital will develop a service improvement plan with the technical support of the
RBF Taskforce.

146. During the first year, three workshops will be held with relevant staff from the Provincial
Health Bureau, district hospitals and district prevention centers. The first workshop will canvass
shortcomings of existing payment and monitoring systems, introduce the central elements of
performance based payment and how its implementation will affect resource flows to the
hospitals and DPHCs in ways that will stimulate improved performance. The second workshop
will be devoted to defining the set of performance indicators that will be used in the pilot and
determining how performance will be judged, monitored and then paid. The third workshop will
focus on defining implementation arrangements and presentation of the final version of the
implementation manual of the pilot.

147. In order to exercise oversight on the implementation of the project, a Result Based
Financing Taskforce will be set up in Nghe An province. The functions of the RBF Taskforce
will include: liaising between various stakeholders, conducting baseline assessment of the
participating hospitals and DPHCs, providing technical support to participating hospitals for
developing service improvement plans, developing and refining performance indicators and
payment rules, and overseeing the auditing and impact evaluation, which will be carried out by a
local consulting firm during the initial phase of the implementation, with gradual transfer of this
role to the RBF Taskforce.

148.    The RBF Taskforce will have two staff (local consultants) with appropriate academic
qualifications and practical experience. One of the consultants shall be a medical clinician with a
demonstrated interest in improving the efficiency and quality of service provision. The other
consultant should have an accounting/finance background. The Taskforce’s full establishment


15
    This is a sizeable sum compared to current non-labor operating budgets. Operating budgets for district
preventive health centers currently are calculated on the basis of: 70% for salaries (estimate 4-5 workers at 30
million per worker per year); 20% for utilities and 10% for activities. More recently, they also include the budgets
for the CHS, mainly salary for about 5 people plus operating budget of 10 million per year per CHS.


                                                        49
and running costs will come from the loan. The Taskforce will be supported by one international
consultant one with a strong background in hospital management and performance measurement.

149. During Year 2 and 3 the pilot will involve 4 district hospitals and 4 DPHCs. At the end
of Year 3, a thorough evaluation of the pilot will be conducted with possible fine-tuning. In
Year 4 and 5 the pilot will involve the remaining 4 district hospitals and DPHCs in Nghe An
province. Conditional on obtaining additional grant funding, the RBF pilot will be expanded to
other provinces as well participating in the project.

150. It is recognized that neither Nghe An’s Provincial Health Bureau nor the RBT Taskforce
will have the capacity to audit the performance of participating hospitals and DPHCs and
evaluate the effectiveness of the pilot at the onset of the pilot. Therefore, the local consulting
firm which will be engaged for the overall project monitoring and evaluation, will also be
responsible for auditing the hospitals and DPHCs participating in the pilot during Years 2 and 3.
The RBT Taskforce and Provincial Health Bureau will be actively involved in this process to
learn how to conduct such audits and evaluation. During Year 4 and 5 auditing function will be
transferred to the RBT Taskforce.

151. Expenditures to be financed from IDA: Under Component Two, the following
expenditures will be financed from the credit: (a) medical equipment; (b) civil works; (c)
consulting services (local and foreign); (d) block grants to DPHCs (such grants are to be used for
pharmaceuticals, medical supplies and consumables, operating costs, consultants; payment to
civil servants is not eligible); (e) performance based grants to district hospitals (such grants are to
be used for pharmaceuticals, medical supplies and consumables, operating costs, consultants;
payment to civil servants is not eligible); and (f) ambulances and vehicles. Payments to DPHCs
and district hospitals participating in the pilot scheme will be subject to the submission of
audited performance data.

COMPONENT THREE - Improving supply and quality of human resources for health
($15.99 million)

152. The objectives of this component are: (a) to strengthen the capacity of existing medical
educational institutions so that they can produce more and better trained medical personnel for
the region, and (b) to improve skills and knowledge of already practicing medical personnel so
that they are better equipped to provide quality health care to the population. The component
will apply a mix of short-term and long-term solutions to health workforce problems faced by the
region. These problems include: shortage of doctors, pharmacists, nurses and technicians; low
quality of training of nurses, technicians, midwifes, and assistant doctors; outdated clinical skills
of medical personnel; poor management skills of health service managers. The short-term
solutions include on-job training, refresher courses, workshops, etc. Long-term solutions include
strengthening the capacities of medical colleges to increase quality and supply of health care
professionals, specialty training of doctors, upgrading of assistant doctors into full-fledged
doctors, etc.

153. Some development partners have been providing support for training in the region: the
ADB is working on preventive care at the provincial level (in all six provinces), and KfW and



                                                  50
GTZ are working on curative care (in Thanh Hoa and Nghe An). The proposed training
activities in this project cover those needs that have not been addressed so far by the other
donors.

154. Sub-component 3.1 – Strengthening medical education system ($6.0 million) This sub-
component will support the Central North region in transforming Nghe An medical college into a
medical university, and in improving teaching facilities in four other medical colleges. This will
be achieved through upgrading teaching equipment and materials, and training of trainers.

155. In the six project provinces of Central North region, there are five medical colleges
training assistant doctors, nurses, midwives, technicians, etc., as well as one medical university
in Hue, which trains medical doctors and offers various post graduate training courses. Among
the five medical colleges, Nghe An Medical College is the most capable and reputable. It
provides training for students from other provinces. For example in academic year 2008-2009,
Nghe An medical college trained students from 17 provinces across the country. There are many
ethnic minority students studying at the Nghe An College supported by government scholarships.
These students, as an exception, are exempt from entry exams on the condition that they will
return and serve in their original place of residence after graduation.

156. The Nghe An College was upgraded from a secondary medical school in 2006. The
government has decided to upgrade the College to a medical university in 2009. According to a
recent survey conducted by the College, 70% of its graduates are working in Nghe An province,
20% are working in other provinces in the region, and about 10% are working elsewhere. The
college has received government and provincial budget to construct new buildings and to buy
essential teaching equipment and materials. However, the budget allocation for teaching
equipment and material is too little to cover the needs and to allow the College to meet the
qualification criteria for a university. The construction of a new building is progressing well. It
is expected that the construction will be finished by the end of 2009, and the facility will be
ready for installation of new equipment.

157. The project will finance the procurement of teaching equipment and materials for the
Nghe An College in the amount of $3.9 million. This will include furniture for classrooms and
laboratories, IT and audio-visual equipment, teaching medical equipment, teaching aids and
simulators, books, library furniture and equipment, etc. The MOH and Ministry of Education
have standards that describe in detail the kind and quantity of teaching equipment and materials
required for medical universities. These standards will be used to develop a detailed list and
specifications of equipment.

158. The project will also support training of faculty of the Nghe An College in the amount of
$0.5 million. This will mostly include postgraduate training for Master’s Degree, internships (up
to one year placement of faculty members in the Hanoi, Hoi-Chi-Minh or Hue Universities), as
well as short-term training in research methodology, or specific disciplines to be taught at the
medical university. The curriculum and training of the faculty will focus on basic medical
specialties such as general surgery, internal medicine, pharmacology, pediatrics, OBGYN,
ophthalmology, otorinolargingology, traditional medicine, public health and preventive
medicine, etc. The project will cover tuition fees and per diem allowances for the trainees.



                                                51
159. The project will also finance capacity building provided by visiting professors from
Hanoi, Hue, Ho-Chi-Minh and other reputable universities. The visiting professors will help the
Nghe An College to upgrade curricula, train trainers, and teach courses to the students in the
subject areas where Nghe An College has a shortage of lecturers/professors. The project will
finance the allowances and living expenses of visiting professors. It is estimated that until 2016
the project will finance 50 Master’s level trainings, 100 internships, and 27 visiting professors.
These are preliminary estimates which will be revised before the pre-appraisal mission.

160. In the process of upgrading to a medical university, the Nghe An College will require a
lot of support from other universities in the country who have strong capacities. The
Administration of Nghe An province and Nghe An College plan to establish official memoranda
of understanding with several medical universities, which will outline the type and volume of
support to be provided to Nghe An College. Such official agreement will be deemed by the
World Bank as a guarantee that the financial support provided to Nghe An College through the
project will be well utilized.

161. In addition to Nghe An College, the project will also provide support to four other
colleges, although there is no plan to upgrade them to medical universities. The objective of the
support to other colleges is to improve the quality of their teaching by supplying them with better
teaching equipment and materials, and by providing training to their faculty. Each college will
receive $0.4 million, out of which $200,000 will be used for upgrading teaching equipment and
materials, and $200,000 for training of the faculty. As in the case of Nghe An College, the
training will include short-term training, internships, and postgraduate training for Master’s
degrees.

       Summary Table: Support to medical colleges
          Province medical         Equipment          Training            Total
              colleges
        Thanh Hoa                       $280,000          $90,000           $400,000
        Nghe An                      $3,700,000         $450,000          $4,400,000
        Ha Tinh                         $280,000          $90,000           $400,000
        Quang Binh                      $280,000          $90,000           $400,000
        Quang Tri                      $280,000           $90,000           $400,000
        Hue                             $280,000          $90,000           $400,000
                                     $ 5,100,000        $ 900,000         $6,000,000

162. Sub-component 3.2 – Training of district health workforce ($ 9.59 million) This sub-
component will support training of clinical staff of district hospitals, personnel of District
Preventive Health Centers, as well as hospital administrators. Only in Quang Tri province the
training plan will include the provincial general hospital, which will be upgraded under the
project. All other provincial health facilities will be excluded from the training plan, on the
grounds that other donors have/will support province level training activities.




                                                52
163. It is recognized that skills and knowledge of medical personnel are crucial components of
quality of care. One of the main reasons why patients by-pass district level hospitals is the lack
of qualified health care personnel, doctors in particular. District hospitals lack specialists with
Level 1 specializations (basic specialties such as surgeon, pediatrician, internist, OBGYN, etc.)
which limits the range of services they can provide to the population. Once the project provides
medical equipment to the district hospitals, they will need qualified medical personnel to make
use of the technologies and attend to the health care needs of the population. The health care
personnel will also need short-term training courses and refreshers to bring their knowledge up-
to-date. Training is necessary for technical staff of the hospital in order to improve their
knowledge in medical equipment and facility maintenance. The hospital administrators will also
be involved in short-term training in order to equip them with necessary tools and skills for more
effective management of their organization in the current and future policy environment towards
which the MOH intends to steer the system. Training of preventive health center staff is also
very important to upgrade their knowledge, improve skills for using the medical equipment to be
provided by the project, and bring them up to date with the policy directions set by the MOH.

164. The project will finance four types of training modalities: short term training (one month
or less); Level 1 and Level 2 specialty training (2 years); on-the-job training for assistant doctors
to upgrade them to full-fledged doctors (4 years); and Master’s degree training (2 years). The
costs that will be covered by the project include: tuition fees, living allowances for the entire
duration of training whenever applicable, and allowances for the trainers providing short-term
training.

165. In order to be accepted for Level 1 and 2 specialty training entry examinations are
required. Doctors from remote districts who have been out of training for a long period of time
will find it difficult to pass the entry exams and earn scores that would guarantee their
acceptance into the program. Therefore, the project will finance three-month preparatory courses
for those willing and selected for the training. The preparatory courses will be offered by the
medical universities.

166. Tuition fees and living allowances are regulated by the cost-norms established by the
MOH and Ministry of Education. The project will apply these cost-norms to the training
activities. From the experience of Mekong project, it was learned that not all training candidates
can attain passing score at the entry exams and these tend to be the individuals from remote
districts or ethnic minorities. The universities can enroll such ‘low passing score’ individuals
into the training programs but charge twice the tuition fee. In order to increase the opportunity
of training for such candidates, the project will finance the higher tuition fees. This will also
contribute to improving geographic imbalance of the health workforce.

167. Taking into consideration the long training required to become a medical doctor, the low
preparedness of local students to pass university entry exams, and the need to take advantage of
the current human health resources in the region, the project will support the training necessary
to upgrade someone from an assistant doctor/pharmacist to university level specialist. This form
of training will take four years to be completed. Such students are mainly health staff currently
working at the local level and they are more likely to continue working at this level after training.




                                                 53
This form of training can fill the personnel gap more quickly than the traditional way of training
a medical doctor, which lasts for six years.

168. Selection of candidate for training will be done at the district level initially, and then the
training list will be approved at the provincial level. The project will not concentrate its training
activities only on those districts where the district hospitals and DPHCs will be upgraded, but
instead will extend to other districts as well. Other donor supported training activities will be
carefully reviewed to avoid duplication of efforts. It is recognized that there is a risk of medical
personnel trained through the project not returning to their original place of placement unless
there is a mechanism to ensure their retention. To mitigate this risk, each candidate accepted to
any form of long-term training program will have to sign a legally binding agreement with the
provincial authorities and the Project Implementation Unit that after training he/she will return to
the original place of practice and remain there for a minimum of 3 years. The following tables
summarize the overall training needs by provinces.

                  Short-term training on examination, treatment and sub-clinic
                Internal medicine




                                                                                                           Photo diagnostic
                                                                           Communicable




                                                                                                                                                                               Cost (USD)
                                                                                               Emergency




                                                                                                                              Anesthetic
                                                Obstetrics


                                                              Pediatrics
                                     Surgery




                                                                                                                                                    Testing
                                                                                                                                           X-ray




                                                                                                                                                                Total
 Quang Tri      2                   2          2             2              2                  2            2                 2            2       2          20         30,000
 province

  District     85                   85         85            85            85              85              94                 85           85      85         859       1,288,500

Thanh Hoa      27                   27         27            27            27              27              27                 27           27      27         270       405,000

 Nghe An       20                   20         20            20            20              20              20                 20           20      20         200       300,000

  Ha Tinh      12                   12         12            12            12              12              12                 12           12      12         120       180,000

Quang Binh      7                   7          7             7              7                  7            7                 7            7       7          70        105,000

 Quang Tri     10                   10         10            10            10              10              10                 10           10      10         100       150,000

Thua Thien      9                   9          9             9              9                  9           18                 9            9       9          99        148,500
   Hue

   Total       87                   87         87            87            87              87              96                 87           87      87         879       1,318,500


Note: Estimated unit cost is $1,500




                                                                                          54
                                         Short training on hospital management and medical equipment


                                                            Waste                  Hospital            Medical equipment             Total        Cost
      Province                          Management        treatment               management           Province District           students      (USD)
   Period                                1 month           2 weeks                  2 weeks            3 months   2 weeks
   Quang Tri                                  5                     2                  12                 5                          24          36,000
   province
   District level                          340                     170                340                 -         170             1,020       1,530,000

   Thanh Hoa                               108                     54                 108                           54               324         486,000

   Nghe An                                  80                     40                  80                           40               240         360,000
   Ha Tinh                                  48                     24                  48                           24               144         216,000
   Quang Binh                               28                     14                  28                           14               84          126,000

   Quang Tri                                40                     20                  40                           20               120         180,000
   Thua Thien Hue                           36                     18                  36                           18               108         162,000

   Total                                   345                     172                352                           170             1044        1,566,000



                                                         Specialists Level 1 and Master’s training
                                           Obstetric




                                                                        Commun
                                                       Pediatric




                                                                                   Emergen




                                                                                                         managem




                                                                                                                                               Expense (USD)
           Internal



                          Surgery




                                                                                             Health.




                                                                                                         hospital
                                                                         icable




                                                                                                          MA in
                                                                                              Com.




                                                                                                                     Total
                                                                                              MA



                                                                                                           ent




                                                                                                                                          Revise
                                                                                     cy
                                              s




                                                          s




                                                                                                                                             for
Province                                                                                                                                   exam    Study         Total
Quang
Tri                   2             2             2        2                2        2            3           2              17         8,500      76,500      85,000
District
level             26            20                28      29               16        12           14          12             157       78,500     706,500      785,000
Thanh
Hoa                   4             3             8        8                2        2            2           2              31        15,500     139,500      155,000
Nghe An               6             3             8        8                2        2            2           2              33        16,500     148,500      165,000
Ha Tinh               6             4             3        4                4        2            4           2              29        14,500     130,500      145,000
Quang
Binh                  2             4             3        3                4        2            2           2              22        11,000      99,000      110,000
Quang
Tri                   5             4             3        3                2        2            2           2              23        11,500     103,500      115,000
Thua
Thien
Hue                   3             2             3        3                2        2            2           2              19         9,500      85,500      95,000
Whole
province          28            22                30      31               18        14           17          14             174       87,000     783,000      870,000




                                                                                             55
                            Upgrading of assistant doctors and pharmacists
(Two unit costs apply: $6,500, which includes regular tuition fee, and $7,500 which includes higher tuition fee for
‘low score’ students)
          Province             Number of students                              Total (USD)
  Thanh Hoa                             162
  Nghe An                               120
  Ha Tinh                                72
  Quang Binh                             42
  Quang Tri                              60
  Thua Thien Hue                         54
                                                              170 x $7500=$1,275,000
                                                                                                  $ 3,485,000
       Total                            510                   340 x $6500= $2,210,000


169. Under this sub-component, the project will also provide support to the implementation of
Decree 1816 of MOH. This policy envisages rotation of qualified medical personnel from the
higher level facilities (provincial hospitals and central hospitals) to district hospitals in order to
temporarily address health personnel shortage and at the same time ensure transfer of knowledge
and skills to the district level hospital personnel. The experienced doctors from provincial or
central hospitals will spend 1 month in an assigned district hospital. During this rotation period,
they will work as regular staff of district hospitals providing medical services to the population.
They will also provide lectures and training workshops to the local staff.

170. The project will finance per diem, travel and accommodation allowances for the visiting
doctors. Usually this program would be financed by provincial governments. However, given
the fact that Central North region is composed of predominantly poor provinces, the provincial
governments cannot allocate sufficient resources to fund the implementation of the policy. The
project will assist the provincial governments by funding 425 cases of such transfers throughout
the life of the project. The table below summarizes the costs of this activity:

   Province               No. of districts      Transfers per          Total transfers        Costs (USD)
                                                district
   Thanh Hoa                      27                    5                      135                    $270,000
   Nghe An                        20                    5                      100                    $200,000
   Ha Tinh                        12                    5                       60                    $120,000
   Quang Binh                      7                    5                       35                     $70,000
   Quang Tri                      10                    5                       50                    $100,000
   Thua Thien Hue                  9                    5                       45                     $90,000
   Total                          85                                           425                    $850,000

171. Expenditures to be financed from IDA: Under Component Three, the following
expenditures will be financed from the credit: (a) tuition fee in relation to short-term and long
term training or any preparatory courses for such training; (b) per diem, transportation and living
expenses related to training; (c) consulting services (local and foreign); (d) operating costs
necessary for conducting training activities (renting facility, providing stationary and teaching


                                                         56
equipment, food catering, translation and interpretation); (e) professional fees, transportation and
accommodation costs of trainers, (f) teaching equipment, instructional materials and aids,
including audio-visual equipment, IT equipment, books, stationery, medical simulators,
laboratory equipment; (g) books; and (h) accommodation and per diem costs for medical
personnel deployed to lower level of health services for medical rotations.

COMPONENT FOUR – Project management, monitoring and evaluation ($ 7.71 million)

172. Project management: The aim of this component is to ensure an adequate management
structure, processes and human resource capacities for the project, and to set up mechanisms for
effective monitoring of activities and evaluation of results.

173. Under this component, the project will fund the establishment of project management
units at the central and provincial levels. Project Management Units will be staffed in
accordance to core project management functions: project director, deputy director, procurement
officer, procurement assistant, accountant, accounting assistant, monitoring and evaluation
officer, and logistics coordinator. The number of staff for each function will vary depending on
the location of PMU and the size of operations in each province.

174. The project will cover operational expenses of project management units and salaries of
full time staff that are not civil servants and are employed as individual consultants. The project
will also finance procurement of necessary office equipment/furniture, and vehicles for the
project management units.

175. In order to build adequate capacities in project management, the project will finance
training of PMU staff in various project management functions, focusing on financial
management, procurement, and monitoring and evaluation. Training will be provided through
short-term training courses organized by the World Bank in Vietnam or outside Vietnam in the
East-Asia region. The project will finance foreign Technical Assistance to the project
management units in procurement and financial management aspects. The Project will also
finance local consulting services to support PMU in managing its various components.

176. Monitoring and Evaluation arrangements: Monitoring and evaluation (M&E) is a
critical function for the project. The main objective of M&E is to generate reliable and accurate
information about the project implementation progress and statistics for measuring the
achievement against the project result indicators. The project will rely, to the extent possible, on
existing health information systems and data collection mechanisms in the MOH and in
provinces in order not to impose an unnecessary burden on the country. However, for certain
statistics it will be necessary to design specific data collection instruments and conduct
independent data collection (e.g. small scale household surveys, patient exit interviews, hospital
surveys, hospital audits). M&E will consist of two components: (a) monitoring of project
implementation process, and (b) monitoring project results indicators and performance of the
pilots.

177. Monitoring of implementation progress will be the responsibility of the project
monitoring officers of PMUs. CPMU in consultation with PPMUs and MCPMU will develop a



                                                57
set of implementation progress indicators, which will be included in the project implementation
manual. These indicators will be monitored twice a year and findings will be provided to the
World Bank two weeks prior to supervision missions. These indicators will be also used for
updating Implementation Status Reports (ISRs).

178. Given the presence of Results Based Financing pilots in the project design, which
requires regular monitoring of the performance of health care providers participating in the pilot,
the project has to set up an adequate independent audit system to verify performance. Also it has
to be recognized that data required for measuring some of the project result indicators is not
readily available and requires special data collection exercise and analysis. In order to ensure
unbiased monitoring and evaluation for the pilots and auditing of their performance, a local
consulting firm will be engaged. The same firm will be responsible also for the baseline survey
the purpose of which is to update the result indicators with the most recent data. If deemed
necessary, a local consulting firm will be engaged for mid-term and final evaluation as well.

179. Expenditures to be financed from IDA: Under Component Four the following
expenditures will be financed from the credit: (a) local and foreign consultants; (b) minor office
repairs; (c) office equipment, consumables and IT technologies; (d) vehicles; (e) operating costs
(such as office rent, costs of conducting workshops, meetings, translations/interpretation,
telecommunication, fuel and other transpiration related costs, per diem for CPMU, PPMUs and
MCPMU when travelling for business); and (f) costs related to monitoring, data collection and
auditing.




                                                58
                                             Annex 5: Project Costs
                             VIETNAM: Central North Region Health Support

                                                                                                    Total
                                                                   Local             Foreign
Project Cost By Component and/or Activity                                                           US$
                                                                 US$ million        US$ million
                                                                                                   million
       1. Health Insurance for the Economically                    9.11                               9.11
          Vulnerable Population

       2. Strengthening District Health Services                  32.20                             32.20


       3. Improving Supply and Quality of                         15.99                            15.99
          Human Resources for Health

   4. Monitoring, Evaluation and Project                           7.71                               7.71
       Management
Total Baseline Cost                                               65.00                             65.00
 Physical Contingencies                                            0.00                              0.00
 Price Contingencies                                               0.00                              0.00
                          Total Project Costs1                    65.00                             65.00
                    Interest during construction
                                  Front-end Fee


                            Total Financing Required              65.00                             65.00
                                                                                         Other
                                                                  IDA          GOV16                Total
                                                                                         donors
Project Cost By Financier and category                            US$           US$                 US$
                                                                                          US$
                                                                 million       million             million
                                                                                         million
       1. Health Insurance for the Economically                    9.105                              9.105
           Vulnerable Population
           a. HI subsidies (insurance premiums,                    5.500
              additional administrative operating
              expenses for VSS)
           b. IEC and capacity building (workshops,
              in-country training courses, overseas                3.605
              training, technical advisory services,
              goods and materials)


       2. Strengthening District Health Services                  32.200                             32.200
          a. Goods and works (medical equipment,
                  consulting services, vehicles including         31.000

16
     Until 2016


                                                            59
           ambulances, civil works, medical
           supplies)
        b. RBF pilots (performance-based grants
           to preventive health centers and district          1.200
           hospitals, pharmaceuticals and medical
           supplies, operating costs, technical
           advisory services, in-country and
           overseas training, workshops)

   3. Improving Supply and Quality of Human                  15.989             15.989
        Resources for Health
        a. Goods (teaching equipment, books,                  5.400
           instructional materials, audio-visual
           equipment, IT equipment, stationary,
           medical simulators, laboratory
           equipment)
        b. Training (tuition fees, per-diem,                 10.589
           transportation and living allowances,
           technical advisory services, operating
           costs, workshops)

   4. Monitoring, Evaluation and Project
        Management                                            7.706    10.000    17.706
        a. Consulting services                                2.3288
        b. Training                                           0.624
        c. Incremental operating cost                         3.790
        d. Contingencies                                      1.9632


Total                                                       65.000     10.000    75.000




                                                       60
                           Annex 6: Implementation Arrangements
                      VIETNAM: Central North Region Health Support

180. Management Structure: The key agencies involved in the implementation of the project
will be: the Project Steering Committee, Central Project Management Unit, Provincial Project
Management Units, and Nghe An Medical College Project Management Unit. While there will
be no formal management structure at the district level the managers of the beneficiary intuitions
(District Hospitals and District Preventive Health Centers) will serve as project implementation
focal points. There will be a Joint Working Group on Health Financing which includes the
Vietnam Social Security, the Health Insurance Department of the Ministry of Health, the
Ministry of Finance, Ministry of Labor, Invalids and Social Affairs and provincial
representatives. Detailed responsibilities of each agency are summarized below:

181. The project Steering Committee: Will be established with a decree of the Minister of
Health and will be charged with the responsibility to provide an overall strategic guidance and
oversight on the project implementation. The Steering Committee will be chaired by a designated
Deputy Minister of Health, and will be composed of various relevant departments of the MOH
depending on their interest and involvement in the project related activities.

182. The Central Project Management Unit: The Central Project Management Unit under the
Department Finance and Planning, MOH, is responsible for the day-to-day implementation of the
project. The CPMU consists of the project director, chief accountant, at least two accountants,
one cashier, chief procurement officer, two procurement consultants, coordinators, and technical
specialists. The key staff and the director were appointed by pre-appraisal and they attended the
discussions on project design and implementation arrangements. Their main responsibilities
include: (i) coordination with the World Bank, MOH, the PPCs, the provincial Department of
Health, the PPMUs, and other ministries or agencies at the national level; (ii) management of
procurement of equipment through ICB and NCB procedures on behalf of six provinces and the
medical college; (iii) management of major technical assistance contracts which provide
consulting services across the provinces; (iv) management of the project account at the central
level; (v) support to the Joint Working Group on Health Financing; (vi) preparation of project
annual procurement plans, implementation plans, and progress reports; (vii) monitoring and
evaluation of project achievements against the indicators; and (viii) organization of the project
Mid Term Review, final review and semi-annual supervisions.

183. Provincial Project Management Units: The PPMUs will be responsible for (i)
coordination and management of activities at the provincial level and supervision of activities in
the districts of the respective province; (ii) procurement of equipment (goods) through NCB and
shopping procedures; (iii) procurement of civil works at district level; (iii) financial management
and project accounting; and (iv) technical support and guidance to the districts. The PPMU
consists of project director, chief accountant, at least one accountant, chief procurement officer,
at least on procurement consultant, civil works supervision consultants. The director and key
staff have been appointed by pre-appraisal.

184. District Level Management Arrangement: This is not a structured management unit at
the district level. The project activities at this level will be carried out by the beneficiaries


                                                61
respectively, and under the leadership of the Provincial Health Department and the PPMU. The
main beneficiaries are the district hospital and the District Preventive Health Center. The
directors of the hospital and the Center are in charge of the project financed activities in addition
to their routine responsibilities. The supervision of construction of the DPHCs will be carried
out by professional construction supervision staff of the provincial government and local
consultants retained by the PPMU using the project funds. They will supervise the construction
works including checking the quality of the construction and certifying the works for payments.
They report directly to the director of the Center and the PPMU. Each PPMU should have
sufficient consultants to ensure adequate on-site supervision of the construction. It is envisaged
to engage one supervision consultant per two to three district preventive health centers. The
number of the local consultants will be determined by the workload and spread of the
construction sites, in consultation with the World Bank. The supervision staff and consultants
should also be supported at each center by one clerk of works in the district government. Regular
supervision or site visits will also be organized by the CPMU.

185. Nghe An Medical College PMU: The MCPMU will be led by a director. In addition the
MCPMU will have a deputy director. Both Director and Deputy Director will be part time staff
members of MCPMU. The MCPMU will also have one full time procurement officer and one
full time accountant. Monitoring and evaluation function will be provided by the relevant officer
of the Nghe An PPMU.

186. The Joint Working Group on Health Financing: the Joint Working Group will be
established under Component A at the national level. Its purpose is to foster national level
engagement by key stakeholders in the implementation of health financing elements of the
project, which tend to concentrate under Component One, but also under the Results Based
Financing pilots in Component Two. The Joint Working Group will be composed of MOH’s
Department of Planning and Financing, the Department of Health Insurance; Vietnam Social
Security Office, The Ministry of Labor and Social Affairs, the Institute of Health Policy and
Research, and representatives from the National Assembly responsible for health and social
affairs. The Joint Working Group will not have its own account. Therefore the project’s support
to them will be carried out by the CPMU, which will serve as secretariat to the Joint Working
Group. The Joint Working Group members will not be paid salary or fees from the project. The
project will provide support only in terms of organizing venues for discussion, knowledge
exchange, workshops, study tours, and small scale research.

187. The Results Based Financing Taskforce: A taskforce will be set up in Nghe An province
to design and oversee the implementation of the RBF pilot. The functions will include liaising
between various stakeholders, conducting baseline assessment of the participating hospitals and
DPHCs, providing technical support to participating hospitals for developing service
improvement plans, developing and refining performance indicators and payment rules, and
overseeing auditing and impact evaluation, which will be carried out by a local consulting firm
during the initial phase of the implementation, with gradual transfer of this role to the RBF
Taskforce. The RBF Taskforce will have two staff (local consultants) with appropriate academic
qualifications and practical experience. One of the consultants shall be a medical clinician with a
demonstrated interest in improving the efficiency and quality of service provision. The other
consultant should have an accounting/finance background. The Taskforce’s full establishment



                                                 62
and running costs will come from the Credit. The Taskforce will be supported by one
international consultant with extensive experience in hospital management and performance
measurement.

188. Reporting Arrangement and Supervision: The PPMUs, including MCPMU, will report to
the CPMU and the CPMU will report to MOH and the World Bank. The CPMU will have
regular supervision visits to each PPMU, MCPMU and site visits to the District Preventive
Centers. The World Bank team will visit selected provinces twice a year. MOH has developed
national standards for District Preventive Health Centers by project appraisal and these standards
including the model design, which is under preparation, will be used with modifications to local
specifications by the districts. Detailed procedures for construction and supervision will be
developed and included in the Operations Manual.




                                               63
             Annex 7: Financial Management and Disbursement Arrangements
                     VIETNAM: Central North Region Health Support

189. Summary of Financial Management Assessment. An assessment of the financial
management (FM) arrangements for the proposed project was conducted based on the November
3, 2005 guidelines issued by the FM Sector Board and included discussions with the financial
management personnel of the Central Project Management Unit and Hue Department of Health
(one of the Provincial Management Units). The assessment concluded that the project meets the
minimum World Bank financial management requirements, as stipulated in BP/OP 10.02.

190. Financial management risk is the risk that World Bank loan proceeds will not be used for
the purposes intended and is a combination of country, sector, and project-specific risk factors.
Taking into account the risk-mitigation measures proposed under the project, a “Substantial” FM
risk rating was assigned to the project at the appraisal stage. The main actions required are: (i)
appointment of qualified personnel for financial management at CPMU, PPMUs and MCPMU;
(ii) Development of Financial Management Manual for the project, (iii) Training for the FM staff
of the CPMU, PPMUs and MCPMU on World Bank FM and disbursement requirements and
procedures, and (iv) Development of Accounting Software for the project and agreement on
format of interim financial reports.

191. The CPMU within the Department of Planning and Finance of the Ministry of Health and
PPMUs, including MCPMU, will be responsible for project implementation and financial
management of their project component. Although the Ministry of Health, specifically the
Department of Planning and Finance, has implemented a number of World Bank funded projects,
the CPMU and all PPMUs, including MCPMU, are newly set up. Lack of experience with the
World Bank’s financial management and disbursement procedures required training to be
provided to CPMU, PPMUs and MCPMU.

192. One Designated Account (DA) will be maintained by the CPMU in United States (US)
dollars at a commercial bank with terms and conditions acceptable to IDA. Traditional
disbursement methods (with reporting methods using Statement of Expenditure (SOE/ Summary
Sheet) will be applied. The project is expected to be 100% financed by IDA. Funds for
payments to be disbursed to suppliers and contractors at the provincial level will be transferred
as advances to the PPMUs and MCPMU for disbursement, based on the annual operational plan
and financial plan approved by Provincial People’s Committee. Every month or when the
PPMU or MCPMU has disbursed 50% of the advance, PPMU or MCPMU will submit to CPMU
the application for advance replenishment.

193. The project Financial Statements will be audited by independent auditors acceptable to
the World Bank in accordance with TORs acceptable to the World Bank. The cost of the audit
will be funded by the project. The audit TOR is to be extended to include the verification of
existence and usage of medical equipments and stocks of the project, and the effectiveness of
project activities, from central to district and end-user level. In addition, quarterly Interim
Financial Reports (IFRs) will be prepared by CPMU based on reports sent from PPMUs and
MCPMU and submitted to the World Bank quarterly, with format and contents acceptable to
IDA.


                                               64
Country Issues

194. The 2007 Country Financial Accountability Assessment (CFAA) determined that the
financial management risk of improper use, control and reporting of funds that are managed
through the Vietnam public financial management systems is moderate. The public accounting
system and financial management arrangements are well-documented and regulated, but
financial management risks arise from gaps and overlaps in the systems, and more particularly,
risks arise from weaknesses in implementation and compliance gaps. The CFAA found that key
challenges in the Public Financial Management (PFM) systems remain in the areas of: (i)
expanding budget coverage in line with internationally accepted norms; (ii) implementing the
new government Chart of Accounts and the Treasury and Budget Management Information
System with strengthened internal controls (including internal audits) and streamlined business
processes; (iii) implementing more comprehensive accounting and timely financial reporting
based on internationally recognized standards and practices; and (iv) expanding audit coverage
and quality, and legislative oversight of PFM. Strengthening strategies and implementing action
plans to enhance capacity and accountability for public financial management in line ministries
and agencies at all levels of government is a priority area for action.

195. Many developments and reforms in PFM such as streamlining of business processes,
strengthening of expenditure and revenue internal controls, and enhancing monitoring and
oversight of budget development and execution are in progress, and a gradual strengthening of
PFM is taking place. The PFM reforms are having a positive impact on the overall PFM
environment, but specific improvements in systems have not yet led to full integration of official
development assistance into the overall PFM framework. The priority is for substantive
implementation of the improvements and enhancements that have been and are being
progressively introduced through legislative reforms and development work in recent years.

196. Risk assessment and mitigation. The overall financial management risk of the project
is assessed as Substantial, both before and after mitigating measures. Below is the table of
factors affecting the risk ratings and the corresponding mitigation measures:
   Legend: N=Negligible, M=Moderate, S=Substantial; H=High
          Risk            Risk Rating    Risk Mitigation Measures Incorporated         Risk After
                                                     into Project Design               Mitigation
 Inherent Risk
 Country level: Overall        M        Capacity building in Medium term                   M
 Fiscal Environment                     Expenditure Framework (MTEF) and
                                        budgeting, implementation and monitoring,
                                        commitment control and debt management;

 Entity and project           M         i) Annual project financial statements             M
 level: Funds may not                   audited by independent auditor acceptable to
 be used efficiently and                the World Bank; ii) Expenditure verification
 economically and for                   by State Treasury on all kinds of payments
 purposes intended                      made by CPMUs, PPMUs and MCPMU; iii)
                                        Financial management manual (including
                                        expenditures authorization, fund and asset
                                        management, segregation of duties) imposed
                                        to CPMU, PPMUs, and MCPMU; iv)
                                        Procurements of goods and services follow


                                                  65
         Risk            Risk Rating     Risk Mitigation Measures Incorporated            Risk After
                                                   into Project Design                    Mitigation
                                       World Bank’s procedures, with ICB and
                                       large amount procurement centralized at
                                       CPMU.

Entity and project           S         i) Technical assistance provided to CPMU               S
level: the CPMU,                       through a PHRD for preparation of the
PPMUs and MCPMU                        project; ii) TOR and CVs of key financial
may      not      have                 management positions reviewed by the
necessary capacity to                  World Bank; iii) trainings provided to
implement the project                  CPMU, PPMUs and MCPMU.

Overall Inherent Risk    Moderate                                                         Moderate
Control Risk
1. Budgeting                 S         i) Central level approvals required for                S
                                       annual plans and budgets; ii) Defined and
                                       time-bound procedures required for approval
                                       process, including steps to be taken in the
                                       event of delays; iii) annual plans and budgets
                                       to be approved prior to the start of the FY;
                                       iv) procedures and approval levels for
                                       variations to plans and budgets to be defined
                                       in the FM manual
2. Funds Flow                S         i) Funds will flow directly from the IDA to            M
                                       the designated account of the CPMU
                                       maintained at a commercial bank acceptable
                                       to the World Bank; ii) Funds for payments to
                                       be disbursed to suppliers and contractors at
                                       the provincial level will be transferred as
                                       advances to the PPMUs and MCPMU for
                                       disbursement, based on the annual
                                       operational plan and financial plan approved
                                       by Provincial People’s Committee. Every
                                       month or when the PPMU or MCPMU has
                                       disbursed 50% of the advance, PPMU or
                                       MCPMU will submit to CPMU the
                                       application for advance replenishment; iii)
                                       expenditures verifications by State Treasury
                                       at both Central and provincial levels.
3. Staffing                  S         i) FM positions, roles and responsibilities at         S
                                       central and provincial levels to be clarified in
                                       FM manual; ii) Financial management staff
                                       to be trained on IDA procedures on financial
                                       management and disbursement
4. Accounting Policy         H         Budgeting, accounting, payments, bank                  S
& Procedures, and                      account management, assets and reporting
internal controls.                     systems and procedures; responsibilities
                                       between CPMU, PPMUs and MCPMU to be
                                       clarified in Financial management manual.

                                       Payment procedures for the performance
                                       based financing of DPHCs and district
                                       hospitals are to be clearly defined in the FM
                                       Manual. Key supporting documents shall



                                                  66
          Risk            Risk Rating     Risk Mitigation Measures Incorporated           Risk After
                                                     into Project Design                  Mitigation
                                        include performance audit certification and
                                        State Treasury verification. Definition of
                                        eligible expenditures to the Bank also
                                        specifies such items.

                                        Payment rules to VSS in the amount of 2%
                                        of the health insurance premium as fixed per-
                                        capita payment for each additional near poor
                                        enrolled need to be specified in the FM
                                        Manual. Key supporting documents shall
                                        include annual verified list of new near poor
                                        enrollees provided by the provincial VSS
                                        offices.
 5. External Audit            M         Project Financial Statements will be audited          M
                                        by Independent Auditors with TORs
                                        acceptable to the World Bank using
                                        International Standards on Auditing. Scope
                                        of audit is extended to cover verification of
                                        existence and usage of medical equipments
                                        and the effectiveness of project activities.
 6.Reporting         &        M         Financial Reporting forms and templates are           M
 Monitoring                             set up in the project FM manual. The interim
                                        financial reports are submitted quarterly to
                                        the World Bank for review.
 7. Internal Audit            S         No effective internal audit in MOH.                   S
                                        Supervisory actions of CPMU against
                                        PPMUs and MCPMU will help to strengthen
                                        the internal control system.
 8. Information Systems       M         A     computerized       accounting      system       M
                                        developed for CPMU, PPMUs and MCPMU.
 Overall Control Risk     Substantial                                                     Substantial

197.    Strengths

       The Department of Planning and Finance – Ministry of Health, the government body
        responsible for implementation of the project has experience with several World Bank
        funded projects;
       Key financial management staff of the PHRD preparation project will continue to work
        for the CPMU, who have been familiar with the World Bank’s financial management and
        disbursement procedures; and
       The internal control system of the provincial Departments of Health, who will implement
        the provincial activities, is in place and documented.

198.    Weaknesses

       FM personnel of PPMUs and MCPMU do not have experience with IDA-financed
        projects;




                                                  67
      It is difficult to equip PPMUs and MCPMU with full time qualified accounting and
       financial management staff due to limited human resources in the poor central provinces;
       and
      Lack of accounting software for preparation and consolidation of project financial report.

199.   FM Action Plan
   Action                                                     Responsibility   To Be Completed By
   1- Project Financial Management Manual                                      Draft has been completed
   Project Financial Management Manual to be developed,       CPMU,            by negotiations. The
   circulated and adopted by the project.                     PPMUs            final version is due prior
   Format of IFRs (interim financial report) to be agreed     MCPMU            to effectiveness as part of
   between Bank and CPMU and specified in FM Manual                            the overall Project
                                                                               Implementation Manual
   II- Staffing
   FM staff with acceptable qualification and experience to
   be appointed by CPMU, PPMUs and MCPMU.

   Chief Accountant for CPMU is already approved.
                                                                               TORs were developed
   CPMU to appoint at least two full time accountants, and
                                                                               and approved by the
   one cashier with qualifications and experiences
                                                              CPMU,            World Bank by
   acceptable to IDA.
                                                              PPMUs            negotiations.
                                                              MCPMU            Appointment of these
   DOHs to appoint a Chief Accountant and at least one
                                                                               staff was set as
   full time accountant within each PPMU with
                                                                               disbursement condition.
   qualification and experiences acceptable to IDA.

   One full time accountant with qualification and
   experiences acceptable to IDA shall be appointed in
   MCPMU.

   II1- Training                                              CPMU,
   Training to FM personnel of CPMU, PPMUs and                PPMUs
                                                                               Effectiveness
   MCPMU to be conducted                                      MCPMU

   IV- Accounting Software and financial reporting format
   Computerized accounting software for CPMU, PPMUs
   and MCPMU to record, monitor and consolidate funds
   received and uses of funds to be developed                 CPMU             Effectiveness

   Format of IFRs (interim financial report) to be agreed
   between World Bank and CPMU

Implementation Arrangements

200. The project is set up to strengthen district level curative and preventive health services
and improve their accessibility for the economically vulnerable population. The project will be
implemented by the Ministry of Health through a CPMU at Department of Planning and Finance
and a PPMU in each of the six project provinces, plus a Project Management Unit in the Nghe
An Medical College.




                                                      68
201. Central Project Management Unit. The Ministry of Health will be responsible for the
overall direction of the project. A CPMU in the Ministry of Health Department of Planning will
have overall responsibility for the financial management of the project including budgeting,
management of funds flows, accounting, reporting and arranging audits. It will also have
responsibility for implementation of central level activities, procurement of most major
equipment, and selection of national level consultants. In addition, the CPMU will be
responsible for providing guidance and support to the PPMUs and MCPMU.

202. Provincial Project Management Units. The role of each PPMU will be to: (i)
coordinate and manage provincial level project activities, including procurement; (ii) develop a
specific action plan for the province in line with the project components; (iii) prepare a
procurement plan; (iv) maintain 90 day project account and ensure timely disbursement of funds;
(v) monitor and supervise the implementation of the action plan; and (vi) assemble the required
reports on performance and participate in project reviews.

203. Nghe An Medical College PMU. The role of each MCPMU will be to: (i) coordinate
and manage investment activities designed for Nghe An Medical College, including procurement
(ii) develop a specific action plan in line with the respective project sub-component; (iii)
contribute to the preparation of a procurement plan; (iv) maintain 90 day project account and
ensure timely disbursement of funds; (v) monitor and supervise the implementation of the action
plan; and (vi) assemble the required reports on performance and participate in project reviews

204. Staffing. The government will appoint key financial project staff for the CPMU
including: Chief Accountant, at least two Accounting Officers, and one cashier. In PPMUs,
there will be a Chief Accountant and at least one Accounting Officer. This staffing will be
adequate for the financial management of project funds to be handled at the provincial level. All
Chief Accountants are required to have education and experience in finance. In MCPMU there
will be one accountant.

205. Accounting Policies, Systems, and Procedures. The project will adopt accounting
policies and procedures acceptable to IDA. The current accounting system used in the Health
Departments is the Accounting System for Investment project which is based on the Decision
214 of MOF. The current chart of accounts of the project management units will need to be
revised, despite conformity with Decision 214, in order to meet the project financial management
requirements of the report by project components, activities and disbursement categories.

206. Internal Controls. CPMU, PPMUs and MCPMU are responsible for ensuring that an
adequate internal control framework and internal controls are in place and operating. Overall,
the internal control system at the provincial Departments of Health is in place, in accordance
with government regulations on the government administrative agencies, including authorization
of payments and transactions, segregation of duties, asset physical management, cash
management, budget formulation and variance analysis, and financial reporting.

207. Payments made for all kinds of expenditures will be verified by the Central State
Treasury (for CPMU’s expenditures) and Provincial State Treasury (for PPMUs’and MCPMU’s




                                               69
expenditures). The State Audit of Vietnam and Ministry of Health’s Inspection will perform
examination on ad hoc and regular basis.

208. Management of fixed assets and stock purchased by the project will be the responsibility
of PPMUs and MCPMU and the beneficiary. Physical inspection and reconciliation with
accounting records will be performed at least every year, in conjunction with the regular stock
take of the Departments of Health as regulated.

Reporting and Monitoring.

209. Each PPMU, including MCPMU, will submit to CPMU a quarterly IFR within 30 days of
the end of the quarter. The CPMU will prepare and submit a consolidated IFR for the project
within 45 days of the end of the quarter. The IFRs, which are unaudited, will cover all project
activities. The IFRs will be based on the Aligned Monitoring Tool (AMT), which is regulated
under the Decision 803 of the Ministry of Planning and Investment.

210. The IFRs include the following forms (with the reference number as indicated in the
AMT package).

Financial reports (analyzing expenditures against budgets)
    IFR1: Sources and Uses of Funds by expenditure category;
    IFR2: Disbursement by component;
    IFR3: Statement of Designated Account Reconciliation

Contract monitoring reports
    Form 12: Contract Progress; and
    11 Forms (Form 7- Form 11): Reports on Procurement Monitoring.

211. Impact of Procurement Arrangements. Procurement procedures for goods and
consultant services will be in line with World Bank Guidelines. While most ICB procurement is
being managed at the central level, NCB for civil works will be done at provincial level. This
feature has been considered when designing the financial management arrangement.

212. Internal Audit. The Inspectorate General (IG) of the Ministry has limited capacity to
conduct an internal audit function. Instead, the CPMU should conduct the supervision to the
PPMUs and MCPMU periodically and ad hoc, with specific programs in all technical,
operational and financial management areas, with detailed documentations in findings and
adequate follow up actions.

213. External Audit. Financial statements for the project will be prepared by the CPMU on
an annual basis. The project’s annual financial statements will be audited in accordance with
international auditing standards and in compliance with the independent auditing regulations of
Vietnam. The auditor’s reports will be made available to IDA within six months of the end of
the fiscal year.




                                              70
214. The auditor will be required to express an audit opinion covering the project financial
statements, use of funds, SOEs and Designated Account, which are prepared in accordance with
International Public Sector Accounting Standards. A management letter addressing internal
control weaknesses will also be provided by the auditor together with the audit report on the
project financial statements.

215. The audit TOR is to be extended to include the verification of existence and usage of
medical equipments and stocks of the project, and the effectiveness of project activities, from
central to district and end-user level. An independent auditor acceptable to the World Bank shall
be appointed to conduct the audit of the annual financial statements of the project in accordance
with Terms of Reference acceptable to IDA.

216. Governance and anti-corruption. To continue strengthening the financial management
arrangements for the project and to help further reduce the risk of fraud and corruption, particular
emphasis during preparation has been given to the financial management arrangements in the
following areas; supervision will also focus on them:

      Clear FM responsibilities with avoidance of gaps and overlaps and maintenance of
       segregation of duties of FM personnel included in the FM manual;
      External audit TOR is extended to include verification of existence and usage of medical
       equipments of the project, and verification of effectiveness of project activities, from
       central to district and end-user level; and
      CPMU periodical and ad hoc supervision over PPMUs and MCPMU with specific
       program in technical, operational and financial management areas, with detailed
       documentations in findings and adequate follow up actions. Enhanced disclosure and
       transparency of financial information.

217. Funds Flow. The traditional disbursement method with direct payments for major
contract payments and a Designated Account will be used. One Designated Account in US
dollars at the central level will be set up and managed by the CPMU at a bank acceptable to IDA.
The CPMU will approve and make payments to suppliers in accordance with contracts from the
Designated Account or submit a withdrawal application to the IDA for direct payments. Each of
seven PPMUs and MCPMU will open a commercial bank account to receive advances from
CPMU.




                                                71
                                        Flow of Fund Mechanism


                         IDA                                   MoF

                                               W/A                          propose/
                          DA replenishment                                  approval W/A
                                                                                  payment request
Central               Designated        payment order          CPMU                                   Treasury
                       Account                                                                         Office
                                                                                       certificate

                                                                            invoices

                                                                         Suppliers/
                             Payments                                   Consultants

                         advance                        Plan     SOE


                                                                                  payment request
Province                Local           payment order          PPMU                                   Treasury
                        Bank                                                                           Office
                                                                                       certificate


                                                                 invoices
                                                          Suppliers/
                             Payments                    consultants/


218. Funds for payments to be disbursed to suppliers and contractors at the provincial level
will be transferred as advances to the PPMUs and MCPMU for disbursement on a 90-day
acquittal basis, based on the annual operational plan and financial plan approved by Provincial
People’s Committee. Every month or when the PPMU or MCPMU has disbursed 50% of the
advance, PPMU or MCPMU will submit to CPMU the application for advance replenishment.
Supporting documents for the application include: i) request for replenishment; ii) SOEs for the
expenditures; iii) State Treasury verification on the SOE. .

219. Disbursement arrangements. Disbursement will be made against project component
(not by categories like current IDA-funded projects). See more detail in the table below. It is
expected that the proceeds of the credit will be disbursed over a period of six years from 2010 to
2016.
           Disbursement by Components                           USD (million)               % Financing
    1      Supporting health insurance for the economically         9.11                             100%
           vulnerable population
    2      Strengthening district health services                     32.2                           100%
    3      Improving supply and quality of human resources            15.99                          100%
           for health
    4      Monitoring, Evaluation, and Project Management             7.71                           100%
           TOTAL                                                      65.00

220. No withdrawals shall be made for payments made prior to the date of the Financing
Agreement; However retroactive financing is allowed for the withdrawals up to an aggregate
amount not to exceed SDR 650,000 (US$1.0 million) for payments made prior to the date of the


                                                        72
Financing Agreement but on or after January 1, 2010. All the procurements made during the
period eligible for retroactive financing should follow the WB’s procurement guidelines.

221. No withdrawals shall be made for the payments under Categories (1) and (2) until the
Recipient has furnished to the Association satisfactory evidence that: (i) the CPMU has
appointed one chief accountant and two accountants all with qualifications and experience and
under terms of reference acceptable to the Association; (ii) PPMUs have each appointed one
chief accountant and one accountant all with qualifications and experience and under terms of
reference acceptable to the Association; (iii) MCPMU has appointed an accountant with
qualifications and experience and under terms of reference acceptable to the Association and (iv)
all chief accountants and accountants have been trained to understand and comply with Project
financial management guidelines and procedure.

222. Use of Statement of Expenditures. Withdrawals from the Credit will be made on the
basis of SOEs and the following supporting documentation shall be provided with each
application for withdrawal:

        For request for reimbursement and for reporting eligible expenditures paid from the
         Designated Account:
            - For expenditures under contracts subject to the IDA’s prior review; List of
                payments against contracts in the form specified in Attachment 4 of the
                Disbursement Letter, together with records evidencing eligible expenditures
                (e.g., copies of receipts, supplier invoices).
            - Statement of Expenditure in the form specified in Attachment 3 of the
                Disbursement Letter for all other expenditures/contracts not subject to the IDA
                prior review.

        For requests for Direct Payment:
            - Records evidencing eligible expenditures, e.g., copies of receipts, supplier
                invoices

223. Documentation supporting SOE disbursements will be kept by the MOH for the life of
the project and one year after the receipt of the audit report for the last year in which the last
disbursement was made. These documents will be made available for review by the auditors and
IDA supervision missions. Expenditures paid from the Designated Account shall be reported
monthly.

224. Designated account. A Designated Account will be opened for the CPMU in a
commercial bank with terms and conditions acceptable to IDA, including appropriate protection
against set off, seizure, and attachments. The Designated Account will be denominated in US
dollars and initially will have an authorized allocation of US$3 million. Once the total project
disbursement reaches US$20 million (SDR 12.5 million) the authorized allocation will increase
from US$3 million to US$5 million. The Designated Account will cover the eligible
expenditures in all components. Replenishment applications should be submitted monthly or
when the account is drawn by 30% of the authorized allocation, whichever occurs first. All
replenishment applications will be accompanied by reconciled bank statements. For withdrawals


                                               73
outside of the Designated Account (i.e. applications for reimbursement, direct payment, or for
issuance of Special Commitments), a minimum application value US$500,000 will apply.

225. Eligible expenditures for Component One: (a) partial costs of health insurance
premiums for the near poor (30% or 40% of the premium depending on the enrollment type); (b)
social marketing, health information and education campaign, which involves local technical
assistance (consulting services), operating costs for conducting the campaign (e.g. workshops,
print materials, media promotions, etc.); (c) a portion of administrative operating expenses of the
district level Vietnam Social Security Services in the amount of 2% of the cost of premium per
each newly enrolled near-poor (subject to submission of verified annual lists of newly enrolled
near poor); (d) technical assistance (consulting services) to streamline instruments for
identification of the near poor; (e) workshops; (f) in-country training; (g) study tours and related
training fees, travel cost and per-diem; (h) office equipment and consumables.

226. Eligible expenditures for Component Two: (a) medical equipment; (b) civil works; (c)
consulting services (local and foreign); (d) performance-based grants to preventive health centers
(Such grants to be used for pharmaceuticals, medical supplies and consumables, operating costs,
consultants. Payment to civil servants is not eligible); (e) performance-based grants to district
hospitals (Such grants to be used for pharmaceuticals, medical supplies and consumables,
operating costs, consultants. Payment to civil servants is not eligible); and (f) ambulances and
vehicles. Payment of performance based grants shall be conditional on the submission of an
audited performance report for involved health care facilities.

227. Eligible expenditures for Component Three: (a) tuition fee in relation to short-term
and long term training or any preparatory courses for such training; (b) per-diem, transportation
and living expenses related to training; (c) consulting services (local and foreign); (d) operating
costs necessary for conducting training activities (renting facility, providing stationary and
teaching equipment, food catering, translation and interpretation); (e) professional fees,
transportation and accommodation costs of trainers, (f) teaching equipment, instructional
materials and aids, including audio-visual equipment, IT equipment, books, stationary, medial
simulators, laboratory equipment; (g) books; (h) accommodation and per-diem costs for medical
personnel deployed to lower level of health services for medical rotations.

228. Eligible expenditures for Component Four: (a) local and foreign consultants; (b) minor
office repairs; (c) office equipment, consumables, and IT technologies; (d) vehicles; (e) operating
costs (such as office rent, costs of conducing workshops, meetings, translations/interpretation,
telecommunication, fuel and other transpiration related costs, per-diem for CPMU, PPMUs and
MCPMU when travelling for business); and (f) costs related to monitoring, data collection and
auditing.

229. Supervision plan. Supervision of financial management will be performed on a risk-
based approach. It will involve two supervision visits in the first year of implementation, with
the subsequent supervision timetable based on findings in the first year. If there are no
significant weaknesses or deficiencies, financial management supervision may be reduced to
once a year. The supervision will review the project’s financial management system, including
but not limited to operation of the SA, SOE, internal controls, reporting and follow up of audit



                                                74
findings, and the mission’s findings. Financial management supervision will be conducted by
IDA’s financial management specialist.




                                            75
                             Annex 8: Procurement Arrangements
                      VIETNAM: Central North Region Health Support

A. General

230. 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, revised
October 2006; (hereinafter called Procurement Guidelines) and "Guidelines: Selection and
Employment of Consultants by World Bank Borrowers" dated May 2004, revised October 2006
(hereinafter called Consultant Guidelines) and the provisions stipulated in the Financing
Agreement. The various items under different expenditure categories are described in general
below. For each contract to be financed by the Loan/Credit, the different procurement methods
or consultant selection methods, the need for pre-qualification, estimated costs, prior review
requirements, and time frame are agreed between the Recipient and the World Bank in the
Procurement Plan. The Procurement Plan will be updated at least annually or as required to
reflect the actual project implementation needs and improvements in institutional capacity.

231. Procurement of Works. Works procured under this project would mainly include
building new DPHCs at 30 districts in 6 project provinces. The estimated cost for constructing
each district preventive health center is about US$200,000. Lessons and experiences from other
projects in the health sector have indicated the importance of timely procurement planning and
realistic unit costs for construction of the DPHCs. Lessons and experiences from other projects
in the health sector were thoroughly discussed during pre-appraisal and appraisal missions. The
key factor is to establish realistic unit costs instead of the current unit cost standards which could
be substantially lower than the market price in particular if the construction is in remote and
mountainous areas where the transportation cost is higher and where there is a shortage of
qualified contractors. It is crucial for MOH to ensure the realistic unit cost estimates for all
constructions be used under the project in order to avoid delays in implementation of civil works.

232. Individual Contracts for Works estimated to cost US$ 3.0 million or more will be
procured using ICB procedures. For all ICB Works contracts, the procurement will be done
using the most updated version of the World Bank’s Standard Bidding Documents for Works
(SBD Works) corresponding to the applicable Guidelines.

233. Contracts for works estimated to cost less than US$ 3.0 million but more than
US$100,000 will be procured using NCB procedures. For procurement of all NCB Works
contracts, the Vietnamese language Sample Bidding Document for works, acceptable to the
World Bank, shall be used. World Bank’s standard NCB contract in Vietnamese will be used
and the procurement guideline of the World Bank and the National Procurement Laws will be
followed. Whenever any procedure in the National Procurement Laws is inconsistent with the
requirements of the World Bank’s guidelines, the World Bank’s guidelines shall prevail. Details
can be found in the NCB Annex which was discussed during the appraisal mission. The NCB
Annex covers: eligibility, registration, advertising, standard bidding documents, qualification
criteria, bid submission, bid opening and bid evaluation, rejection of bids and re-bidding,
complaints by bidders, fraud and corruption, right to inspect and audit, license, and publications
of the award of contracts.


                                                 76
234. Contracts estimated to cost US$100,000 or less will be procured under Shopping
procedures, using the Vietnamese language Sample Request for Quotations (RFQ) developed by
the World Bank procurement team in Hanoi.

235. Procurement of Goods. Goods include vehicles (such as 32 ambulances for hospitals,
30 four-seat cars for DPHCs, 10 cars of 7-, 12-, 45-seat for PPMUs and MCPMU); medical
equipment for emergency and intensive care, internal medicine and infection diseases,
gynecology and pediatrics; office equipment for CPMU, 6 PPMUs and MCPMU; audio-visual
equipment for training and information dissemination purposes; instructional materials and
textbooks for medical colleges; IT equipment for PPMUs, MCPMU and medical colleges;
various software packages for the office, medical college, hospitals and DPHCs; and office
supplies.

The following procurement methods and documents will be used for the procurement of goods:
    ICB procedure and the most updated version of the World Bank’s Standard Bidding
       Documents for Goods, corresponding to the applicable Guidelines, shall be used to
       procure goods estimated to cost the equivalent of US$300,000 or more per contract.
    NCB procedure and the Vietnamese language sample Bidding Documents for NCB
       Goods contracts, acceptable to the World Bank, shall be used for the procurement of
       goods estimated to cost less than US$300,000 but more than US$50,000 equivalent per
       contract.
    Shopping procedure in accordance with paragraph 3.5 of the Procurement Guidelines and
       sample Request for Quotation (RFQ), agreed with or acceptable to the World Bank, to
       procure goods estimated to cost the equivalent of US$50,000 or less per contract.
    Direct Contracting may be used if applicable on an exceptional and case-by-case basis,
       subject to the World Bank's prior review and approval of justifications provided at the
       stage of procurement planning. Justifications for Direct Contracting shall meet
       requirements and procedures set forth in paragraphs 3.6, 3.7 of the Procurement
       Guidelines.

236. Selection of Consultants. As a rule, all consultants, either firms or individuals, will be
selected competitively following the World Bank procedures. Quality- and Cost-based Selection
(QCBS) will be the default selection method under the project. The threshold for short-lists
comprised entirely of national consultants is US$200,000. The following selection procedures
will be used:

      Quality- and Cost-Based Selection. Consulting services estimated to cost more than
       US$100,000 per contract will be procured using the QCBS method as the preferred
       method for selecting consulting firms.
      Least-Cost Selection (LCS). Services for assignments that meet the requirements of
       paragraph 3.6 of the Consultant Guidelines may be procured under the LCS method in
       compliance with provisions set forth in paragraphs 3.1 and 3.6 of the same Guidelines.
      Selection based on the Consultants’ Qualification (CQS). Consulting services to cost less
       than US$100,000 per contract may be procured through the CQS method in accordance
       with provisions set forth in paragraphs 3.1, 3.7, 3.8 of the Consultant Guidelines.



                                              77
      Selection of Individual Consultants (IC). Assignments meeting the conditions specified
       in paragraph 5.1, section V of the Consultant Guidelines will be procured in accordance
       with IC procedure set forth in paragraphs 5.2 through 5.4 of the same section.
      Single–Source Selection (SSS) may be used if applicable on a case by case basis, subject
       to the World Bank’s prior review and approval of justifications provided at the stage of
       procurement planning. Justifications for SSS shall meet requirements set forth in
       paragraphs 3.9, 3.10, 3.11 of the World Bank’s Consultant Guidelines.
Short lists of consultants for services estimated to cost less than US$ 200,000 equivalent per
contract may be composed entirely of national consultants in accordance with the provisions of
paragraph 2.7 of the Consultant Guidelines.

237. Operating Costs. Operating costs will be disbursed from the government counterpart
funding) on the basis of annual budgets to be prepared by the CPMU, and would include the
project incremental costs related to project implementation activities such as: office supplies,
utilities, operating and maintenance expenditures of office equipment and vehicles, translation of
documents and interpreter services required for workshops, seminars, etc.

238. Training. All training programs, seminars, workshops, study tours and other learning
events to be financed under the project will be subject to review by the IDA. Each year (or as
required periodically) the CPMU will prepare and submit a learning plan for the whole project
including all six provinces for review by the IDA. The training program will provide details of
the individual learning events, including: the objective(s) of the event, the number/level of the
target group, the estimated cost, the location of the program, the duration of the event, the
proposed methods of procurement and other relevant details

B. Assessment of the agency’s capacity to implement procurement

239. An assessment of the capacity of the Implementing Agency to implement procurement
actions for the project was carried out during pre-appraisal (August 2009) and updated at the
appraisal (November 2009). The assessment focused mainly on critical issues specific to this
project and the health sector, as the generic issues were discussed in the Vietnam Country
Procurement Assessment (CPAR) in 2002 and 2004.                   The assessment reviewed the
organizational structure for implementing the project and the interaction between the project’s
staff responsible for procurement and officers at the MOH’s relevant central units for
administration and finance, as well as officers at relevant provincial departments in the
respective provinces. An action plan has been developed to strengthen capacity at the central
and provincial levels and to mitigate the identified risks associated with procurement of medical
equipment, medicament, as well as works for upgrading hospital facilities. The Action Plan was
discussed and agreed with all concerned parties during the appraisal mission. Decentralization of
NCB and Shopping contracts for goods and works to provincial level has been discussed and
agreed with CPMU, PPMUs and MCPMU as well.

240. Procurement activities will be carried out by the CPMU being established under MOH,
six PPMUs being established in the six project provinces, and MCPMU established under the
Nghe An Medical College. At the initial stage, the Department of Planning and Finance under
MOH is in charge of identification and preparation of the project. Recently, MOH has issued a


                                               78
decision on establishment of the central implementation unit/agency (i.e. CPMU) that consists of
specialists from related functional departments of the ministry. At the same time at provincial
level, each Provincial People’s Committee of the six project provinces has also established a
respective provincial implementation unit (PPMU) with a core team consisting of specialists
from relevant divisions under the provincial DOH.

241. At the central level, a core team of the CPMU is staffed by a director, a deputy director, a
chief accountant, at least two staff in charge of procurement, an expert in charge of contract
management for civil works, at least one technical expert for medicine and medical equipment.
The CPMU director has worked under an ADB-financed project for several years, and the deputy
director has experience working with some WB-funded projects administered by MOH, so both
of them have basic knowledge of procurement under Multilateral Development Bank funding.
The designated staff in charge of procurement has limited knowledge of the World Bank’s
procurement policies and procedures, so there will clearly be a need for hiring an international
procurement advisor with extensive experience in medical equipment/medicament, technical
specifications development, and international bidding procedures. Some other local individual
consultants (at least two persons) should also be hired in order to supplement the procurement
capacity and assist the implementation of CPMU.

242. At the provincial level, each of the six PPMUs is staffed by a director, a deputy director,
a chief accountant, at least one staff in charge of procurement, and at least an expert in charge of
contract management for civil works. In all implementing agencies, the procurement function is
staffed by people, who possess adequate qualifications and proven experience in handling
procurement under Vietnam Law on Procurement made effective in 2006. The procurement
capacity at the provincial level is more limited than that at the central level, as the project
provinces are the disadvantaged region in the middle part of Vietnam, with high concentration of
poor and ethnic minorities living under unfavorable socioeconomic conditions and even difficult
circumstances. Under such unfavorable conditions, it is difficult to attract and retain qualified
staff or consultants for PPMUs.

243. The key issues and risks concerning procurement for implementation of the project have
been identified and include:

   Slow procurement implementation
   Tendency/Reluctance/Unwillingness/Inability to follow World Bank Procurement Guidelines
    and insistence on following Vietnam Law on Procurement even when it conflicts with World
    Bank Procurement Guidelines
   Bureaucratic processing and approvals in procurement cycle management
   Poor cost estimates
   Biased and narrow technical specifications for medical equipment

244. Action Plan to Strengthen Capacity: The corrective measures which have been
discussed and agreed are:




                                                79
  No                            Actions                                       Deadline
 (i)    - CPMU and PPMUs are established and staffed with          - Completed by negotiations
        director, deputy director, chief procurement officer
        and chief accountant.
 (ii)   - Hiring an international procurement advisor with         - TOR for this international
         extensive experience in medical equipment,                  individual consultant was
         technical specifications development, and                   prepared and submitted to the
         international bidding procedures to assist CPMU in          World Bank by negotiations.
         implementing ICBs and provide on-the-job trainings          The consultant should be
         to local CPMU staff.                                        contracted by effectiveness.
 (iii) - Hiring at least two local individual consultants as       - TORs satisfactory to the
          procurement staff working for CPMU to assist               World Bank were prepared
          regular implementation of procurement activities.          and approved by negotiations.
 (iv) - Each PPMU should contract one more                         - TORs satisfactory to the
          procurement officer and at least two staff for             World Bank were prepared
          supervising civil works at the respective province.        and approved by negotiations.
          MCPMU shall contract one procurement officer.
 (v)    - Regular trainings by the World Bank’s procurement        - The first procurement training
          specialists on the World Bank’s procurement                is scheduled at project launch
          policies and procedures for project staff at all level     workshop
          to be conducted and even on ad-hoc basis if needs
          arise.
 (vi) - Arrangement among MOH and Provincial People’s              - This required delegation
          Committees (PPCs) to establish clear instructions          arrangement will be set as
          on approval authorities and review procedures for          project covenant.
          planning and implementation of procurement
          activities under the project.
 (vii) - A tracking system will be piloted and rolled out at       - This will be set as project
          both central and provincial levels to monitor              covenant.
          internal process of procurement clearances within
          MOH/PPCs
 (viii) - The Operation Manuals for the project that includes      - Cleared with the Bank before
          delegation of approval authorities, procurement            project effectiveness
          policies and procedures to be followed, and draft
          bidding documents for procurement of goods and
          works under NCB and Shopping procedures,
          should be prepared and agreed with the World
          Bank.
 (ix) - Regular support, guidance, supervision by the              - During project implementation
          Bank’s designated procurement specialists.

245. Given the complexity involved with procurement of medical equipment/medicament and
civil works, as well as the limited capacity of implementing agencies at all levels, the overall
procurement risk for the project is High. The residual risk rating after mitigation would be
Substantial.



                                                80
246. Procurement Management under the project. Based on the lessons and experiences
from other projects in the health sector, the mission agreed with MOH that procurement through
ICB and major consulting services contracts on management, monitoring and evaluation, surveys
and auditing will be managed by the CPMU. CPMU will be supported by international and
national procurement consultants as well as contracted staff. The CPMU is responsible for the
quality of all procurement activities and compliance with the procedures stipulated in the World
Bank’s guidelines and project Financing Agreement. The CPMU will report to the World Bank
regularly on procurement progress and issues and will seek approval and no objection from the
World Bank on the annual procurement plan and all contracts which are subject to prior reviews
by the World Bank as defined in the project Financing Agreement.

247. The PPMUs will be responsible for procurement of goods and civil works in the
respective provinces under the NCB and Shopping procedures. The MCPMU will be responsible
for the procurement of goods and services designated for Nghe An Medical College. The review
and approval authority for civil works will be delegated from MOH to the Provincial People’s
Committee (PPC). This delegation of responsibility will be recorded in a Memorandum of
Understanding (MOU). The review and approval authority will include: annual provincial
procurement plan, construction designs, costing, bidding documents, technical specifications,
evaluation of bids, contract awards, contract signing, payments, inspection and acceptance. The
PPMUs and MCPMU will carry out the actual procurement, and report to the PPC and the
CPMU. To support this decentralized arrangement, the CPMU will carry out several training on
procurement in the first year to avoid startup difficulties. The training will continue throughout
the project implementation period because most of the projects encounter high staff turnover and
one or two trainings are normally needed for each incoming new staff. Hands-on training on the
Shopping and NCB procedures, use of standard documents and evaluation forms, and procedures
on selection of individual consultants will be provided by the CMPU. The hands-on training is
essential to ensure full compliance with the World Bank’s procurement procedures and policies,
and it should be mandatory before any procurement activity starts in the PPMUs and MCPMU.
PPMUs may need to start their civil works procurement at different times whenever they are
capable for basic procurement tasks. A roll out plan for decentralization of small procurement
can be worked out with the agreement by the World Bank supervision team. The CPMU will
assist PPMUs and MCPMU in their first two contracts. The PPMUs and MCPMU will provide
their inputs to the ICB bidding documents, including technical specifications for medical and lab
equipment, packaging, evaluation of bids, and contract management. The PPMUs and MCPMU
will be responsible for equipment installation, testing, and operations training.

248. The Composition of the CPMU and the PPMUs and MCPMU and the job description of
each position are summarized in Annex 6 of Institutional and Implementation Arrangements.
These positions will be filled by government officials, contracted staff, and long- and short-term
consultants.

C. Procurement Plan

249. The Recipient, at appraisal, developed a procurement plan for project implementation
which provides the basis for the procurement methods. This plan has been agreed between the
Recipient and the project Team on November 12, 2009 and is available at the CPMU office in



                                               81
       the Ministry of Health of Vietnam, 138A Giang Vo,Vietnam. It will also be available in the
       project’s database and in the World 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
       implementation needs and improvements in institutional capacity.

       250. Thresholds for Prior Review: The following contracts will be subject to prior review
       by the Bank:

               a. For Goods: All ICB contracts and NCB contracts estimated to cost above
                  US$200,000 per contract and all Direct Contracting regardless of values;
               b. For Civil Works: All ICB contracts and NCB contracts for estimated to cost above
                  US$500,000 per contract;
               c. For Consulting Services: consulting assignments with firms estimated to cost above
                  US$100,000 per contract and all Single-source selection (SSS) for assignments with
                  consulting firms regardless of values; and
               d. For Individual Consultants: individual assignments with Procurement Advisor to
                  CPMU, procurement staff working for CPMU, procurement staff working for each of
                  the PPMU and MCPMU, Financial Management staff working for CPMU, PPMUs,
                  and MCPMU, and all Sole-Source selection (SSS) for individuals regardless of
                  values.

       D. Frequency of Procurement Supervision

       251. In addition to the prior review supervision to be carried out from World Bank offices, the
       capacity assessment of the Implementing Agency has recommended twice-a-year supervision
       missions to visit the field to carry out post review of procurement actions.

       E. Details of the Procurement Arrangements Involving International Competition

       1. Goods, Works, and Non Consulting Services
       (a) List of contract packages to be procured following ICB and direct contracting:

                    2                  3             4             5       6             7            8           9
Ref.     Contract Description       Estimated   Procurement    P-Q      Domestic     Review by     Expected   Comments
No.                                   Cost        method               Preference      Bank          Bid
                                     (USD)                              (Yes/No)    (Prior/Post)   Opening
                                                                                                     Date


            Procurement of          2,880,000
         vehicles consisting of 3
                   lots:

                                                                                                                 to be
 1      Lot 1: 32 Ambulances        1,600,000      ICB         No        TBD           Prior       Aug-10     implemented
        for hospitals under                                                                                    by CPMU
        component B1


        Lot 2: 30 cars (4-seat)
        for district PHC under       840,000
        component B2



                                                              82
     Lot 3: 10 cars (7, 12 and       440,000
     45-seat) under
     component C1 and D
     Procurement of
     medicament &
2    equipment for                                  ICB         No         TBD           Prior       Oct-10
                                     975,000
     Emergency and Intensive
     Care
     Procurement of
     medicament &
     equipment for Internal
3                                    4,369,000      ICB         No         TBD           Prior       Oct-10
     Medicine and Infection
     Diseases (consisting of 3
     lots)
     Procurement of
     medicament &
     equipment for
4                                                   ICB         No         TBD           Prior       Oct-10
     Gynecology and                  3,834,000
     Pediatrics (consisting of
     2 lots)


    2. Consulting Services

    (a) List of consulting assignments with short-list of international firms.
                                 2                  3             4           5              6           7
     Ref. No.          Description of            Estimated   Selection    Review by      Expected    Comments
                        Assignment                 Cost      Method         Bank         Proposal
                                                  (USD)                  (Prior/Post)   Submission
                                                                                           Date

                Consulting services
        1       for Social Marketing             385,000     QCBS           Prior        Jun-10        to be
                and Communication                                                                    selected
                Individual                                                                              by
        2       Procurement Advisor              120,000        IC          Prior        Mar-10       CPMU
                procurement
                Individual Consultant
                for Hospital
        3                                        120,000        IC          Prior        Jun-10
                Management & RBF
                implementation
                Selection of financial
        4                                         90,000      LCS           Prior        Dec-10
                audit firm

    (b) Consultancy services estimated to cost above US$100,000 per contract and all Single-source
    selection (SSS) of consultants (firms) for assignments regardless of cost estimates will be subject
    to prior review by the World Bank.

    (c) Short lists composed entirely of national consultants: Short lists of consultants for services
    estimated to cost less than USD 200,000 equivalent per contract may be composed entirely of



                                                             83
national consultants in accordance with the provisions of paragraph 2.7 of the Consultant
Guidelines.

F. National Competitive Bidding Procedures

252. The procedure to be followed for National Competitive Bidding shall be those set forth in
Article 18 on Open Bidding of the Law on Procurement 61 / 2005/QH11 dated November 29,
2005, Law Amending and Supplementing a Number of Articles of the Laws Concerning Capital
Construction Investment 38/2009/QH12 dated June 19, 2009, and Decree 85/2009/ND-CP,
Guiding the Bidding Law and the Selection of Construction Contractors under the Construction
Law dated October 15, 2009 (collectively, “National Procurement Laws”) with due
consideration to economy, efficiency and transparency as set forth in, and broad consistency
with, Section I of the of the “Guidelines for Procurement under IBRD Loans and IDA Credits”
published by the Association in May 2004 and revised in October 2006 (the Guidelines) and
required by paragraphs 3.3 and 3.4 of the Guidelines. Whenever any procedure in the National
Procurement Laws is inconsistent with the requirements of said paragraphs 3.3 and 3.4 of the
Guidelines, the latter shall prevail, including the following:

Eligibility

253. The eligibility of bidders shall be as defined under Section I of the Guidelines;
accordingly, no bidder or potential bidder shall be declared ineligible for contracts financed by
the Association for reasons other than those provided in Section I of the Guidelines. Foreign
bidders shall be eligible to participate in bidding under the same conditions as national bidders.
In particular, no domestic preference over foreign bidders shall be granted to national bidders in
bid evaluation, nor shall foreign bidders be asked or required to form joint ventures with national
bidders in order to submit a bid. Bidders located in the same province or city as the procuring
entity shall not be given preference over bidders located outside that city or province.

254. In addition to the foregoing requirements, equitized Government-owned enterprises in
which the Recipient holds less than fifty percent of the shares are eligible to participate, provided
that the procuring entity or investment owner does not own shares (or represent the
Government's shares) in the enterprise and the governing Board and management team are
autonomous from the procuring entity and the investment owner. Military or security units or
enterprises established under, reporting directly or indirectly to, or owned wholly or partly by,
the Ministry of Defense or the Ministry of Public Security shall not be permitted to bid.

Registration

255. Registration shall not be used to assess bidders’ qualifications. A foreign bidder shall not
be required to register as a condition for submitting its bid and, if determined to be the lowest
evaluated responsive bidder, shall be given reasonable opportunity of registering, without any let
or hindrance. Bidding shall not be restricted to any particular class of contractors, and non-
classified contractors shall also be eligible to bid.




                                                 84
Advertising; Time for Bid Preparation

256. Invitations to bid shall be advertised in at least one widely circulated national newspaper,
allowing a minimum of thirty (30) days, from the date of the invitation to bid or the date of
availability of the bidding documents, whichever is later, for the preparation and submission of
bids, and potential bidders shall be allowed to purchase bidding documents up to any time prior
to the deadline for the submission of bids. In addition, the Recipient is encouraged to advertise
in the Government Public Procurement Bulletin and on a free and open access website.

Standard Bidding Documents

257.   Standard Bidding Documents, acceptable to the Association, shall be used.

Qualification Criteria

258. Qualification criteria shall be clearly specified in the bidding documents, and all criteria
so specified, and only such specified criteria, shall be used to determine whether a bidder is
qualified. Qualification shall be assessed on a pass or fail basis and merits points shall not be
used. Such assessment shall only take into account the bidder’s capacity and resources to
perform the contract, specifically its experience and past performance on similar contracts,
capabilities with respect to personnel, equipment and construction and manufacturing facilities,
and financial capacity.

Bid Submission, Bid Opening and Bid Evaluation

259. Bidders may submit bids, at their option, either in person or by courier service or by mail.
Bids shall be opened in public, immediately after the deadline for submission of bids. Bids
received after the deadline for bid submission shall be rejected and returned to the bidders
unopened.

(a)    Bidding documents shall be sold to anyone who is willing to pay the required fee of the
bidding documents which shall not exceed the costs of printing, reproduction and delivery, and
no other conditions shall be imposed on the sale of the bidding documents.

(b)     Evaluation of bids shall be made in strict adherence to the criteria that shall be clearly
specified in the bidding documents and quantified in monetary terms for evaluation criteria other
than price; merit points shall not be used in bid evaluation.

(c)    A contract shall be awarded to the technically responsive bid that offers the lowest
evaluated price and no negotiations shall be permitted. A bidder shall not be required, as a
condition for award, to undertake obligations not specified in the bidding documents or
otherwise to modify the bid as originally submitted.

(d)    A bidder shall not be eliminated from detailed evaluation on the basis of minor, non-
substantial deviations.

(e)    No bidder shall be rejected on the basis of a comparison with the employer's estimate and


                                               85
budget ceiling without the Association’s prior concurrence.

(f)   A copy of the minutes of the public bid opening shall be promptly provided to all bidders
who submitted bids, and to the Association with respect to contracts subject to prior review.

Rejection of All Bids and Re-bidding

260. All bids shall not be rejected or new bids solicited without the Association’s prior written
concurrence.

Complaints by Bidders and Handling of Complaints

261. The Recipient shall implement an effective and independent protest mechanism allowing
bidders to protest and to have their protests handled in a timely manner.

Fraud and Corruption

262. The Association shall declare a firm or individual ineligible, either indefinitely or for a
stated period, to be awarded a contract financed by the Association, if it at any time determines
that the firm or individual has, directly or through an agent, engaged in corrupt, fraudulent,
collusive, coercive or obstructive practices in competing for, or in executing, a contract financed
by the Association.

Right to Inspect/Audit

263. Each bidding document and contract financed from the proceeds of a Credit shall include
a provision requiring bidders, suppliers, contractors and subcontractors to permit the Association,
at its request, to inspect their accounts and records relating to the bid submission and
performance of the contract and to have said accounts and records audited by auditors appointed
by the Association. The deliberate and material violation by the bidder, supplier, contractor or
subcontractor of such provision may amount to obstructive practice.

License

264. Foreign contractors shall be given a reasonable opportunity to apply for and obtain work
license, which shall not be arbitrarily withheld.

Publication of the Award of Contract

265.    The Recipient shall publish the following information on contract award in the
Government Public Procurement Bulletin or on a free and open access website or on another
means of publication acceptable to the Association: (a) name of each bidder who submitted a
bid; (b) bid prices as read out at bid opening; (c) name and evaluated price of each bid that was
evaluated; (d) name of bidders whose bids were rejected and the reasons for their rejection; and
(e) name of the winning bidder, price it offered as well as the duration and summary scope of the
contract awarded. This publication shall be updated regularly.




                                                86
                                Annex 9: Economic and Financial Analysis
                           VIETNAM: Central North Region Health Support

Economic and sectoral context

266. Vietnam, which experienced strong economic growth in recent years, is facing
considerable challenges at present as a result of the global economic slowdown. Economic
growth, which had averaged 7.5% over many years, moderated to 6.2% in 2008. It is expected to
slow down further to 4.75% in 2009. Since October 2008, exports of goods and services, foreign
direct investment and private remittances have all weakened. The downward pressures are likely
to increase if the global economy deteriorates further. These pressures are likely to impact on
public spending as well.

267. The government has set itself the goal of achieving universal health coverage by 2014,
signifying its commitment to improved coverage and equity in health care. However, the
government recognizes that it faces three major challenges: expanding coverage to a larger, more
difficult to reach section of the population; deepening coverage so that patients’ out-of-pocket
share of total costs is reduced; and containing costs. In expanding coverage, the government has
adopted a phased approach beginning with the most vulnerable (children, the poor). The next
most vulnerable group, the near poor, is the target of this project.

268. Key health system features which underlie these challenges, and continue to undermine
equity and efficiency of health spending include:

          Low levels of public spending. Vietnam’s government health spending is lower than
           expected given its level of GDP per capita. Vietnam allocates 4%-5% of total
           government spending on health, compared to the average among developing countries of
           10%. Nearly 70% of total health spending is from out-of-pocket sources, 20% from
           government budgetary sources and about 13% from insurance contributions, including
           earning related contributions and government demand-side subsidies17. Expanding and
           deepening coverage from a low spending base will prove challenging unless substantial
           efficiency gains are achieved, which generate additional resources. The share of total
           health spending accounted for by social health insurance is also small, reflecting both the
           low levels and lack of depth of coverage.

          Regional disparities in public spending. While the allocation of public spending
           between provinces has improved, thanks to recent reforms to the inter-governmental
           transfer mechanisms, the allocation of public spending within provinces continues to be a
           source of inequality. Under the highly decentralized health system, the largest
           component of government spending is from local government sources. The inter-
           governmental transfer mechanism has been strengthened, so that the poorest provinces
           now receive a higher subsidy. However, provinces that are not that poor, but still have
           limited local revenue sources, are disadvantaged. Also, within-province inequalities in
           spending remain.

17
     National Health Accounts Vietnam. Ministry of Health, 2008


                                                        87
         Socio-economic disparities in public spending. The incidence of public health
          spending is largely pro-rich. In 2006, the poorest 20% of the population account for only
          13% of total inpatient spending and 16% of total outpatient spending by the government
          (Table 1). This is primarily because the rich account for a disproportionately large share
          of use of urban hospitals, which account for a very large share of total government health
          spending18.

         Table 1: Incidence of public subsidies for health, 2006
           Consumption-based          Share of total inpatient  Share of total outpatient
                  quintile                 subsidy (%)                  subsidy
              Poorest quintile                   13                        16
                      nd
                    2                            16                        18
                    3rd                          20                        18
                      th
                    4                            23                        22
              Richest quintile                   27                        26
         Source: World Bank analysis of VLSS 2006 and National Health Accounts

         Low levels of financial protection. Insurance has provided only limited financial
          protection to date. Nearly 15% of Vietnamese household incurred out-of-pocket
          payments that exceeded 20% of their non-food discretionary consumption.19 The poverty
          headcount in Vietnam would have been 1.1% lower in the absence of out-of-pocket
          payments for health care. This figure is higher than that of the Philippines (0.6), Thailand
          (0.2) and Malaysia (0.1)20. One reason is shallow coverage, whereby the insurer
          reimburses only a part of the provider’s costs, with the rest covered by supply side
          subsidies and out-of-pocket payments. Another reason is that over-the-counter drugs,
          which account for a large share of out-of-pocket payments, are not covered by insurance.

         Allocative inefficiencies in public sector delivery. Providers and patients both face
          incentives which are not conducive to shifting demand towards the use of more cost-
          effective services in an outpatient setting. As supply-side subsidies are based on staffing
          levels as well as bed-norms, providers have a strong incentive to maintain high hospital
          occupancy rates. As out-of-pocket payments incurred at low- and high-level facilities are
          not very different low, uninsured patients do not have any incentive to choose lower level
          facilities, particularly if quality is perceived as better at the higher level.

         Technical inefficiencies in public sector delivery. Hospital costs are growing rapidly,
          but much of the annual increase in costs cannot be explained by increases in throughput
          or more complex case-mix. The increase in costs appears to be due to an ever more
          sophisticated style of care, without commensurate increases in health outcomes. Factors
          underlying the cost escalation are the absence of a single payer to exert cost control and
          monitor quality, increased financial autonomy for providers.

18
   National Health Accounts Vietnam. Ministry of Health, 2008.
19
   Van Doorslaer et al (2007); Lieberman and Wagstaff (2009)
20
   Van Doorslaer et al (2006)


                                                       88
269. Increased financing is needed to overcome some of these weaknesses in health system
performance. Equally needed are system level reforms to improve equity and reduce allocative
and technical inefficiencies in service provision. Underlying this is a critical need for
institutional reforms to improve governance and stewardship.

270. The premise of this project is to assist the government in addressing several of these
challenges specifically in the North Central region. In doing so, the project will draw on the
experience of similar reforms undertaken in other regions, including the Northern Uplands and
Mekong, as well as international lessons.

Economic analysis

271. As is the case with most health sector projects, no attempt will be made to quantitatively
estimate the net present value of benefits resulting from the project through cost-benefit analysis.
Not only is it difficult to assign a monetary value to expected improvements in health outcomes,
it is also difficult to reliably estimate the impact of the project’s investments in equipment and
training on health outcomes. Furthermore, the main thrust of the project will be on improving
access for economically vulnerable groups and reducing exposure to financial risk. There are no
widely accepted approaches in cost-benefit analysis to incorporate these benefits. Another
challenge associated with doing a full cost-benefit analysis is that the evidence base for making
assumptions about the impact of project activities on health outcomes is quite weak. Finally, in
an economic and sectoral environment that is constantly changing as in Vietnam, assumptions
about the counterfactual (what would happen in the absence of the project) are highly
speculative.

272. Instead of doing a cost-benefit analysis, the economic analysis will establish the
economic case for the project’s investments by presenting the mechanisms through which cost
savings will be achieved, and by setting out the potential benefits in terms of improved health
outcomes and equity.

273. The project is expected to result in cost savings in the health sector because it will
address inefficiencies both in the production and consumption of health services. In turn, the
cost savings will generate additional resources for the sector as a whole. The magnitude of these
efficiency gains cannot be estimated, but the mechanisms through which such gains will occur
are described below.

274. Inefficiencies in the production of services are associated with poor quality of medical
equipment at the lower levels of care, inadequate training and lack of incentives for efficient
performance. Under Components Two and Three of the project, investments in medical
equipment and training in district hospitals will help reduce the cost of wasteful and unnecessary
treatments that generally result from inaccurate diagnosis because district hospitals are not
sufficiently equipped to treat them. In addition, the Results Based Financing pilot has the
potential to identify effective performance-based financing measures, which could improve
efficiencies in the future. With a better-trained workforce and good quality equipment, the input
mix will become more optimal, thus reducing technical inefficiencies in production. For



                                                89
instance, project investments to increase the production of nurses will change the skill mix in the
region into a more efficient one where there is a higher proportion of nurses than currently.
Finally, the throughput of district hospitals will increase significantly due to insurance on the
demand side, and improve quality of services on the supply side. The increase in throughput will
be achieved without substantial increases in the hospital budget, at least in the short to medium
team. The consequent decline in unit costs will be an improvement in efficiency in itself.

275. Inefficiencies in the consumption of services result from households bypassing commune
and district level services in favour of provincial and central level facilities. Households regard
services at the commune and district levels as poor quality because they are characterised by
shortages of staff, equipment and supplies. In response, households bypass lower level services
and choose provincial and central level hospitals, where staff and supplies are more likely to be
available. They end up paying far more to access the higher level services, both in terms of
higher user fees and higher transport costs. The project’s investments in improving the quality
and availability of personnel and equipment at district level facilities will help reduce bypassing
and strengthen the referral system. Moreover, for insured individuals the co-payment for use of
higher level provincial and central hospitals is significantly higher. If the insured seek care at a
high level (Level 1 or 2) hospital, only 30-50% of their expenditures are reimbursed, compared
to 70% reimbursement at a lower level (Level 3) hospital. The near poor who become insured
through the project will thus have a greater incentive to use district hospitals than if they were
uninsured.

276. Alternatively, seeking care at higher levels is often an inevitable consequence of health
care being sought too late in the illness, when little can be done at the lower levels of the system.
Households often postpone seeking health care due to inadequate knowledge about when and
where to seek care, as well as financial and physical barriers to access. In the North Central
region, 5.9% of the population (and 22.3% of the ethnic minority population) did not seek care
when ill, a higher proportion than the national average of 4.2%. From a health system
perspective, seeking care at the lower levels of the system is more cost-effective, and associated
with greater allocative efficiency. By investing in the lower levels of the system, as well as
preventive care, the project will lead to increased allocative efficiency in the provision of health
services in the North Central region.

277. The project is expected to improve health outcomes by improving access to lower level
health services, and by improving the quality and quantity of services provided. Historically,
public sector investments in primary and preventive care have led to significant reductions in
mortality and morbidity in Vietnam as a whole. However, the country faces the double burden
of communicable and non-communicable diseases, combined with large regional and socio-
economic inequalities in outcomes and access to care. Nowhere are these problems more
pronounced than in the North Central region, the second poorest region in Vietnam. Infant and
maternal mortality rates are significantly higher in this region compared with national averages,
and utilization levels significantly lower. Given the relatively low initial level of health
utilization, the marginal impact of additional investments are likely to be higher in the Central
North region than in other parts of the country where utilization levels are higher. It is also
worth noting that Vietnam, has generally achieved good health outcomes despite limited
financial inputs compared with other countries.



                                                 90
278. The project is also expected to have a positive impact on health equity and poverty
reduction in the Central North region. Rigorous, quantitative evaluation of the health insurance
expansions to date in Vietnam have shown that increased health insurance coverage has had
positive impacts on health outcomes and access to care, while reducing the out-of-pocket burden
on poor households. These evaluations have also highlighted two factors that have tended to
limit the impact of health insurance expansion: the poor quality of primary care, especially in
poor areas, and the fact that health insurance contributions are too low to cover the cost of the
package of services that are promised to the insured.

279. The project, by improving access to health insurance on the one hand, and on the other
hand tackling two of the main factors that have undermined earlier health insurance reforms, is
likely to have a positive impact on equity and poverty reduction. Component One will have a
direct impact on equity by increasing access to health care for the near poor, and reducing the
out-of-pocket costs of treatment they face. In this way, Component One will substantially
increase risk-pooling among the near poor. Furthermore, the premium subsidy provided through
Component One will raise the revenues collected through contributions. Meanwhile, the
project’s supply-side investments under Components Two and Three will directly improve the
quality of services at the district level, where the majority of the poor and near poor obtain their
health care. Component Two investments in preventive health services can be expected to
reduce the burden of disease and need for expensive curative health care among the poor and the
near poor.

280. The project is expected to have a particularly strong impact on improving access to the
poor through its investments in improving the quality of district hospitals. Although hospital
utilization services have generally favoured the rich in Vietnam, utilization of district hospitals is
found to be significantly less pro-rich than utilization of provincial and central hospitals (Table
2). While only 4% of the poorest quintile uses provincial or central hospitals, 12% uses district
hospitals. Moreover, use of district hospital inpatient services is found to be distributed
proportionally, with the poorest 40% of the population accounting for nearly 40% of all district
hospital inpatient services (Table 3).

 Table 2: Distribution of use of hospital and non-hospital services by quintile, 2006
 Consumption            Share of           Clinics      All hospital     District      Provincial
 based quintile       consumption           (%)            visits        hospital      and central
                       per capita                           (%)           visits        hospital
                          (%)                                              (%)            visits
                                                                                           (%)
 Poorest                  6            21                     8             12               4
 2nd                     11            23                    12             16               8
   rd
 3                       15            19                    17             21              12
 4th                     22            21                    23             25              22
 Richest                 47            16                    40             25              55
Source: World Bank analysis of VLSS 2006




                                                 91
 Table 3: Distribution of hospital inpatient and outpatient services by quintile, 2006
  Consumption        All hospital visits        District hospital       Provincial and central
  based                     (%)                    visits (%)                hospital visits
  quintile                                                                       (%)
                Inpatient Outpatient Inpatient           Outpatient    Inpatient     Outpatient
 Poorest           11            7        19                11             6              3
 2nd               16           11        20                15            13              7
 3rd               20           16        22                21            17             11
 4th               24           23        22                26            25             21
 Richest           30           42        18                27            39             58
 Source: World Bank analysis of VLSS 2006

281. The above analysis indicates that district hospitals are a crucial provider of acute,
inpatient care services for the poorest groups in the population. By providing health insurance
on the one hand to reduce financial barriers to access, and on the other hand, improving the
quality of district hospital services, the project will improve access to health care for the poorest
groups in the population.

282. The economic justification for the proposed program is also driven by public finance
criteria for public investments. Government involvement in public financing of services is
typically justified when market failures exist. In the health sector, these include externalities,
public goods, failures in the insurance markets and equity issues. A primary objective of the
project is to increase access to preventive care, a service which has many public good
characteristics and is hence justifiable on public finance criteria. In the case of communicable
diseases, there are also significant positive externalities to government provision of preventive
services. A lack of knowledge by the population of how to prevent and/or control a range of
diseases is also a type of market failure justifying public expenditures on preventive care.
Successful prevention programs would reduce the significant costs of secondary and tertiary
hospital care. By improving the quality of curative care services in the public sector, the
program will improve equity by increasing access to good quality services for the poor -
provided they have access to the service. Finally, by improving access to health insurance for
the near poor the government will provide the safety net needed, given failures in insurance
markets.

Fiscal analysis

283. The fiscal context in which the project will begin implementation is not entirely favorable
but a strong case can be made for well-targeted, effective social spending programs such as
health insurance for the near poor under the current economic circumstances. Following the
global economic downturn and consequent negative effects on Vietnam’s economy, the
government adopted a more accommodative fiscal stance. However, an overly expansive fiscal
policy has been discouraged by the International Monetary Fund as it could further weaken
Vietnam’s external position, and undermine fiscal sustainability. The current stimulus plan aims
to support growth, ensure social security, and accelerate poverty reduction. Emphasis has been
placed effective, well-targeted social sector interventions.



                                                 92
284. In this fiscal environment, overall government expenditure is expected to grow at a
modest, but low 12% per annum during the period 2010-2013. Nevertheless, given the relatively
low share of health in total government spending and government commitment to achieve
universal coverage by 2014, there is fiscal space for a modest increase in per capita spending for
health.

285. The fiscal impact of the specific activities included in the project hinge largely on the
costs arising from them to the government. The fiscal analysis will examine the impact of
project-related expenditures on government finances. There are two types of government
expenditures that will be incurred during the lifetime of the project: direct government outlays
towards subsidising health insurance for the near poor; and the incremental recurrent costs
arising out of the project’s investments.

286. Direct government outlays under this project comprise of a 50% government subsidy
towards the price of the premium that the near poor pay for health insurance. The project will
subsidize a further 30% and near poor households will pay the remainder out-of-pocket. The
project subsidy for family enrolees will be higher still. The price of the health card is estimated
as 4.5% of the minimum wage of VDN 650,000 per month. Current government estimates of the
cost of the subsidy during the project are based on the assumption that the proportion of near
poor individuals who purchase health insurance will increase from 5% in 2011 to 40% by 201621.
Under this assumption, 24% of the near poor will be covered, on average, during the project.
However, since the project will finance an additional subsidy, and conduct social marketing
campaigns to encourage the take up of health insurance, coverage may be higher than
anticipated. Subsidy costs are also estimated here under medium and high take-up assumptions.
Under the medium take-up assumption, the proportion of near poor individuals who purchase
health insurance cards is expected to increase from 5% in 2011 to 50% by 2016. Under the high
take-up assumption, it is expected to increase to 65% by 2016. Table 4 presents all three sets of
estimates.

287. The increase in utilization resulting from greater insurance coverage is a potential source
of incremental recurrent costs. However, it is not clear whether there will be substantial
incremental costs associated with increased utilization. It is of course likely that improved
access to health insurance (Component One) and improvements in quality (Components Two and
Three) will increase use of government health service. If the payment made by the insurer to
providers is below the marginal cost of the service, providers may restrict supply or, more likely,
pass on more of the cost to the patient. Both are likely to dampen utilization. The incremental
costs to the government will increase only if the government increases its budget subsidy to
providers. Alternatively, increased pressure on services may actually increase the productivity of
providers, so that the increased throughput is achieved with little increase in recurrent costs. It is
almost impossible to estimate what the counterfactual increase in utilization would have been,
absent the project, because of the numerous other health financing reforms concurrent to the
project. Given these uncertainties and lack of data, a very conservative estimate and an upper-
bound estimate of the possible increase in costs due to increased utilization is provided here.



21
     Coverage figures provided by MOH.


                                                 93
288. The new equipment provided through the project (Component Two) will have to be
maintained, thus increasing recurrent expenditures on maintenance. Currently, maintenance
expenditures are a province-level responsibility, with provinces expected to allocate 4% of the
value of the equipment for their annual maintenance costs. The fiscal impact of the project’s
investments in equipment will depend largely on whether there are adequate resources in
provinces in Central North region budget to cover the maintenance costs. It is clear from the
experiences of other projects that the government has a poor record of allocating sufficient
funding to maintain its fixed equipment. The lack of adequate funding for equipment
maintenance thus remains a potential risk for the project. In addition, the new preventive health
centers will incur utility expenditures not incurred previously.

289. Finally, project investments in training (Component Three) will result in new graduates
entering the health system, as well as an increase in the technical levels of existing cadre. Both
will necessitate increases in the salary budget. The fiscal impact of training investments will
depend on how easily the increased salary budget can be absorbed. Given difficulties in
estimating the incremental salary expenditures, this was estimated as 1% of the Central North
region annual budget.

290. The analysis of the fiscal impact in Table 4 shows that the incremental recurrent costs of
the project are relatively low at around 3% of the total health budget of the Central North region.
An upper bound estimate is around 4 per cent. The biggest source of incremental recurrent costs
is the maintenance expenditures associated with the new equipment. Significantly upgrading
public sector capacity to provide good quality medical services is a key objective of the project.
To this end, adequate spending on maintenance and replacement costs of medical equipment
represents good investments. They also help institutionalise budgetary allocations for
maintenance and replacement in the budget planning process, in a context where this is not
adequately covered.

291. The fiscal impact of the government subsidy for health insurance premiums is much
greater under the high take-up scenario whereby 65 % of the near poor are covered by 2016.
Under this scenario, up to 3% of the Central North region budget will be spent on this subsidy.
Under the government’s more conservative scenario, up to 1.9% of the region’s budget will be
spent on this.




                                                94
Table 4: Fiscal impact of the project
                                        2006     2007     2008      2009        2010   2011    2012      2013    2014 (3)   2015 (3)   2016(3)
In trillions of VND
GDP(1)                                      974      1144      1479     1623      1844      2100     2392    2724   3100     3529       4017
Total government expenditures               290       376      470       523       570       641      722     817    914     1022       1143
Total government expenditures on             18        20       25        27       30        33        38     43      48      53         59
health (2)
Total government health expenditures                                               1.7       2.0      2.3     2.8    3.2      3.6        4.1
Central North Region
As a share of GDP
Total government expenditures             29.8% 32.9% 31.8% 32.2% 30.9% 30.5% 30.2% 30.0%                          29.5%     29.0%     28.5%
Total government health expenditures       1.9%      1.7%     1.7%      1.7%      1.6%      1.6%     1.6%    1.6%   1.5%      1.5%      1.5%
Total government health expenditures                                             0.09% 0.10% 0.10% 0.10%           0.10%     0.10%     0.10%
in Central North Region
                               Government costs arising from the project (% of Central North region government budget)
                                              Government outlays on 50% subsidy for health insurance card
Subsidies for health insurance card                                              0.00% 0.39% 1.09% 1.19% 1.25%              1.59%      1.86%
(conservative scenario)(4)
Subsidies for health insurance card                                              0.00% 0.39% 1.17% 1.33% 1.71%              2.05%      2.32%
(medium take up scenario)(5)
Subsidies for health insurance card                                              0.00% 0.39% 1.17% 1.66% 2.28%              2.57%      3.02%
(high take up scenario)(6)
                                           Incremental recurrent costs associated with Central North project
Recurrent curative care costs due to
increased health insurance coverage
           Inpatient admissions -                                                0.00% 0.86% 0.76% 0.63%           0.54%     0.48%     0.48%
           conservative estimate(7)
           Outpatient visits -                                                   0.00% 1.03% 0.91% 0.76%           0.65%     0.84%     0.84%
           conservative estimate (8)
           Inpatient admissions – upper                                          0.00% 0.86% 0.99% 1.17%           1.20%     1.07%     1.07%
           bound estimate (9)
           Outpatient visits - upper                                             0.00% 1.03% 1.04% 1.19%           1.20%     1.57%     1.57%
           bound estimate(10)
Maintenance costs of new buildings                                               0.00% 0.00% 0.97% 0.81%           0.69%     0.62%     0.62%
and equipment (11)
Utility costs of new preventive health                                           0.00% 0.00% 0.05% 0.04%           0.03%     0.03%     0.03%
centers (12)
Salary costs of newly trained staff (13)                                         0.00% 0.00% 1.00% 1.00%           1.00%     1.00%     1.00%



                                                                           95
Total incremental recurrent costs –                                                  0.0%      1.9%      3.7%      3.2%      2.9%        3.0%      3.0%
conservative estimate (14)
Total incremental recurrent costs –                                                  0.0%      1.9%      4.0%      4.2%      4.1%        4.3%      4.3%
upper bound estimate (14)

Table Notes:
(1) GDP actuals and 2009-2013 estimates from IMF Article IV Report 2009
(2) Government health expenditures for 2006 from National Health Accounts. Estimates for 2007-2013 assume that that the health share of total government
remains at 5.2%, the average share for 2000-2006
(3) GDP and government expenditures estimates for 2014-2016 based on average annual growth rate 2009-2013
(4) Assumes the following coverage rates for health insurance for the near poor: 2011 = 5%; 2012 = 15%; 2013=20%; 2014=30%; 2015=40%; 2016=40%. This
is the increase in coverage assumed by the Ministry of Health in estimating the costs of the project.
(5) Assumes the following coverage rates for health insurance for the near poor: 2011 = 5%; 2012 = 15%; 2013 = 25%; 2014 = 35%; 2015 = 45%; 2016=50%
(6) Assumes the following coverage rates for health insurance for the near poor: 2011 = 5%; 2012 = 15%; 2013=25%; 2014=40%; 2015=50%; 2016=65%
(7) Assumes 4% increase in inpatient visits between 2010 and 2016, compared to a counterfactual increase of 1%
(8) Assumes 6% increase in outpatient visits between 2010 and 2016, compared to a counterfactual increase of 3%
(9) Assumes 8% increase in inpatient visits between 2010 and 2016, compared to a counterfactual increase of 1%
(10) Assumes a 10% increase in outpatient visits between 2010 and 2016 compared to a counterfactual increase of 3%
(11) Estimated as 4% of the cost of the equipment, based on the usual proportion allocated for maintenance in the government budget
(12) Based on the average utility and maintenance costs of a 600 sq. meter prevent health center. Information provided by MOH
(13) Estimate as 1% of the Central North region annual budget
(14) The conservative estimate of total incremental costs uses the conservative estimates of the increase in inpatient and outpatient utilization; the upper bound
estimate uses the upper-bound estimates of the increase in inpatient and outpatient utilization




                                                                                96
                               Annex 10: Safeguard Policy Issues
                     VIETNAM: Central North Region Health Support

SOCIAL SAFEGUARDS

292. The World Bank’s safeguard policy on Indigenous People (OP4.10) is triggered.
However the project is expected to have no adverse impacts on ethnic minority groups. It is
expected that the project will help to increase demand for and utilization of health services by the
near poor and ethnic minorities by reducing the financial burden of health care for beneficiary
households by increasing coverage and strengthening the implementation of Health Care Funds
for the Poor (HCFP). Given that the project activities will have a potential impact (positive) on
ethnic minorities, the Ethnic Minority Planning Framework (EMPF) was developed to provide
guidance for the preparation of an Ethnic Minority Plan (EMP). A Social Assessment was
carried out with the aim of helping to maximize the project’s benefits for the ethnic minorities by
establishing a participatory process for implementation and monitoring.

293. The World Bank’s OP4.12 on Involuntary Resettlement is triggered in relation to the
construction of the District Preventive Health Centers (DPHCs) in 30 districts (under Component
Two), which in many districts required land acquisition. The World Bank team provided clear
guidance to the Borrower on the procedures for land acquisition that would be acceptable to the
World Bank OP 4.12 on Involuntary Resettlement. A Resettlement Policy Framework (RPF) has
been developed to provide guidance for the development of a Resettlement Plan for the
Component Two of the project. The Resettlement Plan also reviews the status of all Land Use
right Certificates, or “Red Book” provided for the DPHC from May 2008 which is within the
time of project preparation.

294. Authorization for approval of social safeguards instruments has been delegated to the
MOH on April 14, 2009 by the Prime Minister’s Decree N0 551/TTG-QHQT.

Resettlement Policy Framework

295. A Policy Framework for Resettlement, Compensation and Rehabilitation of Project
Displaced Persons was developed specifically for this project, satisfactory to the World Bank.
The RPF was developed in accordance with OP 4.12. The RPF sets out the principles and
objectives, eligibility criteria of displaced persons (DPs), their entitlements, legal and
institutional framework, compensation and rehabilitation mechanisms, people’s participation,
and complaints and grievances procedures that will guide the compensation, rehabilitation and
resettlement of the DPs. This RPF was approved by the MOH (Decision 4439/QD-BYT) on
November 13, 2009. The RPF has been used in the preparation of the Resettlement Plan (RP).
The RPF and RP ensure that minimum requirements of Vietnamese and the World Bank’s
policies regarding land acquisition, compensation and resettlement are met.




                                                97
Resettlement Plan

296. The RP was developed under the guidance of RPF. The RP was approved by the MOH
on December 14, 2009 by Decision 4834/QD-BYT. The RP ensures that all DPs will be
compensated for their losses at the replacement cost and will be provided with rehabilitation
measures to assist them to have better life, or at least maintain their pre-project living standards
and income earning capacity. The RP will be followed during the implementation of component
two, particularly the subcomponent for the construction of DPHCs in 30 districts of six project
provinces. In order to assess project impacts, a field survey of all DPs was carried out from
August to November 2009. The survey obtained key information needed for the preparation,
implementation and evaluation of RP and EMP. The social scientists of the CPMU/MOH
conducted extensive consultations at the community level. They ascertained the number of DPs
and impacted assets. It was determined that the scale of land acquisition under the project is
rather modest - around 3000-5000 square meters, and the number of project affected households
is also small. Nevertheless adequate mitigation measures have been devised under the RP.

Description of Project Impacts

297. The number of project affected households (PAHs) is 98 and the number of DPs is 439 in
all 30 districts together. The total land area acquired for the construction of the DPHCs is
95,478.6 m2 that includes both productive and public land. Except for some plants, no house
structure will be affected. There is no relocation of DPs necessary outside their residential plots.
The impact of land acquisition is less than 10% in all cases and it does not affect household
production of PAHs.

    Table 1: Number of DPs to be affected in six provinces
Province         Number of          Number of           Permanent land           Number of PHs
                 Project Affected Displaced             acquisition (m2)         to be relocated
                 Households         Persons (DPs)
                 (PAHs)
Thanh Hoa        -                  -                   18,943.6                 0
Nghe An          24                 103                 21,096                   0
Ha Tinh          50                 245                 14,398                   0
Quang Binh       12                 52                  13,280                   0
Quang Tri        12                 59                  13,761                   0
Thua Thien Hue -                    -                   14,000                   0
Total            98                 439                 95,478.6                 0

Due Diligence

298. The project preparation started in May 2008. Therefore, all Red Books issued by the
districts after that date were reviewed in order to ensure that every DP was treated appropriately
and equally under the OP 4.12. The CPMU’s social specialists have reviewed all 19 districts that
had obtained the Red Book. It was determined that 16 out of 19 Red Books were issued after
May 2008. In these 16 districts, only 24 PAHs were identified. Despite this modest impact, all
these 24 PAHs were included in the RP. The review also revealed that land acquisition had


                                                98
occurred only in four provinces. In the remaining two provinces, Thanh Hoa and Thua Thien
Hue, the sites for the DPHCs were public vacant land plots and there were no households
affected.

Complaints and Grievances

299. The PPMUs and commune authorities will deal with complaints and grievances regarding
the land acquisition and compensation. In case no agreement is reached, the complaints may be
appealed to the district authorities and then to provincial authorities. At the final stage, the
complaints maybe appealed to the District or Provincial Courts. At each level, the complaint
should be addressed within 15 days. If not satisfied, then complaints must be submitted to the
next higher level no later than 15 days. All grievance procedures including those at the Courts
will be free of charge to complainants.

Cost and Budget

300. The total resettlement cost for RP in six provinces is estimated at VND 997,348,289
which is equivalent to US$ 50,050 (exchange rate USD 1 = VND 18,800). The resettlement
costs will be covered from counterpart fund. The total cost for the RP is summarized in Table 2
bellow.

Table 2: Estimate Cost of Resettlement Plan
  No                      Item                      Level of impact       Amount (VND)


   1.     Permanent acquired paddy land (m2)            15,213              577,282,800

   2.     Permanent acquired forestry land              17,528
          (m2)                                                              42, 136,800

   3.     Timber tree (number of tree)                  5,012               91,650,000

   A      Sum (A)                                                           706,069,600

   7.     Independent monitoring                                            47,000,000

   8.     Management cost 2% (A)                                            14,212,392

   B      Sum (B)                                                           61,212,392

   9.     Contingency 30% (A+B)                                             230,157,297

          Grand Total                                                       997,348,289




                                               99
Ethnic Minority Issues

301. There are a number of ethnic minorities living in six project provinces, including Van
Kieu, Pa Co, Chut, Tho groups, in Quang Tri, and Thua Thien Hue provinces, or Thai, Muong,
H‘mong, Muong, Kho Mu in other provinces. Only four of these groups (Tho, Chut, Odu and
Van Kieu) live in the Central North region. These ethnic minority groups have a long history of
living in the region and their life mainly relies on shifting and terrace cultivation. To date, these
ethnic groups preserve their own habits and rich cultural traditions. It is clear that the project
will not create any adverse impacts on the life of ethnic minority groups living in the project
area. It is expected that the project will help increase demand for utilization and access of health
services by the local peoples, including ethnic minority groups through increasing coverage and
strengthening of District Preventive Health Centers.

302. There are particular issues that characterize the lives of ethnic minorities that impact their
access to and utilization of health services. One significant issue is the cultural practice of the
ethnic minority groups. Whereas, these groups are heterogeneous and different, and one cannot
generalize, there are certain cultural practices, beliefs and norms that do not encourage optimal
use of health services, such as home deliveries, and low utilization of family planning services.
Other barriers to access include culture and language, geography (most tend to live in the
mountainous areas) and financial barriers, especially for the poor among them.

303. A recently-announced government intention of reaching the entire population with health
insurance by 2010 requires parallel efforts to ensure that ethnic minorities (who may speak little
Vietnamese) receive adequate, comprehensible information about their rights and entitlements to
free healthcare. It also requires that financing and delivery mechanisms are in place to fulfill
obligations to healthcare card and insurance holders. The former is being addressed through the
Behavioral Change Communication sub-component that targets beneficiaries to inform them of
their benefits under this program. The second is partially addressed such as through
strengthening HCFP capacity (which involves an operations research study, training and
purchasing of equipment). There are certain aspects of the delivery program beyond the scope of
the project such as the role of VSS and DOLISA.

Social Assessment (SA)

304. Given the fact that ethnic minority groups make up a notable part of the beneficiaries
targeted by the project, a Social Assessment was conducted, with the aim of identifying the ways
through which the project’s design could address the potential issues related to healthcare for the
near poor and ethnic minorities. It also examined the health and social impact of Component one
in the project provinces.

305. From the Social Assessment, it was observed that the project provinces were
characterized by the following features:

      Poor Socioeconomic Conditions. Several of the communes and districts in the project
       provinces are included in the list of extremely hard communes and districts designated by
       the government, reflecting the persistent hardships faced by their residents and the need



                                                100
       for special programs to address their situation. Their average monthly per capita incomes
       are lower than the national average and this makes even the indirect costs of seeking
       health care (such as food and transportation), too much of a burden for households.

      Cultural and Language Barriers. The residents of these provinces, in particular the
       ethnic minorities, also face cultural barriers to health care. These include cultural
       practices of the ethnic minority groups, which in general might not make for optimal
       health seeking behaviors. For instance, early marriages are common, and fertility rates
       are higher than average. Language barriers also exist. Many ethnic minorities do not
       speak Vietnamese, making communication between health workers and other public
       health officers difficult. Coupled with the lower literacy rates, this makes them less
       likely to benefit from most of the health information, education and communication
       messages.

      Poor Quality of Health Services. The assessment also highlighted the fact that health
       workers and particularly doctors in these provinces were less skilled than their
       counterparts in other parts of the country. In addition, there are fewer ethnic minority
       health workers in the region, and retention of health workers remains an issue. Hospital
       management capacity was also judged to be weak in this area. The health facilities were
       also seen to be lacking the basic equipment necessary for providing good quality clinical
       care. Limitations were observed on the demand side as well. Beneficiaries were unaware
       of their benefits and there were challenges in printing and distributing the HI cards.

306. In response to the issues identified above, the Social Assessment report proposed the
following recommendations: (1) Addressing the human resource constraints, including
encouraging training of ethnic minority health care personnel, (2) Improving communication and
education on the benefits of health insurance, and (3) Improving patient-friendliness of district
hospitals towards ethnic minorities.

Ethnic Minority Planning Framework/Ethnic Minority Plan

307. The project activities, including the construction of DPHCs do not cause any culturally
specific impacts on ethnic minority households and their communities. However, in order to
ensure compliance with the World Bank OP 4.10 on Indigenous People and help the ethnic
minority people to get better access to improved health services, the Recipient first developed
EMPF, which was approved by the MOH with Decision 4439/QD-BYT on November 13, 2009.
Subsequently an EMP was developed in accordance with EMPF. The development of the EMP
was based on free, prior and informed consultation with ethnic minority communities in the
project area. The EMP has identified a number of development activities that the Project can
deliver for the local ethnic minority groups such as: (a) supporting training of ethnic minority
health care personnel ; (b) providing capacity building to medical staff on socio-cultural aspects
of health care so that they can provide culturally more sensitive service to ethnic minorities, (c)
developing an awareness raising on health examination and treatment and health insurance; (d)
subsidizing health insurance premiums for the ethnic minority people who fall under category of
near poor, and (e) devising information and education materials that are tailored to ethnic




                                               101
minority groups. The EMP was approved by the MOH on December 14, 2009 with Decision
4834/QD-BYT.

Consultation

308. The consultation process played a key role during preparation of the project. Different
approaches for social assessment were applied to assess the factors that affect demand for health
services and the capacity to provide health care at the district level. Consultation provided
important input for understanding the impact of the construction of DPHC on the affected
households and for devising mitigation mechanisms. The social assessment of the project
involved an extensive consultation process during the period from August to November 2009.
This included group discussions, site visits, focus group discussions, village observation, and
interviews. The social specialists and environmental specialist of the Ministry of Health have
visited all provinces in the region to perform the consultations with different stakeholders. The
consultation process will be continued during the project implementation.

Disclosure

309. As required by the World Bank, all the social safeguard documents, including RPF, RP,
EMPF, EMP, and SA have been disclosed at the World Bank Office in Hanoi and Infoshop.
These documents in Vietnamese language are also disclosed at the project sites and management
at different levels.

Implementation Arrangement

310. The RP and EMP will be implemented jointly by CPMU and PPMUs and relevant local
authorities. While the land acquisition and compensation will be assisted by the district
resettlement committee which exists at the district level, it is requested that the CPMU and
PPMUs assign appropriate staff in charge of social safeguards including both resettlement and
ethnic minority issues. The compensation of PAHs will be implemented in a way that will
guarantee participation of the local authorities as well as Displaced Person (DP) representatives
in planning and decision making process. The PPMU and local authorities will continue the
dialogue with stakeholders during the RP and EMP implementation.

Monitoring and Evaluation

311. The PPMUs are responsible for internal monitoring. The monitoring indicators are
included in the RP and EMP. The PPMUs will collect information from provinces and districts
regularly. Every six months, PPMUs will submit progress reports to CPMU/MOH and the
World Bank. The progress report should have sections on the implementation of Resettlement
Plan and Ethnic Minority Plan.

312. The implementation of RP and EMP will be also monitored by an external monitoring
consultant. The independent monitoring consultant will be financed and hired by CPMU based
on the term of reference acceptable to the World Bank. The consultant will prepare an inception




                                              102
report and semi-annual reports on the implementation of RP and EMP, and will submit the
reports to the CPMU/MOH and then to the World Bank.

HEALTH CARE WASTE MANAGEMENT22

Background

313. Management of health care wastes was identified as a possible area of concern in the
Central North Region Health Support Project. As a result, the World Bank’s safeguard policy on
environmental assessment (OP 4.01) is triggered. The Project will support the construction of 30
DPHCs in 6 provinces. The construction work is expected to generate noise, vibration, dust and
wastewater. The Project also supports investments in healthcare equipment for hospitals, district
hospitals and health centers to strengthen health care services of these facilities. This assistance
is expected to result in an increased level of activity at the targeted hospitals and DPHCs.
Ensuring the proper treatment and disposal of health care wastes generated at these facilities is
therefore necessary to minimize the environmental impacts of the Project.

314. The Central North Region Health Support Project has been assigned to Category B for
Environmental assessment. During project preparation, a study was conducted to review health
care waste management (HCWM) legislation, assess practices at district hospitals in the Project
provinces, identify environmental issues relevant to HCWM, and recommend measures to be
incorporated into the design of the project. This study has benefited from field visits and in-
depth interviews at district hospitals in the Project provinces as well as from reviews of the
following documents: (i) health care waste management legislation in Vietnam, (ii) the Ministry
of Health's HCWM Master Plan, (iii) international regulations and guidelines for HCWM, and
(iv) documentation from local and international workshops on HCWM. The main findings and
recommendations from this review are summarized below.

315. A healthcare waste management plan (HCWMP) was developed by the Recipient to
address these issues. Aside from the regulatory requirements for healthcare waste management,
the HCWMP also covers institutional arrangements for implementation and good practice at the
health care facilities. The HCWMP also provides recommendations for improving the handling
and disposal of healthcare waste in current healthcare facilities under the project. In addition, for
the 30 health preventive centers which will be built by assistance from the Project, the
environmental early screening, assessment and mitigation measures associated with small civil
works have also been implemented and proposed. Furthermore, the healthcare waste
management plan of each subproject will be incorporated in the design phase, implemented and
monitored in the operation phase. The HWMP has been cleared by the World Bank before the
start of any work on site and disclosed. The HWMP was finally approved by the MOH on
December 14, 2009, with Decision 4834/QD-BYT.

316. The Plan found that although national HCWM regulations are in place and have recently
been enhanced, their application remains weak. The regulations propose the standard for

22
   The Health Care Waste Management Plan and appropriate guidelines will be made available to all project
provinces. The HCWMP is available at the MOH, at the World Bank Infoshop, and in the Project files.



                                                  103
healthcare waste segregation, collection, transportation (on site and off site) and storage. The
regulation also suggests some regular methods of treatment and disposal of health care waste,
especially the hazardous and infectious wastes.

317. Aside from the regulatory requirements for healthcare waste management, the HCWMP
also covers institutional arrangements for implementation and good practice at the health care
facilities. The HCWMP provides recommendations for improving the handling and disposal of
healthcare waste in current healthcare facilities under the project. In addition, for the 30 health
preventive centers which will be built through assistance from the project, the environmental
early screening, assessment and mitigation measures associated with small civil works have also
been implemented and proposed. Furthermore, the healthcare waste management plan of each
subproject will be incorporated right in the design phase and will be implemented and monitored
in the operation phase.

Existing Legislation and Regulatory Framework for HCWM

318. HCWM regulations in Vietnam have existed since 1999 and the country is rapidly
proceeding towards the development of a National Action Plan for Health Care Waste
Management to 2015. Approximately 30% of provinces in Vietnam do not have the appropriate
technology for health care waste treatment, particularly in remote and mountainous areas. Some
laws and regulations directly related to HCWM are summarized below:




                                               104
Decision No. 2575/1999/QD-BYT on health care waste management

319. This decision applies to all hospitals, institutions and provincial/district health centers,
general health clinics, maternity hospitals, health stations, private health services, preventive
medicine centers, and health workers training services. It provides details on waste classification
as well as guidance on the collection, treatment, and disposal of waste from health facilities.

320. Waste Classification: Health care wastes are divided into five groups: general waste,
clinical waste, chemical waste, radioactive waste, and pressurized containers. Examples for each
health care waste group are shown in the table below.




321. General principles: Segregation should take place as close as possible to where the waste
is generated. Clinical hazardous waste should not be mixed with the general waste.

322. Color coding of waste bags and containers: Yellow for clinical wastes; green for general
wastes; and black for chemical wastes, radioactive material, and cytotoxic drugs.



                                               105
323. Standards for waste bags: Waste bags should be polyethylene and polypropylene plastic
bags with a maximum capacity o f 0.1 m3 and should be marked at the two-thirds full level.

324. Standards for sharp containers: Sharp containers should be made of rigid material that
can be destroyed by fire. These containers should have a volume suitable for the different kinds
of sharps generated, and should have handles, and a lid for sealing. A sharp box should be
yellow with a horizontal line at the two-thirds full level.

325. Standards for waste containers: Waste containers should be made of polyethylene and
have a lid. If the containers are big, they should have wheels. The container should be the same
color as the waste bag and should be marked at the two-thirds full level.

326. Waste collection: Orderlies are responsible for collecting waste from the generating
source to the storage area. The clinical wastes should be enclosed in regulation color plastic
bags and bound tightly.

327. Waste storage at health care facilities: The storage area should: (i) be a safe distance from
food storage or food preparation areas; (ii) be locked to prevent access by unauthorized persons;
(iii) have a supply of cleaning equipment, protective clothing, and waste bags or containers
located conveniently; (iv) have easy access for waste collection vehicles; and (v) be close to
water supply for cleaning purposes. All stored wastes should be protected from the sun, and
hazardous wastes should be kept separately from the general waste.

328. Storage times for health care waste: In hospitals, waste should be disposed daily, and the
storage time for hazardous waste is 48 hours. For small health care facilities, the storage time for
Group A, B, C, and D wastes should not exceed one week, and Group E waste should be
incinerated or buried immediately.

329. Off-site transportation of clinical waste: Health care facilities should contract waste
transportation and disposal services approved by local authorities for off-site transportation of
clinical waste and should have a consignment note.

330. Treatment and disposal technologies: For all health care facilities in the city, a regional
incinerating center is recommended. For health units in towns, an incinerator for a cluster of
hospitals or for each health unit is recommended. Sanitary landfill is only recommended for
health care facilities that cannot incinerate the waste. Waste should be buried at permitted
locations that meet the prescribed environmental requirements. Primary treatment, which
includes boiling, chemical disinfection, and wet and dry thermal treatment, is only recommended
for Group C waste and materials or equipment used in the treatment of patients with HIV/AIDS,
syphilis, or tuberculosis.

Current HCWM Practices in the project Provinces

331. The HCWM study undertaken as part of project preparation found that although national
regulations are in place, the HCWM practices of health facilities remain poor. Observations
from field to district hospitals in the project provinces revealed that all district hospitals carry out



                                                 106
a basic level of segregation of clinical waste. However, many district hospitals in these
provinces, as in other areas of Vietnam, lack sufficient waste treatment facilities and do not have
the resources to obtain even basic supplies such as colored bins or plastic bags. Therefore, in
many instances, wastes are not segregated correctly, and unsegregated wastes are either land-
filled on-site or offsite, incinerated - oftentimes in rudimentary ovens that do not work properly –
or undergo open-air burning on hospital premises. These practices pose health risks to patients
and their visitors, health care facility personnel, workers who handle health care wastes, and the
general community.

332. Aside from having insufficient resources for HCWM, district hospitals are also affected
by lack of internal guidelines and knowledge on HCWM. Most of the district hospitals have
established HCWM teams but do not have detailed HCWM plans for their hospitals. District
hospitals tend to focus their efforts on ensuring separation of sharp and pointed items, while
giving little attention to the proper treatment o f infectious liquids, body fluids, and waste water.
Although the provincial Departments of Health are responsible for supervision and inspection of
HCWM practices in the district hospitals, their role and capacity remain weak.

Treatment and Disposal of Clinical Waste

333. Group A: Infectious Waste. Methods for treating infectious waste include on-site land
filling, incineration, and open burning.

334. Group B: Sharps. Sharps are segregated from other wastes at most of the district
hospitals, but most hospitals do not have the resources to buy the “box for sharp items.” Some
hospitals reuse polyethylene bottles for drinking water or metal cans to store the needles, which
are then buried in the ground. However, in some hospitals, sharps are collected in thin plastic
bags, posing a risk for workers handling these wastes.

335. Group C: Clinical Waste from Laboratories. After sterilization or disinfection, clinical
waste is burned on-site or in the open. However, many district hospitals lack the disinfection
reagents needed to sterilize this waste.

336. Group D: Pharmaceuticals. Current practices used for solid pharmaceutical wastes
include: on-site burial, discharge to a public location for waste collection, incineration in simple
furnaces, and open-air burning.

337. Group E: Pathological Waste. Current methods for disposing pathological waste include:
incineration in simple furnaces, open-air burning, and burying in the ground. At several district
hospitals, dogs and other animals were observed to be excavating the clinical waste which had
not been land-filled deeply.

Treatment of Liquid Infectious Waste and Hospital Wastewater

338. The HCWM study found that almost all district hospitals in the project provinces do not
give sufficient attention to the treatment of infectious liquid waste and waste water. The
hospitals oftentimes discharge infectious liquid waste, blood, and body fluids into the drainage



                                                107
system without treatment and the waste can leak directly into the environment due to damaged
drainage pipes. In a large number of district hospitals, toilets for patients do not have a proper
septic tank and discharge waste without any treatment, resulting in poor sanitation for the
hospital and nearby residents. Most district hospitals do not have the necessary budget or
facilities to treat this waste.

Proposed Action Plan for HCWM

339. Based on recommendations of the HCWM study conducted during preparation of this
project, the following activities have been incorporated into project design:

340. Enhancement of HCWM guidelines: Guidelines will be developed on how each major
category of health care waste should be handled by the district hospitals, with particular attention
to categories that require special handling and disposal precautions such as infectious laboratory
waste, blood products, pathology and anatomy waste, and sharp items. The guidelines will cover
all aspects of HCWM, including personal protection measures, containerization and proper
labeling, waste handling within the district hospital, transportation and storage of waste, and on-
or off-site treatment and disposal.

341. In developing these guidelines, an assessment of incineration technology and other
alternate methods of waste treatment such as autoclaving and microwaving will be conducted.
Currently, treatment of hazardous solid waste relies heavily on incineration, which involves a
large capital investment and operating costs. Furthermore, some waste may have been
disinfected with chlorine-bearing chemicals, and incineration of chlorine-bearing waste mixed
with organic chemicals in uncontrolled small-scale incinerators will result in the emission of
very hazardous dioxins and furans. The assessment will help ensure that incinerators are
properly designed and operated to avoid such emissions, as well as explore other technologies
that may be more cost-effective.

342. In addition, technology-based standards for the design and operation of technologies
introduced in the HCWM legislation will be prepared. The standards will include permitting,
monitoring, and reporting requirements, drawing from those used in other countries.

343. Institutional and human development activities. At each referral hospital, an HCWM
plan will be developed to assign clear roles and responsibilities of staff involved in HCWM, and
a Waste Management Team or Infection Control Team (ICT) will be appointed. The ICT will be
responsible for HCWM implementation at the district hospitals and reporting to the DOH. One
referral health care waste management planning form and one reporting format will be developed
centrally and will be used for monitoring and reporting HCWM implementation of each health
care facility to the DOH.

344. In terms of human development activities, training of trainers will be delivered to build
capacity for HCWM in the DOHs and hospitals and to inform key staff of how to segregate,
handle, and treat health care wastes. Training on the use of treatment equipment will also be
provided. In addition, IEC materials on the correct methods for handling and disposal of health
care wastes will be developed to build awareness among health care workers. Awareness raising



                                                108
activities will also be undertaken to inform the general public of the risks of unhygienic
conditions and mismanagement of health care wastes.

345. Preparation of district hospital-specific HCWM plans. Each district hospital under the
project will develop a detailed health care facility-specific HCWM plan. The plan will cover
points such as: the location and organization of collection and storage facilities; the appropriate
bags/bins/waste containers, color by color and labeled for clinical waste or sharp items; required
physical and human resources; definition of responsibilities among staff; procedures for
segregating, storing, and handling waste; procedures for monitoring waste categories; and
contingency plans for HCWM. Each hospital will form a health care waste management team to
develop these HCWM plans. A technical adviser hired by the CPMU will assist the teams to
prepare these plans.

346. Provision of HCWM equipment and supplies. Collection tools such as waste collection
bags and boxes for sharp items will be provided based on waste generation rates. The district
hospitals will have responsibility for providing all types of collection tools. For hazardous waste
treatment, current incinerators will be evaluated to determine the appropriate incinerators for the
project provinces. At the same time, the evaluation of alternative technologies will be
conducted, as noted above.




                                               109
                        Annex 11: Project Preparation and Supervision
                      VIETNAM: Central North Region Health Support

                                                    Planned                Actual
PCN review                                        08/12/2008            08/12/2008
Initial PID to PIC                                                       7/22/2009
Initial ISDS to PIC                                                      7/22/2009
Appraisal                                         11/02/2009            11/02/2009
Negotiations                                      01/15/2010            01/29/2010
Board/RVP approval                                04/06/2010
Planned date of effectiveness                     07/06/2010
Planned date of mid-term review                   09/15/2013
Planned closing date                              08/31/2016

Key institutions responsible for preparation of the project:

      Ministry of Health (Planning and Financing Department, Preventive Care and
       Environment Department, Training and Science Department, Medical Equipment
       Department, Medical Service and Administration)
      Provincial Department of Health
      Provincial People's Committee

World Bank staff and consultants who worked on the project included:

Name                                           Title                     Unit

Bukhuti Shengelia                TTL, Senior Health Specialist          EASHH
Toomas Palu                      Lead Health Specialist                 EASHH
Hisham A. Abdo Kahin             Senior Counsel                         LEGES
Peter Berman                     Lead Economist, Health                 HDNHE
Joana Godinho                    Senior Health Specialist               LCSHH
Daniel Cotlear                   Lead Economist                         HDNHE
Adam Wagstaff                    Research Manager                       DECRG
Firas Raad                       Health Specialist                      EASHH
Marcelo Bortman                  Senior Health Specialist               LCSHH
Gaston Blanco                    Social Protection Specialist           LCSHS
Edward Bos                       Lead Population Specialist             HDNHE
Rama Lakshminarayanan            Senior Health Specialist               HDNHE
Karima Saleh                     Senior Health Economist                AFTHE
Lingzhi Xu                       Senior Operations Specialist           EASHH
Huong Lan Dao                    Health Specialist                      EASHH
Aparnaa Somanathan               Health Economist                       EASHH
A. Juliana Williams              Senior Program Assistant               EASHD
Ilaria Regondi                   Junior Professional Associate          EASHH
Nguyen Quynh Nga                 Program Assistant                      EACVF
Cesar Banzon                     Extended Term Temporary                EASHD


                                                110
L. Paneer Selvam               Regional Safeguards Adviser     EAPCO
Surhid Gautam                  Operations Analyst              EASVS
Quang Ngoc Bui                 Operations Officer              EASVS
Mai Thi Phuong Tran            Financial Management            EAPCO
Hoang Xuan Nguyen              Procurement Analyst             EACVF
Hoai Van Nguyen                Procurement Analyst             EAPPR
Huy Toan Ngo                   Environmental Specialist        EASVS
Pramod Agrawal                 Consultant, Social Safeguards   EASVS
Ram Chopra                     Consultant                      HDNHE
Davidson Gwatkin               Consultant                      HDNHE
Graham Harrison                WHO Vietnam
Alfredo Perazzo                Consultant
Pieter Degeling                Consultant




World Bank funds expended to date on project preparation:
  1. World Bank resources: US$393,328
  2. Trust funds: US$38,063
  3. Total: US$431,392

Estimated Approval and Supervision costs:
    1. Remaining costs to approval: $21,000
    2. Estimated annual supervision cost: US$80,000




                                            111
                       Annex 12: Documents in the Project File
                 VIETNAM: Central North Region Health Support

-   Ekman, Björn, et al, Central Region Health Support (CRHS): Technical Assistance to
    Component One: Health Situation and Regional Health Strategy Analysis, June 13, 2008.

-   Joint Health Policy Initiative, AusAID study team, Vietnam Hospital Sector Study
    summary report, draft 1, Hanoi, December 2007.

-   Lieberman, Samuel and Adam Wagstaff, Health Financing and Delivery in Vietnam,
    World Bank, 2009.

-   Ministry of Health, Draft Master Plan for Training Network, 2008.

-   Ministry of Health, Health Report 2006.

-   Ministry of Health, Health Statistics Yearbook 2006, Hanoi.

-   Public Expenditure Review, Health Care Financing Annex E.

-   Sea-Change Partners, Vietnam’s Health Workforce in Transition: Problems, Policies and
    Prospects, 2006.

-   Tran Thi Trung Chien, Vietnam Health Report 2006, Medical Publishing House, 2007.

-   Van Konkelenberg, Ron, Vietnam’s Health Workforce: A Review of Challenges and
    Reform Initiatives Draft Report, Fresbout Consulting International, November, 2008.

-   Vietnam Central North Region Health Support project concept note.

-   Vietnam Country Profiles, May 28, 2008

-   Vietnam General Statistics Office, Vietnam Households Living Standards Survey
    (VHLSS) 2002, 2004, 2006.

-   Vietnam Ministry of Health and Health Partnership Group, Joint Annual Health Review
    2007, Hanoi, January 2008.

-   Vietnam National Health Survey (2001-2002) report.

-   Vietnamese Academy of Social Sciences, Vietnam Poverty Update Report 2006: Poverty
    and Poverty Reduction in Vietnam 1993-2004, Hanoi, December 2006.

-   Wagstaff, Adam, Health Insurance for the Poor: Initial Impacts of Vietnam’s Health
    Care Fund for the Poor, World Bank Policy Research Working Paper 4134, February
    2007.



                                          112
                                            Annex 13: Statement of Loans and Credits
                                     VIETNAM: Central North Region Health Support

                                                                                                                               Difference between
                                                                                                                               expected and actual
                                                                 Original Amount in US$ Millions                                 disbursements
Project ID   FY     Purpose                                    IBRD      IDA        SF        GEF         Cancel.   Undisb.   Orig.     Frm. Rev’d
P108885      2009   VN - Agriculture Competitiveness Project    0.00     59.80       0.00          0.00     0.00     55.63      0.00        0.00
P088759      2009   Fin Sector Modern and Info Mgnt System      0.00     60.00       0.00      0.00         0.00     56.92      0.00        0.00
P082672      2008   VN-Northern Upland Health Support Proje     0.00     60.00       0.00          0.00     0.00     54.73     -2.39        0.00
P083581      2008   VN-HANOI URBAN TRANSPORT                    0.00    155.21       0.00          0.00     0.00    148.57     12.78        0.00
P086508      2008   VN-Priority Infra Investment                0.00    152.44       0.00          0.00     0.00    144.07     -2.00        0.00
P095129      2008   VN-Northern Delta Transport Dev             0.00    170.00       0.00          0.00     0.00    153.69      0.00        0.00
P096418      2008   VN Land Administration Project              0.00     75.00       0.00          0.00     0.00     68.08     -1.90        0.00
P099211      2008   VN-Rural Distribution Project               0.00    150.00       0.00          0.00     0.00    135.39      0.00        0.00
P099376      2008   Tax Administration Modernization Project    0.00     80.00       0.00      0.00         0.00     82.26      0.00        0.00
P100916      2008   VN-Third Rural Finance Project              0.00    200.00       0.00          0.00     0.00    188.00      0.00        0.00
P101608      2007   VN-Avian & Human Influenza Control          0.00     20.00       0.00      0.00         0.00     18.49      5.98        0.00
                    &Prep
P083588      2007   VN-MKG DELTA TRANSPORT INFRA                0.00    207.70       0.00      0.00         0.00    221.29      9.81        0.00
                    DEV
P104848      2007   VN-HIFU DEVELOPMENT                         0.00     50.00       0.00          0.00     0.00     40.77     -4.96        0.00
P082295      2007   VN-COASTAL CITIES ENVMT SANIT.              0.00    124.70       0.00          0.00     0.00    116.31     -4.39        0.00
P079665      2007   VN-2ND HIGHER EDUCATION                     0.00     59.40       0.00          0.00     0.00     51.10      3.63        0.00
P085071      2006   Customs Modernization                       0.00     65.90       0.00          0.00     0.00     67.36     36.83        0.00
P084871      2006   VN-TRANS & DISTRIB 2                        0.00    200.00       0.00          0.00     0.00    158.24     52.00       -0.50
P073361      2006   VN -Natural Disaster Risk Mngt Project      0.00     86.00       0.00      0.00         0.00     66.19      1.53        0.00
P079663      2006   VN-Mekong Regional Health Support Proj      0.00     70.00       0.00          0.00     0.00     64.77     -3.71        0.00
P079344      2006   VN -ICT Development                         0.00     93.72       0.00          0.00     0.00     87.16     26.25        0.00
P075407      2006   VN-Rural Transport 3                        0.00    106.25       0.00          0.00     0.00    107.13     39.71        0.71
P077287      2006   VN-RRD RWSS                                 0.00     45.87       0.00          0.00     0.00     40.30      6.20        0.00
P066051      2005   VN - Forest Sector Development Project      0.00     39.50       0.00          0.00     0.00     29.58     20.29       12.87
P085260      2005   VN-EFA Support Program                      0.00     50.00       0.00          0.00     0.00     15.19     15.00        0.00
P085080      2005   VN-ROAD SAFETY                              0.00     31.73       0.00          0.00     0.00     29.36     22.20        0.00
P073763      2005   VN-WATER SUPPLY DEV.                        0.00    112.64       0.00      0.00         0.00     98.84     29.79        0.00
P082627      2005   Payment System and Bank Modernization       0.00    105.00       0.00      0.00         0.00     84.16     67.01       67.51
                    2
P082604      2005   VN-HIV/AIDS Prevention Project              0.00     35.00       0.00          0.00     0.00     15.90     -2.35        0.00
P074688      2005   VN-RURAL ENERGY 2                           0.00    220.00       0.00          0.00     0.00    134.10     69.59        0.00
P059663      2004   VN-ROAD NETWORK IMPROVEMT                   0.00    225.26       0.00          0.00     0.00    169.56    156.79        0.00
P065898      2004   VIETNAM WATER RESOURCES                     0.00    157.80       0.00      0.00         0.00    130.51     67.35        0.00
                    ASSISTANCE
P070197      2004   VN-URBAN UPGRADING                          0.00    222.47       0.00          0.00     0.00    177.43     24.67        0.00
P044803      2003   VN-PRIMARY EDUC FOR                         0.00    138.76       0.00      0.00         0.00     74.75     36.49       33.80
                    DISADVANTAGED CHILRE
P075399      2003   Public Financial Management Reform          0.00     54.33       0.00      0.00         0.00     44.07     37.27       13.78
                    Proj.
P066396      2002   VN-SYSTEM ENERGY,                           0.00    225.00       0.00      0.00         0.00     73.36     27.80       27.80
                    EQUITIZATION & RENEWAB
P072601      2002   VN - Rural Finance II Project               0.00    200.00       0.00          0.00     0.00      0.00    -39.90        0.00




                                                                       113
P073305   2002   VN-Regional Blood Transfusion Centers       0.00     38.20    0.00   0.00   0.00     25.42     17.41    -5.27
P062748   2001   VN - COMMUNITY BASED RURAL                  0.00    102.78    0.00   0.00   0.00     14.17     -5.60     0.00
                 INFRA.
P052037   2001   VN-HCMC ENVMTL SANIT.                       0.00    166.34    0.00   0.00   0.00     95.18     69.05    69.05
P042927   2001   VN-Mkg Transp & Flood Protection            0.00    135.00    0.00   0.00   0.00     54.22      9.76    -3.19
                                                    Total:   0.00   4,551.80   0.00   0.00   0.00   3,392.25   797.99   216.56




                                                                    114
                                                        VIETNAM
                                                 STATEMENT OF IFC’s
                                                Held and Disbursed Portfolio
                                                 In Millions of US Dollars

                                                          Committed                                        Disbursed
                                                         IFC                                            IFC
FY Approval   Company                         Loan      Equity         Quasi    Partic.   Loan          Equity        Quasi   Partic.
2003          ACB-Vietnam                      0.00       5.02           0.00     0.00      0.00          5.02         0.00     0.00
2002          CyberSoft                        0.00       0.06           0.00     0.00      0.00          0.06         0.00     0.00
2002          Dragon Capital                   0.00       0.00           1.05     0.00      0.00          0.00         1.05     0.00
2002          F-V Hospital                     5.00       0.00           3.00     0.00      5.00          0.00         3.00     0.00
2005          Khai Vy                          6.00       0.00           0.00     0.00      0.00          0.00         0.00     0.00
1998          MFL Vinh Phat                    0.13       0.00           0.00     0.00      0.13          0.00         0.00     0.00
1997          Nghi Son Cement                  10.09      0.00           0.00     1.88     10.09          0.00         0.00     1.88
2004          Olam                             20.00      0.00           0.00     0.00     20.00          0.00         0.00     0.00
2005          Paul Maitland                    7.20       0.00           0.00     0.00      7.20          0.00         0.00     0.00
2001          RMIT Vietnam                     7.25       0.00           0.00     0.00      3.50          0.00         0.00     0.00
2006          SABCO                            20.00      0.00           0.00     0.00      0.00          0.00         0.00     0.00
2003          Sacombank                        0.00       2.77           0.00     0.00      0.00          2.77         0.00     0.00
2004          Sacombank                        0.00       2.31           0.00     0.00      0.00          2.31         0.00     0.00
2005          Sacombank                        0.00       2.05           0.00     0.00      0.00          2.05         0.00     0.00
2006          Sacombank                        0.00       3.05           0.00     0.00      0.00          3.05         0.00     0.00
2002          VEIL                            0.00        0.00           2.00     0.00      0.00          0.00         2.00     0.00
2003          VEIL                            0.00        7.41           0.00     0.00      0.00          7.41         0.00     0.00
2007          VEIL                            0.00        6.15           0.00     0.00      0.00          6.15         0.00     0.00
                          Total portfolio:      75.67    28.82           6.05     1.88     45.92        28.82          6.05     1.88



                                                                           Approvals Pending Commitment
              FY Approval       Company                             Loan         Equity      Quasi          Partic.
              2000              MFL-AA                            0.00            0.00           0.00         0.00
              2006              CCS-Asia                          0.02            0.00           0.00         0.00
              2000              Interflour                        0.01            0.00           0.00         0.01
              2006              CII-Vietnam                       0.00            0.00           0.00         0.00
              2000              MFL Mondial                       0.00            0.00           0.00         0.00
              2002              F-V Hospital                      0.00            0.00           0.00         0.00
              1999              MFL Minh Minh                     0.00            0.00           0.00         0.00
              1999              MFL Chau Giang                    0.00            0.00           0.00         0.00
                                     Total pending commitment:         0.03       0.00           0.00         0.01




                                                                 115
                                                                             Annex 14: Country at a Glance
                                                VIETNAM: Central North Region Health Support
                                                                                                East
P O V E R T Y a nd S O C IA L                                                                A s ia &         Lo w-
                                                                                                                           D e v e lo pm e nt dia m o nd*
                                                                             V ie t na m     P a c if ic   inc o m e
2007
P o pulatio n, mid-year (millio ns)                                                85.1            ,91
                                                                                                  1 4           1,296
                                                                                                                                           Life expectancy
GNI per capita (A tlas metho d, US$ )                                              790            2,180           578
GNI (A tlas metho d, US$ billio ns)                                                67.2           4,174           749

A v e ra ge a nnua l gro wt h, 2 0 0 1- 0 7
P o pulatio n (%)                                                                     1.3           0.8            2.2
                                                                                                                           GNI                                         Gro ss
Labo r fo rce (%)                                                                     2.2           1.2            2.7
                                                                                                                           per                                        primary
M o s t re c e nt e s t im a t e ( la t e s t ye a r a v a ila ble , 2 0 0 1- 0 7 )                                        capita                                  enro llment
P o verty (% o f po pulatio n belo w natio nal po verty line)                         29              ..            ..
Urban po pulatio n (% o f to tal po pulatio n)                                        27             43            32
Life expectancy at birth (years)                                                      71             71            57
Infant mo rtality (per 1,000 live births)                                             15             24            85
Child malnutritio n (% o f children under 5)                                          20             13            29            A ccess to impro ved water so urce
A ccess to an impro ved water so urce (% o f po pulatio n)                            92             87            68
Literacy (% o f po pulatio n age 1 5+)                                                 ..            91            61
Gro ss primary enro llment (% o f scho o l-age po pulatio n)                           ..           10
                                                                                                     1             94                      Vietnam
  M ale                                                                                ..             1
                                                                                                     11           100                      Lo w-inco me gro up
  Female                                                                               ..           109            89

KE Y E C O N O M IC R A T IO S a nd LO N G - T E R M T R E N D S
                                                                  19 8 7          19 9 7        2006          2007
                                                                                                                           E c o no m ic ra t io s *
GDP (US$ billio ns)                                                36.7            26.8            61.0           71.2
Gro ss capital fo rmatio n/GDP                                      13.6           28.3            35.7          35.3
                                                                                                                                                 Trade
Expo rts o f go o ds and services/GDP                                6.0           43.1            73.5          75.7
Gro ss do mestic savings/GDP                                         4.8           20.2            32.4          27.4
Gro ss natio nal savings/GDP                                           ..          21.6            36.9          32.8
Current acco unt balance/GDP                                         -1.6           -6.2           -0.3           -3.1
                                                                                                                           Do mestic                              Capital
Interest payments/GDP                                                0.0              1.0           0.5              ..
                                                                                                                           savings                                fo rmatio n
To tal debt/GDP                                                      0.5             81 .1         33.1              ..
To tal debt service/expo rts                                            ..           7.7            2.0              ..
P resent value o f debt/GDP                                             ..              ..         27.9              ..
P resent value o f debt/expo rts                                        ..              ..         37.3              ..
                                                                                                                                            Indebtedness
                                               19 8 7 - 9 7 19 9 7 - 0 7         2006           2007       2 0 0 7 - 11
(average annual gro wth)
GDP                                                    7.7           7.2            8.2             8.5             8.1                     Vietnam
GDP per capita                                         5.6           5.9            6.9             7.2            6.9                      Lo w-inco me gro up
Expo rts o f go o ds and services                     27.3          17.9           22.7            17.9           17.9



S T R UC T UR E o f t he E C O N O M Y


                                                                  19 8 7          19 9 7        2006          2007         G ro wt h o f c a pit a l a nd G D P ( %)
(% o f GDP )
                                                                                                                          15
A griculture                                                       40.6            25.8            20.4              ..
Industry                                                           28.4            32.1            41.6              ..   10
  M anufacturing                                                   22.4            16.5            21.3              ..    5
Services                                                            31.1           42.2            38.1              ..
                                                                                                                           0
Ho useho ld final co nsumptio n expenditure                            ..           71.7           61.7          67.1               02      03         04   05     06       07
General go v't final co nsumptio n expenditure                         ..            8.1            5.9           5.5                            GCF              GDP
Impo rts o f go o ds and services                                   14.8            51.2           76.8          83.6


                                                             19 8 7 - 9 7 19 9 7 - 0 7          2006          2007
                                                                                                                          G ro wt h o f e xpo rt s a nd im po rt s ( %)
(average annual gro wth)
A griculture                                                         4.0            4.0             3.4              ..   40

Industry                                                             9.5            9.9            10.4              ..   30
  M anufacturing                                                     6.5             1
                                                                                    1 .2           12.4              ..   20
Services                                                             9.1            6.2             8.3              ..
                                                                                                                          10
Ho useho ld final co nsumptio n expenditure                           ..            10.8           12.9          20.3      0
General go v't final co nsumptio n expenditure                        ..             5.7            8.5           8.5               02      03         04   05     06       07
Gro ss capital fo rmatio n                                         23.8             10.2            9.3           9.2                      Exports               Import s
Impo rts o f go o ds and services                                  29.6             1 8.1          21.5          22.6


No te: 2007 data are preliminary estimates.
This table was pro duced fro m the Develo pment Eco no mics LDB database.
* The diamo nds sho w fo ur key indicato rs in the co untry (in bo ld) co mpared with its inco me-gro up average. If data are missing, the diamo nd will
   be inco mplete.




                                                                                                            116
                                                                                                                                                            Vietnam
P R IC E S a nd G O V E R N M E N T F IN A N C E
                                                   19 8 7     19 9 7     2006        2007
                                                                                                Inf la t io n ( %)
D o m e s t ic pric e s
                                                                                                10
(% change)
                                                                                                8
Co nsumer prices                                       ..        3.2         7.5         7.5
                                                                                                6
Implicit GDP deflato r                             362.6         6.6         7.3         8.2
                                                                                                4
G o v e rnm e nt f ina nc e                                                                     2
(% o f GDP , includes current grants)                                                           0
Current revenue                                      13.2       20.9        27.1        25.5    -2              02             03         04        05          06          07
Current budget balance                               -0.6        4.5         8.5         5.8
                                                                                                                               GDP def lator                    CPI
Overall surplus/deficit                                 ..       -1.4       -0.3        -3.4

TRADE
                                                   19 8 7     19 9 7     2006        2007
                                                                                                E xpo rt a nd im po rt le v e ls ( US $ m ill.)
(US$ millio ns)
To tal expo rts (fo b)                                610      9,1 85    39,826            ..   50,000
  Rice                                                  ..       926      1,276            ..
                                                                                                40,000
  Fuel                                                  ..     1,443      8,265            ..
  M anufactures                                         ..     4,401     19,360            ..   30,000
To tal impo rts (cif)                                ,1
                                                    1 84       1
                                                              1 ,592     44,891            ..   20,000
  Fo o d                                                ..          6         ..           ..
  Fuel and energy                                       ..     1 94
                                                                 ,1       5,970            ..   10,000

  Capital go o ds                                       ..     3,51 2    10,800            ..          0
                                                                                                                01        02         03        04    05      06        07
Expo rt price index (2000=100)                          ..        1
                                                                 19          100           ..
Impo rt price index (2000=100)                          ..       120         103           ..                              Export s                  Imports
Terms o f trade (2000=1 00)                             ..        99          97           ..




B A LA N C E o f P A Y M E N T S
                                                   19 8 7     19 9 7     2006        2007
                                                                                                C urre nt a c c o unt ba la nc e t o G D P ( %)
(US$ millio ns)
Expo rts o f go o ds and services                       ..     1
                                                              1 ,678     44,926      52,964     4
Impo rts o f go o ds and services                       ..     3,61
                                                              1 8        47,710      58,502
                                                                                                2
Reso urce balance                                       ..    -1,940     -2,784      -5,538
Net inco me                                          -94        -614      -1,430      -1,887    0
Net current transfers                                 27        887       4,049       5,227                01        02         03        04        05     06         07
                                                                                                -2
Current acco unt balance                            -592      -1,667        -165      -2,198
                                                                                                -4
Financing items (net)                                   ..        56      3,093            ..
Changes in net reserves                                 ..       ,61
                                                                1 1      -2,928            ..   -6

M emo :
Reserves including go ld (US$ millio ns)               ..         186       1
                                                                           1 ,485          ..
Co nversio n rate (DEC, lo cal/US$ )                78.3      1
                                                             1 ,683.3   15,963.9    16,056.0

E X T E R N A L D E B T a nd R E S O UR C E F LO WS
                                                  19 8 7      19 9 7     2006        2007
                                                                                                C o m po s it io n o f 2 0 0 6 de bt ( US $ m ill.)
(US$ millio ns)
To tal debt o utstanding and disbursed               191      21,777     20,202           ..
  IB RD                                                0           0          0           0
                                                                                                                     G: 2,504
  IDA                                                 60         569      3,663       4,549                                                          B: 3,663
To tal debt service                                     2        914         918           ..
 IB RD                                                  0          0           0           0                                                                 C: 181
                                                                                                     F: 1,987
 IDA                                                    0          4          56          64
Co mpo sitio n o f net reso urce flo ws
                                                                                                                                                                D: 2,196
 Official grants                                       41        254        543            ..
 Official credito rs                                   -1        378        863            ..
 P rivate credito rs                                    0        292         -66           ..
 Fo reign direct investment (net inflo ws)             10      2,220       2,315           ..
 P o rtfo lio equity (net inflo ws)                     0          0           0           ..
                                                                                                                       E: 9,671
Wo rld B ank pro gram
 Co mmitments                                           0       444         656         973     A - IBRD                                                  E - Bilateral
 Disbursements                                          0        181        340         748     B - IDA               D - Other mult ilateral             F - Privat e
 P rincipal repayments                                  0          1         23          30     C - IM F                                                  G - Short -t erm
 Net flo ws                                             0       180         317         718
 Interest payments                                      0          3         33          34
 Net transfers                                          0       177         284         684


No te: This table was pro duced fro m the Develo pment Eco no mics LDB database.                                                                                 9/24/08




                                                                                    117
         Annex 15: Map IBRD 37148
VIETNAM: Central North Region Health Support




                    118

				
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