Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No: 27981-YU PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT Public Disclosure Authorized IN THE AMOUNT OF SDR 4.9 MILLION (US$7.0 MILLION EQUIVALENT) TO SERBIA AND MONTENEGRO FOR A MONTENEGRO HEALTH SYSTEM IMPROVEMENT PROJECT Public Disclosure Authorized May 12,2004 Human Development Sector Unit South East Europe Country Unit Europe and Central Asia Region ~ Public Disclosure Authorized 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 April 30,2004) Currency Unit = Euro 1 Euro = US$1.194 US$1.45133 = SDR1 FISCAL YEAR January 1 - December31 ABBREVIATIONS AND ACRONYMS AAA Analytical and Advisory Assistance APL Adaptable Program Loan CAS Country Assistance Strategy CIDA Canadian International Development Agency CFAA Country Financial Accountability Assessment CPAR Country Procurement Assessment Report DFID Department for International Development DM Deutsche Mark EAR European Agency for Reconstruction EC European Commission EIB European Investment Bank ERTP Economic Reconstruction and Transition Program ESW Economic and Sector Work EU European Union FRY Federal Republic of Yugoslavia GDP Growth Domestic Product GNP GFATM Gross National Product HIF Global Fund to Fight AIDS, Tuberculosis and Malaria HIV/AIDS Health Insurance Fund IBRD Human Immunodeficiency VirusIAcquired Immunodeficiency Syndrome IDA International Bank for Reconstruction and Development IDPs International Development Association IFC Internally Displaced Persons ILO International Finance Corporation IMF International Labor Organization ISSP International Monetary Fund IPH Institute for Strategic Studies and Prognoses JPR Institute of Public Health of the Republic of Montenegro MDG Joint Bank-Government Country Portfolio Performance Review MOF Millennium Development Goals MOH Ministry of Finance ofthe Republic of Montenegro NGO Ministry of Health ofthe Republic of Montenegro OED Non-governmental Organization PEIR Operations Evaluation Department PHC Public Expenditure Institutional Review PI0 Primary Health Care PMN Pension and Disability Fund PRSP Project Management Network SAC Poverty Reduction Strategy Paper SAA FOR OFFICIAL USE ONLY SAM Structural Adjustment Credit SEE Stabilization and Association Agreement SFRY Serbia and Montenegro SME South East Europe STIs Socialist Federal Republic ofYugoslavia TA Small and Medium-Sized Enterprises TB Sexually-Transmitted Infections TFFRY Technical Assistance TSS Tuberculosis UN Trust Fund for Federal Republic ofYugoslavia UNDP Transitional Support Strategy UNICEF United Nations WBI United Nations Development Program WTO ZOP UnitedNations Children’s Fund World Bank Institute World Trade Organization Clearing and Settlements Bureau ofthe Republic ofMontenegro Vice President: Shigeo Katsu Country Director: Orsalia Kalantzopoulos Sector Manager: Armin H. Fidler Task Team Leader: Loraine Hawkins This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization. 4 . Social Assessment ........................................................................................................................ 15 5 . Environmental Assessment ......................................................................................................... 15 6 . Safeguard policies ........................................................................................................................ 15 7 . Policy Exceptions and Readiness................................................................................................ 16 Annex 1: Country and Sector or Program Background ....................................................................... 17 Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ............................... 26 Annex 3: Results Framework and Monitoring...................................................................................... 28 Annex 4: Detailed Project Description................................................................................................... 34 Annex 5: Project Costs ............................................................................................................................. 41 Annex 6: Implementation Arrangements ............................................................................................... 44 Annex 7: Financial Management and Disbursement Arrangements .................................................. 45 Annex 8: Procurement ............................................................................................................................. 51 Annex 9: Economic Analysis and Social Context .................................................................................. 61 Annex 10: Safeguard Policy Issues ......................................................................................................... 70 Annex 11: Project Preparation and Supervision................................................................................... 71 Annex 12: The Project in the Context ofthe PRSP and the ................................................................. 73 Montenegro Health Reform Strategy ...................................................................................................... 73 Annex 13: Documents in the Project File ............................................................................................... 78 Annex 14: Statement of Loans and Credits ........................................................................................... 79 Annex 15: Country at a Glance............................................................................................................... 81 Map: IBRD 31506R1 SERBIA AND MONTENEGRO MONTENEGRO HEALTH SYSTEM IMPROVEMENT PROJECT PROJECT APPRAISAL DOCUMENT EUROPE AND CENTRAL ASIA ECSHD Date: May 12,2004 Team Leader: Loraine Hawkins Country Director: Orsalia Kalantzopoulos Sectors: Health (1 00%) Sector ManagedDirector: Armin H. Fidler Themes: Health system performance (P); Population and reproductive health (S); Public expenditure, financial management and procurement (S); Other public sector governance (S) Project ID: PO82223 Environmental screening category: Not Required Lending Instrument: Specific Investment Loan Safeguard screening category: Not Required Project Financing Data [ ] Loan [XI Credit [ ] Grant [ ] Guarantee [ ] Other: For Loans/Credits/Others: Total Bank financing (US$m.): US$7.00 million Proposed terms (IDA): Standard Credit Modified Terms: 20 years to maturity; 10 years grace Deriod. with no acceleration clause ASSOCIATION OTHER DONOR 0.07 0.50 0.57 Total: 5.16 4.73 9.89 Borrower: Ministry of International Economic Relations Serbia and Montenegro Responsible Agency: Ministry of Health Trg Vektre Poslovni Centar Krusevac bb Serbia and Montenegro 1 Project implementation period: Start October 4,2004 End: September 30,2008 Expected effectiveness date: October 4,2004 Expected closing date: March 3 1, 2009 Does the project depart from the CAS in content or other significant respects? [ ]Yes [XINO Ref:.I PAD A.3 Does the project require any exceptions from Bank policies? Re$ PAD D. 7 [ ]Yes [XINO Have these been approved~~ by Bank management? [ ]Yes [ IN0 Is approval for any policy exception sought from the Board? [ jYes [ NO Does the project include any critical risks rated “substantial” or “high”? [ ]Yes [XINO Re$ PAD C.5 Does the project meet the Regional criteria for readiness for implementation? [XIYes [ ]No Re$ PAD D. 7 Project development objective Re$ PAD B.2, Technical Annex 3 The objective of the proposed Health System Improvement Project is to put in place the first phase of steps towards reform of the health system in the Republic ofMontenegro, giving priority to increasing capacity for policy, planning and regulation; stabilizing health financing; and improving primary health care service delivery. Project description Re$ PAD B.3.a, Technical Annex 4 1. Support for the Government’s health reform program, through health policy development and capacity building in key agencies, and through health information systems development; 2. Phased implementation ofprimary health care development, beginning in Podgorica, with scaling up of aspects of reform and development to other locations; and 3. Project management. Which safeguard policies are triggered, if any? Re$ PAD D. 6, Technical Annex 10 Environmental Assessment (OP/BP/GP 4.0 l),category C Significant, non-standard conditions, if any, for: Re$ PAD C.7 Board presentation: N/A Loadcredit effectiveness: 1. The Montenegrin Parliament has adopted a Law on Health Insurance and a Law on Health Protection, both laws satisfactory to IDA; and 2. The Government of Montenegro has adopted a health financing plan for 2005-2007, acceptable to ii IDA, consistent with the Government's medium term fiscal strategy and with the Laws on Health Insurance and Health Protection, that achieves planned fiscal balance in the HIF in each of these three years, and plans for improvement in management of public expenditure on health, while protecting access to health services for the poor and vulnerable. Covenants applicable to project implementation: The Borrower shall, by December