ASIAN DEVELOPMENT BANK PCR: PNG 24208

PROJECT COMPLETION REPORT

ON THE

THIRD RURAL HEALTH SERVICES PROJECT

(Loan No. 1097-PNG[SF])

IN PAPUA NEW GUINEA

February 2001

CURRENCY EQUIVALENTS

Currency Unit Kina (K)

At Appraisal At Project Completion

K1.00 = $1.0464 $2.4570 $1.00 = K0.9556 K0.4070

ABBREVIATIONS

ADB - Asian Development BankAusAID - Australian Agency for International DevelopmentCHW - Community Health WorkerCSTB - Central Supply and Tender BoardDOW - Department of WorksDPPE - Division of Policy, Planning and EvaluationDTP - Department of Treasury and PlanningHC - Health CenterHED - Health Education DivisionHEO - Health Extension OfficerHMIS - Health Management Information SystemHRD - Human Resource DevelopmentHSDP - Health Sector Development ProgramIDC - Interest during constructionMMR - Maternal Mortality RateNDOH - National Department of HealthNGO - Non-Government OrganizationPCR - Project Completion ReportPCRM - Project Completion Report MissionPDOH - Provincial Division of HealthPDOW - Provincial Department of WorksPHC - Primary Health CarePIU - Project Implementation UnitPNG - Papua New GuineaSDR - Special drawing rightUPNG - University of Papua New Guinea

NOTES

(i) The fiscal year (FY) of the Government ends on 31 December.(ii) In this report, “$” refers to US dollars.

CONTENTS

BASIC DATA i

MAPvi

I. PROJECT DESCRIPTION 1

II. EVALUATION OF IMPLEMENTATION 1

A. Project Components 1B. Implementation Arrangements 6C. Project Costs and Financing 6D. Project Schedule 7E. Engagement of Consultants and Procurement of Civil Works and Goods 7F. Performance of Consultants, Contractors, and Suppliers 7G. Conditions and Covenants 8H. Disbursements 9I. Environmental Impact 9J. Performance of the Borrower and the Executing Agency 9K. Performance of ADB 9

III. EVALUATION OF FINANCIAL PERFORMANCE AND BENEFITS 10

A. Financial and Economic Performance 10B. Attainments of Benefits 10

IV. THE TECHNICAL ASSISTANCE 11

V. CONCLUSIONS AND RECOMMENDATIONS 11

A. Conclusions 11B. Lessons Learned and Recommendations 12

APPENDIXES 14

BASIC DATA

A. Loan Identification

1. Country Papua New Guinea2. Loan No. 1097-PNG(SF)3. Project Title Third Rural Health Services Project4. Borrower Papua New Guinea5. Executing Agency Department of Health6. Amount of Loan SDR15.743 (original)

($21.9 million equivalent)SDR11.244 (revised)($15.840 million equivalent)

7. PCR No. PCR:PNG 607

B. Loan Data

1. Appraisal- Date Started 19 Apr 1991- Date Completed 20 May 1991

2. Loan Negotiations- Date Started 30 Jul 1991- Date Completed 2 Aug 1991

3. Date of Board Approval 5 Sep 1991

4. Date of Loan Agreement 29 Oct 1991

5. Date of Loan Effectiveness- in Loan Agreement 27 Jan 1992- Actual 27 Jul 1992- Number of Extensions 2

6. Closing Date- in Loan Agreement 31 May 1997- Actual 15 Aug 2000- Number of Extensions 3

7. Terms of Loan- Interest Rate 1% service charge per annum- Maturity 35 years (including a grace period

of 10 years)

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8. Disbursements

a. Dates

Initial Disbursement Final Disbursement Time Interval08 Jun 1993 15 Aug 2000 7 years & 2 monthsEffective Date Original Closing Date Time Interval27 Jul 1992 31 May 1997 4 years & 10 months

b. Amount ($ million) ($ million)

Category Originalallocation 1

RevisedAllocation 2

AmountCancelled

Net AmountDisbursed

1A Civil Work Rural Health System Facilities

7.843 7.166 0.676 7.166

1B Civil Work Water Supply and Sanitation

1.111 0.892 0.218 0.892

2A Equipment – Imported 4.177 2.509 1.668 2.5092B Equipment – Basic Furniture

0.033 0.005 0.028 0.005

3 Training – Overseas/ Fellowships

0.218 0.047 0.171 0.047

4 Consulting Services – International Consultants

1.799 3.625 -1.826 3.625

5 Blood Screening 0.000 0.361 -0.361 0.3616D Consultants – Domestic 0.549 0.248 0.300 0.2486E Training Fellowships 1.112 0.299 0.813 0.2996F Recurring Costs 0.688 0.170 0.518 0.1707 Service Charge During Construction

0.923 0.517 0.406 0.517

8 Unallocated 3.085 0.000 3.085 0.000

Total 21.536 15.840 5.696 15.8401 At time of loan approval.2 At loan closing.

C. Project Data

1. Project Costs ($ million)

Item Appraisal Estimate ActualForeign Exchange Cost 10.865 9.1161

Local Currency Cost 15.454 11.540Total Cost 26.319 20.6561 including interest during construction of $0.517 million.

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2. Financing Plan($ million)

Item Appraisal Estimate ActualsForeign Local Total Foreign Local Total

Implementation Costs: Borrower-financed 0.0 5.3 5.3 0.0 4.8 4.8 ADB-Financed a 10.0 10.1 20.1 8.6 6.7 15.3

Subtotal (A) 10.0 15.4 25.4 8.6 11.5 20.1IDC Costs: Borrower-Financed 0.0 0.0 0.0 0.0 0.0 0.0 ADB-Financed 0.9 0.0 0.9 0.5 0.0 0.5

Sub-total (B) 0.9 0.0 0.9 0.5 0.0 0.5Total 10.9 15.4 26.3 9.1 11.5 20.7

a Excluding IDCADB = Asian Development BankIDC = Interest during construction

3. Cost Breakdown, by Project Component ($ ‘000)

Appraisal Estimate ActualItem Foreign Local Total Foreign Local Total

Part A: InstitutionalStrengthening Training & Fellowships 91 775 866 0 118 118 Equipment 165 24 189 6 40 46 Consulting Services 372 440 812 0 47 47 Recurrent Costs 0 56 56 0 201 201Part B: Rural Health Services Civil Works 2,599 5,898 8,497 2,444 6,860 9,304 Sanitation 602 602 1,203 497 555 1,052 Equipment 3,939 576 4,515 2,494 170 2,664 Furnishings 5 109 114 Consultants 588 694 1,282 2,737 1,413 4,150 Training & Fellowships 108 918 1,026 47 611 658 Blood Screening 361 181 542 Recurrent Costs 0 2,610 2,610 0 685 685Part C: Project ImplementationUnit Consultants 167 198 365 0 5 5 Equipment 4 1 5 8 18 26 Furnishings 0 0 0 0 1 1 Office Renovation 0 0 0 0 3 3 Recurrent Costs 0 258 258 0 527 527

Subtotal Base Cost 8,635 13,049 21,684 8,599 11,540 20,139Physical Contingency 490 655 1,145 0 0 0Price Contingency 864 1,726 2,590 0 0 0Service Charge DuringImplementation

900 0 900 517 0 517

Total Project Cost 10,889 15,431 26,320 9,116 11,540 20,656Slight difference in totals due to rounding off.

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4. Project Schedule

Item Appraisal Estimate Actuala. Civil Works

Construction Jan 1992 Dec 1992 (force acct-DOW) 1

Completion Dec 1996 Jul 2000

b. EquipmentFirst Procurement Jul 1992 Mar 1993 (Computer)Last Procurement Dec 1995 Feb 1999 (Simbu)

c. Consulting ServicesDate of Start Jan 1992 Mar 1993 (Rishworth)Date of Completion Jun 1995 Mar 2000 (C&D)

d. Training and WorkshopsDate of Start Mar 1992 Mar 1993 (Indonesia)Date of Completion Jun 1996 Feb 1999 (Water and Sanitation)

1 activities carried over from Special Interventions Program (SIP)

D. Data on ADB Missions

Type of Mission DateNo. of

PersonsNo.

Person-Days

Specialization ofMembers

Fact-Finding 11-25 Feb 1991 1 15 Project Economist1 15 Financial Analyst

Appraisal 19 Apr - 20 May 1991 1 30 Project Economist1 5 Population Specialist1 5 Programs Officer1 5 Counsel1 14 Consultant

Loan Reconnaissance 1-9 Nov 1991 1 10 Project EconomistReview/Informal Inception 8-18 Dec 1991 1 11 Head, PAU

1 11 Sr. AssistantReview/Inception 2-9 Nov 1992 1 8 PAU HeadReview 1 14 Aug - 1 Sep 1993 1 5 Health SpecialistReview 2 29 Nov-10Dec 1993 1 2 Health SpecialistReview 3 21 Mar-8 Apr 1994 1 6 Health SpecialistReview 4 2-20 May 1994 1 6 Health SpecialistReview 2 3-7 Oct 1994 1 2 Health SpecialistReview 2 30 Jan-3 Feb 1995 1 3 Health SpecialistReview 5 17-28 Apr 1995 1 6 Health SpecialistReview 6 15-18 Aug 1995 1 2 Sr. Project SpecialistMidterm Review 17-27 Oct 1995 1 10 Sr. Project Specialist

1 10 Sr. AssistantReview 5-22 Mar 1996 1 17 Project Administration

Specialist1 4 Sr. Project Specialist

Review 1-8 Nov 1996 1 4 Project AdministrationSpecialist

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Review 5-20 Mar 1997 1 15 ProjectAdministrationSpecialist

15 Sr. AssistantReview 2-12 Nov 1997 1 10 PAU Head

1 10 Associate OperationsAnalyst

Review 4-20 May 1998 1 16 PAU Head1 16 Associate Operations

AnalystReview (Health Sector) 23 Nov - 2Dec 1998 1 1 2 PAU Head

1 2 Health Specialist1 2 Proj. Implementation

SpecialistReview 7 23 Jun - 20 Jul 1999 1 10 Health SpecialistProject Completion Review 8 19 Jun - 6 Jul 2000 1 17 Health Specialist

1 17 Associate OperationsAnalyst

1 Reviewed with Loan 1054-PNG(SF): Special Interventions Project (SIP); Loan 1225-PNG(SF):Population and Family Planning Project (PFPP); and TA 1875-PNG: Review of Health ServicesDelivery.

2 Reviewed with Loan 1225-PNG(SF): PFPP.3 Reviewed with Loan 1054-PNG(SF): SIP and TA 2060-PNG: Human Resources Development (HRD).4 Reviewed with Loan 1225-PNG(SF); PFPP; and TA 2060-PNG: HRD.5 Reviewed with Loan 1225-PNG(SF): PFPP and TA 2103-PNG: National Health Plan Development.6 Reviewed with TA 2103-PNG: National Health Plan and other health and education projects7 Reviewed with Loan 1516/17/18-PNG: Health Sector Development Program (midterm).8 Reviewed with Loan 1225-PNG(SF): PFPP, and Loan 1518-PNG: Investment Loan.

I. PROJECT DESCRIPTION

1. The Third Rural Health Services Project aimed to help the Government improve thequality and delivery of health services for the rural population which accounts for 80percent of the total population of Papua New Guinea (PNG), by constructing and upgradinga broad range of physical infrastructure and by institutional strengthening. The Projectcovered all provinces and the National Department of Health (NDOH), with civil workscomponent for 13 selected provinces. The strategy was to support the implementation ofthe Third National Health Plan (1991-1995), whose goals were to (i) improve healthbehavior and reduce the incidence of communicable and noncommunicable diseases, (ii)improve and extend the provision of primary health services and ensure that acceptablestandards are maintained, and (iii) promote parental responsibility regarding family sizeand child spacing. 2. The Project was preceded by two previous loans to the health sector.1 As a result ofextensive civil works activity conducted under the two loans, coverage had improvedmarkedly in the years since independence. However, the quality of available service washighly variable and at times effectively nonexistent. Service was often severelycompromised by poor maintenance, difficulties in retaining trained staff in isolated areas,irregular provision of basic supplies, inadequate supervision, and lack of standardization ofstaff responsibilities and service norms at each level. 3. As a result of the 1977 Organic Law on Provincial Government and supportinglegislation in 1983, the actual delivery of most basic health services was handed over tothe 19 provincial divisions of health (PDOH). Although NDOH retains responsibility formonitoring health standards under the decentralized health system, its ability to performthis function was severely compromised by (i) lack of sufficient qualified staff to performessential monitoring, planning, supervision and review of national and provincial healthprograms; and (ii) lack of control over provincial budgeting for health services. 4. The Project consisted of three parts. Part A was to strengthen capacity of theNDOH Division of Policy, Planning, and Evaluation (DPPE) in (i) health informationsystems, and (ii) health finance and health management. Part B supported direct serviceimprovement in the rural areas. Part C provided institutional and management support tothe project implementation unit (PIU), which was established within DPPE for the first andsecond rural health services projects.

II. EVALUATION OF IMPLEMENTATION A. Project Components

5. The planned and actual project achievements are compared in Appendix 1. Mostcomponents experienced some implementation delay. Several changes in project scopewere introduced during implementation in response to the changing patterns of demand oroperational policies. A component to provide for blood screening materials and reagentswas introduced in 1992, in response to the increasing incidence of AIDS/HIV.2 This

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Loan 586-PNG: Rural Health Services Project, for $12.0 million approved on 30 September 1982, and Loan746 (SF)/747-PNG: Second Rural Health Services Project, for $8.5 million in Special Funds resources and$5.4 million in ordinary capital resources, approved on 24 October 1985. The health sector has also beensupported under the Special Intervention Project (Loan 1054(SF)-PNG, for $10.5 million, approved on 27November 1990, primarily for construction/upgrading of urban and rural civil works.

2 Acquired immuno-deficiency syndrome/human immunodeficiency virus.

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component was financed by reallocating funds from the contingency funds. Some targetedfamily planning activities were cancelled because another project on the same subject wasimplemented.3 Due to the late completion of the civil works, most basic furnishings for thehealth facilities were not purchased.

6. The main operational policy change during project implementation was furtherdecentralizing of health services responsibility under the Organic Law in 1995. Projectimplementation was strongly affected by the economic crisis that hit the country in 1994-1995. No significant economic recovery has yet benefited the country, and this situationcontinues to affect health services delivery.

1. Part A: Institutional Strengthening

a. Health Information System

7. The consultant supported the setting up of a health management informationsystem (HMIS). The system achieved its highest ever reporting rate of 91 percent in 1998.Staff in the Monitoring and Research Unit are now able to manage the system. They (i)ensure health facilities have stocks of stationery and forms for collecting data, (ii) maintaina high reporting rate, (iii) undertake data quality checks, and (iv) produce routine reports.Current skill levels are significantly higher than two years ago, and staff are also able toundertake some ad hoc data analysis using standard software. The three major concernsare

(i) low level of computer support currently available to the National Departmentof Health (NDOH), with urgent need to upgrade software and strengthensystem integration;

(ii) lack of stable counterpart staff to the consultant, which affects thesustainability of the HMIS, and thus the investment made under the Project;and

(iii) uneven financial support at the provincial level. For example, modem linesare not functioning in some provinces due to nonpayment of rental fees;therefore, data transmitted are not on time.

b. Health Finance and Health Management

8. The consultant in health finance assisted the Government in developing andimplementing a cost-recovery system in the hospitals. The Hospital Charges Act, whichwas amended in December 1994 to increase the cost recovery measures, becameeffective on 1 July 1995. At the request of the Government, the contract of the consultantwas extended by two years in April 1995, to assist NDOH in further implementing the costrecovery system. Hospitals’ staffs were trained in the procedures of collecting fees andmanagement. The revenue from user fees has been monitored since 1995. The consultantalso assisted the Government in preparing a new budget approach. A standard healthbudget, to be used at the district, provincial, and national levels, was developed andincorporated in the National Health Plan 1996-2000. The standard health budgetcomprises 10 programs and reflects national health policy and priorities. The Departmentof Finance officially recognized it, in Finance Instruction dated 27 June 1997. The systemwas still in use for health budget elaboration at the time of the Project Completion ReviewMission (PCRM), and constitutes the basis for the follow up of provincial and districtsexpenditures

3 Loan 1225-PNG(SF): Population and Family Planning, for $ 7.1 million, approved on 1 April 1993.

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under the Health Sector Development Program (HSDP).4 Funds for health finance andmanagement studies were not utilized. The funds could have been used to evaluate theimpact of user fee implementation on the financial accessibility of health services.

c. Human Resources Planning

9. Only one of the four scheduled human resources planning workshops for in-servicetraining of provincial officers in human resources planning procedures and techniques wascompleted. The remaining three were cancelled due to constant changes in the humanresources program. The impact of this component appears negligible.

d. Health System Research 10. The only disbursement under this component was for one computer for the medicalfaculty of the University of PNG (UPNG). NDOH and the University did not propose anyresearch activities or programs. NDOH attributed the situation to the absence of externalexpertise scheduled under this component to assist the department and UPNG inidentifying health systems research subjects. Consultants’ input for this component wascancelled during loan negotiations because the Government wanted to reduce the cost ofconsulting services.

1. Part B: Rural Health Services

11. Part B comprised eight components at appraisal. A ninth was added during projectimplementation.

a. Construction and Upgrading of Designated Health Facilities and

Staff Housing in Rural Areas

12. This component provided for staff housing and construction or renovation ofexisting rural health facilities in 13 Provinces, as well as extension of some trainingfacilities. Implementation suffered major delays due to (i) the financial situation of thecountry, which has constrained the 10 percent Government’s contribution; (ii) theunreliability of the national and provincial Department of Works (DOW), which wasincapable of carrying out the task, and (iii) the lack of supervision.

13. In the absence of progress in the civil works component, (i) the architect who wasrecruited to design the specifications for the buildings was rehired in 1997 to review theimplementation of DOW activities, and (ii) an architectural consulting firm was recruited inApril 1998. Its terms of reference included coordinating and managing the design,construction, and renovation of the health facilities and staff houses not yet started byDOW in six provinces, and the construction of larger facilities in Port Moresby andprovincial urban areas. Inspecting and reporting progress of construction at the healthcenter and Aidposts under the direct control of the DOW provincial offices were added tothe work of the consulting firm in October 1998, due to the sudden ailment of the architect.The consultants had to revise and update the list of the facilities completed or not, whichshowed major inaccuracies. Despite additional delays caused by (i) the Central Supply andTender Board (CSTB) inefficiency and (ii) the reluctance of DOW to provide standarddetails for various housing and facilities, significant progress had been achieved by May

4 Loans 1516/1517-PNG(SF): Health Sector Development Program (HSDP), for $45 million (OCR) and $5

million (SF), approved on 20 March 1997.

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1999. To allow the completion of the majority of the civil works, the Asian DevelopmentBank (ADB) finally approved two extensions of the loan, and the major part of thiscomponent has now been implemented. However, the Missions noted the following duringfield visits:

(i) the project completion stage, a number of facilities under the responsibilityof DOW was either not finished and abandoned, or not started, althoughDOW had been paid 90-100 percent of the total cost of the building;

(ii) completion of unfinished works can take several years, or may neverhappen. Some works that DOW certified as 100% complete are, in fact,unfinished; and

(iii) the quality of materials utilized by DOW was systematically lower thanexpected, and the adverse effect on the life expectancy of these buildingswas evident at the time of the PCRM.

b. Equipment for Rural Health Centers

14. The procurement of medical equipment at the national level, and distribution to theprovinces and then to the district level, were particularly slow and inefficient. Provinceswere late in submitting the requirements. Distribution of equipment procured and receivedby the provinces was inefficient for lack of funds, lack of a distribution list attached to theboxes, or lack of commitment. Due to the late completion of civil works, basic furnishingsfor a number of facilities had not been provided, and part of this component had beenreallocated and utilized to purchase computers and accessories for the provinces toimprove data collection for the HMIS.

c. Construction of Water Supply and Sanitation Systems in RuralCommunities

15. The water supply and sanitation component’s initial design assumed a substantialinvolvement of the communities. However, implementation started extremely slowly; mostprovinces found it difficult to ensure community participation. Civil works were successfullyimplemented only after a consultant to manage the component was recruited in November1997. Due to severe budget shortfall in 1998, additional funds had to be reprogrammedthrough Secretary’s Advance to remedy the budget deficiency under this component andallow full implementation.

16. The Project constructed and installed water supply systems serving 101,157people, and installed in selected villages 245 ventilated improved latrines serving 2,450people. Most of the provincial water and sanitation committees had to be reactivated whenthe consultant was fielded. At the time of the PCRM, the committees were still active insome provinces. At the request of the Environmental Health Unit of NDOH, the consultanthelped in preparing and developing a technical manual on rural water supply and sanitationrelevant to PNG, in addition to his initial terms of reference. Regional and national trainingworkshops were conducted for officers in charge (OICs) of provincial rural water supplyand sanitation offices, provincial health officers, and district health inspectors from the 19provinces.

d. Training and Curriculum Development

17. All the consultants under this component were fielded and completed their inputs.The nursing, postbasic pediatrics, and postbasic midwifery curricula were reviewed, but theNDOH decided to upgrade them to diploma level, which was done under a project funded

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by AusAID. The health extension officer and the health inspector curricula were designed.The three years testing ended in 1998, but the teachers and trainers guides have not beencompleted. As a result of the changes in scope and delays in formalizing curricula, nofunds were used for printing and distributing the curricula, which were not ready by the endof project’s implementation. The PIU did not receive any completion report from theHuman Resource Development (HRD) Branch.

18. The environmental health officer curriculum was completed, and training started atLae Technical College. The health teaching and health education sub-component atGoroka College was considerably expanded because it proved very popular and thedemand was high. It supported the training of about 120 students. Unfortunately, mostgraduates were placed in administrative positions not involving any kind of health teaching,as most health educator positions had been abolished in the provinces.

e. Staff Development

19. The consultant was fielded in 1994, just as the country’s financial crisis severelyimpacted all activities. Therefore the scope of the component was reduced, and activitieswere carried out as a pilot project in only one province, instead of the entire country. Aftergathering information through direct observation and a questionnaire, three workshops totrain officers-in-charge in functional job analysis were organized. Recommendations madeto NDOH to extend and complete the work done under this pilot project were neverimplemented. They were included in the design of the investment component of theHSDP,5 which faces major implementation difficulties.

f. Upgrading of Health Education Programs at National andProvincial Levels

20. The Project established and financed on a declining basis staff positions for onenational health educator and 12 provincial educators. Most of these positions wereabolished in 1996-1997, after the health educator positions were absorbed on theprovincial staff as a result of decentralization (Organic Law passed in 1995). Some healtheducation materials were reprinted, and the Project financed the acquisition of printingequipment.

g. Improving the Quality of Public Dental Health Programs

21. Equipment was distributed to the dental faculty and to provinces with a certifieddental doctor on their staff. Three of the four regional in-service seminars on improvedpublic dental procedures and techniques were organized and completed.

h. Upgrading Maternal and Child Health and Family PlanningCapacity at NDOH and PDOHs

22. Most activities under this subcomponent were cancelled and transferred to thePopulation and Family Planning Project (footnote 3). Only the overseas seminar inIndonesia and the distribution of delivery kits from United Nations Children’s Fund(UNICEF) were completed.

5 Loan 1518-PNG: Investment Component of the HSDP (Loan 1516-1517) for US$9.1 million, approved on 20

March 1997.

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i. Blood screening and Serosurveillance

23. This category was created in September 1992 by reallocating $730,000 equivalentfrom the unallocated category. Notwithstanding the successive Missions’recommendations, the blood screening and serosurveillance component was neversatisfactorily implemented, due mainly to lack of awareness, and despite an exponentialincrease in seropositivity in the country.

2. Part C: Project Implementation Unit 24. Institutional and management support was provided to the PIU, which wasestablished within DPPE of NDOH for the first and second rural health services projects.This was completed at the early stage of project implementation. B. Implementation Arrangements 25. NDOH served as the Project’s Executing Agency. The PIU in DPPE, alreadyestablished for the Rural Health Services Project and the Second Rural Health ServicesProject, was responsible for the detailed execution of the Project. The PIU was headed bythe ADB project coordinator, who reported directly to the secretary of NDOH. But becauseNDOH does not have direct implementation authority under the decentralized system, theresult was lack of coordination and absence of clear assignment of responsibilitiesbetween the national and the provincial levels. In addition, PIU staff could not visit theprovinces regularly, for lack of staff and counterpart funding, further aggravating lack ofcoordination and supervision. 26. The responsibility for civil works was initially with DOW. At appraisal, DOW wasconsidered a well-organized technical department. However, it commencedimplementation but failed to complete it. Aggravated by financial difficulties due to theeconomic crisis, disorganization and frequent staff changes at the DOW provincial officesresulted in lack of continuity. Finally, supervision of civil works had to be transferred to aprivate firm, which contracted private companies to complete the works. C. Project Costs and Financing 27. The total project cost at appraisal was estimated at $26.3 million equivalent, ofwhich $10.9 million (41 percent) was the foreign exchange cost and $15.4 million (59percent) was the local currency cost. ADB provided a loan of $21.0 million equivalent(SDR15.743 million), or about 80 percent of the total project cost, for financing the fullforeign currency cost of $10.9 million (including interest during construction [IDC] costs)and about $10.1 million equivalent of the local currency cost. The Government agreed tofinance the remaining balance of $5.3 million equivalent or 34 percent of the local currencycosts. The total actual project cost at completion was about $20.6 million, or 78 percent ofthe appraisal estimates (Appendix 2). This amount comprised $9.1 million (44 percent)foreign currency and $11.5 million equivalent (56 percent) local currency costs. Of these,ADB financed the full foreign exchange cost of $9.1 million (44 percent) and $6.72 million(33 percent) of the local costs. About $5.7 million comprising an undisbursed loan balancewas cancelled on final loan closing on 15 August 2000. The net amount disbursed by ADBwas $15.840 million6 as of 15 August 2000.

6 Including IDC of about $0.517 million.

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28. The actual project costs were lower than the appraisal estimates, due to (i) thereduced scope of the project components, and (ii) depreciation of the Kina against thedollar during the implementation period. Funds allocated to training and fellowship wereunderutilized due to the reduced scope of several components resulting from insufficientcounterpart funds or poor management. On the other hand, the expenditure on consultingservices was 70 percent higher than the appraised. Due to the late completion of civilworks, little equipment for health facilities was purchased. As discussed (para. 22), theblood screening and serosurveillance component was not fully implemented.

D. Project Schedule 29. The Project was envisaged at appraisal to be implemented from December 1991 toDecember 1996, but overall implementation of ADB’s portfolio of loans slowed down in1994 and almost ceased in 1995 and 1996 due to Government funding constraints.Severely affected were components involving substantial counterpart funds. The loan wastherefore initially extended up to 31 May 1999. With K3.7 million allocated against K14.7required, the project-appropriated budget for 1998 was the lowest ever. In addition to thelow appropriation in the Government budget, the flow of funds and release of warrants fromDepartment of Treasury and Planning were sporadic, making it very difficult to implementthe Project (in 1998, only K1.8 million was released). After contracting out the supervisionof civil works to a private consultant in 1998, this component progressed quickly. ThereforeADB approved in May 1999 a second extension up to 31 December 1999 to allowsubstantial completion of the civil works. A third extension up to 30 April 2000 wasapproved in view of the spillover of some civil works, which had started later thanexpected. The Government was allowed to complete disbursement up to end-July 2000. E. Engagement of Consultants and Procurement of Civil Works and Goods 30. Additional consultant inputs were identified during project implementation toexpedite implementation of some components. A water supply and sanitation specialist,and an architect consulting firm were recruited. The contracts of several consultants wereextended: (i) health finance specialist, by two years, to design and implement financialreform in the hospitals; (ii) health information systems specialist, by 25 months; and (iii)computer programmer, by 5 months. As a consequence of the substantial investment ininformation technology under the Project, a Y2K consultant was recruited in 1999. Aconsultant for donors coordination was also funded. All consultants were recruited inaccordance with the ADB’s Guidelines on the Use of Consultants. 31. Procurement followed ADB’s Guidelines on Procurement. Most civil works weredone through DOW using force account and local competitive bidding procedures. Somechurch groups also assisted to facilitate completion of civil works. For the water andsanitation component, some of NDOH’s manpower were utilized to complete the facilities.International shopping procedures were used in procuring medical equipment, furnishings,and HIV supplies. F. Performance of Consultants, Contractors, and Suppliers

32. The services of the consultants followed the terms of reference.

33. The civil works contracts managed by DOW were unsatisfactorily conducted. Somecivil works were abandoned unfinished (one of the health centers visited had beenabandoned for seven months, another had benefited only from door painting and the roofwas falling apart). Many renovations are questionable, or far more limited than the price

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charged. The plumbing was not finished in most cases. The use of cheap materials (suchas water-based painting) reduced the life expectancy for the buildings. The PIU paid DOWup-front, but in many cases the latter did not complete the work. Some of the completioncertificates were obviously forged. At the time of the PCRM, an investigation on DOW wasbeing commissioned by the general auditor’s office in Western Highland Province.

G. Conditions and Covenants

34. Of the 46 covenants, 30 were complied with, 3 were not complied with, and 12 werepartly complied with (details in Appendix 3). The major difficulties were the following:

(i) Poor supervision of implementation by the Executing Agency resulted inmajor delays.

(ii) The positions of national health educator and 12 provincial health educators

were created, but the national position was abolished in 1997, and theprovincial positions were progressively abolished after the provincialgovernments took over.

(iii) The Borrower did not make available, promptly or as needed, the funds

required as well as the loan proceeds, for carrying out the Project and foroperating and maintaining the project facilities. Budget appropriation was lowduring the whole implementation period. A number of facilities inspected werenot being operated for lack of position in the provincial budgets. No fundswere for maintenance were available in the provincial budgets.

(iv) Due to lack of skilled staff and recurrent staff movements, monitoring of

project accounts deteriorated resulting in late submission of required reports.Submission of audit certificates was delayed systematically.

(v) Restructuring of the functions of the PIU (now Projects Section) in May 1999changed the unit’s duty statement. In addition to implementing only ADB-funded projects, the Projects Section is now tasked to implement other aid-funded projects. This has resulted in heavier workload and weaker flow ofcommunication on implementation matters between ADB and the PIU.

(vi) The Borrower did enable ADB to review all appointments to the PIU during

the early stages of implementation. However, recent appointments were nolonger referred to ADB for review and approval.

(vii) The national/provincial agreements were established and passed. However,

when the conditions included in the agreements involved any financialcommitment from the provinces, they were not complied with and likewisenot enforced. This is notably the case with staffing and maintenance of newfacilities, which in most cases are not ensured, and with the position ofhealth educators.

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H. Disbursements

35. Loan proceeds disbursed were largely through the imprest account and directpayment procedures. The initial imprest account (called the Third Rural Health ProjectTrust Account), for both ADB and Government funds was operated through the Foreign AidDepartment. Initial disbursement from this account was made on 8 June 1993. On 27September 1996, a separate imprest account for ADB funds was established and wascentrally managed at PIU.

36. The pace of disbursement was slow during the entire implementation period mainlydue to delays in obtaining expenditure data from the project provinces and in puttingtogether necessary documentation for submitting withdrawal applications to ADB. Lack ofproper record maintenance and monitoring also led to the PIU’s inability to claim othereligible expenditures for ADB reimbursement under the loan resulting in low overalldisbursements. Total disbursements amounted to $15.840 million, and the undisbursedloan balance of about $5.7 million was cancelled at loan closing date. The projected andactual loan disbursements are in Appendix 4. The Project also was allowed to completedisbursements during the three-month grace period after loan closing on 30 April 2000.

I. Environmental Impact

37. Civil works were limited to construction or renovation of rural health facilities andstaff housing. Considering the scale of the civil works, the Project had no majorenvironmental impact. Progress in water supply and sanitation indeed improved thepopulation’s health as well as the environment. J. Performance of the Borrower and the Executing Agency

38. The PIU’s project management and coordination capacity deteriorated duringimplementation. The weak management capacities of the national and provincial NDOHsresulted in an overload on the PIU, which had to manage directly implementation of mostof the components. Lack of direct supervision by NDOH and lack of coordination betweenthe national and provincial levels resulted in the payment to DOW for unfinished facilities.No consultation between ADB and NDOH were made on appointment or movements ofstaffs in the late phase of implementation. The accounting function systematicallyunderperformed, and delays occurred in compiling and auditing project accounts. This lednotably to late submission of progress reports to ADB.

39. Some contracting delays occurred during project implementation due to problemswith the CSTB. The latter rejected the recommendations for award of contract to the lowestconforming bid presented by the NDOH’s evaluation panel. On such occasions, NDOHhad to follow the Public Finance Act, which allows NDOH to bypass the CSTB’s approvalrequirement. This as well as delays in CSTB’s approving and signing some contractsprolonged the implementation period.

K. Performance of ADB 40. ADB sent 18 supervision missions during project implementation. The InceptionMission was fielded four months after loan effectiveness. Overall, ADB supervision wasadequate. Throughout implementation, adequate recommendations were made to NDOH.But for lack of funds, staff, and capacity, the recommendations were often notimplemented. For example, the recruitment of a firm to supervise civil works was agreedupon during the Review Mission of November 1996. Reallocation was made after the

10

Mission of March 1997, after PIU had made an assessment of reallocation needs. But thefirm was recruited only in April 1998, thus delaying implementation by one year.

41. Amendments to the Loan Agreement were prepared in time to allow the inclusion ofa blood screening and serosurveillance component. However, this component was neversatisfactorily implemented. During the Midterm Review in November 1995, ADBrecommended the creation of a separate subheading Maintenance Fund to fixequipment in rural areas that had fallen to disuse due to lack of funds. Funds for this itemwould come from the unallocated category. However, the 1996 budget had already beenapproved when the recommendation was made. In addition, the national and provincialbudget structures were under reform following the 1995 Organic Law, and NDOHencountered difficulties including this item in the budget. With the financial stringency andmajor implementation delays, the idea was abandoned for the 1997 budget.

42. Missions urged the Government to strengthen PIU capacity by providing adequatestaff to carry on its operational activities. But with the structural adjustment program, andlimited possibilities to recruit public servants, the Government was not able to meet thisrequest.

III. EVALUATION OF FINANCIAL PERFORMANCE AND BENEFITS

A. Financial and Economic Performance 43. At appraisal, ADB’s policy was not to calculate the financial and economic rates ofreturn for health sector projects. B. Attainments of Benefits 44. The general benefits expected from the Project were (i) improved labor productivity,(ii) longer life expectancy, and (iii) improved quality of life for beneficiaries. As shown in thetable, the main health indicators have not substantially improved during projectimplementation. While this failure cannot be attributed to the Project itself, it did notmitigate the impact of the economic crisis and the subsequent reorganization of healthservices.

Health Indicators Item 1980 1993 1996 Life expectancy (years) 50 52 54 Infant Mortality Rate (per 1,000) 72 82 73 Crude birth rate (per 1,000) 34 34 36

45. The Project also intended to address institutional weaknesses at the national andprovincial levels. It has been successful in the area of health information system, althoughthe sustainability of this component is highly questionable. The implementation of thehealth finance reform has been affected by (i) decentralization under the Organic Law, and(ii) the economic crisis ongoing in the country for several years. The major problem of thehealth sector is still the lack of management capacities at all levels, particularly theabsence of proper human resource management, development, and training. Noimprovement has been achieved in these areas since appraisal, and the quality of serviceshas not improved.

46. Comparing the cost of upgrading health facilities and the actual work donesuggests that the beneficiaries did not get value for money in many cases. In addition,

11

many of the facilities renovated or built under the Project were not staffed or lacked drugsand supplies when visited by the Review Missions.7 Therefore, the improvement of healthservices accessibility and availability in many rural areas was very limited.

IV. THE TECHNICAL ASSISTANCE 47. Advisory technical assistance for Strengthening Monitoring of Health ServiceDelivery8 in the amount of $350,000 was attached to the Project. The objective was toassist NDOH in developing standardized service norms, job descriptions and facility orequipment configurations. Three consultants were fielded in 1992. They produced acomprehensive report, recognized as an excellent basis for further development in HRDand quality assurance in the health sector. In 1993 and 1994, NDOH attempted to startimplementing some of the consultants’ recommendations. The beginning of the economiccrisis in 1995 suspended the process, with the structural adjustment program and chaoticbudget allocation. The recommendations have not yet been implemented. The successiverestructuring of NDOH then particularly increased the instability of staffs in their position.This is seen as one of the main reasons for this failure.

V. CONCLUSIONS AND RECOMMENDATIONS A. Conclusions

48. The Project was the third ADB-funded Project in the rural health sector in PNG. Thefirst two projects improved the access of many remote parts of the country to primaryhealth care. However, the availability and quality of services were hampered by closure orreduced operation of a number of health facilities due to shortage of trained staff,insufficient medical supplies, inoperable equipment, and poorly maintained buildings. Thetwo projects were therefore considered partly successful in the project performance auditreport prepared in May 1994.

49. The Project was designed to improve the situation, in a broader perspectiveincluding management, financing, and information systems. Some major achievementshave been made. The Project upgraded and built 95 facilities in rural, remote areas. Watersupply and sanitation systems were provided for more than 100,000 people. The healthinformation system regularly provides an extensive set of data, both epidemiological andon the facilities, from the district to the national level. User fees and standard budgetinghave been successfully implemented all over the country. However, this has beenachieved with a substantial input of international consultants, and capacity building wasvery limited due to the absence of local counterpart staff to the consultants. Institutionalstrengthening has been very limited in the area of management, which remains extremelyweak at all levels. No substantial progress has been made in human resources planning,management, and staff development. The impact of user fees on accessibility of healthservices has not been evaluated.

50. The project risks identified at appraisal were (i) provision of facilities where demanddoes not materialize, (ii) provision of inputs more costly than anticipated, (iii) a longer-than-anticipated implementation period, (iv) inadequate counterpart funds, (v) inadequateimplementation supervision, and (vi) inadequate coordination of implementation bythe

7 Midterm Review of the Health Sector Development Program (HSDP) and Review of the Third Rural Health

Services Project, 23 June-20 July 1999; and PCR Mission, 19 June-7 July 2000.8 TA 1557-PNG, approved on 5 September 1991.

12

different levels of government. While the demand for health services exists, most of theother risks in fact materialized. The beginning of the economic crisis in 1995 suspendedthe initial progress made, with the structural adjustment program and chaotic budgetallocation. The successive restructuring of NDOH increased particularly the instability ofstaff and lowered staff morale.

51. In view of the above, and the limited impact and reduced prospects for long-termsustainability of project benefits, the Project is considered unsuccessful.

B. Lessons Learned and Recommendations

52. Concerns or lessons that arise from the Project include the following.

(i) The project design did not pay enough attention to ensure a sufficient levelof coordination between NDOH and DOW. When several implementingagencies are involved, the full commitment of each agency should besought.

(ii) Continuous reliance on expatriate consultants did not result in any capacity

building through skills transfer due to the unavailability or instability ofcounterpart staff, which is a consequence of weak management. Evaluatingthe real demand for expertise at the project design stage might be helpful.No consultant should be fielded on a long-term basis, as this situationresults in their occupying front-line positions, and training requirementsshould be emphasized in the terms of reference.

(iii) PIU capacity and staffing have been a constraint during project

implementation. The PIU was not able to properly supervise theimplementation, and therefore some problems were discovered very late. Toprevent any instability in PIU staffing, the only solution seems to be aprovision under the loan for 100 percent funding of PIU by the project, andthe recruitment of an accountant on a private contract basis.

(iv) Contracting with the private sector appears as the best solution for specific

areas where there is no capacity in the public sector, such as accounting, orwhere the public sector has no added value, such as logistics. This shouldbe a positive signal for the development of the private sector.

(v) Not enough emphasis was put on direct relationship with the provinces, to

involve them more directly in implementation as should have been done,given the decentralization of health services as a result of the Organic Law.It is likely that meeting regularly with the governors and making themaccountable for progress would have helped.

(vi) The impact of training is difficult to appreciate without baseline data.However, the main problem with training is that most trained people leavetheir job soon after they are trained. There should be a bonding system toensure that people who have benefited from training remain at least threeyears in the position for which they have been trained.

(vii) Most of the difficulties experienced during project implementation hadalready been identified by the project performance audit report of the first

13

and second rural health services projects prepared in 1994 by ADB’sPostevaluation Office. ADB’s current portfolio is affected the same way.ADB shall therefore provide technical assistance for sector review prior toprocessing new project or program in the health sector to ensure that thesame problems will not occur and that ADB assistance will have a positiveimpact.

(viii) Assisted by the World Bank, the guidelines and procedures followed by allgovernment agencies for procurement of goods and services are currentlybeing reviewed. This process also includes a review of the role andresponsibility of the Central Supply and Tenders Board (CSTB), theapproving authority for all major contracts released. The completion of thisreform process should be monitored in view of the implementation of futureloans.

14

APPENDIXES

No. Title Page Cited onPage, Para.

Appendix 1 Appraisal and Actual Project Activities 15 page 1, para 5Appendix 2 Appraisal and Actual Project Costs 21 page 6, para 27Appendix 3 Status of Compliance with Loan Covenants 22 page 8, para 34Appendix 4 Projected and Actual Disbursements 33 page 9, para 36

SUPPLEMENTARY APPENDIXES(available on request)

No. Title

A Project Implementation Schedule

B Chronology of Major Project Events

Appendix 1, page 1

APPRAISAL AND ACTUAL PROJECT ACTIVITIES

Appraisal Inputs Achievements

Part A: Institutional Strengthening1. Health Information Systems

(i) One consultant in health informationsystems for 24 person-months (p-m)

49 p-m inputs completed(Cibulskis)

Health Managementinformation system (HMIS)is fully operational.

(ii) One computer programmer/technicalsupport specialist for 12 p-m

3 p-m inputs (Chua) plus 18p-m inputs (Mellor)

(iii) One computer set for the consultants,including maintenance and basicoperational expenses

Two computers & printersprovidedFunded some maintenance

(iv) One computer set, funds for maintenanceand basic start-up materials for 14provinces of Western, Gulf, NationalCapital District, Central, SouthernHighlands, Enga, Simbu, Morobe,Madang, East Sepik. West Sepik(Sandaun), New Ireland, and West NewBritain

one computer set eachpurchased for all provincesin 1993Funds for maintenance alsoincluded44 computers/softwareinstalled in all 20 provincesand National Department ofHealth (NDOH) (HMIS)

(*) Additional 28 computers for the HealthManagement Information System (HMIS)

- see above –- Reallocation approved

by Asian DevelopmentBank (ADB) in April1997.

(v) Funds for each of the 14 provinces forequipment installation and training of thedesignated provincial health informationofficer and three back-up officers,including funds for the printing ofnecessary training materials

20 provincial healthinformation officers trainedin the use of computers

Uneven financial support tothe HMIS from the provinces

(vi) Funds for NDOH to procure updatedsoftware

Various softwarespurchased - (mappinginformation, etc)

Quarterly publication ofextensive reports on healthand facilities by district

(vii) Provision of 7 modems with network cardsto facilitate data networking capacitybetween the medical supplies Branch andsix area medical stores in Port Moresby,Lae, Wewak, Mt. Hagen, and Madang

7 modems installed in sixarea medical stores - Lae,Mt. Hagen, Wewak, PortMoresby, Madang, andRabaul

(*)1 Provision of consultant to assist in Y2Kprogram

5 p-m inputs completed(Joji)Minor change in scopeapproved in June 1999

All ADB-funded computersand systems Y2K compliant

2. Human Resources Planning(i) Four regional workshops for in-service

training of provincial officers in humanresources planning procedures andtechniques

Only one training done inPort Moresby in 1994

Impact negligible

1 Addition to the Project.

15

Appendix 1, page 2

3. Health Systems Research(i) One computer for the use of the health

systems research activities to beconducted at the Community Medicine atthe University of Papua New Guinea(UPNG)

One computer setpurchased

(ii) Funds to be made available on an annualbasis for health systems researchproposals

Not done No program was prepared;no research proposalsreceived.

(iii) Funds for the establishment of a healthsystems research information andreference center, including printing of ahealth systems research bibliography

No request was made byUPNG.

Nil

4. Health Finance and Management(i) One consultant in finance and

management for 12 p-m36 p-m inputs (Izard)provided2-year additional inputsapproved in April 1995

User fees implemented inthe hospitals, and standardhealth budget enforced at allgovernment levels (district,provinces, national)

(ii) One computer for the consultant, includingfunds for maintenance

One computer setpurchased

(iii) Training for 4 base hospitals in upgradedfee collection and managementprocedures at Port Moresby Hospital

Training was done in fourbase hospitals : PortMoresby, Goroka, Rabaul,and Lae.

Training did allow the properimplementation of user fees

(iv) Funds for health finance and managementstudies

Not requested No studies done (inparticular, no evaluation ofthe impact of increasedhealth care accessibility)

(v) Funds for related basic materials andoperational expenses

Funds were made availablefor operational costs.

Part B: Improvement of Rural Health Services1. Civil Works

(i) Construction/renovation of rural healthfacilities and staff housing in the provincesof Gulf, Central, Oro, Western, East Sepik,Manus, New Ireland, Madang, Morobe,Southern Highlands, Western Highlands,Eastern Highlands and Enga.

Important delays incompleting this component

95 construction andrenovation of rural healthfacilities and staff housing inselected provincescomplete. However anumber of worksundertaken by theDepartment of Works arenot completed. Renovatedor newly built facilities oftenare not operated (lack ofstaff or drugs).

(ii) Expansion/extension of regional supportunits (RSUs) in the towns of Lae, Goroka,Rabaul, and Port Moresby

RSUs abolished byDepartment of Health. Noinput except for theextension of malaria officein Goroka.

Marginal

(iii) Construction of limited staff housing ateach of the four RSUs

2 x houses in PortMoresby,1 house inButuwin & 3 houses inGoroka

Done

16

Appendix 1, page 3

(iv) Construction of additional classroomspace at Goroka Teachers College

Construction of additionalClassroom in GorokaTeachers College for audio-visual/practical classroomcompleted in 1995

Done

(v) Construction of a 20-bed dormitory forlaboratory trainees at the Goroka RSU,including basic furnishings

20 bed-dormitory forlaboratory trainees inGoroka completed

Done

(vi) Renovation of the Oliguti Training Center Renovation done andcompleted for OligutiTraining Center

Done

(vii) Expansion of the Health Curriculum Unit(Taurama);

Not done - transferred toHRD Project

Nil

(viii) One consultant architect for three p-m Initial 12 p-m plus 18 p-minputs provided (Paton)Reengagement to assistfast-track civil work programapproved in April 1997

(*)2 Provision of domestic consulting firm tooversee civil work program (N)3

27 p-m inputs provided(Cardno). Change in scopeand reallocation approvedApril 1997

Did allow substantialachievement inbuilding/renovation in fast-tracking the civil workprogram.

2. Equipment(i) Funds for provision of medical equipment

to all provinces for rural health centers,health subcenters, and aidposts;

Two major purchases in1994 and 1997 with minorones for few provinces in1996, 1998 and 1999

(ii) Provision of basic furnishing to allprovinces receiving civil works inputs

Buildings constructed underthe project have beenfurnished.

However, due to the latecompletion of civil work, asubstantial part of the fundsunutilized

(*) Provision of human immunodeficiencyvirus blood screening and sero-surveillance activities (N)

Provision made available topurchase reagents & HIVtesting kits. Change inscope and reallocation offunds were approved byADB in September 1992.

Only 48% disbursed. Nocommitment from NDOH

(*) Purchase of PIU vehicle (N) One 15-seater buspurchased in 1997

3. Water Supply and Sanitation(i) Funds for construction by provinces of

Community water supply and sanitationsystems, including funds for requiredtravel of NDOH and Provincial Departmentof Health and Environmental Health staff

All provinces were includeduntil 1997 when EuropeanUnion took over someprovinces. Only Western,Gulf, Oro, Morobe,Sandaun, SouthernHighlands Province, Enga,Manus, Simbu and NewIreland funded under the

Substantial progressachieved after fielding of aconsultant

2 Addition to the Project.3 N=New; not in original appraisal report.

17

Appendix 1, page 4

project. Western HighlandsProvince, EasternHighlands Province

(ii) Funds for construction of prioritycommunity water supply and sanitationsystems, as recommended by theEnvironmental Health Section of NDOH;

(iii) In-service technical training for one healthinspector or other identified health officerfrom each of 18 provinces at the OligutiTraining Center in Eastern HighlandsOffice;

Not done Center closed following arestructuring of DOW

(iv) Equipment for the environmental healthactivities at the College of Allied HealthSciences in Madang and at the OligutiTraining Center including funds formaintenance

Purchased computer set forMadang College of AlliedHealth Science only.Training equipment andfurniture for Oliguti

(*) Provision of water supply and sanitationconsultant (N)

18 p-m specialist inputscompleted. Change inscope approved by ADB inApril 1997

The major part of thecomponent has beenimplemented.

4. Training and Curriculum Development(i) Funds for completion of ongoing NDOH

task analysisNot done Nil

(ii) One curriculum consultant in generalnurse (GN), post-basic pediatrics, andpost-basic midwifery training for 36 p-m

36 p-m for GN, post basicmidwifery and pediatricscompleted

General Nurse/Post-basicPediatrics/Midwifery notimplemented

(iii) One curriculum consultant in health officertraining (HEO) for 18 p-m

24 p-m (Tom Coles) Health education officer(HEO)/health inspector (HI)curricula tested for 3 years,but no follow-up(abandoned)

(iv) One curriculum consultant in HI training,for 18 p-m

18 p-m (Peter Day)

(v) One computer for each consultant,including funds for basic maintenance andoperational expenses

1 set of computerpurchasedFunds made available formaintenance andoperational expenses

(vi) Three orientation seminars to initiate thetraining and curriculum developmentactivities

Not done - curricula notready

Nil

(vii) Two in-service seminars to adviseteachers on proper utilization of thecurricula and training materials to berevised under the Project

Not doneNil

(viii) Five local fellowships, for individualsnominated from the participating traininginstitutions, to the Goroka TeachersCollege for the diploma in technicaleducation

Not done Not utilized, becausecurricula not readyImpact nil

(ix) Supporting services for the printing anddistribution of revised curricula and

Not done. - same as above-

18

Appendix 1, page 5

training materials;(x) Funds for printing and distributing revised

curricula and training materialsNot done. - same as above -

(xi) Funds for participating institutions toprocure equipment, including funds formaintenance, reference books, and basicsupplies

Not done. - same as above -

5. Staff Development(i) One consultant in staff development, for

12 p-m13 p-m inputs(Moore/Denison)

Only pilot project in oneprovince. Recommendationto extend and complete thework never implemented

(ii) Local fellowship for either theadministrators or deputy administratorsfrom the participating training institutions,to obtain Bachelor of Education degree atUPNG and study middle management forthree months at the Institute of PublicAdministration

No training done Nil

(iii) Local fellowships to Goroka TeachersCollege for one individual from each of theparticipating training institutions, for thediploma in teaching

107 participated andgraduated at GorokaTeachers College withdiploma in teaching andhealth education

Graduates not posted inrelevant positions, thereforeno impact

(iv) Local fellowships to the Department ofCommunity Medicine at the MedicalFaculty for one individual from each of theparticipating training institutions, for short-term training

No training done Nil

6. Health Education(i) Establishment and financing on a

declining basis of project implementationof staff positions for one national healtheducator and 12 provincial healtheducators in the provinces of Western,Central, Oro, Southern Highlands, Enga,Western Highlands, Eastern Highlands,Morobe, East Sepik, Manus, New Irelandand East New Britain; all such provincesto become the responsibility after projectcompletion of the respective PDOHs, or, inthe case of the national health educator,the NDOH.

One national healtheducator's positionestablished and occupieduntil 1997All 12 provincial healtheducators' position wereestablished until 1996 whenthe positions wereabsorbed in each of theprovincial structureaccording to their needs.

Nil

(ii) Production of health education materials Done under Loan 1225-PNG: Population Project

Nil

(iii) Audiovisual equipment for the healtheducation activities in the 18 provincesand at the Goroka Teachers College,including funds for maintenance

Audiovisual equipment waspurchased for 12 provincesas well as the rest of otherprovinces that need healtheducation equipment.

Utilized under Loan 1225-PNG: Population Project

(iv) Typesetting and other printing equipmentfor health education unit, including

Purchased guillotine, silvermaster plate, and binding

Equipment now installedand operated in the new

19

Appendix 1, page 6

expansion of current facilities and fundsfor maintenance, in anticipation ofincreased demand for such services asfamily-planning related media productionand health education activities

machine Media Production Unit atGordons

7. Dental Health Services(i) Four regional in-service seminar on

improved public dental procedures andtechniques;

Three completed Regional workshops held forthe three regions islands,Mamose, and Highlands.

(ii) Dental and related audiovisual equipmentfor dental training institutions, includingfunds for maintenance

Completed

8. Maternal and Child Health (MCH)/FamilyPlanning(i) One consultant in reproductive health and

family planning for 12 p-m, to providetechnical support to the Family HealthServices Section of NDOH in MCH/familyplanning activities

Reprogrammed to recruit afinancial managementconsultant for PIU

Nil

(ii) Overseas seminar for one family planningadministrator from each of the 18provinces, in current family planningprocedures and managementconsiderations;

Three trips made toBangkok and Indonesia byprovincial family planningcoordinators

Marginal

(iii) Obstetric and antenatal equipment forrural health facilities including funds formaintenance, to be allocated amongprovinces by the Division of PrimaryHealth Services in consultation with theProject Manager

Completed Delivery kits werepurchased from UnitedNations Children’s Fundand delivered to allprovinces.

Part C: Institutional and Management Supportto the Project Implementation Unit

(i) Services of one project coordinator, andone procurement officer

One project coordinator andone procurement officerrecruited

Both positions still on board

(ii) Provision of computer, including funds formaintenance

Two computers purchasedfor PIU

(iii) Provision of financial managementspecialist (N)

(12 + 5.5 p-m) inputscompleted (McKay) April1995. Reprogrammed fromFamily Health Services toassist PIU while the projectcoordinator was completingher master's program.

(iv) Overseas master’s in public health forproject coordinator (N)

Reprogramming approvedby ADB in May 1993

PIU coordinator completedthe course in 1994.

20

Appendix 2

APPRAISAL AND ACTUAL PROJECT COSTS( $'000 million)

Appraisal Estimate ActualsComponent Forei gn Local Total Forei gn Local a Total

Part A: Institutional StrengtheningTraining & Fellowships 91 775 866 0 118 118Equipment 165 24 189 6 40 46Consulting Services 372 440 812 0 47 47Recurrent Costs 0 56 56 0 201 201

Total (Part A) 628 1,295 1,923 6 407 413

Part B: Rural Health ServicesCivil Works 2,599 5,898 8,497 2,444 6,860 9,304Sanitation 602 602 1,204 497 555 1,052Equipment 3,939 576 4,515 2,494 170 2,664Furnishings 5 109 114Consultants (International & Domestic) 588 694 1,282 2,737 1,413 4,150Training & Fellowships 108 918 1,026 47 611 658Blood Screening 361 181 542Recurrent Costs 0 2,610 2,610 0 685 685

Total (Part B) 7,836 11,298 19,134 8,585 10,584 19,169

Part C: Project Implementation UnitConsultants 167 198 365 0 5 5Equipment 4 1 5 8 18 26Furnishings 0 1 1Office Renovation 0 3 3Recurrent Costs 0 258 258 0 527 527

Total (Part C) 171 457 628 8 549 562

Subtotal Base Cost 8,635 13,050 21,685 8,599 11,540 20,144Physical Contingency 490 655 1145Price Contingency 864 1,726 2,590Service Charge During Implementation 900 0 900 517 0 517

Total Pro ject Cost 10,889 15,431 26,320 9116 11,540 20,656

a Includes Asian Development Bank (ADB) financing of $6.72 million. Slight difference between Government andADB figures due to SDR and $ exchange rate fluctuations.

21

Appendix 3, page 122

STATUS OF COMPLIANCE WITH LOAN COVENANTS(as of 6 July 2000)

Covenant Status of Compliance

1. The Borrower will cause the Project to be carried outwith due diligence and efficiency and in conformitywith sound administrative, financial, engineering,environmental and health service delivery practices.L.A. Section 4.01(a)

Partly complied with. Major delaysaffected part B implementation, mostlyas a result of poor supervision by theExecuting Agency and lack ofcounterpart funds.

2. In carrying out the Project and operation of theproject facilities, the Borrower will perform, or causeto be performed, all obligations set forth in Sched. 6to the Loan Agreement.L.A. Section 4.01(b)

Complied with

3. The Borrower will make available, promptly asneeded, the funds, facilities, services, land, and otherresources required, in addition to the proceeds of theLoan, for carrying out the project and for operatingand maintaining the project facilities.L.A. Section 4.02

Partly complied with. Low budgetappropriations were evident during theimplementation period, and of the projectfacilities were not done properlymaintained due to lack of funds.

4. In carrying out the Project, the Borrower will causecompetent and qualified consultants and contractors,acceptable to the Borrower and the AsianDevelopment Bank (ADB), to be employed on termsand conditions satisfactory to the Borrower and theADB.L.A. Section 4.03 (a)

Partly complied with. No problem wasencountered with consultants. TheDepartment of Works did not properlyfulfill its obligation as regardsconstruction of funded project facilities

5. The Borrower will cause the Project to be carried outin accordance with plans, design standards,specifications, work schedules, and constructionmethods acceptable to the Borrower and ADB. TheBorrower will submit, or cause to be submitted, toADB, promptly after their preparation, such plans,design standards, specifications, and workschedules, and any material modificationssubsequently made therein, in such details as ADBwill reasonably requests.L.A. Section 4.03 (b)

Partly complied with. Work scheduleswere not respected.

6. The Borrower will ensure that the activities of itsdepartments and agencies with respect to carryingout the Project and operating the project facilities areconducted and coordinated in accordance with soundadministrative policies and procedures.L.A. Section 4.04

Not complied with. Provincialdepartments of health did not commitenough resources to projectimplementation. Department of Worksinvolvement has been unsatisfactory.

23

Appendix 3, page 223

7. The Borrower will make arrangements satisfactory toADB for insuring the project facilities to such extentand against such risks and in such amounts as areconsistent with sound practice.L.A. Section 4.05(a)

Complied with. The Government self-insures its assets.

8. Without limiting the generality of the foregoing, theBorrower undertakes to insure, or cause to beinsured, the goods to be imported for the Project andto be financed from the proceeds of the Loan againsthazards incident to the acquisition, transportation anddelivery thereof to the place of use or installation, andfor such insurance any indemnity will be payable in acurrency freely usable to replace or repair suchgoods.L.A. Section 4.05(b)

Complied with. The Government self-insures its assets. Goods procuredoverseas are Cost, insurance, andfreight.

9. The Borrower will maintain, or cause to bemaintained, records and accounts adequate toidentify the goods and services and other items ofexpenditure financed from loan proceeds to disclosethe use thereof in the Project, to record the progressof the Project (including the cost thereof) and toreflect, in accordance with consistently maintainedsound accounting principles, the operations andfinancial condition of the agencies of the Borrowerresponsible for carrying out the project and operatingof the project facilities, or any part thereof.L.A. Section 4.06(a)

Partly complied with. Due to lack ofskilled staff and recurrent staffmovements, monitoring of projectaccounts has deteriorated resulting inrecurrent late submission of requiredreports.

10. The Borrower will (i) maintain, or cause to bemaintained, separate accounts for the Project, (ii)have such accounts and related financial statementsaudited annually, in accordance with sound auditingstandards, by auditors acceptable to ADB; (iii) submitto ADB, as soon as available but in any event notlater than six (6) months after the end of each relatedfiscal year, unaudited copies of such accounts andfinancial statements, and not later than nine (9)months after the end of each related fiscal year,certified copies of such audited accounts andfinancial statements and the report of the auditorsrelating thereto, all in the English language; and (iv)submit to ADB other information concerning suchaccounts and financial statements and the auditthereof as ADB will from time to time reasonablyrequest.L.A. Section 4.06 (b)

Partly complied with. Delays noted insubmission of reports. Audit certificatefor FY1998 accounts (due Sep 1999)was received on 29 June 2000.

Appendix 3, page 324

11. The Borrower will enable ADB, upon ADB’s request,to discuss the Borrower's financial statements for theProject and its financial affairs related to the Projectfrom time to time with the Borrower's auditors, andwill authorize and require any representative of suchauditors to participate in any such discussionsrequested by ADB, provided that any such discussionwill be conducted only in the presence of anauthorized officer of the Borrower unless theBorrower agrees otherwise.L.A. Section 4.06(c).

Complied with

12. The Borrower will submit, or cause to be submitted,to ADB all such reports and information as ADB willreasonably request concerning (i) the Loan, and theexpenditure of the proceeds and maintenance of theservice thereof; (ii) the goods and services and otheritems of expenditure financed from loan proceeds;(iii) the Project; (iv) the administration, operation, andfinancial condition of the agencies of the Borrowerresponsible for carrying out the Project and operatingthe Project facilities, or any part thereof; (v) financialand economic conditions in the territory of theBorrower and the international balance-of-paymentsposition of the Borrower; and (vi) any other mattersrelating to the purposes of the Loan.L.A. Section 4.07(a).

Complied with

13. Without limiting the generality of the foregoing, theBorrower will submit, or cause to be submitted, toADB semiannual reports on the carrying out of theProject and on the operation and management of theproject facilities. Such reports will be submitted insuch form and in such detail and within such a periodas ADB reasonably requests, and will indicate,among other things, progress made and problemsencountered during the six-month period underreview, steps taken or proposed to be taken toremedy these problems, and proposed program ofactivities and expected progress during the followingsix months.L.A. Section 4.07(b).

Partly complied with. Frequent delaysin submission of quarterly reports dueto delays in provision of financial datawithin the department (see item 9).

14. Promptly after physical completion of the Project, butin any event not later than three months thereafter orat a date agreed upon for this purpose by theBorrower and ADB, the Borrower will prepare andsubmit to ADB a report, in such form and in suchdetail as ADB reasonably requests, on the executionand initial operation of the Project, including its costs,performance by the Borrower of its obligations underthe Loan Agreement, and accomplishment of thepurposes of the Loan.L.A. Section 4.07(c).

Not complied with. Government’s ProjectCompletion Report has not yet beenreceived.

25

Appendix 3, page 425

15. The Borrower will enable ADB's representatives toinspect the Project, the goods financed from loanproceeds, and any relevant records and documents.L.A. Section 4.08.

Complied with

16. The Borrower will ensure that the project facilities areoperated, maintained, and repaired in accordancewith sound administrative, financial, engineering,environmental, and maintenance and operationalpractices.L.A. Section 4.09.

Partly complied with. Provincialgovernments are tasked withmaintaining and repairing the projectfacilities after completion. Lack offunds and prioritization continue to be aproblem.

17. It is the mutual intention of the Borrower and ADBthat no other external debt owed a creditor other thanADB will have any priority over the Loan by way of alien on the assets of the Borrower. To that end, theBorrower undertakes (i) that, except as ADBotherwise agrees, if any lien will be created on anyassets of the Borrower as security for any externaldebt, such lien will ipso facto equally and ratablysecure the payment of the principal of, and servicecharge and any other charge on, the Loan; and (ii)that the Borrower, in creating or permitting thecreation of any such lien, will make express provisionto that effect.L.A. Section 4.10(a).

Complied with

18. The provisions of item 17 will not apply to (i) any liencreated on property, at the time of purchase thereof,solely as security for payment of the purchase priceof such property; or (ii) any lien arising in the ordinarycourse of banking transactions and securing a debtmaturing not more than one year after its date.L.A. Section 4.10(b).

Complied with

19. The term "assets of the Borrower" as used in para.(a) of this Section includes assets of the Borrowerand assets of any entity owned or controlled by, oroperating for the account or benefit, of the Borrower,including the Bank of Papua New Guinea and anyother institution performing the functions of a centralbank for the Borrower.L.A. Section 4.10(c).

Complied with

20. National Department of Health (NDOH) will be theExecuting Agency and will be responsible for thegeneral execution of the Project. The Secretary ofHealth of NDOH or his designee will be the ProjectManager, responsible for supervising and monitoringimplementation of the Project.L.A. Schedule 6, para. 1

Complied with

Appendix 3, page 526

21. PIU will be responsible for the detailed execution ofthe Project. At the provincial level, the respectiveassistant secretaries for health or the individualsotherwise designated as chief officers of the PDHs,will have delegated responsibility for implementingthe Project and operating the project facilities.L.A. Schedule 6, para. 2

Complied with

22. PIU will be headed by a Project Coordinator who willreport directly to the Project Manager. Theresponsibilities of the Project Coordinator includeworking on day-to-day implementation of the Project,including matters related to liaison with ADB,preparing the project reports referred to in Section4.07 of the Loan Agreement, supervising theestablishment and maintenance of separate recordsand accounts as required in Section 4.06 of the LoanAgreement, identifying expenditures of proceeds ofthe Loan for the various project components andsupervising the consultants engaged under theProject.L.A.. Schedule 6, para. 3

Complied with. However, the functionsof the PIU (now Projects Section) wererestructured in May 1999, which led toa change in the Unit’s duty statement.In addition to implementing only ADB-funded projects, the Projects Section isnow tasked to implement other aid-funded projects. This has resulted inheavier workload and weaker flow ofcommunication between ADB and PIUon implementation matters.

23. Prior to the effective date, NDOH will assign to PIUon a full-time basis, two additional officers, one to actas deputy Project Coordinator who will beresponsible for assisting the Project Coordinator inproject implementation matters, and the other to beresponsible for procuring equipment and facilities tobe provided under the Project.L.A. Schedule 6, para. 4

Complied with

24. The Borrower will enable ADB to review allappointments to PIU to ensure that the experienceand qualifications of PIU staff meet ADB standards.L.A. Schedule 6, para. 5

Partly complied with. Complied withduring the early stages of implementation,but recent appointments were no longerreferred to ADB for review and approval.

25. The Project Coordination Committee (PCC) will beresponsible for coordination during projectimplementation with concerned departments oragencies at both the provincial and nationalgovernment levels of the Borrower. PCC will bechaired by the Secretary for Health or his designatedalternate and will comprise senior representatives ofDOW, Department of Personnel Management,Department of Finance and Planning, the churches,Medical Council, as well as representatives fromPDHs in those provinces that receive civil worksassistance under the Project. The chairman of PCChas the power to expand PCC membership, ifnecessary.L.A. Schedule 6, para. 6

Complied with. The first PCC meetingwas in October 1992 and the final onewas in March 2000.

Appendix 3, page 627

26. Agreements concerning project implementation in aform satisfactory to ADB will be concluded betweenthe Borrower and the government of each projectprovince of the Borrower will be signed by theBorrower and each of the Project Provinces(National-Provincial Agreements). Each of theNational-Provincial Agreements will include:

(a) detailed descriptions of project components to beimplemented in the individual Project, including,where applicable, relevant quantities, specifications,and siting;

(b) funds to be provided out of the Loan proceedsand out of the resources of the Borrower allocated byNDOH to the individual Project Provinces for specificProject activities;

(c) contributions by the individual Project Provincesto the specific project activities to be made in theamounts and allocated on a yearly basis satisfactoryto ADB during project implementation; and

(d) recurrent project-related expenditures to beassumed by the individual Project Provinces, made inthe amounts on a yearly basis during projectimplementation, satisfactory to ADB and thecommitment to assume all such expenditures afterproject completion.L.A. Schedule 6, para. 7(a-d)

Complied with

27. In addition to the Project-specific matters enumeratedabove, the National-Provincial Agreements willinclude general provisions summarizing theresponsibilities of the Borrower (and NDOH inparticular); the responsibilities of the ProjectProvinces (and the PDHs in particular); theprocedures relating to budget and financial matters;accounting and reporting responsibilities;responsibilities for management and operationprocedures for amendment thereto; and otherpertinent requirements and points of agreement.L.A. Schedule 6, para. 8

Complied with

28. A copy of each National-Provincial Agreement will beforwarded to ADB upon execution and delivery. Pursuant to para. 17, Sched. 3 to this LoanAgreement, the execution, delivery, andeffectiveness of each National-ProvincialAgreement will be a condition to the disbursement ofLoan funds for the concerned Project Province. TheBorrower will cause NDOH and DOW not toauthorize the award of civil works contracts or thecommencement of civil works on a force account

Complied with

Appendix 3, page 728

basis in a particular Project Province, or distributionof equipment to the PDH in that Project Province.L.A. Schedule 6, para. 9

29. Procurement and distribution of the equipmentprovided under Parts II(b)(ii) and d(ii) will be carriedout in accordance with the following requirementsand procedures:

(i) the items requested by the Project Provinceswill be limited to (a) items in the MedicalStores Catalogue, with the exceptions tosuch listed items to be determined by theDivision of Pharmaceutical Services (DPS) ofNDOH in consultation with the ProjectManager; and (b) items costing more thanK100 per item;

(ii) the funds for procuring the equipment underPart II(b)(ii) provided to all Project Provinceswill be divided on a population basis.

(iii) the funds for procuring the medicalequipment provided under Part II(b)(ii) will bemade available in two blocks, in each of thefirst and third years of the projectimplementation;

(iv) the funds for procuring other equipmentprovided under Part II(d)(ii) of the Project willbe made available in the first year of Projectimplementation; and

(v) NDOH will issue invitation to ProjectProvinces to submit requests for equipmentmentioned in both subpara. (iii) and (iv)above, three months after Loaneffectiveness, and issue invitation to ProjectProvinces to submit requests for theequipment mentioned in subpara. (iii) abovetwo years after the date of the invitationissued in the first year of projectimplementation.L.A. Schedule 6, para. 10 (i-v)

Complied with

Complied with

Complied with

Complied with. Last order was placedin 1997; goods were delivered to theArea Medical Stores, but delivery to therural health centers remains a problem.

Complied with

Complied with. However, someprovinces were slow in submitting theirrequirements.

30. Not later than three months from the effective date,the Environmental Health Section of NDOH willprepare and issue to the Environmental Sections ofeach of the PDHs appropriate guidelines forimplementing the component of rural water supplyand sanitation systems, which will serve the purposesas required in subpara. (b)(iii) below.L.A. Schedule 6, para. 11 (a)

Complied with. The guidelines wereissued in 1991.

31. The Borrower will carry out the component of thewater supply and sanitation systems under theProject as described in Part II.d(i) in Sched. 1 to the

Complied with. Committees were inplace; guidelines were issued and noproblems encountered with evaluationsand release of funds.

Appendix 3, page 829

LA in accordance with the following requirements andprocedures:

(i) in a manner satisfactory to ADB, theBorrower will constitute in each of the ProjectProvinces a Provincial Water Supply andSanitation Committee within 180 days of theeffective date;

(ii) based on the guidelines prepared by theEnvironmental Health Section of NDOHreferred to in subpara. 11(a) above, theEnvironmental Health Section of each ofPDHs will prepare implementing guidelinesfor each Project Province, with slightvariations reflecting the current localsituations, which will, inter alia, includeindicators of the adequacy of communityparticipation in construction and maintenanceof the water supply and sanitation systemssupplied under the Project; and

(iii) unless such capacity is proven adequate bythe technical review conducted by the HealthInspector in accordance with the provincialimplementing guidelines of the localconditions in the communities where watersupply and sanitation systems will beconstructed, the Project Province concernedwill not release funds for such constructionsin such communities until the ProvincialWater Supply and Sanitation Committeeconcerned has been satisfied that the aboveprovincial implementation guidelines havebeen complied with.L.A. Schedule 6, para. 11(b).

32. The Borrower will make available within six months ofthe Effective Date positions for one National HealthEducator and 12 provincial Health Educators for PartII(d)(ii) of the Project as described in Sched. 1 to theL.A.; and will engage domstic individual consultantsfor purposes of (a)(ii) and (e) of Sched. 5 to this L.A.L.A. Schedule 6, para. 12

Partly complied with. National HealthEducator position was filled in July1992 but has now been restructured.Currently, no individual is specificallyassigned as Health Educator and theposition is now integrated in the wholeHealth Promotion and EducationBranch of NDOH. Some provincialpositions were abolished progressivelyIn 1996/97 due the integration ofprovincial staff positions.

33. The Borrower will cause NDOH to prepareinstructions to the draft proposed amendments toHospital Charges Act of 1978 deleting references tospecific fees; and will cause the proposedamendments to the Hospital Charges Act 1978 to be

Complied with. Revised HospitalCharges Act was approved in 1994.

Appendix 3, page 930

submitted for parliamentary consideration within 12months of the Effective Date, or such other date asthe Borrower and ADB may agree for this purpose.L.A. Schedule 6, para. 13

34. The Borrower will enable NDOH to participateannually in the review of provincial budgets (duringproject implementation) immediately prior to theBudget Priorities Committee meeting of DOFP.L.A. Schedule 6, para. 14

Complied with

35. The Borrower will ensure that the internal proceduresof the Borrower for selecting individuals eligible fortraining and fellowships will continue to apply for thetraining and fellowships provided under the Project,with the final selection of nominees to be conductedin consultation with the Project Manager.L.A. Schedule 6, para. 15.

Complied with

36. The Borrower will cause DOW by one year from thedate of Loan effectiveness to have (i) redesignedkithouse specifications in light of experience gainedunder the First and Second Rural Health ServicesProjects; and (ii) reviewed designs for all civil worksactivities at the four regional support units, theGoroka Teachers College, the Oiguti Training Center,and health education unit.L.A. Schedule 6, para. 16

Complied with. Approved in October1992

37. The Borrower will provide, for regular ADB reviewitemized consolidated accounts of total provincialhealth expenditures from the provinces of East NewBritain and Madang, to include (i) transfers fromNDOH for provincial activities, (ii) transfers fromDOFP for provincial PDH salaries, (iii) allocation bythe provincial governments of minimum unconditionalgrant funds for health sector activities, and (iv)provincial health activities funded by provincial orlocal revenues. The consolidated accounts willclearly distinguish between capital and recurrentexpenditures and will indicate total expenditures onprimary and basic health care. Presentation ofconsolidated accounting will also be required of otherfinancially autonomous Project Provinces that adoptprogram budgeting during project implementation.L.A. Schedule 6, para. 17

Being complied with. Provincialexpenditures are being monitoredunder the Health Sector DevelopmentProgram (HSDP).

Appendix 3, page 1031

38. The Borrower will ensure that the provincial Bureausof Management Services concerned have adequatestaff to maintain the required financial records andaccounts for the project components carried out inthe particular Project Provinces.L.A. Schedule 6, para. 18

Complied with. No longer relevant tothe Project, as imprest accounts havebeen established and managed inNDOH.

39. The Borrower will ensure that all land, rights in land,and other rights or privileges required for civil worksof the Project are acquired or otherwise madeavailable on a timely basis to avoid delay in projectimplementation.L.A. Schedule 6, para. 19

Complied with

40. The Borrower will ensure that all rural health facilitiesto be constructed, upgraded or otherwise assistedunder the Project will be staffed to carry out the basicfunctions of project facilities.L.A. Schedule 6, para. 20

Partly complied with. Some facilitiesinspected were not being operated dueto either law and order conditions andat times due to the absence (longleave) of the community healthworkers, or lack of position in theprovincial budgets.

41. The Borrower will (i) ensure that housing providedunder the Project to staff of NDOH and PDHs will befor the use of such staff only (ii) ensure that adequateand secure accommodation is provided for theconsultants assigned to work on the Project and (iii)assist NDOH staff assigned to work on the Project inthe Port Moresby area in making satisfactoryarrangements for housing.L.A. Schedule 6, para. 21

Partly complied with. Complied with (i)and (ii). No adequate provision for item(iii).

42. The Borrower will ensure that the components of theProject designed to improve rural water supply andsanitation services will be directed towardcommunity-wide facilities rather than towardGovernment institutions. All water supply andsanitation facilities to be developed under the Projectwill be open to the public, with no private connectionother than to nongovernment health facilities.L.A. Schedule 6, para. 22

Complied with

43. All water supply and sanitation systems under theProject will be installed in areas that meet criteriaagreed upon by the Borrower and ADB.L.A. Schedule 6, para. 23

Complied with

44. The Borrower will inform ADB in a timely fashion asto the passage and/or alteration of Provincial HealthActs by any Project Province, as well as any new orexisting national or provincial legislation affecting theimplementation of project-supported health financereform.L.A. Schedule 6, para. 24

Complied with. ADB was informed ofthe new Organic Law, which came intoeffect in June 1995.

32

Appendix 3, page 1132

45. The Borrower will ensure that church-affiliated andother nongovernment health facilities assisted underthe Loan continue to be assisted and supplied on anequitable basis.L.A. Schedule 6, para. 25

Complied with

46. The Borrower agrees to the institution of a midtermreview, to be carried out with ADB assistance threeyears from the Effective Date.L.A. Schedule 6, para. 26

Complied with. Midterm review wasundertaken in October 1995.

Appendix 4

PROJECTED AND ACTUAL DISBURSEMENTS($ million)

Year QuarterProjected

DisbursementsPercentof Loan

ActualDisbursements

Percentof Loan

1992 I 0.00 0 0.00 0II 2.60 12 0.00 0III 0.00 0 0.00 0IV 0.00 0 0.00 0

1993 I 0.00 0 0.00 0II 0.80 4 1.43 7III 0.40 2 0.24 1IV 0.30 1 0.01 0

1994 I 0.50 2 0.00 0II 0.50 2 1.64 8III 0.50 2 0.00 0IV 0.50 2 1.55 7

1995 I 0.30 1 0.71 3II 0.20 1 0.98 4III 0.50 2 0.21 1IV 0.50 2 0.15 1

1996 I 0.25 1 0.22 1II 0.30 1 0.70 3III 0.30 1 0.07 0IV 0.30 1 0.14 1

1997 I 0.04 0 0.34 2II 0.20 1 0.67 3III 0.54 2 0.43 2IV 0.50 2 0.07 0

1998 I 0.20 1 0.32 1II 0.45 2 0.11 0III 0.98 4 1.01 5IV 0.88 4 0.85 4

1999 I 1.43 7 0.09 0II 1.89 9 0.25 1III 0.00 0 0.95 4IV 0.00 0 0.63 3

2000 I 1.50 7 0.87 4II 0.00 0 0.67 3III 0.00 0 0.00 0IV 0.00 0 0.00 0

79 70

33