Report and Recommendation of the President to the Board of Directors

Project Number: 54175-001 June 2020

Proposed Loan and Grant Kyrgyz Republic: COVID-19 Pandemic Emergency Project Distribution of this document is restricted until it has been approved by the Board of Directors. Following such approval, ADB will disclose the document to the public in accordance with ADB's Access to Information Policy.

CURRENCY EQUIVALENTS (as of 1 June 2020)

Currency unit – som (Som)

Som1.00 = $0.013551 $1.00 = Som73.7950

ABBREVIATIONS

ADB – Asian Development Bank COVID-19 – coronavirus disease ICU – intensive care unit IMF – International Monetary Fund MHIF – Mandatory Health Insurance Fund MOF – Ministry of Finance MOH – Ministry of Health NCAP – National Contingency Action Plan PAM – project administration manual PIU – project implementation unit PPE – personal protective equipment WHO – World Health Organization

NOTE

In this report, “$” refers to United States dollars.

Vice-President Shixin Chen, Operations 1 Director General Werner Liepach, Central and West Asia Department (CWRD) Directors Rie Hiraoka, Social Sector Division (CWSS), CWRD

Candice McDeigan, Kyrgyz Resident Mission (KYRM), CWRD

Team leaders Cebele Wong, Young Professional, CWSS, CWRD Oksana Nazmieva; Principal Financial Management Specialist;

Portfolio, Results, Safeguards and Gender Unit (CWOD-PSG); CWRD

Mamatkalil Razaev, Senior Project Officer, KYRM, CWRD Team members Melanio Altoveros; Procurement Specialist; Procurement Division 1

(PFP1); Procurement, Portfolio and Financial Management Department (PPFD)

Hiddo Huitzing, Health Specialist, CWSS, CWRD Shaista Hussain, Senior Results Management Specialist, CWOD-

PSG, CWRD Jenevieve Javier, Associate Project Analyst, CWSS, CWRD

Ursula Lagan, Counsel, Office of the General Counsel Steven Lewis-Workman, Unit Head, Project Administration, KYRM,

CWRD Cristina Lim, Senior Operations Assistant, CWSS, CWRD

Sona Poghosyan, Social Development Specialist (Safeguards), CWOD-PSG, CWRD

Nathan Rive; Senior Climate Change Specialist; Environment, Natural Resources and Agriculture Division; CWRD

Thomas Robinson, Procurement Specialist, PFP1, PPFD Mary Alice Rosero, Social Development Specialist (Gender and

Development), CWOD-PSG, CWRD One ADB Teama

Syed Asim Ali Sabzwari, Environment Specialist, CWOD-PSG, CWRD

Fritz Tuliao, Associate Project Analyst, CWOD-PSG, CWRD Donneth Walton, Lead Project Management Specialist, CWOD,

CWRD Zehra Abbas, Principal Environment Specialist, Safeguards Division

(SDSS), Sustainable Development and Climate Change Department (SDCC)

Eduardo Banzon, Principal Health Specialist, Health Sector Group, SDCC

Charlotte Benson, Principal Disaster Risk Management Specialist, Climate Change and Disaster Risk Management Division, SDCC

Erik Bloom, Senior Evaluation Specialist, Thematic and Country Division, Independent Evaluation Department

Haidy Ear-Dupuy, Senior Social Development Specialist (Core Labor Standards), SDSS, SDCC

Carlo Antonio Garcia, Senior Integrity Officer, Prevention and Compliance Division, Office of Anticorruption and Integrity

Kashif Jamal, Financial Management Specialist, Public Financial Management Division, PPFD

Januar Laude, Senior Financial Control Specialist, Loan and Grant Disbursement Section, Controller’s Department

Irina Novikova, Senior Social Development Specialist (Safeguards), SDSS, SDCC

Susann Roth, Principal Knowledge Sharing and Services Specialist, Knowledge Advisory Services Center, SDCC

Malika Shagazatova, Social Development Specialist (Gender and Development), Gender Equity Thematic Group, SDCC

Agnes Surry; Senior Planning and Policy Specialist; Operations Planning and Coordination Division; Strategy, Policy and Partnerships Department

Takashi Yamano, Senior Economist, Economic Analysis and Operational Support Division, Economic Research and Regional Cooperation Department

a Interdepartmental advisory team.

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS

Page

PROJECT AT A GLANCE

I. THE PROPOSAL 1

II. THE PROJECT 1

A. Rationale 1 B. Project Description 4 C. Value Added by ADB 5 D. Summary Cost Estimates and Financing Plan 6 E. Implementation Arrangements 7

III. DUE DILIGENCE 8

A. Technical 8 B. Economic and Financial Viability 9 C. Sustainability 9 D. Governance 9 E. Poverty and Social 10 F. Gender 10 G. Safeguards 10 H. Summary of Risk Assessment and Risk Management Plan 11

IV. ASSURANCES 12

V. RECOMMENDATION 12

APPENDIXES

1. Design and Monitoring Framework 13

2. List of Linked Documents 16

Project Classification Information Status: Complete

PROJECT AT A GLANCE

Source: Asian Development BankThis document must only be generated in eOps. 04052020134320301143 Generated Date: 02-Jun-2020 10:01:10 AM

1. Basic Data Project Number: 54175-001Project Name COVID-19 Pandemic Emergency Project Department/Division CWRD/CWSSCountry Kyrgyz Republic Executing Agency Ministry of HealthBorrower Ministry of Finance

Country Economic Indicators

https://www.adb.org/Documents/LinkedDocs/?id=54175-001-CEI

Portfolio at a Glance https://www.adb.org/Documents/LinkedDocs/?id=54175-001-PortAtaGlance

2. Sector Subsector(s) ADB Financing ($ million)Health Disease control of communicable disease 16.00

Health sector development and reform 4.00

Total 20.00

3. Operational Priorities Climate Change InformationAddressing remaining poverty and reducing inequalities

Accelerating progress in gender equality

Tackling climate change, building climate and disaster resilience, and enhancing environmental sustainabilityStrengthening governance and institutional capacity

Fostering regional cooperation and integration

GHG reductions (tons per annum) 0Climate Change impact on the Project

Low

ADB Financing

Adaptation ($ million) 0.00

Mitigation ($ million) 0.00

Cofinancing

Adaptation ($ million) 0.00

Mitigation ($ million) 0.00

Sustainable Development Goals Gender Equity and MainstreamingSDG 1.5SDG 3.8, 3.dSDG 5.1SDG 10.4SDG 16.8

Effective gender mainstreaming (EGM)

Poverty TargetingGeneral Intervention on Poverty

4. Risk Categorization: Low.

5. Safeguard Categorization Environment: C Involuntary Resettlement: C Indigenous Peoples: C

.

6. Financing

Modality and Sources Amount ($ million)

ADB 20.00

Sovereign Project grant: Asian Development Fund 10.00

Sovereign Project (Concessional Loan): Ordinary capital resources 10.00

Cofinancing 0.00

None 0.00

Counterpart 1.70

Government 1.70

Total 21.70

Currency of ADB Financing: US Dollar

I. THE PROPOSAL 1. I submit for your approval the following report and recommendation on a proposed emergency assistance loan and grant, both to the Kyrgyz Republic for the COVID-19 Pandemic Emergency Project. 2. The proposed project is part of an integral package of support to help the government’s immediate efforts to mitigate the significant health, social, and economic impacts of the coronavirus disease (COVID-19) pandemic. The project will assist the Government of the Kyrgyz Republic to improve testing, diagnosis, and treatment of COVID-19 cases to reduce transmission and improve clinical management of patients. The project will also improve government resilience to future health pandemics and disasters.

II. THE PROJECT A. Rationale 3. The COVID-19 pandemic. In December 2019, COVID-19 emerged and quickly spread around the world, causing a surge in fatalities, especially among people with comorbidities.1 The World Health Organization (WHO) declared a global pandemic on 11 March 2020. Since then, over 6 million people had been infected globally and over 373,000 had died as of 2 June 2020.2 The Government of the Kyrgyz Republic announced the first three cases of COVID-19 on 17 March 2020 and declared a state of emergency on 24 March 2020. By 2 June 2020, there were 1,845 infected people, of whom 20% were health workers. With 83% of health workers being female, women outnumber men among the infected people. A model of the global impact of COVID-19 predicts that many more people could become infected and require hospital care, with devastating health and socioeconomic impacts.3 The Ministry of Health (MOH) currently anticipates the pandemic will peak in the second quarter of 2020, but a second or third wave is also possible as the country considers loosening restrictions and restarting economic activity. 4. Socioeconomic impact. The Kyrgyz Republic, with a population of about 6.3 million and estimated gross national income per capita of $1,220 (Atlas method, 2018 prices), is one of the most integrated and open economies in Central Asia.4 The country is at high risk to the impacts of the pandemic through its significant migrant population and exposure to cross-border contamination stemming from high volumes of travel within neighboring countries.5 The economic disruption caused by border closures and emergency lockdown measures have created a large fiscal deficit, estimated at $722 million by the International Monetary Fund (IMF).6 5. The pandemic has resulted in widespread job losses, particularly for those involved in the industry and service sectors (which account for 70% of all employment). The Ministry of Social Protection and Labor identified around 1.8 million people (about 30% of the population) who will need direct social protection support during the economic downturn, including about 1.0 million

1 Comorbidities are defined as the simultaneous presence of multiple conditions in a patient. Patients with diabetes,

hypertension, and other cardiovascular conditions appear more likely to develop severe symptoms of COVID-19. 2 WHO. COVID-19 Dashboard. (accessed 2 June 2020). 3 Walker, et al, 2020. Global Impact of COVID-19 and Strategies for Mitigation and Suppression. London. 4 International Monetary Fund (IMF). 2018. World Economic Outlook Database. Washington, DC. (accessed 11 March

2019). 5 Asian Development Bank (ADB). 2019. Kyrgyz Republic: Improving Growth Potential. Manila. 6 The IMF’s projections as of 24 March 2020, which does not include its budget support according to analysis from the

Kyrgyz Republic: COVID-19 Active Response and Expenditure Support Program.

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people who are likely to lose their jobs.7 Household income, employment, and food security are all expected to decline precipitously as the pandemic progresses. The Asian Development Bank (ADB) estimates that the poverty rate could increase by 26% because of COVID-19 and result in an additional 200,000 people falling into poverty.8 6. Government response. The government adopted its first legislation to address COVID-19 on 29 January 2020.9 The government requested ADB for emergency assistance on 6 April 2020. To coordinate the COVID-19 response, the Republican Headquarters for the Prevention of the Spread of COVID-19 was established in the Ministry of Emergency Services with the Prime Minister of the Kyrgyz Republic as chair and representatives of all ministries and state agencies as members. To respond to the substantial adverse impact of COVID-19, the government has developed a $248 million COVID-19 countercyclical plan and health sector response plan covering population security and food security, business entities, state budget stability, and health. A separate COVID-19 headquarters was established in the MOH to manage the health sector response.10 The government prepared the National Contingency Action Plan (NCAP) for COVID-19 response with partners led by WHO and activated intersector and interagency coordination mechanisms.11

7. Damage and needs assessment. The NCAP is the first part of the government’s strategic response, focused on the health sector, to mitigate the impact of the COVID-19 pandemic. It emphasizes reducing transmission, mortality, and socioeconomic impact, and is expected to cost $88 million to implement, assuming 4,000 cases. As stated in the NCAP, the government aims to (i) ensure early identification of cases and their safe and effective management; (ii) reduce the severity of disease by providing clinical care, especially to vulnerable populations; (iii) ensure contingencies are in place to avoid disruption of essential medical services; and (iv) minimize societal disruption by guiding business continuity. 8. The capacity of the government and the overall health system to deal with the outbreak effectively is low. Therefore as an immediate first step, the country instituted drastic measures to prevent the further spread of the pandemic by imposing border restrictions; instituting a lockdown on the population; closing most businesses, shopping areas, and banks across the country; and suspending international and domestic flights. The MOH also introduced risk communication measures and isolation and quarantine of people suspected of having COVID-19 infection, and their contacts. Development partners have supported expansion of the COVID-19 surveillance and testing system from two laboratories to seven. Laboratory staff have been trained in technical and safety procedures. However, more contact tracing and testing capacity will be required to contain the predicted surge in cases and before the lockdown can be relaxed.12

7 Organisation for Economic Co-operation and Development (OECD). 2018. Social Protection System Review of

Kyrgyzstan. OECD Development Pathways. Paris. 8 ADB. COVID-19 and Poverty: Some Scenarios Based on Grouped Distribution Data on Household Consumption.

Unpublished. Poverty rate based on $3.2/day poverty line in lower-middle income countries. 9 On 29 January 2020, the government adopted key legislation for COVID-19, including Government Order No. 30,

Order No. 52 of the Minister of Health on prevention of the spread of COVID-19 disease, and Protocol No.1 based on the meeting of the Republican Headquarters for the Prevention of the Spread of COVID-19 on the Territory of the Kyrgyz Republic. The Headquarters consists of all ministries and state agencies, including the MOH, Ministry of Emergency Situations, Ministry of Interior, State National Security Agency, State Committee for Defense, Security Council, Ministry of Foreign Affairs, Ministry of Economy, Ministry of Finance, Ministry of Culture and Tourism, Ministry of Transportation and Roads, State Border Service, State Custom Service, Veterinary Service, and Phytosanitary Agency.

10 The deputy minister of health is the executive representative and a secretariat in the Department of State Sanitary and Epidemiology Control.

11 Government of the Kyrgyz Republic. 2020. Inter-sectoral inter-agency contingency plan for COVID-19. Bishkek. 12 WHO. COVID-19 Health System Response Monitor: Policy Responses for Kyrgyzstan.

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9. For stage one of the pandemic, the government designated 12 hospitals in the cities of Bishkek and Osh and four regions (Chui, Jalal-Abad, Batken and Osh) as COVID-19 treatment centers, with a total capacity of 950 beds including 87 intensive care beds. For stage two of the pandemic, an additional 21 hospitals have been identified throughout the country, with an additional 1,315 beds including 139 intensive care beds. With effective lockdown, these facilities should, with some adaptation, be enough to handle a slow surge in COVID-19 inpatients, but a shortage of intensive care beds is projected as the pandemic progresses. While the MOH can mobilize more health workers, there is a shortage of trained intensive care staff.13 The Kyrgyz Republic’s public health spending of about 6.2% of gross domestic product in 2017 is insufficient to handle a surge in COVID-19 inpatients.14 Health facilities are overwhelmed, which also threatens the delivery of essential health services including vaccinations. 10. Furthermore, these facilities are not up to safety and quality standards for COVID-19 case management in terms of quarantine and waste management, medical supplies, and personal protective equipment (PPE). WHO’s assessment of hospitals in the Kyrgyz Republic found that staff and visitors were ill-informed about risks and quarantine and care protocols.15 Medical personnel account for 21% of confirmed infections, suggesting that the capacity to prevent transmission in facilities may be very low. Additional detail can be found in the Summary Assessment of Damage and Needs.16 11. Emergency assistance coordination. ADB is coordinating with other development partners on all potential areas for support.17 In February 2020, the government reached out through the Development Partners Coordination Council to mobilize resources. The IMF approved two consecutive loans totaling $241.80 million to address the fiscal gap of the government budget. On 3 April 2020, the World Bank approved a $12.15 million loan primarily for the purchase of medical supplies and equipment for intensive care units (ICUs) as part of its COVID-19 response, and will allocate $9.00 million from its ongoing Enhancing Resilience in the Kyrgyz Republic Project to support social protection measures.18 ADB approved a $50.00 million budget-support COVID-19 Active Response and Expenditure Support Program on 4 May 2020.19 Other development partners have established crisis responses such as training and provision of medical supplies. ADB and World Bank teams have preliminarily agreed to conduct joint review missions and will be supporting separate treatment facilities, while WHO ensures overall emergency coordination in line with the NCAP to fight COVID-19. 12. Lessons learned. The government and development partners are learning lessons through regular communication and coordination given the unique nature of the COVID-19 pandemic. The World Bank project for COVID-19 has shown the need for maintaining flexible procurement and implementation arrangements, and that health facilities require flexible funds which can be used to respond to emerging needs resulting from the pandemic. ADB’s experience in supporting countries during the severe acute respiratory syndrome (SARS) outbreak shows the

13 There are 29,502 health workers in the Kyrgyz Republic, including 8,322 physicians and 21,180 mid-level health

workers. 14 WHO. Global Health Expenditures Database (accessed 29 April 2020). 15 WHO. 2020. Hospital Readiness Assessment – in the Context of the COVID-19 Outbreak, February 2020. 16 Summary Assessment of Damage and Needs (accessible from the list of linked documents in Appendix 2). 17 WHO is responsible for all training related to COVID-19, and is working with the government to develop specific

national clinical management guidelines for hospitals. The Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH (GIZ) and the Red Cross are providing enough technical assistance services to cover trainings under WHO leadership and following WHO-developed manuals.

18 World Bank. 2020. Kyrgyz Republic - Emergency COVID-19 Response project. $12.15 million; World Bank. 2020. Enhancing Resilience in the Kyrgyz Republic (contingent emergency response component, $9 million).

19 ADB. 2020. Kyrgyz Republic: COVID-19 Active Response and Expenditure Support Program. Manila.

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importance of focusing on key priorities for disease control. During the first critical months, ADB partnered with technical agencies such as WHO to assist governments to develop rapid and effective responses while longer-term capacity building needs were identified.20 13. Proposed ADB assistance. This project will provide the most urgently needed supplies and equipment and strengthen the health sector to address the top priorities of mortality and morbidity. This project will support the priorities of (i) increasing testing and diagnostic capacity; (ii) supporting the protection of health care workers including appropriate specifications of PPE and related support for the high proportion of female health care workers; (iii) strengthening institutional capacity and accountability mechanisms of government to respond to the crisis; and (iv) supporting expansion of treatment capacity including for severely ill patients. The proposed project aligns with five operational priorities within Strategy 2030: (i) addressing poverty and reducing inequalities, through improved health access; (ii) accelerating gender equality, through occupational safety and training targets for women; (iii) tackling climate change and building climate and disaster resilience and enhancing environmental sustainability, through improving health sector capacity; (iv) strengthening governance and institutional capacity; and (v) fostering regional cooperation, through reducing risks of cross-border disease transmission.21 B. Project Description 14. Impact and outcome. The project is aligned with the following impact: to strengthen the public health system and mitigate the impact of the COVID-19 outbreak in the Kyrgyz Republic (footnote 11). The project will have the following outcome: capacity in the health system to mitigate COVID-19 improved.22 15. Output 1: Capacity of surveillance and response services to COVID-19 strengthened. The project will help mitigate the surge in COVID-19 cases by increasing health system capacity to identify and diagnose potentially infected people and improve contact tracing for isolation of cases. The output will support the procurement of PPE, test kits, reagents, and other supplies to increase screening, testing, and prevention of COVID-19 for the sanitary and epidemiological services of the MOH, the COVID-19 laboratories, and other key health facilities as agreed with the MOH. Health workers and facility staff who are at highest risk of infection will have increased access to diagnostic services. 16. Output 2: Capacity for infection prevention control and quality of care for COVID-19 patients improved. This output is aligned with the Government’s objective to mitigate the impact of the epidemic, by providing improved clinical care of COVID-19 and avoiding disruption of essential services. The project will improve eight hospitals that have been designated as COVID-19 treatment centers. These comprise five hospitals for stage one in Bishkek, Osh, and Jalalabad requiring additional support; and three hospitals for stage two in Naryn, Talas, and Issyk-Kul region. These hospitals currently have 792 beds with 81 intensive care beds. The hospitals were selected on the basis of COVID-19 cases, geographical coverage, existing capacity to manage infectious diseases, support from other donors, and projected need for additional ICU beds.

17. The project will assist these hospitals to function as COVID-19 treatment centers including staff training, quarantine, and infection prevention control arrangements and expansion of ICU by

20 ADB. 2011. Technical Assistance Completion Report: Emergency Regional Support to Address the Outbreak of

Severe Acute Respiratory Syndrome. Manila. 21 ADB. 2018. Strategy 2030: Achieving a Prosperous, Inclusive, Resilient, and Sustainable Asia and the Pacific.

Manila. 22 The design and monitoring framework is in Appendix 1.

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an additional 80 beds. This output will support in (i) providing medical supplies and equipment such as appropriately sized PPE, special supplies for female staff, ventilators, anesthetic instruments, and monitors; (ii) training staff in safety and quality of care for COVID-19 patients, and technical agencies providing clinical and services guidelines; and (iii) providing ambulances to project facilities. To ensure the hospitals are well-prepared and staffed to provide quality COVID-19 treatment, the project will also provide funds for (i) staff incentives in the form of hardship allowances as approved by government regulation,23 (ii) minor repairs and refurbishment of facilities,24 and (iii) improvement of facilities for hospital staff and including separate changing and resting facilities for male and female health workers. The enhanced capacity of the eight hospital facilities will strengthen the resilience of the country to future outbreaks and pandemics.25 18. Emergency assistance eligibility. The proposed emergency assistance loan and grant meets the eligibility criteria for ADB’s emergency assistance financing as (i) it helps refurbish high-priority physical assets, such as hospitals and medical facilities, and restore economic, social, and governance activities by improving confidence in public health capacity so that regular activities may resume; (ii) it is designed to mitigate immediate losses to priority assets, capacity, or productivity (such as health care workers); (iii) it provides immediate short-term transitional assistance; (iv) it is restricted to the transition phase and is exclusively for priority rehabilitation; and (v) it complements efforts by other development partners to ease the transition from relief to normal development.

C. Value Added by ADB 19. ADB’s overall support to the government will mitigate economic losses and help close the financing gap in the government’s budget to meeting essential expenditures in 2020. This project is part of a comprehensive package of support to the Kyrgyz Republic, including immediate support in the form of (i) a $200,000 technical assistance grant and additional financing of $700,000 from ADB regional technical assistance to procure emergency supplies including PPE;26 (ii) a joint ADB––United Nations Development Programme socioeconomic study of the impact of the pandemic on the country’s poor and vulnerable communities; and (iii) an approved $50 million COVID-19 Active Response and Expenditure Support Program, under the countercyclical support facility––COVID-19 pandemic response option. ADB and the government are discussing an additional $50 million policy-based loan in 2020 for social protection and fiscal resilience.27 In addition, ADB will provide additional medium-term support to the government through the regional technical assistance for Addressing Health Threats in Central Asia Regional Economic Cooperation Countries and Central West Region Developing Member Countries. 28 As a trusted partner in the Kyrgyz Republic, ADB is providing financing, knowledge and technical support.

23 The Government of the Kyrgyz Republic issued regulation No.194, dated 3 April 2020, “Regulation of the ordinance

of the spending of the funds received for the support of the pandemic measures and its operating mechanism,” which adds a hardship allowance to health and other workers supporting facilities fighting COVID-19. The allowance in a form of nonrefundable payment is payable through the Mandatory Health Insurance Fund (MHIF), which supports a single payer system in health care and has adequate facilities to track transactions and e-procurement.

24 Minor repairs and refurbishment of facilities cover repair of handwashing and hygiene facilities, electrical and sewage repairs, staff and patient safety, repair of health wards to convert them to ICUs where new equipment will be placed, and meeting temporary housing needs for health workers.

25 Support for health workers allowances beyond the 8 facilities will be considered depending on the scale of the outbreak and once detailed costs for supporting the 8 facilities are determined during implementation.

26 ADB. 2020. Regional Support to Address the Outbreak of Coronavirus Disease 2019 and Potential Outbreaks of Other Communicable Diseases. Manila.

27 Subject to program readiness and ADB's resource availability. 28 ADB. 2020. Addressing Health Threats in Central Asia Regional Economic Cooperation Countries and Central West

Region Developing Member Countries (ongoing processing).

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D. Summary Cost Estimates and Financing Plan 20. The project is estimated to cost $21,700,000 (Table 1). Detailed cost estimates by expenditure category are included in the project administration manual (PAM).29

Table 1: Summary Cost Estimates ($ million)

Item Amounta A. Base costb 1. Output 1: Capacity of surveillance and response services to COVID-19 strengthened 2.0 2. Output 2: Capacity for infection prevention control and quality of care for COVID-19 patients improved 18.4 Subtotal (A) 20.4 B. Contingenciesc 1.1 C. Financial charges during implementationd 0.2 Total (A+B+C) 21.7 ADB = Asian Development Bank. a Includes taxes and duties of $3.13 million, of which ADB will finance $1.43 million while the government will contribute

$1.70 million. Such amount does not represent an excessive share of the project cost. The grant procurement will be exempt from customs duties. The government will also provide in-kind project management support.

b Mid-2020 prices. The project management costs are included in outputs. c Physical contingencies have been computed at 5.00% of the base cost while price contingencies have been

computed at an average of 1.57% per annum (1.50% in 2020, 1.60% in 2021, and 1.60% in 2022) for the foreign currency component and at an average of 4.5% (3.5% in 2020, 5.0% in 2021, and 5.0% in 2022) for the local currency component of the project costs including physical contingencies.

d Interest rate is 1% for concessional ADB loans (Group A) from ordinary capital resources during and after the grace period. There are no commitment or other charges on all sources of financing.

Sources: ADB, Government of the Kyrgyz Republic, World Health Organization.

21. The government has requested (i) a concessional loan of $10,000,000 from ADB’s ordinary capital resources and (ii) a grant not exceeding $10,000,000 from ADB’s Special Funds resources (Asian Development Fund) to help finance the project. The loan will have an interest charge at the rate of 1% per year; a term of 40 years, including a grace period of 10 years; repayment of principal at 2% per year for the first 10 years after the grace period and 4% per year thereafter; and such other terms and conditions set forth in the draft loan agreement. 22. The summary financing plan is in Table 2. The ADB loan and grant will be applied in parallel manner, with grant funds prioritized for imported goods and equipment because procurement using grant funds is exempt from customs duties. The ADB loan and grant will be financing goods, civil works, consulting services, and hardship allowances as set out in the detailed cost estimates in the PAM (footnote 29). The government will provide in-kind support in the form of exemptions of customs duties and taxes on grants, and project management support.

Table 2: Summary Financing Plan Source Amount ($ million) Share of Total (%) Asian Development Bank Ordinary capital resources (concessional loan) 10.0 46.0 Special Funds resources (ADF grant) 10.0 46.0 Government (in-kind only) 1.7 8.0

Total 21.7 100.0 ADF = Asian Development Fund. Note: The project will be funded by a portion of the performance-based country allocation in concessional ordinary capital resources lending (COL) and some freed-up ADF grant resources from savings and cancellations of ongoing projects in countries eligible for ADF grants. Sources: Asian Development Bank and the Government of the Kyrgyz Republic.

29 Project Administration Manual (accessible from the list of linked documents in Appendix 2).

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E. Implementation Arrangements 23. The project will be implemented over 18 months from June 2020 to December 2021. The loan and grant are expected to be financially closed by 30 June 2022. The implementation arrangements are summarized in Table 3 and- described in detail in the PAM (footnote 29). The MOH will be the executing agency and will appoint a senior staff member as the project director. The MOH project implementation unit (PIU) will be the primary implementing agency, while fiduciary and disbursement functions will be provided by the Ministry of Finance (MOF). The PIU will report both to the MOH and the MOF. The MOH will be responsible and accountable for procurement, coordinating with other development partners, monitoring and evaluating project indicators, and gender targets. Individual consultants will be recruited by the MOH as needed to support with monitoring and evaluation, procurement, civil works monitoring, procurement, and other implementation activities. The MOF will be responsible for financial management, disbursements, contract management, financial reporting, project records management, and audits management. 24. The Mandatory Health Insurance Fund (MHIF) will administer funds for refurbishment of eight hospital and top-up salary and hardship allowances to health workers under output 2, amounting to $2 million. The MHIF’s role will be limited to transferring funds; collecting supporting documents from the eight hospitals; recording individual contracts for refurbishment and monitoring the contractual payment compliance; recording additional payments to individual health workers; and preparing financial reporting of activities at the hospital level for the eight project facilities.30 The arrangements for funds transfer will follow the same mode agreed between the government and the World Bank, subject to ADB’s review and approval, and will be updated in the PAM.31 Eligible items to be financed include refurbishment and repair of health facilities, and installation of equipment and related utilities. The funds may also be used to top up the salary and hardship allowance to health workers engaged in the COVID-19 response. 25. Procurement. Considering the unique nature of the COVID-19 pandemic and the ensuing global shortage of goods required to respond to the health crisis, value for money will be achieved by balancing the time, quality, and cost. Direct contracting with MOH established suppliers, World Bank suppliers, and/or United Nations agencies will be conducted to assure consistent quality of products and to attain the best price. Goods will be procured using the ADB Procurement Policy (2017, amended from time to time) and Procurement Regulations for ADB Borrowers (2017, as amended from time to time), as well as the additional exemptions as endorsed per ADB’s comprehensive response to the COVID-19 pandemic.32 Procurement could involve suppliers from non-ADB member countries, and at government request ADB will apply universal procurement (footnote 32). Details on procurement arrangements are found in the PAM.

Table 3: Implementation Arrangements Aspects Arrangements Implementation period June 2020 to December 2021 Estimated completion date 31 December 2021

30 The MHIF was established in 1996, through health sector reform, as a single purchaser to pool funds at the national

level for standardized packages of services. This helped to shift health care services from input- to output-based budgeting (i.e., capitation for primary health care and case-based payments for secondary care services). The MHIF was supported through the ADB Technical Assistance for the Second Community-Based Early Childhood Development project, and by a number of World Bank projects.

31 World Bank. 2020. Kyrgyz Republic Emergency COVID-19 Project. Funds transfers will be made through the MHIF to health facilities.

32 ADB. 2020. ADB’s Comprehensive Response to the COVID-19 Pandemic. Manila.

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Aspects Arrangements Estimated loan and grant closing date

30 June 2022

Management (i) Oversight body The Republican Headquarters for the Prevention of the Spread of coronavirus

disease (COVID-19), with the Prime Minister of the Kyrgyz Republic (chair) and representatives of all ministries and state agencies (members).

(ii) Executing agency Ministry of Health (iii) Key implementing

agency Not applicable

(iv) Implementation unit The project implementation unit (PIU) will consist of 12 staff, of which five will be based in the MOH and seven in the Ministry of Finance (MOF). The MOF will support the MOH with financial management, disbursements, financial reporting, and audits.

Procurement Direct contracting (existing government suppliers, World Bank suppliers, or United Nations agencies)

Multiple contracts $17.4 million

Direct contracting (national suppliers)

Multiple contracts

$0.5 million

Consulting services Individual consultant selection (national)

120 person-months $0.3 million

Consulting firm (national), least-cost selection, biodata technical proposal

Audit $0.1 million

Consulting firm (national), fixed budget selection, biodata technical proposal

Training and Assessment Firm

$0.2 million

Funds Transfer a Hardship allowances and top-up payments to health workers; minor civil works – repair and rehabilitation of facilities

$2.0 million

Retroactive financing and advance contracting

Advance contracting as well as retroactive financing up to 30% of the loan and grant amounts for expenditures incurred not earlier than 24 March 2020 is allowed. b Eligible items covered include (i) refurbishment of the facility to COVID-19 treatment centers; (ii) health workers’ hardship allowance; (iii) procurement of COVID-19-related personal protective equipment, tests, other supplies, equipment, and ambulances as agreed between the MOH and Asian Development Bank; (iv) procurement of PIU furniture and equipment; and (v) recruitment of PIU staff.

Disbursement The loan and grant proceeds will be disbursed following the Asian Development Bank Loan Disbursement Handbook (2017, as amended from time to time) and detailed arrangements agreed between the government and the Asian Development Bank.

a Fund transfers for minor repair and refurbishment works and top-up salary and hardship allowances to health workers are to be channeled through the Mandatory Health Insurance Fund (using e-procurement tracking).

b The government declared a state of emergency on 24 March 2020.

Source: Asian Development Bank.

III. DUE DILIGENCE

A. Technical 26. All components of the project are technically viable, based on needs assessment conducted by the MOH and WHO. Project activities are based on key mitigation priorities identified in the NCAP and are based on global best practices, tailored for the local context. By focusing on a small number of facilities for treating COVID-19, resources and staff can be deployed more efficiently. Equipment and infrastructure provided to facilities will be standardized with those provided by other donors to ensure compatibility and minimize training requirements. The project has a low climate risk category as project sites will be in urban and/or semi-urban areas with limited to no direct risks from climatic conditions. The activities supported by this project will contribute to increased resilience to future pandemics by increasing the capacity of hospitals and the health workforce on infection prevention control and clinical management of patients.

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B. Economic and Financial Viability 27. Preliminary analysis by ADB shows that the Kyrgyz Republic will suffer significant economic impact because of the COVID-19 pandemic, with estimated losses of up to $529 million.33 The project outputs will save lives and address short-term gaps in the health system. Financial viability assessment is not necessary since project outputs are public service goods with no opportunity for cost recovery as testing and treatment of COVID-19 are sponsored by the Government of the Kyrgyz Republic.34 Because of the short processing time available for the emergency response, due diligence following ADB guidelines on economic analysis will be conducted during project implementation within 3 months of project effectiveness.35 The MOF will provide necessary information to ADB to undertake the project economic analysis, in compliance with ADB requirements. C. Sustainability 28. The operation and maintenance costs of the project assets will be funded through the MOH’s recurrent budget. While the contracts for procurement of equipment under the project will ensure supplier-provided maintenance over the short term, the government’s commitment to ensure adequate budget allocations for operations and maintenance post-COVID-19 project will be covenanted in the financing agreement and monitored during project implementation. In view of expected adverse macroeconomic effects of the COVID-19 pandemic on the Kyrgyz Republic, public debt levels are expected to peak at 66% of gross domestic product in 2020.36 Therefore, during implementation a loan covenant will ensure that the MOH submits a comprehensive financial analysis of the operation and maintenance costs for project assets. D. Governance 29. ADB completed a governance risk assessment in 2018 according to the implementation guidelines of ADB’s Second Governance and Anticorruption Action Plan. The assessment found that the country’s public financial management systems were functioning well overall and had improved in the areas of budgeting, transparency, Treasury functions, tax administration, debt management, financial reporting, and legislative framework (new budget code). However, several weaknesses remain, including investment planning and estimation of expenditures, off-budget funds, financial management information system, and internal and external audits, which are being addressed through a 3-year World Bank and European Union technical assistance project. 30. The financial management assessment concluded that project financial management risk is substantial, because of the emergency nature of the project; the potential adverse impacts of weak internal and external audit arrangements on the internal controls framework; the limited strength of finance and internal audit staff within the MOF, MOH, and MHIF; and the potential misuse of funds by target hospitals and staff incentive payments. Key risk mitigating strategies are set out in the financial management assessment. ADB’s Anticorruption Policy (1998, as amended to date) was explained to and discussed with the government. The specific requirements and supplementary measures are described in the PAM (footnote 29).

33 ADB. 2020. The Economic Impact of the COVID-19 Outbreak on Developing Asia. Manila. 34 The MHIF has established a hospital reimbursement rate of Som9,000 per treated case, which is likely insufficient to

cover costs incurred by hospitals. 35 ADB. 2017. Guidelines on Analysis of Health Projects. Manila; and as suggested in ADB staff instruction on business

processes for economic analysis of projects dated 17 March 2017. 36 IMF. 2020. Kyrgyz Republic—Request for Purchase Under the Rapid Financing Instrument and Disbursement under

the Rapid Credit Facility—Debt Sustainability Analysis. Washington, DC.

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31. As per ADB’s project procurement risk assessment, procurement risk is medium mainly because of limited experience with ADB procurement procedures and the smaller size of packages. Accordingly, capacity of the PIU will be enhanced with additional consultants and close supervision by project staff, and direct contracting through United Nations agencies will be encouraged to leverage buying power. The government is also planning to strengthen procurement rules to enhance transparency, including subjecting all procurement of emergency supplies to an ex-post audit by the Audit Chamber with results published on the MOF website. E. Poverty and Social 32. During 2012–2018, the poverty rate in the Kyrgyz Republic dropped from 38% to 22%.37 In the Kyrgyz Republic as elsewhere, the COVID-19 pandemic will have a much higher impact on the poor and near-poor as a result of lower access to information and services, lockdown resulting in loss of jobs during and after the pandemic, and the increasing cost of food and medical and other services. The project will benefit all citizens of the Kyrgyz Republic including the poor by preventing or mitigating the impact of COVID-19 and comorbidity through provision of inclusive health services and improved well-being. F. Gender

33. The project’s gender categorization is effective gender mainstreaming. Initial evidence suggests that, globally, COVID-19 affects men more than women. However, infections in women outnumber men in the Kyrgyz Republic, with 53% of cases in females. Women predominate in the health services, with 83% of the health workers being female, placing women most at risk of contracting an occupational COVID-19 infection. The government is developing testing protocols that will proactively increase access to testing for health workers, and prioritize testing based on risk. The government has also approved a resolution (footnote 23) that outlines additional remuneration for health workers involved in COVID-19 treatment and control. These measures are expected to benefit and compensate health workers for the additional risks and workload caused by the COVID-19 response.

34. Equipment designed for men may not fit women properly. Adequate and gender-sensitive facilities are also important. This project will support provision of sanitation measures for medical staff; separate changing rooms for men and women; and rest areas for female doctors, nurses, and other facility staff. Training and retraining for medical personnel involved in COVID-19 patient care will be provided to quickly train staff to safely care for patients and themselves. To ensure effective gender mainstreaming in the project, the following gender designs and targets have been agreed with the MOH: (i) equal access to testing; (ii) targets for providing incentives to female health workers; (iii) capacity building and training on appropriate use of PPE, infection prevention, and patient management; (iv) gender-sensitive changing and rest areas for health workers; and (v) provision of appropriate PPE and sanitary supplies.

G. Safeguards 35. In compliance with ADB’s Safeguard Policy Statement (2009), the project’s safeguard categories are as follows.38

37 ADB. Basic Statistics, Asia and the Pacific (accessed 2 June 2020). 38 ADB. Safeguard Categories.

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36. Environment (category C). The proposed project will cover urgent priorities, such as PPE, medical equipment for ICUs, and laboratory supplies. There may be very small-scale refurbishment works for preparing the infrastructure for the equipment within the existing facilities. Hence, minimal environmental impacts are envisaged. Category C for environmental safeguards has therefore been proposed. A code of construction practice has been prepared and attached to the PAM and will be implemented to address the limited environmental impacts. 37. Involuntary resettlement and indigenous peoples (category C). The project will not result in any new land acquisition as civil works will entail minor refurbishment and repair of existing medical facilities. Site-based social due diligence will be performed based on a screening checklist to confirm no impacts related to economic displacement and restriction of access in land use. Should due diligence confirm occurrence of adverse land acquisition and resettlement impacts, the project will be recategorized accordingly and measures will be taken to mitigate such impacts. Ethnic minorities in the proposed urban project sites constitute about 10% of the population and are economically fully integrated and at parity with the Kyrgyz. These minorities are not considered indigenous as defined by the ADB Safeguard Policy Statement for project operation purposes.

H. Summary of Risk Assessment and Risk Management Plan 38. Significant risks and mitigating measures are summarized in Table 4 and described in detail in the risk assessment and risk management plan.39

Table 4: Summary of Risks and Mitigating Measures

Risks Mitigation Measures Limited capacity of MOH to adequately assess needs and capacities at the facility level weakens the relevance of the project activities

PIU staff will be engaged to support the MOH to assess needs and capacities at facility level. A training firm will assist with capacity assessments and evaluations. Funds transfers to hospitals through MHIF will enable hospitals to manage and determine needs and submit for MOH review and approval.

High infection rate among health workers (21% of all cases) together with low salaries and unclear health and life insurance schemes will leave the system with a severe shortage of doctors at the peak of the contagion

The government will urgently implement policies introducing clear and adequate remuneration and special health and life insurance schemes for personnel engaged in fighting COVID-19. The project is designed to support improved infection prevention control measures to reduce transmission rates in health workers.

Risk posed by mismanagement of funds transfers through the MHIF

The Ministry of Finance will support fiduciary management, and procurement will use e-procurement system of MHIF developed with support of donors. Segregated accounts will be opened in the Treasury system for eight designated hospitals to allow better accountability and tracking of the disbursed funds (the operating details will be in the MOH operating instructions developed for the World Bank and ADB COVID-19 response, which is a disbursement condition for the funds).

39 Risk Assessment and Risk Management Plan (accessible from the list of linked documents in Appendix 2).

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Risks Mitigation Measures Government accountability for emergency fund expenditure is not robust and there is a risk of mismanagement

Two annual financial audits, including in the retroactive financing

period, and two special audits will be performed at the midterm review and post-project completion. Additional measures will be agreed with the IMF through its letter

of intent to enhance procurement transparency such as ex-post audit by Audit Chamber and publishing of bidding documents.

COVID-19 = coronavirus disease, IMF = International Monetary Fund, MHIF = Mandatory Health Insurance Fund, MOH = Ministry of Health. Source: Asian Development Bank.

IV. ASSURANCES

39. The government has assured ADB that implementation of the project shall conform to all applicable ADB requirements, including those concerning anticorruption measures, safeguards, gender, procurement, consulting services, financial management, and disbursement as described in detail in the PAM and loan and grant documents. 40. The government has agreed with ADB on certain covenants for the project, which are set forth in the draft loan and grant agreements.

41. Disbursement condition. No withdrawals from the ADB loan shall be made for funds transfers through the MHIF to the eight hospitals until detailed operating instructions developed by the MOH and acceptable to ADB are adopted.

V. RECOMMENDATION 42. I am satisfied that the proposed loan and grant would comply with the Articles of Agreement of the Asian Development Bank (ADB) and recommend that the Board approve

(i) the loan of $10,000,000 to the Kyrgyz Republic for the COVID-19 Pandemic Emergency Project, from ADB’s ordinary capital resources, in concessional terms, with an interest charge at the rate of 1% per year; for a term of 40 years, including a grace period of 10 years; with repayment of principal at 2% per year for the first 10 years after the grace period and 4% per year thereafter; and such other terms and conditions as are substantially in accordance with those set forth in the draft loan agreement presented to the Board; and

(ii) the grant not exceeding $10,000,000 to the Kyrgyz Republic, from ADB’s Special Funds resources (Asian Development Fund), for the COVID-19 Pandemic Emergency Project, on terms and conditions that are substantially in accordance with those set forth in the draft grant agreement presented to the Board.

Masatsugu Asakawa President

3 June 2020

Appendix 1 13

DESIGN AND MONITORING FRAMEWORK

Impact the Emergency Assistance Project is aligned with:

The public health system strengthened (Public Health Protection and Health Care System for 2019–2030)a

The effects of COVID-19 pandemic mitigated (National Contingency Action Plan for COVID-19)

Results Chain Performance Indicators

with Targets and Baselines Data Sources and

Reporting Mechanisms Risks Outcome By December 2021

Capacity in health system to mitigate COVID-19 improved

a. All eight project-supported COVID-19 facilities meeting WHO-endorsed quality standards for COVID-19 treatment (2020 Baseline: 0)b

a. MOH compliance checks based on WHO guidelines, midterm review special audit, and post-project special audit reports

COVID-19 transmission and infection patterns exceed all forecasted scenarios and overwhelms health systems and planning assumptions

b. Monthly infection incidence rate of health workers in project supported facilities retained at less than 1.5% (2020 baseline: 2.0%)c

b. MOH report, PIU assessment of facilities, midterm review special audit, and post-project special audit reports

Outputs By December 2021

1a. COVID-19 diagnostic equipment, test kits, and reagents delivered to testing laboratories (baseline: not delivered)

Delays in procuring supplies because of global shortages

1. Capacity of surveillance and response services to COVID-19 strengthened

1a. MOH report, PIU project progress report

1b. All staff in project-supported COVID-19 facilities tested according to government-developed protocols d (83% of whom are female) (2020 baseline: 0) 1c. At least 100,000 additional PCR tests conducted for COVID-19 (baseline April 2020: 26,000)

1b. MOH report, PIU assessment of facilities 1c. MOH report, PIU project progress report

2. Capacity for infection prevention control and quality of care for COVID-19 patients improved

2a. Access to water and sanitation as needed, medical equipment and supplies, ambulances, proper sized PPEs, with suitable face masks and shields, and sanitary supplies (including menstrual kits) provided to all eight project-assisted facilities have access (2020 baseline: none)

2a. MOH report, PIU project progress report

High infection rate among health workers will leave the system in severe shortage of doctors at the peak of the contagion

14 Appendix 1

Results Chain Performance Indicators

with Targets and Baselines Data Sources and

Reporting Mechanisms Risks 2b. Supply of at least 80 fully equipped ICU beds provided to eight project-assisted facilities (2020 baseline: none) 2c. All staff (83% female) at eight project-assisted facilities provided hardship allowances according to government regulation 194e (2020 baseline: none) 2d. All medical staff (83% of whom are women) responsible for testing and treating COVID-19 patients in eight project-assisted facilities provided training on infection prevention control and patient management to treat COVID-19 cases and other infectious respiratory diseases f (baseline: 0%)

2b. MOH report, PIU project progress report 2c. MHIF financial management report 2d. Training firm report

Key Activities with Milestones 1. Capacity of surveillance and response services to COVID-19 strengthened 1.1 Conduct detailed needs assessments at laboratories to determine required supplies and materials (Q2

2020) 1.2 Collect data on availability and turnaround time of testing (Q2 2020) 1.3 Procure laboratory supplies and equipment (Q2–Q3 2020) 1.4 Deliver supplies to COVID-19 laboratories (Q2–Q3 2020) 1.5 Set up system to monitor testing capacity and health worker access to testing (Q3 2020) 2. COVID-19 treatment facilities improved 2.1 Conduct detailed needs assessments of eight project facilities, ensuring consultations with health

workers (female and male) (Q2 2020) 2.2 Collect data on repair and civil works (including on access to water and sanitation) activities and

assessment of safeguards (Q2 2020) 2.3 Determine packages for procurement of goods and supplies (Q2 2020) 2.4 Advertise supplies and equipment packages (Q2 2020) 2.5 Procure supplies and equipment (Q3 2020) 2.6 Convert facilities to quarantine treatment centers for a predicted surge of COVID-19 cases (Q3 2020) 2.7 Develop clinical quality guidelines for WHO endorsement (Q3 2020) 2.8 Increase and improve the safety of ambulance services (Q3 2020)

Project Management Activities Start recruiting PIU staff (Q2 2020) Finalize funds transfer mechanism with MHIF based on World Bank arrangement (Q2 2020) Conduct financial and economic analysis with assistance of PIU staff (Q2 2020) Establish monitoring and evaluation system (Q2 2020)

Appendix 1 15

Inputs ADB: $10,000,000 (COL loan) ADB: $10,000,000 (ADF grant) Government: $1,700,000 in kind Assumptions for Partner Financing

Not applicable ADB = Asian Development Bank, ADF = Asian Development Fund, COL = concessional ordinary capital resources loan, COVID-19 = coronavirus disease, ICU = intensive care unit, MHIF = Mandatory Health Insurance Fund, MOF = Ministry of Finance, MOH = Ministry of Health, PCR = polymerase chain reaction, PIU = project implementation unit, PPE = personal protective equipment, Q = quarter, WHO = World Health Organization. a Government of the Kyrgyz Republic. The Program of the Kyrgyz Republic Government on Public Health Protection

and Health Care System Development for 2019-2030 “Healthy Person – Prosperous Country”; Government of Kyrgyz Republic. 2020. Inter-sectoral inter-agency contingency action plan for COVID-19.

b WHO has worked with the MOH to develop clinical guidelines for testing and treatment of COVID-19. An assessment will be developed based on these guidelines and agreed with WHO.

c Baseline value is for March-May 2020 and measures total prevalence, as incidence not currently available. However, given the short time frame covered, this can be used as proxy measure for incidence. Monthly infection incidence will be measured as number of newly diagnosed infections in health workers at project facilities divided by total health workers at project facilities in a given month.

d Hospital workers include all staff such as doctors, nurses, administrators, cleaners, etc. Testing protocol to be developed by Government of the Kyrgyz Republic.

e The Government of the Kyrgyz Republic issued regulation No.194 dated 3 April 2020 on “Regulation of the ordinance of the spending of the funds received for the support of the pandemic measures and its operating mechanism,” which adds a hardship allowance to health and other workers supporting facilities fighting COVID-19.

f Training will be based on government-developed protocols, and coordinated with other donor partners such as WHO and the World Bank. Distance learning and in-person training options will be considered, taking into account local restrictions on travel and social distancing.

Source: ADB.

16 Appendix 2

LIST OF LINKED DOCUMENTS http://www.adb.org/Documents/RRPs/?id=54175-001-3

1. Loan Agreement

2. Grant Agreement

3. Summary Assessment of Damage and Needs

4. Project Administration Manual

5. Contribution to the ADB Results Framework

6. Emergency Assistance Coordination

7. Summary Poverty Reduction and Social Strategy

8. Risk Assessment and Risk Management Plan

9. Gender Action Plan

Supplementary Documents

10. Financial Management Assessment

11. Strategic Procurement Planning Report

12. Procurement Risk Assessment Report