PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No.: AB2560 Project Name. Bahia Integrated Water Management Region

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No.: AB2560 Project Name Bahia Integrated Water Management Region LATIN AMERICA AND CARIBBEAN Sector General water, sanitation and flood protection sector (45%); Health (40%); Sub-national government administration (15%) Project ID P Borrower(s) State of Bahia Implementing Agency SEPLAN (Secretary of Planning), will be the lead agency responsible for overall coordination of implementation of the proposed Project. Environment Category [ ] A [X] B [] C [ ] FI [ ] TBD (to be determined) Date PID Prepared September 25, 2009 Estimated Date of November 9, 2009 Appraisal Authorization Estimated Date of Board March 9, 2010 Approval 1. Key development issues and rationale for Bank involvement Bahia is Brazil s fifth largest state in terms of land size (564,692 km²), and fourth in terms of population with 14 million inhabitants, or 7.5 percent of the nation. According to the latest census, two-thirds of Bahia s inhabitants live in urban areas. Bahia occupies 36 percent of the Northeast Region the poorest region in the country with more than two-thirds of the state s land considered semi-arid. Bahia s GDP has grown at a faster pace than that of Brazil as a whole, but growth has been spatially skewed across the state. The state s 4 percent GDP growth in 2006 was ranked 6 th in Brazil 1, and its cumulative growth over the past four years was 21.6 percent, almost doubling the 14.4 percent growth rate for all of Brazil during the same time period. The majority of Bahia s 417 municipalities, however, especially the semi-arid ones, are not as prosperous: While 25 municipalities account for 75 percent of the state s GDP; the poorest 132 municipalities generate a combined 5 percent. In addition, 53 percent of the state s wealth is concentrated in the Salvador (the state capital) Metropolitan Region. Despite its economic growth, Bahia is still ranked 22 nd in Brazil s Human Development Index (HDI). The state s GDP growth has not translated into much improvement in the standard of living for the state s population as a whole 2. Although policies to stimulate economic growth (e.g. tax breaks for new businesses) contributed to Bahia s recent economic dynamism, these policies are proving to have limited effectiveness for the state s overall development, because many of these industries are concentrated in the chemical and metallurgical sectors which create relatively few employment opportunities, and because the foregone tax revenues that arise from tax incentives have 1 Bahia s GDP was 96.6 billion Reais (local currency), estimated for March One real is approximately equivalent to 2 USD. 2 Bahia s economic report 2007.

2 not necessarily translated into social development. As a result, the state s GDP growth has not translated into much improvement in the standard of living for the state s population as a whole 3. Bahia s territorial concentration of production and wealth has generated asymmetrical economic and social development, which is reflected in several social indicators: (i) 53.1 percent of the state s residents live in poverty, against a national figure of 45.3 percent 4 ; (ii) 24 percent of the population lives on less than R$ , compared to the national average of 12.3 percent; (iii) the illiteracy rate is 20.4 percent, much higher than the national average of 11.2 percent; (iv) maternal mortality is deaths per 100,000 live births, against a national average of ; and (v) only 31.7 percent of rural households have access to a safe water supply, compared to 53 percent nationwide 7. Health status in both Brazil and Bahia has significantly improved over the last ten years 8, but less so in Bahia than in the country as a whole. Federal programs such as the Family Health Program (Programa de Saude da Familia PSF), as well as the state-level health sector reform, have both contributed to expanding basic healthcare to Bahia s rural and poor populations. However, Bahia continues to face several important health challenges such as: Its infant mortality rate (IMR), despite a significant reduction from per 1,000 live births in 1997 to around 20 in , is the seventh highest in the country. The progress resulted primarily from a reduction in post-neonatal deaths (those between 28 days and one year of life, which is mostly affected by socio-economic conditions). Today the dominant component of IMR is neonatal mortality, which accounts for 69.2 percent of deaths of infants 28 days or younger 10. While post-neonatal mortality is primarily affected by hygiene behaviors and water supply, the neonatal mortality is affected mostly by obstetric and neonatal health care services. The maternal mortality ratio (MMR), at deaths per 100,000 live births (2006), has worsened in recent years, from the original 91.1 (in 2000), particularly affecting young women (25 percent of pregnancies from 1996 to 2007 were to mothers between ages of 10 and 19). The MMR is now recognized as one of the most serious public health challenges, especially since it is estimated that 90 percent of maternal deaths could be avoided through timely delivery of quality health care. Maternal health care is also key for the reduction of IMR, and especially early neonatal mortality. If the negative trend continues, by 2015 Bahia could reach an MMR of 148 deaths per 100,000 live births, far higher than its Millennium Development Goal (MDG) of Bahia received Bank assistance under the first phase of the APL I for the state s Health Sector Reform. The main strategy was to define ten health priorities and corresponding indicators to be achieved by at least 50 percent of Bahia s municipalities, expanding family health coverage to the 35 percent of the population. As a result of the first phase, Bahia surpassed the initial target, approaching the population coverage for almost 50 percent of its population, and with 61 percent of Bahia s municipalities meeting eight out of ten indicators. 3 Bahia s economic report Attacking Brazil s Poverty, World Bank 2001, and State s data Reference to State s data WHO: Center for classification of diseases (2006). 7 WHO/UNICEF 2001, and data from Bahia For example, infant mortality in Brazil fell 47 percent from 47.5 per 1,000 live births in 1990 to 24.1 per 1,000 live births in 2005; mortality rates from vaccine-preventable diseases in children are negligible; and less than 7 percent of deaths among children under five are attributed to diarrheal diseases. 9 Datasus, Brazil 2008 (last available year). 10 SESAB s administrative data

3 Three of the ten key indicators were not achieved by the State as a whole 11 : TB treatment, diarrhea, and low weight at birth. While in Bahia TB treatment with low cure rates is attributed to the many patients who abandon treatment, low weight at birth is mainly a consequence of increased youth pregnancies, and low quality maternal and neonatal health care. Low weight at birth affects neonatal mortality. Diarrhea is more correlated with socio-economic conditions, such as the lack of clean drinking water and sanitation services. While on average the rate of acute diarrhea in children is around eight per 1000, in rural areas its incidence is far more than nine. The most importance cause of infant post-neonatal mortality is diarrhea (40 percent). Water and sanitation are crucial for reducing morbidity and mortality due to diarrhea in children. All mentioned health indicators vary greatly across the state, with especially poor results in rural municipalities of the semi-arid region. The reduction of infant and maternal morbidity and mortality requires multi-sectoral interventions. Synergy between water and healthcare interventions represents one of the most powerful combinations in reducing morbidity and mortality. In the case of water, the importance of adequate water supply and sanitation in the prevention of diarrheal diseases has been recognized by the international community as key to reducing IMR. In the case of health, the quality of health care services is the most important condition for the reduction of neonatal mortality and advanced cases of dehydration in children due to diarrheal diseases. Others include better equipment, timely referrals from primary healthcare (health care regulation), better obstetric health care, and training. A strategy that combines interventions in both sectors (water and health), in Bahia s context has been recognized as the most cost-effective strategy in the reduction of diarrheal diseases and the ultimate reduction of the IMR regarding its post-neonatal component. A longitudinal study in Salvador, Bahia ( ) showed a reduction of 21 percent in diarrheal prevalence among children 0-36 months old (43 percent in the highest prevalence areas) as a result of the implementation of a sanitation program 12. In addressing infant morbidity and mortality due to diarrhea, the state of Bahia still requires to overcome significant challenges in the water sector. The State continues to build up its institutional capacity for addressing water resources management (WRM) to ensure adequate rules and organizational structures to allocate water across competing uses and protecting its quality. The passages of the new water law and establishment of new institutions have been a part of these efforts to consolidate Bahia s WRM system. While the State met targets initially established for the Water for All program providing water supply to 97 percent of the urban population, and 150,000 families in rural areas, the water indicators show that the State still faces significant challenges. In 2005, only 31.7 percent of rural households were connected to the state water supply network, while in the urban area, the proportion of households not connected was at 5.4 percent. The rural poorest populations are disproportionally affected by the lack of access to reliable water resources. Regarding the access to sanitation, the direst situation is in Bahia s rural areas, where only 5.7 percent of the population has access to adequate sewage systems even when pits are included. The Government of Bahia is implementing the Bahia s Strategic Plan for in order to improve the equity, quality and efficiency of its social development, in particular healthcare percent of Bahia s municipalities have achieved 8 out of 10 basic health indicators included in the Pacto pela Vida, signed between the municipalities and the state. 12 Barreto, M Effect of city-wide sanitation program on reduction in rate for childhood diarrhea in northeast Brazil: assessment by two cohort studies.

4 and water/sanitation services, including guaranteed access to quality health and the expansion of social infrastructure (housing, water, sanitation, and energy). In health, the objectives are to reduce maternal and neonatal mortality as well as morbidity and mortality due to diarrhea in all Bahia s municipalities. For water, the objective is to guarantee access to adequate and safe water supply, adequate sanitation and treatment through an integrated water resources management. The State Government is committed to managing public policies effectively, and to seek synergies between different sectors. The State has requested Bank assistance to finance a multisector operation focusing on the health and water sectors, based on the evidence of positive impact of synergies 13 between these two critical sectors in their effect on a multi-sector problem of health. In addition, the use of multi-sector-based indicators to track the results of government actions is the initial step for the implementation of a more comprehensive monitoring system for all public policies. Rationale for Bank Involvement. The Bank has partnered with Brazil on regional development policies and specifically with the State of Bahia since the late 1990s. In addition to benefitting from several Bank-supported federal programs implemented by Brazil s states and municipalities, Bahia has had direct Bank lending for both health and water sectors, recently including the Health Sector Reform APL, Phase I (Loan 7182-BR), and the Bahia Integrated Water Resources Management Project - PGRH Project (Loan 4232-BR). The proposed Project is closely aligned with Brazil s Country Partnership Strategy. The proposed Project addresses selected key areas in the Equitable Brazil Plan for the FY period: (i) extending health and education coverage and systems and improving the quality of these services; (ii) strengthening the accountability and the M&E performance of relevant institutions; (iii) increasing involvement in the areas of health and education at the State and Municipal levels; (iv) focusing urban development efforts in excluded communities; and (v) prioritizing investment in the Northeastern region. 2. Proposed objective(s) Higher Development Objective. In order to support Bahia s main health strategy of reducing the state s IMR, the Bahia Health and Water SWAp objectives are: i) the reduction of State s morbidity and mortality due to diarrhea in children under one year of age (to affect the post-neonatal component of the IMR), and (ii) the reduction of early neonatal mortality (less than seven days) in 45 selected reference hospitals (to affect the neonatal component of the IMR). The Project would support capacity building of the corresponding public institutions related to the mentioned objectives, in the context of the State Government s Strategic Plan for Specific Project Objectives: The Project would: (i) Reduce morbidity due to diarrhea in children under one years of age (ii) Reduce mortality due to diarrhea in children under one year of age (iii) Reduce early neonatal mortality in 45 selected reference hospitals (iv) Strengthen the state s WRM system, by supporting the implementation of WRM instruments to improve and monitor the state s water quality (v) Facilitate the access of WSS services in 30 selected municipalities affected by diarrhea (vi) Support the annual management performance agreements between EMBASA and the Ministry of Cities for improving the efficiency, effectiveness, and quality of 417 water systems. 13 Pan-American Health Organization data shows that water supply and sanitation services contribute to improve health conditions particularly in marginal areas.

5 3. Preliminary description The proposed $60 million loan would be a multi-sector Specific Investment Loan (SIL) following a SWAp approach. Building upon earlier Bank assistance to the state in the water and health sectors, the loan would finance selected state-level investment programs in water, health and public management (Eligible Expenditure Programs, or EEPs). The basic design of the SWAp would be similar to previously approved operations supporting state-level programs in Ceara, Minas Gerais, Pernambuco and the Distrito Federal. A SIL under a SWAp approach is preferred for several reasons. First, the State of Bahia has a defined program that should be supported in a multi-sectoral manner. Since a SWAp allows for combined sector support with a focus on specific programs, the model is the most conducive to Bahia s needs. Second, by supporting and contributing to improve the Government s ongoing programs, Bank assistance would be fully owned by and integrated within those programs, especially by pooling Government and Bank resources. Finally, Brazil, and specifically Bahia, has strong financial management systems that can be relied upon for the Bank s fiduciary requirements, allowing for transparent, robust disbursement processes. By adopting this approach, World Bank s disbursements would be heavily concentrated in a few programs to accelerate their implementation and the achievement of expected results. To maintain continuity, the state investment programs supported by the previous Bankfinanced health and water projects (Loan 7182-BR and Loan 4232-BR respectively), would continue to be supported under the proposed SWAp since they continue to be priority programs for the state. In addition to providing assistance for these and other water and health sectoral investments under EEPs, a technical assistance component would be included to support the assistance needed for implementing the project in the sectors, as well as for strengthening the public management monitoring system. The proposed Project would have two components: a SWAp component for the two project objectives; and an institutional modernization component for supporting the sectors in achieving the objectives. Component 1: SWAp component will have two sub-components. Sub - Component A: Reduce the State s morbidity and mortality due to diarrhea in children under one year of age. This sub component will include the EEPs: (i) Water for All (small scale water supply systems); (ii) Comprehensive Water Resources Management; (iii) Managing Water Resources for Sustainable Development; (iv) Bahia Health Sector Modernization; and (v) Comprehensive healthcare for strategic and vulnerable populations (rotavirus vaccination to children less one year of age). Sub Component B: The reduction of early neonatal mortality (less than 7 days) in 30 selected reference hospitals would include: Comprehensive Healthcare for Strategic and Vulnerable Populations. This subcomponent aims to support municipalities to expand and improve the quality of primary and secondary health services through the introduction of a Maternal and Neonatal Incentive Insurance System (MANIIS) to improve the quality of maternal and child health care services. Component 2: Institutional Modernization of health, water and planning sector The Component includes technical support for the water, health, and planning sectors and its institutions to improve the management, and the monitoring and evaluation capacities for implementing the selected interventions included in the project. Activities financed under this component would support: (i) identification of the programs to be monitored and evaluated in both Sectors; (ii) identification of an M&E system of WRM activities to be implemented by INGÁ, and for

6 programs to be implemented under SESAB; (iii) training on M&E and results based management for the sector-specific technical units implementing the Health and Water components of this SWAp; (iv) drafting a work plan for the implementation of M&E instruments in both Sectors and in SEPLAN; (v) supporting the development of M&E instruments for all three Sectors involved; (vi) defining M&E indicators; (vii) collecting data for program monitoring; (viii) data analysis, and (ix) drafting and consolidating monitoring narratives, as well as the dissemination of major results. 4. Safeguard policies that might apply In view of the nature of expenditures, capacity building, planning and management, as well as institutional development, with a focus on quality and efficiency areas to be triggered in both sectors and the fact that there are small scale rural supply systems, it is expected that the Environmental Assessment safeguard (OP/BP/GP 4.01) will apply. Background work to ensure compliance with the Bank s safeguard policies would benefit from prior and ongoing Bank-financed operations in Bahia, and to the extent possible, build upon work done in the context of preparation and implementation of earlier operations. Work has already begun on preparing an environmental assessment for Component 1. The Indigenous Peoples Safeguards (OP 4.10) will also apply. An IPP, building upon earlier work and tailored to the specific aspects of the proposed Project, has already begun. 5. Tentative Financing Source: ($m.) BORROWER 140 INTERNATIONAL BANK FOR RECONSTRUCTION AND 60 DEVELOPMENT Total Contact Point Contact: Fernando Lavadenz Title: Task Team Leader Tel: (202) Flavadenz@worldbank.org