IN THE AMOUNT OF SDR 16.2 MILLION

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Human Development Sector Unit (ECSHD) Europe and Central Asia Region Document of The World Bank FOR OFFICIAL USE ONLY PROJECT APPRAISAL DOCUMENT ON A PROPOSED IDA GRANT IN THE AMOUNT OF SDR 16.2 MILLION (US$25.00 MILLION EQUIVALENT) TO THE CENTRAL ASIA COOPERATION ORGANIZATION FOR A CENTRAL ASIA AIDS CONTROL PROJECT February 15,2005 Report No: ECA This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

2 CURRENCY EQUIVALENTS (Exchange Rate Effective December 3 1,2004) CurrencyUnit = USD SDRl = US$1.55 US$ 1 = SDR0.65 FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS AIDS Acquired Immune Deficiency Syndrome MST APHEW AIDS Foundations East-West MTCT ARV Anti Retroviral Drugs NGO CA Central Asia PCN CACO Central Asia Cooperation Organization PIP CAS Country Assistance Strategy PLWHA CDC Centers for Disease Control and Prevention POM CFP Country Financing Parameters PSI CPC Country Project Coordinators PHC CSW Commercial Sex Worker RAF DDR Drug Demand Reduction RDU DFID UK Department for International RM Development ECA Europe and Central Asia RPMU FMS Financial Management System RPSC GDP Gross Domestic Product SA GFATM Global Fund to Fight AIDS, TB & Malaria SDP HIV IDA IDU Human Immunodeficiency Virus International Development Association Intravenous Drug User STI IOM JICA KfW M&E MDGs International Organization for Migration Japan International Cooperation Agency Kreditanstalt fur Wiederaufbau Monitoring and Evaluation Millennium Development Goals TB TWG UNAIDS UNFPA UNHCR UNICEF UNODC Methadone Substitution Therapy Mother-to-Child Transmission Non Governmental Organization Project Concept Note Project Implementation Plan People Living with HIV/AIDS Project Operations Manual Population Services International Primary Health Care Regional AIDS Fund Registered Drug User The World Bank Resident Missions Regional Project Management Unit Regional Project Steering Committee Special Account Standard Disbursement Percentage Sexually Transmitted Infection Tuberculosis Technical Working Groups Joint United Nations Program on HIViAIDS UN Population Fund UN High Commission on Refugees UN Children's Fund UN Office for Drug Control and Crime Prevention MIS MOH MSM Management Information System Ministry of Health Men who have sex with men USAID VCT WHO United States Agency for International Development Voluntary Counseling and Testing World Health Organization Country ManagedDirector: Sector Director: Sector Manager: Dennis de Tray Charles Griffin Armin Fidler

3 CENTRAL ASIA CENTRAL ASIA AIDS CONTROL PROJECT FOR OFFICIAL USE ONLY CONTENTS Page A. STRATEGIC CONTEXT AND RATIONALE Country and sector issues Rationale for Bank involvement Higher level objectives to which the project contributes... 6 B. PROJECT DESCRIPTION Lending instrument Project development objectives and key indicators Project components Lessons learned and reflected in the project design Alternatives considered and reasons for rejection C. IMPLEMENTATION Partnership arrangements Institutional and implementation arrangements Monitoring and evaluation of outcomesh-esults Sustainability Critical risks and possible controversial aspects Grant conditions and covenants D. APPRAISAL SUMMARY Economic and financial analyses Technical Issues Fiduciary Issues Social Issues Environmental Issues Safeguard policies Policy Exceptions and Readiness ANNEXES: Annex 1 : Country and Sector or Program Background Annex 3: Results Framework and Monitoring Annex 4: Detailed Project Description Annex 5: Project Costs This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Baiik authorization.

4 Annex 6: Implementation Arrangements Annex 7: Financial Management and Disbursement Arrangements Annex 8: Procurement Arrangements Annex 9. Economic and Financial Analysis Annex 10: Safeguard Policy Issues Annex 1 1 : Project Preparation and Supervision Annex 12: Key Institutions Responsible for Preparation of the Project Annex 13: Documents in the Project File Annex 14: Statement of Loans and Credits... 84

5 CENTRAL ASIA AIDS CONTROL PROJECT Date: February 15,2005 Country Director: Dennis N. de Tray Sector Manager: Annin H. Fidler Project ID: PO87003 Lending Instrument: Specific Investment Loan Team Leader: Joana Godinho Sectors: Health (100%) Themes: Health system performance (P); HIV/AIDS (P); Other human development (P); Child health (S); Population and reproductive health (S) Environmental screening category: Not Required Safeguard screening category: No impact Project Financing Data [ ] Loan [ ] Credit [XI Grant [ ] Guarantee [ ] Other: For Loans/Credits/Others: Total Bank financing (SDR$m.): 16.2 (US$25 million equivalent) Proposed terms: IDA Grant Financing Plan (US$m) Source BORROWEFURECPIENT Local 0.08 Foreign 0.00 Total 0.08 IDA GRANT I I DFID GRANT Total: Recipient: Central Asia Cooperation Organization (CACO) Responsible Agency: Regional Project Management Unit (RPMU) on behalf of CACO Does the project depart from the CAS in content or other significant respects? Ref: PAD A. 3 Does the project require any exceptions from Bank policies? Ref: PAD D. 7 Have these been approved by Bank management? Is approval for any policy exception sought from the Board? Does the project include any critical risks rated substantial or high? Ref: PAD C.5 Does the project meet the Regional criteria for readiness for implementation? Ref: PAD 0.7 [ ]Yes [XINO [XIYes [ ]No [XIYes [ ]No [xjyes 1 NO [XIYes []No 1

6 Project Development Objectives Re$ PAD B.2, Technical Annex 3 The proposed Central Asia AIDS Control Project will contribute to minimizing the potential negative human and economic impact of a generalized HIV/AIDS epidemic in Kazakhstan, the Kyrgyz Republic, Tajikistan and Uzbekistan. The proposed Project will complement programs and projects financed by Governments, the Bank and other partner organizations (UNAIDS, GFATM, UNODC, DFID, USAID, and the Soros Foundation, among others) at the country level. The proposed project has the following development objectives: Reduce the growth rate of the HIV/AIDS epidemic in Central Asia in the period Establish in Central Asia a sustainable mechanism - the Regional AIDS Fund - that will serve as a vehicle for financing HIV/AIDS prevention and control activities in the region during and beyond the end of the Project. Contribute to better regional cooperation in Central Asia, and effective inter-sectoral collaboration between the public sector, non-governmental organizations (NGOs) and the private sector on HIV/AIDS control in this region. Project description Re$ PAD B.3.a, Technical Annex 4 The proposed CA AIDS Control Project will have three main components: Component 1. Regional Coordination, Policy Development and Capacity Building (total cost US$7.5 million). The component will aim to: (i) establish a legal environment that facilitates the implementation of the HIV/AIDS Regional Strategy, including prevention work with highly vulnerable groups such as drug users, commercial sex workers, men who have sex with men, prisoners and mobile populations; (ii) improve information and decision-making based on good quality epidemiological data; and (iii) build capacity of public agencies, NGOs and private sector engaged in HIV/AIDS control. Component 2. Central Asia Regional AIDS Fund (total cost US$16.7 million). This component will establish a demand-driven Regional AIDS Fund (RAF) to finance initiatives that will contribute to containing the rapidly growing epidemic of HIV/AIDS and sexually transmitted infections (STIs) in Central Asia. The Regional AIDS Fund will technically and financially support cost-effective initiatives in the field of HIV/AIDS prevention and control that will cover mobile populations and regional epidemiological hotspots. It will provide incentives for greater regional cooperation, as well as for cooperation between public, private and NGO sectors; and between different public services (for example, AIDS Centers and prison sector). Component 3. Project Management, Monitoring and Evaluation (total cost US$2.8 million). This component will finance project management, and monitoring and evaluation (M&E) of the project. The project will finance the establishment of a Regional Project Management Unit and hiring of Country Coordinators in each of the four participating countries. The component will finance establishment and operation of the Project Monitoring and Evaluation System and Management Information System (MIS), including computerized Financial Management and Accounting System, and carrying out of annual financial audits of the project. Which safeguard policies are triggered, if any? Re$ PAD D. 6, Technical Annex 10 Environmental Assessment, Category C. 2

7 Significant, non-standard conditions Re$ PAD C. 7 Board presentation 0 Establishment of a financial management system, including budgeting, accounting, reporting and auditing, capable of generating Financial Monitoring Reports satisfactory to the Bank. This condition has been met by contracting the Kyrgyz Health Reform PMU to provide financial management support to the project until the RPMU has established a financial management system acceptable to the Bank. 0 Approval of the draft DGA and other agreements reached during Negotiations by the Council of Foreign Ministries of CACO on behalf of the Recipient. This condition has been met. Project Effectiveness Ratification of the CACO Agreement by all benefiting countries. Establishment of the Regional Project Steering Committee (RPSC). Establishment of the Regional Project Management Unit (RPMU), with staff, capacities and Terms of Reference acceptable to the Association. Adoption of a Project Operational Manual (POM) acceptable to the Association. 3

8 A. STRATEGIC CONTEXT AND RATIONALE 1. Country and sector issues The AIDS epidemic has entered its third decade worldwide. The global HIV/AIDS epidemic killed more than three million people in 2004, and an estimated five million acquired the human immunodeficiency virus (HIV) - bringing to 40 million the number of people living with the virus around the world (UNAIDS 2004). In recent years, the Eastern Europe and Central Asia Region (ECA) has seen the world s fastest growing HIV/AIDS epidemic. Officially, the number of HIV infections in ECA has grown from less than 30,000 cases in 1995 to an estimated 1.4 million by the end of However, the real number is estimated to be much higher. Central Asia has been experiencing four overlapping epidemics - HIV/AIDS, drug abuse, sexually transmitted infections (STIs), and tuberculosis (TB) - that mostly have youth at its center. Although Central Asia is still at the earliest stages of the HIV/AIDS epidemic, available evidence indicates that HIV/AIDS is spreading rapidly, and registered cases have grown exponentially from less than 100 in 1995 to more than 9,000 in It is estimated that some 90,000 people in the region live with HIV/AIDS. An increase in drug production and trade since the war in Afghanistan has triggered a rapid growth of drug abuse. Most of the estimated 500,000 drug users inject drugs and share needles, which places them at high risk of contracting HN/AIDS. Drug trafficking and injecting drug use continue to increase throughout Central Asia along the Northern Corridor that links Afghanistan to Russia. Furthermore, the region has been experiencing epidemics of STIs, which facilitate transmission of HIV/AIDS and tuberculosis (TB), which is the main opportunistic infection for HIV/AIDS (Annex 1 includes an overview of the epidemic country-by-country). Governments, NGOs and partner organizations working in the field have initiated appropriate early action to avoid a major epidemic: the Governments have approved and, in cooperation with NGOs and assistance from international organizations, have started implementation of evidence-based regional, national and, in some cases, sector-specific HIV/AIDS strategies prepared with assistance from UNAIDS. The Regional AIDS Strategy prepared by UNAIDS in collaboration with Central Asia countries provided the framework for country-specific strategies. Kazakhstan, Kyrgyz Republic, Tajikistan and Uzbekistan applied for, and have been granted, funding from the Global Fund to Fight AIDS, TB and Malaria (GFATM). However, available and planned funding, including funding from the GFATM, covers less than 25% of groups at risk, and does not cover cross border populations such as migrants. Since 2001, the Bank has been carrying out sector work on HIV/AIDS, STIs and TB in Central Asia. In November 2003, the Bank and DFID initiated discussions with the Governments of Central Asia about the possibility of financing a regional operation that will further assist implementation of the regional and country-specific strategies to control HIV/AIDS. The Governments of Kazakhstan, the Kyrgyz Republic, Tajikistan, and Uzbekistan have initiated the preparation of the proposed Project, which Godinho J, Novotny T, Tadesse H and Vinokur A (2004). HIViAIDS and TB in Central Asia: Country Profiles. World Bank Working Paper 20. Washington DC: The World Bank. Godinho J, Renton A, Vinogradov V, Novotny T, Gotsadze G, Rivers MJ, and Bravo M (in press). Reversing the Tide: Prioprities for HIV/AIDS prevention in Central Asia. Washington DC: The World Bank. Godinho J, Veen J, Dara M, Cercone J, and Pacheco J. Stopping TB in Central Asia: Priorities for Action. Washington DC: The World Bank. In preparation for publication. Renton A, Gzirishvili D, Gotsadze G and Godinho J (2004). Mapping of drug trafficking and use, migration, HIV/AIDS, STIs, TB. Submitted for publication at the Journal AIDS. 4

9 will contribute to minimizing the potential negative human and economic impact of a generalized HIV/AIDS epidemic in Central Asia2. 2. Rationale for Bank involvement Global experience shows that countries that take early and decisive action to prevent a nascent HIV/AIDS epidemic manage to reduce the high human and economic costs observed in countries that lag behind. The proposed Project will contribute to addressing the following sector issues: (i) Rapid growth of the HIV/AIDS epidemic in Central Asia. Clearly, the time to address this problem is now if the sub-region is to prevent the potential negative impact at the household level, on health services expenditures, on the labor market, and at the economic and demographic levels. The number of HN infections has grown exponentially since the late 1990s, as shown in Table 1. Table 1. Newly-Diagnosed HIV Infections in Central Asia Uzbekistan Central Asia ,000 1,8363, ,1402,9252,7568,078 (ii) Potential human and economic impact of the epidemic. If the epidemic is not prevented, HIV/AIDS in Central Asia is likely to have a far-reaching impact on the demographic and economic development of the region. A slow-down in GDP growth and losses in GDP level may be accompanied by losses in effective labor supply, which will be worsened by negative population growth in some countries. If the number of cases is not reduced and treatment costs are not cut dramatically, costs of HIV/AIDS treatment will not be sustainable by private and public budgets. The Bank-financed intervention will contribute to preventing an increase in health expenditures and an annual decline in economic growth rates. (iii) Coverage of highly vulnerable groups is still well below desirable targets. The proposed Project will aim at closing the financial gap in coverage of high risk groups, which is due to insufficiency of funding, lack of coordination among different stakeholders, and lack of capacity to implement the agreed strategies. With available funding (see Table 2 below), coverage of highly vulnerable groups such as intravenous drug users (IDU), commercial sex workers (CSW), and men who have sex with men Turkmenistan officially reports two cases of HIV/AIDS; has not yet approved an HIViAIDS Strategy; has not applied to participate in the proposed regional project; and is not a member of CACO and IDA. However, Turkmenistan may be considered to participate in the project if it applies, and at the time complies with project eligibility criteria for participating countries. Recently, the Russia Federation has joined the Central Asia Cooperation Organization (CACO), which provides the legal framework for this project. However, the Russia Federation has recently obtained funding from the Bank and GFATM for HIViAIDS control, and therefore will not participate in the proposed project. 5

10 (MSM), will only reach 5-6 percent in the Kyrgyz Republic and Tajikistan, and it will reach a maximum of 10 percent in Uzbekistan, while it is recommended that at least 60 percent of high-risk groups be covered by prevention programs. Even in the best cases, coverage rates are typically below 15 percent and are not expected to rise above 25 percent with existing Government, GFATM, international, and bilateral resources available and planned for the prevention and treatment of HIV/AIDS in this region. Table 2. Funding available and planned for HIV/AIDS Prevention and Control in Central Asia (all sources, US$OOO) Sources: Ministries of Finance and Health; international organizations, including GFATM, 2004 (iv) Multi-country regional projects agenda. Since it started supporting HIVIAIDS prevention and control in the mid-l990s, the Bank has moved from supporting country-specific projects to financing multi-country AIDS programs. Recently, the Bank has started financing regional projects that specifically focus on regional coordination and harmonization of responses to HIV/AIDS. Good examples of Bankfinanced regional HIVIAIDS projects are the Abidjan-Lagos Transport Corridor AIDS Project and the Regional HIV/AIDS Program in the Caribbean Region (CARICOM). The Bank s Central Asia Regional Framework emphasizes the importance of multi-country grant and credit facilities based on demand. The proposed Regional AIDS Control Project will enable Governments and NGOs to cover populations such as migrants that have not been adequately addressed so far, and regional corridors and cross border epidemiological hotspots identified by the mapping study carried out during Project preparation. 3. Higher level objectives to which the project contributes (i) Promote a public good of multi-national scope. Prevention and treatment of HIV/AIDS are considered global public goods. The HIVIAIDS epidemic knows no boundaries. Porous borders and easing of travel restrictions, combined with poverty, have increased mobility from rural to urban areas, both within countries and within the region. Some of the most vulnerable groups are hghly mobile populations such as commercial sex workers (CSWs), trafficked people, truck drivers, and migrant workers, who move from country to country and have casual, unsafe sex that substantially increases the risk of being infected and further transmitting the infection. Large migrant populations significantly increase the risk of the spread of HIV/AIDS to the general population. (ii) Poverty reduction. The Bank s mission of reducing poverty and supporting development requires action on HIVIAIDS. This epidemic thrives in poor environments, and in turn generates further poverty, having become one of the most significant development problems of our time. Therefore, fighting HIV/AIDS is a core strategy of the Bank Group s development agenda. The proposed Project will strengthen the capacity of member countries to design, implement, monitor, and evaluate the effectiveness of HIV/AIDS programs in the region. (iii) Promote regional cooperation by addressing a cross-border HIV/AIDS issue. The Bank has been recognizing the increasing importance of regional integration and cooperation for growth in IDA 6

11 countries. The proposed Project will contribute to developing strategies to address negative cross-border factors. The Bank considers that there are four dimensions of added value which could be delivered by the proposed Central Asia AIDS Control Project: 1) Major epidemic drivers act regionally and can therefore best be addressed at a regional level. These include trafficking in people and drugs; sex work; and economic and political migration. 2) Constraints in developing an effective response are common in all countries in the region, as are the tools to overcome these, which include: legislative and regulatory reform; approaches to managing professional resistance to change; and advocacy and communication needs. 3) There is a need to deliver economies of scale in terms of both financial and human resources by developing regional activities in key areas. These include: sentinel and second-generation surveillance; development of best practice guidelines and protocols; sexually-transmitted infections (STIs), injecting drug use (IDU), and HIV management protocols; training programs for capacity building in all aspects of design and delivery; procurement of goods and services; and development of Public-Private Partnerships (PPP). 4) Sharing of best practices from countries which have solved problems to those which have not. These include: harm reduction approaches; modernization of services; and NGO development. B. PROJECT DESCRIPTION 1. Lending instrument The proposed Project will be a Sector Investment Loan (SIL) financed by an IDA Grant of US$25 million, a DFID Grant of US$1.9 million, and counterpart financing of US$O.8 million. Once established, the Regional AIDS Fund will eventually be co-financed by other donors, including by the private sector, to ensure sustainability of financing of HIV/AIDS in Central Asia. The Project will become effective on July 1, 2005, and close on December 31, However, if the project performance is satisfactory, and additional fbnding is identified, the project could be extended. The Project will focus on regional activities that will benefit all countries involved, leaving country-specific activities to be financed from other sources (individual Governments; Global Fund to Fight AIDS, TB and Malaria; and multilateral and bilateral organizations, including the Bank under country-specific operations). The Central Asia Cooperation Organization (CACO) Agreement provides a suitable legal framework for the proposed regional project. All countries have ratified this agreement prior to Negotiations3. Under the agreement, the Councils of Heads of State and Ministries of Foreign Affairs meet at least once a year. Under CACO, Deputy Prime Ministers of participating countries will form the Regional Project Steering Committee (RPSC). A Regional Project Management Unit (RPMU) is being established to manage project implementation, and will act as a Secretariat for the RPSC. Technical Working Groups (TWGs) from several Ministries (Health, Justice, Interior, Transport, etc), Drug Control Agencies, NGOs and the private sector have been preparing the project. These TWGs will continue assisting the RPSC and RPMU in implementing the project. The proposed Project is consistent with the Bank s Central Asia Regional Framework and Country Assistance Strategies (CAS) for Kazakhstan, Kyrgyz Republic, Tajllustan, and Uzbekistan. Moreover, the Project follows the provisions under IDA-13, which specifically allows for regional HIV/AIDS projects that fulfill the following criteria: The Kyrgyz Republic Parliament has ratified the agreement on January 20,2005, and submitted it to the President for signature. 7

12 Involvement of three or more countries. The proposed Project will involve four countries: Kazakhstan, Kyrgyz Republic, Tajikistan, and Uzbekistan; Benefits will spill over country boundaries. The proposed Project will benefit not only the sub-region as a whole, but also neighboring countries such as China and the Russian Federation; Clear evidence of country or regional ownership. Governments and NGOs of four participating countries have been actively participating in project preparation. At a Regional meeting on June 28, 2004 in Almaty, Governments of the four countries signed a Memorandum of Understanding committing themselves to cooperate on HIV/AIDS prevention and control at the regional level, and to prepare the project; The project provides a platform for a high level of policy harmonization across countries. This will be one of the project specific objectives; and The project is part of a well-developed and broadly supported regional strategy. Regional Governments, national and international NGOs, UN agencies, bilateral organizations, the Bank and other organizations have been working in partnership to implement the Regional Strategy to prevent and control HIViAIDS in Central Asia. 2. Project development objectives and key indicators The proposed Central Asia AIDS Control Project will contribute to minimizing the potential negative human and economic impact of a generalized HIV/AIDS epidemic. The Project has the following development objectives: 0 Reduce the growth rate of the HIV/AIDS epidemic in Central Asia in the period Establish a sustainable mechanism in Central Asia - the Regional AIDS Fund - that will serve as a vehicle for financing HIV/AIDS prevention and control activities in the Region beyond the life of the project. 0 Contribute to better regional cooperation in Central Asia, and effective inter-sectoral collaboration between public sector, NGOs and private sector on HIV/AIDS control in this region. Table 3. Key Project Development Indicators 9 Reduce the growth rate of HIV prevalence among identified intravenous drug users (IDU), commercial sex workers (CSWs), prisoners, migrants and out of school, unemployed youth. 9 Increase to 50% the percentage of IDUs and CSWs reporting using clean syringedneedles and condoms, and knowing their HIV status. 9 Increase to 50% the percentage of prisoners, migrants and out-of-school, unemployed youth, using condoms during high risk sex and knowing their HIV status. 9 Increase to 75% the percentage of IDUs and CSW with access to harm reduction programs, including peer-to-peer education, voluntary counseling and testing (VCT) and supplies (condoms, syringesheedles and IEC materials). 9 Increase to 75% the percentage of prisoners, migrants and out-of-school, unemployed youth with access to IEC and condoms. P Regional AIDS Fund established by the end of the first year of the project. 9 Project funds disbursed according to plan. 8

13 3. Project components Project Design. The proposed Central Asia AIDS Control Project will have three main components (see detailed project description in Annex 4): Component 1. Regional Coordination, Policy Development and Capacity Building (total cost US$7.5 million). This component will build on the endorsement by participating countries of the UN principles known as the "Three Ones" for HIV/AIDS Programs: One agreed HIV/AIDS action framework that provides the basis for coordinating the work of all partners; One national AIDS coordinating authority, with a broad based multi-sector mandate; and One agreed country-level monitoring and evaluation system. The component will aim to: (i) establish a legal environment that facilitates the implementation of the HIV/AIDS Regional Strategy, including prevention work with highly vulnerable groups such as drug users, commercial sex workers, men who have sex with men, prisoners and mobile populations; (ii) improve information and decision-making based on good quality epidemiological data; and (iii) build capacity of public agencies, NGOs and the private sector engaged in HIV/AIDS control. Capacity will be developed to overcome common barriers to delivering an effective response, including: legislative and regulatory reform; approaches to managing professional resistance to change; advocacy and communication needs; mitigating the negative impact of epidemic drivers that act regionally, including trafficking in people and drugs, economic and political migration, and sex work; and supporting grant implementation. Specifically, the component will contribute to establishmg clear and functioning national and regional coordination of HIVIAIDS programs; further developing a regional strategic and regulatory framework that will facilitate prevention and control of HIV/AIDS in Central Asia; supporting further development of surveillance (including sentinel and second generation surveillance) and regional monitoring and evaluation systems; and building human resources capacity. The component will finance goods, consulting services, training, and operating costs. Component 2. Central Asia Regional AIDS Fund (total cost US$16.7 million). This component will establish a demand-driven Regional AIDS Fund (RAF) to finance initiatives that will contribute to containing the rapidly growing epidemic of HIV/AIDS and STIs in Central Asia. This grant facility is consistent with the regional scope of the Project and is expected to promote regional cooperation; allow for better coverage of gaps in AIDS-related activities; increase transparency over the use of grant funds; encourage grant applicants from participating countries, through evaluation criteria, to target projects in priority areas; and build local capacity to develop and manage projects. The Regional AIDS Fund will be financed by participating Governments, and IDA and DFID grants. Eventually, other sources of funding will co-finance this grant facility (multilateral and bilateral agencies, private sector). Government agencies, public organizations, NGOs and private sector will be eligible to develop sub-project grant proposals, and seek financing from the Regional AIDS Fund on a competitive basis. The Regional AIDS Fund will technically and financially support cost-effective initiatives in the field of HN/AIDS prevention and control that will cover mobile populations and regional epidemiological hotspots along regional corridors and borders. It will provide incentives for greater regional cooperation, as well as for cooperation between public, private and NGO sectors; and between different public services (e.g., AIDS Centers and prison sector). Therefore, proposals jointly submitted by organizations from two or more countries, and by different sectors, will have more chances of obtaining funding than proposals submitted by just one country, one sector or one agency. 9

14 The Fund will manage two schemes: a large grants scheme and a small grants scheme. Initially, both schemes will be managed by the RPMU; the small grants scheme will be decentralized to the country level for management by unified national coordinating bodies as soon as these are established and active. Grants will be awarded according to criteria included in Annex 4 and specified in the POM. Table 4 summarizes the main selection criteria and the respective areas to be assessed. Table 4. Criteria for Selection of Sub-projects under the Central Asia Regional AIDS Fund Selection Criteria Key points assessed r Clearly identifies beneficiaries, targets mobile groups and is poverty orient e d Technical assessment Clear and well-prepared time-based proposal targeted to eligible areas and consistent with National AIDS Program policies. Additional areas to be evaluated include: complements existing donor activities and includes M&E indicators. Institutional Quality of the proposal, organization s previous experience and proposed staff qualifications. 1 o Technical assessment Clearly identifies beneficiaries, targets mobile groups and is poverty oriented Clear and well-prepared time-based proposal targeted to eligible areas and consistent with National AIDS Program policies. Additional areas to be evaluated include: inter country proposals; joint participation of public and private sectors; complements existing donor activities and includes M&E indicators. Quality of the proposal, organization s previous experience, proposed staff qualifications and institutional resources contributed. Assesses the cost per beneficiary and co-financing participation. Proposal clearly identifies how recurrent costs will be financed and outlines long-term impact of project. Competitions for small and large grants will be announced simultaneously twice a year. The RPMU will maintain a roster of regional experts from the public and private sector and from NGOs for the establishment of evaluation committees. The evaluation committee will be established by the RPMU for each grant round (or alternatively for one year) drawing experts from the roster. The evaluation committee will have equal representation of experts from each participating country, and representatives from UNAIDS and DFID. The Project will finance goods, consulting services, training, resources for subprojects, and operating costs. Component 3. Project Management, Monitoring and Evaluation (total cost US$2.8 million). This component will finance project management, and monitoring and evaluation of the project. The project will finance the establishment of a RPMU, the hiring of Country Coordinators in each of the four participating countries, and will support the work of the RPSC and TWGs. The Component will finance establishment and operation of the Project M&E system and MIS, including a computerized Financial Management and Accounting System, and carrying out of annual financial audits. The Project will finance goods, consulting services, training, and operating costs. 10

15 4. Lessons learned and reflected in the project design There are a number of lessons learned from analytical work, international best practices and project preparation in Europe, Central Asia and other regions, as follows: The use of early, aggressive prevention interventions targeting vulnerable and highly vulnerable groups is the most effective strategy to prevent the spread of HIV/AIDS; Strong commitment to HIVIAIDS control by different levels of the Government is a requirement for success; High-risk groups, patients and their families, as well as civic leaders, NGOs and private sector all have important roles in planning and implementation of HIV/AIDS activities; There are strong linkages between HIV/AIDS, STIs, and TB. STIs management is one of the most important strategies to prevent the spread of AIDS. TB control can help reduce mortality among people living with HIV/AIDS (PLWHA). On the other hand, prevention of HIV/AIDS can contribute to reducing the burden of disease caused by TB; Incentives (including social support) for patients and providers may be needed, especially in resource poor settings, but have to be designed with care, and tested to avoid perverse effects and plan for sustainability; and Good surveillance, and monitoring and evaluation, are critical to the success of a disease control program. The social and institutional assessment prepared for the proposed project identified the following lessons: There is a need for coherent and coordinated HIVIAIDS policies to address the regional threats, or future drivers, of the epidemic. Some potential threats include drug-trafficking, incarceration, migration and trafficlung of women; Advocacy should be targeted to the highest levels of Government, rather than to the technical professionals who work exclusively on HIV/AIDS; Regional Governments in Central Asia, with assistance from international donors, should scale up or initiate efforts to establish sentinel surveillance (which allows monitoring of the population s epidemic through small-scale sampling of specific subgroups), and second-generation surveillance; Local NGOs should play a predominate role in the program s implementation. Local NGOs should be clearly identified and targeted as the distribution channel for many of the programs. Capacity building for NGOs is a critical activity that will promote long-term sustainability of the programs and improve implementation; The service delivery network must be properly recognized as a key success factor. Program implementation should address this explicitly as an issue of modernizing and improving service delivery; Efforts should be made to build public-private partnerships, including the use of the private sector to extend access to basic commodities (condoms, syringes, gel and drugs) and to advocate for HIV/AIDS prevention and control at Government level; There must be significant investment in policy and management capacity especially focused towards management of grant implementation; fund disbursement by Governments to NGOs; and overcoming structural political and vested interests barriers to implementation; and It is advisable to share facilities, infrastructure and specialized services and sources of professional expertise that will otherwise be beyond the means of individual countries. 11

16 5. Alternatives considered and reasons for rejection The countries in Central Asia are experiencing major epidemics of drug use driven by poor economic circumstances and the transit of at least 35 percent of global opiate production through their territories. They are in the early stages of a drug-injection HIVIAIDS epidemic, set against a background of high rates of sexually transmitted diseases and tuberculosis. In Central Asia, HIV/AIDS is driven by regional structural factors. As mentioned previously, HIV/AIDS prevention and control efforts in Central Asia require not only national programs but also cross-border actions. These actions should address common epidemic drivers and constraints; take advantage of economies of scale for procurement and training; and facilitate sharing of best practices to reduce the risks of gaps in knowledge and inadequate strategies for the prevention and control of the pandemic that otherwise might aggravate if countries did not move in a coordinated manner. Without concerted action, the epidemic may rapidly evolve from concentrated outbreaks among injecting drugs users to a more generalized epidemic. Recognizing the increasing importance of regional integration and cooperation for growth in IDA countries; the global public goods nature of prevention and control of HIV/AIDS; and the indivisibility of benefits, IDA has provided grants to finance Regional AIDS Projects in the Caribbean and in Africa similar to the proposed project. IDA Grant financing is justified in view of the regional focus and expected benefits and the fact that grant-financed activities will not benefit or be attributable to any one country, but rather, to the Region as a whole. The proposed Central Asia AIDS Control Project is based on the assumption that national actions can be strengthened by a coordinated regional response that shares best practices, and increases the solidarity among the countries to stop the epidemic. CACO has been identified as the appropriate recipient for addressing this regional crisis, and the proposed IDA Grant will benefit the Recipient s ability to deal with a regional problem that knows no country boundaries. The proposed approach - a regional project including a Regional Fund that will finance regional prevention activities - was considered the most suitable to address the transnational epidemic. A country-by-country approach was rejected as it was considered to be less cost-effective and without the potential of creating economies of scale that bestow substantial benefits across the region. In addition, a coordinated regional response to the AIDS epidemic addresses the limited human resource capacity available in Central Asia. In sum, the strategy of supporting a regional activity is a response to the uneven distribution of financial and institutional capacity to address HIV/AIDS in Central Asia. C. IMPLEMENTATION 1. Partnership arrangements The proposed Regional AIDS Control Project will support further development of a regional partnership between Governments, NGOs, the private sector, and international partner organizations, to ensure early and appropriate action to prevent and control HIV/AIDS. The Project will complement funding available from other sources, and contribute to improved donor coordination in this area and strengthened links between the various stakeholders active in the field. Project Co-Financing The UK Department for International Development (DFID) has been assisting the preparation of the proposed Central Asia AIDS Control Project and coordinating efforts with other development partners to support implementation of national programs, according to the UN principles of one national coordination body, one national program and one national monitoring and evaluation system. DFID will co-finance the proposed Project with a grant of US$1.9 million, and it may eventually allocate further 12

17 grant funding for regional activities, depending on project performance. In addition, and in parallel, DFID is providing a grant of US$9.1 million over a four-year period to improve the responses to HIV/AIDS in the Kyrgyz Republic, Tajilustan, and Uzbekistan. Technical Partnerships UNAIDS, DFID and the Bank have organized Regional Meetings with participating Governments, NGOs, the private sector and donors, to prepare the proposed Project. These regional meetings took place in the four participating countries: Project Identification Workshops in November 2003; Donors Meeting in April 2004; high level Government Meeting for signature of the Memorandum of Understanding by Deputy Prime Ministers and First Regional Technical Meeting in June 2004; and Second and Third Regional Technical Meetings in September and December An additional Technical Meeting is planned for Project Launch in UNAIDS. UNAIDS is providing assistance to the Governments in Central Asia in updating Regional and Country Strategies for HIV/AIDS, and is contributing to the development of a regional network for people living with HIV/AIDS (PLWHA). UNAlDS will also support national and sub-national monitoring and evaluation systems through provision of Country Response Information System (CRIS) software and training. This partner organization has been actively assisting the Central Asia AIDS Control Project preparation. UNODC. In 1996, the Governments of Central Asia signed a Drug Control Agreement, and since 2002 have been carrying out regular assessments through the national Drug Control Agencies, with assistance from UNODC. The national and international agencies dealing with drug control have recently shifted from simple control of drug supply to Drug Demand Reduction (DDR) strategies and prevention of HIV/AIDS. The Bank and UNODC have been developing a global partnership, which has a pilot site in Central Asia. The proposed Project will include updating policies, surveillance and training regarding drug use and treatment; in addition, Drug Control Agencies may apply for grants from the Regional AIDS Fund with assistance from UNODC. WHO. WHO is mainly focusing on the Three by Five Initiative4. This agency has been providing support for training in protocols of care for HIV/AIDS patients with funding from DFID. WHO supports the implementation of DOTS Programs to control TB, and is expected to become active in the area of prevention and control of the dual TB and HIV/AIDS infection. GFATM. The Global Fund to Fight AIDS, Tuberculosis and Malaria (GFATM) is an independent public-private partnership working to increase funding to fight these three diseases. All four countries participating in the proposed Project have been granted funds totaling US$18.7 million from GFATM for HIV/AIDS. These resources are supporting efforts in prevention, treatment, care and support of PLWHA that complement existing programs and/or activities. Eventually, management of GFATM funds may be merged with management of other funds available for HIV/AIDS at the regional level - including IDA and DFID grants. USAID. In the context of its regional program, USAID has been funding activities in Kazakhstan, Kyrgyz Republic, Tajikistan, and Uzbekistan through its implementing partners (CDC, JSI, Soros, and PSI). USAID has been intervening in the areas of surveillance of communicable diseases, drug demand reduction, and HIV/AIDS prevention. USAID s CAPACITY Project, which has become fully operational in the beginning of 2005, will provide technical assistance to strengthen national coordination; develop and implement ARV procurement and treatment policies; and accelerate The Three by Five Initiative is a global target set by WHO and UNAIDS aiming to provide life-long antiretroviral treatment to 3 million people living with HIViAIDS in poor countries by the end of

18 e epidemic control measures through strengthening civil society agencies. The Project will also support effective use of GFATM funds by recipient countries. US Centers for Disease Control and Prevention (CDC) have been active in the region since CDC offers technical assistance and training in sentinel and second generation surveillance; and laboratory work. CDC has agreed to provide technical assistance for the development and implementation of the surveillance subcomponent under the proposed CA AIDS Control Project. 2. Institutional and implementation arrangements Implementing Agencies. The Project would be implemented by the RPMU, while subprojects will be implemented by grantees, including public agencies, NGOs, and private sector entities in the participating countries, under the supervision of the Regional Project Steering Committee (RPSC) and the Regional Project Management Unit (RPMU). These agencies will receive sub-grants, through the Regional AIDS Fund, based on criteria stipulated in the Project Operations Manual, and contracts signed with the RPMU. Implementation arrangements by component are as follows: Component 1. Regional Coordination, Policy Development and Capacity Strengthening. Policy development would be implemented by participating Governments (Ministries of Health, Justice and/or Interior). Surveillance and monitoring and evaluation of the epidemic would be implemented by Ministries of Health with technical assistance from the U.S. Centers for Disease Control (CDC). Training under this component would take place in the AIDS centers in participating countries and Schools of Public Health in Kazakhstan and Uzbekistan. Suitable institutions for training under the Project are being identified in the Kyrgyz Republic and Tajikistan. Videoconferencing facilities would be installed at the main training sites to facilitate regional coordination and training. Component 2. Regional AIDS Fund. Under the supervision of the RPSC, and with technical assistance from the TWGs, the RPMU would manage the grant facility, and supervise the use of grant funding. The RPMU would disburse funds to public services, the private sector and NGOs that would work with vulnerable and highly vulnerable groups, and PLWHA. NGOs and public and private sector agencies would maintain bank accounts for Regional AIDS Fund grants, and would be responsible for disbursement of funds in accordance with contracts signed with the RPMU. Such NGOs and agencies would be subject to assessment by the RPMU prior to receiving funding for the first time. A Regional Project Steering Committee (RPSC) would act as the coordination mechanism at the regional level. Deputy Prime Ministers of participating countries and the UNAIDS Regional Representative would be members of the RPSC. The RPSC would lead and oversee the strategic direction of project implementation, and monitor and evaluate attainment of Project Development Objectives (PDOs). Moreover, the RPSC would establish Technical Working Groups (TWGs), and collaborate closely with the Regional Project Management Unit (RPMU), which would act as the RPSC Secretariat. Technical Working Groups (TWGs) have been preparing the proposed project. These TWGs include representatives from different Ministries, Drug Control Agencies, NGOs and the private sector. During project implementation, TWGs would continue to assist the development of project activities, including preparation of policy amendments for approval by the RPSC; provision of expert assessment of sub-project grant applications to the Regional AIDS Fund; and provision of terms of reference and technical specifications for services and goods to be procured under the Project. Regional Project Management Unit (RPMU). At the Regional Meetings, in June and September 2004, country participants agreed that a RPMU would be established, and regional staff would be contracted on a competitive basis. Other options for project management, such as contracting out to a regional or international firm, were rejected. All RPMU staff have been selected, and the Project 14

19 Executive Director was contracted before appraisal. Other key staff (Procurement Officer and Financial Management Specialist) have been contracted before Board presentation; and remaining staff will be contracted before project effectiveness. Participating Governments agreed that the RPMU would be located in Almaty for a number of reasons: (i) this is not a capital city; (ii) many international partner organizations have their regional headquarters in Almaty; and (iii) Almaty is well-connected to other regional centers, and current visa regulations in Kazakhstan facilitate easy travel for nationals of participating countries. Three locations are being considered by the Government of Kazakhstan for RPMU location: (i) the School of Public Health: (ii) the Republican Sanitary-Epidemiological Services (SES), where the Republican AIDS Center is located; and (iii) the Almaty AIDS Center. Country Project Coordinators and/or Units (CPCs and CPUs). There would be one coordinator in each of the four participating countries. This individual can eventually be assisted by other staff, as needed. The coordinators would be responsible for day-to-day project management and liaison with the counterparts, coordination of activities of country techrucal working groups, and coordination of limited accounting, disbursement and procurement-related activities, under the overall supervision of the RPMU. The CPCs would also represent the Regional AIDS Fund in the respective countries. The CPC would operate in the context of AIDS centers, and subcontract existing management structures, such as PMUs of Bank-financed projects or GFATM Implementation Units, to carry out limited fiduciary activities. The CPCs would be responsible for the management of the advance accounts for country-level activities. Accounting and disbursement support, limited to funds disbursed through the Advance Accounts, would be provided by the PMUs or GFATM management units, under the overall guidance of the RPMU financial manager. These advance accounts would be operated on an imprest basis, and the CPCs would be accountable to the RPMU on the use of these funds. Currently, two PMUs that would provide country-level support to the CPCs- the Kyrgyz HR PMU and Uzbekistan CPB - have satisfactory financial management systems that would be able to provide adequate support to the CPCs. In Kazakhstan and Tajikistan, accounting and disbursement support would be provided by the GFATM project implementing units. These units have not been assessed to determine their capacity to provide project accounting and disbursement support to the CPCs. It is expected, however, that CPCs will not be involved in any significant expenditure decisions, such as managing large procurement contracts or making large payments through the advance accounts. It is, therefore, not envisaged that the units supporting CPCs would be subject to assessment because they would be maintaining only small advances on imprest system, with small value transactions relating mainly to local expenses. These transactions would be reported to the RPMU periodically, and supporting documents would be available for review by the RPMU, which would have the responsibility of reporting to the Bank through FMR. Strengths and weaknesses. RPMU does not yet exist, but key staff for the project have been contracted under the PHRD Grant for project preparation. Staff will be initially attached to the Kyrgyz HR PMU that is currently implementing an IDA-financed Health Reform Project, during which time they will gain familiarity with World Bank procedures for financial management, disbursement and procurement. A major weakness is that financial management and internal control procedures have not been set up. Financial management arrangements of the RPMU have not been reviewed to evaluate accounting and internal control systems, existence of written standards and procedures including clear responsibilities and levels of authority, familiarity of staff with Bank procedures, audit arrangement and financial reporting system. As an interim measure, the PMU of the Kyrgyz Health Reform Project has been contracted to provide financial management support to the project until the financial management arrangements of the RPMU have been set up, assessed and are satisfactory to the Bank. The financial 15

20 management arrangements of the Kyrgyz Health Reform PMU have been reviewed periodically during project supervision missions and are satisfactory to the Bank. 3. Monitoring and evaluation of outcomes/results The Project has dual monitoring and evaluation needs: (i) monitoring the epidemic and epidemic drivers at the regional level; and (ii) monitoring and evaluating the implementation and impact of the Project itself. A strategic M&E plan, including baseline indicators for the epidemic, epidemic drivers and project implementation, is under development. Monitoring and evaluation capacity in the individual countries remains weak. Information control is a further impediment to successful program implementation, and issues of data reliability pose problems for adequate assessment, planning and evaluation of the HIV/ADS situation and effective intervention planning in the country. Furthermore, there are few impact assessments of the efforts by international organizations to fight the epidemic. Local and regional capacities need to be strengthened. The Regional M&E system will build on national M&E systems. The Project will work closely with national counterparts in each participating country to improve M&E at the national level, and support the establishment of M&E at the regional level under the management of the RPMU. Ths will be done in close co-operation with the Ministries of Health and Justice/Interior in each participating country, and bilateral and multilateral donors (UNADS, GFATM, DFID, USAID, CDC among others) which are assisting the establishment of a single M&E system in each country in the context of the UN Three Ones. CDC will provide technical assistance to the establishment of a unified M&E system throughout the region. In addition, a Management Information System (MIS) is being designed to include a Project Monitoring and Management sub-system, a Financial Management and Accounting sub-system, and relevant databases. The objectives of the establishment of the MIS are to: (i) support the RPSC, RPMU, and CPCs in the management and monitoring of the Project; (ii) provide the TWGs and implementation partners with an instrument for effective communication during project implementation; and (iii) facilitate access of all project stakeholders to relevant information. During implementation, regular surveys will be conducted as a core part of the data collection process. The RPMU will establish an M&E system for subprojects that receive grant funding; and sub-projects will be required to define M&E arrangements, and allocate funding for these. 4. Sustainability The Central Asia AIDS Project is expected to be a sustainable institutional initiative for leading the regional response to the HIV/AIDS epidemic. The Project has a positive financial impact. Discounted at 4 and 10 percent the project financial NPV is US$18.5 million and US$13.9 million, yielding IRRs of more than 40 percent. The Project has a positive fiscal impact and can influence the state budget by generating additional tax revenues and increased health expenditure. The Project will also contribute to the long-term sustainability of the regional response by: (a) increasing civil society awareness of the risk of the epidemic; (b) strengthening capacity of public agencies, NGOs and the private sector to fight HIV/AIDS infection; and (c) establishing a Fund that will finance regional activities on a demand-driven and competitive basis. Three Ones principles for coordination of national AIDS responses are: (i) one agreed HIVIAIDS action framework for coordinating the work of all partners; (ii) one national AIDS coordinating authority; and (iii) one country-level M&E system. 16

21 5. Critical risks and possible controversial aspects The proposed Project faces substantial risks, which nonetheless are worth taking, based on the expected project benefits. Risks have been mitigated during project preparation, and will be further mitigated during implementation. Although participating countries have shown a high level of commitment to the Project, and have a shared agreement about the actions to be undertaken under the project, the situation may change when it comes to providing coordinated responses for prevention and control of HIV/AIDS. In addition, project implementation is logistically complex, as active participation of all countries and many sectors will be required. Based on lessons learned from a decade of policy dialogue and operational work in the region, the following possible risks have been identified: Low Government commitment to implement the Project. This is a low to moderate risk. It will translate into limited action to establish the necessary regional mechanisms to make the project work, and non-disbursement of funds. Experience with regional operations in Central Asia is limited and disappointing in the case of the Aral Sea Program. However, Central Asia Governments have already initiated regional activities to tackle the drug problem that is at the root of the HIV/AIDS epidemic in the region. In addition, Governments of participating countries signed a Memorandum of Understanding in June 2004 committing themselves to regional cooperation to preventing HIV/AIDS and participating in project preparation. All four Governments have signed the PHRD Grant Agreement for project preparation, and have been actively participating in project preparation activities and in the Regional Meetings that have been organized by UNAIDS, DFID and Bank to agree on project design. Limited experience to fully develop the proposed Regional Project. This is a low to moderate risk. This will be the first Regional Project on HIV/AIDS in ECA. In Central Asia, Governments have previous experience in regional projects, including the Aral Sea Program, which focused on improving living conditions in this sub-region; the CIS 7 Initiative, which tackles poverty; and the Biodiversity Project, which aims at improving the environment. However, participating countries have limited experience in implementing HIV/AIDS activities that require regional coordination. Large number of stakeholders. This is a significant risk. The Project will involve a large number of stakeholders, as it will cover four countries, and require involvement of the public sector, NGOs and international partner organizations. However, a regional partnership has already been established among key stakeholders (Governments, UNAIDS, other UN agencies, USAID/CDC, Soros Foundation among others), including in the context of the UN Theme Groups operating in each country, and Technical Groups that have been preparing the proposed Project. Further development of this essential partnership will be supported financially and technically by the Project. Conflicting interests. Ths is a significant risk. The different stakeholders - highly vulnerable groups and vulnerable groups that are the ultimate beneficiaries of policy and action in this area; civil society; decision-makers; opinion-makers; and the international community - have interests that do not always coincide, and do not always contribute as intended to early prevention and control of the four overlapping epidemics. Regional intersectoral activities promoted by the proposed Project will contribute to mitigate this risk. Lack of country, regional, and donor coordination. This is a significant risk. Although all countries have national HIV/AIDS committees chaired by Prime Ministers or their deputies, there is an overall lack of leadership and coordination among the different stakeholders. The Project will complement national efforts to unify different coordination mechanisms into a national body that will represent Governments, NGOs, private sector and international partners. Updated policies, evidence-based protocols and other project products not adopted nationally. This is a moderate to significant risk. Some Governments may procrastinate before adopting modern, 17

22 0 evidence-based approaches and products recommended by the Project. Policy dialogue, advocacy and technical assistance provided by UNAIDS, WHO, USAID and the proposed Project will contribute to mitigating this risk. Financial Management and fiduciary issues. HIV/AIDS projects present a high inherent risk that funds will not be used for their intended purpose. Although this is a small project, estimated to cost $ 27 million, there will be numerous transactions with several agencies involved - NGOs, public and private sector agencies spread throughout benefiting countries, which also represents a high risk. In addition the Recipient of the Grant, CACO, and the RPMU (to be set up) are new organizations that have no experience with project management and implementation, and policies and procedures have not been established to provide guidance to project staff. Risk mitigation measures include (i) ensuring that RPMU develops and maintains an effective financial control and monitoring mechanism; (ii) regular monitoring of advances and sub-grants to implementing agencies (iii) regular FM supervision; and (iv) comprehensive audit that includes monitoring achievement of agreed milestones. Substantial training of the RPMU staff will be required, together with effective implementation support. In addition, the Kyrgyz Health Reform PMU will provide financial management support, including on the job training of the FM staff, until the RPMU has established financial management arrangements satisfactory to the Bank. 6. Grant conditions and covenants The Central Asia Cooperation Organization (CACO) provides a suitable legal framework for the proposed Project. All countries have ratified this agreement prior to Negotiations. The representatives of the Kyrgyz Republic informed that the Parliament has ratified the agreement on January 20, 2005, and submitted it to the President for signature. Individual operations funded by IDA grants are subject to Board approval. IDA grants are processed, disbursed, monitored, and evaluated in accordance with regular procedures for IDA credits. IDA-13 grants can be used for HIV/AIDS Projects, including regional projects. The proposed Project will support the implementation of region-wide HIV/AIDS prevention and control measures in Central Asia. Project design, components and activities have been structured according to the IDA Grants indivisibility criteria: given the regional nature of the proposed Project, the activities to be supported by the same will be indivisible, and therefore all participating countries, regardless of their lending status, will benefit from the grant. Conditions of Board Presentation and Effectiveness Board presentation 0 Establishment of a financial management system, including budgeting, accounting, reporting and auditing, capable of generating Financial Monitoring Reports satisfactory to the Bank. This condition has been met by contracting the Kyrgyz Health Reform PMU to provide financial management support to the project until the RPMU has established a financial management system acceptable to the Bank. 0 The Council of Foreign Ministries of CACO approves the draft DGA and other agreements reached during the Negotiations on behalf of the Recipient. This condition has been met. 18

23 Project Effectiveness Ratification of the CACO Agreement by all benefiting countries, which provides the legal framework for the proposed Project. Establishment of the Regional Project Steering Committee. Establishment of the Regional Project Management Unit, with staff, capacities and Terms of Reference acceptable to the Association. Adoption of a Project Operational Manual acceptable to the Association. Covenants applicable to Project implementation: The main sub-project eligibility criteria under the Regional AIDS Fund are specified in Annex 4. These include: 0 Coverage of cross border and mobile populations along regional corridors for transport of people and goods; 0 Coverage of regional epidemiological hotspots; and 0 Inter-sectoral and inter-country cooperation. D. APPRAISAL SUMMARY An extensive consultation process has been carried out during project preparation, and will continue during project implementation. In November 2003, Project Identification Workshops were conducted in participating countries; in June 2004, a high level meeting with Deputy Prime Ministers and senior staff of the Governments of Kazakhstan, the Kyrgyz Republic, Tajikistan and Uzbehstan took place in Almaty; in September and December 2004, Regional Technical Meetings were organized, respectively, in Bishkek and Tashkent, with participation from several government sectors, the private sector and NGOs; another Regional Technical Meeting is scheduled for Project Launch. A Donors Meeting to review initial project design was organized in April 2004, and international organizations joined the September and December 2004 Regional Meetings. In addition, a survey of 61 representatives of public agencies, academia, NGOs and international organizations in the four participating countries regarding project design was carried out during project preparation. The majority of the survey respondents indicated their agreement with PDOs and project design. 1. Economic and financial analyses Economic Analysis. The Project is estimated to save a total of 69,000 years of life over 10 years. As shown in Annex 9, the Net Present Value (NPV) of the total Project costs6 is US$38 million and US$32 million discounted at 4 and 10 percent respectively. The PV of the total benefits is US$237 million discounted at 4 percent, yielding a benefit-cost ratio of 6.3 to 1. Even with a 10 percent rate, the Project is estimated to yield US$172 million in benefits, with a benefit-cost ratio of 5.4 to 1. The benefitcost ratio increases further in a longer time perspective, although the problem of attaching monetary value to human life affects the precision of such economic estimates. Total project costs for the Economic Analysis have been calculated from the investment costs of US$ million plus incremental costs for maintenance for a period of 10 years after project start. 19

24 Data for Eastern Europe and Central Asia suggest that prevention, harm reduction, and STI treatment are the most cost-effective interventions. The unit costs of these programs are estimated as follows: STI treatment - US$8-9; voluntary counseling and testing (VCT) - US$11; harm reduction programs among IDUs vary from US$3 to 13 per person reached. The preventive activity of distributing condoms among CSWs and their clients cost US$16 per CSW reached. Cost-effectiveness analysis for the CA AIDS Control Project shows similar results on the assumption that fbnds are allocated equally across prevention interventions. Annex 9 shows that programs targeted at IDUs and CSW and their clients are the most cost-effective. In general, prevention and control activities are highly cost-effective because the average annual health sector saving (US$500) per prevented high risk HIV/AIDS case is three times higher than the corresponding annual costs. This modeling exercise built upon previous work done in the Russian Federation with similar results (Table 5). Table 5. Modeling the Macroeconomic Implications of a Generalized AIDS Epidemic in the Russian Federation BANK Dramatic impact in the absence of preventiodtreatment Mortality from 500lmonth in 2005 to 21,000lmonth in 2020 Cumulative HIV+ from 1.2 million in 2005 to 5.4 million in 2020 GDP falls 4.15% in 2010 and 10 in 2020 Prevention has a high cost-benefit as long as ARV price > $300lpersodyear UNDP Significant population decline: 6.9 million (7%) loss by 2020 Population structure, dependency ratio distortion after 2010 Significant aggregate GDP declines (6%) over long term Under open-economy, extractive industries more vulnerable ILO Scenario 1: Epidemic remains constant: peak 685,000 HIV+ in 2007, 257,000 PLWA in 2012; disability and survivor pensioners grow 4-4.5% by Scenario 2: Growing infection: peak 699,000 HIV+ in 2008, 259,000 PLWA in 2012, health care costs 0.26% GDP in 2011, disability benefits cost 74% in Scenario 3: Decreasing infection: peak 636,000 HIV+ in 2006,255,000 PLWA in 2011, health care costs 0.25% GDP in 2011 Scenario 4: Infection probability shift: number of employed falls 0.1% 2005, 0.5% 2010 and 1.8% in 2050 Scenario 5: Complete risk group saturation: peak 1,169,000 HIV+ in 2008, 181,000 PLWA in 2010, health care-costs 0.430/0 GDP in 2011 Source: Sharp S (2004). Informing Policy Through Modeling: A Case Study of the Socio-economic Implications of AIDS in Russia. Gastein: European Health Forum. Sensitivity Analysis. The sensitivity analysis shows that project efficiency is highly sensitive to any delay in project implementation. The project NPV decreases by 43 and 58 percent (to US$86 million and US$117 million when discounted at 4 percent) when project implementation is delayed by 2 and 3 years respectively. This confirms that HIV/AIDS preventive interventions under a concentrated epidemic stage should be given a hgh priority in order to maximize efficiency of available resources and prevent the epidemic from spreading to the general public. The decrease in the project direct benefits resulting from the inadequate coverage or unsafe behavior of high risk population groups also affects project efficiency ratios, although at a lower level. The discounted project NPV decreases by 12 and 15 percent (i.e., by US$24 million and US$30 million) in response to the 40 and 50 percent reduction in direct project benefits. Funding Required for the Response to HIVlAIDS in Eastern Europe and Central Asia, WHO, WB, UNAIDS, Futures Group Intl., July 2003, p

25 Financial analysis. The project has a positive financial impact. Discounted at 4 and 10 percent the project financial NPV is US$23 million and US$17 million, yielding IRRs of more than 50 percent. Although the project financial NPV is positive, the accumulated net financial impact in subsequent years is negative, totaling about US$0.3 million per year. The Project has a positive fiscal impact and can influence the state budget by generating additional tax revenue and increased health expenditure. Longer life, especially of people living with HN/AIDS (PLWHA), would require additional health resources, estimated at US$24 million in total. However, this can be covered by additional tax revenue generated by the productive years of life saved by the Project. Over 69,000 years of life saved by the project can generate an additional US$47 million in tax revenue. 2. Technical Issues Some of the technical issues identified by the social and institutional assessment carried out during project preparation that will be partially addressed by the proposed project are the following: Overlapping of TB and HIV/AIDS epidemics. The region has been experiencing epidemics of sexually transmitted diseases (STIs), which facilitate transmission of HN/AIDS and tuberculosis (TB), which is the main opportunistic infection for HN/AIDS. Because of their suppressed immune systems, people co-infected with HN and TB are many times more likely to develop active TB. In other countries affected by both epidemics, the number of TB cases has doubled and even trebled in the past decade, mainly as a result of the HN/AIDS epidemic. Due to the economic downturn that followed the breakup of the Former Soviet Union, the subsequent poverty, and the overcrowding in prisons, tuberculosis has become an epidemiological crisis in Central Asia. With the concomitant rise in multi-drug resistance and the persistent problems with inappropriate therapy, this situation has global repercussions. The proposed Project will focus on co-infection by HIV/AIDS and TB; other TB activities will need to be covered by independent operations. KfW has been considering financing a regional operation to tackle TB, which the Bank may want to consider co-financing. Intersectoral cooperation for prevention of HIV/AIDS. The relative newness of country strategies requiring a multi-sectoral approach to planning and decision-making becomes evident through territory protection, and operating in silos, lack of shared resources, lack of clear roles in strategies or GFATM proposals, and lack of formal or informal approaches to collaborative decision-making. There is still little cooperation between different sectors (e.g., Health and Justice/Interior) and between different services (e.g., Narcology Departments, AIDS Centers, STIs Dispensaries, and TB Institutes). The Project will provide incentives for intersectoral cooperation, within the public sector, and between the public and private sectors, and NGOs. Policy on anti-retroviral drugs (ARVs). The key policy gaps related to ARV are the following: public financing of ARV treatment; price and procurement of ARV drugs; protocols for treatment based on scientific evidence and international standards; improvement in laboratory support for ARVs; and monitoring of drug resistance. The Project will provide support to the development of a regional policy on ARV drugs; negotiations of drug prices; and development and adoption of appropriate protocols of care. The GFATM has started financing anti-retroviral treatment in Central Asia. However, further support may eventually be needed, depending on how the epidemic progresses in the region, and the number of patients that will be treated by the public system. In addition, the following technical issues were identified during project preparation: Country and Subproject Eligibility. The potential participation of others countries in the proposed Project has been discussed. Turkmenistan may be considered for participation in the project if it applies, and at the time complies with project eligibility criteria for participating countries. The Russian Federation has recently obtained fhding from the Bank and GFATM for HN/AIDS control, and therefore will not participate in the proposed Project. Afghanistan could eventually be considered for 21

26 participation, should it be interested. To participate, it will need to become a CACO member; and project funding will need to increase accordingly. Regional vs. country allocations and structures. Two issues were discussed during project preparation: (i) nominal country allocations under the Project; and (ii) extent of country-based project structures and operations. Ths is a Regional Project that focuses on prevention activities that are of regional interest - regional coordination, policy development, information sharing, and cross border prevention activities. Eligibility criteria for sub-projects to be financed by the Regional ADS Fund provide incentives for inter-sectoral and inter-country cooperation, and covering cross border epidemiological hotspots and populations. Therefore, it was agreed that allocations by component and activity were more relevant than country allocations. As the Regional AIDS Fund is a performance-based mechanism, organizations that perform better according to project objectives and criteria will potentially benefit more from project funds. The Project Mid-Term Review will evaluate the performance of different organizations and countries, and make suggestions regarding possible imbalances in resource allocation according to need. Regarding the extent to which the project should develop country-based structures, it was agreed that the Project will initially finance Country Coordinators that will operate in the context of the AIDS Centers, assisted when necessary by existing management units (management units of Bank-financed projects, GFATM management units, etc.) that will be subcontracted to undertake fiduciary activities. These Coordinators will ensure the link between the regional level and each participating country, and assist project implementation in their respective countries. 3. Fiduciary Issues (Annexes 7 and 8) Preliminary FM assessment of the project shows that the financial management arrangements of the RPMU are not satisfactory to the Bank. The RPMU has not been legally established, and there is no financial management system in place. A financial management action plan (Annex 7) has been developed and agreed during negotiations, for the establishment of a financial management system that meets Bank requirements. Successful implementation of the action plan would ensure that the project meets Bank financial management requirements by Board approval. The Project Financial Management System will be reviewed for compliance with Bank requirements, and to ensure that it is capable of properly recording all project-related transactions and monitoring expenditures per category, activity, and component. Internal accounting controls for the Project will be set out in detail in the financial management section of the POM, and will be satisfactory in providing reasonable assurances that accounts will be properly recorded and resources safeguarded. The chart of accounts for the Project will be designed to allow reporting according to harmonized requirements of financing sources participating in the financing of the project (Govemments, IDA and DFID). In the meantime, the Kyrgyz Health Reform PMU has been contracted to provide financial management support to the project until the project has established financial management arrangements satisfactory to the Bank. The financial management arrangements of the Kyrgyz Health Reform PMU have been reviewed periodically during supervision missions and are acceptable to the Bank. The Project will finance 100% of expenditures, which requires an exception from Bank policy for the following reasons: this is a project to prevent and control HIV/AIDS at the regional level, and the Grant will be disbursed to the Central Asia Cooperation Organization. The indivisible nature of Project activities and benefits does not provide a rationale for attributing expenditure to individual benefiting countries on a just and equal basis. In addition, a country-by-country allocation would hinder inter-country co-operation and unnecessarily complicate and slow down project implementation by diverting scarce resources, particularly of the RPMU and small NGOs, to seeking tax funding. Implementation speed is critical to attaining the Project s objective to reduce the growth rate of the HIV/AIDS epidemic in Central Asia. 22

27 Management clearance was obtained for financing 100% of expenditure for international consultants services in the Kyrgyz Republic, including taxes, as a deviation from current CFPs, on the basis that the amount of taxes on foreign consultant services in the Kyrgyz Republic is expected to be non-material relative to the total grant and relative to llkely total expenditures withm the Kyrgyz Republic (to the extent that they may be identified distinctly from the regional amounts), as well as the need to keep consistency in the financing shares across the four countries for reasons of equity and administrative simplicity. Furthermore, Board approval is requested for financing 100% of project expenditure including taxes and duties in Kazakhstan and Uzbekistan as an exception to Bank policy OP 12.00*. This request is in line with the precedent set by similar Bank projects in other regions, particularly the Bank-supported Pan-Caribbean Partnership Against HIVIAIDS Project, which was also granted approval to finance 100% of project costs including taxes and duties. 4. Social Issues In the context of the studies that have been carried out in Central Asia, social and institutional assessments were undertaken. The size of the groups at risk was estimated to be up to two million individuals in the four countries involved in the proposed Project. The needs of these groups are currently not adequately met, which significantly increases the risk of a more generalized epidemic. The stigma attached to highly vulnerable groups such as IDUs and Commercial Sex Workers (CSWs) plays a significant role in the level of priority that decision-makers and other stakeholders give to the four overlapping epidemics taking place in Central Asia. Information and education of decision-makers, opinion leaders and gatekeepers (such as brothel owners), who are necessary for implementation of policies such as 100 percent condom use by CSWs, will be essential for successful prevention of a generalized epidemic. The Project will contribute to attaining the social development objectives of inclusion, security and empowerment. It will bestow positive social effects on specific HIV/AIDS highly vulnerable groups (IDUs, CSWs, MSM, prisoners, and trafficked people) and vulnerable groups (migrants, truckers, crossborder traders, out-of-school youth, etc.), which are only partially addressed throughout the region. Due to lack of resources, these vulnerable groups are underserved, and the scale of the International Office for Migration (IOM) and UNHCR operations is small relative to the needs. Finally, the Project will also contribute to further development of civil society. The Project will support capacity building for civil society organizations, including NGOs. 5. Environmental Issues The environmental rating for the Project is C. The Project does not envisage major civil works, medical waste or land acquisition. 6. Safeguard policies * Current CFPs for Tajikistan already allow for 100% financing of project costs. 23

28 Safeguard Policies Triggered by the Project Safety of Dams (OP/BP 4.37) Projects in Disputed Areas (OP/BP/GP 7.60) Projects on International Waterways (OP/BP/GP 7.50) Yes No [ 1 [XI [ 1 [XI [ 1 [XI 7. Policy Exceptions and Readiness Policy Exception. The project is requesting a waiver to allow 100% disbursement for all expenditure categories and countries, on an exceptional basis. By presentation of this Project to the Board, approval of 100% financing of costs, including taxes and duties, is requested for Kazakhstan and Uzbekistan, as an exception to Bank policy OP and current SDPs for these two countriesg. As previously indicated, this is a project to prevent and control HIV/AIDS at the regional level, and the Grant would be disbursed to CACO. The indivisible nature of Project activities and benefits does not provide a rationale for attributing expenditure to individual participating countries on a just and equal basis. In addition, a country-by-country allocation would hinder inter-country co-operation and unnecessarily complicate and slow down project implementation by diverting scarce resources, particularly of the RPMU and NGOs, to seeking tax funding. Implementation speed, however, is critical to attaining the Project s objective to reduce the growth rate of the HIV/AIDS epidemic in Central Asia. Ths exception will be in line with the precedent set by the Bank-funded Caribbean Partnership on HIV/AIDS Project, which was also granted approval to finance 100% of project costs including taxes and duties. Readiness Criteria. Most of the applicable readiness criteria, detailed component activities, budgets, output and outcome indicators, implementation plan and schedule, procurement plan, monitoring and evaluation plan and project supervision strategy have been reviewed and agreed with counterparts. A draft POM with detailed criteria for selection and funding of sub-projects from the Regional AIDS Fund was submitted to the Bank prior to Negotiations. Establishment of a financial management system including budgeting, accounting, reporting and auditing, and capable of generating Financial Monitoring Reports was a condition of Board presentation, which has been met by contracting the Kyrgyz Health Reform PMU to provide financial management support to the project until the RPMU has established a financial management system acceptable to the Bank. The Kyrgyz Health Project PMU is currently also managing a PHRD Grant to support project preparation activities on behalf of the four benefiting countries. CFPs for Kazakhstan and Uzbekistan are in advanced stages of preparation, but are not expected to be finalized prior to Board presentation of the Project. Management clearance has been obtained to allow 100% financing of foreign consultant services, including financing of taxes, as an exception to CFPs for the Kyrgyz Republic. CFPs in place for Tajikistan allow for 100% financing of project costs, including taxes and duties. 24

29 Annex 1: Country and Sector or Program Background CENTRAL, ASIA AIDS CONTROL PROJECT The Central Asia Regional Framework points out that lack of cooperation among the Central Asian countries has led to dramatic disintegration of economic links and has contributed to significant welfare losses for their populations. The Framework listed six critical regional cooperation areas: trade and transport, water and energy, environment, natural and manmade hazards, communicable diseases, and drugs. On communicable diseases, the Bank is supporting the proposed Central Asia AIDS Control Project. On drugs, the Project will have a drug use component and the Bank now has a full-time anti-money laundering expert in its Almaty Hub Office. Control of HIV/AIDS may be a less contentious issue than trade, water and energy, and one that could provide useful lessons for further expansion of regional cooperation in other areas. Briefings to the Bank President on HIVIAIDS in Central Asia have been prepared. The briefings point to the need for continued advocacy to ensure high-level involvement in early efforts to prevent a major epidemic in Central Asia. The Central Asia HIV/AIDS and TB Country Profiles" reviewed available epidemiological data; strategic and regulatory frameworks; surveillance; preventive, diagnostic and treatment activities; non governmental and partner activities; and resources available in the five Central Asia countries. The study summarized main issues identified, and made recommendations for further study and action, The study summarized information available from Governments and partner organizations such as UN agencies, USAID, and the Soros FoundatiodOSI. The Central Asia AIDS Study" was carried out as a follow-up to the Country Profiles, to update epidemiological data; carry out economic projections of the epidemic; and carry out in-depth reviews of stakeholders involved in early action to control HIV/AIDS in Central Asia; strategies recently adopted by Governments; resources that are being allocated to the implementation of these strategies; and institutional capacity to implement the strategies. A framework for a regional communication strategy on HIV/AIDS was also prepared. Mapping of drug and human trafficking, drug use, HIV/AIDS, STIs and TB in Central Asia" is underway. An initial assessment funded by DFID was carried out in Central Asia; further mapping work, and a survey of knowledge attitudes and practices concerning HIV/AIDS funded by the Bank- Netherlands Partnership will be carried out in Central Asia and Afghanistan in The Bank has also carried out the Central Asia TB Study13. The study includes a review of DOTS implementation, and of resources that have been allocated to TB control in Central Asia. It aims at identifying the major constraints for implementation of appropriate programs to control TB in Central Asia, and suggests strategies to overcome these constraints and achieve target case detection and cure rates. The Bank and Government of Kazakhstan carried out a review of the Kazakh TB and HIV/AIDS Programs in this country, in the context of the sector work that is co-financed by both parties. The review includes a cost-effectiveness study. In the context of the preparation of the Uzbek Health I1 Project, several assessments of Public Health in Uzbekistan, including HIV/AIDS and TB, have been prepared. lo Godinho J, Novotny T, Tadesse H and Vinokur A (2004). HIVIAIDS and TB in Central Asia: Country Profiles. World Bank Working Paper 20. Washington DC: The World Bank. Godinho J, Renton A, Vinogradov V, Novotny T, Gotsadze G, Rivers MJ, and Bravo M (in press). Reversing the Tide: Priorities for HIV/AIDS prevention in Central Asia. Washington DC: The World Bank. Renton A, Gzirishvili D, Gotsadze G and Godinho J. Mapping of drug trafficking and use, migration, HIVIAIDS, STIs, TB. Submitted for publication at Journal AIDS. l3 Godinho J, Veen J, Dara M, Cercone J, and Pacheco J. Stopping TB in Central Asia: Priorities for Action. Washington DC: The World Bank. In preparation for publication. 25

30 Overview of the four overlapping epidemics in participating countries Kazakhstan 0 Distinguished by its large territory and relatively high annual per capita income (US$1,250), Kazakhstan has a population of 15 million, of which more than 50 percent are aged years. Approximately one-third of the population now lives below the poverty line, but 65 percent report a daily income of less than US$4 per capita. 0 Kazakhstan has a reported HIV/AIDS prevalence (0.14 percent) that is hgher than its four neighboring countries combined, which could be attributed to a better financed and functioning health system. In 2004, 78 new cases of HIV+ were identified in the country, bringing the cumulative number to 4,696 (31.4/100,000) by the middle of 2004, of which three-quarters were IDUs. Figure 1. New and Cumulative notifications of HIV infection: Kazakhstan: No. New - 20 notifications Cumulatie No. notifications -15 e g x Notification Rate / 1 OOK 0) Notifications - 5 Cum / look -0 Year Source: MOH: Kazakhstan There has been a five-fold increase in registered IDU since the beginning of the 1990s. UNODC estimates a total number of drug users of around 200, ,000 (1,333 per 100,000). Annual numbers of notified STIs cases increased from 1.5 per 100,000 in 1990, to 231 per 100,000 in 1996, but then stabilized around 109 per 100,000 in Thus, the size of the epidemic has been large in Kazakhstan. Since independence in 1991, the tuberculosis notification rate more than doubled, from 65 in 1991 to 165 per 100,000 population in Kazakhstan has the highest rates of all Central Asian Republics. The Strategic Plan to Fight HIV/AIDS has been elaborated in close consultation with various donors, civil society and different sectors of the government. Kazakhstan plans to update the Strategy in 2005 in close collaboration with UNAIDS. Kazakhstan has started to develop sentinel and second-generation surveillance with the help of USAID/CDC. Upgraded HIV/AIDS labs, and improved testing capacity have contributed to effective training of lab technicians and epidemiologists. In 2003, the Country Coordination Mechanism (CCM) received a grant in the amount of US$6.5 million from the GFATM for HIV prevention among vulnerable population groups and provision of treatment for people living with HIV/AIDS. 26

31 Kyrgyz Republic 0 The Kyrgyz Republic is the smallest country in Central Asia in terms of both territorial size and population (about 5 million), and one of the poorest, with US270 per capita of annual income. More than 50 percent of the population is aged years, and more than half live in poverty (less than US$l per day). 0 There are about 6,000 drug users registered in the Kyrgyz Republic, but it is estimated that IDUs are about 70,000. In 2003, 132 new cases of HIV were identified in the country, bringing the cumulative number to 508, of which 421 were IDUS. Figure 2. New and Cumulative notifications of HIV cases: Kyrgyz Republic: oo T z TI H No. New notifications -8 d -Cumulative s? No. notifications - x Notification Rate al I100K - 2 ~otifications Cum 1100K -2-0 Year Source: MOH: Kyrgyz Republic 0 Annual numbers of notified cases of syphilis increased from 2 per 100,000 in 1990 to 167 per 100,000 in 1997, but then declined and stabilized below around 50 per 100,000 by Thus, the size of the epidemic has been large in the Kyrgyz Republic. 0 In 2003, a total of 6,172 new TB cases were registered in the country, of whch 1,671 (27%) were new sputum smear positive pulmonary TB. The total notification rate was 123 per 100,000. There is a stable trend of increase since Mortality rate was 11.8 per 100,000 in 2003, which is slightly less than in previous years. 0 The Government of the Kyrgyz Republic has been active in grasping the significance of the epidemics of HIV and sexually transmitted diseases for the country. The Strategic Plan to control HIV/AIDS in the country was developed through a broad government and NGO consultation process. 0 This country is arguably the most advanced in Central Asia in prevention and treatment of HIV/AIDS. Significant donor support is being provided. The country has benefited from intensive assistance from UNAIDS and other UN agencies. UNADS assisted the preparation of the Strategic Plan, and sectoral strategies. UNODC supports the Narcology Center on provision of social and psychological rehabilitation programs and counseling for IDUs. 0 The Kyrgyz Republic obtained US$5 million from the GFATM for two years starting in August USAID through its implementing partners (CDC, Soros Foundation, PSI, and the University of North Carolina) currently funds several projects that have direct relevance to HIV/AIDS. DFID will provide a US$3 million grant to the Kyrgyz Republic. 27

32 Tajikistan Tajikistan is the poorest ECA country, with an annual per capita income of US$170. According to official data, 80 percent of the population lives in poverty. The total number of registered drug users more than doubled from 2,905 in 1999 ( ,000) to 6,356 (99/100,000) in Tajikistan's economic dependency on drug trafficking creates many barriers against containing the pending drug-related epidemic of HIV/AIDS. Current government estimates put the number of persons living with HIV in Tajikistan at 119 (1.9 / 100,000) by the end of 2003, with over 75 percent of HIV-positive persons believed to be drug users. New cases identified have risen steadily over the same period with 42 cases (0.7/100,000) identified in Figure 3. New and Cumulative notifications of HIV infection: Tajikistan: T 2'5-2 No. Ne# 0 notficatims mamdatie s No. notiicaticns x Notification Rate -1 I 10M p Notifications Cum I 1OM 0.5 I, Year Source: MOH: Tajikistan Significant labor migration, which is estimated to be of about 620,000 people a year, threatens Tajikistan with an increase in the share of heterosexual transmission. Notified syphilis cases increased from 107 (1.6 / 100,000) in 1990 to 1320 (23.8 / 100,000) in 1998 falling to 778 (12.3/100,000) in The poorly funded and dysfunctional health care system may not be able to detect and report the size of the epidemic adequately. The number of notified TB cases increased from almost 2,500 (41/100,000) in 1998 to almost 4,000 (61/100,000) in The government approved a law on TB control introducing the DOTS strategy in The GFATM approved the Tajik proposal for assistance in TB control, and funding in the amount of US$1.5 million will be available over the next 2 years. Tajikistan was awarded US$1.5 million by the GFATM to support implementation of the National Strategic Plan for HIV/AIDS for two years, starting March In addition, Tajikistan will obtain a US$3 million grant from DFID. 28

33 Uzbekistan 0 Uzbekistan is a low income country with a Gross National Income (GNI) per capita of US$460. The country is rich in natural resources, such as coal, copper, gold, natural gas, oil, silver and uranium. Uzbekistan is at the initial stage of the HIV/AIDS epidemic. As this is the largest population in Central Asia (25 million), very young and at high risk of an epidemic - the number of cases more than doubled in the last year - it requires prompt and well-managed action. 0 In 2003, there were approximately 20,000 registered drug users. The government estimates that 50 percent of all drug users inject. 0 In 2003, 1,836 cases of HIV infection were identified in Uzbekistan, bringing the cumulative number of cases to 3,596 by December 31,2003. Figure 4. New and Cumulative notifications of HIV infection: Uzbekistan: f 3000 t g 2500 H E z 1000? T No &N New notifications Cumulative No notifications otiic at ion Rate / 1OOK Notifications Cum 11OOK OLO 2 2 ( D w : 2 Region I Sex 0 Source: MOH: Uzbekistan Annual numbers of notified cases of syphilis increased from 1.8 per 100,000, to 47.3 per 100,000 in 1987 before falling to 21.8 per 10,000 in In 2003, a total of 19,725 TB cases were newly registered and 27% were found sputum smear positive. The notification rate of all cases is 88 per 100,000. The mortality rate is 34 per 100,000, Uzbekistan's commitment to respond to HIV/AIDS has been steadily building over the past several years, With significant assistance from UNAIDS and other UN agencies, the government approved the Strategic Program on Counteracting the HIV/AIDS Epidemic in the Republic of Uzbekistan for Uzbekistan was granted US$5.2 million by the GFATM for two years starting May USAID through its implementing partners (CDC, Soros, PSI, and Project Capacity) currently funds several projects that have direct relevance to HIV/AIDS control. DFID will provide a grant of US$3 million to Uzbekistan. The Bank-financed Uzbek Health I1 includes a Public Health Component. This component will contribute to scaling up activities to prevent HN/AIDS and STIs, and control TB. 29

34 5 E: 8 E: E 5 E 8 E ~ 0 E Y 8 8 > 3 0 si.3 d 0 M m Li E 0

35 VI.- 8 L B s VI u I L 0 a

36 3 t 3 c 3

37 .- c i C C i -f M M

38 Table 8. World Bank Group Projects World Bank Group Projects in Central Asia Central Asia Biodiversity - Project - Central Asia Regional Small Enterprise Assistance Fund (IFC) Kyrgyz - Health Sector Reform I1 Project _. Uzbek Health I1 Project Health I1 Project in Tajikistan (to the Board FY05) World Bank Group Regional Projects on HIV/AIDS Abidj an-lagos Transport Corridor AIDS Project Caribbean Partnership on HIV/AIDS Project Board Approval 22-" OCT MAY SEP-2004 Pipeline Board Approval 13-NOV MAR

39 Annex 3: Results Framework and Monitoring CENTRAL ASIA AIDS CONTROL PROJECT PDO Reduce the growth rate of the HIViAIDS epidemic in Central Asia in the period Establish a sustainable mechanism in Central Asia - the Regional AIDS Fund - that will serve as a vehicle for financing HIViAIDS prevention and control activities in the Region beyond the end of the Project. Contribute to better regional cooperation in Central Asia, and effective inter-sectoral collaboration between public sector, NGOs and private sector on HIVIAIDS control in this region. Intermediate Results One per Component Component One: Strategic, policy and regulatory framework updated Capacity is built throughout the region and sectors involved in HIViAIDS prevention and control Component Two: Regional AIDS Fund performance is satisfactory Component Three: Funds disbursed Results Framework Outcome Indicators HIViAIDS Incidence Rate At least 60% of groups at risk covered by the Regional AIDS Fund activities Stakeholders consider Regional AIDS fund performance satisfactory Regional AIDS Fund is financed beyond the life of the Project (5 years) National Coordination Mechanisms and RPSC integrate representatives of Governments, NGOs and donors; and meet at least twice a year Results Indicators for Each Component Component One: Approval of updated regional and national strategies before Project mid-term review Sentinel and second generation surveillance established throughout the region by the 2nd year of the Project Regional M&E established by midterm Schools of Public Health in Kazakhstan and Uzbekistan routinely carrying out training of staff from public agencies, NGOs and private sector by mid-term Component Two: Funds granted and disbursed annually as planned At least 75% of users express satisfaction with RAF performance 10% groups at risk covered in the first year; 25% in the second year; 40% in the third year; 55% in the fourth year; and over 60% in the fifth vear Component Three: By component and year as planned Use of Outcome Information Existing national statistics Regional M&E statistics Project statistics (MIS) Use of Results Monitoring Component One: Existing national statistics Regional M&E statistics Project statistics (MIS) Component Two: Existing statistics Regional M&E statistics Project statistics (MIS) Component Three: Project statistics (MIS) 35

40 3 2-5 u d z Y : i! Y L F i : I * i 2 t C C.I C.I ; U c - : 5 E : b U c C C e b 4,c? 0 W m N,c? 0 2 wl

41 Annex 4: Detailed Project Description CENTRAL ASIA AIDS CONTROL PROJECT The proposed Central Asia AIDS Control Project will contribute to minimizing the potential negative human and economic impact of a generalized HIV/AIDS epidemic. The proposed Project will have three main components: Component 1. Regional Coordination, Policy Development and Capacity Building (total cost US$7.5 million). The component will aim at: (i) establishing a legal environment that facilitates the implementation of the HIV/AIDS Regional Strategy, including prevention work with highly vulnerable groups such as drug users, commercial sex workers, men who have sex with men, prisoners and mobile populations; (ii) improving information, and decision-making based on good quality epidemiological data; and (iii) building capacity of public agencies, NGOs and private sector engaged in HIV/AIDS control. Capacity will be built to overcome common barriers to developing and delivering an effective response including: legislative and regulatory reform; approaches to managing professional resistance to change; advocacy and communication needs; mitigation of the negative impact of epidemic drivers that act regionally, including trafficking in people and drugs, economic and political migration, and sex work; and grant implementation. The grant will finance goods, consulting services, training, and operating costs. Sub-component 1: Regional HIV/AIDS Coordination and Policy Development. This sub-component will focus on national and regional coordination of HIV/AIDS programs; and further establishment of a regional strategic and regulatory framework that will facilitate prevention and control of HIV/AIDS in Central Asia. The sub-component will finance the activities of the RPSC; national coordination mechanisms and establishment of links between the national and regional coordination; and further strategic and policy development. The subcomponent will provide necessary local and international technical assistance to elaborate andor amend proposed strategies and regulations. It will finance studies that will inform the policy formulation process; and regional meetings for policy review. Training and technical assistance will be provided for: strengthening national and regional inter-sectoral coordination mechanisms for HIV/AIDS control, including establishing the RPSC at the regional level; reviewing and revising legislation affecting vulnerable groups (including anti-discrimination and decriminalization laws); advocating and communicating about HIV/AIDS; adopting standardized approaches to diagnosis and treatment of HJY/AIDS and STIs; and facilitating procurement of commodities. Counterparts endorsed the establishment of a RPSC which will act as the coordination mechanism at the regional level. The RPSC will lead and oversee the strategic direction of project implementation, and monitor and evaluate attainment of PDOs. Steering Committee members will initially comprise the Deputy Prime Ministers of each country, and the Regional UNAIDS representative. The RPMU will act as the Secretariat for the RPSC, and the Executive Director of the RPMU will participate in Steering Committee meetings as an observer. At a later stage, it is envisaged to include in the RPSC NGO representatives, the private sector, and representatives from UN and bilateral donor agencies, similar to what happens at the national level. The Steering Committee will meet twice a year in the context of regular CACO meetings, and further meetings will be conducted through videoconferences. At the country level, existing coordination bodies will be merged into one National A D S Coordination (NAC) mechanism to be chaired by the Deputy Prime Ministers who will also sit on the RPSC. The Regional Project and NACs will be assisted by multi-sectoral Technical Working Groups (TWG) expected to provide technical guidance; and by secretariats responsible for day- 37

42 to-day activities necessary for national coordination. UNAIDS will lead this process at the country level. The sub-component will co-finance with UN agencies, USAID/CAPACITY project, and other partners, the establishment of NACs and respective secretariats. Technical Working Groups (TWGs) have been established during project preparation to design the project during Country Identification Workshops and Regional Meetings, and will be formalized to further assist project implementation. During project preparation, TWGs have identified PDOs and project development indicators (PDIs); activities under the Project; and necessary resources. During implementation, TWGs will continue to assist the development of project activities, including preparing terms of reference and identifying the specific needs in goods, training and technical assistance, and providing technical specifications for goods to be procured under the Project. Participating governments have been asked to proceed with the official designation of members of these intersectoral Technical Working Groups, whch should include representatives from key public sectors such as health, justice, interior, transport and Drug Control Agencies; and NGOs and private sector representatives. The Government of Kazakhstan has done so by appraisal. AlDS Centers will serve as a link between the RPSC and the TWGs. The TWGs will receive assignments from the RPMU; will closely coordinate their work with Country Coordinators, Component Coordinators and procurement officers; and will report to the RPSC and RPMU as needed. TWG staff time for work carried out at the country level will be part of the Governments contribution to project financing. Table 9. Policy Areas that will be addressed under the Project Policy Area Create a regulatory environment favorable for prevention work with most vulnerable groups, and implementation of prevention and control interventions. Improve the legislative environment for NGOs working on HIV/AIDS. Develop and implement policies for HIV/AIDS education in different settings (health services, prisons system, schools, enterprises, transports, border posts, amy) Improve policies related to medical care and treatment of people living with HIV/AIDS (PLWHA). Provide social protection to PLWHA Intended Changes Remove legal discrimination against most vulnerable groups (IDU, CSW, MSM, Migrants, people living with HN/AIDS) and develop mechanisms for protecting and monitoring human rights violations against these groups Facilitate NGO registration and operation, and develop a system of accreditation of NGOs working on HIV/AIDS control Develophpdate intersectoral strategies and policies Include training on HIV/AIDS into school curricula Enable integration of HIV/AIDS, STI and Narcology interventions and services Support establishment of Centres of Excellence that offer comprehensive and integrated services to the most vulnerable groups on drug use, sexually transmitted infections and HIV/AIDS Develop policies on financing, procurement and use of antiretroviral drugs Ensure inclusion of PLWHA in the national social protectiodsafety programs 38

43 The Project will co-finance updating the Regional and National Strategies, which is being carried out with assistance from UNAIDS. Special emphasis will be placed on harmonization of policies across countries to facilitate an effective regional response and coordinated action on cross-border issues. The subcomponent will focus on harmonization of policies related to the following issues: (i) human rights and anti-discrimination; (ii) decriminalization of risk practices such as drug use, commercial sex work and homosexuality; (iv) medical care and treatment, including policy on procurement and use of antiretroviral drugs; (v) strengthening of health care system and accreditation of NGOs working on HIV/AIDS control; and (iv) social protection of HIV/AIDS patients and their family members. Specifically, the TWGs have identified five areas for further strategic policy development under the Project (see Table 8 above). Sub-component 2: Surveillance and Regional Monitoring and Evaluation Systems. Sentinel and second generation surveillance systems that track drug use, sexually transmitted diseases, HIVAIDS and TB, will be established at the regional level. The upgraded system should be able to: (i) monitor incidence and prevalence of HIV/AIDS and other STIs in each country, including among most vulnerable groups; (ii) monitor AIDS mortality; and (ii) monitor knowledge and risk practices (especially among IDUs and other highly vulnerable groups). In close cooperation with USAID and CDC, the sub-component will support the establishment of sentinel and second-generation surveillance in oblasts not yet covered by this kind of surveillance. In close cooperation with UNAIDS, the subcomponent will also contribute to the development of M&E systems to monitor the regional spread of the epidemic and the impact of regional epidemic drivers such as drug use and migration - and that will enable evidence-based planning and decision-making. The M&E system should be able to provide information on: (i) inputs, processes and outputs of programs financed by Governments, NGOs and international agencies worlung on HIV/AIDS prevention and control; and (ii) outcomes and impact of those programs. Assistance will be provided to improve data collection, analysis, and reporting practices; gaps in diagnostic capacity will be addressed by providing necessary laboratory equipment and supplies, communication equipment and transportation. Assistance will also be provided to national and regional counterparts to develop an overall framework for M&E of individual projects, and national and regional programs. Training on surveillance and M&E will be provided, as well as equipment (computers and software) for further development of surveillance and M&E. Sub-component 3: Human Resources Development. While significant human resources have been developed over the past few years in the public sector and NGO sector, the capacity of these resources varies from country to country, and is in general low. In addition, scarcity of training programs in some of these countries does not allow meeting training needs at the national level. Regional co-operation will allow for increased outputs of training programs by pooling quality-teaching resources at the regional level and achieving economies of scale. The following groups will benefit from training under the proposed Project: 1. NGOs and social workers involved in harm reduction and other outreach programs; 2. Health staff working on HIV/AIDS programs, especially those involved in surveillance; 3. Prison and Drug Control Agencies staff; 4. Staff from Ministries of Health, Justice, Interior, Defense, Transport, and Border Control; and 5. Decision and opinion-makers (e.g., politicians, journalists and religious leaders). 39

44 ~ Information The training of staff, especially from NGOs working with groups at risk, will aim to: 0 Facilitate sharing of experiences at the regional level among organizations with significant practical experience in working with high-risk groups, so that organizations can begin to collect and compile years of local experiences and examples of preventing HlV among risk groups in Central Asia. 0 Facilitate the development of skills-based training programs that will promote practical skills, facilitate rapid applications in direct practice, and transfer of cutting-edge technologies in working with risk groups. 0 Develop a critical cadre of trainers and NGOs that could offer training in their work settings and in their respective countries. The Technical Working Groups have identified the target groups and areas for training under the Project (Table lo). Training will take place at the Schools of Public Health in Kazakhstan and Uzbekistan. Suitable facilities for training are being identified in the Kyrgyz Republic and Tajikistan. Resource Centers will be established to provide training to NGOs and public agencies working with highly vulnerable groups. Assistance will be provided to the NGO community to establish an accreditation system for HIV prevention workers and organizations, aiming at improving the quality of services. Table 10. Training to be provided under the Project Training Area Work with Most Vulnerable Groups Surveillance and M&E 1 Management and education Target Groups NGO and public sector staff that provide preventive, harm-reduction and curative services to most vulnerable groups such as IDUs, CSWs, MSM, prisoners, migrants, trafficked people and youth at risk. Staff of law enforcement agencies (including prison system) worlung with most vulnerable groups. Health sector and prison staff will be trained on epidemiological and behavioural surveillance, and M&E. Laboratory staff will be trained on HIV/AIDS testing and diagnosis. Management staff will be trained on project management and financial management, and M&E. Managers from public services, NGOs and private sector that apply for funding from the Regional AIDS Fund will be trained in planning, project management, budgeting, financial management, and M&E. Opinion-makers will receive information about the epidemic and regional epidemic drivers. The Project will finance costs related to curriculum development; development, publication and dissemination of training materials; travel and subsistence for regional meetings; training of trainers at the regional level; and the establishment of the Regional Prevention 40

45 Resource Network. Training at the national level will be financed by developing partners active in the region (DFID, USAID, GFATM, OSI, etc.). Implementation of this subcomponent will be closely linked and coordinated with the work supported by those organizations. Under the PHRD Grant, a consultant will assist technical counterparts (especially NGOs, AIDS Centers and Schools of Public Health in Kazakhstan and Uzbekistan) in preparing the Central Asia HIV/AIDS Training Plan to be implemented under the Project. Component 2. Central Asia AIDS Fund (total cost US$16.7 million). This component will establish a demand-driven Regional AIDS Fund (RAF) to finance initiatives that will contribute to containing the rapidly growing epidemic of HIV/AIDS and STIs in Central Asia. This grant facility is consistent with the regional scope of the Project and is expected to promote regional cooperation; allow for better coverage of gaps in AIDS-related activities; increase transparency over the use of grant funds; encourage grant applicants from participating countries, through evaluation criteria, to target projects in priority areas; and build local capacity to develop and manage projects. The grant will finance goods, consulting services, training, resources for sub-projects, and operating costs. Participating Governments, and IDA and DFID Grants will finance the Regional AIDS Fund. Eventually, other sources of funding will co-finance this grant facility (other multilateral and bilateral agencies, private sector). Government agencies, public organizations, NGOs and the private sector will be eligible to prepare sub-project grant proposals, and seek financing from the Regional AIDS Fund on a competitive basis. Who is eligible to participate? a a a 0 Public sector agencies, NGOs and private sector. Newly established NGOs will be able to participate for a first project up to US$5,000. After this, they could apply for small grants <US$20,000. After two successful cycles of small grant implementation, they will be able to apply for a large grant. Newly established NGOs could apply for a large grant at any time with an established eligible partner. Individual countries and entities could apply for small grants, while two or more organizations and/or countries should submit proposals for large grants. International participation of NGOs and international organizations is possible in cooperation with regional organizations. Grants must be used to finance the field costs for implementation of the subproject. The Regional AIDS Fund will technically and fmancially support cost-effective initiatives in the field of HIV/AIDS prevention and control that will cover mobile populations and regional epidemiological hotspots along regional corridors and borders. It will provide incentives for greater regional cooperation, as well as for cooperation among the public, private and NGO sectors; and between different public services (e.g., AIDS Centers and prison sector). Therefore, proposals jointly submitted by organizations from two or more countries, and by different sectors, will have more chances of obtaining funding than proposals submitted by just one country, one sector or one agency. Grants will be awarded according to criteria specified in the POM. Proposals submitted by several countries, as well as by different sectors (for example, public sector and NGO) will be 41

46 encouraged. Projects targeting highly vulnerable groups, as well as those addressing a crossborder issue, will also be given priority. What types of sub-projects will be financed? Sub-proj ects covering mobile populations, and epidemiological hotspots, especially along regional corridors for transport of people and goods, and on regional borders Voluntary Counseling and Testing Harm Reduction for IDUs, including in prisons Prevention and treatment of STIs among groups at risk Condom distribution among high-risk groups and social marketing of condoms Drug use prevention and treatment IEC targeted at most vulnerable groups (IDU, CSW, MSM, Prisoners, trafficked people and migrants) IEC for adolescents and pregnant women IEC for military, border guards and law enforcement Youth Friendly Clinics Interventions in the Workplace Vertical Transmission Prevention Programs Social and palliative care for PLWHA Support for orphans and street children Advocacy for PLWHA and support of human rights Studies, surveillance, M&E and training on prevention and control of HIV/AIDS, including surveys, seminars and study tours The Fund will manage two schemes: a large grants scheme and a small grants scheme. Initially, both schemes will be managed by the RPMU; the small grants scheme will be decentralized to the country level for management by national coordinating bodies as soon as these are established and active. The Fund will organize promotiordinformation dissemination campaigns and will call for large and small grant proposals twice per year. Technical assistance will be available to support sub-project preparation, development of monitoring & evaluation systems, and appraisal of sub-projects. A Regional Technical Evaluation Committee (RTEC) for evaluation of proposals submitted to the Regional AIDS Fund will be established by the RPMU for each grant round. The RPMU will maintain a roster of regional experts from the public and private sectors and from NGOs to form the evaluation committees. The RTEC will be established by the RPMU for each grant round (or altematively for one year), drawing experts from the roster. The RTEC will have equal representation of experts from each participating country, and representatives from UNAIDS and DFID. The RTEC will use video and e-conferences for exchange of information and discussion of sub-project proposals and will meet at least twice a year for approximately 10 days for final evaluation. The process of selection and organization of the RTEC is further detailed in the POM. 42

47 How will financing flow under the CARAF? 0 Two windows of investment: small and large grants. Ceilings on investments by project type: <= US$20,000 small grants, >US$20,000 large grants. 0 The main allocation principle will be technical merit of the submitted project proposal. 0 The aggregate amount of small grants will not exceed 20% of the funds available for the RAF grants. 0 Large grants funds will not be pre-allocated by country. 0 Small grant funds will be initially pre-allocated by country based on a per capita and risk adjusted basis and GDP/health expenditures per capita; RPSC will revise the allocation annually, depending on country performance. 0 There will be an estimated US$1 million for technical assistance to support subproject preparation, implementation, supervision and M&E. How will sub-projects be evaluated? a The RPMU will screen sub-project proposals against a set of eligibility criteria (detailed in the POM) and submit eligible ones for RTEC consideration. 0 The RTEC will: o evaluate sub-proj ect proposals in line with pre-established criteria for small and large grants presented in Table 11; o prepare ranking lists for small grant proposals (<US$20,000) and large grant proposals based on their scores against the criteria; and select proposals with the highest scores and with an aggregated cost not exceeding the amount of funds allocated by the RSC for the current round. The score of the selected projects cannot be less than 50 points; o approve the selected small grant proposals and advise the RPMU to sign the grant agreement; o prepare an evaluation report recommending selected large grant proposals for approval by the RPSC. 0 The RPMU will: 0 0 o o sign Grant Agreements for approved small grants; submit approved large grant proposals with RTEC recommendations for RPSC consideration and facilitate the approval process; The RPSC will make final decisions on approval of large grant proposals. No conflict of interest is allowed. This implies that any individual and/or organization participating in the evaluation process will not be eligible to apply and receive grant fmancing in that round. 43

48 Table 11. Criteria for Selection of Sub-projects under the Central Asia AIDS Fund o o Social assessment Technical assessment o Institutional assessment LARGE GRANTS o Social assessment o o o o Technical assessment Institutional assessment Financial and economic assessment Sustainability Clearly identifies beneficiaries, targets mobile groups and is poverty-oriented. Clear and well-prepared time-based proposal targeted to eligible areas and consistent with National ADS Program policies. Additional areas to be evaluated include: complements existing donor activities and includes M&E indicators. Quality of the proposal, organization s previous experience and I proposed staff qualifications. Clearly identifies beneficiaries, targets mobile groups and is poverty-oriented. Clear and well-prepared time-based proposal targeted to eligible areas and consistent with National AIDS Program policies. Additional areas to be evaluated include: inter-country proposals; joint participation of public and private sectors; complements existing donor activities and includes M&E indicators. Quality of the proposal, organization s previous experience, proposed staff qualifications and institutional resources contributed. Assesses the cost per beneficiary and co-financing participation. Proposal clearly identifies how recurrent costs will be financed and outlines long-term impact of Project. Component 3. Project Steering, Management and Evaluation (total cost US$2.8 million). At the Regional Meetings in June and September 2004, country participants agreed that a RPMU will be established, and regional staff will be contracted on a competitive basis. Other options for project management, such as contracting out to a regional or international finn, were rejected. The RPMU staff will comprise a core staff of 15 people, including: Executive Director; Procurement Officer; Financial Manager; AccountantDisbursement Specialist; Project M&E Officer; Component Coordinators; four Country Coordinators; Promotion Officer; and Team Assistant. The RPMU staff is being contracted to work with the Kyrgyz HR PMU for the duration of the PHRD Grant, but will move to Almaty for project implementation. All RPMU staff have been selected, and the Project Executive Director was contracted before appraisal. Other key staff (Procurement Officer and Financial Management Specialist) were contracted before Board; and remaining staff will be contracted before effectiveness. Participating Governments agreed that the RPMU will be located in Almaty for a number of reasons: (i) this is not a capital city; (ii) many international partner organizations have their regional headquarters in Almaty; and (iii) Almaty is well-connected to other regional centers, and current visa regulations in Kazakhstan facilitate easy travel for nationals of participating countries. Three locations are being considered by the Government of Kazakhstan for RPMU location: (i) the School of Public Health (ii) the Republican Sanitary-Epidemiological Services (SES), where the Republican AIDS Center is located; and (iii) the Almaty AIDS Center. There will be one Country Project Coordinator (CPC) and/or Unit (CPU) in each of the four participating countries. These coordinators could eventually be assisted by other staff, as needed, 44

49 or subcontract fiduciary functions when necessary. The CPC will be responsible for day-to-day project management and liaison with the counterparts, coordination of activities of country technical working groups and will represent the Regional AIDS Fund in the respective country. The CPC will also be responsible for coordination and management of decentralized fiduciary activities (e.g., accounting, disbursement and procurement-related activities) originating from country-based activities as agreed with the RPMU, and under the overall guidance of the RPMU financial manager and procurement specialists. The CPC will be responsible for the management of the advance accounts for country-level activities in the respective country. The CPC will operate in the context of AIDS Centers, and subcontract existing management structures, such as PMUs of Bank-financed projects or GFATM Implementation Units, to carry out fiduciary activities as needed. This component will finance RPMU staff time, office equipment and h iture, technical assistance, training and operating costs of the RPMU, support to operating costs for the RPSC and TWGs, and staff time and operating costs for the CPCs. The component will also finance Project M&E System and MIS, including computerized Financial Management and Accounting System, and carrying out of annual financial audits. 45

50 Annex 5: Project Costs CENTRAL ASIA AIDS CONTROL PROJECT (US$ million) Project Cost By Component and/or Local Foreign Total Activity' 1. Coordination, Policy and Capacity Building Regional AIDS Fund Project Management Total Baseline Cost Price Contingencies 'Numbers may not add due to rounding. 46

51 Annex 6: Implementation Arrangements CENTRAL ASIA AIDS CONTROL PROJECT 47

52 Project Implementation Arrangements Implementing Agencies. The Project will be implemented by public agencies, NGOs, and the private sector in participating countries under the supervision of the RPSC and the management of the RPMU, including the four CPCs. These agencies and NGOs will receive subgrants under the Regional AIDS Fund (RAF), based on criteria and contracts signed with the RPMU. Component 1. Regional Coordination, Policy Development and Capacity Strengthening. Participating Governments (Ministries of Health, Justice and/or Interior) will implement policy development activities. Ministries of Health, with technical assistance from the U.S. Centers for Disease Control (CDC), will implement surveillance and monitoring and evaluation of the epidemic. Training under this component will take place in the AIDS Centers in participating countries and Schools of Public Health in Kazakhstan and Uzbekistan. Suitable institutions for training under the Project are being identified in the Kyrgyz Republic and Tajikistan. Videoconferencing facilities will be installed at the main training sites to facilitate regional coordination and training. Component 2. Regional AIDS Fund. Under the supervision of the RPSC, and with technical assistance from the TWGs, the RPMU will manage the grant facility, and supervise the use of grant funding. The RPMU will disburse funds to public services, the private sector and NGOs that will work with vulnerable and highly vulnerable groups, and people living with HIV/AIDS (PLWHA). NGOs and public and private sector agencies will maintain bank accounts for Regional AIDS Fund grants, and will be responsible for disbursement of funds in accordance with contracts signed with the RPMU. Such NGOs and agencies will be subject to assessment by the RPMU prior to receiving funding for the first time. A Regional Project Steering Committee comprising high-level representatives of participating Governments (deputy prime minister level) and a representative of UNAIDS will lead and oversee the strategic direction of the Project and project implementation, and monitor and evaluate attainment of its objectives. The RPSC will act as the coordination mechanism at the regional level. The RPSC will steer project implementation, and help address complex issues that may arise during project implementation and that cannot be resolved at the individual country level. In addition, the RPSC will act as policy forum to reflect the views and concerns of the individual countries in policy development. This approach will promote the goal of increased policy harmonization among Central Asian countries. The Chair of the RPSC will rotate annually among the countries, and the RPSC will meet twice a year in the context of CACO meetings. Moreover, the RPSC will establish Technical Working Groups and will collaborate closely with the RPMU, which will act as the RPSC Secretariat. Main functions of the RPSC: 0 Ensure adequate political support for the Project; 0 Approve annual work plans; 0 Approve grant proposals; and 0 Supervise and evaluate HIV/AIDS control project implementation. Technical Working Groups (TWGs) have been preparing the proposed Project. These TWGs include representatives from different Ministries (Health, Justice, Interior, Transport, Education, and Information), Drug Control Agencies, NGOs and the private sector. During project implementation, TWGs will continue to assist the development of project activities, 48

53 including preparation of policy amendments for approval by the RPSC; providing expert assessment of sub-project grant applications to the Regional AIDS Fund; and providing terms of reference and technical specifications for services and goods to be procured under the proposed Project. TWGs will be established at the request of the RPSC, but will be expected to comprise technical experts from the Member State s Government and/or non-governmental agencies. The Government of Kazakhstan has already designated the Kazak members of the TWG. Each TWG will include two or three experts from each country. Initially, the following four technical workmg groups will be established: (i) human rights, with a focus on policy issues related to drug decriminalization, protection of CSWs, MSMs and PLWA, and patient confidentiality; (ii) migration and prison system, working on support/protection of prisoners, finetuning legislation and regulation for migrant population with border guards, police and other law enforcement agencies, and discussing and developing policies for migrant population protectiodassistance; (iii) surveillance and clinical issues; and (iv) monitoring and evaluation (M&E). Other TWGs will be established based on the specific needs determined by the RPSC under the annual implementation plan. Work in the technical groups is envisioned to be part time. Country representatives in the TWGs should have close links with national level activities and be able to influence and synchronize regional and country level work in certain technical areas. Technical groups will meet twice a year to report on progress and to synchronize approaches. Regular working meetings of TWGs and some operational expenses will be financed by the Project. Main Functions of TWGs: 0 Select sub-project grant proposals 0 Provide techcal advice to the RPSC and RPMU in elaboration of project procedures and documents, and project implementation. At the Regional Meetings, in June and September 2004, country participants agreed that a Regional Project Management Unit would be established, and regional staff would be contracted on a competitive basis. Other options for project management, such as contracting out to a regional or international firm, were rejected. Core RPMU staff have been selected, and the Project Executive Director was contracted before appraisal. Other key staff (Procurement Officer, and Financial Management Specialist) were contracted before Board; and remaining staff will be contracted before effectiveness. The Regional Project Management Unit will have three functional units with the following responsibilities: Administrative, Procurement, and Financial Department, responsible for management of fiduciary tasks, procurement, logistics and administration. Program Department, responsible for project management. This unit will coordinate day-today management of project activities to support policy development and institutional strengthening; implementation of the demand-driven grant facility, particularly the processing of grant applications; provision of administrative and secretarial support to RPSC and TWGs; and management of the M&E system. Information, Monitoring and Evaluation Department. The RPMU will be responsible for: (i) information, dissemination and public relations; (ii) development and operation of the MIS that will carry out M&E of the Project; (iii) reporting to RPSC, Governments of the participating countries, IDA and development partners; and (iv) support to and facilitation of communication and coordination among involved institutions. 49

54 ~ Executive Director I r I 1 Administration Procurement FMS, Chief Accountant, Secretary Program Department Public Health Specialist Coordinators for Components 1 and 2 M&E Specialist Communication Kazakhstan Country Coordinator Kyrgyz Republic Country Coordinator Tajikistan Country Coordinator Uzbekistan Country Coordinator Core staff of the RPMU will comprise the Executive Director, two Component Coordinators, one Monitoring and Evaluation Specialist, one Communications Officer, one Financial and Administrative Manager, one AccountantDisbursement Specialist, Disbursement and Procurement Officers/ Assistants, and support staff for translation, Information Technology (IT), and office administration. Based on the strategic directions and goals agreed by the RPSC, the RPMU will manage implementation of project activities in accordance with the Project Implementation Plan (PIP), operate the project accounting and financial management system, including disbursement, and manage overall procurement planning and processes. Furthermore, the RPMU will liaise and coordinate with CPCs on a day-to-day basis. Further activities will comprise regular reporting, and monitoring and evaluation of project implementation progress. Country Project Coordinators. For management of project activities in the participating countries, each country has selected a CPC. The Coordinator can be eventually assisted by other staff as needed, or subcontract fiduciary functions when necessary. The CPC will be responsible for day-to-day project management and liaison with the counterparts and the RPMU, coordination of activities of country technical working groups, and will represent the Regional AIDS Fund in the respective country. The CPC will also be responsible for coordination and management of decentralized fiduciary activities (e.g., limited accounting, disbursement and procurement-related activities) originating from country-based activities as agreed with the RPMU, and under the overall guidance of the RPMU financial manager and procurement specialists. The CPC will be responsible for the management of the advance accounts for country-level activities in the respective country. The CPC will operate in the context of AIDS centers, and subcontract existing management structures, such as PMUs of other Bank-financed projects or GFATM Implementation Units, to carry out limited fiduciary activities as needed. 50

55 Annex 7: Financial Management and Disbursement Arrangements CENTRAL ASIA AIDS CONTROL PROJECT The Regional Project Management Unit, to be located in Almaty, Kazakhstan, will manage the project. This unit has not been established although key staff - Project Director, Financial Manager and Procurement Specialist, have been contracted. An arrangement has been made with the Project Management Unit of the Kyrgyz Health Reform Project to provide financial management and procurement support to the project, in the interim period, until the RPMU is established, and financial management arrangements acceptable to the World Bank are in place. An assessment of the financial management arrangements of the Kyrgyz Health Reform PMU was undertaken in February 2005 to determine whether financial management arrangements in place were acceptable to the Bank. These arrangements include the systems of budgeting, accounting, financial reporting, auditing, and internal controls. The RPMU, to be established with a legal status, will be the main implementing agency on behalf of participating countries, under the umbrella of the Central Asia Cooperation Organization (CACO). It will install a computerized accounting system, using an appropriate accounting software that ensures full automation and data integrity. Conclusion The Kyrgyz HR PMU is currently implementing the IDA-financed Health Reform Project, and has been managing a PHRD grant for the preparatory phase of the Central Asia HIV/AIDS Control Project. The Kyrgyz HR PMU has developed and maintained a financial management system that meets IDA requirements. Taking into consideration the financial management systems and processes currently in place, the financial management arrangements of the Kyrgyz HR PMU are capable of recording all transactions and balances, supporting the preparation of regular financial statements, and safeguarding the assets of the project. Country Financial Management Issues The countries participating in the project are Kazakhstan, Kyrgyz Republic, Tajikistan and Uzbekistan. Country Financial Management Assessments (CFAA) have recently been carried out in these countries, and the reports show a common pattern of weak public sector financial management, including public sector budgeting, accounting, reporting and auditing. There is also the perception of pervasive corruption at various levels of the economy, which are been addressed through various interventions with assistance of development partners. These include IDA-financed GSAC/GTAC in the Kyrgyz Republic, Public Finance Management Reform Project in Uzbelustan, etc., which are expected to assist the governments to strengthen the public sector to ensure effectiveness, accountability and transparency in the use of public resources. Overall, the status of the accounting profession in the region is low; and the use of national accounting standards is widespread, with little progress towards adoption of International Accounting Standards (IAS) or International Public Sector Accounting Standards (IPSAS) due to inadequate capacity, both in the public and private sectors. Government accounting remains based on the Soviet accounting system using double entry bookkeeping and a quasi accrual system. Most Project Implementing Agencies use the cash basis of accounting, which is not in accordance with US, but which in many cases is sufficient for proper accounting. Internal audit is only found in a few institutions; while external audit is practiced by individuals and a small number of audit firms. Most audits required by international organizations traditionally have been performed by 51

56 the most important international fmsl, mostly with staff based in Almaty, Kazakhstan, and Tashkent, Uzbekistan. The Bank has periodically conducted reviews of audit firms to determine their acceptability to audit Bank-financed projects. Most World Bank-financed projects in the region have been managed by stand alone project implementing units (PIUS), partly as a way of managing fiduciary risks associated with weaknesses in public financial management structures. Under this arrangement, fiduciary safeguards and financial management in Bank-financed projects is arranged outside the national institutions of accountability using stand-alone project implementation units. Implementation Arrangements On a day-to-day basis, project activities will be managed by the RPMU, consisting of full-time staff who are hired as consultants. The RPMU will be headed by the Executive Director, and would include specialists in Procurement, Financial Management, Health, M&E, Information Technology (IT) and administrative staff. The RPMU would be responsible for developing and updating the consolidated PIP, ensuring that project activities are implemented according to the legal documents, procurement plan and operations manual, reporting on project progress to the RPSC, and the World Bank, ensuring that procurement of goods and services is done in a timely manner and in accordance with World Bank guidelines, managing project funds, maintaining accounts, getting the accounts audited, ensuring adequate budget provisions for the proposed Project in the national budgets, facilitating the work of consultants, reviewing consultant outputs, etc. At the country level, Country Project Coordinators will be responsible for coordination and management of limited fiduciary activities (e.g., accounting, disbursement, including management of advance accounts, and procurement) originating from country-based activities as agreed with the RPMU, and under the overall guidance of the RPMU financial manager and procurement specialists. The CPC will be supported in the management of these activities by existing country-level management structures, such as PMUs of other Bank-financed projects or GFATM Implementation Units, to cany out limited fiduciary activities as needed, under the supervision of the Regional Financial Manager. Strengths and Weaknesses The RPMU does not exist yet, but key staff have been selected and contracted under the PHRD Grant for preparation of the proposed project. Staff are currently attached to the Kyrgyz Health Reform Project Management Unit (HR PMU) that is implementing an IDA-financed Health Reform Project and the PHRD grant, during which time they will gain familiarity with World Bank procedures for financial management, disbursement and procurement. A major weakness is that financial management and internal control procedures have not been set up. As a result, financial management arrangements have not been reviewed to evaluate accounting and internal control systems the existence of written standards and procedures, including clear responsibilities and levels of authority, familiarity of staff with Bank procedures, audit arrangement and financial reporting system. As an interim measure, the Kyrgyz Health Reform PMU has been contracted to provide financial management support to the project, until the RPMU has established financial management arrangements acceptable to the Bank. Staffing of the AccountingIFinance Function The RPMU Procurement, Financial and Administrative Unit would have a Financial Manager (FM) and an Accountant /Disbursement Specialist. The FM would be responsible for all * Deloitte & Touche, Ernst & Young, KPMG and PricewaterhouseCoopers. 52

57 aspects of the financial management and accounting, including managing the Special Account and advance accounts to be opened in the participating countries. The FM will be assisted by the accountant/disbursement specialist who would be responsible for disbursement functions, as well as project accounting - maintaining books of accounts, reporting day-to-day transactions and preparing accounting reports and financial statements, as well as monitoring financial flows to the project. The FM will be involved in the budget preparation for the Project, will have primary responsibility for the quarterly Financial Monitoring Reports (FMRs), and prepare annual financial statements for audit. The FM will also review reports submitted by NGOs, and private and public sector agencies involved in implementation of sub-proj ects, through the grant scheme under the Regional AIDS Fund (RAF) and will conduct periodic field reviews of these agencies and NGOs. The RPMU FM staff will gain some experience with the PHRD-financed preparation activities, and will establish key internal control mechanisms in the application and use of funds. However, they will need additional training on World Bank financial management and disbursement requirements, preferably in regional training programs. Accounting and Internal Control Systems The financial management sections of the POM, being developed for the Project, will reflect the RPMU structure as well as the flow of funds to support activities under the AIDS fund component. Accounts and records for the Project will be maintained by the RPMU, which will operate and maintain a financial management system (FMS) capable of generating FMRs in accordance with formats agreed with the Bank. Books of accounts for the Project will be maintained by the RPMU based on International Accounting Standards (IAS). The RPMU FM will be responsible for overall Project financial management, maintenance of books and accounts for the Project, preparation and dissemination of financial statements and FMR, and timely audits of the Project. The RPMU will generate and maintain accounting vouchers and supporting documentation for expenditures on all activities of the Project, and will document the accounting transaction information flow. Funds will be transferred from the Special Account to pay for eligible expenditures in accordance with the Financing Agreement. Sub-project implementing agencies (grantees), NGOs, public and private agencies will be responsible to the RPMU for maintaining accounts and records for all funds received under the AIDS fund component. These accounts and records will be subject to periodic review by the RPMU, and may be subject to audit at the discretion of the RPMU. The CPCs will be responsible to the RPMU for maintaining adequate records of transactions through the advance accounts to be monitored by the RPMU, and will submit regular reports to the RPMU with every request for replenishment of the advance accounts. Financial Monitoring and Reporting Quarterly FMRs, including Financial Statements, Physical Progress Reports and Procurement Reports, in formats acceptable to IDA, would be generated from the financial management system within 45 days of the end of each quarter. The first quarterly FMRs would be submitted after the end of the first full quarter after disbursements commence. Formats of the annual financial statements and the FMRs will be incorporated in the Financial Management section of the Project Operations Manual. The FMR should include: (a) Project Sources and Uses of Funds, (b) Uses of Funds by Project Activity, (c) Output Monitoring Reports (in tables and narrative form), and (d) Procurement Reports. Other supporting schedules may include, but would not be limited to, Special Account Statement plus Local Bank Account Statement, etc. The software to be installed would generate the FMR, incorporating all components, categories and performance indicators which are acceptable to IDA. Sample reports to be produced will be reviewed by IDA before Board approval. In addition to the FMRs to be submitted to the Bank, all 53

58 implementing agencies (grantees) will submit regular reports to the RPMU, in form and content to be agreed with the RPMU at the time of sub-grant approval. These reports will include financial progress reports and physical milestones, and would form the basis of subsequent tranche releases to the grantees. All reports submitted by grantees and CPCs will be consolidated by the RPMU before submission of FMR to the Bank. Planning and Budgeting The RPMU will prepare annual budgets in line with the Procurement Plans, and these budgets would form the basis for spending and requesting funds from the respective Governments for counterpart contribution, if any. These budgets, prepared in accordance with the FMR format (disbursement categories, components and activities, financiers, account codes, and by quarter), should establish physical targets to ensure linkage between expenditures and physical progress, and proper comparison between actual and budgeted performance. Review of actual results against the budget will be a key managerial tool for monitoring financial performance of the Project. The financial management section of the POM will prescribe the appropriate manner for preparing budgets to satisfy the respective governments' and World Bank requirements. A detailed budget for the first full year of project implementation, broken down by quarter, would be prepared before the Grant becomes effective. Planning by the implementing agencies (grantees) under the Regional AIDS Fund would be in the form of framework agreementdcontracts that would form the basis of fund releases to the agencies. CPCs will prepare budgets for country-level activities, and these will determine the size of the advance accounts. Audit Arrangements There will be comprehensive annual audits of the project financial statements, covering all aspects of the project, including country-level activities managed by the CPCs. The RPMU may also require activities of the intermediary implementing organizations, NGOs, public and private sector agencies, to be audited as part of the overall audit of the project. The audits would be performed by independent private sector auditors acceptable to IDA, and in accordance with ISA, and the World Bank's guidelines on auditing as stated in the guidelines on Annual Financial Reporting and Auditing for World Bank-financed Activities (June 2003) and other guidance that might be provided by IDA. The auditors' terms of reference (TORS) will be prepared by the RPMU and cleared by IDA before the engagement of the auditor. They will include both the audit of financial transactions and an assessment of the operation of the financial management system (FMS), including a review of the internal control mechanisms. The annual audit reports would be in a format in accordance with ISA and World Bank guidelines, and they will include a single opinion on the financial statements of the RPMU, incorporating the project financial statements, including Special Account/Advance Account Reconciliation, and SOE Withdrawal Schedule, as well as a Management Letter. The audit reports will be submitted to IDA not later than six months after the end of the fiscal year to which they relate. The cost of the audits would be eligible for financing from the IDA Grant. The RPMU will provide the auditor with full access to project-related documents and records and with the information required for the purpose of the audit. Sample TORS for the Project audit are to be included in the POM. Disbursement/Flow of Funds Arrangements The proceeds of the IDA Grant will be disbursed to the CACO over a period of five years, or for such longer period as would be agreed with IDA. Grant funds will initially flow to the Project via disbursements to the Special Account (SA) opened by the RPMU. 90-day 54

59 Advance Accounts will also be opened in the respective participating countries under similar terms and conditions as for the Special Account. Disbursements will follow the transaction-based method, i.e., the traditional Bank procedures (reimbursements with full documentation, Statements of Expenditure (SOEs), direct payments and special commitments). Withdrawals from the Grant Account, under transaction-based disbursement, would be requested in accordance with the guidance provided in the Disbursement Letter. Withdrawal applications may be signed by an authorized representative of the Grant Recipient, or the Executive Director, with written delegated authority. The Financial Manager would ensure completeness and accuracy of all withdrawal applications and would append her/his signature as part of the internal control procedures. Funds to intermediary implementing organizations (grantees) will be released on the basis of a framework agreementkontract, with specific criteria for initial and subsequent release of funds, mainly financial progress reports and physical milestones. Should the Project migrate to report-based disbursement, the maximum balance that may be maintained on the Special Account will no longer be limited to the authorized allocation. Transfers from the Grant Account to the Special Account will be made on a quarterly basis, in accordance with the Recipient s (RPMU s) forecast of expenditures to be made via the Special Account during the subsequent two quarters. Requests for replenishment will be supported by Expanded FMRs (regular FMRs plus a number of additional schedules) and copies of Special Account bank statements. The project will not migrate to report-based disbursement until such time as the Bank is satisfied that the Recipient (RPMU) and all CPC s have good budget monitoring capability to accurately forecast expenditures, and the Grant Agreement has been amended accordingly. Allocation of Grant Proceeds The proposed Project has been designed to be implemented over a five year period. The disbursement arrangements are based on IDA S appraisal of the financial management capacity of the implementing agency as well as the experience and lessons leamed from similar Bankfinanced projects. The Project Completion Date, by which time all activities should have been initiated or completed, is set for June 30, Grant funds are expected to be fully disbursed by the Project Closing Date of December 3 1, The disbursement categories and amounts and percentages to be financed under each category are presented in Table 12 below: Table 12. Allocation of Grant Proceeds Consultant Services, including Audit, and Training Sub-projects Regional AIDS Fund Recurrent Costs Unallocated 4,408, % 13,025, % 2,072, % 2,500,000 I Total I I I Ths grant does not have country-specific allocations. It will be disbursed to the CACO, and will be managed by the RPMU. Ultimately, funds will be disbursed for activities to be l6 A waiver to OP is proposed, to allow 100% disbursement for all expenditure categories and countries. For further details, see sections D2, D3, D7. 55

60 implemented in the four participating countries. The Project will finance 100% of expenditures. Planned activities will be indivisible, and expenditures cannot be easily attributed to individual countries as this is a project to prevent and control HIV/AIDS at the regional level. In addition, a country-by-country allocation will hinder inter-country co-operation and unnecessarily complicate project management by diverting scarce resources, particularly of the RPMU and small NGOs, to seeking tax funding rather than concentrating on their primary mandate. In Tajikistan, Country Financing Parameters are in place to allow for 100% disbursement for all expenditure categories. Management clearance was obtained for financing 100% of expenditure for international consultants' services including taxes in the Kyrgyz Republic as a deviation from current CFPs. By presentation of the Project to the Board, approval is requested for financing 100% of project expenditure including taxes and duties in Kazakhstan and Uzbekistan as an exception to Bank policy OP and SDPs in these two c~untries'~. This is in line with the precedent set by similar Bank projects in other regions, particularly the Bankfinanced Pan-Caribbean Partnership against HIV/AIDS. In addition, procurement from IDA Grant funds is already tax-exempted by law in Tajikistan" and Kazakhstan". In the Kyrgyz Republic, the project will have to be ratified by the President or Parliament to be exempted from taxes, with the exception of income taxes and social charges for Kyrgyz nationals. In Uzbekistan, the Government will take the necessary steps to authorize tax exemption for procurement under the Grant from taxes and duties prior to effectiveness. Use of Statements of Expenditure (SOEs): Disbursement arrangement under the Project will be carried out using SOE procedures for: (a) goods under US$lOO,OOO; (b) services of consulting firms and individuals costing less than US$50,000; and (c) training, sub-grants and operating costs under such terms and conditions as the Association shall specify by notice to the Recipient. Special Account (SA): To facilitate timely project implementation, the Recipient will establish, maintain and operate, under terms and conditions acceptable to IDA, a Special Account for the Project, denominated in US dollars in a commercial bank acceptable to IDA. Payment of eligible expenditures may be made by the RPMU out of the SA. The authorized allocation is US$2,000,000. The initial deposit into the SA will be US$l,OOO,OOO, until the aggregate amount of withdrawals from the Grant Account plus the total amount of all outstanding special commitments entered into by IDA shall be equal to or exceed the equivalent of SDR 6,000,000. Replenishment applications will be submitted on a monthly basis and will be accompanied by full documentation, including monthly bank statements of the SA, for all items except those eligible for disbursement on the basis of SOEs. All other applications for direct payment or issuance of Special Commitments must be for an amount of 20 percent or more of the SA allocation. Since Project implementation is decentralized, it is expected that there will be small payments to local institutions in the benefiting countries. Therefore, 90-day advance accounts, denominated in US dollars, will be opened in the benefiting countries as required under similar terms and conditions as for the Special Account. These accounts will be maintained by the Country Coordinators at a commercial bank acceptable to the Bank, and will be replenished from the Special Account based l7 CFPs for Kazakhstan and Uzbekistan are in advanced stages of preparation, but are not expected to be in place before Board presentation of the Project. Except for income taxes for local consultants and international consultants residing in Tajikistan for more than 3 months. l9 Except for services provided by non-resident consultants. 56

61 on a 90-day forecast of the projected needs by the country coordinators, to meet eligible project expenditure in the benefiting countries. Disbursement procedures to be used for the Regional AIDS Fund For disbursement purposes, periodic advance (or tranche) payments to grantees can be treated as eligible expenditures for replenishment as long as they are made in line with the provisions of the financinghbproject grant agreement. Supporting documentation for the replenishment would be in the form of a simple summary statement providing details about the payments to the sub-projects, e.g., sub-project total amounts approved, amounts paid to date on account of the sub-project, and the amount of the current payments. For project monitoring and control purposes, reporting and accounting for the advances or tranche payments must be submitted to the RPMU, in a form and content appropriate to the Project. The form and content of the reports may vary from one project to another and could include one or more of inter alia, progress and completion reports, technical inspection certificates, minutes of community meetings, memoranda of receipts and expenses, etc., as determined by the RPMU and reviewed by the Bank. Ths reporting need not be submitted to the Bank, but should be retained by the RPMU and made available for review during regular supervision missions and for audit purposes. Other Disbursement Mechanisms to be considered. When the average level of expenditures cannot justify an increase in the authorized allocation, but there is an unusually large requirement for funds in any given period, the RPMU can utilize other disbursement mechanisms available to all projects, such as: 0 Reimbursement, in cases where the government agency pre-finances sub-proj ect payments. 0 Direct payment, when sufficient funds are not available in the Special Account and waiting for replenishment would unduly delay project implementation. In such case, the Bank would finance a package of sub-project requests through a disbursement directly to the RPMU, or in certain circumstances, directly to sub-projects. 0 Special Commitment procedures, for large procurements of, for example, ARVs. Financial Management Action Plan As stated above, the RPMU has not been established although financial management staff have been selected, and contracted. There is no financial management system in place. During negotiations, an action plan for the establishment of a financial management system acceptable to the Bank was discussed. It was agreed that the financial management action plan would be fully implemented prior to Board approval. Successful implementation of the action plan would enable the RPMU to have in place systems and procedures that will ensure efficient and effective use of project resources, reporting to stakeholders on project performance and safeguarding the resources and assets of the project. Implementation of the action plan will be monitored by the World Bank to ensure that satisfactory financial management arrangements are in place before the RPMU can assume full responsibility for financial management. In the meantime, and as an interim measure, the Kyrgyz Health Reform PMU has been contracted to provide financial management support to the project pending full implementation of the action plan. 57

62 ACTION PLAN FINANCIAL MANAGEMENT SYSTEM Date: January 26,2005 Action Responsibil ity Due Date Remarks Financial Management Procedures described in Operations Manual: Fully documented in the Operations Manual the following procedures: budgeting, accounting and internal control, including description of the accounting system and books of accounts, disbursement and flow of funds (including chart), financial reporting, including FMR and reports by implementing agencies (grantees) and CPCs, auditing - periodic and annual. Present the final draft manual to the Bank for review. Finalize the manual incorporating Bank comments. Establish Project Accounting and Financial Reporting System Develop specifications, identify suitable software and sign contract for software installation Complete installation of the system, including design of Chart of Accounts and draft FMR Provide appropriate training to the RPMU financial manager, accountanddisbursement specialist and procurement specialist on application and maintenance of the installed system. Test the accounting and financial reporting system. Produce draft FMR, based on PHRD Grant, for submission to the Bank for review and comments. NB: Financial Monitoring Reports to be generated by the accounting system. RPMU (Kyrgyz Health Reform PMU) Final draft of the Manual to be submitted to the Bank for review by February 14, Final draft, incorporating Bank comments to be ready by February 25,2005. February 14, 2005 March 1,2005 March 10,2005 March 1,2005 A draft of the Operations Manual was presented during negotiations, but the FM sections are not adequate. These will be updated by the financial manager, with assistance of a consultant. TOR for the computerized project accounting system are being prepared by the Kyrgyz HR PMU, under the PHRD Grant. System should be tested and fully functional before Board Approval Sample reports to be based on activities under the PHRD Grant, would be reviewed by the Bank prior to Board Date. Format and content to be agreed during FM assessment. NB: A consulting fm to be contracted to assist the financial management in establishing a financial management system, including finalization of the FM Sections of the POM. 58

63 Action Responsibil ity Due Date Remarks Staffing of the FM Unit 0 Recruitment of Financial Manager and AccountantlDisbursement Specialist RPMU (housed within Kyrgyz RPMU (Kyrgyz HR PMU) February 4,2005 (for financial manager) and February 28, 2005 for accountant1 disbursement specialist March 4,2005 The FM and AccountantlDisbursement Specialist participate in the development of the project accounting system. Acceptable FM arrangements to be in place by March 15,2005. Financial Management Supervision Plan IDA will conduct risk-based financial management supervision, at appropriate intervals, to monitor progress of project implementation. The financial management supervision will pay particular attention to: (i): project accounting and internal control systems; (ii) budgeting and financial planning arrangements; (ii) review of project's financial monitoring reports, including reports submitted by grantees and CPCs; (iii) review of audit reports, including financial statements and remedial actions recommended in the auditor's Management Letters; (v) review of implementation of progress; and (iv) disbursement management and financial flows, including counterpart funds, etc. 59

64 Annex 8: Procurement Arrangements CENTRAL ASIA AIDS CONTROL PROJECT A. General Procurement for the proposed Project will be carried out in accordance with the World Bank s Guidelines: Procurement under IBRD Loans and IDA Credits dated May 2004; and Guidelines: Selection and Employment of Consultants by World Bank Borrowers dated May 2004, and the provisions stipulated in the Legal Agreement. The general description of various items under different expenditure category are described below. For each contract to be financed by the Grant, the different procurement methods or consultant selection methods, the need for prequalification, estimated costs, prior review requirements, and time frame are agreed between the Recipient and the Bank project team in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. Procurement of Goods. Goods identified for procurement at the time of appraisal are medical equipment and supplies; condoms; vehicles; training equipment and supplies; office equipment and supplies. Procurement will be done using Bank s SBD for all ICB, which shall contain draft contract and conditions of contract acceptable to the Bank. Procurement of Works. The Project includes small works (painting) costing less than US$50,000. Selection of Consultants. Consultant services to be procured under the Project include: technical assistance for program coordination, policy development, surveillance, monitoring and evaluation; training; and for preparation, appraisal and evaluation of grants under the Regional AIDS Fund. Short lists of consultants for services estimated to cost less than US$lOO,OOO equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. Procurement of non-consulting services. Technical services under the Project will be procured in accordance with the appropriate bidding documents, which shall contain draft contract and conditions of contract acceptable to the Bank. Other. The RPMU will delegate the execution of procurement activities to participating sub-project implementation agencies for grants under Component 2. Large and small grants will be awarded according to the basis of community participation terms specified in the POM (Annex 4 includes a detailed description of the Fund). The exact scope of goods and services to be financed under each grant will be identified by the RPMU during sub-project appraisal. Operational Costs. The Project will finance the following for the RPMU: staff salaries, office supplies, office rent, utilities and communications, training associated with implementation of the proposed Project, travel and subsistence, and vehicle fuel and maintenance costs. The RPMU will prepare an annual budget to be agreed with the Association. B. Assessment of the agency s capacity to implement procurement An assessment of the capacity of the RPMU to implement procurement actions for the project will be carried out before Board. The RPMU is staffed by one qualified procurement officer selected on a competitive basis. The assessment will review the organizational structure 60

65 for implementing the Project and the interaction among the project staff responsible for procurement. The RPMU will have overall responsibility for procurement under the large grants program. Procurement for large grants will be conducted by RPMU and sub-project implementation agencies in accordance with Bank procurement guidelines. Procurement for small grants will be carried out by grantees. The main procurement risks which may delay procurement processes and project implementation are the following: (i) Government officials who will be involved in project procurement through Tender Committees may not be familiar with procurement procedures; and (ii) Goods and services required for project implementation may not be widely available at country level. As a result, there may be inadequate competition resulting in higher prices for goods and services, and high transaction costs associated with a large number of small contracts procured. The following corrective measures are recommended: The Bank will organize a one day Project Procurement Launch for RPMU staff and representatives from national agencies that will be involved in the implementation of the proposed Project. The RPMU Procurement Officer and hisher backup should receive training in international procurement at regional procurement workshops and seminars. For all procurement, at the national and local levels, a simple but detailed operational manual should be prepared. The manual should include a detailed description of procurement methods to be followed by the Project, as well as the standard or sample documents to be used for each method. Bank staff will review the procurement efficiency under the Project one year after Grant effectiveness. Thresholds for Procurement Methods. It is recommended that the following thresholds be applied under this Project: Procurement Method ICB: Goods Shopping: Goods Shopping: Works Quality and Cost Based Selection (QCBS) for Consultant Services Quality Based Selection (QCBS) Selection under a Fixed Budget (FBS) Least-Cost Selection (LCS) Selection Based on Consultants Qualifications Individual Consultants Threshold >US$lOO,OOO per contract <US$lOO,OOO per contract <US$50,000 per contract >US$200,000 per contract (Intemational shortlist) <US$lOO,OOO per contract (National shortlist) <US$200,000 per contract <US$200,000 per contract <US$200,000 per contract <US$200,000 per contract 61

66 Suggested Thresholds for Prior Review. Taking into account the high risk rating, the following procurements are subject to prior review by the Bank: (a) All contracts awarded through ICB (estimated to cost more than US$lOO,OOO); (b) All TORS for consulting services, irrespective of the contract value; (c) Contracts with consulting firms and individuals (2US$50,000); and (d) Single source or direct contracting are subject to justification. As project implementation progresses and the RPMU acquires higher procurement capacity, the above thresholds may be revised. Procurement Plan. The Recipient, before negotiations, developed a Procurement Plan for project implementation which provides the basis for the procurement methods. This plan has been agreed between the Recipient and the Bank Team at negotiations on January 26,2005 and is available at the RPMU Office. The Procurement Plan will be updated annually in agreement with the Project Team, or as required to reflect the actual project implementation needs and improvements in institutional capacity. C. Frequency of Procurement Supervision In addition to the prior review supervision to be carried out from Bank offices, post review of procurement actions will be carried out during the periodic supervision missions. Details of the Procurement Arrangement involving international competition. Goods and Works and non consulting services (a) List of contract Packages which will be procured following ICB and Direct Contracting: No Contract Estimated Procur P-Q Domestic Review Expected Description Cost Method Preference by Bank Bid- (yes/no) (Prior / Opening Post) Date Office equipment 120,000 ICB No No Prior 5/10/2005 for secretariats Lab equipment 480,000 ICB No No Prior 2/10/2006 Office equipment 192,000 ICB No No Prior 1/10/2005 for reghat M&E system (b) ICB Contracts estimated to cost above US$lOO,OOO per contract and all Direct contracting will be subject to prior review by the Bank. 62

67 Consulting Services 1 2 No. Description of Assignment 1 Policy harmonization 2 National AIDS coordination 3 Design of regional Estimated Selection Review Expected cost Method by Bank Proposals (Prior / Submission Date Post) 120,000 CQ Prior May ,000 CQ Prior April ,000 FBS Prior April TA for M&E system 120,000 I CQ Prior June development Training for NGOs 552,000 QCBS Prior July 2005 Curriculum development 120,000 CQ Prior August 2005 Sub-project preparation 360,000 QCBS Prior May 2005 Sub-project evaluation 240,000 QCBS Prior Sep 2005 (b) Consultancy services estimated to cost above US$50,000 per contract and single source selection of consultants will be subject to prior review by the Bank. (c) Short lists composed entirely of national consultants: short lists of consultants for services estimated to cost less than US$lOO,OOO equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. 63

68 Annex 9. Economic and Financial Analysis CENTRAL ASIA AIDS CONTROL PROJECT The HIV/AIDS epidemic is a new challenge in the region. The private sector in health in Central Asia is just emerging and has limited incentives and capacity for engaging in HIV/AIDS prevention and control because of stigmatization, the risk and marginalized nature of HIV/AIDS patients, and their low ability to pay. This market failure justifies public investment in HIV/AIDS prevention and control. On the other hand, prevention and control of STI and infectious diseases are public goods. Given the concentrated stage of the HIV/AIDS epidemic in the region and the positive externalities of addressing STIs and TB, project benefits for society at large considerably outweigh project costs. The economic and financial analysis is based on projections of the HIV/AIDS epidemic and the estimated benefits that would be derived from the positive effect of the preventive activities under the proposed Project. Project costs and benefits are estimated for the 10 year period starting from the Project inception year (2005) until All costs and benefits are calculated in 2003 prices and presented in US Dollars. The discount rates applied are 4 and 10 percent respectively. The Project financial (direct) and economic (total including indirect) costs and benefits are measured by the net present value (NPV) and the internal rate of return (IRR). Table 14. Summary Costs and Benefits of the Project PV at 4% discount rate PV at 10% discount rate Economic Financial Economic Financial Analysis Analysis Analysis Analysis Benefits Costs20 Benefit - Cost Ratio Net Benefits IRR $237,424,368 $60,198,140 $17 1,524,933 $49,14 1,199 $37,56 1,788 $37,56 1,788 $31,663,486 $31,663, : : : 1 1.6: 1 $199,862,580 $22,636,352 $139,86 1,448 $17,477, % 63% 128% 54% The Project is estimated to save a total of 69,000 years of life over 10 years. As shown in Table 14, the NPV of the project investment is US$38 million and US$32 million discounted at 4 and 10 percent respectively. The NPV of the total benefits is US$237 million discounted at 4 percent, yielding a benefit-cost ratio of 6.3 to 1. Even with a 10 percent rate, the project is estimated to yield US$172 million in benefits, with a benefit-cost ratio of 5.4 to 1. The benefitcost ratio increases further in a longer time perspective although the problem of attaching monetary value to human life affects the precision of such economic estimates. The net financial impact of the project over 10 years is US$27 million, implying that direct health sector savings exceed recurrent costs incurred by the Project. The PV of net financial benefits to the health *' Total project costs for the Economic Analysis have been calculated from the investment costs of US$ million plus incremental costs for maintenance for a period of 10 years after project start. 64

69 sector of recipient countries is US$23 million and US$17 million discounted at 4 and 10 percent respectively. Internal Rates of Return (IRR) are 63 and 54 percent respectively. Main Assumptions The main assumptions of the economic analysis are the following: Annual population growth rate in the region remains 0.9 percent from 2003 to 2010, and 0.6 percent from to 20 14; The regional Total Fertility Rate (TFR) decreases from 2.7 in 1999 (UN Population Division) to 2.5 in 2014; Life Expectancy (LE) rises from 68 years in 1999 (UN Population Division) to 70 years in 20 14; Sexual contacts: IDUs have 4 new partners a year, 50 percent of MSM are married (Le., have female partners), and clients of SW have 2 new partners a year; HIV prevalence in the region is 0.01 in 1999, 0.03 in 2001 and acheves saturation level for the population groups at high risk in 2010 in the absence of the Project: IDUs living with HIV rises by 50 percent, MSMs - by 40 percent, CSW and their clients - by 30 percent, MTCT - by 15 percent, prisoners - by 15 percent. The number of IDUs living with HIV/AIDS rises from 139 thousand in 2005 to 287 thousand in 2014, MSM - from 38 thousand to 96 thousand, CSW and their clients - from 3 1 thousand to 70 thousand, prisoners - from 4 thousand to 11 thousand; Activities funded by the RAF cover targeted population on accelerated scheme: 10 percent in the first year, 25 - in the second year, 40 - in the third year, 55 - in the fourth year, 60 - in the fifth year, and remain at 60 - until New HIV cases are prevented in 40 percent out of 60 percent of covered population at high risk; AIDS deaths rise from less than 550 in 2005 to 50 thousand in 2014 without the Project. The Central Asia AIDS Control Project reduces AIDS deaths by 5 percent: AIDS deaths averted an increase from less than 100 in 2005 to 10 thousand in 20 14; The Perinatal Transmission Rate remains constant during the project life cycle at 32 percent; LE after AIDS onset is expected to be 2 years with 67 percent of infants with AIDS dying in the first year. Project costs and benefits Two types of costs and benefits flows are assessed: direct and indirect. Direct costs and benefits are associated with institutions involved in prevention and treatment of HIV-AIDS cases, whereas indirect costs and benefits are associated with risk groups and society at large. Table 18 illustrates project costs and benefits. Direct costs include investment costs, i.e., project funds and recurrent costs. Recurrent costs, which consist of operating and maintenance expenditure for the equipment purchased by the project, are estimated at 10 percent of investment costs. The total project cost is US$47 million; discounted at 4 and 10 percent, the PV of total costs is US$38 million and US$32 million, respectively. Total project benefits are US$301 million; the discounted PV of benefits is US$237 million and US$172 million. The Project would save an estimated US$70 million of health expenditures due to prevented HIV cases. Discounted at 4 and 10 percent the PV of these direct benefits is US$60 million and US$49 million, respectively. Based on the total of 69,000 YLLs 65

70 saved by 2014, the project increases regional GDP by US$231 million converted into monetary terms using per capita GDP (WHO - HFA 2001)21. Project Cost-Effectiveness Data for Eastem Europe and Central Asia suggest that prevention, harm reduction, and STI treatment are the most cost-effective interventions. The unit costs of these programs are estimated as follows: STI treatment- US$8-9; voluntary counseling and testing (VCT) - US$11; harm reduction programs among IDUs vary from US$3 to US$13 per person reached. The preventive activity of distributing condoms among CSWs and their clients cost - US$16 per CSW reached22 Cost-effectiveness analysis for the CA AIDS Control Project shows similar results on the assumption that funds are allocated equally across prevention interventions. As can be seen in Table 15 below, programs targeted at IDUs and CSW and their clients are the most cost-effective. Clearly, the low prison population determines high unit costs for prisoners. In general, prevention and control activities are highly cost-effective because the average annual health sector saving (US$500) per prevented HIV case among high risk population is three times higher than the corresponding annual cost per prevented HIV case. Table 15. Unit costs of the AIDS Control Project Investment Cost per HIV HIV cases costs case Costper HIV prevented YLS ($000) prevented YLS prevalence IDU MSM SW and Clients MTCT Prisoners Total high risk population Low risk population 68,969 $4,673 $ ,075 $4,673 $ ,915 $4,673 $ $4,673 nla ,633 $4,673 $1, , $23,367 $180 $ ,518 n/a $1,230 $34 nla 0.03 Cost-effectiveness analysis suggests that HIV prevention interventions are more costeffective than ARV treatment. Both blood screening and STI control among sex workers are the most cost-effective preventive interventions at the costs of US$3-US$12 per IDU reached and US$16 per CSW reached. ARV treatment is the least cost-effective, costing US$1, per lifeyear saved at generic drug prices. Sensitivity Analysis Sensitivity analysis tests the potential impact of critical project risks including those listed in Section C5 on the project outcome. One risk is that a lack of Government commitment to implement the Project could translate into a lack of action in implementing the Project, and could ultimately result in the absence of necessary regional mechanisms for the Project, e.g., slow and inadequate counterpart financing or slow disbursement. Another risk is lack of experience and low capacity of the implementing agency in coordinating and implementing regional cross- 21 YLL= - [D*C*e "-(fi*a)] / [(pfr)" 21 * [e "-(P+r)L*(l+(P+r)*(L+a))-(l+(p+r)*a)] Where, disability weight factor = 1 - in case of death, in case of disability 22 WHO, WB, UNAIDS Funding Required for the Response to HIViAIDS in Eastern Europe and Central Asia. Futures Group Intl. p

71 sectoral activities with many stakeholders. The unsafe behavior of the project target groups may also put project benefits at risk. All these factors would ultimately delay project implementation and offset expected project benefits. Therefore, the robustness of benefits was tested on the following assumptions: delays in project implementation for 2 and 3 years, and decrease of the direct benefits by 40 and 50 percent. The decrease in the HIV cases prevented in high risk population groups is assumed to cause the reduction of the direct benefits. Table 16. Sensitivity analysis 1 Delay in Project Implementation by 2 years a. 4% discounting rate b. 10% discounting rate 2 Delay in Project Implementation by 3 years a. 4% discounting rate b. 10% discounting rate 3 Decrease in Direct Benefits by 40% a. 4% discounting rate b. 10% discounting rate 4 Decrease in Direct Benefits by 50% a. 4% discounting rate b. 10% discounting rate indicators base case simulated case change NPV 199,862, ,336,545-85,526,035 IRR 140.9% 139.9% -0.9% NPV 139,861,448 76,543,583-63,317,865 IRR 127.7% 126.8% -0.9% NPV 199,862,580 83,239, ,622,978 IRR 141% 139% -2% NPV 139,861,448 54,347,784-85,513,664 IRR 128% 126% -2% NPV 199,862, ,783,324-24,079,256 IRR 141% 100% -41% NPV 139,86 1, ,204,968-19,656,480 IRR 128% 89% -39% NPV 199,862, ,763,510-30,099,070 IRR 141% 91% -50% NPV 139,861, ,290,848-24,570,600 IRR 128% 80% -47% % change -43% -45% -58% -61% -12% -14% -15% -18% The analysis shows that project efficiency is highly sensitive to any delay in project implementation. The project NPV decreases by 43 and 45 percent (to US$86 million and US$63 million discounted at 4 and 10 percent respectively) when project implementation is delayed by 2 years and project NPV decreases by 58 and 63 percent (to US$117 and US$86 million discounted at 4 and 10 percent) when project delayed by 3 years. This confirms that HN interventions to prevent a concentrated epidemic from spreading to other groups of the population, should be given a high priority in order to maximize efficiency of available resources and prevent the epidemic spreading to the general public. The decrease in the project direct benefits resulting from the inadequate coverage or unsafe behavior of high risk population groups also affects efficiency ratios of the project, although at a lower level. The discounted project NPV decreases by 12 and 14 percent (i.e. by US$24 million and US$20 million discounted at 4 and 10 percent respectively) in response to the 40 percent reduction in direct project benefits; and project NPV decreases by 15 and 18 percent (i.e., by US$30 and US$25 million discounted at 4 and 10 percent) when project direct benefits are reduced by 50 percent. 67

72 Financial analysis The Project has a positive financial impact. Discounted at 4 and 10 percent the project financial NPV is US$18.5 million and US$13.9 million yielding IRRs of more than 40 percent. The figure below shows that although after the project incremental costs slightly exceed its direct benefits, the accumulated direct benefits in terms of health sector savings significantly outweigh project costs, Annual financial costs and benefits Accumulated financial costs and benefits I J project years +Incremental costs +Healthsector savings ' 1 --taccumulated costs +Accumulated benefits I project year: Although the project financial NPV is positive, the accumulated net financial impact in subsequent years is negative, in total about US$0.3 million per year. As Table 17 below illustrates, the total post-project incremental recurrent costs of US$2.9 million, broken down by participating countries represent a small share of their annual state health budgets: 1.8 percent in Tajikistan, 1.2 in the Kyrgyz Republic, 0.2 in Uzbekistan, and 0.1 in Kazakhstan. The need for additional funds raises the issue of funding sources. These may be borne by health sector rationalization, reallocation of state budget expenditure, or redirecting increased tax revenues generated by saved years of life. Table 17. Project investment and incremental costs in relation to health budgets year 1 year 2 year 3 year 4 year 5 year 10 Investment cost: % of total health buget 0.15% 0.23% 0.28% 0.22% 0.10% % of Government health buget 0.21% 0.31% 0.38% 0.31% 0.13% Recurrent cost: % of total health buget 0.01% 0.01% 0.01% 0.01% 0.01% 0.10% % of Government health buget 0.02% 0.02% 0.02% 0.02% 0.02% 0.14% Investment cost: % of total health buget 1.22% 1.78% 2.19% 1.74% 0.74% % of Government health buget 1.96% 2.87% 3.54% 2.80% 1.19% Recurrent cost: % of total health buget 0.11% 0.11% 0.10% 0.10% 0.09% 0.75% % of Government health buget 0.18% 0.18% 0.16% 0.15% 0.14% 1.21% Investment cost: % of total health buget 2.51% 3.66% 4.49% 3.54% 1.50% %of Government health buget 3.10% 4.52% 5.55% 4.37% 1.85% Recurrent cost: % of total health buget 0.23% 0.23% 0.21% 0.19% 0.18% 1.49% % of Government health buget 0.28% 0.28% 0.26% 0.24% 0.22% 1.84% Investment cost: % of total health buget 0.30% 0.44% 0.55% 0.43% 0.18% % of Government health buget 0.39% 0.57% 0.71% 0.56% 0.24% Recurrent cost: % of total health buget 0.03% 0.03% 0.03% 0.02% 0.02% 0.18% % of Government health buget 0.04% 0.04% 0.03% 0.03% 0.03% 0.24% 68

73 The Project has a positive fiscal impact and can influence the state budget by generating additional tax revenues and increased health expenditure. Longer life, especially of people living with HN/AIDS (PLWHA), would require additional health resources, at US$24 million in total. However, this can be covered by additional tax revenue generated by the productive years of life saved by the Project. Over 69,000 years of life saved by the Project, 91 percent of which are economically active, can generate an additional US$47 million. 69

74

75 Annex 10: Safeguard Policy Issues CENTR4L ASIA AIDS CONTROL PROJECT The environmental rating category is C. The project does not envisage major civil works, medical waste or land acquisition. 71

76 Annex 11: Project Preparation and Supervision CENTRAL ASIA AIDS CONTROL PROJECT Project Schedule Identification Preparation Missions PCN review Initial PID to PIC Initial ISDS to PIC Pre-appraisal Appraisal Negotiations BoardlRVP approval Planned date of effectiveness Planned date of MTR Planned closing date Planned Actual November 2003 November 2003 February 2004 February 2004 April 2004 April 2004 June 2004 June 2004 January 2004 January 26,2004 December, 2003 March 8,2004 December, 2003 March 9,2004 September 2004 September 2004 December 2004 December 2004 February 2005 January 2005 March 2005 July 2005 December 2007 December 2010 Bank funds spent to date on project preparation: 1, Bank resources: 2. Trust funds: US$338,688 (Bank Budget) US$ 80,000 (disbursed from Recipient Executed PHRD Grant of US$889,300) US$ 49,636 (from DFID grant for preparation) 3. Total: US$468,324 Estimated Approval and Supervision costs: 1. Remaining costs to approval: remaining FY05 LEN Budget of US$43, Estimated annual supervision cost: US$250,000 72

77 Supervision Plan Supervision strategy The Project will require intensive supervision given its path-breaking nature, the mix of crosscountry and multi-sectoral stakeholders, the wide spread of activities across the four beneficiary countries in Central Asia, and its blend of implementation agencies comprising public, private and civil society partners whose experience with HIVIAIDS programs varies considerably. The envisaged range of activities in prevention, care, treatment, and mitigation is complex and will be implemented by many entities whose capacity will need strengthening. The Bank's supervision effort in the first year will focus on the following strategic areas: Comprehensive approach to HIV/AIDS. Funding and executing a broad range of HIV/AIDS activities across many sectors by multiple implementation agencies across the four countries, with a particular emphasis on filling the gaps of current programs and activities, and scaling up existing programs and building capacity across geographical borders in the region, will require consistent and sustained support and coordination, including learning from other Bank-funded HIV/AIDS programs from around the world. Creating ownership among stakeholders. Experience has shown that the commitment and enthusiasm shown by stakeholders during project preparation needs to be maintained during early project implementation by accelerating funding of projects in both the public sector and civil society. While the draft POM has been prepared with involvement of the main stakeholders, this needs to be expanded and supervision should focus on constantly adjusting the POM based on realities on the ground. This particularly applies to the Regional Grant Facility. New institutions. The RPMU, to be based in Almaty, Kazakhstan, is designed to facilitate and coordinate rather than to control and implement activities supported by the Project. Supervision will focus, in particular, on assisting the RPMU to: (a) contract out key administrative, fiduciary and advisory services where appropriate; (b) co-operate proactively with the Country Coordination structures in the participating countries by regularly assessing implementation progress and maintaining a dialogue with all stakeholders; and (c) empower the implementing agencies in the public sector and civil society across countries by allowing them to make decisions on program activities and to participate in adjusting Project processes based on the early lessons of implementation. Fiduciary architecture. Financial management, procurement, monitoring and evaluation, and establishing and maintaining appropriate implementation channels represent the core fiduciary responsibilities that need to be assessed and enhanced during supervision. The principle that program monitoring and evaluation is part of the fiduciary framework for regional projects is new for the four participating countries (although some have experience with the regional Biodiversity project supported by the GEF) and for the Bank, and will require special attention during implementation. Partnership arrangements The Project was prepared jointly with UNAIDS and DFID. DFID is also providing joint cofinancing to the Regional Grant Facility. UNDP and USAID/CDC, as well as a number of bilateral donors and international NGOs in their countries of activity, provided additional support. The preparation team worked closely with the Governments of the four beneficiary countries and a wide variety of public, private, and civil society partners during preparation and expects to continue this close cooperation during project implementation. The Project will also continue to hold regular regional meetings of key stakeholders that were initiated during preparation to facilitate information exchange and networking. 73

78 Policy dialogue with other donors will be maintained, and the Bank will work closely with the GFATM, the Country Coordination Mechanisms (CCMs), other HIV/AIDS-related projects, and the UN Theme groups for supervision and information exchange. Implementation of supervision arrangements Objectives and schedule of supervision missions. During the first twelve months of implementation, the Project will have three formal supervision missions in addition to ad-hoc visits by Bank staff working on health and related projects that support HIV/AIDS activities. The UNAIDS Regional Adviser and national program offices, as well as DFID, may also assist with supervision on an ad-hoc basis in addition to: (a) assisting public sector and civil society organizations to enhance subproject preparation to access grant finding from the Regional Grant Facility; and (b) improving the efficiency and effectiveness of HIV/AIDS interventions through specialized technical expertise. Costs of supervision. Experience from other Bank-supported HIV/AIDS projects has shown, and the Regional Operations Committee concluded in its review of the Project, that regional projects require intensive supervision using multi-sectoral teams that can provide implementation assistance in a variety of sectors. The extensive Bank preparation effort will be carried over into the first year of supervision, enhanced by: (a) continued support of the Bank team that worked on preparation of the Project; (b) continuous assistance from field-based Bank staff, particularly in the areas of procurement and financial management; and (c) support from other stakeholders in the region including bilateral and multilateral development partners, particularly from UNAIDS and DFID. Being a regional and pioneer project, it is expected that the supervision budget for the first twelve months will exceed the Bank norm for national projects in the region, which is currently at US$150,000. First supervision mission Second supervision mission Third supervision mission Task team leader, procurement, financial, operations & implementation, social fund, institutionay civil society/ community participation specialists Task team leader, health/aids/sti, social find, institutional, operations & implementation, procurement specialists Task Team Leader, health, social fund, financial management, operations / implementation specialist Budgeted cost of supervision for the first 12 months of the project amounts to US$250,000 (US$150,000 for staff costs, US$lOO,OOO for travel and miscellaneous expenditure). DFID will support joint project supervision with an additional amount of US$50,

79 Annex 12: Key Institutions Responsible for Preparation of the Project CENTRAL ASIA AIDS CONTROL PROJECT The proposed Project was prepared by the Governments of Kazakhstan, Kyrgyz Republic, Tajikistan and Uzbelustan, regional NGOs and private sector with assistance from World Bank, UNAIDS, DFID and USAID. E v Minister of Health Minister of Justice First Deputy Minister of Information Deputy Minister, CIS Affairs Committee/National Coordinator, Organization on Central Asian Cooperation (CACO) Deputy Minister of Health Deputy Minister of Internal Affairs Chairman of Committee on REPUBLIC OF KAZAKHSTAN 1 Prime Minister in charge of social issues I Bvrganvm S. Aitimova I I Erbolat Dosaev I Onalsvn Zhumabekov I Oleg Ryabchenko I Nurlan Onzhanov Anatoliy Belonog Anatoliy Vyborov Head of the Section for Organizational and Methodological Issues Division Head, Committee on CIS Affairs, Ministry of Foreign Division Head, Drug Control Committee Head of Division for Control at Motor Service and Automobile Roads, Ministry of Transport and Communication Head, Section for Planning and Monitoring Budget Programs, Financial Department, Ministry of Health Head, Primary Health Care Section, Ministry of Health Head of Division for Provision of Medical Services to Prisoners, Committee for Criminal Law Enforcement Svstem. Ministrv of Klara Baimukhanova Botanoz Kuatbekova v Olga Ryl Aldan Akhmetov Bakhyt Raeva Nurkhan Nazirova Marat Akhmetov 75

80 ~ Justice Third Secretary, Section for Regional Cooperation, Committee Galymzhan Daulbayev on CIS Affairs/ Coordinator of the Organization on Central Asian Cooperation (CACO) in the Ministry of Foreign Affairs Deputy Head, Division of Healthcare & Social Protection, Saken Abzhanov M<nistry of Economy and Budget Planning Deputy Head of Consolidated & Analytical Division, Ministry Uriyash Uali of Labor and Social Protection Deputy Head, Division for Educational Work & Boarding Sholpan Saipina Schools, Ministry of Education and Science Deputy Head of Medical Division, Ministry of Internal Affairs Karim Bisimbiev Chief Specialist, Section for Work with Financial & Economic Bekzhan Kalimbekov Organizations and Rating Agencies, Ministry of Economy and Budget Planning Chief Specialist, Section for Medicine Development & Ainur Ashirova International Relations, Ministry of Health Chief Specialist, Healthcare & Social Protection Section, Dinara Davletova Ministry of Finance Chief Specialist, Section for Relations with International Farida Mutalieva Organizations, Ministry of Finance Chief Physician, Kazakh Dermatovenerologic Research Institute Asylkhan Abishev I Chief Phvsician. Ministrv of Health I Raushan Kabvkenova Epidemiologist, Medical Division, Ministry of Internal Affairs Shakira Tutanova Epidemiologist, Medical Division of Internal Troops, Ministry Alibek Galiev of Internal Affairs Rector. School of Public Health I Maksut Kulzhanov Acting Assistant Professor at the School of Public Health Gulzada Arystanova Research Scientist, Epidemiology and Microbiology Section, Ulan Kozhamkulov National Center of Tuberculosis Problems KYRGYZ REPUBLIC First Vice Prime Minister and Minister of Transport and Communication Vice Prime Minister on Social Issues Vice Prime Minister Resident Representative of the Kyrgyz Republic under the I Eurasian Economic SocietylNational Coordinator, Organization I. - on Central Asian Cooperation (CACO) Minister of Health Minister of Economic Development, Industry and External Trade Deputy Minister of Education First Deputy Minister of HealtWRector of the Medical Academy Deputy Minister, Chief State Sanitary Doctor I Kubanychbek Jumaliev I Ularbek Mateev Kybanychbek Osmonov Bazarbai Mambetov Mitalip Mamytov Amang eld ymur algv Kynatbek Smanaliev Tilek Meimanaliev Ludmila Steinke I Deuutv Minister of Foreirm Affairs I, Y I ErkinMamkulov I Deputy Minister of Justice Tashtemir Atbaev Deuutv Minister of Finance Murat Ismailov I, Director, Department on Investment Policy, Ministry of Finance I Sandjar Mukanbetov I 76

81 and Punishment Head of the Department on State Epidemiological - Review, Ministry of Health Head of the Chief Division on Organization of the Medical Assistance and Licensing, Miniscry of Health Head of the Department on International Agreements, Ministry of External Affairs Head of the department on organization of the medical department, Ministry of Health Head of the Controls Service on Juridical Curcling of Drugs, State Drug Control Agency Acting Head, Health Care Delivery Department, Ministry of Health First Secretary, CIS Division, Ministry of Foreign AffairsiCoordinator of the Organization on Central Asian Cooperation (CACO) in the Ministry of Foreign Affairs Lieutenant Colonel. Ministrv of Defense Chief Doctor, Dermatovenerologic Dispensary Deputy Head, Borderline Control Lieutenant Colonel, Border Line Control Head of the Medical Department, Chief Division on Execution and Punishment Chief Specialist of the Financial Economic Department, Ministry of Health Lead Specialist, Department on Social Sector, Ministry of Finance Specialist of lst Category, Department of the Strategy and Prognosis Development, Ministry of Education Specialist on Legal Issues, Ministry of Justice Coordinator of the Medical Program and Department on I Azamat Imakeev Toktogazy - - Kutukeev Erik Beishembiev Kasymbek Mambetov Altynai Arstanbekova Melis Madybaev Gulnara Kenenbaeva Vladimir Tumanov Dj amal Nurgazieva Sabyrbek Dubanaev Daniyal Serikbaev Akylbek Muratov Gulnara Kenjeeva Ludmila Zabirova Venera Toktogazieva Renat Chuznacmetov Raushan Abdildaeva 77

82 ~ ~ I Reforming. Ministrv of Justice I I Pro-Rector on Science, Medical Academy Doctor, Clinic, Ministry of Internal Affairs Advisee on Penitentiary Institutions, Ministry of Health Director, GFATM Grant TB PIU Scientific-Production Union on Preventive Medicine TB Socio-Medical Expert Commission, Ministry of Labor and Nurlan Brimkulov Ludmila Zubova Elena Kuchranova Alexander Kan Omor Kasymov Maratbek Abdyldaev Social Protection RPIU Director, CAT Biodiversity Project Manager, PIU, Global Fund for the Fight with AIDS/TB and Kanat Moldokulov Talgat Subanbaev Malaria Director, PCU/Second Health Sector Reform Project Chairman of the Committee on CIS Affairs, Legislative Bolot Sarbanov Nikolai Bailo REPUBLIC OF UZBEKISTAN Minister of Health Feruz Nazirov Minister of Foreign Affairs Sadyk Safaev First Deputy Minister of Health Abdukhakim Khodj ibaev National Coordinator, Central Asia Cooperation Ilchum Nematov OrganizatiodDeputy Minister of Foreign Affairs Deputy Minister of Health Bakhtior Niyazmatov Deputy Minister of Internal Affairs and Head of the Penalty Radjab Kadyrov Execution Department Advisor to President, Administration of the President Shavkat Kurbanov Lead Specialist, Department on Social Issues, Cabinet of Vladislav Bolkunov Mini sten 78

83 NGOS/PFUVATE SECTOR Representative of NGO The Public of Kazakhstan Against AIDS Head, CSW NGO SENIM President of the Union of Chambers of Commerce and Industry Lead Specialist, Zhambyl Oblast Chamber of Trade and Industry Yelena Rosental Tatiana Rodina Khamit Rakishev Valentina Kovkova Chairperson, Intredemilge NGO Chairman, Sanitas, Humanitarian Charitable Foundation Chairperson, Tais Plus Public Association Chairman, Oazis NGO Chairman, Belyi Juravl NGO Chaimerson. Koz Karash NGO Raushan Abdildaeva Ilya Savcheko Shachnoz Islamova Vladimir Tupin Dennis Babajanov Damira Imanalieva 79

84 Vice President, Chamber of Commerce and Industry Advisor to the President, Chamber of Commerce and Industry General Director, Reemstma Kyrgyzstan Director, Coca Cola General Director, Shoro General Director, KATEL General Director. ZUM Chairman, Congress of Business Association General Manager, Demir Kyrgyz International Bank Yuri Karchin Gans-Yurgen Chering Eduard Rausch Cevdet Dum Jumagil Egemberdiev Salavat Iskakov Giornio Fiacconi I Emil Umetaliev I Ahmet Pannaksiz Epidemiologist, Center of Legal Support for Youth Director, Guli Surkh NGO Guli Surkh NGO Mehmbon NGO Deputy Director, "TAJFARMPROMINVEST", Limited Comnanv Aziza Pirova Sevar Kamilova Ozoda Sattarova Ran0 Alieva 1 Munowar Elnazarov Head, Department for Foreign Economic Relations, Business Women Association Chairperson, Center for support of Women and Children "Sabo" Intilish NGO Ibn Sin0 NGO AntisPid NGO Bolalar va Kattalar NGO Istiqbol Avldod NGO Qalb Sadosi NGO DDRP NGO Head, Ishonch va hayot NGO Executive Director, American Chamber of Commerce Steinert Industries Silk Road and Silk Press Ltd Deputy Director, Shell International Head of the Office, Colgate Palmolive Representative Office President, American Investment Group Public Affairs and Communications Manager, Coca Cola Saida Tukhtaeva Natalia Kurganovskaya Tatyana Nikitina Tuymart Normulatov Naziya Salieva Tatiana Chabrova Nodira Karimova Oleg Mustafin Rahima Nazarova Sergei Uchaev Tatyana Okynskaya Vladimir Steinert Marat Akhmedi anov Rahim Nazirov Eren Ag Oybek Khalilov Kadry Ozen Partner Organizations Late Regional Coordinator Acting Coordinator in Central Asia Regional AIDS Advisor Head, DFID Office in the Kyrgyz Republic Program Manager Program Development Officer Program Officer in Central Asia Consultant Rudik Adamian Olavi Elo Natasha Mesko Jason Lane Aida Tashirova Atabek Sharipov Felicity Malcolm George Gotsadze 80