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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank FOR OFFICIAL USE ONLY TECHNICAL ANNEX ON A PROPOSED GRANT IN THE AMOUNT OF SDR 2.7 MILLION (US$4 MILLION EQUIVALENT) TO THE LAO PEOPLE S DEMOCRATIC REPUBLIC FOR Report No: T7669-LA AVIAN AND HUMAN INFLUENZA CONTROL AND PREPAREDNESS PROJECT UNDER THE GLOBAL PROGRAM FOR AVIAN AND HUMAN INFLUENZA CONTROL AND PREPAREDNESS PROJECT (GPAI) Human Development Sector Unit East Asia and Pacific Region FOR ELIGIBLE COUNTRIES UNDER THE HORIZONTAL APL June 14,2006 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 May 13,2006) Currency Unit = Lao Kip LAK10,028 = US$1 US$ = SDRl FISCAL YEAR October 1 - September 30 ABBREVIATIONS AND ACRONYMS AH1 AHIF ARI DLF EGPF EMP EWORS FA0 GPAI HPAI IEC IHR IFR ILI M&E MAF MOH NAHC NAHICO NAMRU-2 NAPA NC/CDC NCLE OiE PHRD PIP PPE VHV vvw WHO Avian and Human Influenza Multi-donor avian and human influenza facility Acute respiratory infection Department of Livestock and Fisheries Ethnic Group Planning Framework Environment Management Plan Early Warning Outbreak Recognition System Food and Agriculture Organization Global Program for Avian Influenza Control and Human Pandemic Preparedness and Response Highly pathogenic avian influenza Information, education and communication International Health Regulations Interim Financial Report Influenza like illness Monitoring and evaluation Ministry of Agriculture and Forestry Ministry of Health National Animal Health Center National Avian and Human Influenza Coordination office United States Naval Medical Research Unit National Advance Purchase Agreement National Committee for Communicable Disease Control National Center for Laboratory and Epidemiology The World Organization for Animal Health Policy and Human Resource Development Project Implementation Plan Personal Protective Equipment Village Health Volunteers Vi1 lage Veterinary Workers World Health Organization Acting Regional Vice President: Country ManagerDirector: Sector Manager: Task Team Leader: Jeffrey Gutman Patchamuthu Illangovan, Ian C. Porter Fadia Saadah Hope C. Phillips

3 LAO PEOPLE S DEMOCRATIC REPUBLIC AVIAN AND HUMAN INFLUENZA CONTROL AND PREPAREDNESS PROJECT CONTENTS A. STRATEGIC CONTEXT AND RATIONALE... 1 Page 1. Introduction Country and Sector Issues Rationale for World Bank involvement Country eligibility under GPAI... 4 B. PROJECT DESCRIPTION Project development objective and key indicators.,... 4 Financing instrument and project components... 5 C. IMPLEMENTATION Institutional and implementation arrangements... 6 Monitoring and evaluation of outcomes/results... 7 Sustainability. critical risks and possible controversial aspects... 7 Loan/credit/grant conditions and covenants D. APPRAISAL SUMMARY Economic and financial analyses Technical Fiduciary Social Environmental and social safeguard policies Policy Exceptions and Readiness 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.

4 Appendix 1 : Country and Sector Background Appendix 2: Results Framework Appendix 3: Detailed Project Description Appendix 4: Project Coordination and Implementation Appendix 5: Project Costs and Financing Appendix 6: Procurement Appendix 7: Financial Management and Disbursement Arrangements Appendix 8: Environmental and Social Analysis and Mitigation Appendix 9: Project Preparation and Supervision Appendix 10: Economic and Financial Analysis Appendix 11: Discussion Note on Compensation for HPAI Poultry Losses in Lao PDR Appendix 12: Statement of Loans and Credits Appendix 13: Country at a Glance Appendix 14: Map MAP (S) IBRD 33431

5 LAO PEOPLE'S DEMOCRATIC REPUBLIC AVIAN AND HUMAN INFLUENZA CONTROL AND PREPAREDNESS PROJECT PROJECT APPRAISAL DOCUMENT EAST ASIA AND PACIFIC EASHD Date: June 14, 2006 Country Director: Ian C. Porter Sector ManagerDirector: Fadia M. Saadah Project ID: P Lending Instrument: Emergency Recovery Loan Team Leader: Hope C. Phillips Volker Sectors: Health (5O%);General agriculture, fishing and forestry sector (50%) Themes: Natural disaster management (P);Other communicable diseases (P) Environmental screening category: Partial Assessment Project Financing Data [ 3 Loan [ ] Credit [XI Grant [ 3 Guarantee [ ]Other: For Loans/Credits/Others: Total Bank financing (us$m.): 4.00 IDA Grant JAPAN: MINISTRY OF FINANCE - PHRD GRANTS AH1 FACILITY OTHER SOURCES Total: Borrower: Lao PDR Responsible Agency: NAHICO Ministry of Health Vientiane Lao People's Democratic Republic Tel: Fax: onyvanh@laotel.com

6 Does the project depart from the CAS in content or other significant respects? Re$ PAD A.3 Does the project require any exceptions from Bank policies? Re$ 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? Re$ PAD D. 7 [ ]Yes [XINO [ ]Yes [XINO [ ]Yes [ IN0 [ ]Yes [ IN0 [XIYes [ ]No [XIYes [ ]No Project development objective Re$ PAD B.2, Technical Annex 3 The overall development objective of the Project is to contribute to Government s National Plan which aims to minimize the threat posed to humans and the poultry sectors by highly pathogenic avian influenza (HPAI) infection and other zoonoses in Lao PDR, and to prepare for, control, and respond to influenza pandemics and other infectious disease emergencies in humans. Project description [one-sentence summa y of each component] Re$ PAD B.3.a, Technical Annex 4 Animal Health will reduce the risk of introduction of AI in the formal and informal sectors, as well as enhance the capacity for early detection and warning and rapid and effective response in case of an outbreak. Human Health: Surveillance and Response aims to improve the surveillance in humans, as well as putting in place an integrated (human and animal) surveillance system. Human Health: Curative Services will strengthen the curative and laboratory resources. Information, education and communication will formulate a national awareness campaign on avian and human influenza and disseminate the same. Program Coordination and Regulatory Framework will strengthen the function of the National Coordination Committee for the Prevention and Control of Communicable Diseases and develop necessary financial, legal, and monitoring and evaluation frameworks. Which safeguard policies are triggered, if any? Re$ PAD D. 6, Technical Annex 10 Environmental Assessment and Indigenous Peoples. Significant, non-standard conditions, if any, for: Re$ PAD C.7 Board presentation: None. Loadcredit effectiveness: None. Covenants applicable to project implementation: Preparation of a procedures manual for the Compensation Fund, and a manual for procedures to access the Research and Pilot Fund, acceptable to IDA, will be a condition of disbursement for this category.

7 A. STRATEGIC CONTEXT AND RATIONALE 1. Introduction The continuing outbreaks of highly pathogenic avian influenza (HPAI) in recent years have caused substantial damage to the poultry industry in several regions of the world, resulted in the loss of human life, and raised concerns about a possible human pandemic. Large scale outbreaks began in 2003 in several Southeast Asian countries, and HPAI has now reached Europe, the Middle East, and West Africa. Between 2003 and April 4, 2006, 191 laboratory-confirmed human cases of infection with HPAI (hereafter, Avian and Human Influenza, or AHI) have been diagnosed, and 108 of these died. Nearly all of the confirmed cases are known to have had contact with birds, and so far AH1 does not transmit easily from human-to-human. However, as the disease spreads there is a concern that the virus may acquire the characteristics which would enable efficient human-to-human transmission.2 Each additional human case gives the virus an opportunity to improve its transmissibility in humans, and thus develop into a pandemic strain. The recent spread of the virus to poultry and wild birds in new areas further broadens opportunities for human cases to occur. While neither the timing nor the severity of the next pandemic can be predicted, the probability that a pandemic will occur has increased. If the virus achieves high transmissibility between humans and is highly pathogenic, then a severe human pandemic could result with very large losses of human life and enormous economic disruptions and losses on a global scale. The global response to the threat of AH1 in humans and domestic poultry, guided by the global strategies put forward by World Health Organization (WHO), Food and Agriculture Organization (FAO), and World Organization for Animal Health (OiE), comprises four key strategies: (i) progressively controlling and eradicating the spread of the disease in animals, thus lowering the animal-origin virus load in the environment and reducing the risks of human infection; (ii) preventing and limiting the spread of the disease among humans, thereby reducing the opportunity for the virus to improve its human transmissibility; (iii) in the event of a pandemic, helping affected populations cope with its effects; and (iv) minimize the social and economic impact from the threat of AHI. AH1 prevention and control involves many players in the areas of health, agriculture, natural disaster response, finance and planning, and a multisectoral approach is therefore essential. It is also recognized that individual countries are Avian influenza, or bird flu, is a contagious disease o f animals caused by viruses that normally infect only birds and, less commonly, pigs. Avian influenza viruses are highly species-specific, but have, on rare occasions, crossed the species barrier to infect humans. In domestic poultry, infection with avian influenza viruses causes two main forms of disease, distinguished by low and high extremes o f virulence. The low pathogenic form commonly causes only mild symptoms and may easily go undetected. The highly pathogenic avian influenza (HPAI) form spreads very rapidly through poultry flocks, causes disease affecting multiple internal organs, and has a mortality that can approach loo%, often within 48 hours. H5N1 is one strain of the HPAI virus. The virus can improve its transmissibility among humans via two principal mechanisms. The first is re-assortment in which genetic material is exchanged between human and avian viruses during co-infection of a human or pig. The second mechanism is a more gradual process of adaptive mutation, whereby the capability of the virus to bind to human cells increases during subsequent infections of humans. 1

8 central to a coordinated and effective global response. Country strategies should be developed in accordance with country-specific needs and circumstances, and the strategies should be owned by the individual governments facing the threat of AHI. Regional Dimensions. In East Asia and the Pacific, cases of AH1 have occurred in a number of countries, including Cambodia, China, Lao People s Democratic Republic (PDR), Indonesia, Japan, Korea, Malaysia, Myanmar, Thailand and Vietnam. Responses to the outbreaks in domestic and wild fowl have included screening, surveillance, and precautions at the borders, controlling movement inside the country, culling programs, and control of wildlife reservoirs. Several countries have already developed integrated regional plans. Specific strategies vary across countries, especially regarding issues such as the appropriateness of mass vaccination of poultry. Clearly the cross-country issues in dealing with AH1 are critical in terms of transmission, information sharing, as well as coordination. The country specific strategies have been adapted to the specific conditions in-country. In addition, Lao PDR participates in a number of regional initiatives through ASEAN, APEC, Mekong Basin Surveillance, among others. The national dimension. The last confirmed outbreak of HPAI in Lao PDR was in March 2004, and in February 2006 the virus was detected in a duck in Vientiane Province; while there have been no other confirmed reports, there is speculation that other outbreaks may have occurred, and it is thought possible that there may also have been human cases which were not reported or investigated. Lao PDR is a land-locked country that shares borders with countries affected by outbreaks caused by H5N1 (alternatively referred to as HPAI), specifically Vietnam, Thailand, Cambodia, and China. These borders are largely permeable, where crossing of food products, animals, and people occur. Although the population of Lao PDR is not large, 5.6 million, the majority of these people live in rural and remote mountainous areas, with the attendant challenges of communications, transport, and service provision. The population is also ethnically diverse: 49 distinct ethnic groups speak different languages, and have different cultures. With a per capita income in 2005 of US$380, Lao PDR is classed among the Least Developed Countries. There are approximately 20 million poultry in Lao PDR of which, 20 percent is owned by approximately 120 commercial enterprises that serve the larger urban populations in Vientiane, Luang Prabang, Champasak, and Savanakhet. The remaining 80 percent is owned by subsistence fanners for family consumption. The FA0 has been providing support to the National Animal Health Center (NAHC) in Vientiane the national laboratory, which has limited surveillance due to capacity at the laboratory, and also suffers from a shortage of veterinarians. Health expenditures, at $12 per capita, are among the lowest in Asia, and the sector is characterized by insufficient health workers, essential drugs, and equipment. Most hospitals have insufficient isolation rooms and equipment for patients with severe respiratory diseases. The constraints in the health sector are mirrored in the National Center for Laboratory and Epidemiology (NCLE), which also lacks sufficient human and financial resources. 2

9 In response to the situation, the Government of Lao PDR has prepared an integrated National Avian Influenza Control and Pandemic Preparedness Plan (the National Plan) covering the period The National Plan is fully consistent with, and draws heavily on, the global strategies developed by FAO/OiE and WHO, and provides the basis for the program which the World Bank and other donors will support. 2. Country and Sector Issues The first and only wave of avian influenza (H5N1) outbreaks in the poultry population was reported in early 2004: a total of 45 incidents were reported from mid-january to the end of March It is suspected, however, that more outbreaks may have occurred in rural areas, but were either undetected or unreported. In May 2006, the Government confirmed that a duck sampled in February in Vientiane tested positive for the virus. To date, no human cases have been reported but it is possible that non-reporting is the result of failure to detect or document (details of the health and animal health sectors are provided in Appendix 1). The Government s rapid and appropriate response to the 2004 outbreak is likely to have contributed to forestalling a much larger and sustained outbreak. Under the Global Program for Avian Influenza Control and Human Pandemic Preparedness and Response (GPAI), Lao PDR is characterized as an endemic country (page 44). In line with the eligibility criteria in the GPAI, the Government has prepared and is implementing an HPAI Control Strategy in collaboration with UN technical agencies. This national plan has five strategies: (i) development of a disease free avian management system; (ii) disease surveillance and response in humans during outbreaks; (iii) laboratory and curative care; (iv) health education and community action; and (v) strengthening of institutional and legal frameworks. Each activity under the National Plan has been classified according to its priority level and whether it is to be undertaken in the short- or medium-term. Current financing sources and indicative resource gaps have also been identified. Every activity receiving support under this program has been rated as high priority and is not receiving support from other donors or agencies. 3. Rationale for World Bank involvement A key justification for the World Bank s involvement is the global public goods aspect of controlling HPAI - one of many emerging and re-emerging zoonoses. There is also a national public goods perspective for countries to strengthen their veterinary services, disease surveillance, and human health system as planned in this operation. The social and economic impacts of the threat of AH1 are extensive. HPAI control programs require a multi-disciplinary approach to integrate the technical, social, economic, political, policy, and regulatory issues that must be addressed in a coordinated response. The technical assistance provided by the World Bank has been important in similar global or regional emergency situations such as SARS, and post-disaster reconstruction. The World Bank has a comparative advantage in providing integrator skills and multi-sectoral perspectives and in addressing the institutional dimensions of the response to such emergencies. 3

10 The World Bank has been working closely with WHO, FAO, OiE, multilateral, bilateral, and other partners at both the country and international levels to prepare the GPAI. In Lao PDR, the World Bank has been working with UNDP (the convener of the donor round table), and other partners to help the Government assess and improve its National Plan, and continues to review with Government the range of activities that require financing. The World Bank is also in a position to assist Lao PDR in leveraging additional resources from other bilateral and international agencies. 4. Country eligibility under GPAI The proposed project falls under the GPAI, approved by the Bank s Board of Directors on January 16, GPAI support is to be provided using the horizontal Adaptable Program Loan (APL) instrument and within a global coordination framework. Under the global APL, individual countries may obtain separate loans, credits and grants, as they become available, to finance their own national projects, up to the global aggregate limit of US$500 million. Since the GPAI is designed to provide emergency financing to participating countries to contain outbreaks of avian flu through early detection and rapid response measures, the country specific operations will be processed under the Bank s emergency policy OP/BP The GPAI will treat specific emergency response projects in each country as phases of a horizontal APL (similar approaches include the Multi-Country HIV/AIDS Programs for the African and Caribbean Regions). Lao PDR clearly meets the eligibility criteria specified in the GPAI document, given that: (i) it is a country in endemic situation (with outbreaks in poultry, but no human infection); (ii) the Government has prepared and is implementing an HPAI Control Strategy in collaboration with UN technical agencies; and (iii) the activities included under this proposed Project are fully consistent with the provisions of GPAI. B. PROJECT DESCRIPTION 1. Project development objective and key indicators As indicated above, Lao PDR s National Plan has five strategies, and forms the basis for support being provided by the various development partners. Resources being provided by the World Bank (comprising an IDA grant, PHRD grant, and funds from the Avian and Human Influenza Facility (AHIF)) will be used to finance (within the available funds) the critical, short-term and long-term activities that are currently not being financed from other sources. The World Bank support will be flexible due to the uncertainties surrounding the further spread of AH1 and to ensure that, when other financiers provide support, the World Bank funding can be used to fill the gaps that remain. The overall development objective of the proposed World Bank financing is to support the Government s National Plan, which aims to minimize the threat posed to humans and the poultry sector by AH1 infection and other zoonoses in Lao PDR, and to prepare for, control, and respond to influenza pandemics and other infectious disease emergencies in humans. The key indicator will be the percent of districts that remain free of confirmed HPAI infection in the poultry sectors. 4

11 2. Financing instrument and project components Funding provided by the World Bank, other donors and technical agencies, denoted as total below, will support the implementation of the National Plan. Financing from the World Bank will be provided through: an Emergency Response Credit (ERC) from IDA Grants, co-financing obtained through the Japanese Policy and Human Resource Development (PHRD) grant, and the multi-donor AH1 facility (AHIF). The components have been designed to mirror the strategies identified in the National Plan. A relatively large amount of hnds were left unallocated to provide flexibility during implementation. Animal Health (Total: US$5.35 million). Component 1 focuses on controlling the disease in poultry, and is in line with the recommendations made by the leading international technical agencies (FAO, OiE and WHO). Given the current status of HPAI in Lao PDR, the component is directed at investigation, surveillance, prevention, and preparedness for any new outbreak. Activities to reduce the risk of AI infection in backyard poultry, commercial, and fighting cock production are being supported, as are those to increase the capacity for laboratory diagnosis and early detection and response (including improving the national information system) at the field-level. Regional and international networking will be supported, as will the training of veterinarians, in response to the need to provide front-line veterinary services and surveillance. Financing is being provided for developing a compensation mechanism, and an indicative amount will be allocated to the fund. Access to the fund will require the development of guidelines that are acceptable to the World Bank. Human Health - Surveillance and Response (Total: US$1.10 million). Component 2 supports surveillance of human health and establishes a mechanism for responding in the event of outbreaks. Activities include capacity building to improve the surveillance system and integration of routine surveillance systems and data. Simulations to assess the state of implementation and effectiveness of public health measures will also be covered. Human Health - Curative Services (Total: US$2.54 million). Component 3 will support key activities related to laboratory and curative care to strengthen the public health sector s response in the event of an outbreak or declaration of a pandemic. The Government s strategy includes strengthening human resources, infrastructure and border control. Support will be provided for developing and monitoring pandemic preparedness activities and improving hospital information systems. The National Plan includes an option to finance the construction of a new laboratory or rehabilitate and improve the biosafety of the existing laboratory. Improving laboratory quality control, including translation and printing of guidelines and capacity building are supported under this component. Information, Education and Communication (Total: US$1.87 million). Component 4 supports the formulation and dissemination of a national awareness campaign on AHI. These activities will be participatory in nature and are targeted to the general population. 5

12 Financing for translation of the communication tools developed into local and minority languages are included. In order to reach children, messages will be provided through an existing school program. A knowledge, attitude and practice (KAP) survey will be undertaken to establish a baseline. A second KAP will be conducted in about 12 months and a final survey will be fielded at the end of the Project. Program Coordination and Regulatory Framework (Total: US$2.69 million). Component 5 will support planning for the multisectoral activities, necessary in the event of an outbreak (in either animals or humans), or a pandemic. Financing is available to review existing regulations to ensure that they provide the requisite authority and are sufficiently broad in scope to allow for a rapid response in the event of a declared emergency. An amount of $200,000 has been set aside for undertaking programmatic research or piloting activities that would inform the National Plan. In addition, support will be provided to the National Committee for Communicable Diseases (NC/CDC) and the National Avian and Human Influenza Coordination Office (NAHICO), which is charged with overseeing the implementation of the National Plan. Technical assistance, provided to NAHICO, will also provide capacity building to the implementing agencies in procurement, financial management and monitoring and evaluation. C. IMPLEMENTATION 1. Institutional and implementation arrangements A Prime Minister s Decree (No. 377/PM) dated December 9, 2005, established the NC/CDC, chaired by the Prime Minister, with representation from key line Ministries and Mass Organizations. The same decree established the Secretariat to the NC/CDC, chaired by the Chief of Cabinet of the Prime Minister s Office. The Prime Minister s Office, on May 11,2006, issued an Agreement (No. 113/PMO) establishing NAHICO and naming a Chair, a Vice Chair and three Members and established the following four Units: (i) Coordination and Collaboration; (ii) Planning and Finance; (iii) Monitoring and Evaluation; and (iv) Procurement. Implementation of World Bank financing of the National Plan, expected to take four years, will be delegated from NAHICO to relevant Ministries and other collaborators (e.g., Mass Organizations, among others). This will result in implementation of Component 1 by the Department of Livestock and Fisheries (DLF) in the Ministry of Agriculture and Forestry (MAF). The Department of Hygiene and Prevention in the Ministry of Health (MOH) will be responsible for implementing Component 2 and the Department of Curative Services in MOH has responsibility for implementing Component 3. NAHICO will have an oversight/coordination role in the implementation of Components 4 and 5, with Component 4 being implemented collaboratively by the MOH, MAF, Ministry of Information and Culture, Ministry of Education, and Mass Organizations (i.e., Youth, Women, and Trade Unions). The implementation of all but the Program Management for Component 5 will be carried out collaboratively with MOH, MAF, the Ministry of Foreign Affairs, and the Ministry of Justice. NAHICO will have sole responsibility for implementation of the Program Management. 6

13 2. Monitoring and evaluation of outcomes/results Monitoring the National Plan and its implementation will be continuous, with quarterly reporting provided to the development partners and interested stakeholders. The reports will not only cover physical progress relating to civil works, training, consultancies, and institutional activities using performance indicators, but will also include interim financial reports (IFRs). The quarterly reports will maintain a section devoted to issues affecting implementation and the steps taken or to be taken to resolve the identified constraints. The fourth quarterly report will serve an annual report, covering all activities of the past year. Reviews of the Program will be carried out jointly with the financing partners on, at least, a semi-annual basis. A Joint Mid-Term Review will be conducted to review the progress to date, and to consider any corrections (such as the need to modify the World Bank support based on lessons learned, expected outcomes and financing available from other sources), that may be required in response to a changing situation. Within six months of the closing date, the Government, and the World Bank will each prepare an Implementation Completion Report providing information on the impact achieved by the Project, as well as lessons to benefit similar operations. The overall monitoring and evaluation (M&E) framework, as well as indicators for the National Program are provided in Annex 2. World Bank specific indicators are presented in italics. The overall responsibility for M&E, including preparation of progress reports and annual review meetings, rests with the M&E Unit of NAHICO. In addition to overall supervision of each activity within the National Plan, the Unit will prepare quarterly reports consolidating physical and financial progress of the National Plan from the-implementers and disseminate the report to stakeholders and financiers. Data collection and reporting for Component 1 will be the responsibility of the NAHC and DLF in the MOM, while Component 2 and 3 indicators will be the responsibility of various units in the MOH (e.g., NCLE, Department of Curative Services). Indicators for Component 4 will be the responsibility of the National and Provincial Infection Coordination Office and the Province and District Level IEC Units, under the overall guidance of NAHICO. Indicators for Component 5 will be collected and reported by NAHICO. 3. Sustainability, critical risks and possible controversial aspects Sustainability. Strong political support and leadership, an adequate flow of financial resources and the continuous ownership by the various stakeholders will be critical to project sustainability. Government has demonstrated a very strong commitment to AH1 control and preparedness. The establishment of NC/CDC and NAHICO further cements the Government s strong support for a national multisectoral response. Ownership by all stakeholders will be ensured by: (i) strengthening of programs to maintain public awareness of the threat of HPAI and other rapidly spreading infectious diseases; and (ii) sustained surveillance and prevention and control activities, particularly in high-risk regions. 7

14 Critical Risks. sk From Outputs to Objective In the event that there are few or no AH1 outbreaks in Lao or neighboring countries it may be difficult to sustain the present political commitment to address AHI, the threat of a global influenza pandemic and other I infectious diseases as national priorities. Project implementing agencies do not have sufficient authority, leadership and capacity to take a leading role in avian influenza prevention and control. Intervention activities not effective in containing the spread of avian influenza from birds to the human population. Rating S S S The project comprises a dual strategy of: :i) strengthening the human and animal iealth systems, and (ii) augmenting the scale and capacity of emergency outbreak aesponse. Strengthening the human and mimal health systems will provide mportant benefits to the general 3opulation throughout and beyond the life if the project. Strong central government :ommitment coupled with the Project s xograms to maintain public awareness will be sufficient to maintain a high state if readiness in the event of significant AH1 mtbreaks throughout the period of project imdementation. 4dequate implementation arrangements nave been put in place, including the necessary capacity building through?revision of technical assistance and training, as well as the continued support If the donor communitv. Activities supported would strengthen response capacity in priority areas in the short- and medium-term and lay the foundation for a more broad-based strategy, including: Comprehensive IEC campaigns, critical to containing the spread of an influenza pandemic. Well designed, cost-effective interventions. Carefully monitored interventions, allowing for modifications and redesign as needed. Service delivery deconcentrated with the maximum use of local governments and civil society. Good M&E to flag emerging issues. Flexibility to adjust the program as needed. 8

15 High-level central commitment does not translate into action on the function. From Components to Outputs Controlling the spread of the pandemic may expose the Government to criticism if social distance measures are needed. Delays in testing, diagnosis, and reporting of cases and access to medical inputs and supplies in case of pandemic. S S S S Mitigation Measure [mplementation mechanisms explicitly zddress the link between the required :entralized decision making (the principle 3f direct chain of command ) with the needed local-level implementation; :ommunication strategies will include local-level implementing actors as targets; sapacity building includes the periphery. A robust internal audit function independent from operations reports to Govemment and financiers. Advocacy and coalition building to sensitize key groups including policy makers and the media will be supported. This will be complemented by carefully designed mass communication campaigns to build support for the Project among the Powlation. Monitoring long-term case reporting and coordination with WHO that has established an international antiviral stockpile with donations from the pharmaceutical industry. Financial resources not accessible in a timely manner; weak procurement management. Lack of timely and predictable access to expert advice and technical support. Low priority given to public accountability and transparency in pro gram management M M S Procurement and financial management arrangements will be handled by suitably qualified and properly trained staff. Project activities have been designed with assistance from leading multilateral agencies (e.g., FAO, WHO, UNICEF and OiE). Publication of audit results and achievements; transparency in decision and resource allocation. 9

16 Risk I Rating I Mitigation Measure Inadequate capacity for planned surveillance, surveys and M&E. Inadequate access to information and education materials to all social and socioeconomic groups Misuse of the Compensation Fund facility Overall Risk Rating: M 4. Loan/credit/grant conditions and covenants S S S Technical assistance and partnership between local and international institutions will be provided. The M&E plan will include information on instruments for data collection, agencies responsible and a detailed timetable. Ensure culturally similar materials and use multiple channels to reach various groups (social, economic, ethnic, gender, etc.) Implementation arrangements for the Compensation Fund will incorporate strong features of transparency, community involvement, and ex-ante and ex-post checks that have been found effective in the country under other projects. Conditions of effectiveness: In order to avoid delays in implementation, the following are conditions of effectiveness: (i) the annual work program for the first year of the Project has been approved by IDA; (ii) the selection and contracting of key consultants needed for strengthening the fiduciary and M&E functions in NAHICO and DLFNAF (specifically for procurement and financial management), to be financed from World Bank funding, and in accordance with the Consultant Guidelines; (iii) the adoption of an Operational Manual (or Project Implementation Plan (PIP), including Financial Management and Procurement Manuals, acceptable to IDA; (iv) the establishment of a financial management system satisfactory to IDA; and (v) the co-financing agreements between the Recipient and the PHRD as well as the AH1 Facility are signed and meet all conditions for effectiveness, other than the effectiveness of the IDA Grant, Condition of disbursement: The finalization of a Compensation Manual and a Pilot Research Fund Manual are conditions of disbursement against those categories. Implementation dated covenants: The disclosure of the Environment Management Plan and the Ethnic Group Planning Framework are dated covenants. D. APPRAISAL SUMMARY 1. Economic and financial analyses The sequence of 45 reported outbreaks during Jan-March 2004 in Lao PDR led to the death through disease or culling of 155,000 heads of poultry, valued at approximately US$0.32 million at 2004 prices. Future outbreaks remain possible as the disease circulates among birds in neighboring countries. Given the concentration of poultry farming in three provinces (Vientiane, 10

17 Champansek, and Savannakhet) any future avian outbreaks of H5N1 may rapidly put a significant portion of the flock at risk. Lao PDR has so far not reported any laboratory confirmed human cases. However, it would be at significant risk in the event of a human pandemic because of a burdened health system with inadequate resources. Just avoiding the notional loss of income from the mortality after a country-wide attack rate of 20 percent and a fatality rate of 2 percent would imply enormous returns. The recurrent cost implications of the Program are not expected to pose a burden on government finances given that many of the operating costs of infrastructure built or equipment purchased are being met (or the infrastructure is not new). For further detail, see Appendix 10. The Program, recognizing the national and even global public goods nature of the animal and human health preventive and mitigatory investments herein, has made a significant original investment in building up Lao PDR s responsive capacity. Also, since infectious diseases emerging from the sphere of animal-human interaction threaten to be globally transmittable and highly disruptive, the investment in Lao PDR has beneficial externalities beyond its borders. 2. Technical The National Plan was prepared in direct consultation with, and support from, the lead technical agencies on AH1 and establishes the framework within which support for AH1 is being provided by the development partners. The technical appraisal looked at the activities proposed and the appropriate sequencing to ensure that the funding available will target key areas requiring support. Based on lessons learned during the 2004 outbreak in poultry, the project has adopted a multipronged approach, which includes distributing relevant information on AH1 to the public, strengthening the early detection and warning system at the field level, and improving the capacity for a rapid and effective response to an outbreak. The health sector will be prepared to respond in the event of human outbreaks and the capacity at the central level and the decentralized level will be strengthened to carry out investigations with MAF staff. Linkages of the human and animal routine (weekly) surveillance systems and data will also be made. The formulation (in consultation with MAF, MOH, Mass Organizations) and carrying out of an awareness campaign targeting the population in general is supported, utilizing community level interventions. 3. Fiduciary An assessment of the project financial management arrangements was carried out by the Bank s financial management team during project appraisal in May After reviewing the financial management capacity of the principal implementing agencies, an action plan to strengthen the project financial management arrangements was agreed with the Government of Lao PDR. With the implementation of the agreed actions as conditions of effectiveness, and a condition of 11

18 disbursement for two categories, the project financial management arrangements are considered adequate to meet the World Bank s minimum requirements (see Appendix 7 for details). Activities financed through IDA will be procured in accordance with procedures set forth in the World Bank Guidelines - Procurement under IBRD Loans and IDA Credits dated May 2004 ( the Guidelines ). Consultant services will be selected and employed utilizing Guidelines: Selection and Employment of Consultants by World Bank borrowers dated May 2004 ( the Consultant Guidelines ). A procurement capacity assessment was undertaken during appraisal which found a need to strengthen the capacity for procurement utilizing financing being provided through the World Bank (see Appendix 6). Procurement Methods and Procurement Plan. The emergency nature of the Project requires the use of methods that would allow procurement to be made in the shortest possible time while still ensuring a reasonable degree of competition and transparency. Given the small value and nature of procurement packages, the proposed methods include shopping, procurement from specialized UN agencies, direct contracting and individual consultants in accordance with the provisions of the Guidelines and Consultant Guidelines, May A preliminary procurement plan has been developed. 4. Social The Project is expected to contribute to minimizing the impact of outbreaks and a human pandemic by having in place a surveillance and response system to reduce the potential impact of an unchecked outbreak in the avian population. In addition, the Project will be financing an analysis of possible compensation packages, including their relative merits and sustainability, in order to be prepared for a possible outbreak. Ensuring that there is a proper response to any outbreak in animals (including poultry) should help to ameliorate the potential of humans contracting the disease and possibly passing it on to others. The Project s support to improving the surveillance, conducting public awareness campaigns (including translation of messages into ethnic languages), and putting in place a preparedness plan, should help to prevent or, in the event of a pandemic, reduce the impact on the population. The integrated surveillance system to be supported by the Project will reinforce the multi-sectoral response necessary to this threat. 5. Environmental and social safeguard policies The project is not expected to have any large-scale, significant and/or irreversible impacts as its activities focus largely on public sector capacity building and ensuring readiness for preventing or reducing possible human infections. This will be achieved by strengthening emergency preparedness and response to outbreaks of AI in domestic poultry. The project design incorporates other beneficial measures such as improved biosecurity in farms and live markets, and control of poultry movement within and across countries. The project activities aim at improving the effectiveness and safety over the existing AI practices and will have positive human health and environmental impacts. Among the Bank s safeguards policies, only the policies on Environmental Assessment and Indigenous Peoples are triggered. The project design incorporates the necessary mitigation measures for the adverse impacts associated with the activities involved in responding to AI outbreaks. A draft Environmental Management Plan 12

19 (EMP) and Ethnic Group Planning Framework (EGPF) have been prepared and will be finalized during project implementation. The EMP and EGPF will be disclosed in Lao PDR and Washington D.C. (Infoshop) after consultation with various Government agencies, the commercial poultry associations, mass organizations, and NGOs. The Financing Agreement will reflect implementation of the EMP and EGPF. 6. Policy Exceptions and Readiness The project meets the criteria for readiness for implementation and no policy exceptions are anticipated. 13

20 Appendix 1: Country and Sector Background LAO PDR: Avian and Human Influenza Control and Preparedness Project 1. Lao PDR is a landlocked country that shares borders with countries most affected by the recent outbreaks of Influenza A virus (H5N1), namely Vietnam, Thailand, Cambodia and China. These borders are largely permeable with legal and illegal crossing of people, animals, and food products. While the population of Lao PDR is not large, 5.6 million, the majority of these people live in rural and remote mountainous areas, with the attendant challenges of communications, transport, and service provision. There are 141 Districts in the 16 Provinces and the capital of Vientiane. The population is also ethnically diverse; 49 distinct ethnic groups speak different languages, and have different cultures. With a per capita income in 2005 of US$380, Lao PDR is classed among the Least Developed Countries. 2. Animal Health. Lao PDR reported its first and only wave of avian influenza (H5N1) outbreaks in the poultry population in early 2004: a total of 45 incidents were reported from the mid-january to the end of March, Vientiane had 38, Champasak had 5, and Savanakhet had 2, with 42 reports from commercial enterprises and 3 from villages (38 in Vientiane, 5 in Champasak and 2 in Savanakhet). Approximately 155,000 poultry died: 1/3 from the disease and the remainder from culling. The MAF estimated that the cost of investigation, response, and management of the outbreaks was US$4 million. While no further outbreaks have been reported, it is suspected that more outbreaks may have occurred in rural areas, but were either undetected or unreported. In May 2006 Government reported that a sample taken from a duck in Vientiane in February 2006 was confirmed positive for H5N1. To date there have been no human cases reported, although it is possible that they have occurred but were either undetected or unreported. There are approximately 20 million poultry in Lao PDR, with around 20 percent held in more than 120 commercial enterprises which serve the larger urban populations in Vientiane, Luang Prabang, Champasak and Savanakhet. The remaining poultry, found in all Provinces, are owned by subsistence farmers for personal family consumption. 3. The veterinary services in Lao PDR have been plagued by a chronic shortage of veterinarians serving the agriculture sector. Of the 69 fully qualified veterinarians, 12 are employed in the DLF of the MAF in Vientiane. Approximately 893 government personnel are involved in animal production and animal disease control programs at the national, Provincial and District levels, and there are 785 livestock officers located at 17 Provincial livestock offices. The 11,180 villages are supported by 5,177 VVWs administering animal health services; their time is spent on cattle, buffalo, pigs (50 percent), dogs and cats (30 percent), poultry (20 percent)..t 4. Laboratory capacity is in general a major constraint to improved surveillance for HPAI. FA0 has supported the purchase of essential equipment required to detect HPAI for the NAHC in Vientiane, and laboratory staff have been trained on test methods as well as quality assurance, and bio-safety/containment procedures. Some personal protective equipment (PPE) is available and is being shared between the MAF and MOH. 5. Lao PDR s health care system has one of the lowest per capita health expenditures in Asia (US$12); Government spending on health provision is heavily supplemented by household 14

21 expenditures and contributions from donors. The system is characterized by insufficient health workers in absolute terms, compared to international norms, a lack of essential drugs (and irrational use of drugs), and a lack of needed or functional equipment. However, considerable external investment in health over the past 10 years has led to significant improvements. A major constraint remains the lack of funds for recurrent expenditures; the sector is quite projectdriven which complicates health sector management. The capital, Vientiane, has four Referral Hospitals and three Specialized Hospitals. There are four Regional Hospitals, and each of the 16 Provinces has a Provincial Hospital; there are 141 District Hospitals, and 789 Health Centers. Many health facilities have insufficient professional medical and administrative staff, limited essential drugs and basic equipment; there is an absolute shortage of health workers which is compounded by skewed distribution (most workers live and work in urban areas), and their skill level tends to be low. The perceived low quality, which relates to health worker motivation and skills, quality of facilities, and also to a lack of knowledge about the need for health care, often leads to quite low utilization of health facilities. The number of patient services provided per health worker or health facility is actually low, which speaks to inefficiencies in the health system. The dependence on user fees for recurrent costs may also contribute to the underutilization of facilities. At the community level, 14,000 VHVs are, or have been, working mainly on malaria and the drug-kit programs after receiving limited training (from a few days to six weeks). Although there is a 10 bed isolation ward in Vientiane, and at least one new isolation ward was build in six locations in response to SARS, most hospitals have insufficient isolation rooms, inadequate equipment and staff to provide intensive care for patients with severe respiratory diseases; unsafe methods are still utilized to dispose hospital waste disposal. Nursing practice needs to be upgraded to improve isolation procedures in order to improve both patient and health worker safety. The hospitals and health centers are supervised by the Curative Department of the MOH while the surveillance and public health laboratory is the responsibility of the Department of Prevention and Hygiene. 6. The public health communicable disease surveillance system is carried out by the NCLE, located in Vientiane, supported by 17 Provincial Surveillance Units, and 141 District Health Offices. The NCLE carries out surveillance, case and outbreak investigation, response, and research, and serves as the public health laboratory and the national reference lab. There is a weekly communicable disease reporting system which includes 18 conditions, to which influenza, avian influenza and ILI are currently in the process of being added. NCLE has also been receiving support from the U.S. Naval Medical Research Unit (NAMRU-2) to implement a computerized Early Warning Outbreak Recognition System (EWORS) in the four hospitals in Vientiane and in three of the four Regional Hospitals. EWORS is a symptom-based hospital surveillance system that collects and sends data to NCLE on a daily basis from the outpatient and emergency rooms. Currently the reporting is only produced on a month basis, and the data is not being used to its capacity. The Provincial Surveillance Unit has between two to four staff with variable levels of training, consequently NCLE staff often conduct outbreak investigations and response, leaving little or no time for other tasks; District level staff are typically not qualified in epidemiology, carry out many public health activities, and also work at the District Hospital. The Health Centers and some District Health Offices lack communication equipment (i.e., telephones, faxes and/or radios), making it difficult to report health events to the next level up in a timely manner. 15

22 7. The public health laboratory structure has four central laboratories in Vientiane, four in the Regions, 13 at Provincial level and 125 at District level laboratories. Although the NCLE acts as the public health and national reference laboratory, it has not achieved biosafety level 2 status and currently does not have the capacity to perform influenza diagnosis, consequently suspected AI specimens are shipped out of the country for testing and then to reference laboratories for confirmation. A capacity to use RT-PCR techniques for identification of influenza is being established as an interim step in upgrading influenza diagnostic capacity and should be operational by the end of 2006; until then viral culture of human influenza will still be analyzed outside of Lao PDR. The overall performance of the national and peripheral laboratories is relatively low due to inadequate human (trained lab technicians) and financial (equipment and supply of reagents) resources. A long-term plan for enhancing the public health laboratory is desirable, and it is recognized that this may require an entirely new facility and also considerable investment in training laboratory workers. 8. An awareness campaign was carried out during, and following, the 2004 outbreak and included distribution of leaflets to Provincial and District animal field officers, and to farms and villages in Vientiane, where radio and television messages were also broadcast. Several booklets and handouts were also produced to educate bird owners and VVW on the signs of HPAI and preventive measures such as bio-security. A participatory national AI Communication workshop was held in May, 2006, attended by key government stakeholders, mass media, television, mass organizations, the United Nations and other international agencies. The purpose was to develop an overall communication action plan for AH1 pandemic preparedness. One outcome was the establishment of an IEC AI Communication Taskforce with representatives from Government, UN agencies, non-governmental organizations, and mass organizations. A second outcome was the development of an action plan for development, within three months, of communication tools on hygiene and food safety. 9. Government established (through Order No. 02/Decree No. 17) the NC/CDC, and Decree No. 377 has named the Prime Minister as the chair, giving this multi-sectoral body more authority, and established a Secretariat to the CDC. In addition, Agriculture Ministerial Orders (0012, 0075, 1067) and Department Order 172 have been issued to ban the importation of poultry and poultry products from neighboring countries with HPAI. A February 16 Announcement (No. 242) from the Prime Minister s Office provides guidance on implementation of Avian Influenza and Massive Disaster, indicating the responsibility for each of the five strategies from the National Plan. A May 11,2006 Agreement (No. 113/PMO) issued by the Prime Minister s Office established NAHICO and gave the names of the Board responsible for its activities and coordinating the strategies which cover animal health, human health, as well as IEC, and institutional and legal frameworks. 16

23 Appendix 2: Results Framework LAO PDR: Avian and Human Influenza Control and Preparedness Project Background Implementation of the National Plan will be financed by the World Bank (IDA grant, PHRD, and AHIF) as well as other donors, many of whom are providing their funding through technical agencies such as WHO, FAO, and UNICEF, who are using their own resources as well. As all the donors have a limited amount of funds available and activities they can (or cannot) fund (e.g., PHRD can only be used for 75 percent of the total training and technical assistance required), many related activities that are necessary to achieve the objectives of each strategy are being funded through multiple donors. The Government and the financiers have agreed to establish one monitoring and evaluation (M&E) framework and a set of Program indicators that will be used to monitor the implementation progress of the National Plan. The results framework includes not only the indicators for the activities that will be supported by the World Bank, but also those that will be supported by other donors. The indicators for the activities that are directly supported by the Bank are italicized below. Given the uncertainty of the situation, and the fact that the planned activities may need to be modified during implementation as the phase of epidemic changes, the emphasis will be on monitoring the implementation progress of various activities under the National Plan rather than on evaluation. The evaluation will be limited to compliance, accountability, and progress, except for certain activities that can be implemented regardless of the epidemic phases (e.g., IEC). Purpose M&E is intended to demonstrate: (i) how well a series of activities under the National Plan are achieving their stated objectives (this is accomplished by routinely collecting data on performance indicators and comparing actual results with targets; and (ii) why the intended results are (or are not) achieved by assessing specific contribution of activities to the results. Therefore, the M&E process and results will not only inform achievements and recommendations for improvement, but also alert decision makers, or relevant stakeholders, to actual and potential problems during implementation so that adjustment can be made. Mechanism: responsibility, reporting, and feedback The primary responsibility for M&E of implementation progress will rest with the implementing ministries, in close collaboration with relevant technical agencies and donors, as described below. Every quarter, the M&E unit in the NAHICO will: (i) collect the information from the M&E focal point for each component; (ii) produce a quarterly progress report; and (iii) share the report with all the stakeholders. In order to minimize the burden on implementing ministries, and to promote information sharing, feedback forwarded to the M&E Unit of NAHICO will be consolidated and shared with the implementing agencies for their information and follow-up, and to financiers of the National Plan for their information. Quarterly Progress Reports should include: (i) interim financial reports; (ii) physical progress of implementation including the achievement toward the objectives using the selected indicators; (iii) risk management plan (e.g., risk identification and control plan); and (iv) any other essential information that needs to be shared with stakeholders (e.g., AH1 situation, additional funding 17

24 sources and activities that will be undertaken with those funds). The fourth quarterly progress report per year will serve as an annual progress report, and should include annual achievements. NAHICO will organize semi-annual review meetings with the financiers to evaluate the achievements and lessons learned, as well as planning for the year ahead in detail. In addition, a joint mid-term review, based on a mid-term progress report to be prepared by the Government and/or independent assessors, will be conducted approximately halfway through the project. The joint review will evaluate the progress to date and discuss any proposed changes which may be required based on the situation on the ground, including reallocation, design, and/or expected outcomes among others. ACTIVITY M&E REPORTING FEEDBACK CONSULTAT ION TECHNICAL FOLLOW-UPS SUPPORTS FINANCIERS DLF, MAF DLF, MAF Curative Care/ NCLE, MOH NAHICO r M&E Unit NAHICO NCLE, MOH CDC, WB Component 4 NAHICO External stakeholders Component 5 I NAHICO } Current M&E capacity and technical assistance needed Given the emergency nature of the program, quite a few activities are planned in the first couple of years, and thereby need to be monitored. Although indicators are carefully chosen to minimize the additional burden of collecting data whenever possible, considerable efforts still have to be made to ensure the proper implementation and M&E of the activities under the National Plan. However, M&E capacity, which varies by implementing agency, is generally weak in Lao PDR. Consequently the following is recommended to build and/or complement existing capacity. 9 M&E focal point - the M&E technical assistant to be hired for NAHICO should provide capacity building to implementing agencies.. Training a. Initial training on basic M&E and requirements for reporting - this three to five day training should be attended by M&E focal points as well as senior officials 18

25 from each implementing Ministry; participation of senior officials for at least a day will contribute to ensuring the proper allocation of staff time and resource on M&E. b. Refresher training-at least one month before the first annual report is prepared, refresher training should be offered for M&E focal points to make sure the timely preparation of the report for discussion at the annual meeting. c. Time and finance permitting, the M&E focal points should also be offered indepth training in M&E, possibly out of the country.. Technical assistance may also be needed to finalize the operational plan of M&E, to standardize reporting forms, and to prepare annual and mid-term review reports and meetings, among others. 19

26 Results Framework To support the Government s National Plan, which aims to minimize the threat posed to humans and the poultry sector by AH1 infection and other zoonoses in Lao PDR, and to prepare for, control, and respond to influenza pandemics and other infectious disease emergencies in humans out YO of provinces that send weekly surveillance report including ILI, AI, SARS on time. YO of backyard poultry farmers who are currently doing at least 3 things to protect their poultry and/or family from AI utco 1 To evaluate the projects overall outcome Intermediate Results se. Improve poultry farming system - Strengthen the capacity of early detectiodwarning and diagnosis 9 Enhance capacity for rapid and effective response to HPAI outbreak 1 % of backyard poultry producers in Vientiane, Savannakhet and Champasack provinces trained about bio-security improvement 9 % of commercial poultry producers trained about biosecurity improvement 9 % of slaughtering house employees trained about biosecurity improvement 9 % of targeted laboratory staff trained for HPAI diagnosis and sub-typing for H5 9 9 % of provinces with an effective rapid response team % of districts that maintain fiee of HPAI infection in the poultry sector YO of diagnostic tests (including sub-typing for H5) of suspected cases done within 48 hours 9 (in case of outbreaks) % of outbreaks responded by the rapid response team within 24 hours To assess the status of HPAI infection in the poultry sector in the country 1 To assess the progress of interventions To evaluate the effectiveness of interventions including training 20

27 ntralize HPAI outbreak disease surveillance % of districts with trained care workers at each level of facilities Improve the capacity o f laboratory Component 4: IEC - % o f health facilities with targeted staff trained on infection control and case management ## of influenza surveillance sentinel hospitals with at least 5 staff trained on specimen collection YO of trained staff who have correct knowledge on infection control and case management YO of suspected patients treated according to the infection control and case management guideline - YO of targeted influenza specimens tested - YO of suspected AI specimen tested within 24 hours 9 Enhance IEC on AH1. AI communication strategy and action plan developed 'YO of backyard poultry farmers who know about AI YO of backyard poultry farmers who know at least 3 ways to protect themselves and their families from AI 9 YO of backyard poultry farmers who know at least 3 wags to protect their poultry from getting AI.. To assess the progress of interventions To evaluate the effectiveness o f interventions including training To assess the progress o f interventions To evaluate the effectiveness of interventions including training 21

28 ntermediate Resul One per Component Component 5: Strengthenin! Strengthen the function of the national CDC committee and NAHICO Results Indicators for Each Component Df institutional and legal fram % ofprovinces that have a multisectoral AI team 1 % ofprovinces that have avian influenza and pandemic preparedness plan 9 To strengthen collaboration of multisectoral stakeholders 9 To evaluate the effectiveness o f interventions * Input and output indicators are in regular font: outcome indicators are in b d. Indicators for activities that are funded by the World Bank are italicized. M&E.of all the activities in each Component are funded by the Bank. 22

29

30 0 b. 0 v) m 3 I 10

31 0 W 0 m 0 d - I 0 I I. I.

32 Appendix 3: Detailed Project Description LAO PDR: Avian and Human Influenza Control and Preparedness Project The World Bank is one of the financiers of the National Plan, with FAO, and OiE supporting component 1, WHO is supporting components 2,3 and 5, and the United Nations Children Fund (UNICEF), and the Academy for Educational Development (AED) supporting component 4; the United Nations Development Program is also providing support for component 5. In addition to using their internal budgets where available, these organizations have also received financing from the Governments of Germany, the United States, Luxembourg, among others. The Asia Development Bank is also providing support for activities within the National Plan. Every effort has been made to ensure that there is no overlap of support or duplication of effort; as other support to the National Plan becomes available in the future, or if additional financing from existing financiers becomes available, the World Bank resources will be re-directed to areas within the National Plan where shortfalls exist. While details of anticipated activities to be provided through World Bank financing are described below, it is understood that there will be flexibility of activities to be financed, given the impossibility to predict the needs, except for some immediate term requirements, as well as the possibility of financiers providing additional funding. Following is a description of each component (which corresponds to each of Government s strategies), with an indication of the activities currently proposed for funding from the World Bank either through an IDA grant, PHRD or AHIF resources. Component 1: Animal Health (Total: US$5.35 million). This component, directed specifically at the control of the disease in poultry, will be implemented by the DLF in the MAF, with support from FA0 and OiE. The activities supported under this component are in line with the recommendations of FA0 and OiE, and, given the current status of HPAI in Lao PDR, is appropriately directed at investigation, surveillance, prevention and preparedness for any new outbreak. This support is based on detailed assessments of the AI epidemiological status, of the capacity of national veterinary services to cope with HPAI epidemic, and the vulnerability of the poultry industry to emerging infectious diseases. Subcomponents cover reduction of risk, enhancing capacity for early detection, strengthening capacity for laboratory diagnosis, research and development, improving the national information system, enhancing the response and the networking between sectors within the country, region and internationally, as well as the provision of veterinary training. As indicated above, FA0 (through its own resources and those provided to them by other financiers) and OiE are supporting various activities presented in the Plan. Financing provided through World Bank resources, which are complementary to this support, include activities associated with reducing the risk of HPAI in the commercial sector, and targeted interventions directed at fighting cock production. To support early detection, consultants will be financed to prepare guidelines and procedures for use at internal and cross-border checkpoints, and vehicles will be provided. To complement FA0 support, World Bank financing will cover research related to the monitoring of national and international poultry movements. The national information system will be supported by the World Bank through the provision of communication equipment. Rapid response will be supported through the financing of transport and per diems (using United Nations rates). World Bank financing will be provided to complete the national veterinary laboratory. In addition to funding provided by FAO, World Bank 26

33 financing is available to contribute to the design of a compensation plan (such as the preparation of procedures and guidelines), as well as compensation to owners of culled poultry. Networking activities (internally, regionally and nationally) will be supported, as will the training of veterinarians within the region. Component 2: Human Health: Surveillance and Response (Total: US$l. 10 million). This component intends to support Lao PDR s preparedness by improving the surveillance of human health, as well as putting in place a mechanism for responding in the event that human cases are discovered. Financing for this component is being provided by WHO, with the World Bank financing the training in field-based epidemiology, the provision and operating costs of mobile phone, vehicles, and M&E of activities supported under this component. Component 3: Human Health: Curative Services (Total: US$2.54 million). Government s plan divides key response activities into those that support curative services, and those that support laboratory activities. Financing is available through WHO for many of the activities, but additional support is required, and will be provided through World Bank financing. M&E of Component 3 will be financed through World Bank sources, as will the purchase and operating costs of ambulances to transport patients, costs associated with health care waste management (including evaluation of current plans, provision of, training on, and operating costs associated with relevant equipment). Financing through the World Bank could also cover health staff at checkpoints, and the establishment and running costs for improving the surveillance system at five hospitals (support for the remaining hospitals is being provided through other donors) for improving the surveillance system. Financing for rehabilitation of the existing laboratory is also included in financing from the World Bank; support for this will also require the inclusion of relevant skills for design and supervision of the civil works. Component 4: Information, Education and Communication (IEC) (Total: US$1.87 million). IEC is an important tool in the arsenal for a comprehensive response to conditions within the country, in the animal and human health sectors, as well as the public in general. Support for this important activity is being provided through funding given to UNICEF, and AED. Efforts will be made to ensure that communications tools which are designed are culturally appropriate and translated into languages to ensure that ethnic groups are reached in the process. Financing from World Bank resources will cover survey(s) to assess the effectiveness of various IEC interventions in the National Plan. Component 5: Program Coordination and Regulatory Framework (Total: US$2.67 million). Given the multisectoral response required in the event of an outbreak (in either animals, or humans), or a pandemic, the need for a well coordinated response has been identified as critical. The recent establishment of NAHICO, to take the lead in coordinating this response and to report on progress in implementing the Plan to the NC/CDC is most welcome. This component will be coordinated by NAHICO, with implementation to be delegated to relevant Ministries. Support necessary to manage World Bank financing will be handled by NAHICO. Given the fact that NAHICO will be responsible for overall M&E of the National Plan, financing for activities associated with M&E is being made available from the World Bank. Other activities which the World Bank financing will cover support to the NC/CDC, desktop pandemic simulation, provision of PPEs and their management, and the review and recommendation of existing 27

34 regulations, and drafting new ones if needed to ensure an efficient response in the event of an outbreak or pandemic. Financing is also provided for research on pandemic preparedness and piloting innovative activities to reduce the risk of HPAI infection. Assistance associated with overall management of the Plan, including support for collaboration, and requisite financial, procurement, and monitoring and evaluation capacity will be provided through World Bank financing under this component. 28

35 Appendix 4: Project Coordination and Implementation LAO PDR: Avian and Human Influenza Control and Preparedness Project The coordination framework was described in a Notification of Prime Ministers Office No. 242/PMO, dated February 16, 2006, where the implementation arrangements for Strategy 1 are vested with MAF, and Strategies 2 and 3 rest with MOH. While the implementation of Strategies 4 and 5 indicates that MOH should lead, it is expected to do so in collaboration with a variety of Ministries and Mass Organizations. Collaborating partners include MAF, MOH, the Ministry of Education, the Ministry of Information and Culture, Ministry of Justice, Ministry of Foreign Affairs, Lao Women s Union, Lao Youth Union, Lao Trade Union, among others. On May 11, 2006 NAHICO was established through Decree No. 113/PM, further cementing Government s commitment to a multi-sectoral approach to AH1 control and preparedness; NAHICO is expected to provide a coordinating role in activities undertaken by line ministries, and to report to NC/CDC on progress in implementing the National Plan. The Decree names the director, deputy director, and members of the Board (in total comprising 5 people), and notes that there would be four Units under NAHICO, namely, Coordination and Collaboration, Planning and Finance, M&E, and Procurement. The Coordination and Collaboration Unit will be working closely with the partners supporting the National Plan. It is expected that the Financial Management Specialist to be financed by the World Bank will be located in the Finance and Planning Unit supporting to NAHICO; this function will also provide capacity building to line Ministries charged with the responsibility for implementing the National Plan. The M&E Unit should be headed by an internally recruited person, who will be responsible for the continuous M&E of the National Plan activities, and providing capacity building to implementing agencies. The results framework (see Appendix 2), agreed between the Government and financiers of the National Plan, will form the basis for at least semi-annual evaluations of progress against targets. Since only World Bank financing will flow to the Government directly, the Procurement Unit will be staffed by a Procurement Specialist, who will have the ultimate responsibility for ensuring that the procurement documentation is prepared appropriately, with relevant input from line ministries. In addition to providing technical assistance to NAHICO, the financial management and procurement specialists to be recruited are also expected to help develop capacity in line ministries with implementation responsibilities. The recommendation is for Government to consider preparing terms of reference for hiring a firm which would be in a position to put together a team (for at least financial management and procurement, if not M&E as well) to provide the necessary support and capacity building to the implementing agencies of the National Plan which would be receiving financial support through the World Bank. The May 2006 Decree allows NAHICO to approach relevant ministries to seek their nomination of staff to provide support to NAHICO. It is assumed that this support will be part time in nature, since most Government staff already have full time responsibilities. It is therefore anticipated that the only fill time staff working in NAHICO will be those contracted, and paid for from financing sources provided through the World Bank. NAHICO is envisaged as a small, efficient organization, which will not draw technical staff from line ministries, to the detriment 29

36 of the functions within the line ministries, to fill positions within NAHICO. Given the emergency nature of the problem at hand, it is also clear that it will be important to have a mechanism which would allow for complete delegation; the current Board consists of Ministry staff with other commitments. Consideration needs to be given to having someone (presumably within Government) who would have the delegated authority to ensure that activities, supported through financing available through the World Bank, do not come to a standstill in the absence of the requisite decision maker. NAHICO will be delegating implementation responsibility to the relevant Ministries. It is understood that Component/Strategy 1 would be delegated to the DLF of MAF, where a dedicated team would be constituted to carry out the activities of the National Plan; financing from the World Bank resources could cover the necessary consultants (see the description above as one example of capacity building) to augment the capacity within the Department with respect to financial management. Implementation of Components/Strategies 2 and 3 would be the responsibility of the Department of Hygiene and Prevention and the Curative Department of the MOH respectively. These Departments would assign staff to be responsible for ensuring that the Subcomponents/Measures are carried out according to the National Plan. Activities under Component/Strategy 4 are entirely financed through resources obtained by UNICEF and AED (the full funding of the National Plan), with the exception of a KAP to be financed by World Bank resources at the end of the Project. Activities would be undertaken by multiple implementers; the Ministry of Information and Culture, MAF, MOH, and mass organization, with NAHICO playing a coordinating role. NAHICO will be responsible for contracting the KAP survey which will serve as to inform on progress during implementation. Component/Strategy 5 comprises a number of cross cutting activities, such as pandemic preparedness, stockpiling of supplies, and overall program management, among other activities. Responsibility for oversight of the implementation, to be carried out by a number of collaborators, rests with NAHICO. In particular NAHICO will be responsible for ensuring overall Program implementation, including procurement, financial management, timely reporting and coordination (not only among relevant Lao stakeholders, but also with the donor community). NAHICO will provide the forum for gathering interested stakeholders in AHI, and convene meetings to discuss relevant topics; it will also be responsible for hosting at least semiannual reviews of the implementation progress of the National Plan with the financiers and other stakeholders. Terms of reference for the coordination activity is in the process of being finalized and will be included in the PIP. Following is an organogram depicting reporting and organizational arrangements. 30

37 National Avian and Human Influenza Coordination National Committee for Communicable Diseases Control NClCDC (Chair: Prime Minister) (Ministers level - meets every semester ) Partners Group (Meets quarterly) Chaired by the Minister of Health, Cochaired by UN Resident Coordinator CDC Secretariat (Vice ministers level -meets quarterly) National Avian and Human Influenza Coordination Office (NAH ICO) Comprising Director, Deputy Director and three permanent.members -- C2 - Human C3 - Human C4 - IEC Health - Health - NAHICO Surveillance Curative In collaboration with &Response Services MICIMAFIMOHIMOEI Mass Organizations A'l I C5 - Program Coordination and Regulatory Framework NAHICO In collaboration with MFNMOHIMOFN MOJ National Avian and Human Influenza Coordination Office NAHICO Level I: Overall Program Coordination and Management t Unit 1 : Unit 2: Coordination Planning and and Finance Collaboration I I I L Unit 3: Monitoring and Evaluation Procurement I1 Level 2: Coordination for Implementation of activities Coordination of Implementation for Components 4 (IEC) and 5 (Program Coordination and Regulatory Framework (MAF, MOH, MOFA, MOE, Mass Organizations, Mass Media) 31

38 Appendix 5: Project Costs and Financing LAO PDR: Avian and Human Influenza Control and Preparedness Project PROJECT BUDGET PER ACTIVITY (IN US$ MILLIONS) Project Preparation: 0.00 Component 1.92 Component Component Component 4: Component Project total: PROJECT BUDGET PER EXPENDITURE CATEGORY (IN US$ MILLION) 32

39 Appendix 6: Procurement LAO PDR: Avian and Human Influenza Control and Preparedness Project A. PROCUREMENT ARRANGEMENT As described in OP 8.50 for Emergency Recovery Assistance (ERA), in addition to emergency assistance, the Bank may support operations for prevention and mitigation in countries prone to specific types of emergencies. This may comprise: (i) developing a national strategy; (ii) establishing an adequate institutional and regulatory framework; (iii) carrying out studies of vulnerability and risk assessment; (iv) reinforcing vulnerable structures; and (v) acquiring hazard reduction technology. Given the threat that AH1 may pose to the economic and social fabric of the country, as well as to the health of the population because of the risk of an influenza pandemic, the Project will be financed through an IDA Grant to be approved following ERA procedures. Procurement for the proposed project would be carried out in accordance with World Bank Guidelines: Procurement under IBRD Loans and IDA Credits (Guidelines), May 2004; and Guidelines: Selection and Employment of Consultants by World Bank Borrowers (Consultant Guidelines), May 2004 and the provisions stipulated in the Financing Agreement. The general description of various items under different expenditure categories are described below. A detailed Procurement Plan covering the first 18 months of the project implementation was provided by the Project Implementing Agency (NAHICO) prior to the negotiations. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. Civil Works Civil Works contracts estimated to cost US$300,000 or more per contract will be procured using the World Bank s international competitive bidding (ICB) procedures and Standard Bidding Documents. These include constructiodrehabilitation of two laboratories. Works estimated to cost less than US$300,000 but more than US$40,000 per contract will be procured using national competitive bidding (NCB) procedure. These may include construction of quarantine rooms. Procurement will be done through NCB in accordance with the Bank s Procurement Guidelines and following the detailed procedures for Public Bidding as laid out in Decree No.O3/PM dated January 9, 2004, and Implementing Rules & Regulations No. 0063/MOF (IRRs) dated March 12, 2004, in that they complement each other. The national standard bidding documents developed by the Procurement Monitoring Office (PrMO), Ministry of Finance, may be used subject to modifications required by the Bank. Small works such smaller quarantine rooms or fences. estimated to cost less than US$40,000 per contract may be procured through shopping, following the detailed procedures for Price Comparison as laid out in the above-mentioned Decree and IRRs, incorporating the Special Provisions listed below, and using the national standard Request for Quotation (RFQ) documents developed by PrMO. 33

40 Goods and Non-Consulting Services Goods procured under the proposed project include, but are not limited to, office, communication, and laboratory equipment, office supplies, software and hardware, PPE, drugs, and vehicles. ICB using the Bank s standard procedure and Standard Bidding Documents will be used for packages estimated to cost US$lOO,OOO or more per contract. Vehicles may be procured from IAPSO. NCB will be used for packages estimated to cost less than US$lOO,OOO but more than US$20,000 per contract in accordance with the World Bank s Guidelines and following the detailed procedures as laid out in the above-referenced Decree and IRRs, in that they complement each other. The national standard bidding documents developed by PrMO may be used subject to modifications required by the Bank. Such ICB packages would comprise relatively large value of goods not readily available in the local market. However, if these packages will be required for emergency operations, faster procurement methods such as shopping may be allowed on an exceptional basis. Shopping may be used for contracts estimated to cost less than US$20,000 each and would cover most of the equipment and supplies required for the project. The procedure for shopping shall follow the detailed procedures for Price Comparison as laid out in the above-mentioned Decree and IRRs, incorporating the special provisions for shopping listed below, and using the national standard RFQ developed by PrMO. Direct contracting in accordance with paragraph 3.6 of the Procurement Guidelines and procurement from UN Agencies such as WHO or UNICEF in accordance with the paragraph 3.9 of the Procurement Guidelines may be the appropriate method for procurement of certain types of goods and services provided that such procurement to be proposed by the project implementing agency will meet the conditions as specified in the mentioned respective paragraphs. Direct contracting may be used for emergency procurement of PPE kits that would be included in a positive list to be defined and agreed in advance with the Bank. Consulting Services Except several consulting services including laboratory construction design and supervision, financial management, procurement and independent audit of project financial statements, the IDA Grant is currently not envisaged to fund consulting services. However, it is possible that, in the event of changing circumstances, there may be a need for funding consultants from IDA resources. Possible areas where consultancy services might be needed include formulating guidelines, conducting research, reviewing compensation schemes, reviewing regulatory control measures, developing a GIS database to link human cases and animal data, developing a communication strategy and plan, developing information, education and communication materials, conducting rapid participatory community surveys, database manager, desktop pandemic simulation, and reviewing legal decrees and laws related to pandemiddisease prevention and control. Most consulting services would be of small value and to be provided by individual consultants. Several consulting services such as construction design and supervision or audit may require firms to be selected using Selection based on Consultant Qualification (CQS) In addition, there may be occasion to utilize Single Source Selection (SSS) for consultancies of a specialized nature. Least Cost Selection (LCS) may be appropriate for contracting the audit firm. 34

41 Workshops and Training IDA financing of the extensive training program, including in-country workshops and training courses will be carried in accordance with agreed procedures based on training programs agreed with the World Bank. Operating Costs Operating Costs include communication, operational travel, printing and printed material, media spots for education campaigns, office rental, office supplies, utilities, equipment operation and maintenance, vehicle operation and maintenance, and office consumables. The annual/semi-annual training program and operating costs expenditures plans, including incountry workshops, seminars, official travels, etc. shall be conducted in accordance with agreed procedures to be provided in the Operational Manual (PIP) based on programs with detailed itemized budgets approved by the appropriate Government agencies and the World Bank. The plans shall provide the objectives, criteria for selection of participants, number of participants, venues selected, timing of activity and detailed estimated costs including travel, living expenses, shopping list, unit costs, etc. Activities and expenditures incurred under these activities and included in the Statement-of Expenditures shall be supported by documentary evidence such as invoices, receipts, list of participants, per diem received, etc., signed by an official responsible and accountable for ensuring that the resources are spent strictly in accordance with the agreed plans with hidher statement confirming that. These activities and documents shall be subject to regular and/or non-regular unannounced verification and inspection by the World Bank staff and/or independent technical/financial/management inspectors. Compensation Fund Guidelines for accessing the Compensation Fund will be designed during implementation, and their acceptance by IDA, and inclusion in the PIP, will be a condition of disbursement. Pilot Research Fund Guidelines for accessing the Pilot Research Fund will be designed during implementation. Their acceptance by IDA, and inclusion in the PIP, will be a condition of disbursement. The Bank s Procurement Review Requirements The following contracts shall be subject to the World Bank s prior review in accordance with the Guidelines or Consultant Guidelines: The first contract for goods or non-consulting services from each implementing agency regardless of value and all subsequent contracts exceeding US$50,000 equivalent per contract. The first contract for works from each implementing agency regardless of value and all subsequent contracts exceeding US$ 100,000 equivalent per contract. All direct purchases and appointments contracts. The first contract for firms and the first contract for individuals from each implementing agency regardless of value, and all subsequent consulting services exceeding US$50,000 equivalent for firms and US$25,000 equivalent for individuals per contract respectively. 35

42 5. All single source selection contracts. All other contracts shall be subject to post review in accordance with the Guidelines and Consultant Guidelines. B. PROCUREMENT CAPACITY ASSESSMENT A procurement capacity assessment was conducted during the project appraisal. The procurement capacity of the proposed project implementing agencies (NAHICO, MOH and MAF) was found inadequate. The procurement issues and risks for implementation of the proposed project are mainly related to: (i) inadequate procurement knowledge and experience of the project implementing agencies; (ii) potential heavy workload due to the emergency nature of the proposed project in addition to the workload by potential projects to be funded by other donors; (iii) potential slow Government s internal procurement approval process; and (iv) potential abuse of shopping and statement of expenditures procedures. Action plan for strengthening the procurement capacity of the project implementing agencies agreed during the appraisal: NAHICO will provide a detailed Procurement Plan for the first 18 of project implementation to the Bank prior to negotiations. CDC will issue an instruction on the project procurement work including a simplified Government approval procedure and measures to ensure transparency and economy of the shopping and statement of expenditures procedures by the project effectiveness. NAHICO will select a Procurement Consultant by the project effectiveness CDCIMOH will assign one Procurement Officer to work full time at NAHICO by the project effectiveness. Each participating agency will assign one staff with responsibility for providing NAHICO with technical support for procurement of their respective sub-project components. NAHICO will organize a procurement workshop with the Procurement Consultant as the main resource person and with assistance from the Procurement Monitoring Office (PrMO), Ministry of Finance within one month after the project effectiveness. NAHICO will establish the project procurement record and filing system by the project effectiveness. 36

43 8. NAHICO will explore possibilities of experience sharing with the on-going World Bank-funded project managed by MOH. The overall project risk in respect of procurement is high. C. PROCUREMENT PLAN A detailed procurement plan covering the first 18 months of the project implementation was presented during negotiations. D. FREQUENCY OF PROCUREMENT SUPERVISION The assessment of the capacity of the Project Implementing Agencies recommended, in addition to prior reviews, bi-annual post review of procurement actions. E. DETAILS OF THE PROCUREMENT ARRANGEMENT INVOLVING INTERNATIONAL COMPETITION 1. Goods, Works and Non Consulting Services. (a) List of contract packages which will be procured following ICB and direct contracting: 1 Contract Description 1 CostUS$ Estimated Procurement Domestic Review Expected Method p-q Preference bybank Bid- Opening (b) ICB contracts estimated to cost above US$lOO,OOO per contract for goods and US$300,000 for works and all direct contracting will be subject to prior review by the Bank. 37

44 2. Consulting Services (a) List of Consulting Assignments with short-list of international firms: Description of Assignment Procurement and financial management consultant Review national legislation on pandemic 560,000 prior 100,000 I QcBs prior Expected Proposals Submission Date tbd tbd (b) Consultancy services estimated to cost above US$lOO,OOO per contract and all Single Source selection of consultants (firms) will subject to prior review by the Bank. (c) Short lists composed entirely of national consultants: Short lists of consultants for services estimated to cost less than US$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. 38

45 Appendix 7: Financial Management and Disbursement Arrangements LAO PDR: Avian and Human Influenza Control and Preparedness Project Summary of the Financial Management Assessment An assessment of the project financial management arrangements was carried out by the Bank s financial management team during project appraisal in May After reviewing the financial management capacity of the principal implementing agencies, an action plan to strengthen the project financial management arrangements was agreed with GoL (see below). With the implementation of the agreed actions as conditions of effectiveness, and a condition of disbursement for one component, the project financial management arrangements are considered adequate to meet the World Bank s minimum requirements. Country Issues The Country Financial Accountability Assessment (CFAA), carried out in mid-2002 concluded that the overall fiduciary risk in Lao PDR is considered to be high, despite the fact that there are elaborate built-in controls within the government financial management system. This is because there is insufficient transparency in public finances and the general attitude towards fiscal discipline is lax. The budget process is not yet transparent and public access to government financial information is limited. These weaknesses have been compounded by insufficient awareness of modem practices of internal control in the public sector and by the government s ongoing decentralization initiative, which needs to be supported with a sufficiently robust institutional framework that clearly defines the new responsibilities at lower levels. Technical capacity of staff at these levels needs to be strengthened and the oversight functions and the State Audit Organization need improvement. A recently completed IDF grant to improve accountability in State owned enterprises and the private sector has helped develop the environment for the accounting and auditing professions and initiated amendments to accounting and auditing laws. A Public Expenditure Review is currently underway. The recent (November 2005) Joint Portfolio Effectiveness Review (JPER) undertaken by GoL, ADB, Sida and WB also identified similar issues and weaknesses and agreed to implement a series of remedial measures in a time bound action plan., including: (i) delegation of authority over the management of project special accounts to executing agencies that have in place adequate quality and control systems; (ii) streamlining of approval processes; (iii) harmonization of a financial management manual; (iv) utilization of uniform FM software; (v) consolidation of project FM functions; and (vi) implementation of a consolidated training program. While these actions have started to improve specific fiduciary issues, the country financial management environment for externally-funded projects remains weak. Risk Analysis Inherent Risk. Overall inherent risk is considered to be due to limited financial management capacity, skills and resources in the country. Audit and internal controls are weak. These weaknesses contribute to levels of corruption being perceived as high. 39

46 Control Risk. Overall control risk at the project level is substantial due to lack of adequate financial systems and capacity, but is considered to be reduced to moderate after implementation of the risk mitigation measures described below. Risk NAHICO has just been created as a new legal entity. Its management structure and project managerial skills, including financial management and administration are yet to be tested. Central management of Special Account by MOF could cause delay of fund flows. Lack of experienced FM staff within the implementing agencies. Lack of appropriate accounting procedures: internal control, payment processing, cash and asset control are not in place Weak financial control environment Overall project financial management risk rating after mitigation Risk Rating M S M M M M Risk Mitigation Measures A financial management consulting firm will be contracted as a condition of effectiveness to provide FM services and training and capacity building to NAHICO and staff of related implementing agencies. MOF has agreed to release funds on a timely basis. Subsidiary accounts will be with commercial banks. The DLF in MAF has experienced FM staff who, together with the staff of NAHICO, will be supported and trained by consultants who are to be recruited as a condition of effectiveness. Financial management manuals, which are to be prepared and adopted as a condition of effectiveness, will set out procedures to be followed and strengthen internal controls. Annual audit to be conducted by independent auditors acceptable to the Bank, including review of internal controls. Quarterly FM supervision with annual SOE review focusing on non-contract and below threshold expenditures. Strengths and Weaknesses Strengths. The main project implementing agencies in the MAF and MoH have capable financial management units which can contribute to successful project implementation. The financial unit in the DLF in MAF has experienced staff accustomed to dealing with donor financed projects. The PMU in the MoH handling the IDA financed Health Services Improvement Project also has developed financial management capacity which can be made available to the AH1 project as needed in an advisory capacity. It will assist in preparing the project Financial Management Manual and the Interim Financial Report formats. 40

47 Weaknesses. Significant weaknesses have been addressed during project preparation and proposed remedial actions are described below. Significant Weaknesses Weak country financial management environment. Limited experience and capacity in project financial management under IDA procedures at each participating agency Resolution A.separate financial management system and unit will be established for the project, strengthening capacity in the implementing agencies and harmonizing where possible with other donor FM systems. FM for all components, except component 1, will be centralized in NAHICO and technical assistance and training will be provided under the financial management contract for NAHICO and for DLF, which will implement component 1. Implementing Entity The overall coordination of project implementation will be the responsibility of NAHICO. Implementation responsibilities will be as follows: 0 Component 1 will be implemented by the Department of Livestock and Fisheries (DLF) in the Ministry of Agriculture and Forestry. 0 Component 2 will be implemented by NAHICO through the Department of Preventive Health and Hygiene in the Ministry of Health. 0 Component 3 will be implemented by NAHICO through the Department of Curative Services in MoH. 0 Components 4 and 5 will be implemented by NAHICO, in coordination with other Ministries. NAHICO, which was established by Government decree in May, 2006, has four Units, each of which will be staffed with local personnel seconded from existing Ministries and supported by consultants as follows: (i) Coordination Unit; (ii) Financial Management Unit, supported by three FM consultants initially; (iii) Monitoring and evaluation Unit, supported by one consultant; and (iv) Procurement Unit, supported by two consultants initially. The centralization of financial management and procurement functions within NAHICO, supported by professional financial consultancy services, is one of the key measures taken in this project to mitigate fiduciary risks. NAHICO will carry out all the normal functions of a project implementation unit, including coordination and consolidation of project budgets; management of the project special account and payments to suppliers; establishment and maintenance of internal control procedures; asset management; and regular accounting and reporting. Accounting for component 1 activities implemented through the sub-proj ect account managed by DLF would be undertaken by DLF accounting staff assisted by NAHICO s consultants. DLF 41

48 accounts will form part of the consolidated project accounts prepared by NAHICO. Accounting for all other components will be undertaken by NAHICO. Project filzancing arrangements The project is being financed by IDA, AHIF and PHRD Fund. 0 The PHRD Fund would finance 100% of specific identified expenditure categories (viz., Training and workshops and Consulting services on Components 1 and 5). 0 Other expenditure categories would be cofinanced by IDA and AHIF (67% and 33% respectively of total costs including taxes). In line with the AHIF agreement, local taxes and duties will not be financed from the AHIF. The financing shares of IDA and EC of 67% and 33% respectively have been determined factoring in that no taxes and duties should be financed from the AHIF (see computation in table below). All taxes and duties on these categories would be financed by IDA.' The project accounting system will record the appropriate source of funding for different expenditures, to account and report on their uses by source of funds. The project financing statements and audit would confirm adherence to the stipulated financin shares, thereby also confirming that taxes and duties have not been financed from the AHIF. B The table below indicates the amounts allocated and the percentage of project expenditures financed by expenditure category and financing source. ' The Lao PDR country financing parameters allow for IDA financing of all taxes and duties. IDA has appraised that taxes and duties do not constitute an excessive share of project costs (estimated at about 11.8% of project expenditures on these categories). These estimated taxes have been computed based on the different tax rates applicable to each expenditure category. 3 For clarity, the Notes to Project Financial Statements would state that the financing shares between IDA and AHIF financing stipulated at the beginning have been determined in a manner as to exclude any financing of taxes and duties from the AHIF; and confirm that these agreed financing shares have been adhered to, and therefore no taxes and duties have been financed from the AHIF. 42

49 Amount Jlocated Percentage of Project Expenditures Financed $Million! Million Expenditure category TOTAL IDA Civil works Goods Training, 1.18 workshops (a) Components 1& $ Million $ Million O/O % YO AHIF PHRD IDA AHIF PHRD (b) All Other components Consulting Services 1.17 (a) Components 1& (b) All Other comvonents Compensation fund Pilot and research fund I PROJECT TOTAL COST Funds Flow Funding for the project will be derived from three different sources: 0 IDA grants, US$4 million; Japanese PHRD grants, US$2 million; Avian and Human Influenza Facility, US$2 million The grants will be pooled in one designated account with the funds from each source being separately identified and accounted for the in the accounting records and system for the project. The project accounting records will match each expenditure, with the appropriate source of funding to account and report on their uses by source of funds. The project chart of accounts and reporting formats will be developed to make this possible. A US dollar ($) designated account will be opened and maintained in the Bank of Lao (BoL), managed by the Ministry of Finance. To facilitate timely project implementation and disbursement, a Sub-project Account in US dollar ($) will be opened and maintained in a commercial bank acceptable to IDA, managed by NAHICO. Amounts will be transferred from the BoL designated account to the Sub-project account managed by NAHICO as and when 43

50 needed. A second level sub-project account in US$ will be opened and maintained in a commercial bank acceptable to IDA and managed by DLF for the implementation of component 1. The BoL designated account will have an authorized allocation of US$800,000 comprised of: IDA Grant $US400,000 PHRD US$200,000 and AHIF US$200,000. The sub-accounts will operate on an imprest basis with advance of funds based on project activity expenditure requirements. The NAHICO managed sub-project account will have a ceiling of US$600,000 and the DLF managed second level sub-project account, a ceiling of US$200,000. The flow of funds is shown in the attachment to this appendix. Disbursement Arrangements Separate withdrawal applications would be submitted for the IDA and AHIF with the required reconciliations of the ledger accounts to the bank account balances. The withdrawal applications for the AHIF would indicate that the AHIF financing (33% of total costs) does not include any taxes and duties. The project will use transaction based disbursement procedures, using the designated accounts and project accounts for most expenditures, with replenishment on the basis of statements of expenditures (SOEs). Direct payment methods may also be used for expenditures above the levels for SOEs (see below). Use of SOEs. Some of the proceeds of the grants are expected to be disbursed on the basis of SOEs as follows: (i) civil work contracts costing less than US$lOO,OOO equivalent each; (ii) goods contracts costing less than US$50,000 equivalent each; (iii) service contracts for individual consultants costing less than US$25,000 equivalent each and for firms costing less than US$50,000 equivalent each; (iv) training, workshops and study tours; (v) operating costs; and (vi) compensation fund and pilot and research hnd expenditures. Disbursements for services and goods exceeding the foregoing limits will be made in accordance with respective procurement guidelines and provisions in the Financing Agreement against submission of full documentation and signed contracts. Staffing NAHICO will hire a qualified consulting firm to undertake financial management and accounting activities and capacity building and training amongst local staff. The government has nominated designated senior officials to supervise and monitor these critical functions. Counterpart financial management staff will be seconded to NAHICO from existing ministerial units. DLF in the MAF already has a complement of five accounting staff (two senior accountants and three assistant accountants) in its accounting units. These staff will receive assistance and training in financial management, internal controls and reporting from the consulting team to be established in NAHICO. Accounting Policies and Procedures NAHICO will develop a Financial Management (FM) Manual for the project. The FM manual will focus on strengthening controls over requests for expenditure processing and will describe and adopt financial policies and procedures for: (i) reviewing and approving proposals for strategy activities; (ii) roles and functional responsibilities; (iii) names and positions of 44

51 authorized signatories in the bank accounts and threshold for delegation of payment approvals; (iv) budgeting; (v) accounting system and financial reporting; (vi) asset management; and (vii) all routine financial management and related administrative activities. The Financial Management Manual will be based on the existing FM Manual used by the PMU of the Health Services Improvement Project, which is satisfactory to IDA. Its preparation and adoption is a condition of effectiveness. The FM manual will also include financial policies and procedures to be followed by the DLF in implementation of component 1. External Audit The project financial statements and special accounts will be audited by independent auditors acceptable to IDA, working to terms of reference acceptable to IDA. The audit TOR will require the auditor to undertake an annual review of internal controls in the project. The audit report is required to be submitted within 6 months after the end of the fiscal year. As the country fiscal year is ended September 30, the audit reports are therefore due to be submitted by March.31 each year. The cost of audit will be paid out of project funds as an authorized expenditure. Reporting and Monitoring Reporting and Monitoring. Required reports include: (i) Interim Financial Reports (IFR); and (ii) Annual audited financial statements. The interim financial reports (IFRs) are required to be submitted quarterly within 30 days after the end of each quarter. As the IFR will also be used as a monitoring tool, it should report project progress with adequate description and explanation and analysis of variances. The financial statements will include report on sources and uses of funds, the project financial position; project expenditures, physical progress compared with plan; and procurement monitoring. The IFRs will not be subject to audit. The format of the IFRs will be agreed at negotiation. The format, which will be based on the existing reports prepared by the HSIP PMU in the MoH modified for this project, will report project activities of each strategy and will link the financial information with the project s physical progress. The monitoring and evaluation team shall be responsible for ensuring that physical data synchronize with the financial data. The annual financial statements are subject to be audited annually by external auditor and according to audit TOR acceptable to the Bank. The audited statements and audit reports are required to be submitted to the Bank within six months after the end of the fiscal year. The format of annual financial statements will be similar to IFR financial statements. 45

52 Financial Management Action Plan The following actions have been agreed upon: Actions Recruit and appoint consultants to provide FM services and capacity building to the implementing agencies. Establish a financial management system for the project Prepare and complete Financial Management Manual Prepare and agree on format of Interim Financial Reports Agree on FM arrangements and adopt a FM manual for the Compensation Fund Supervision Plan Responsible Agency NAHICO NAHICO NAHICO NAHICO NAHICO Completion date Condition of Effectiveness Condition of Effectiveness Condition of Effectiveness Agreed at Negotiations Condition of disbursement for this component. Financial management supervision will be undertaken on a quarterly basis by members of the regional FM team. Physical supervision on the ground will be supported by reviews of the quarterly interim financial reports and the annual audit reports, including the management letters describing the status of internal controls. Intensity of supervision will be reassessed after the first year of implementation. 46

53 ATTACHMENT FLOW OF FUNDS IDA (US$4.0 million) AHIF (US$2.0 million) PHRD (US$2.0 million) BANK OF LAOS DESIGNATED ACCOUNT (US$0.8 MILLION) - Managed by MoF Commercial Bank Sub-project Account (US$600,000) - Managed by NAHICO Commercial Bank 1 DLF 1 Sub -Account I 1 I I I I I I * SUPPLIERS/ BENEFICIARIES COMPONENT 2,3,4 AND 5 SUPPLIERS/ BENEFICIARIES COMPONENT 1 47

54 Appendix 8: Environmental and Social Analysis and Mitigation LAO PDR: Avian and Human Influenza Control and Preparedness Project 1. EXPERIENCE IN RESPONDING TO AVIAN INFLUENZA OUTBREAKS IN LAO PDR In early 2004, avian influenza (AI) outbreaks occurred in three provinces of Lao PDR (38 cases in Vientiane, 5 cases in Champasak, and 2 cases in Savannakhet). Of these 45 cases, 42 cases were reported from commercial enterprises and 3 cases were reported from villages). As a result, 155,000 animals died, about 1/3 of which from the disease and 2/3 from culling. It is suspected that more outbreaks might have occurred in rural areas, but these have not been reported. No human cases of AI were reported in Lao PDR. The procedures used to respond to these outbreaks were as follows: 0 Use ofpersonalprotection equipment (PPE). PPE was used at farms where AI outbreaks occurred and were suspected to occur (i.e., those farms where poultry was culled). Each worker wore one tyvex suit/day. There was no tyvex suit change in a day as the workers did not leave the work area or took any breaks (e.g., lunch break) until they finished their daily work. Other PPE used included gloves, masks, and booths. 0 Culling of poultw. At all reported locations, except for one, neck dislocation or placement of live birds in plastic bags was used as the method for culling of poultry in Lao PDR. The exception took place at a large commercial farm where culling of about 10,000 poultry was done using carbon dioxide (C02) gas. Disinfection of-farm surfaces, equipment, materials and wastes. After culling of poultry, the surfaces and equipment in a farm, poultry manure, bedding material, etc. were sprayed with sodium hypochlorite (NaOC1) as the least expensive disinfectant available in Lao PDR. 0 Transportation qf carcasses. Transportation of animal carcasses or farm waste was not an issue because AI outbreaks occurred at commercial farms. Carcasses were transported by carts only within the farm site to the burial pit. 0 Disuosal sf used PPE. Used PPE was put in a plastic bag and then destroyed it in an incinerator at the city. However, incineration of PPE potentially containing chlorinebased disinfectant spills would likely generate hazardous dioxins and hrans (which would be emitted to the atmosphere). 0 Disposal of carcasses and farm wastes (e.2. bedding material, manure). Burial was used as the method for disposing of culled poultry. This was done as follows: (i) a burial pit of about 2 meters was dug, (ii) the bottom of the pit was covered with lime [Ca (OH)2], (iii) the carcasses were placed on top of lime for about 1 meter depth, (iv) a lime layer was spread on top of carcasses, and (v) the remainder of the burial pit (less than about 1 meter) was closed to ground level with soil. 48

55 0 Capabilities of veterinaw laboratories. Until recently, none of the veterinary laboratories in Lao PDR had the capacity to detect H5N1, although NAHC were able to detect Type A or B. For this reason, specimens had to be sent abroad (to Thailand and Vietnam) for detection of the H5N1 virus. 0 Capabilities of the national virolom laboratow. As the virology laboratory at NCLE did not have the capability to detect the H5N1 virus, the suspected AI samples had to be sent abroad to Japan for testing. 0 Measures at hospitals. At selected hospitals, isolation rooms were established to receive AI-infected patient or patients suspected to be AI-infected. However, no such patient was received. There are no respirators in any of the isolation rooms. With FAO s technical support and the French Government s financial support, in March 2005, the Department of Livestock and Fisheries (DLF) of MAF published a manual entitled Basic Knowledge about Avian Influenza and How to Prevent It. This manual aims at disseminating basic knowledge on AI and prevention methods for agriculturalists, village veterinarians, livestock technical officers, and veterinarians as well as other people interested in AI. The manual, which contains useful information would benefit from updating, with some reorganization based on specific targeted audiences. The Government of Lao PDR has established a committee for the communicable diseases from 14 lines ministries, with MOH and MAF forming the core of this committee. Within MOH, the Department of Hygiene Prevention worked with the Surveillance Unit for daily reporting of AI cases. Some hospitals have designated isolation rooms (e.g., Mittaphab Hospital and Setthathirath Hospital in Vientiane) to receive SARS patients, which can now be used potentially AI-infected patients. Guidelines have been established for personal hygiene and healthcare waste management in Lao PDR. However, although the basis of the solid healthcare waste management system is in place (with the three-bin system of infectious, sharps, and ordinary wastes; posters on waste segregation; and some staff training), implementation is less than perfect regarding waste segregation and treatment. In addition, sewage from hospitals (particularly from the isolation rooms) is not generally treated. In 2005, the Government of Lao PDR set up the National Plan that consisted of five strategies: 1. STRATEGY 1 (Sl) - Development of a disease-free avian management system (animal aspect) 2. STRATEGY 2 (S2) - Disease surveillance and response in humans during AI outbreaks 3. STRATEGY 3 (S3) - Laboratory and curative care 4. STRATEGY 4 (S4) - Health education and community action 5. STRATEGY 5 (S5) - Strengthening institutional and regulatory frameworks For example, the design of the incinerator at the Settathirath Hospital does not meet the international standards (e.g., does not have a gas washing system). The incinerator is not operated as planned due to the high fuel cost. 49

56 In 2005, the national committee was upgraded to a higher level chaired by the Prime Minister. In January 2006, a national coordination committee was set up within the Ministry of Health. MAF has identified the National Animal Health Center (NAHC) in Vientiane as the veterinary laboratory for AI detection. In addition, one veterinary laboratory in the south (in Champassak and/or Savannakhet) and another veterinary laboratory in the north (in Luang Prabang and/or Oudomxay) have been designated to collect and ship the AI specimens to NAHC. NAHC has an exiting animal laboratory in Vientiane with limited space and capability. Currently, MAF is constructing a new building for NAHC, which is incomplete. FA0 and OiE have supported purchase of essential equipment required to detect HPAI for NAHC (which were partially received), and the laboratory staff has been trained on test methods, personal hygiene, and quality assurance (Q/A). To treat patients potentially infected with AI, MOH has identified three central and four regional hospitals for upgrading. These hospitals are: Each hospital is envisioned to have five (5) isolation rooms for the AI patients. 2. INSTITUTIONAL FRAMEWORK IN LAO PDR Environmental Management. At the national level, environmental management is under the Science, Technology and Environment Agency (STEA), which reports to the Prime Minister s office. STEA has an office in each province (PSTEO), which reports to the provincial government. In addition, in various line ministries there are units that deal with environmental issues. Recognizing the cross-sectoral character of environmental conservation and protection, the Lao Government has created multiple coordination bodies to facilitate inter-agency and provincial coordination. These include the National Environment Committee (NEC), the Water Resources Coordination Committee (WRCC), and the Lao National Mekong Committee (LNMC). Animal Health Sewices. At the national level, the Ministry of Agriculture and Forestry (MAF) is responsible for animal health services. To extend these services, MAF has a network of personnel at the national, professional, and district levels. MAF has also veterinary laboratories, including one at the National Animal Health Center (NAHC) in Vientiane and provincial veterinary laboratories (e.g., in Champassak, Luang Prabang). 50

57 Of the 69 qualified veterinarians in Lao PDR, 16 of them are employed at MAF in Vientiane. As half of this staff is to retire within the next three years and there are no universities in Lao PDR offering a degree in veterinary sciences, the currently limited professional human capacity in animal health services is expected to reach critical levels if some measures are not taken promptly. Currently, there are 893 Government personnel who are involved in animal production and animal disease control programs and responsible for administrating animal health services for poultry at the national, provincial, and district levels. There are 785 livestock officers located at 12 provincial livestock offices. At the community level, there are 5,177 veterinary workers in 1 1, 180 villages who are administering animal health services for poultry (20 percent); cattle, buffalo, pigs (50 percent); and dogs, and cats (30 percent). Public Health Services. The Ministry of Health (MOH) is in charge of human health services in Lao PDR. MOH has 5 central hospitals (all in Vientiane), 4 regional hospitals, 16 provincial hospitals, 141 district hospitals, and 789 health care centers. Many health facilities have insufficient professional and medical staff, limited drugs and basic equipment, including insufficient isolation rooms and inadequate equipment (e.g., ventilators) for patients with severe respiratory diseases. At the community level 14,000 village health volunteers have been working on malaria. At the hospitals, the current healthcare waste management practices need strengthening. The public health surveillance is carried out by the National Center for Laboratory and Epidemiology (NCLE) in Vientiane. NCLE carries out surveillance, case and outbreak investigation, response, and research; and serves as the public health laboratory and the national reference laboratory. Although AI has not been a reportable disease in Lao PDR, NCLE has been receiving support from the U.S. Naval Medical Research Unit to implement a computerized Early Warning Outbreak Recognition System (EWORS) in four hospitals in Vientiane and three hospitals in three regional hospitals.* NCLE is supported by 17 provincial surveillance units (PSU) and 141 district health offices (DHO). On the average, each PSU has two to four staff with variable level of training. Staff at DHO are typically not qualified in epidemiology. Some DHOs lack communication devices (e.g., telephones, faxes), making it difficult to report health events to the next level in a timely manner. The public health laboratovy structure is similar to the surveillance system. NCLE acts as the public health and national reference laboratory. It has not achieved bio-safety level 2 status and currently does not have the capacity to perform AI diagnosis. Suspected AI specimens have to be shipped abroad (e.g., Japan) for testing. EWORS is a symptom-based hospital surveillance system that collects and sends data to NCLE on a daily basis from the outpatient and emergency rooms. 51

58 3. LEGAL FRAMEWORK IN LAO PDR Environmental Aspects. The Environmental Protection Law of 1999 and its implementing regulation of 2002 are the principal environmental legislation in the country. This legislation includes measures for the protection, mitigation and restoration of the environment as well as guidelines for environmental management and monitoring. Other key environmental legislative measures in Lao PDR include promulgation of the regulation on Environmental Assessment (2000); creation of an Environment Protection Fund to channel earmarked revenues to environmental activities, and decentralizing environmental functions to provinces. Animal Aspects. In 2000, the regulation on Management of Livestock Productivity (No ), sponsored by the MAF, was promulgated. Other key regulatory actions by MAF in the area of avian influenza (AI) include: 0 Decree of the Prime Minister regarding animal control in Lao PDR (No. 85PM of May 31,2005). 0 Order of the Prime Minister regarding AI control (No. 02PM dated January 27,2004). 0 Decision of the Prime Minister regarding the policy and measures to help agriculturalists affected by AI (No. 06PM of March 1,2004). 0 Order of MAF regarding increasing control and prevention against AI (No. 0075/MAF.2005 of February 2,2005). 0 Recommendation of the Director of the Department of Livestock and Fisheries regarding implementation of the Ministerial Order on increasing control and prevention against AI (No. 0024/DLF.2005 of February 14,2005). Human Hvniene/Environmental Aspects. In 2001, the Law of the Hygiene, Disease Prevention, and Health Promotion (No. Ol/NA, April 10/25,2001) sponsored by the MOH was enacted. The implementing regulation (No of October 4, 2005) for this law establishes drinking and domestic water quality standards. Other hygiene-related regulations sponsored by MOH are: 0 0 Regulation on healthcare waste management (No of July 20,2004). Regulation on hygiene in public areas (No of July 20, 2004) (examples of topics covered include public sanitary facilities, drainage, garbage control, animal control). Currently, there are no national safety guidelines for laboratories. 4. PROJECT OBJECTIVE AND DESCRIPTION The objective of this project is to contribute to the National Plan, which aims to minimize the threat posed to humans and the poultry sector by avian and human influenza infection and other zoonoses in Lao PDR, and to prepare for control and to respond to influenza pandemics and other infectious diseases in humans. The design of the subject project follows exactly the Government Strategy for avian influenza (AI). As such, the project consists of the following components: 52

59 Component 1 - Animal health (Sly. This component supports prevention, control, and eradication of HPAI among the animal population. Component 2 - Human health-surveillance and response 62). This component aims to improve disease surveillance and response in humans during AI outbreaks Component 3 - Human health - Laboratory and curative services (S3). This component supports preparation of the health system to respond to AI outbreaks. Component 4 - Information, education, and communication 64). This component supports the activities to plan and carry out a public awareness campaign. Component 5 - Program coordination and regulatory framework (S5). This component is focused primarily on a number of cross-cutting issues, including support to the National Avian and Human Influenza Coordination Office (NAHICO), which will be responsible for the overall coordination of this project. Each of Government s five strategies include measures and activities (see Appendix 3 for more detail). 5. APPLICABILITY OF THE BANK S SAFEGUARDS POLICIES The project is not expected to have any large-scale, significant and/or irreversible impacts as it is focused largely on public sector capacity building and strengthening readiness for dealing with outbreaks of avian influenza (AI) in domestic poultry as well as preventing or reducing possible human infections by strengthening emergency preparedness and response. In addition, the project design incorporates other beneficial measures such as improved biosecurity in farms and live markets, and control of poultry movement within and across countries. The project s preventive activities (funding of facilities, equipment, laboratories, procedures, and training programs), aimed at improving the effectiveness and safety over the existing the AI practices, will have positive human health and environmental impacts. As such the project is assigned an Environmental Category B. The applicability of the Bank s safeguards policies is discussed below. In summary, among the Bank s safeguards policies, only the policies on Environmental Assessment (OP 4.01) and Indigenous Peoples (OP 4.10) are triggered. The project is being processed under OP 8.50, Emergency Recovery Assistance, and the task team has received concurrence from the EAP Vice President to delay preparation and disclosure of the EMP under the exception granted under OP 4.01, para Environmental Assessment (OP 4.01). The key environmental and personal hygiene issues include: (i) disease transmission from animals during response to AI outbreaks in the field (e.g., culling of poultry; selection of appropriate disinfectants for disinfection of contaminated farm areas; transportation of farm wastes and carcasses (if necessary); management and disposal of farm wastes, animal carcasses and used PPE; and packaging and shipment of specimens); (ii) management of wastes and personal hygiene at the 53

60 laboratory of the National Animal Health Center (NAHC); (iii) management of wastes and personal hygiene at hospitals to be receiving potentially AI-infected patients and at the laboratory of the National Center for Laboratory and Epidemiology (NCLE); and (iv) civil works (completion of the construction of the NAHC building and the upgrading of the existing laboratory at NCLE). 0 Natural Habitats (OP 4.04). This Bank policy is not triggered because the project will not convert or degrade any protected areas, known natural habitats, or established or proposed critical natural habitats as defined under the policy. 0 Pest Management (OP 4.09). This Bank policy is not applicable because the project will not procure pesticides nor will increase use of pesticides will result from the project. However, the chemicals to be used for the disinfection of farm facilities/personal protection equipment will be evaluated on a case by case basis for conformity with the OP 4.09 for Pest Management. The selected disinfectants will conform to the Bank s Pest Management Policy. Use of hazardous disinfectants would necessitate providing training in safe transport, handling, and application. 0 Physical Cultural Resources (OP 4.11). This Bank policy is not triggered because the project will not affect sites with archeological, paleontological, historical, religious, or unique natural values in the project area. However, appropriate clauses will be included in all construction contracts regarding the procedures to be followed in the event of chance find of culturally significant artifacts or sites. 0 Indigenous Peoples (OP 4.10). This Bank policy applies because the indigenous peoples, who form the poorest sector of the population in Lao PDR, would be most vulnerable to loss of poultry and the income derived from it. Accordingly, an ethnic group policy framework (EGPF) has been developed outlining the principles to be used for project activities that might take place in indigenous communities. A communication strategy has been incorporated into project design to address concerns about any large-scale project activities and to disseminate information in local languages and in culturally appropriate and accessible ways. 0 Involuntary Resettlement (OP 4.12). This Bank policy is not triggered as no involuntary land acquisition or displacement of people is expected under the project (however, compensation of farmers for the loss of poultry has been incorporated into the project design). 0 Forestry (OP 4.36). This Bank policy is not triggered because the project will not involve significant conversion or degradation of critical forest areas or related critical natural habitats as defined under the policy. The project will not involve significant conversion or degradation of critical forest areas or related critical natural habitats as defined under the policy. 0 Safety of Dams (OP 4.37). This Bank policy is not triggered because the project will not construct or rehabilitate large dams as defined under this policy. 54

61 0 International Waterways (OP 7.50). This Bank policy is not triggered because there are no known project components involving international waterways as defined under the policy. 0 Disputed Areas (OP 7.60). This Bank policy is not triggered because there are no known project components involving international waterways as defined under the policy. 0 Public Disclosure (BP 17.50). Because the project is being processed under OP 8.50, Emergency Recovery Assistance, safeguards issues will be addressed through the use of accepted good practice and sound design principles. Safeguards documents will not be prepared prior to appraisal. The draft documents will be disclosed as they are prepared and again when they are finalized. 6. ENVIRONMENTAL AND HUMAN HEALTH IMPACTS AND MITIGATORY MEASURES TO BE ADDRESSED UNDER THE PROJECT The project is not expected to have any large-scale, significant and/or irreversible impacts as it is focused largely on public sector capacity building and strengthening readiness for dealing with outbreaks of avian influenza (AI) in domestic poultry as well as preventing or reducing possible human infections by strengthening emergency preparedness and response. In addition, the project design incorporates other beneficial measures such as improved biosecurity in farms and live markets, and control of poultry movement within and across countries. The project s preventive activities (funding of facilities, equipment, laboratories, procedures, and training programs), aimed at improving the effectiveness and safety over the existing the AI practices, will have positive human health and environmental impacts. As such the project is assigned an Environmental Category B. The potential environmental impacts and mitigation measures to be addressed under this project are described below and summarized in Table 1. All of these mitigation measures have been incorporated into the design of the project. Component 1 : Animal Health. The main environmental and personal hygiene issues under Component 1 of the project are associated with the: Completion of the construction of the National Animal Health Center building Personal hygiene at the animal laboratory of the National Animal Health Center Management of wastes generated at the animal laboratory of National Animal Health Center Response to AI outbreaks by veterinarians and livestock officers. 1. Completion of the construction of the National Animal Health Center Building. Construction of the NAHC building will be completed under hnds provided through the subject project. The new building will provide additional space for NAHC. The adverse impacts during construction would include dust and noise emissions, generation of construction waste, disturbance of traffic, and discharge of untreated sewage. These adverse impacts will be 55

62 mitigated by including in the construction contract a clause regarding observation of standards for good construction practices. 2. Personal hygiene at the animal laboratory of the National Animal Health Center. The project will not address this issue as the staff at the animal laboratory of NAHC staff has been trained by FA0 on test methods, personal hygiene, and quality assurance; and staff straining will continue under another project implemented by FAO. 3. Management of wastes generated at the animal laboratory of the National Animal Health Center. The project will not provide any funds in this area as the infectious wastes-sharps generated at the animal laboratory of NAHC are properly managed. This involves collection of the infectious wastes-sharps separately from common wastes, on-site treatment of these wastes by autoclaving, and collection of the treated wastes along with garbage by the municipality for disposal. Procurement of another autoclave may become necessary if the existing treatment capacity is exceeded from infectious wastes generated as a result of the analysis of potential AI samples. In this case, OiE has committed funds to procure such an autoclave. 4. Response to AI outbreaks by the veterinarians and livestock officers. The information contained in the Department of Lifestock and Fisheries (DLF) manual will be updated for different audiences, including: (i) veterinarians and livestock officers, (ii) the commercial farm owners, (iii) backyard farm owners, and (iv) the general public. The manual for the veterinarians and livestock officers will be presented in the form of Standard Operating Procedures. This manual will address, at a minimum, the following issues: (i) Packaging and shipment of animal specimens. It is important that the animal specimens be packaged and shipped in such a manner to avoid spread of AI. Animal specimens will be shipped for analysis at the National Animal Health Center (NAHC) in Vientiane. The IATA Regulations for packaging of biological specimen will be adopted and included in the SOPS. (ii) Culling ofpoultry. It is important that culling of poultry be conducted in a humane, safe, and efficient manner. The following methods for culling poultry were identified from the OiE/FAO guidelines: (i) neck breaking (manual), (ii) neck cutting (using mechanical devices), (iii) gassing with inhalation agents (e.g., carbon dioxide), and (iv) culling following electrocution or poisoning. Based on consideration for humane, safe and efficient culling and experience from the previous AI outbreaks in Lao PDR, the following methods were selected for this project: neck breaking for backhouse farming, and use of carbon dioxide inhalation for commercial farms with large numbers of poultry. The SOPs will specify the criteria for using one versus the other method; and will provide the design and operating requirements on of the gassing systems (e.g., specific locations and quantities of stocked carbon dioxide). (iii) Selection of disinfectants. It is important that the disinfectants to be selected for the disinfection of farm surfaces, equipment, materials, and wastes do not have adverse impact on human health and the environment. The selection of disinfectants in this project will be based on such criteria as impacts of disinfectants on human health and the environment, and availability and cost of disinfectant in Lao PDR, and 56

63 compatibility of the disinfectants with the disposal methods of the wastes. The selected disinfectant, which will comply with the Bank s Pest Management Policy (OP4.09), will be specified in the SOPs. Disinfection of farm surfaces, equipment, materials, and wastes. Based on selected disinfectant, the type of equipment and procedures for preparing (e.g., dilution with water) and applying the disinfectant will be specified in the SOPs. Disposal of carcasses and farm wastes. It is important that the selected disposal method does not have adverse impacts on human and the environment. For example, improper burial practices may cause contamination of ground or surface water, and poorly designed and/or operated cremation or incineration systems may create particulate emissions and objectionable odors to neighbors. The following options for the disposal of poultry carcasses and farm wastes were considered: (i) burial in a pit; (ii) open air burning (cremation); (iii) composting; (iv) incineration at a fixed location; and (iv) mobile incineration. Incineration (mobile or at a fixed location) was eliminated based on cost considerations. Among the remaining options, based on experience from the previous AI outbreaks in Lao PDR, burial was selected as the disposal method. However, criteria will be developed and included in the SOPs for the applicability of this disposal option for specific sites. This criteria will include: (i) height of the water table (the base of the burial pit must be at least 1 meter above the water table); (ii) dry weather conditions (dry season); (iii) distance to watercourses, bores and wells; (iv) slope of the land at the burial site to the nearest watercourse (drainage to and from the pit); (v) type of soil (or soil permeability); (vi) distance to human settlements and public lands (including roads), (vii) prevailing wind direction (for odor emissions); (viii) availability of space for temporary storage of excavated soil; and (viii) accessibility of burial site by digging equipment (e.g., excavator). For those situations where the burial criteria are not met (wet weather conditions, high water table), the SOPs will specify the most appropriate, environmentally-safe and cost-effective disposal option for Lao PDR. The SOPs will provide detailed design (depth of the pit), construction and operating requirements (how the pit will be filled). Disposal of Used PPE. It is important that the selected PPE and disinfectant be compatible with the disposal method of the PPE to avoid generation of hazardous wastes. Based on experience in Lao PDR, used PPE will be incinerated. As incineration of chlorine-bearing material with organics might generate emissions of dioxins and furans, care will be exercised in selecting PPE and disinfectants. First of all, all PPE procured under this project will be chlorine-free. In addition, best effort will be made to select a chlorine-free disinfectant. However, if this is not possible, then before incineration, used PPEs will be washed before incineration and the washed water needs to be disinfected and waited before discharge. The SOPs will describe these procedures in detail. Transportation of animal carcasses and farm wastes ($ necessay). If proper measures are not taken, transportation of AI infected animal carcasses and farm wastes would likely spread the virus outside of the infected farm areas. Under this 57

64 project, transportation of carcasses and farm wastes to another site for disposal will be avoided to the maximum extent possible. However, if transportation is required, then the SOPs will specify the specific requirements for vehicle design and operation as well as containment of carcasses and farm wastes for transportation. These SOPs will also include decontamination of vehicle surfaces (e.g., tires) prior to exiting the farm. (viii) Personal hygiene. If proper hygiene measures are not taken, AI may spread to human. For this reason, for each of the above-mentioned activities to be conducted during AI outbreaks, the SOPs will specify the level of protection (e.g., gloves, masks, overalls, boots) to be used. Component 2: Human Health - Surveillance and Response. No environmental or personal hygiene issues are anticipated. Component 3: Human Health - Laboratory and Curative Services. The main environmental and personal hygiene issues under Component 3 of the project are: 1. Personal hygiene at hospitals. 2. Healthcare waste management at hospitals to be receiving potentially AI-infected patients. 3, Immediate measures for healthcare waste management at central and provincial hospitals. 4. Upgrading of the existing laboratory at NCLE (if funded). 5. Health laboratory-related personal hygiene measures. 6. Waste management at the NCLE laboratory. 1. Personal hygiene at hospitals. If proper hygiene measures are not taken, AI may spread to humans. For this reason, guidelines regarding personal hygiene procedures will be developed at central, provincial, and district hospitals as well as community health centers. In addition, 3,150 PPE to health staff will be provided to the healthcare staff at all levels. Staff from six central hospitals in Vientiane, four regional hospitals, 13 provincial hospitals, 141 district hospitals as well as health care centers will be trained on these guidelines. 2. Healthcare waste management at hospitals to be receiving potentially AI-infected patients. AI virus may spread to humans if proper waste management measures are not taken at hospitals treating potentially AI-infected patients. Under this project, three hospitals at the central and four hospitals at the regional/provincial level have been designated to receive AI infected (or potentially AI infected) patients. This subcomponent aims at instituting proper waste management procedures at each of these hospitals. The main activities will include: (i) Consulting sewices for determining waste quantities by type (especially infectious wastes and sharps), selecting the optimum technology for infectious waste treatment through evaluation of alternatives (autoclave, microwave, incineration) and providing the specifications of the selected technology, identifying and providing a conceptual design for the sewage treatment system for the isolation rooms, and preparing detailed healthcare waste management plan for each of the seven hospitals. A waste treatment system will be installed at each of the four regional/provincial hospitals. 58

65 However for the three hospitals in Vientiane, the consultant will evaluate the optimum arrangement for waste treatment (the treatment equipment located at each hospital versus at one hospital receiving also the infectious wastes from the two other hospitals transported by means of a van). In addition, the consultant services will include the design of the sewage treatment (disinfection) system for the isolation rooms at each of the seven hospitals. (ii) Healthcare waste management investment. This will include procurement and installation of the solid waste treatment technology at each of the regional/provincial hospital and the recommended system in Vientiane [one, two or three treatment equipment, based on the findings from (i)]. Training of the operating staff at each hospital will be provided by the equipment supplier. In addition, in case of common waste treatment in Vientiane, a waste transport van will be procured. Equipment and supplies (trolleys, containers, bins, plastic bags, labels) for each of the seven hospitals will also be procured. In addition, the sewage treatment (disinfection) system for the isolation rooms at each of the seven hospitals will be procured and installed. (iii) Consulting services for healthcare waste management training to the local trainers as well as the staff of the seven hospitals. The local trainers will be training the healthcare staff for the subsequent years. (iv) Procurement of consumables. The project will fund operating costs for the waste management system at each of the seven hospitals. These will include fuel for the waste transport van, steam (for the autoclave technology) and electricity for the treatment technology, and supplies (e.g., bags, plastic labels). In addition, the consultant will evaluate if it is feasible to treat the infectious wastes generated from NCLE at one of the hospitals in Vientiane. 3. Immediate measures for healthcare waste management at central and provincial hospitals. This activity focuses on only the immediate measures for healthcare waste management until the system covered under the previous activity (item no. 2) is established. This activity involves provision of materials and supplies (containers, bags, labels) to implement the existing healthcare waste management guidelines in Lao PDR. 4. Upgrading of the existing laboratory at NCLE (if funded). If this activity is funded, the adverse impacts during construction (e.g., dust, noise, management of construction waste, disturbance of traffic, water supply, sewage management) will be mitigated by including in the construction contract a clause regarding observation of standards for good construction practices. 5. Health laboratorv-related personal hygiene measures. If proper hygiene measures are not taken, AI may spread to humans. For this reason, SOPS will be prepared for the collection, handling, and transportation of suspected AI specimens to the NCLE laboratory as well as handling of these specimens at the NCLE laboratory. In addition, PPE will be procured and 59

66 supplied to the staff collecting, handling, and analyzing the suspected AI specimens. Training and then refresher training courses will be given to the staff on personal hygiene measures. 6. Waste management at the NCLE laboratory. Currently infectious wastes from the serology/virology, bacteriology and toxicology laboratories of NCLE are collected separately from the garbage and treated on site by autoclaving. The treated wastes and garbage are stored in an open-top basket and collected by the municipality twice a week for disposal. As the same autoclave is currently used for the disinfection of laboratory glassware as well, NCLE is in need of treatment of infectious wastes and glassware in separate equipment. This need will be addressed under the subject project. This activity will be conducted jointly with the above-mentioned item (no. 2) on healthcare waste management in hospitals. Accordingly, a consultant will be engaged to identify the quantity of infectious waste generated from the NCLE laboratory (currently estimated to be about 0.15 m3/day) (and the three hospitals in Vientiane). The consultant will evaluate alternative options for waste management (joint treatment with the hospital wastes in Vientiane or a dedicated treatment system at the NCLE laboratory) and devise an optimum scheme. The consultant will prepare a waste management plan for the NCLE laboratory solid (this plan will address all waste types, including infectious wastes, sharps, liquid wastes, and common wastes). If a dedicated infectious waste treatment system at the NCLE laboratory is found to be the optimum solution, then this treatment system will be procured and installed at the NCLE laboratory (otherwise the wastes will be transported to the hospital that will have the common treatment system). In addition, various supplies (e.g., bins, bags, labels) will be procured. The NCLE staff will be provided training on waste management. Component 4: Information, Education, and Communication. No environmental or personal hygiene issues are anticipated. Component 5: Program Coordination and Regulatory Framework. Stockpiling of PPE to the frontline workers as well central- and provincial-level MOH and MAF workers who are involved in the management of AI outbreaks is envisaged. However, no environmental issues are anticipated. 7. IMPLEMENTATION ARRANGEMENTS OF THE PROJECT The overall project coordination will be provided by the National Avian Influenza Coordination Office (NAHICO). The Lao PDR agencies responsible for implementing the various project components are: Component 1: Department of Livestock and Fisheries (DLF) of the Ministry of Agriculture and Forestry (MAF). Component 2: Department of Hygiene and Prevention (DHP) of the Ministry of Health (MOH). Component 3: Department of Curative Care (DCC) and NCLE of the MOH. 60

67 Component 4: NAHICO for overall coordination. Implementing agencies include the MOH, MAF, Ministry of Information and Communication, and mass organizations (youth, trade, and women s unions). Component 5: NAHICO for overall coordination with the Ministry of Foreign Affairs, Ministry of Justice, MOH, and MAF. The international implementing agencies and their respective funding sources are as follows: 0 World Bank through its own resources and through PHRD fund (Government of Japan) and AHIF (multi-donor trust fund). 0 WHO through its own resources, Government of USA, and Government of Luxembourg 0 UNICEF through the Government of Japan. 0 FA0 through the Government of Germany, Government of Japan, and U.S.AID (Government of USA). 0 AED (consulting firm) through U.S.AID (Government of USA). 8. CONSULTATION AND DISCLOSURE OF THE PROJECT S ENVIRONMENTAL MANAGEMENT PLAN This Environmental Management Plan has been consulted with the representatives of the Ministry of Health and the Ministry of Agriculture and Forestry (MAF). Upon establishment of the National Avian Influenza Coordination Office (NAHICO), this Environmental Management Plan will also be consulted with other participating Government agencies (e.g., Ministry of Information and Communication, Ministry of Justice, Ministry of Foreign Affairs, and the Science, Technology and Environment Agency (STEA), the commercial poultry association, mass organizations (youth, trade, and women s unions), and other non-governmental organizations (NGOs). The draft Environmental Management Plan will be finalized upon incorporation of comments by these NGOs. The finalized Environmental Management Plan will be disclosed at publicly accessible locations in Lao PDR and at InfoShop in Washington. 9. REPORTING ON THE IMPLEMENTATION PROGRESS OF THE PROJECT SMITIGATION AND MONITORING MEASURES Procedures for providing information on the progress of project implementation and results of mitigation and monitoring measures have been structured to facilitate project supervision and review. Accordingly, NAHICO will receive biannual progress reports from MAF and MOH on the implementation of various activities under this EMP. After compilation of these reports, NAHICO will submit a biannual report to all international implementing agencies. The biannual reports will indicate the activities conducted, the remaining activities to be conducted, the products generated, the major issues encountered and how these issues have been resolved as well as the outstanding issues, the expenditures in comparison with the budget. NAHICO will also submit a copy of the EMP-related specific activity reports (e.g., the waste management plan) to the international implementing agency (e.g., World Bank) for review, comments, and no objection (if satisfactory). 61

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73 Social Analysis and Mitigation Project Beneficiaries Project activities will cover all of Lao PDR, however, some activities will focus on three Provinces (Vientiane, Savanakhet and Champasack) with high risks due to the concentration of poultry production in these. The Project will benefit commercial poultry farmers and industries in these Provinces in improving their poultry management practices to reduce the risk of an outbreak of avian influenza. Backyard farmers and fighting cock producers in the three Provinces will also be targeted for training in bio-security improvements. Many of these are poor farmers living subsistence based livelihoods, including ethnic groups. Women play a key role in the backyard poultry sector as they are often responsible for poultry production and obtain food products and income from their poultry flocks. A national campaign will provide information and educate farmers as well as the general public about the risks of avian influenza. This IEC campaign will be designed to take into account the diverse stakeholders and characteristics of the three sectors covered (commercial, backyard and fighting cock production). Multiple media tools will be used and relevant campaign material will be translated into key ethnic minority languages. Commercial and backyard poultry farmers will benefit from the establishment of a Compensation Fund, which will provide compensation in cases of avian influenza outbreaks that lead to deaths and/or culling of poultry. The Project will undertake assessments to evaluate the best options for compensation schemes and criteria. Key beneficiaries of the Project will be government agencies and staff, particularly in the agricultural and health sectors. These will benefit from training exercises, institutional strengthening and enhanced management practices. The general population of the Lao PDR will benefit from enhanced institutional set-up, management practices and awareness concerning poultry production and the health sector. The risk for an outbreak of avian influenza and subsequent pandemic will be minimized and the ability of key stakeholders (e.g., health practitioners and poultry farmers) to address a possible outbreak and pandemic will be enhanced. Consultations Consultations have been held with a large number of government representatives in the respective sectors receiving support under the Project. These consultations have taken place at national as well as provincial levels. MAF has held consultations with commercial and backyard poultry farmers concerning measures to avoid and address outbreaks of avian influenza. Feedback from these consultations has been incorporated into the Lao PDR Government s strategy supported by the Project. Further consultations and IEC campaigns will be undertaken with various stakeholders during implementation, including commercial and backyard poultry farmers. Consultations with civil society With the establishment of NAHICO, the Environmental Management Plan and the Ethnic Group Planning Framework will be discussed with, and consultation sought from, participating Government agencies, the commercial poultry association, mass organizations (youth, trade, 67

74 women s unions and the Lao Front for National Construction), organizations. and non-governmental Consultations with beneficiaries and NGOs, and/or their involvement in implementation There are no particular civil society stakeholders specifically for the poultry sector in the Lao PDR. However, many development NGOs in Lao PDR work with poor farmers, including activities supporting small livestock such as poultry. NGOs will be an important target group for increasing their awareness of national policy and measures to address the risk of avian influenza. They will thus be consulted during implementation. Mass based organizations will participate in project implementation, mainly with respect to the IEC campaign under Component 4. District and village facilitators will be trained and participate in implementing the public information campaign. Resettlement No land acquisition or resettlement will take place under the Project. Compensation for loss of poultry due to avian influenza will be provided under the Project, with the criteria and mechanism for providing such compensation to be designed during Project implementation. Indigenous People The Project does not affect ethnic groups adversely. However, Project activities will take place in all areas of the country and ethnic groups will benefit from an enhanced understanding of avian influenza, of ways to improve bio-security, of measures to be taken in case of outbreaks, and from the compensation for loss of poultry due to an outbreak. The IEC campaign will be designed to ensure it is appropriate for the diverse ethnic population in the Lao PDR; the campaign will be translated into ethnic languages. An Ethnic Group Planning Framework has been prepared. 68

75 Appendix 9: Project Preparation and Supervision LAO PDR: Avian and Human Influenza Control and Preparedness Project Planned Actual PCN review 03/29/2006 Initial PID to PIC 05/31/2006 Initial ISDS to PIC 05/31/2006 Appraisal 05/01 / /02/2006 Negotiations 05/3 1/2006 BoardRVP approval 06/15/ /03/2006 Planned date of effectiveness Planned date of mid-term review Planned closing date 09/20/2010 Key institutions responsible for preparation of the project: NAHICO, MOH, MAF and other relevant ministries and stakeholders. The project is also closely coordinated with activities carried out by UN agencies working on AHI. Implementation reviews of the Government s plan will be undertaken on a bi-annual basis, with the participation of all the partners who are providing support to the Plan. This approach is particularly important since, except in the case of the IEC component, there are a number of partners supporting interlinking activities within each component (or strategy). The indicators prepared during the appraisal, which were agreed to by the financing partners and the Government, will form the basis for evaluating. These implementation reviews will provide an opportunity for joint reviews and for making adjustments to the Plan based on the situation on the ground. The conduct of joint implementation reviews should reduce the burden which would result through separate reviews by financiers of activities which they are financing. These implementation reviews will be coordinated jointly between the AH1 Coordination Office in UNDP, and the World Bank Country Office, with the former responsible for ensuring that the proposed timing of the reviews is convenient for NAHICO, the partners, and World Bank. Bank staff and consultants who worked on the project included: Name Title Unit Hope C. Phillips Sr. Operations Officer EASHD Guzman P. Garcia-Rivero Operations Adviser EASRD Alan Piazza Senior Economist EASRD Yi-Kyoung Lee Young Professional EASHD Thang Chien Nguyen Sr. Procurement Specialist EACVF Nipa Siribuddhamas Financial Management EACTF Specialist Boun Oum Inthaxoum Operations Officer EACLF 69

76 Emiko Naka Extended Term Consultant EACLF Bekir Onursal Senior Environment Specialist EASES Gillian Brown Senior Gender Specialist EACTF Denis Robitaille Operations Manager EACTF Souphanthachak Procurement Analyst EACLF S isaleunsak Mei Wang Senior Counsel LEGEA Mingngakham Pangnasak Program Assistant EACLF Chandra Chakravarthi Program Assistant EASHD Juliana Williams Sr. Program Assistant EASHD Francisco Quintana Research Analyst EACLF Douglas Graham Financial Management EAPCO Jennifer Thomson Sr. Financial Management EAPCO Specialist Svend Jensby Social Science Specialist EASES Ray Webb Veterinarian Consultant EASRSD Arin Dutta Economist Consultant EASHD 70

77 Appendix 10: Economic and Financial Analysis LAO PDR: Avian and Human Influenza Control and Preparedness Project INTRODUCTION 1. Human Health: Lao PDR has a population of 5.6 million, with 79.8 percent living in rural areas. In spite of the progress made in recent years, health status indicators demonstrate that the population remains affected by significant health problems. Disparities between urban and rural social indicators are profound. Fertility rates per 1,000 women aged vary from 1 15 in rural areas to 49 in urban areas, while births attended by skilled birth attendants range from 11.6 percent in rural areas to 63.4 percent in urban areas. Infant mortality can be directly related to these indicators with Infant Mortality Rates (IMR) over twice as high in rural areas as in urban areas. Infant mortality and maternal mortality continue to be among the highest in the region. From 1990 to 2000, maternal mortality remained stable. Infant mortality decreased over the same period, but at a rate slower than is necessary; Lao PDR needs to reduce its IMR by 4.4 percent annually to meet the MDG of a 2/3 reduction in infant mortality by From 1990 to 2002, Lao averaged a 2.7 percent reduction per year in infant mortality. 2. Background, Lao PDR Poultry Sector: The sector comprises mainly of smallholders raising free-range, local chicken for meat and eggs, for consumption or for local sale. An average village has around 350 chickens, ducks, turkeys and quail being raised in small flocks interspersed among village homes by about 78 families, with women primarily responsible for the flocks. Ducks, turkey, and quail are also raised, with negligible amounts of geese found scattered around the country. The few commercial operations (less than 100 in total, with 89 of these located near Vientiane) in the country supply nearby metropolitan areas. It is estimated that less than 25 percent of all poultry production is produced on the commercial farms. Most of the commercial production is for domestic consumption, with local (native) chickens accounting for 87 percent of total production, ducks next at 9 percent, followed by commercial breeds of layers and broilers at 2 percent each. There are some smaller commercial operations (from 100 birds or more to a maximum of 10,000 birds) of broilers or layers, mostly clustered in the Vientiane city area. Savannakhet and Champasak are the other two major production areas. Estimates of the total poultry population vary, with that for 2005 at 20 million birds, heavily concentrated in Vientiane, Savannakhet, and Champasak Provinces. Biosecurity and technology utilization are minimal, with little available veterinary care from either private or Government sources. 3. Highly Pathogenic Avian Influenza in Lao PDR: The initial assessment of losses due to HPAI identified 50,670 dead birds. The Lao Government s stamping out efforts culled another 100,250 birds on 39 commercial operations in the Vientiane area and three others in Champasak and Savannakhet provinces. Economic impacts were most severely felt by the commercial broiler operations and some quail farms, mostly due to market * USDA (2005) Laos Poultry and Products: Avian Influenza 2005, Voluntary Report - public distribution Date: 3/16/2005, GAIN Report Number: LA

78 inactivity after the initial culling efforts. Restocking efforts varied, with commercial farms taking between two to eight months to fully restock, after receiving some assistance from the Lao Government and FAO. It was reported that some farms in Champasak province were restocked with chicks from Thailand, in spite of the ban on imports. Some producers switched completely away from poultry into fish farming, cattle, and hog prod~ction ~. The total lost poultry was worth approximately $0.32 million if valued using an average of 2004 poultry prices. In addition the MAF estimated that the cost of investigation, response, and management of the outbreaks was US$4 million. [Also see: Appendix 11. Future outbreaks remain possible as the disease circulates among birds in neighboring countries. Given the concentration of poultry farming in three provinces (Vientiane, Champansek, and Savannakhet) any future avian outbreaks of H5N1 may rapidly put a significant portion of the flock at risk. 4. The objective of this economic analysis is, first, to provide a justification for government, World Bank and other partners intervention in this area. The main factors considered are the project correction for market failure and meeting of society s equity objectives. Second, given that government intervention is justified, we analyze whether the Program s social benefits outweigh the social costs. In general, the uncertainty in the risk of further HPAI outbreaks among birds and of a potential human pandemic makes it difficult to prepare empirically based cost-benefit analysis or cost-effectiveness analysis. What we have attempted here is to provide order of magnitude estimates of the Program s economic benefits in relation to its costs as an approximate benefit-to-cost ratio. Any rigorous quantitative analysis beyond this is not possible due to the lack of (i) data on quantitative impact of several of the concerned interventions; and (ii) solid estimates of social benefits and costs over and above those of private benefits and costs. RATIONALE FOR GOVERNMENT & WORLD BANK INVOLVEMENT 5. Program Activities Supported Mitigate Market Failure: The lack of biosecurity in the predominantly backyard poultry sector, the poor situation in both animal and human health surveillance systems, and the possible inability of the human curative system to cope with a potential HPAI pandemic are all issues which are directly related to the effect of poverty and a lack of prior capacity. Weaknesses in the health system identified during the Lao Health Services Improvement Project (HSIP; see WB Report LA) may be exacerbated by the stress placed by a potential human influenza pandemic. Many of the animal and public health issues can be averted or substantially mitigated with adequate financing and improved performance of the respective systems (in the animal case this system does not exist at present). 6. National Public Goods Nature: However, the benefits of such new investments and improvements would accrue in the manner of true public goods since one cannot exclude persons unwilling to pay. As such, private provision of such financing for building or improving the concerned systems is not available in a society such as Lao PDR. Primarily, the Government is involved in both animal and public health activities that correct for market failure. This Program provides support to public goods via USDA (2005) op cit. 72

79 information systems for detection and response to outbreaks of HPAI in poultry, development of systems for support to the poultry sector, surveillance and response for the human health sector, building curative capacity for high virulence and infectious diseases such as HPAI, and for information and awareness, which alone can bring large rewards in preventing such catastrophes. 7. Global Public Goods Nature: Also, since infectious diseases emerging from the sphere of animal-human interaction - often with an origin in Asia - threaten to be globally transmittable and highly disruptive, the investment in Lao PDR has beneficial externalities beyond its borders. The in-country investment will reduce the overall, global probability of a particular virus achieving a form capable of efficient human-to-human transmission, and reduce the rate of transmission to neighboring countries if such a virus (that emerges elsewhere) reaches Lao PDR. As such, this investment has a global public good nature that may be difficult to quantify but should not be disregarded. In the future, further analysis afier this Program s inception, both in Lao PDR and elsewhere, will generate the data that will make it easier to capture such positive externalities beyond the narrow focus of the benefits of avian and pandemic flu prevention and control. 8. The investments of the HSIP laid the groundwork for basic and key human health infrastructure, training, and subsidies for use of services. The investment in animal and human health surveillance, human health curative services and preventive measures against HPAI supported under this Program are those that will fill remaining gaps in the Lao PDR human development strategy and protect the momentum for progress against future emerging and endemic infectious diseases. SUPPORTED SYSTEMS PREPARE AGAINST FUTURE NSKS 9. National, Multi-Use Systems Supported by this Program: The overall development objective of the proposed World Bank support is to contribute to Government s National Plan, which aims to minimize the threat posed to humans and the poultry sector by AH1 infection and other zoonoses in Lao PDR, and to prepare for, control, and respond to influenza pandemics and other infectious disease emergencies in humans. In this respect, this project represents a significant investment in building up Lao PDR s animal and human health capacity. The analysis below presents the benefits strictly for the focal issue only, Le., the benefits to Lao PDR from preventing an outbreak of HPAI. However, the multi-sectoral surveillance and response capacity built with this investment will be relevant for other diseases. 10. This Program can be said to produce three concrete systemic results in the animal and human health sectors of a society like Lao PDR (sector described in Appendix 1): policy development, system design & implementation, and human resource development. Since these are basically investment activities, their benefits can be expected to extend beyond the four-year life ( ) of the Lao Government s National Plan for Avian Influenza control supported by the Program. Their main effect is potentially to reduce the cost of providing a given level and quality of health services. An effect likely via the policy component, for example, is the potential reduction in the social cost of providing 73

80 animal and human health services. The animal health component includes support for veterinary training and strengthened capacity for laboratory diagnosis. The human health component of the Program - even if focused on priority areas geared to respond to a pandemic - will support ongoing Government efforts to improve curative services. Specifically, the support given to ambulatory service (see Appendix 3) will help extend the reach of human health networks into areas most at need. 11. Since the administrative and distortionary costs of financing such animal and health services through taxes are likely to be quite high in Lao PDR, use of alternative forms of financing could be associated with significantly lower social costs. The net benefits of the project s investment in developing system capacity are also substantial. BENEFIT-COST ANALYSIS 12. Size of At-Risk Avian Population in Lao PDR: The series of avian influenza outbreaks during 2003 in Vietnam is estimated to have led to the death from disease or culling of 17.5 percent of the 2003 poultry stock. The concentrations of poultry stock in three provinces (the same provinces that also saw many of the outbreaks) leads us to believe that in a sustained series of outbreaks in the future (in the without Program scenario), up to 30 percent of the Lao PDR poultry stock could come at risk of dying or needing to be culled (since vaccination is not a part of the present Lao strategy). 13. Size of At-Risk Human Population in Lao PDR A human pandemic of HPAI - which could have origins in the region, or even within Lao PDR - could have a devastating impact on the human population in the without Program scenario because of the lack of preparedness in the health sector [see Appendix 1, paragraph 51. Many current models of worldwide impact use a baseline attack rate of 30 percent and a case fatality rate that could range from 0.5 to 2 percent. The historic case fatality rate for the 1918 flu pandemic was in excess of 2.5 percent for certain regions of the US where the best data has been preserved, and attack rates as high as 60 percent were seen in certain towns. The best estimates for the global attack rate for the 1918 epidemic are in the range of percent. In recent times, case fatality rate with avian flu (non-pandemic stage) among humans has been 56.8 percent based on deaths observed in laboratory confirmed cases [Source: WHO, as of May 23 d, Assuming the virus will lose virulence in its sustained human-to-human transmissible form, we assume a case fatality rate of 2 percent and an attack rate of 20 percent among humans, which would anchor our assumptions close to a moderate 1918-type pandemic. 14. Other Assumptions made for this Analysis: There is no accessible/ reliable data available to the team on the cost of hospitalization with a case of acute respiratory disease, which makes it difficult to account for the possible hospitalizations caused by a HPAI outbreak. The benefits of this avoided morbidity and health spending would be large. The SARS epidemic in Asia during 2003 also led to an additional cost to economies from excess avoidance behavior of individuals (curtailing movement in 10 Taubenberger JK, Morens DM influenza: the mother of all pandemics. Emerg Infect Dis [serial on the Internet] Jan. Available from 1/ html. 74

81 public, postponing purchases, etc), which could be as high as 1-2 percent of quarterly output. While in a true pandemic such costs could build up to a high number, we do not estimate them in this analysis. As such, our estimate of benefits in terms of avoided costs is quite conservative. Benefit Avoided excess hospitalizations and morbidity Avoided costs due to excess panic, loss of output and demand Avoided excess deaths Avoided excess poultry deaths Avoided income losses due to poultry deaths Avoided losses to consumers Type Direct costs, human Indirect costs, societal (these can be substantial in the case of a human pandemic) Direct costs, human: Lost income (present discounted value of a 20 year stream) Direct costs, poultry sector: Value of lost poultry (in absence of compensation) Direct & indirect costs, poultry sector: Losses due to market disruption, inability to restock, etc. Indirect costs: Higher poultry product costs, or higher Drices of substitute meats in the case of an outbreak Status Not estimated Not estimated Estimated Estimated Not estimated Not estimated A variety of sources were referred for the best non-epidemiological parameter estimates used in this analysis. Parameter Average market price for a chicken (in US $)= 2.1 Population of Laos in 2005: 5.61 million. Average, gross household agricultural income = 6,142,000 Lao Kip, p.a. Exchange rate = 10,028 Lao Kip/US $ Backyard chicken value multiplier = 3.5 (FAO: 7) Use Source Valuation of excess Weighted average of the value of native chickens poultry deaths at $2.2/head (preferred type) and $1.3/head for imported broiler breeds [Rushton et al, 2006]11. Estimate likely Lao Census, 2005 deaths in a pandemic Estimate value of Lao Expenditure and Consumption Survey I11 income lost for likely ( ) deaths in a pandemic General Exchange rate effect May 13,2006 Valuation of lost heads of poultry FA0 (based on facts on the backyard chicken sector of Vietnam), I Rushton J., R. Viscarra, E.G. Bleich, and A. McLeod (2005). Impact of avian influenza outbreaks in the poultry sectors of five South East Asian countries (Cambodia, Indonesia, Lao PDR, Thailand, Vietnam) outbreak costs, responses and potential long term control, FAO, Rome. I Accessed 5/22/06. 75

82 15. Program Costs by Component: In response to the concerns raised about avian flu and a potential human pandemic of HPAI, the Lao PDR Government has prepared a National Plan which will be supported by the Program. The Program will support the following five strategic components: Components # 1-5 Source: Section B, Project Description. 16. In an initiative such as the Lao PDR National Plan, i.e., the Avian and Human Influenza Control and Preparedness Program, the eventual results will accrue for the prevention of the focal disease if the entire project holds together, because of the nature of the integrated risk (animal and human). Therefore, though we offer separate animal and human benefit-cost ratios in the analysis below, it may be more appropriate to view benefit-cost ratios for the Program as a whole. Similarly, though the directly Bank supported portion (via AHIF, PHRD and IDA) is valued at US$8 million (with other donors providing US$5.56 million), the gains fkom the total Program spending per component are of interest. (in US $ where relevant) Protection Rate Potential poultry attack rate Potential human attack rate Fatality rate (human) Human lives saved Costs: human side* Benefits in health sector Discount rate Benefit-cost ratio (health) Costs: agricultural side Benefits in agricultural sector Backyard Chicken value multiplier Benefit-cost ratio (agriculture) Scenario I Scenario I1 Scenario I11 80% 33 % 80% 30% 30% 30% 20% 20% 20% 2.0% 2.0% 2.0% ,645,000 3,645,000 3,645,000 87,379,063 36,043,863 87,379,063 10% 10% 10% ,350,000 5,350,000 5,350,000 10,080,000 4,158,000 35,280, Overall costs I 13,559,800 Overall benefit-cost ratio ,559,800 13,559,

83 17. The extent of protection achieved through the implementation of the National Plan will depend on the efficacy of the prevention, containment and treatment measures. Assumed levels of efficacy of these measures determine the range of protection scenarios, with the protection rates varying between 33 and 80 percent for both birds and humans (see Scenarios 1-11). 18. Benefits in the Agricultural (Animal) Sector: Then the donor-supported portion of the agricultural strategy (valued at US$5.35 million) that prevents death of birds from disease or culling for 80 percent of the at-risk flock returns a benefit-to-cost ratio of 1.9. FA0 estimates that the total value of a stream of benefits from a single bird to households in backyard poultry sectors is up to 7 times its market value (see References below, v). At even half this rate of return on investment, and given the same project efficiency, the supported strategies return a benefit-to-cost ratio of 6.6 (Scenario 111). Further, since 80 percent of the flock is held by small or backyard farmers, the strategy would prevent any worsening of existing inequity. The break-even protection rate (ie., the rate at which the benefit-cost ratio is exactly one) is 44 percent. This is the minimum Program efficiency required with these assumptions. 19. Benefits in the Human Health Sector: Lao PDR has so far not reported any laboratory confirmed human cases. However, it would be at significant risk in a human pandemic because of a burdened health system with inadequate resources. Just avoiding the notional loss of income from the mortality after a country-wide attack rate of 20 percent and a fatality rate of 2 percent would imply enormous returns. The present value of this annual income stream is calculated, going out 20 years, with a discount rate of 10 percent, and then aggregated for all the deaths averted. In such a situation if the human health portion of the donor-supported strategy (valued at US$3.645 million) leads to a protection rate o f 80 percent, there would at least be a benefit-to-cost ratio of 24. Given the high benefits from protected human lives, the break-even Program efficiency (i.e., protection rate) required is 4.5 percent. 20. Overall: For overall benefit-cost analysis, the costs of Components 4 and 5 are added in as well. Then the Program overall returns a benefit-cost ratio of 7.2 with the base assumptions (Scenario I), which is sensitive to the backyard poultry value multiplier (Scenario 111), as can be expected in a poultry sector where at least 80 percent of the holdings (and 90 percent of producers) are backyardhousehold poultry farmers Sensitivity Analysis: The benefits of sensitivity analysis are low in an environment where significant uncertainties are present from the epidemiological side. For example, increasing the discount rate from 10 percent to 12 percent would not significantly change the cost-benefit ratio in the analysis of the human health component (Scenario V below). However, since we have not accounted for appreciation in incomes over this 20-year period (Lao PDR has seen per capita incomes rising steadily in recent years), then we could be justified in using a lower discount rate to proxy for the use of a fixed annual per capita agricultural household income number. With discount rates at 5 percent, we see a substantial rise in the benefit-cost ratio (Scenario VI below). 77