.
PROJECT INFORMATION DOCUMENT (PID)
APPRAISAL STAGE
Report No.: 73467
.
Project Name / Emergency Support to Critical Education, Health and Nutrition Services Project (P131945)
Region / AFRICA
Country / Madagascar
Sector(s) / Primary education (40%); Health (45%); Other social service (15%)
Lending Instrument / Emergency Recovery Credit
Project ID / P131945
Borrower(s) / Republic of Madagascar
Implementing Agencies / UAT-EPT
Contact Person: Mrs. JosianeRabetokotany
Telephone No.: +261-202228295
Email:
UGP
Contact Person: Dr. Rémi Rakotomalala
Telephone No.: +261-202255323
Email:
PNNC
Contact Person: Mr. Jean Rakotosalama
Telephone No.: + 261-34 02 111 83
Email:
Environmental Category / B-Partial Assessment
Date PID Prepared / 26-Sep-2012
Estimated Date of Appraisal Completion / 15-Sep-2012
Estimated Date of Board Approval / 20-Nov-2012
Concept Review Decision
Other Decision (as needed)
.
I. Introduction and Context
Country Context
1.Madagascar’s economic potential has been hindered by periods of political fragility. Over the past 15 years, the country experienced 5 years of political crisis on two distinct occasions, the most recent of which has been ongoing since 2009. An unconstitutional regime change in March 2009 had devastating effects on the economy, poverty and social outcomes. Socio-economic development suffered from growing insecurity, stalled progress on already weak governance, a reduced ability to deal with exogenous shocks, and deteriorating infrastructure. Some recent progress has been made in resolving the political stalemate, mediated by theSouthern African Development Community (SADC), most notably the independent electoral commission’s announcement of Presidential and Parliamentary elections in mid-2013. This represents an important step forward in the implementation of the SADC brokered roadmap, and has garnered the support of international organizations. In spite of these positive developments, the political climate remains difficult.
2.Throughout the crisis, the country has been able to maintain a reasonably sound macroeconomic framework. The decline in economic growth was exacerbated in 2009 by the negative impact of the global financial turmoil on export-oriented activities. In 2009, GDP declined by 4 percent, followed by a weak rebound in 2010. Contrary to other countries undergoing political crisis, prudent fiscal and monetary policies have helped to keep the macroeconomic framework under control, with reasonable fiscal and external balances, and relatively stable financial indicators. However, the economic costs of the crisis are substantial. Overall economic growth has been flat over the period 2009-12, and with high population growth (2.9%), income per capita in 2012 has returned to its 2003 level. Madagascar grew at an average rate of 5 percent a year when it was not in a crisis. If this rate were maintained for the 2009-2012 period, the GDP would have been 18 percent higher than the current figure, which translates into a cumulative loss in incomes of around US$6.3 billion, representing 60 percent of annual GDP.
3.However, relatively goodmacroeconomic performance has come at the expense of drastic cuts in the national budget for the social sectors and public infrastructure. The economic and social effects of the crisis have been intensified by the resulting suspension of many donor activities, which, in a country where international aid represents at least 50 percent of the total government budget, led to significant cuts in investments and a sharp decline in the delivery of services. Public expenditures on education, as a share of GDP, decreased from 3.6 percent in 2008 to 2.6 in 2010 or a 30 percent reduction in constant 2010 prices. Similarly, per capita government expenditure on health decreased by more than 30 percent between 2008 and 2010[1]. The share of social protection expenditure in total Government expenditure fell from 13.4 percent in 2007 to 2.9 percent in 2010. Investment in transport infrastructure, two-thirds of which was financed by donors prior to the crisis, has fallen to near zero, and the very existence of some of the institutions responsible for operating and maintaining the national road and rail networks is now threatened due to lack of financing.As a result, many critically needed roads, bridges, and irrigation works have deteriorated noticeably during the last three years, further threatening the livelihoods of the large segment of the population that has suffered losses of lives, houses, assets and tools. Large numbers of schools and health centers have also been damaged and have not yet been repaired due to lack of resources, disrupting the delivery of basic social services.
4.The effects of the crisis have been further exacerbated by exogenous shocks at the household level. More than half the Malagasy households overcame a catastrophic event that adversely affected their economic well-being, and the majority has never recovered. While households vary in their probability of recovering from a shock, poor households that lack the necessary physical and human capital are less likely to recover. In 2010, 6 out of 10 extremely poor households suffered a catastrophic event. Households in the South of Madagascar are disproportionally affected by such events: in VatovavyFitovinany and Androy more than 9 out of 10 households reported having suffered a shock that adversely affected their economic well-being.
5.Poverty, already pervasive prior to the crisis, has risen and is now among the highest in the world.The country ranks 151 in the world according to the 2011 United Nations’ Human Development Index. Income per capita barely reached US$400 in 2011[2]and in 2012, returned to its 2003 level. Preliminary estimates suggest that from 2008 to 2012, the proportion of the population living under the poverty line, already high before the crisis, may have increased by 10 percentage points, with the larger effects over 2011-12, as the crisis deepened. About 77 percent of households are currently below the poverty line, the highest rate in Africa[3]. Factoring in population growth, it is estimated that some 4 million more Malagasies are in poverty than there were in 2008. However, these averages mask large disparities in poverty levels among households, by geographic location, e.g. different regions and urban-rural location. Poverty rates vary from 57 to 77 percent by region and between 74 percent and 52 percent by rural and urban areas respectively.
6.Efforts to improve public sector governance have stagnated since the beginning of the crisis in 2009. Since the early 2000s, the Government of Madagascar has taken a proactive role in the fight against corruption with the establishment of an Anti-Corruption Council in 2003 and the creation of the Independent Office for the Fight Against Corruption (Bureau indépendant de luttecontre la corruption - BIANCO) in 2004, followed by the adoption of a comprehensive anti-corruption legislative package. Nonetheless, important regulatory and institutional reforms needed to support these changes have yet to take place. The recent update of the Transparency Index shows that Madagascar lost 38 places in the ranking between 2008 and 2011, but regained 23 places in the 2011 ranking. This modest gain is partially explained by the Government’s recent efforts to improve public perceptions of its management practices in sensitive sectors, such as mining and forestry. The Government has also embarked on an ambitious Public Financial Management (PFM) agenda, with the adoption of the Finance Legislation in 2004. The new legislation aims for a better articulation between policies, programs and budget allocations and was supported by the introduction of the Medium-Term Expenditure Framework (MTEF) in 2005. Progress was made to roll out the reforms with the revision of the budget classification. However, these reforms never fully materialized before March 2009, and budgetary constraints faced by the Government since the beginning of the political crisis have forced the Administration to adopt conservative measures and embrace a more traditional approach to budget planning.
7.On the demand side of governance, the Republic of Madagascar has a diverse and fragmented civil society. The thematic and geographic areas of focus of these various organizations vary. Nonetheless, over the past few years efforts have been made to strengthen civil society capacity by improving access to key documents (e.g. budget, PRSP/MAP, and sectoral strategies) and their participation in the policy dialogue, both at the national and regional level. Several community scorecard evaluations (in health) and participatory budgeting exercises (in the region of Anosy) were completed in 2007 and 2008. These efforts have not been sustained since 2009 and further efforts are required to increase the involvement of citizens in the formulation of public policy.
Sectoral and Institutional Context
8.The crisis has reversed a decade of progress in the social sectors in just three years. From 2002 to 2008, Madagascar made considerable progress on the social Millennium Development Goals. For example, Madagascar seemed likely to achieve the fourth MDG: under five mortality declined from 94 in 2002 to 71 in 2008. The country was starting to tackle some persistent challenges on improving maternal health and reducing stunting rates among children due to chronic malnutrition. Significant progress was also achieved in expanding universal access to primary education and reaching gender parity. Enrolment in primary education steadily grew by 500,000 annually, and the primary completion rate increased substantially, from only 37 percent in 2001 to 69 percent in 2008. The net enrolment rate in primary education attained 78 percent in 2005.
9.However, since the start of the crisis, there has been a dramatic decline in key social indicators[4]:
  • Immunization coverage with DPT, Hep B3, BCG, and measles rapidly decreased from an average of 90 percent in 2006 to 70 percent in 2011
  • Acute malnutrition grew from 4.7 percent in 2008 to 7.4 percent in 2011 in some of the poorest districts
  • Infant mortality rate increased by 23 and 14 percent in the regions of Androy and AtsimoAtsinana, respectively
  • Child mortality increased by 30 percent in Androy
  • Prescription satisfaction rate, a key indicator for drug availability, declined from 69 percent in 2008 to 58 percent in 2010/11 at the facility level
  • The utilization rate of Basic Health Centers decreased by 20 percent from 2008 to 2011.
  • Prenatal consultations in Health Centers also decreased 20 percent from 2008 to 2011.
  • Enrolment growth in primary education halted abruptly in 2009 with only 0.1 percent compared to the 5 percent annual growth on average over almost a decade– an additional 500,000 of new pupils annually. In 2010, enrolment declined for the first time in a decade
  • Drop-out in the first year of education increased from 19 percent in 2007 to 25 percent in 2009
  • The number of out-of-school children has risen from an estimated 590,000 in 2005 to over 800,000 children in 2010
  • The net enrolment rate in primary school had declined by 4 percent-point to 74 percent in 2010

10.The rapid deterioration of basic social service delivery is primarily due to decreasing public resources. Relatively goodmacroeconomic performance has come at the expense of the social sectors with drastic cuts in the national budget for education and health. The economic and social effects of the crisis have been intensified by the suspension of donor support, which, in a country where international aid prior to the crisis represented around half of the total government budget, led to significant cuts in investments and a sharp decline in the delivery of services. Public expenditures on education, as a share of GDP, decreased from 3.6 percent in 2008 to 2.6 in 2010 or a 30 percent reduction in constant 2010 prices. Similarly, per capita government expenditure on health decreased by more than 30 percent between 2008 and 2010.[5] Currently, the Government is largely only paying salaries of central level staff with the available budget for health and nutrition. Operational budgets (non-salaries) for the health and nutrition sectors were cut by approximately 80 percent between 2009 and 2011. There have also been drastic cuts in budgets at the health center level which is the primary point of access for poor and vulnerable groups. This has been further exacerbated by a decrease in the commitment of external funding for health from 16.3 percent of total government budget prior to the crisis in 2009 to 3.1 percent in 2010.
11.The sharp cuts in public spending substantially decreased the service delivery, availability of supplies, and increased the burden of payment onto families. School grants going to each school management committee for school supplies declined two-thirds from USD 1.5 per pupil per year pre-crisis to USD 0.45 in 2011. 339 primary health care facilities out of 2,500 (14 percent) facilities closed between 2008 and 2011. Outpatient visits decreased by nearly 20 percent in the same years. Service delivery is also constrained by a critical shortage of basic drugs and technical equipment. SALAMA, the procurement agency used by the public health sector, is regularly experiencing disruption of supplies. Further, the costs of service are shifting to families. In education, as much as two-thirds of primary school teachers are now hired by communities, and part of their salaries are paid by parental contributions. An increasing number of families cannot afford these parental contributions, causing their children to drop out or decreasing access to education in the first place. Similarly, the 5,500 community nutrition sites nation-wide are now funded primarily by the efforts of communities. Furthermore, the crisis has weakened the strategic leadership and management of the public service delivery system at the central level, reducing accountability and compromising the quality of services being provided.
12.Access to social services is affected by the growing inability of families to pay out-of-pocket costs and weakened management and governance at all levels. At the same time that out-of pocket costs for service delivery has increased, a greater share of households have suffered declines in income and become more vulnerable. This has led to growing inability of families to pay for services. Notably, 47 percent of households cite financial problems as reason for not seeking medical care when sick with an illness considered as important (Household Survey 2010). Despite service delivery being free of charge in principle, there are often out-of-pocket prescription costs and indirect costs, such as for supplies and transportation, or in the case of education, expected contributions to the community teacher salaries and school maintenance. Despite the funding cuts, the service delivery capacity at the facility- and school level has proven relatively resilient due to community involvement. Lastly, access to key basic health, nutrition and education services has been affected by insufficient maintenance of buildings and access roads as well as the damage by cyclones on facility buildings, schools and feeder road have reduced capacity or closed schools and health care facilities.
13.There is an urgent need to preserve access to key basic social services. The challenge is to preserve availability of public services on the supply side, notably the availability of health, nutrition, and school supplies; as well as the presence of health workers and teachers at the facility level, in a way that builds upon the capacity of communities. In addition, demand side obstacles such as financial and geographic barriers to accessing social services need to be addressed. The support should be coordinated among development partners and targeted to the neediest regions. Further, a support program would be most effective if the investment in human capital “software” i.e. health, nutrition, and education services, and increase in earnings opportunities of vulnerable households be complemented by investments in physical capital “hardware”, i.e. the rehabilitation of school and health facilities.
Relationship to ISN
14.The proposed Project focus and approach is consistent with Interim Strategy Note (ISN) for Madagascar, the recommendations of the 2011 World Development Report (WDR) on Conflict and Security, and the World Bank’s Africa Strategy. Following the political events in January 2009, preparation and approval of new lending was put on hold under the Madagascar portfolio in March 2009 in accordance with OP/BP 7.30, Dealing with De Facto Governments. Given the continued application of OP/BP 7.30 to Madagascar, a two-year Interim Strategy Note (ISN), (2012-2014) was discussed at the Board in February 2012, which proposes a cautious, strategic and selective approach to new operations to mitigate the heavy impact of the crisis on the most vulnerable populations and identifies the health, nutrition and education sectors as the priority areas. The proposed Project is thus well aligned with the ISN. It also integrates lessons from the 2011 WDR which highlights the critical role of strengthening community-based social services in a fragile environment by producing tangible benefits for communities relatively quickly and thus promoting social cohesion. The project also reflects a core area of the World Bank Africa Strategy, addressing vulnerability and strengthening resilience.
15.Complementarity with other IDA activities. The proposed operation has substantial complementarities to other Bank activities in the Madagascar portfolio:
(i)Emergency Infrastructure Preservation and Vulnerability Reduction Projectwillprioritizerestoration of health centers and schools in the same five regions supported by this project. This is an essential coordination, which ensures that all critical facilities, supplies, and teachers/health workers are presents in the project areas. Further, it will prioritize rehabilitation of rural roads that connect the population to health and education facilities in the project areas.
(ii)Second Multisectoral STI/HIV/AIDS Prevention Project (MSPPII): The design of the operation dovetails with the Second Multisectoral STI/HIV/AIDS Additional Financing Project (MSPPII-AF) approved in June 2012 by having the same regional focus and scales up the package of critical services financed under the health and nutrition components of the proposed operation.
(iii)Global Partnership for Education grant under preparation, for which the Bank is the supervising entity, could provide sustainability to the critical educational interventions supported in this project.
(iv)Second Governance and Institutional Development Project includes a focus on enhancing social accountability, access to information and knowledge sharing among state and non-state actors. The proposed emergency project will work towards these aims for the social sectors by: (i) enhancing civil society capacity to monitor budgets; and (ii) increased administration transparency through community scorecards and school report cards.
.
II. Proposed Development Objective(s)
Proposed Development Objective(s)
16.The project development objective (PDO) is to preserve critical education, health and nutrition service delivery in targeted vulnerable areas in the recipient’s territory.
III. Preliminary Description