Third health project
 Report No: ; Type: Report/Evaluation Memorandum ; Country: Indonesia; Region: East Asia And Pacific; Sector: Basic Health; Major Sector: Health
                                                 Nutrition & Population; ProjectID: P003874


        The Indonesia Third Health project, supported by Loan 3042-IND, for US$43.5 million, was approved in FY89.
The fully disbursed loan totaled US$42.9 million, closing on March 31, 1996, nine months behind schedule. The Japan
Grant Facility provided US$4.4 million equivalent for technical assistance and studies, primarily for the preparation of
the project. The Implementation Completion Report (ICR) was prepared by the East Asia and Pacific Regional Office.
The borrower’s evaluation of the project is appended to the ICR. The cofinancier did not comment on the ICR.

The project was designed to improve the health status of the population in two provinces and
strengthen sector management. This was to be accomplished by (i) supporting the government’s

expenditure program for health specified in the five-year plan for the project provinces; (ii) implementing pilot
programs for decentralization of planning, an integrated budgeting framework, and increased fee retention by the health
sector; and (iii) providing technical assistance and training to improve sector managerial capacity.

         The project met its objectives. Two-thirds of project expenditures supported provincial health programs that
significantly increased the delivery of maternal and child health outreach, immunizations, drug supplies, and improved
water supplies and sanitation. The program to integrate and manage certain budget categories at the district level was
successfully piloted and has now become national policy. Fees have been raised and retained as planned. Other
accomplishments include the development of an improved drug inventory management system that has been introduced
nationally, a rural water and sanitation program involving substantial community participation that is now being
extended through a Bank-financed project for this purpose, and rehabilitation or construction of facilities that generally
equaled, and in some cases surpassed, targets established in the five-year plan.

         The ICR rates project outcome as highly satisfactory, sustainability as likely, institutional development as
substantial, and performance of the Bank as satisfactory. The Operations Evaluation Department (OED) agrees with
these ratings except for project outcome which it rates as satisfactory because gains similar to those achieved in few
project provinces were achieved in nonproject provinces. An underlying reason for the decentralization initiatives was
to encourage more local responsibility for health funding. While substantial additional local funds were raised for the
health sector in the project provinces, transfers from the center increased even more, with the result that dependence on
the center increased. These transfers appear sustainable under current economic conditions. A number of nonproject
provinces experienced similar absolute increases in local funds for health and achieved similar gains in rehabilitation
and expansion of their health infrastructure.

        What explains the success in achieving a degree of decentralization and resource mobilization while so many
other projects have failed? A critical factor was a flexible project design that encouraged participation and adaptation.
Other important factors were commitment to the broad principles at senior levels of government, high quality of the
project management team, continuity of government and Bank project staff, heavy inputs of time by both Bank and
government staff, facilitated by the fact that the task manager was located in the field for much of the implementation
period, and a focus on only two provinces.

The ICR is satisfactory and includes useful tables and a thoughtful borrower’s evaluation. The
project has been audited.