Documentof The World Bank FOR OFFICIALUSEONLY ReportNo: 37423-CV PROJECTPAPER ONA PROPOSEDADDITIONAL FINANCINGCREDIT INTHEAMOUNT OFSDR3.4MILLION (US$5 MILLIONEQUIVALENT) TO THE REPUBLIC OF CAPE VERDE FORA HIV/AIDSPROJECT November27,2006 HumanDevelopmentI1 CountryDepartment 14 Africa Region This document has a restricted distribution and may be used by recipients only in the performanceo f their official duties. Its contents may not otherwise be disclosedwithout World Bank authorization. CURRENCYEQUIVALENTS (Exchange RateEffectiveOctober2006) CurrencyUnit = CapeVerde Escudo(CVE) US$1 = CVE81 FISCALYEAR January 1 - December31 ABBREVIATIONSAND ACRONYMS AIDS AcquiredImmuneDeficiency Syndrome ARV Anti-retroviralDrugs CAS CountryAssistance Strategy CBO Community-basedOrganization ccs- Comite de CoordinapTo do Combate a SIDA (CoordinationCommitteeto CombatAIDS) SIDA HIV HumanImmonodeficiencyVirus FM FinancialManagement FMR FinancialManagementReporting IDA InternationalDevelopmentAssociation IEC Information, Education,andCommunication IDSR Inquerito Demografico e de Saude Reproductiva (DemographicReproductiveHealth Survey) MAP Multi-CountryHIV/AIDS Program M&E MonitoringandEvaluation NGO Non-GovernmentalOrganization PLWHA PersonLivingwithHIV/AIDS SIL Specific InvestmentLoan STI SexuallyTransmittedInfection UN UnitedNations VCT Voluntary CounselingandTesting WHO WorldHealthOrganization Vice President: GobindT. Nankani Country Director: MadaniM.Tall Sector Manager: EvaJarawan Task TeamLeader: MauriziaTovo FOROFFICIAL USE ONLY REPUBLICOF CAPE VERDE HIV/AIDS PROJECT ADDITIONAL FINANCING CONTENTS Page A. INTRODUCTION........................................................................................................ -1 B . BACKGROUNDAND RATIONALEFOR ADDITIONAL FINANCING................1 C . PROPOSEDCHANGES ............................................................................................... 4 D . CONSISTENCY WITH THE CAS AND THE PRSP .................................................. 5 E . APPRAISAL OF ADDITIONAL ACTIVITIES ........................................................... 6 F . EXPECTED OUTCOMES ............................................................................................ 6 G . BENEFITS AND RISKS............................................................................................... 7 H. FINANCIAL TERMS AND CONDITIONS FOR ADDITIONAL FINANCING .......8 TECHNICALANNEX............................................................................................................. -9 APPENDIX A: PROJECTPREPARATIONAND TIMETABLE OF KEY PROCESSINGEVENTS......................................................................................................... 19 APPENDIX B:MONITORINGINDICATORS..................................................................... 20 APPENDIX C: DETAILED PROJECTCOSTS ..................................................................... 21 APPENDIX D:ECONOMIC AND FINANCIAL ANALYSIS ............................................. 22 IBRDMAP 33383 ................................................................................................................... 21 This document has a restricted distribution and may be used by recipients only in the performance o f their official duties. Its contents may not be otherwise disclosed without World Bank authorization. REPUBLIC OF CAPEVERDE HIV/AIDSPROJECT ADDITIONAL FINANCING PROJECTPAPERDATA SHEET Date: November 27, 2006 Team Leader: MauriziaTovo Country: Republic o f Cape Verde Sector Manager: EvaJarawan Project Name: HIV/AIDS Project Country Director: MadaniM.Tall Project ID: P101950 Environmental Category: B Borrower: Government of Cape Verde ResDonsibleArrencv: Office of the Prime Minister For Loans/Credits/Others: Total Bank financing(US$m.): 5.00 equivalent Prouosedterms: 40 vears maturitv. includinga mace Period o f 10 vears Source Local Foreign Total BORROWElURECIPIENT 0.50 0.00 0.50 Borrower: Government of Cape Verde ResponsibleAgency: Office ofthe PrimeMinister CCS-SIDA Secretariat Contact Person:Mr.Artur Correia, Project Coordinator I Email: Tel: (238) 260-51-13; Fax: (238) 2613099 ccssida@cvtelecom.cv - A. INTRODUCTION 1. This Project Paper seeks the approval of the Executive Directors to provide an Additional Financing in an amount o f SDR 3.4 million (US$5 million equivalent) to the Republic o f Cape Verde for the HIV/AIDS Project (Cr. 3629-1-CV). The proposed Additional Financing would help finance the costs that cannot be financed by the current loan and are associated with: (i) scaling up key interventions successfully piloted under the initial credit within the context o f the new national strategy to address HIV/AIDS; and (ii) identifying ways o f ensuring the sustainability o f current efforts in the fight against HIV/AIDS after IDA funds run out. No changes to the objectives or general design and implementationmodalities o f the project are being proposed. The Additional Financing will include a two-year extension o f the Project until December 31,2008. 2. This Additional Financing satisfies the conditions for Additional Financing for Investment Lending as stated in BP 13.20 issued in June 2005: (a) it will support activities that will increase the project's impact in a manner consistent with the Project Appraisal Document (PAD) presented to the Board in March 2002; (b) the current IDA- financed project is properly implemented (Le., satisfactory PDO and IP ratings, compliance with all legal covenants); (c) activities to be financed have shown results under the ongoing Project; and (d) the closing date will be within the limit o f three years after closing o f the initial project. The Additional Financing will also help set up mechanisms to ensure sustainability after project completion. B. BACKGROUNDAND RATIONALE FORADDITIONAL FINANCING 3. Country context. Cape Verde is a small archipelago of ten islands located off the coast o f Senegal. Only about one-tenth o f the country's surface is arable. While the islands are home to about 470,000 Cape Verdeans, twice as many Cape Verdeans live abroad while maintaining close ties with their homeland. The country's growth performance since the late 1980s has raised it to the ranks of lower middle income countries, with a GNI per capita o f US$2,040 in 2005. Economic growth (an average o f 2.5 per capita per year over the last ten years and around 4.3 percent per capita in 2005) has been sustained through public and private investment based on a high level o f donor support, strong private capital flows, and remittances. Thanks to this growth, poverty has declined by one-fourth over the last decade, while the human development index has increased from 0.59 in 1990 to 0.67 in2003. Adult literacy rates are high(approximately 76 percent in2002), and life expectancy at birth(69) is the third highest inAfrica. 4. Political openness has accompanied this economic and social progress. Since the adoption o f a multi-partysystem in 1991, there have beenfour national elections and two orderly changes in government. A free press further supports the building o f an open society. The most recent legislative and presidential elections were held in January and February2006, respectively. 5. The original Credit. The original Development Credit Agreement (Cr 3629-CV) in the amount of SDR 7.3 million (US$9.0 million equivalent) was approved on March 1 28,2002. Itbecame effective on July 17,2002 andwas amended on April 8,2004 andon July 29, 2004. Its closing date is December 31, 2006. It i s executed under a Specific Investment Loan (SIL) for a total project cost o f US$9.6 million equivalent, o f which the Government i s financing US$0.6 million equivalent. As o f November 2006, nearly 100 percent o f the Credit (SDR 7.3 million or US$10.9 million equivalent') has been disbursed, including an advance o f SDR 450,000 to the Special Account. The remaining Credit balance as well as the Special Account advance are committed and all expenditures are expected to be documented ahead o fthe project closing date. 6. Project objectives. The original project development objective, as stated in the Project Appraisal Document, is to support the goal o f the national HIV/AIDS strategy o f the Government o f Cape Verde to reduce the spread o f HIV infection inthe country. To contribute to this goal, the project also supports (a) the establishment o f a strong and sustainable national capacity to respond to the epidemic; and (b) the mitigation o f health and socio-economic impact o fHIV/AIDS at individual, household, and community levels thus sustaining an economicallyproductivepopulation. 7. Scope and design ofthe project. The project has a countrywide geographic and multi-sectoral scope. It provides for mainstreaming program activities into Line Ministries and other agencies at the national and municipal levels as well as for harnessing the capacity o f communities, civil society, women and youth organizations, and labor unions to implement interventions to fight HIV/AIDS. 8. Project oversight and fiduciary compliance is the responsibility o f the CCS-SIDA (Comite' de Coordenap7o do Combate a Sida) Secretariat. Implementation o f the activities i s and will continue to be carried out by a variety o f actors at different organizational levels, including Line Ministries, Municipalities, civil society, and private sector organizations. Contracting out by Ministries and Municipalities is encouraged in order to make the best use o f the implementation capacity of civil society and the private sector. 9. Components. The project has four components: (a) capacity-building; (b) public sector initiatives, including national and municipal levels, (c) civil society and private sector initiatives, and (d) project facilitation, coordination, monitoring and evaluation. It supports: (a) health promotion activities targeted at behavior change to reduce the transmission o f HIV; (b) diagnosis, treatment, care and support for Persons Leaving with HIV/AIDS (PLWHA) and others affected by the epidemic; (c) mitigation o f the socio- economic impact o f HIV/AIDS, and (d) operational research, surveillance, monitoring andevaluationto strengthen national andlocal capacityto respondto the epidemic. 10. Project performance. Implementation performance is satisfactory. The project is likely to achieve or exceed its development objectives. The Project Performance Indicators were modified through an amendment o f the Development Credit Agreement in June 2005. With respect to indicators in the original project, the use o f HIV prevalence rate as an outcome indicator has been dropped because it has beenrevealedto This increase inthe US$ amount i s due to exchange rate fluctuations. 2 be an inadequate measure for HIV/AIDS projects performance. The rationale for this is summarizedbelow: 0 HIV prevalence is slow to respond to changes in HIV risk behavior and HIV incidence; In concentrated epidemics, HIV prevalence in the general population reflects the tail-end o f a long infection chain; 0 HIVprevalence provides no timely information as to whether a project is on track and does not enable management byresults; 0 HIV prevalence depends on the balance between incidence and mortality, which may be changed by increasingaccess to treatment; 0 HIV prevalence changes cannot be attributed to a single development partner's efforts -they reflect the totality o fnational andinternational HIV responses; 0 HIVprevalence measuresmaynotbeconsistent or stable over time. Given the above, outcome indicators are no longer to be linked to prevalence but rather to behaviors that can result in lower HIV infection rates, that is, the utilization o f condoms by the sexually active population in general and the main high-risk group in particular, and the median age at the first sexual intercourse. The outcome and intermediate indicators for the Additional Financing have also been revised to reflect the two-year extension. In addition, a new process indicator has been added to monitor the gradual implementation of mechanisms to ensure sustainability o f HIV/AIDS interventions in Cape Verde. An explanation ofthe revised indicators can be found inAppendix B. 11. Compliance with environmental and social safeguards has been categorized as highly satisfactory -- the medicalwaste management framework is actually considered as a best practice for the sub-region. Fiduciary compliance is rated satisfactory. Financial management was temporarily rated moderately unsatisfactory in 2005, primarily because o f the Project failure to produce Financial Monitoring Reports (FMR), delays in preparing the annual budget and weak internal control. A list o f issues identified during an IDA mission carried out inNovember 2005 i s presented inthe technical annex with a list o f key actions that needed to be addressed in order to upgrade the rating. Financial management was upgraded to satisfactory in the subsequent ISR (May 2006) as the project had complied with the agreed actions to improve performance, including the regular production o f FMR, the submission o f an acceptable budget and activity action plan, and the transmission o f the internal control report. The Government is fully committed to the project and has complied with all covenants specified in the Development Credit Agreement. The performance o f the CCS-SIDA Secretariat and implementing agencies has been satisfactory. The CCS-SIDA Secretariat has established an acceptable accounting and reporting system for the project that will continue for the Additional Financing. 12. Rationale and reasons for requesting the Additional Financing. The initial project was designed to cast a large net, as little was known about the characteristics o f the epidemic and the most effective ways to fight it. Thanks to additional information and the implementation experience o f the past three years, it is now possible to focus 3 efforts on a smaller, better targeted number o f activities. The Government has requested additional financing o f US$S.O million equivalent inorder to: (i) implement activities that will help consolidate project gains and focus on the most cost-effective approaches and actions, particular for high-risk groups (see Technical h e x for details); and (ii)identify ways o f making the fight against HIV/AIDS financially sustainable as no more IDA funding is envisaged after this operation andpublic financing will be very limited. This latter objective will be pursued primarily by establishing partnerships with the private sector. Both objectives are consistent with the recently revised national strategy against HIV/AIDS (October 2006). 13. At present, the Government is unable to provide sufficient hding to continue financing proposed activities. In addition, Cape Verde i s not eligible for Global Fund support due to its high GDP per capita and low HIV infection prevalence rate (0.8 percent). Regarding other development agencies, the UNfamily, with UNDP as the lead agency, has a $2 million program over four years, but hding remains with the donors. Moreover, Brazil i s providing some assistance in the context o f the "South-South Link" initiative (mostly technical assistance and anti-retroviral drugs for pregnant women) and France has a small program exclusively for the island o f Fogo. Hence, only additional financing from the World Bank could help the Government consolidate progress in the fight against HIV/AIDS and implement mechanisms that would build a sustainable program throughout the country. The good performance o f the project so far suggests that implementation under this Additional Financing arrangement would continue to be satisfactory, thus ensuring quality service delivery in a sector critical for the Government's poverty reduction efforts. C. PROPOSEDCHANGES 14. The original operation included a wide variety o f small interventions, a wide- reaching and comprehensive Information, Education and Communication (IEC) effort, and a number o f studies. N o w the knowledge base has been built and prevalence rates seem to be under control (0.8 percent), so the challenge is to consolidate overall results and find ways to assist at-risk groups. For example, studies on commercial sex workers, street children and drug addicts were carried out under the original project, but their recommendations can only be implementedifadditional financing i s secured. Similarly, a pilot ARV treatment program introduced under the original project can only be continued ifadditional funds are made available. Inaddition, a Voluntary Counseling and Testing (VCT) network implemented on each island needs to be strengthened in several Municipalities. Lastly, the M&E system that was launched needs to be improved to beginproducingreliable data on aregular basis. 15. The proposed changes in project design are marginal and consist mainly o f sharpening the current approach with an eye to ensuring sustainability. Because the cost o f the fight against HIV/AIDS cannot be covered at 100 percent in the short to the medium term, the CCS-SIDA Secretariat will explore ways to develop partnerships with the private sector, and inparticular with sub-sectors that by their nature are more exposed to the risk o f HIV/AIDS andor more effective in reaching at-risk groups (e.g., tourism, entertainment). The recently approved Law on Charitable Contributions (locally known 4 as "Mecenate Law") represents an important opportunity as private enterprises can now obtain fiscal advantages inexchange for investments insocial causes. The project objectives remain the same. The institutional framework will remain the same, although minor staffing changes may be decided to reflect the new emphasis on strategic targeting and sustainability. Two new categories o f disbursements have been introduced to allow for Grants to be made to Line Ministries or Municipalities on the basis o f an Agreement which will be signed between the Line Ministry or Municipality on one hand, and CCS-SIDA, on the other. This will give more responsibility to the Line Ministry or Municipality to manage the implementation o f their respective Action Plan. Activities to be financed under the Additional Financing are expected to be completed by the end o f June 2008; therefore, the closing date for the original Development Credit Agreement will be extended to December 31,2008. 16. The costs and financing plan for the Additional Financing are presented in the table below. The total cost based on actualized unit costs is estimated at US$5.5 million equivalent, o f which an IDA financing o f US$5.0 million equivalent is proposed. The Government contribution i s estimated at US$0.5 million equivalent, representing 10 percent o f the total additional financing. The Country Financing Parameters to allow for the financing o f taxes have now been introduced. Detailed project costs are given in Appendix C. Cost by Componentandby Financier IDA Beneficiaries/ Total (AmountinUS$ million,including Government contingencies) 1. Capacity-building 1.oo 0.00 1.oo 2. a. National Initiatives 1S O 0.20 1.70 b.MunicipalInitiatives 0.60 0.05 0.65 3. Civil Society and Private Sector 1.00 0.00 1.oo Initiatives 4. Project Facilitation, Coordination, 0.90 0.25 1.15 I Totalcosts Monitoringand Evaluation I 5.00 I 0.50 I5.50 I D. CONSISTENCYWITH THE CAS AND THE PRSP 17. The ongoing HIV/AIDS Project and the proposed Additional Financing are consistent with the high case scenario o f the current Country Assistance Strategy (CAS, Report No. 30941-CV, January 27, 2005).2 They also support the goals o f the national The WorldBank interventionwas initially predicatedona longer-terminvolvement(fifleen years) and includeda follow-upMAP project, but inlight ofthe unexpectedlowprevalenceit was decidedthat a more limitedengagementshouldbe sufficient. 5 strategy to reduce the incidence and impact o f HIV/AIDS inthe country, which inturn is based on the Growth and Poverty Reduction Strategy Paper (GPRSP). E. APPRAISAL OFADDITIONAL ACTIVITIES 18. As mentioned above, the additional activities consist o f refining the activities financed under the initial operation. The project remains essentially as originally designed and appraised. The economic, financial, technical, institutional, fiduciary, environmental and social aspects o f the activities to be undertaken with additional financing remain essentially the same as in the original project, but they are now fully embedded in the National HIV/AIDS Strategic Plan 2006-10. This document, which is the result o f extensive consultations, identifies four axes o f intervention: (a) universal prevention, (b) quality o f life for those infected or affected by HIV/AIDS, (c) involvement o f sectors in addition to health, and (d) management, coordination and facilitation. 19. Details concerning the activities to be financed with supplemental funding can be found in the Technical Annex. As mentioned previously, they consist o f a sub-set o f activities supported under the original IDA credit with an emphasis on executing plans rather than developing them and a focus on providing services for high-risk groups while maintaining efforts at prevention through IEC and condom promotion. Activities to be supported will include (a) IEC targeted at behavior change to reduce the transmission o f HIV, with a focus on groups that are most at risk; (b) diagnosis, treatment, care and support for PLWHA and others affected by the epidemic; (c) mitigation o f the impact o f HIV/AIDS; and (d) operational research, surveillance, monitoring, and evaluation to strengthen national and local capacity to respond effectively and efficiently to the epidemic. It should be noted that the environmental and safeguards category for the requested additional finding i s B as under the original IDA credit, and no firther safeguards study i s needed. Procedures laid out in the Medical Waste Management Plan o f 2002 will apply to the execution o f activities funded through the requested additional credit. F. EXPECTED OUTCOMES 20. The proposed additional activities will strengthen and enhance the impact o f the original project development objective. In particular, the updated outcome indicators as discussed with ActAfrica, are expected to cover the following: 0 the proportion o f the 15-49 age group who report using a condom in their last sexual act with a non-regular partner has increased from 46 percent to 50 percent for females and from 72 percent to 75 percent for males (as a measurement o f effective preventive interventions); 0 the median age o f first sexual relation among both females and males remains the same, that is, 17 years o f age for both sexes; 0 the number o f commercial sex workers who report using condoms has increased by 20 percent; 6 the percentage o f pregnant women using ante-natal services who benefit from voluntary counselingtesting (VCT) increases from 13 percent to 40 percent; 0 no health structure providing ARV treatment has been out o f stock o f ARV drugs duringthe previous 12months; and the percentage o f private enterprises with 30 or more employees investing in activities that support the National HIV/AIDS Strategic Plan 2006-10 reaches 10 percent. G. BENEFITSAND RISKS 21. Benefits. The project will continue to provide the following benefits to Cape Verde: reduce the number o f new HIV/AIDS cases, by reducing the rate o f transmission o f HIV through (i)changing unsafe behaviors related to HIV infection, (ii)improving access to condoms, (iii) reducing the rate o f sexually transmitted diseases, (iv) reducing the number o f infections transmitted from mother to child; 0 extend the productive life o f people living with AIDS by: (i) improving the prevention o f treatment o f opportunistic infections, especially tuberculosis, (ii) providing ARV treatment, and (iii) providing nutritional supplements for people livingwith HIV/AIDS; improve the diagnosis, treatment and care for people living with HIV/AIDS by: (i)continuing to offer VCT to every Municipality and community; (ii) disseminating standard protocols, and training health care providers on the clinical management o f STI and HN/AIDS-related opportunistic infections; (iii)improving planning, procurement, and distribution o f essential diagnostic kits andpharmaceuticals including antiretroviral drugs; improve the ability o f communities, households, and individuals to prevent or cope with the impact o f HIV/AIDS, through community-led HIVIAIDS initiatives; 0 improve the economic prospects o f orphans and poor HN-stricken families; and 0 identify mechanisms to make the fight against H N / A I D S sustainable, for example, by establishing partnerships with the private sector. 22. Risks. The modest level o f risk prevailing at the time o f the original Project approval did not materialize as shown by the successful implementation by Line Ministries and Municipalities, despite little experience with multisectoral initiatives and no experience in HIV/AIDS control. The new system to channel funds to civil society also worked well. This being said, IDA will have to continue (a) providing adequate 7 resources for supervision which are above the standard supervision coefficients; (b) conducting supervision with teams that have specialists from various sectors and in particular, have specialists in key areas such as financial management, procurement, monitoring and evaluation; and (c) collaborating closely with intemaVextema1 partners and stakeholders. The only remaining risk is related to the Government's willingness to continue providing a modicum o f resources for the fight against HIV/AIDS, and in particular to fund at least part o fthe operating expenses o fthe CCS-SIDA Secretariat. H. FINANCIAL, TERMS AND CONDITIONS FOR ADDITIONAL, FINANCING 23. Disbursement arrangements for Grants to the Line Ministries and to the Municipalities. An advance for budget expenditures for a period o f up to six months will bemade upon signature o f anAgreement between a Line Ministryor a Municipality, and the CCS-SIDA, with subsequent semi-annual payments to be made on the basis o f satisfactory reports providing: (a) evidence o f performance/results in light o f indicators specified in the Action Plan; (b) documentation substantiating expenditures incurred duringthe previous semester; and (c) a plan and budget for the subsequent semester that would be consistent with the lessons learned from previous experience. Random technical and financial audits will validate such reporting. A sample Agreement will be included in the Project Operational Manual to be revised and submitted as part o f the condition o f effectiveness. 24. The Additional Financing o f US$5.0 million equivalent will be provided as a Credit. The only condition o f effectiveness is that a revised version o f the Operating Manual reflecting agreed changes will havebeen approvedby IDA. 8 CAPE VERDE: HIV/AIDS PROJECTADDITIONAL FINANCING .................... TechnicalAnnex 1. DetailedDescriptionofthe AdditionalFinancing The project will finance HN/AIDS-related activities for the period 2007-08. Its set-up takes into account the two-tiered decentralized adMinistrative structure in Cape Verde at national and municipal levels as well as the existence o f vibrant civil society and private sectors. Project components, therefore, allow for division between public and private sector (the latter including civil society), while at the same time taking into account the geographical and social separation o f the Cape Verdean island communities. The objectives and the activities o f the project are consistent with the newly adopted National HIV/AIDS Strategic Plan 2006-10, which is the result o f widespread consultations and builds on the experience o f the original HIV/AIDS operation. The project components remain as for the original project and are described below. General The proposed project will implement activities that will help consolidate gains under the original project and focus on the most cost-effective approaches and actions. This will mean scaling up or intensifying some o f the existing efforts by mainstreaming pilots in Line Ministries and other government agencies and by harnessing the capacity o f communities, civil society organizations and the private sector. Project oversight i s the responsibility o f the CCS-SIDA (Comite' de CoordenapZo do Combate a Sida) Secretariat. Implementation o f the activities will be at different organizational levels including central government, Municipalities, civil society organizations, and private sector entities. Contracting out by Ministries and Municipalities will continue to be encouraged to make the best use o f the implementation capacity o f civil society organizations and the private sector. Inaddition, on the basis o f lessons from the original project, procedures have been amended to give greater responsibility to Municipalities and Ministries while simplifying reporting requirements. Activities to be supported will include (a) IEC targeted at behavior change to reduce the transmission o f HIV, with a focus on the groups that have been found to be most at risk; (b) diagnosis, treatment, care andsupport for PLWHA andothers affectedbythe epidemic; (c) mitigation o fthe impact o f HIV/AIDS; and (d) operational research, surveillance, monitoring, and evaluation to strengthen national and local capacity to respond effectively and efficiently to the epidemic. Project Component 1: Capacity Building US$l.OOmillion - This component will continue to support HIV/AIDS-related capacity building for the various implementers o f the project with a view to filling remaining gaps. This will include training, technical assistance and any other capacity building activities that are necessary for the public and private sector (including civil society organizations) to be able to effectively and efficiently implement HIV/AIDS prevention, care and support 9 activities in the country. For instance, medical personnel will be trained in surveillance techniques as well as in HIV/AIDS treatment adMinistration, while staff from relevant government andnon-government agencies will be trained and supported inthe design and implementation o f targeted socioeconomic research (e.g., on the HIV/AIDS-related behavior o f high-risk groups). CCS-SIDA and its Secretariat will continue to benefit from capacity building for key areas which were not sufficiently covered during the initial phase o f the project, such as M&E and strategic IEC. This component will also purchase equipment and finance work directly related to the training program for entities such as hospitals, blood banks andhealth districts. Project Component 2: Public Sector Initiatives - US$2.35million This component will support HIV/AIDS initiatives o f the central government Ministries and State Secretariats, parastatal organizations and municipal governments. In order to reflect the decentralized nature o f Government and support its efforts to further decentralization, the public sector initiatives component will be broken into (a) National Initiatives and (b) MunicipalInitiatives. a) National Initiatives (US$1.70 million). This component will support public sector HIV/AIDS activities carried out a national level by Line Ministries or central government agencies. Some o f these activities will be contracted out to civil society organizations and/or the private sector. As part o f the multisectoral approach to HIV/AIDS, all Ministries, including their representations at the municipal level, will be expected to have, at a minimum, a mechanism to inform and educate their employees and an HIV/AIDS social support network. Each Ministry has already prepared an Action Plan including HIV/AIDS prevention and mitigation activities for its staff, and has a focal person or team for HIV/AIDS. The project will support the implementation, updating and evaluationo f such plans. Specific activities to be financed include those outlined below. General: Continue providing HIV/AIDS IEC services with a focus on vulnerable groups as identified inthe National HIV/AIDS Strategic Plan 2006-10; Expand HIV/AIDS social networks for employees o f the Ministries and their families to provide prevention, care and support; Expandcounseling as well as psychologicalandmaterial support for PLWHA and their families. Ministry of Health 0 Strengthen the HIV/AIDS surveillance system; 0 Improve early detection and treatment o f STI (including HIV/AIDS), tuberculosis and other opportunistic infections; Expand access to ARV treatment to cover every AIDS patient identified while maintaining previously achieved delivery standards; 0 Continue providing control o f blood supply safety and quality, and ensure availability o f the relevant diagnostic kits (HIV, hepatitis and syphilis) in the entire blood transfusion network 10 Expand the control o f mother-to-child transmission through universal access to diagnostic tests for pregnant women and anti-retroviral therapy. Ministry of Education Continue promoting HIV/AIDS initiatives by school and student associations at all education levels; Intensify efforts to integrate information and sensitization on HIV/AIDS into the curriculum at all levels o f the formal education system, including teacher training colleges; Expandprovision o fHIV/AIDS social support networks for teachers and students at all levels o f education. b) Municipal initiatives (US$0.65 million). Under the decentralized system o f adMinistration in Cape Verde, Municipalities are particularly important agents for effecting change at the local level. Under this sub-component, the project will support activities that are directly carried out by municipal authorities or contracted out by them to civil society organizations or to the private sector. All Municipalities developed Action Plans during the original project, but five additional Municipalities were recently created andthey still have to develop their Action Plans. The project will support the preparation (for the new Municipalities) and execution o f Action Plans in accordance with the National HIV/AIDS Strategic Plan 2006-10. Activities to be financed under this sub- component include the following: Expand IEC activities through municipal and community leaders, teachers and school management teams on the impact o f the HIV/AIDS epidemic; Promote behavioral changes and safe sex practices in accordance with the priorities o f the National HIV/AIDS Strategic Plan2006-10; Continue supporting municipal HIV/AIDS teams inprevention, care, and support activities; Expandcounseling as well as anonymous andvoluntary testing services offered at municipal facilities; Improve early detection and treatment o f STI (including HIV/AIDS), tuberculosis andother opportunistic infections. Project Component 3: Civil society andprivate sector initiatives US$l.00 million - Under this component, the project will support initiatives directly carried out by, or contracted out to civil society organizations, such as NGOs, religious organizations and organizations o f PLWHA. These initiatives would include the preparation and execution o f sub-projects aimed at preventing and controlling HIV/AIDS and at supporting those affected by it. Activities to be financed could include: Continue conducting HIV-related IEC focusing on vulnerable groups as identified inthe NationalHIV/AIDS Strategic Plan2006-10; Target support to orphans, guardians o f poor orphans, and AIDS-stricken impoverished or disadvantaged households, including those headed by women, 11 youth and the elderly (usually because o f the death o f a spouse, parent or guardian) byproviding material andpsychologicalhelp; a Intensifythe promotion o fcondomuse through social marketinganddistribution; a Expandthe provision o fhome andcommunity-basedcare for PLWHA; a Expand community-based HIV/AIDS networks in prevention, care and support activities. Project Component 4: Project facilitation, Coordination, and Monitoring and Evaluation - US$1.15million This component will fbnd the continued functioning o f the CCS-SIDA Secretariat. The Secretariat i s a lean structure designed to facilitate and coordinate project execution, with project activities being implemented by Ministries, civil society organizations, private enterprises, Municipalities, and communities. The main direct responsibilities o f the Secretariat will continue to be facilitation, coordination, review of action plans and fundingproposals, supervision, M&E, and support to CCS-SIDA for longer-term national planning and policy development. Inaddition, the Secretariat will focus on identifying ways o f ensuring the sustainability o f current efforts after IDA funding runs out. Some progress has already been made in this sense, as IDA was the only donor when the original project started, while now the UN family, Brazil and France are also contributing. In addition to continue looking for donor support, the Secretariat will concentrate on establishing partnerships with the private sector, and in particular with sub-sectors that by their nature can be more exposed to the risk o f HIV/AIDS and/or more effective in reaching at-risk groups (e.g., tourism, entertainment). The recently approved Law on Charitable Contributions (locally known as "Mecenate Law") represents an important opportunity as private enterprises can now obtain fiscal advantages inexchange for investments insocial causes. 2. ImplementationArrangements Project oversight and fiduciary compliance is the responsibility o f the CCS-SIDA Secretariat. Implementation o f the activities i s and will continue to be carried out by a variety o f actors at different organizational levels, including Line Ministries, Municipalities, civil society, and private sector organizations. Contracting out by Ministries and Municipalities is encouraged in order to make the best use o f the implementation capacity o f civil society and the private sector. Civil society organizations in particular are financed through grants given upon acceptance o f a proposal, a mechanism that has revealed quite effective in managing a plethora o f small contracts. A similar mechanism is now proposed for financing activities implemented by Municipalities and key Line Ministries (initially Health, Education and the Youth State Secretariat), whereby these entities would receive grants upon acceptance o f their Action Plan and signature o f an Agreement with the CCS-SIDA Secretariat. Dedicated staff would be hiredat the municipal level to ensure close monitoring o f the use o f grant h d s andcompliance with fiduciary requirements. 12 Project implementation period. The closing date o f the original credit is December 31, 2006. An extension o f the Credit closing date to December 31, 2008, was agreed with the Government inorder to implement the additional activities. Capacity of the Borrower to execute the project. The existing implementing agencies (CCS-SIDA, Line Ministries, Municipalities, civil society organizations), which have performed satisfactorily under the original project, will carry out and oversee execution o f the new activities. The proposed Additional Financing does not require any additional implementation capacity beyond what i s already inplace, and its implementation will be subject to the same monitoring and reporting requirements as inthe original project. Implementation arrangements for Line Ministries and Municipalities. Action plan proposals by Ministries and Municipalities will be submitted to the CCS-SIDA for approval and subsequent funding. An annual Agreement, which will include an action plan and budget with agreed input and output indicators, will define the respective roles and responsibilities o f the contract signatories and frame the relationship between the various executing agencies and the CCS-SIDA. The Agreement will be conceived according to a performance-based management approach, whose primary focus i s on accountability for results. A sample Agreement will be included in the Project Operational Manualto be revised and submitted by effectiveness. Procurement and Disbursement. Procurement and disbursement procedures will follow the procedures applied under the original Credit. However, the procurement section for this Additional Financing has been revised to reflect the credit amount o f US$5.0 million equivalent as well as the type o f expenditures being procured under the Additional Financing. The CCS-SIDA has prepared a comprehensive procurement plan, including procurement o f ARV and additional activities. According to this plan, all activities should be completed before June 30, 2008. Concerning the Grants for Line Ministries and for Municipalities, an advance for budgeted expenditures for a period o f up to six months will be made upon signature o f an Agreement between a Line Ministry or Municipality and the CCS-SIDA with subsequent semi-annual payments to be made on the basis o f satisfactory reports providing: (a) evidence o f performance/results inlight o f indicators specified in the Action Plan Agreement; (b) documentation substantiating expenditures incurred during the previous semester; and (c) a plan and budget for the subsequent semester that would be consistent with the lessons learned from previous experience. Random technical and financial audits will validate such reporting. Retroactive financing is included for up to US$200,000 equivalent to cover eligible expenditures made from October 1,2006 untilthe FinancingAgreement i s signed. Special Account. The authorized allocation for the Additional Financing is set at us$800,000. 13 3. Accounting, financialreportingandauditingarrangements The following objectives o f the project's financial management system remain the same for the Additional Financing. These objectives are: (i) to ensure that funds are used only for their intended purposes in an efficient and economical way while implementing agreed activities; (ii)to enable the preparation o f financial reports that show costs budgeted and incurred for the current period and the total budget and cost o f the Project to date; (iii) to enable the CCS-SIDA management to monitor efficiently implementation o fthe project; and (iv) to safeguard Project assets and resources. The Project accounting and reporting system, including arrangements for audits, have been overall satisfactory and there i s no proposal to make changes inthe implementation arrangements for the Additional Financing. Therefore, only a desk review was conducted on the financial management (FM) capacity o f the CCS-SIDA Secretariat. It was agreed that the FM staff and the computerized financial management system in place should continue to be used to support implementation o f the additional activities. Particular attention will be paid to the regular production o f periodic financial reporting such as Financial Monitoring Reports. Special account, Statement of Expenses (SOEs) and annual accounts o f CCS-SIDA will continue to be subject to annual audits by private independent auditors, as well as periodic reviews by national Public Control Institutions. Fiduciary compliance is rated satisfactory. Financial management was temporarily rated moderately unsatisfactory in 2005, primarily because o f the Project failure to produce Financial Monitoring Reports (FMR), delays in preparing the annual budget and weak internal control. A list o f issues identified during an IDA mission carried out in November 2005 is presented below, followed by a list o f key actions that needed to be addressed in order to upgrade the rating. Financial management was upgraded to satisfactory in the subsequent ISR as the project complied with the agreed actions to improve performance, including the regular production of FMR, the submission o f an acceptable budget and activity action plan, and the transmission o f the internal control report. Area Actions Internal Control Overall, the project's internal control systems are not sufficient. The problems met in the financial management actually are essentially due to the absence of adequate internal control system. Accounting procedures at the Municipality During the midterm review the mission level recommended the recruitment o f eight facilitators at the Municipality level to take care of all the financial management aspects o f the project at municipality level and collect and process the supporting documents. Now, 14 Area Actions one year later, the mission noted that this recommendation was not implemented at all. This has resulted in inadequate financial management, where national CCS-SIDA financial management unit has had to undertake work intended to be done at municipality level, thereby overwhelming the unit and preventing it fkom doing some if its core fiduciary responsibilities. FinancialMonitoring Reporting The Executive Secretariat has not started producing Financial Monitoring Reports (FMR), as required by the DCA 18 months after effectiveness. This wealaess was initially due to the original and deficient accounting software, which was changed for a new one in August 2004. However the acquisition of new software did not resolve the situation and as notedno FMRshave been produced. The mission recommended and agreed with CCS-SIDA ES, that the productiono f the FMRfor the third quarter of 2005 and their transmission to the Bank before the end of November 15, 2005, and thereafter produce and submit to IDA FMRs according to the schedule identified in the Development Credit Agreement. Budgetingmanagement The budget of the current fiscal year was never elaborated, although it i s noted that a budget was prepared for 2004. The absence of annual budgets does not permit comparison with actual realization for each period. For the next fiscal year, the mission recommends the elaboration of a realistic budget, taking into account the priority actions recommended by the mission and agreedon with CCS-SIDA ES. Information Systems A new system was purchased and installedin 2004 but the modules o f withdrawals of special account are not used. The withdrawals applications are made inexcel application. 15 Area Actions InternalControl Overall, the project's internal control systems are not sufficient. The problems met in the financial management actually are essentially due to the absence o f adequate internal control system. Accounting procedures at the Municipality During the midterm review the mission level recommended the recruitment of eight facilitators at the Municipality level to take care of all the financial management aspects of the project at Municipality level and collect and process the supporting documents. Now, one year later, the mission noted that this recommendation was not implemented at all. This has resulted in inadequate financial management, where national CCS-SIDA financial management unit has had to undertake work intended to be done at Municipality level, thereby overwhelming the unit and preventing it from doing some if its core fiduciary responsibilities. Financial Monitoring Reporting The Executive Secretariat has not started producing FinancialMonitoring Reports (FMR), as required by the DCA 18 months after effectiveness. This weakness was initially due to the original and deficient accounting software, which was changed for a new one in August 2004. However the acquisition of new software did not resolve the situation and as noted no FMRs have been produced. The mission recommended and agreed with CCS-SIDA ES, that the production o f the FMR for the third quarter of 2005 and their transmission to the Bank before the end o f November 15,2005, and thereafter produce and submit to IDA FMRs according to the schedule identified in the DevelopmentCredit Agreement. Budgetingmanagement The budget of the current fiscal year was never elaborated, although it i s noted that a budget was prepared for 2004. The absence of annual budgets does not permit comparison with actual realization for each period. For the next fiscal year, the missionrecommends the elaboration of a realistic budget, taking into account the priority actions recommended by the mission and agreed on with CCS-SIDA ES. 16 IInformation Systems A new system was purchased and installed in 2004 but the modules of withdrawals o f special account are not used. The withdrawals applications are made inexcel application. 17 FinancialManagementPerformance ActionPlanof November2005 andStatus of Compliance ActionI Tasks Responsible CompletionDate Status (as of May 2006) Elaborationof the Budgetfor the fiscal year 2006 Submissionof the budget to the Bank CCS-SIDAES November 15,2005 Done ' Submissionofthe activity actionplanto the Bank CCS-SIDA ES November 15,2005 Done Bankcommentsonthe proposedbudgetand IDA November 30,2005 Done actionplan Withdrawalapplication Improvethe quality of withdrawalapplication CCS-SIDAES Immediate Done Productionof FMR ... Submissionofthe FMR for the periodending on CCS-SIDA ES November 15,2005 Done September 2005 Regular submissionof FMR CCS-SIDA ES Eachquarter as per On-going DCA Managementletterfor 2004 Transmissionofthe Internalcontrolreport for CCS-SIDAES/ Immediate Done 2004 to the Bank Auditor 4. Environmentaland social aspects The proposed activities do not trigger any new safeguard policies or raise the environmental category o f the project. Activities proposed under the Additional Financing are the same as were proposed in the original project (category B). The existing Medical Waste Management Plan elaborated in March 2002, which has been successfully implemented by the Cape Verdians, is considered a "best practice" for the region. The Medical Waste Management Plan has been be re-disclosed at the Bank's InfoShop in September 2006. Concomitantly, the Government has published another disclosure notice inthe country. During execution o f the original project, no detrimental environmental issues were triggered as a result o f the project and the Medical Waste Management Plan has been implemented as required. Capacity to supervise environmental aspects has been satisfactory under the original Credit. Category B has been assigned to the additional financing accordingto the rating for MAPprojects. 18 CAPEVERDE HIV/AIDS PROJECT ADDITIONAL FINANCING APPENDIX A: PROJECTPREPARATIONAND TIMETABLE OF KEY PROCESSINGEVENTS RVP Approval September 8,2006 Appraisal October 4,2006 I Board Presentation Date ofPlannedEffectiveness 1I January December21,2006 I 19,2007 I Credit Closing 1 December 31,2008 IDAstaffwho worked onthe project included: Name Title Unit MauriziaTovo Lead Social Protection Specialist and Task Team AFTH2 Leader Johanne Angers Operations Officer AFTH2 StkphaneLegros Public Health Specialist WBIHD Adriana Cunha Program Assistant AFTH2 Costa Bourama Diaite Sr. Procurement Specialist AFTPC Luz Meza-Bartrina Sr. Counsel LEGAF Suzanne Morris Sr. Finance Officer LOAG2 Serigne 0.Fye Sr. Environmental Specialist AFTS2 Osval Romao Financial Management Specialist AFTFM 19 CAPE VERDE HIV/AIDS PROJECT ADDITIONAL FINANCING APPENDIX B: MONITORING INDICATORS Baseline December 31, Explanationon Revised 2008 OutcomeIndicators OutcomeAmpactIndicators 1.The proportion of 15-49 who Female: 46%; Female: 50%; Targets have changedto reflect report usinga condom intheir Male: 72% Male: 75% newclosing date. An interim last sexual act with anon- (IDSR11,2005) study will be conducted to regular partner has increased obtain data at project end. from 46% to 50% for females and from 72% to 75% for males (as a measurement of effective preventiveinterventions); 2. The median age of first sexual Female: 17; Female: 17; Wording changed from "has relation i s maintainedamong Male: 17 Male: 17 increasedby one year" to "be bothfemales and males (15-24 (IDSR 11,2005) maintained", which i s more year olds); realistic considering the trends intheregion. An interimstudy will be conducted to obtain data at project end 3. The percentage of Survey to be Increasedby 20% New indicator focusing on commercial sex workers who carried out behavioral change o f one of the report usingcondoms has (2006) maintarget groups increasedby 20% Output Indicators 1. Percentageofpregnant 13% 40% Indicator on VCT modified women usingante-natal services (IDSR11,2005) because goal under previous benefitingfrom voluntary indicator already achieved counseling testing (VCT) (100% o fMunicipalities increasesfrom 13% to 40% offering the service) 2. No health structure providing 0 0 New indicator introducedby ARV treatment hasbeenout of (2005) amendment o fthe D C A inJune stock o f ARV drugs duringthe 2005 to reflect procurement of previous 12months ARV 3. Percentageof private 0 10% Newindicatorto addressthe enterprises (30 or more (2006) objective o f sustainability employees) investingin through potential additional activities supporting the resources and innovative National HIV/AIDSStrategic partnerships with the private Plan 2006-10 reaches 10% sector 20 APPENDIX C: DETAILEDPROJECTCOSTS (AmountinUS$ million,includingcontingencies) Cost by Component and by Financier IDA Beneficiaries/ Total Government Capacity Building 1.oo 0.00 1.00 NationalPublic Sector Initiatives 1S O 0.20 1.70 Municipal Public Sector Initiatives 0.60 0.05 0.65 Civil Society and Private Sector Initiatives 1.oo 0.00 1.00 ProjectFacilitation, Coordination, and Monitoring 0.90 0.25 1.15 and Evaluation Total costs 5.00 0.50 5.50 Cost by Category and by Financier Government I I 1.Civil Works 0.40 0.05 0.45 ~ ~ 2. a. Goods, Vehicles and Office Equipment 0.30 0.05 0.35 2 b. Goods -Drugs tests and Medical Supplies 1.oo 0.25 1.25 3. Consultant Services, Training and Audits 0.90 0.00 0.90 4. Grants for CSO Subprojects 1.oo 0.00 1.00 5. Operating Costs 0.30 0.05 0.35 6. Grants for Municipalities 0.60 0.05 0.65 7. Grants for LineMinistries 0.40 0.05 0.45 8. Unallocated 0.10 0.05 0.10 Total costs 5.00 0.50 5.50 Cost by Category Local Foreign Total 1.Civil Works 0.45 0.00 0.45 2. a. Goods, Vehicles and Office Equipment 0.20 0.15 0.35 2. b. Goods -Drugs tests and Medical Supplies 0.10 1.15 1.25 3. Consultant Services, Training and Audits 0.60 0.30 0.90 4. Grants for Subprojects 1.oo 0.00 1.00 5. Operating Costs 0.30 0.05 0.35 6. Grants for Municipalities 0.65 0.00 0.65 7. Grants for Line Ministries 0.45 0.00 0.45 8. Unallocated 0. 10 0.00 0.10 Total costs 3.85 1.65 5.50 21 CAPEVERDE HIV/AIDS PROJECT ADDITIONAL FINANCING APPENDIX D:ECONOMICAND FINANCIAL ANALYSIS Economic Analysis. The detailed economic analysis on HIV/AIDS was carried out under the umbrellaproject (see Annex 5 o fthe Project Appraisal Document for the Multi- Country HIVAIDS Program for the Africa Region, Report No. 20727-AFR, paragraphs 76-78). The analysis includes an overall assessment o f the impact o f HIV/AIDS on economic development and poverty and shows that a reduction in AIDS-related deaths would increase GDP growth. Financial Analysis. The financial analysis presented in paragraph 79 o f the Project Appraisal Document for the Multi-Country HIV/AIDS Program for the Africa Region (Report No. 20727-AFR) states that, "for each o f the physical works components, the operation and maintenance costs will be calculated and commitment required from Government to finance and carry out effective Operations and Maintenance on an annual basis. An annual review o f Operations and Maintenance for physical works will be carried out three months prior to the beginning o f each fiscal year." The fiscal impact o f the project is not expected to be significant. The amount to be disbursed annually, less than US$2.0 million equivalent, represents slightly more than one percent o f the total Government budget. Counterpart funds are not expected to be undulyheavy. Civil works will be limitedto minor renovationof existing facilities. The actual fiscal impact is further minimized since a significant portion o f the project will be implemented directly by NGOs, private sector organizations, and community-based organizations. 22 MAPSECTION 23 25°W 24°W 23°W This map was produced by the Map Design Unit of The World Bank. RIBEIRA The boundaries, colors, denominations and any other information GRANDE shown on this map do not imply, on the part of The World Bank Ribeira Grande Group, any judgment on the legal status of any territory, or any Vila das Pombas endorsement or acceptance of such boundaries. Ribeira da Cruz PAÚL Lajes Santo Antão 17°N PORTO (1803 m) Porto Novo 17°N NOVO Mindelo SÃO VINCENTE W I N D W A R D Calhau São Pedro Madeiral São Vicente Santa Luzia Sal Espargos SÃO NICOLAU Ilhéu Branco SAL Ilhéu Raso Riberia Brava Santa Maria Tarrafal Preguica I S L A N D S São Nicolau AT L A N T I C O C E A N Sal-Rei BOA VISTA Norte Boa Vista Povocão Velha Povocão 16°N 16°N CAPE VERDE DS CAPE VERDE LEEWARD ISLANSão Tiago TARRAFAL SANTA Maio Tarrafal CRUZ MAIO SANTA Santa Cruz SELECTED CITIES AND TOWNS CATARINA Vila do Maio Santa Catarina NATIONAL CAPITAL Mosteiros Ilhéus Do Igreja MOSTEIROS São Domingo São RIVERS Rombo 15°N Mt. Fogo DECEMBER SÃO MAIN ROADS (2,829 m) 0 10 20 30 Kilometers Brava Furna PRAIA DOMINGOS IBRD São PRAIA COUNTY (CONCELHO) BOUNDARIES BRAVA Filipe SÃO FILIPE 0 10 20 30 Miles 33383 2004 INTERNATIONAL BOUNDARIES Fogo 25°W 24°W 23°W