Project Name Fourth Health Sector Development Project
Project Number 41243-012
Country / Economy Mongolia
Project Status Closed
Project Type / Modality of Assistance Grant
Source of Funding / Amount
Grant 0236-MON: Fourth Health Sector Development Project: Improving Sector Governance
Asian Development Fund US$ 14.00 million
Grant: Fourth Health Sector Development Project
World Health Organization US$ 450,000.00
Loan 2932-MON: Fourth Health Sector Development Project - Additional Financing
Asian Development Fund US$ 25.00 million
Loan 3802-MON: Fourth Health Sector Development Project - Additional Financing
Ordinary capital resources US$ 16.00 million
Strategic Agendas Inclusive economic growth
Drivers of Change Gender Equity and Mainstreaming
Governance and capacity development
Sector / Subsector

Health / Health sector development and reform

Gender Effective gender mainstreaming
Description The project will strengthen the hospital sector in Ulaanbaatar and improve drug safety nationwide. It complements previous Asian Development Bank (ADB) development initiatives in the health sector in Mongolia.
Project Rationale and Linkage to Country/Regional Strategy

1.The project will strengthen the hospital sector in Ulaanbaatar and improve drug safety nationwide. The project builds on previous health sector development initiatives to continue reforming the Mongolian health sector, including health care financing, in line with the National Development Strategy and the government's Health Sector Master Plan (2006-2015). ADB's Independent Evaluation Department's (IED) sector recommendations emphasize the need for structural changes in health care delivery by rationalizing excess hospital capacity at the secondary and tertiary level, particularly in Ulaanbaatar. The project is included in the Country Operations Business Plan (2009-2012) and the Country Partnership Strategy (2010-2015, in preparation). The project is in line with Strategy 2020 and the Operational Plan for Health under Strategy 2020 addressing sector governance issues and promoting more efficient allocation of health resources.

2.ADB is the largest external financier providing assistance to the health sector, and plays a pivotal role in assisting the government to formulate and implement health sector reforms. Support from other partners tends to be focused on assisting the government to address particular diseases or to develop certain programs. ADB works in close consultation with other partners, and to improve aid effectiveness, efforts are made to support the implementation of the Health Sector Master Plan. Efforts are underway under the leadership of the Ministry of Health (MOH) and in coordination with other development partners in the sector to gradually evolve towards a more sector-based assistance. Parallel cofinancing with the World Health Organization is confirmed under this project.

3.The hospital sector absorbs the bulk of the MOH budget and is characterized by excessive capacity, inefficiencies, fragmentation, and lack of quality services. Mongolia has moved from a health service based on the Semashko model of poli-clinics and mono-profile specialist hospitals to a focus on primary health care provided by family doctors working in Family Group Practices. Public secondary and tertiary care in Ulaanbaatar is provided by over 50 hospitals. Six mono-profile hospitals managed by MOH provide tertiary and secondary care in cancer, traumatology and orthopedics, psychiatry, dermatology, pediatrics, and maternal and child care. Also, MOH manages three multi-functional hospitals that provide a wide range of secondary and some tertiary services. District hospitals, under the city government of Ulaanbaatar, provide a limited range of services, mainly internal medicine and neurology services. Deficient quality of services at primary level and the weakness of the district hospital system result in patient seeking care at tertiary level where lower level services are provided at higher costs.

4.There is a rapidly growing and poorly regulated private health sector consisting of hospitals, clinics, laboratories, and pharmacies which are primarily concentrated in Ulaanbaatar. Hospital buildings and equipment in the public and private sectors are generally in poor condition. Patients stay too long in hospitals with many inappropriate admissions. The training of specialist medical staff is not up to international good practice and the management of the hospital sector is weak. Increasing investments in the hospital sector are expected as the economic outlook for Mongolia is promising. The challenge is to ensure investments are used efficiently to improve accessibility and service quality.

5.The cost of reforming the hospital sector in Ulaanbaatar is estimated at about $450 million. A central question is how to use the limited budget available to the project in a strategic way to ensure an efficient use of future investments. A vision, a hospital policy, and a clear hospital reform plan for Ulaanbaatar (including legal, regulatory, and institutional reforms; capacity building needs; and potential financing sources) are missing. Decision-makers have little understanding on how to improve hospital sector management, rationalize hospital services, and especially how district hospitals could be turned into multi-profile hospitals.

6.Mongolia suffers from illegal importation of drugs and circulation of substandard and counterfeit medicines in the market. Drug regulatory functions are fragmented and local drug manufacturers lack compliance with good manufacturing practices. Public information, drug promotion, and post-marketing surveillance are significantly under-developed. The social and economic costs of unsafe drugs sold on the market are high and there is little awareness among decision-makers. Drug safety needs government's interventions as market forces alone will not solve the problem. Mongolia requires investments and technical support as domestic skills in the area of drug safety are scarce.

7.The need to reform the hospital sector has been identified for more than 10 years (with little achievements), although it is clearly reflected in the government's Health Master Plan (2006-2015). The prospects for meaningful health sector reform are greater now than at any time in the past for several reasons. First, public-private partnerships to tap capital and management for the health system are now possible; second, public demand for reform is mounting; and finally, political leaders are starting to recognize the urgency of improving the system. The project will assist Mongolia in preparing future reforms and ensuring decent socio-economic returns of future investments. The project will improve governance in the sector by improving public investment planning, providing decent and efficient hospital services, protecting the population against fake and substandard drugs, and facilitating the public's access to information on hospital performance and drug safety. At the same time, hospital reforms give the government a unique opportunity to establish a public-private collaboration for the benefit of the population. The project will deliver tangible benefits to women by ensuring their active participation in institutional processes to reform the hospital and drug safety sub-sectors.


Improved health status of the Mongolian population, including the poor

Project Outcome
Description of Outcome

Improved health sector efficiency, governance, and drug safety

Progress Toward Outcome

Project policy recommendations on reform of institutional framework for specialist training were reflected in the revised Health Law (2016) and the new Law on Medical Care and Services (2016). The recommendations included (i) establishing a regulatory agency/institution under MOH that is responsible for all regulatory functions on postgraduate specialist training (these functions were previously split between the health and education ministries and training institutions), such as planning, selection of training institutions/hospitals, financing, monitoring and evaluation of training quality, and examination and licensing of the graduates; (ii) refining the status of clinical residents as of the host hospitals' employees; and (iii) defining funding sources and financing mechanisms. Project consultants have revised the 4 specialist training curricula and made them comparable to the internationally accepted levels. New curricula have substantial differences in terms of content, training structure, funding mechanism, duration, and requirements for the training institutions, trainers, and trainees. The MOH piloted the new curricula in the residency training for the new SDH staff that has been organized by the Project.

Specialist training curricula for doctors

- 4 curricula in internal medicine, general surgery, obstetrics-gynecology, and pediatrics were revised in 2014 & reviewed by respective professional boards and associations in Dec 2015.

- Based on the MOH order #A/172, 07 Dec 2016 the revised curriculums for 4 residency trainings (3 years) were piloted for 12 residents who had studied at MNUMS during the 2016-2019 academic years. In total, 37 doctors trained in residency trainings.

- The textbooks for residency programs on (i) internal medicine, (ii) obstetrics-gynecology, (iii) Pediatrics were translated and published in 1300 copies each and distributed to end-users (resident doctors and medical universities' lecturers) in 2018 and 2019.

- Assessment for 3 years- residency program was done by MNUNS in 2020.

- In total, 19 doctors were trained on 11 sub-specialization trainings.

Training curricula for nurses

- Postgraduate training curriculums for nurses were also revised and approved by the Nursing professional board in 2015. Contract for training on 11 clinical areas for 123 nurses was signed with MNUMS.

- In total, 55 nurses have completed 3 month-trainings in pediatric, intensive care, surgical nursing, anesthesia, and public health; and 50 assistant nurses completed their training.

Implementation Progress
Description of Project Outputs

Component 1: Strengthened Hospital Services in Ulaanbaatar

1.1. Hospital development policy and strategic plan for Ulaanbaatar

1.2. A hospital capital investment planning system is established and operational

1.3. A demonstration multifunctional general hospital established in Songinohairkhan district

1.4. Increased hospital governance

Component 2: Strengthened Human Resource Development

2.1. Strengthened postgraduate specialist structure and residency programs

2.2. Hospital management module integrated in a local training institution

Component 3: Strengthened Drug Safety Regime

3.1. A drug regulatory authority established

3.2. Strengthened drug regulatory functions

3.3. Upgraded drug control laboratory, including accreditation system

3.4. Implementation of good manufacturing practice (GMP)

11. Strengthened post-marketing surveillance and adverse drug reaction monitoring

12. Strengthened drug safety governance function at MOH

Status of Implementation Progress (Outputs, Activities, and Issues)

Completed. The Ministerial order on procedures on reporting on adverse drug reaction (ADR) was approved in 2013. The MOHS approved the National Pharmacovigilance strategy thru the ministerial order in 2014. Trainings for medical professionals and for hospital drug therapeutic committees were conducted in 2013-2014. The number of reported ADRs has increased 4-times since 2010.

Completed. In 2014, the Drug regulatory unit of the NCHD responded with 27 feedback recommendation letters to 20 public and private hospitals and 7 feedback letters were sent to pharmaceutical wholesale and retail companies.

Completed. Drug safety indicators were included in the NMP implementation plan. The plan was approved by the ministerial order in Dec 2014.

Annual report with indicators was developed and approved by Management Board in 2015 and publications were printed in 2015, 2016, 2017, and 2018.

Completed. A web-based software program (LICEMED) to provide public information on products (registered medicines), suppliers (licensed wholesale companies, manufactories, and pharmacies), professionals (licensed), and processes (issued license), including rapid alert system warning on unregistered or counterfeit drugs and data on persons affected by unsafe drugs, was upgraded and approved in Nov 2015 and copyrighted in 2017. The system is operational.

Completed. Hospital care development policy was approved by Ministerial Order no.55, 2014. Mid-term implementation strategy was approved by ministerial order no.181, 2015. The mid-term implementation strategy (2015-2019) was also approved by MOH order No.181, 2015. In 2017, the MOH integrated these two documents and some other policy papers into one document named 'State Policy on Health (2017)

The working groups established since 2011 consistently had over 50% female participation and it was increased to 61.6% as of Q2 2021.

Regulation on medical equipment inventory system and its use was approved by MOH Ministerial order 493 in Dec 2017.

Completed. Patient satisfaction survey was conducted in 2014. Survey results revealed that in average 4.941.67 percent of patients were 'less satisfied with service they received, 68.8 percent thinks that hospital' diagnostic and treatment equipment and tools needed to be improved, and 21.5 percent would like to have improved attitude and communication of medical staff toward patients. The final survey (Patient satisfaction survey and Community sore card evaluation) was conducted in Dec 2020. A qualitative part of the survey was also conducted and the survey report was developed and submitted to the MOH in May 2021.

Completed. The Concept Design and Functional Plan for the new hospital, was approved by MOH in 2014. Architectural design of the hospital was developed and approved by the National Construction Development Center in Oct 2015. The MOH signed a contract with Vamed Engineering, the contractor for CW on 24 May 2017.

In November 2018, the government requested an additional financing to address cost overruns caused by (i) government new regulations introduced during implementation of the ongoing project (e.g., new requirements for seismic resistance, upgraded national standards for hospital construction); (ii) limited restructuring of the building to answer address requests made by nearby residents; (iii) construction of a separate building to house the hospital electrical substation and medical gas container, which were originally planned to be located in the basement of the hospital, to conform with requirement of the government inspection authority; (iv) variations in quantities and volumes from the initial bill of quantities; and (v) additional costs to re-route the hospital access road due to the decision of the government to retain the existing hospital. In 2019 ADB approved the additional financing of $16.0 million to complete the construction.

The hospital construction was completed and commissioned in November 2020 by the state expertise. The medical and non-medical equipments supplied and accepted by MOH's technical working group for inspection of equipment. The installation and calibration of the medical and non-medical equipment were completed in Q1 2021. The hospital building was handed over to the end-user in early April 2021.

Completed. Two ministerial orders were approved in 2013 to improve hospital licensing based on consultant' recommendations. These were the (i) MOHS ministerial order no.143 on terms of references and working principles of the licensing committee of the MOHS; and (ii) ministerial order no.145 on licensing regulations, and procedures.

Completed. Gender-specific needs for services and diagnostic requirements were identified for SHD demonstration hospital and reflected in the Functional plan of the hospital in 2014. The specific gynecological and obstetric needs of disabled women were included in an updated version in 2019.


The public reporting on hospital performance was developed and pilot tested in 3 hospitals. Decision of MOH to institutionalize the public reporting system at demonstration Songinokhairkhan hospital was issued in November 2020.

Completed. Institutional plan developed. Legal changes pertaining reforming of postgraduate medical specialist training system reflected in the new Law on medical care and services, approved by the parliament in May 2016.

Completed. Curricula in four clinical areas (internal medicine, general surgery, obstetrics-gynecology and pediatrics) were revised in 2014 and approved by respective professional boards and associations (Dec 2015), and by MOH Order #A/172, 07 Dec 2016. The revised residency training curriculum was piloted at MNUMS during the academic years between 2016 and 2019. Postgraduate training curricula for nurses was also revised and approved by the Nursing professional board. However, this indicator was removed based on recommendation of the Midterm review mission.

Completed. Training curricula and handbooks were developed for use of the national training institutes since 2014. In total, 54 managers (61% of females) were trained in two rounds of hospital management training in 2015.

Completed. In total of 1492 people (82.9% female participants) participated in 25 different types of professional trainings for MOHS, GASI staff and for pharmaceutical companies.

Completed. The concept of establishment of a drug regulatory authority as an integrated authority with strengthened regulatory functions and improved coordination and quality of medicine is incorporated in several policy documents: (i) Government Action plan 2012-2016; (ii) National Medicines Policy, approved by parliament in October 2014; and (iii) the law on medicines and medical devises was revised in Aug 2020. The government issued decision to establish a Drug Regulatory Agency in November 2020. evelopment of the MOHS. Core regulatory functions of the unit are: (i) registration of medicines and medical devises, (ii) licensing of specialists and providers, (iii) issuance of import and export licenses, (iv) monitoring and reporting adverse drug reactions, (v) monitoring medicines marketing and advertisement, (vi) promoting rational use of medicines, (vii) developing national pharmacopeia and standards. But some functions are still with the General Agency for State Inspection (GASI) such as drug control and control and inspection.

Completed. A baseline review of drug regulatory functions was undertaken in 2011.The score of the drug regulation in Mongolia was 46.9%. The review of 2015 shows an increased score for drug regulation at 57%. The DRA was established and operational for all regulatory functions since January 2021 and an increased score for drug regulation is at 80%.

Completed. Drug Control Laboratory building has been upgraded with the support of PRC grant in 2013; new equipment were installed in November 2013. Pre audit for Medicines and bio preparation laboratory was provided by International accreditation body- ANAB ACLASS in May 2015. Final audit was organized in Oct 2015 and ISO-17025 certificate by international accreditation body was awarded to the DCL in Dec.2015. However, this indicator has been removed based on recommendation of the Midterm review mission

Completed. A new national GMP standard (MNS5524:2014) was approved by the Mongolian Agency for Standardization and Metrology in 2014. A GMP certification procedure was approved by MOHS in 2013.


A regular assessment had been conducted in 5 most promising local drug manufacturers since 2012 to support them to be certified by the upgraded GMP standard.

The IVICO and Monos Pharma companies were certified by upgraded GMP standards in Feb 2015, then Nahia and Enkhiin shuuder companies obtained GMP certificates in 2017, and Tsombo LLC in 2019.

Geographical Location Ulan Bator
Safeguard Categories
Environment B
Involuntary Resettlement C
Indigenous Peoples C
Summary of Environmental and Social Aspects
Environmental Aspects An environmental assessment has been carried out in accordance with the Mongolia regulatory framework and ADB's Safeguard Policy Statement (2009). A consolidated initial environmental examination (IEE) report was prepared, which assesses and addresses (i) the environmental implications of the construction of the new Songinohairkhan District Hospital (SDH), and (ii) the New Drug Control Laboratory (DCL). The possible adverse environmental impacts have been prevented or minimized to acceptable levels, through the implementation of the environmental management plan (EMP) that includes adequate mitigation and monitoring arrangements. The Environmental Management Plan (EMP) of the project was updated several times based on review mission recommendations. The implementation of EMP has been regularly monitored and corrective actions were taken as required. The EMP reports were disclosed to the public. The establishment of a new Drug Control Laboratory completed in 2016. No environmental issues were reported during and after the construction of the DCL. The environmental assessment process achieved significant value added by (i) catalyzing, through policy dialog with GASI, the implementation of the project's activities associated establishment of new DCL building, and (ii) developing comprehensive management systems for the collection, storage, and treatment of hazardous chemical waste. The establishment of the SDH is ongoing. The Grievance Redress Mechanism (GRM) guidelines were developed in accordance with the ADB's environmental regulations. With the start of construction of SDH, the project updated the GRM team, organized seminar for project stakeholders on project GRM and training on environmental management, health and safety for GRM team. Information boards and suggestion boxes were placed in the construction site and the current hospital to inform about GRM and receive complaints. In June 2017, the project received two complaints. The first compliant came from residents of apartment No.106 located in the south side of the planned hospital main building. The residents concerned about close location of the hospital building. The boundary points of architectural planning assignment of SDH were in accordance to standard requirements and the construction site scheme was approved by UB city Urban Development and Master Planning Agency in 2015. However, to resolve this complaint, PIU updated the construction site scheme and master plan of the planned building. A boundary point of architectural planning assignment was relocated by 3 meters to the north and 7 meters to the west. The Master plan and construction site scheme of SDH were updated and approved by the UB city Urban Development and Master Planning Agency. The second compliant was about a guardhouse, which is built near to 1st and 2nd floors and closing window of apartment No.106. A guardhouse was moved away from the apartment by 6 meters. GRM reports are available.
Involuntary Resettlement No involuntary resettlement effects are foreseen, and the project is classified as a category C project. The construction of the multifunctional hospital is curried out on existing government land and do not affect local residents or residential buildings. No resettlement plan and framework are required. Should there be any change in scope or other changes with unanticipated resettlement impacts during project implementation, land acquisition and resettlement activities will be implemented in accordance with ADB's Safeguard Policy Statement.
Indigenous Peoples The project will not have any negative impact on indigenous peoples and is therefore classified as a category C project. No further actions are therefore required.
Stakeholder Communication, Participation, and Consultation
During Project Design

Consultations with key stakeholders were held during project preparation including focus groups with beneficiaries such as local community member and hospital patients, in-depth interviews with family general practice doctors, hospital directors, and specialist doctors in Ulaanbaatar. The first series of consultations investigated current access to health services and medical drugs by the poor, and the findings are included in the poverty and social analysis section above. The second round of interviews and focus groups were held with hospital doctors and inpatients to solicit their views, suggestions, and recommendations regarding the proposed project design to establish a multifunctional hospital and a drug regulatory body. The multifunctional hospital will involve establishing new patterns of service delivery which will be complex and there may be risks associated with it. For this reason effective ways of defining and measuring the quality of hospital care will be established and systems will be put place to redress poor quality service should it arise.

During Project Implementation Two local NGOs ('Monconsult LLC and 'Shagdui LLC) have been engaged to implement the project consultation and participation activities and to foster community participation and involvement. Shagdui LLC has developed (i) information, education and communication (IEC) materials on drug safety and hospital care policy, and (ii) prepared the draft communication strategy for hospital policy reform and drug safety. Monconsult LLC has been implementing the community awareness program to raise awareness among the community of focus on the ongoing hospital reform and drug safety issues, and to ensure community participation for the monitoring and feedback purposes in Songinokhairkhan district. A baseline patient satisfaction survey was done in 2015, and the end line survey is planned in 2019. The Community Score Card (CSC) surveys were conducted in 2015, 2016, 2017, and in 2018. A number of outreach activities was conducted in 2017-2018 with assistance of 64 outreach workers trained by the NGO.Shagdui LLC. prepared 17 types of the IEC materials on drug safety, hospital development policy and new demonstration hospital; MOH selected seven for publishing and distribution. In addition, five articles on hospital policy reform and drug safety were written by journalists and published 10 times in daily newspapers and posted on websites in 2017. A 30-min TV programs and 15-min short TV spots were developed and broadcasted (8 and 28 times) via MNB and TV-5 channels in 2017-2018.
Business Opportunities
Consulting Services The Recipient is responsible for selecting, engaging, and supervising Consultants engaged under the loans and grants funded by ADB. All consultants will be recruited according to ADB's Guidelines on the Use of Consultants (April 2010, as amended from time to time).
Procurement All procurement of goods and works will be undertaken in accordance with the Asian Development Bank's (ADB) Procurement Guidelines (2010, as amended from time to time). International competitive bidding (ICB) will be applied to goods contracts estimated to cost $2,000,000 or more and works contracts estimated to cost $5,000,000 or more. Goods contracts with values less than $2,000,000 and works contracts with values less than $5,000,000 will follow national competitive bidding (NCB). Works and goods contracts with values less than $100,000 will be procured using ADB's shopping procedure. NCB procurement will be carried out on the basis of NCB procedures, in accordance with the Mongolian Procurement Law, subject to modifications agreed with ADB. Before the start of any procurement, ADB and the government will review the public procurement laws of the central and state governments to ensure consistency with ADB's Procurement Guidelines. The internationally tendered equipment packages will include the necessary technical support for ensuring proper installation, testing, commissioning, and training of operational staff as part of the related contracts. In accordance with ADB requirements, foreign contractors may participate in bidding for NCB contracts. For NCB, the first draft English language of the procurement documents (prequalification, bidding documents, draft contract) should be submitted for ADB approval regardless of the estimated contract amount. Subsequent procurement are subject to post review. All ICB contracts are subject to prior review. Prior review and approval of ADB of the procurement documents (prequalification, bidding, contract) is required.
Responsible ADB Officer Jigjidsuren, Altantuya
Responsible ADB Department East Asia Department
Responsible ADB Division Mongolia Resident Mission (MNRM)
Executing Agencies
Ministry of Health (formerly Ministry of Health and Sports)
Concept Clearance 04 Jun 2010
Fact Finding 18 May 2010 to 20 May 2010
MRM 03 Sep 2010
Approval 29 Nov 2010
Last Review Mission -
PDS Creation Date 19 Oct 2010
Last PDS Update 21 Sep 2021

Grant 0236-MON

Approval Signing Date Effectivity Date Closing
Original Revised Actual
29 Nov 2010 10 Dec 2010 03 Mar 2011 31 Dec 2016 30 Jun 2021 11 Feb 2022
Financing Plan Grant Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 17.70 Cumulative Contract Awards
ADB 14.00 07 Nov 2022 13.99 0.00 100%
Counterpart 3.70 Cumulative Disbursements
Cofinancing 0.00 07 Nov 2022 13.99 0.00 100%
Status of Covenants
Category Sector Safeguards Social Financial Economic Others
Rating Satisfactory Satisfactory Satisfactory Satisfactory - Satisfactory

Loan 2932-MON

Approval Signing Date Effectivity Date Closing
Original Revised Actual
05 Nov 2012 07 Feb 2013 14 Jun 2013 31 Dec 2016 30 Jun 2021 11 Feb 2022
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 27.00 Cumulative Contract Awards
ADB 25.00 07 Nov 2022 22.48 0.00 100%
Counterpart 2.00 Cumulative Disbursements
Cofinancing 0.00 07 Nov 2022 22.48 0.00 100%
Status of Covenants
Category Sector Safeguards Social Financial Economic Others
Rating Satisfactory Satisfactory Satisfactory Satisfactory - Satisfactory

Loan 3802-MON

Approval Signing Date Effectivity Date Closing
Original Revised Actual
12 Jul 2019 02 Oct 2019 31 Oct 2019 30 Jun 2021 - 11 Feb 2022
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 16.16 Cumulative Contract Awards
ADB 16.00 07 Nov 2022 13.91 0.00 100%
Counterpart 0.16 Cumulative Disbursements
Cofinancing 0.00 07 Nov 2022 13.91 0.00 100%
Status of Covenants
Category Sector Safeguards Social Financial Economic Others
Rating Satisfactory Satisfactory Satisfactory Satisfactory - Satisfactory
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