Mongolia: Fourth Health Sector Development Project

Sovereign Project | 41243-012 Status: Active


ADB is helping Mongolia improve hospital services in the capital, Ulaanbaatar, and strengthen the country's drug safety regime. The project will assist in preparing the first hospital development policy for Ulaanbaatar, strengthen medical residency training and postgraduate programs as part of human resource development, set up a drug regulatory authority, and upgrade a drug control laboratory.

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Project Name Fourth Health Sector Development Project
Project Number 41243-012
Country Mongolia
Project Status Active
Project Type / Modality of Assistance Grant
Source of Funding / Amount
Grant 0236-MON: Fourth Health Sector Development Project: Improving Sector Governance
Concessional ordinary capital resources / 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
Concessional ordinary capital resources / Asian Development Fund US$ 25.00 million
Strategic Agendas Inclusive economic growth
Drivers of Change Governance and capacity development
Sector / Subsector

Health - Health sector development and reform

Gender Equity and Mainstreaming 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.

Impact 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

The SIMED International (The Netherlands), an international firm, completed the development of the concept design and functional plan of the new hospital in August 2015. The Junglim Architect (Republic of Korea) has prepared architectural drawings, which were approved by the state expertise team of the National Construction Development Center in October 2015. The Junglim Architect and PIU have prepared the draft bidding document and submitted to ADB for review and approval after the establishment of the Bid Evaluation Committee. The invitation for bids was advertised on 8 July 2016. The bids are opened as scheduled on 8 September 2016. The bids will be evaluated upon establishment of a new Bid Evaluation Committee.

Demolition of 5 small buildings on the construction site and relocation of heating, water and electricity supply systems are almost completed as of September 2016.

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)

The MOH approved " The Hospital care development policy" in Feb 2014. Development of the strategic plan of implementation of the policy is ongoing.

6 technical working groups have established on 15 Sep 2011. 60% of working group members are female. Hospital policy and strategy development WG was established by Health Minister's order #212/2011.

Current system of hospital facility and equipment auditing and capital planning at MOH has been reviewed. Capital planning system assessment was completed. Recommendations on establishment of the capital planning system is provided

Local NGO which was recruited in Oct 2013 for advocacy has carried out a patient satisfaction survey in the first quarter 2014 under supervision of the national consultant on gender, and social poverty.

Additional funding of $25 mln in loans for establishing demonstration hospital was approved on 7 February 2013. Te consultant firm to plan the hospital was recruited in Jan 2014.

Ongoing. Concept design and functional planning of new hospital is developed based on identifyed gender specific needs

Ongoing. Hospital licensing system was reviewed. The report prepared by GVG consulting firm under THSDP is available. Licensing regulation was reviewed by ministerial order in 2012. New revision was discussed by PSC in March 2013.

Revision of four specialist curricula has been started.

Ongoing. An inter-sectoral working group on postgraduate medical specialist training chaired by Vice Minister of Health was established in Sep 2013. Two reports including (i) a situation analysis of the current residency programs, and (ii) recommendations on how to reform the residency programs were presented in September 2013 to the multi-sectorial working group chaired by the Vice-minister of Health. The working group has reached a consensus on key reform issues on postgraduate specialist training system in Mongolia proposed by the consultants and finalized the proposed revisions of the law and other relevant government documents in December 2013. Recommendations to reform a system of postgraduate medical specialist training were developed and approved by PSC in June 2013 and discussed in the consultative meeting held in Oct, 2013 involving representatives of MOH, MoES, HSUM, HDC and professional boards of MOH. Legal framework for reforming the system is developed and submitted to MOH in Dec 2013 to Jan 2014.

The training of the first batch of 25 managers started in October 2013. MOH will also submit to ADB its proposal on further actions toward the institutionalization of the hospital management training course.

The project objective of establishing a drug regulatory agency (DRA) is reflected in the Government Action Plan for 2012-2016 as the establishment of a Food and Drug Agency (FDA). The National Security Council also issued a resolution in January 2013 to establish an FDA. The project consultants have provided technical input to MOH on drug regulatory functions to be integrated in a future FDA. However, various other options for institutional arrangements for drug regulatory authority, such as DRA and GASI are being considered by the government and a consensus has not been reached yet.

All participant lists show the total number of women and men.

Baseline review of drug regulatory functions was undertaken using WHO methodology in Nov-Dec 2011 and results were discussed at the relevant stakeholders meeting on 24 Jan 2012. The positive score was 46.9%.

Ongoing. The design of a new lab building the building complies with ISO per-qualification criteria, as confirmed by the ISO expert, who visited DCL in Dec 2012. The construction of new Drug Control laboratory (DCL) was completed in Feb 2013. The project supported the laboratory in developing an Action Plan for achieving ISO17025. DCL is continuing to work with OPM toward getting ISO17025, the international accreditation as planned under the project.

SWOT analysis and baseline Good Laboratory Practice assessment of the medicine and bio-preparation laboratory of the Central Lab, GASI was conducted and findings were presented in Jan-March 2013.

The Drug Control Laboratory of the National Reference Laboratory of GASI has passed ISO/IEC 17025 standard accreditation by ANAB (American National Accreditation Board). ANAB- a signatory of the International Accreditation Forum and the International Laboratory Accreditation Cooperation has certified the laboratory against ISO/IEC 17025 standards. Technical assessors of ANAB conducted a thorough evaluation of all factors relevant to a laboratory's function and confirmed the laboratory is capable to produce precise, accurate calibration and test data.

National MNS 5524:2011 on GMP was assessed against WHO GMP Guidelines and International GMP requirements. National GMP standard is being revised.

In 2012, all 33 local manufactories were assessed against national standards. The findings revealed that only 4-5 could comply with. OPM team is continuously providing technical support to potentially capable manufactories in improving their setting. For example, OPM conducted review of conceptual design of new GMP facility of Monos pharma (formal assessment), Astra pharma and Nakhia in June 2012. In 2012 total of 7 manufactories were undergone a gap analysis toward GMP. In 2013 additional 11 manufactories involved in assessment. Based on technical assistance and recommendation provided by OPM some of them are continuously improving their operations (IVCO, Tsombo, Astra pharma. Monos pharma, New Nakhia, Tun pharma, Degd pharma).

Survey started to measure knowledge, attitude and practices of hospital and district pharmacists.

ADB approved to fund the first part of Prevalence of counterfeit and substandard drugs in Selected Regions of Mongolia using a Stratified Random Sample Survey which covers provinces (7 Mar 2012) and the contract was made with the researcher from School of Pharmacy, HSUM (22 Mar 2012). The second part of the project proposal to determine prevalence of counterfeit and substandard drugs in Ulaanbaatar, after several discussions at the WHO Country Representative Office, was agreed to be funded by WHO through CRO. The survey completed in May 2013. The survey report is available.

Geographical Location

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 the environmental implications of the rehabilitation and expansion of the Songinohairkhan District Hospital and the New Central Laboratory. The team and project counterparts agreed to specify the whole laboratory building as an associated facility. This allowed conducting necessary due diligence for the building, resulting in the conduct of the necessary domestic environmental assessment, ensuring compliance with the Mongolian law. The consolidated IEE summarizes the findings of the New Central Laboratory Environmental Impact Assessment (EIA) and the Songinohairkhan District Hospital Initial Environmental Examination (IEE), and a due diligence review of project associated facilities. Potential adverse impacts during the construction and operation phase include limited standard construction impacts; and occupational and community health and safety issues, especially the unsafe collection, storage, treatment, and disposal of medical and chemical hazardous waste. The possible adverse environmental impacts will be prevented or minimized to acceptable levels, through the implementation of the environmental management plan (EMP) that includes adequate mitigation and monitoring arrangements. Following up the Inception mission, project national environmental consultant had reviewed the Environmental Management Plan (EMP) of the project and updated relevant sections based on mission recommendations and results of situation analysis and submitted to ADB in June.

The environmental assessment process achieved significant value added by (i) catalyzing, through policy dialog with MNET and GASI, the development of an EIA for the project's associated new central laboratory building; (ii) developing comprehensive management systems for the collection, storage, and treatment of medical and hazardous chemical waste; and (iii) developing a substantial consolidated IEE report which defines environmental mitigation measures, monitoring requirements, institutional responsibilities, and training and capacity building requirements.

The Inception mission reviewed the progress of project preparation with regard to environmental safeguards, and agreements were reached on the next steps and responsibilities. Field visits were conducted to the Songinokhairkhan district hospital, the new Central Laboratory, and the medical waste treatment facility operated by Element Company.

The Grievance Redress Mechanism (GRM) guidelines were developed in accordance with recommendations and templates provided by the ADB environmental specialist and submitted to ADB on 9 June and received feedbacks and incorporated them into the guidelines. GRM section of EMP was also revised.

Involuntary Resettlement No involuntary resettlement effects are foreseen and the project is classified as a category C project. The upgrading of the facilities of the multifunctional hospital will be on existing government land and will not affect local residents or residential buildings. A resettlement plan and framework are therefore not 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

The project has contracted two local NGOs ( Monconsult LLC and Shagdui ) to implement the consultation and participation activities of the project and to foster participation and community involvement. A Patient Satisfaction Survey is a major part of the C&P plan which aimed to evaluate and assess the impact of project activities related to hospital reform. Monconsult developed the design and survey methodology (approved by the ethical committee of the National Center for Public Health in 2014). The baseline survey was conducted in 2014 involving 311 patients of the Songinokhairkhan hospital. Patients were asked how they see the hospital environment, quality of service they received, attitude of medical staff toward them, whether informal payments were made, and what problems they encountered. In addition to quantitative data collection through questionnaire, patients were invited for face-to-face discussions to obtain qualitative information on their views about skills and capacity of medical staff, factors influencing quality of care and solutions they propose in order to improve hospital services.

A community awareness program is being implemented by Monconsult in Songinokhairkhan district with the aim of raising awareness among community of the district hospital catchment area of ongoing hospital reform and drug safety so that they can participate in monitoring developments and provide their feedback. Monconsult developed information education and communication (IEC) program on (i) hospital reform and (ii) drug safety. Implementation of IEC activities will start in 2016. Monconsult is using Community Score Cards (CSC) to collect data from community and monitor changes using the scores. The first score cards were collected from 108 residents and patients in April 2015; assessment and discussions on findings of the score cards took place in June 2015. It was proposed to collect score cards on a yearly basis. The CSC is a relatively new tool that is used for the first time in the health sector to monitor public opinion in regard to provision of public health services. Therefore it is important to have experts' views with regard to design, methodology and implementation arrangements of the CSC.

Information and outreach program is another part of the project C&P plan. Shagdui developed a draft communication strategy to effectively communicate the content of the Hospital Care Development Policy (2014) and the National Medicines Policy (2014) to community members and project stakeholders. The draft communication strategy is supported by an implementation plan for 2016-2018. The Mission notes that the implementation plan is missing cost estimates, which are necessary for planning further project activities. The communication strategy is yet to be approved by MOHS before end of 2015; implementation of information and outreach activities will start from 1Q 2016.

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 Staff

Responsible ADB Officer Jigjidsuren, Altantuya
Responsible ADB Department East Asia Department
Responsible ADB Division Mongolia Resident Mission
Executing Agencies
Ministry of Health (formerly Ministry of Health and Sports)
[email protected]
1st Floor, Government Building VIII
Olympic Street 2, Ulaanbaatar


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 30 Sep 2016

Grant 0236-MON

Approval Signing Date Effectivity Date Closing
Original Revised Actual
29 Nov 2010 10 Dec 2010 03 Mar 2011 31 Dec 2016 31 Dec 2018 -
Financing Plan Grant Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 17.70 Cumulative Contract Awards
ADB 14.00 29 Nov 2010 4.40 0.00 31%
Counterpart 3.70 Cumulative Disbursements
Cofinancing 0.00 29 Nov 2010 4.64 0.00 33%
Status of Covenants
Category Sector Safeguards Social Financial Economic Others
Rating 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 31 Dec 2018 -
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 27.00 Cumulative Contract Awards
ADB 25.00 05 Nov 2012 1.14 0.00 5%
Counterpart 2.00 Cumulative Disbursements
Cofinancing 0.00 05 Nov 2012 1.27 0.00 6%
Status of Covenants
Category Sector Safeguards Social Financial Economic Others
Rating Satisfactory - - Satisfactory - Satisfactory
Title Document Type Document Date
Fourth Health Sector Development Project: Procurement Plan Procurement Plans Jan 2017
Fourth Health Sector Development Project: Audited Project Financial Statements (January-December 2015) Audited Project Financial Statements Oct 2016
Fourth Health Sector Development Project - Additional Financing: Audited Project Financial Statements (January - December 2014) Audited Project Financial Statements Sep 2015
Amendment to Loan Agreement for Loan 2932-MON: Fourth Health Sector Development Project - Additional Financing Loan Agreement (Special Operations) Jun 2015
Fourth Health Sector Development Project - Additional Financing Procurement Plans Jun 2015
Amendment to the Loan Agreement for Loan 2932-MON: Fourth Health Sector Development Project - Additional Financing Loan Agreement (Special Operations) Mar 2015
Amendment to the Grant Agreement for Grant 0236-MON: Fourth Health Sector Development Project Grant Agreement Jun 2014
Fourth Health Sector Development Project (Additional Financing) Project/Program Administration Manual Jul 2013
Эрүүл мэндийн салбарыг хөгжүүлэх IV төсөл : Төслийн Мэдээллийн Тайлан Translated PDS Feb 2013
Loan Agreement for Fourth Health Sector Development Project – Additional Financing Loan Agreement (Special Operations) Feb 2013
Fourth Health Sector Development Project - Additional Financing Gender Action Plans Oct 2012
Fourth Health Sector Development Project (Additional Financing) Project/Program Administration Manual Oct 2012
Fourth Health Sector Development Project - Additional Financing Reports and Recommendations of the President Oct 2012
Fourth Health Sector Development Project (Additional Financing) Initial Poverty and Social Analysis Aug 2012
Grant Agreement for Fourth Health Sector Development Project: Improving Sector Governance between Mongolia and Asian Development Bank dated 10 December 2010 Grant Agreement Dec 2010
Fourth Health Sector Development Project Project/Program Administration Manual Nov 2010
Fourth Health Sector Development Project Summary Poverty Reduction and Social Strategies Nov 2010
Fourth Health Sector Development Project Reports and Recommendations of the President Nov 2010
Fourth Health Sector Development Project: Gender Action Plan Gender Action Plans Nov 2010

Safeguard Documents See also: Safeguards

Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.

Evaluation Documents See also: Independent Evaluation

None currently available.

Related Publications

None currently available.

The Public Communications Policy (PCP) establishes the disclosure requirements for documents and information ADB produces or requires to be produced in its operations to facilitate stakeholder participation in ADB's decision-making. For more information, refer to the Safeguard Policy Statement, Operations Manual F1, and Operations Manual L3.

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