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Rebuilding together

  1. 1. REBUILDING TOGETHER Multi-Donor Fund for Aceh and Nias Progress Report No. 1 | December 2005 NAD Nias
  2. 2. TABLE of CONTENTS 1. Introduction • Foreword 1 • Joint Donor Statement 2 • Abbreviations 4 • Acknowledgements 5 • Executive Summary 7 2. The First Six Months 1. Establishment 15 2. Building a Portfolio and Achieving Results 19 3. Looking Forward 32
  3. 3. REBUILDING TOGETHER | Multi-Donor Fund for Aceh and Nias | Progress Report No. 1 - December 20053. Finance and Operations 1. Finance 37 2. Operations 43 3. Communications 45 4. Monitoring and Evaluation 46 5. Fighting Corruption 484. Annexes 1. Recovery Assistance Policy 34 2. RAP: A Review 67 3. Project Fact Sheets 71 4. Members of the Steering Committe 77 5. Logical Framework 78 6. Secretariat Organizational Chart 83 7. Sitemap of the Website and References 84The findings, interpretations andconclusions expressed here have beenprepared by the Secretariat of the Multi-Donor Fund and do not necessarily reflectthe views of the Steering Committee ofthe Multi-Donor Fund or of the entitiesrepresented by individual members.
  5. 5. Foreword by Steering Committee Co-chairsThe stark scenes of devastation and human suffering in the wake of the earthquake and tsunami onDecember 26, 2004, were televised to audiences around the world. These images of torment and lossshocked the international community, and prompted unprecedented support. Recognizing the needfor a coordinated approach to long-term reconstruction and recovery, the Government of Indonesiaasked bilateral and multi-lateral donors to consider pooling their resources to establish a multi-donortrust fund, with the World Bank as trustee.The establishment of the Multi-Donor Fund for Aceh and Nias came at a critical juncture for thepeople of Aceh. Prior to the tsunami, Aceh was a province under civil emergency rule, still caught inthe middle of a decades-long conflict, with a declining economy. The recent peace accord, coupledwith the inflow of financial assistance for reconstruction, offers the opportunity for creating a new andmore prosperous future.Significant progress has been made during the Fund’s first six months of operation. With its support,land titles will be provided for 600,000 land parcels, houses are being constructed, waste is beingconverted into building materials, and grants are being provided to communities throughout Acehand Nias.Much work remains, however, and we must not underestimate the challenges that lie ahead. Theon-set of the wet season makes the need for housing and basic infrastructure even more urgent. Thisneed for a rapid response must always be balanced with the longer-term requirements for quality andensuring that reconstruction takes place in a transparent, accountable and sustainable environment.Forming strong partnerships with all stakeholders in the recovery process is essential as it allows thesharing of lessons learnt and avoids overlaps. The Multi-Donor Fund plays a key role in forging thesepartnerships, as its Steering Committee brings together fifteen donors, Government representativesat both provincial and national levels, civil society, United Nations and international NGOs. The sharedvoice and common vision of its Steering Committee allows the Fund to respond swiftly to the needson the ground.The Multi-Donor Fund and the Government of Indonesia will continue to work together over thecoming years to meet these challenges to assist the people of Aceh and Nias to build a brighter future. Kuntoro Mangkusubroto H. E. Jean Bretéché Andrew Steer Co-chair Co-chair Co-chair Director of BRR Ambassador, Head of Delegation Country Director Badan Rehabilitasi European Commission World Bank dan Rekonstruksi Indonesia 1
  6. 6. Joint Donor Statement We, the contributors to the Multi-Donor Fund, would like to reiterate our support for its goal which is to efficiently and effectively contribute to the reconstruction of a better Aceh and Nias following the earthquakes and tsunamis. In this context, a “better” Aceh and Nias means not only improving infrastructure in accordance with the Government’s Master Plan, but also addressing social concerns such as reducing poverty, improving livelihoods, and increasing equity. This overall goal is being accomplished by: • Pooling donor resources to support a mutually-agreed portfolio of projects and programs; • Working through and within the Government of Indonesia’s Master Plan for recovery; • Promoting bottom-up and demand-driven development of initiatives that are eligible for financing; • Partnering with government and non-government agencies; • Serving as a forum for donor coordination; • Supporting a policy dialogue between the international community, civil society and the Government of Indonesia on progress in the recovery process; • Having funds flow through the Government of Indonesia budget wherever effective, and outside of the budget if the Steering Committee deems this more effective; • Pursuing gender-sensitive activities; • Seeking opportunities to support the peace process (conflict sensitivity); and • Avoiding worsening regional disparities. The Multi-Donor Fund is and will continue to be a unique mechanism for supporting the recovery of Aceh and Nias as it is characterized by: a) participation of key partners in the donor community, Government of Indonesia and civil society through its Steering Committee; b) substantial grant financing that is available over a five-year time period; c) a great deal of flexibility in being able to support projects as well as programs that are not earmarked in advance; d) a common concern with promoting good governance and combating corruption; and e) the accumulation of development experience that is available through the currently accepted Partner Agencies (World Bank, Asian Development Bank and the UN organizations), and other members of the Fund.2
  7. 7. H.E. Jean Bretéché H.E. Nikolaus Van Dam Sarah SanyahumbiAmbassador, Head of Delegation Ambassador of the Netherlands Head of DfID IndonesiaEuropean Commission Indonesia Andrew Steer H.E. Bjorn Blokhus H.E. Niels Erik Andersen Country Director, World Bank Ambassador of Norway Ambassador of Denmark H.E. Randolph Monk H.E. Lennart Linner Edgar A. Cua Ambassador of Canada Ambassador of Sweden ADB Country DirectorH.E. Joachim Broudré-Gröger William Frej H.E. Hans-Christian Kint Ambassador of Germany USAID Mission Director Ambassador of Belgium H.E. Markku Niinioja H.E. Phillip Gibson H.E. Hugh Swift Ambassador of Finland Ambassador of New Zealand Ambassador of Ireland (Singapore) 3
  8. 8. Abbreviations ADB Asian Development Bank BPN Badan Pertanahan Nasional (National Land Agency) Badan Rekonstruksi dan Rehabilitasi NAD-Nias (Agency for the Rehabilition and BRR Reconstruction of Nanggroe Aceh Darussalam - Nias) CFAN Coordination Forum Aceh / Nias CRS Catholic Relief Services CBO Community-Based Organization CSO Civil Society Organization DIPA Budget Execution Document DPR Dewan Perwakilan Rakyat (Indonesian National Parliament) EC European Commission GAM Gerakan Aceh Merdeka (Free Aceh Movement) GoI Government of Indonesia IDP Internally Displaced Person ILO International Labour Organization INGO International Non-Governmental Organization KDP Community Recovery Through the Kecamatan Development Project M&E Monitoring and Evaluation MDTFANS Multi-Donor Trust Fund for Aceh and North Sumatra MIS Management Information System MoF Ministry of Finance NAD Nanggroe Aceh Darussalam (Aceh Province) NGO Non-Governmental Organization RALAS Reconstruction of Aceh Land Administration System Project RAN Database Recovery of Aceh and Nias Database RAP Recovery Assistance Policy Rp Indonesian Rupiah $ United States Dollars SBY Susilo Bambang Yudhoyono SC Steering Committee UN United Nations UNDP United Nations Development Programme UNICEF United Nations Children’s Fund UPP Community Recovery Through the Urban Poverty Program WB World Bank WFP World Food Programme WHO World Health Organization4
  9. 9. AcknowledgementsThis report was prepared by the Secretariat of the Multi-Donor Fund with contributions from thePartner Agencies, UNDP and the World Bank, as well as the project teams.The Multi-Donor Fund Secretariat team was led by Joe Leitmann, the Multi-Donor Fund Manager,and includes Sabine Joukes, Diane Zhang, Georgia Wimhöfer, Safriza Sofyan, Geumala Yatim andRahayu Novianty. Many thanks to Steven Orr and Stuart Andrews for their contributions. The reportwas prepared under the guidance of Andrew Steer and Joel Hellman.The following people also contributed to the report: Anja Latacz, Gary Swisher, George Conway,George Soraya, Isono Sadoko, James Sheppard, Keith Bell, Lis Nainggolan, Puteri Watson,Scott Guggenheim, Susan Wong, Tim Brown, Tim Walsh, Vic Bottini and Widjajanto.We would also like to express our gratitude to members of the Steering Committee from the BRR,European Commission, DfID, Sweden, Denmark and Canada, who commented on the report.Special thanks go to the contributions of Kristin Thompson, for bringing our projects to life with herwonderful photos and to Christianto Nusatya for interviewing the many beneficiaries and projectimplementers in Aceh.Contributions from Aceh and NiasThe Multi-Donor Fund team has actively encouraged the involvement of the communities of Acehand Nias over the past months. Their valuable contribution is reflected in two ways in this report:1. The Multi-Donor Fund logo was developed using elements of the winning logos and slogan from a Logo Design Competition which received almost 150 entries from high school students throughout Aceh and Nias. Three winners were selected and they contributed to the logo in the following way: • Hands reaching out – helping each other, supporting each other; • A House – symbolizing the reconstruction of Aceh and Nias; • “Bersama Membangun” or “Rebuilding Together” – a slogan, NAD Nias indicating that rebuilding is a joint effort with the people of Aceh and Nias.2. Some of the photos you see throughout the report were taken by people from communities in Aceh and Nias. As part of the one-year anniversary commemoration activities, the Secretariat distributed 100 disposable cameras to the people to take photos which, in their opinion, best reflect the theme “One Day in the Recovery of Aceh and Nias”. This provided those involved in the day-to-day efforts of rebuilding Aceh and Nias with the opportunity to share their views on the progress of the recovery in an exhibition called “Reflections of Aceh and Nias”.(Copyright of all other photos belongs to Kristin Thompson) 5
  10. 10. First Prize : Zakiul Fuadi (24) “Fishermen working together” Muria Batu, November 16, 2005 (Reflections of Aceh and Nias)6
  11. 11. Executive SummaryDuring its first six months of operations, the Multi-Donor Fund received pledges of $525 million from 15donors and approved eight projects valued at $237 million to support the Government of Indonesia’s planfor post-tsunami reconstruction. Implementation of each of these projects is underway and the Fundwill disburse over $82 million to these projects by December 31, 2005. Another five projects valued at$58 million are approved in principle, and should commence implementation in January 2006.The Multi-Donor Fund is governed by a Steering Committee representing the Government of Indonesia,contributors, civil society, and other key partners (international NGOs and the UN). The government’sreconstruction coordination body, the BRR (Badan Rekonstruksi dan Rehabilitasi NAD-Nias), co-chairs theSteering Committee, along with the European Commission (EC) as the largest donor and the World Bank asthe Trustee. The broad representation of stakeholders on its Steering Committee has established the Fund asan important donor coordination mechanism and forum for dialogue on recovery policy between theGovernment and the international community.The Steering Committee is guided by the Recovery Assistance Policy, which provides strategic direction toassess whether a project is suitable to receive financing. The Fund supports quality projects in under-fundedsectors, which promote capacity building, good governance, sustainable development, gender equity,geographic balance, and conflict sensitivity.Building a PortfolioProjects already approved or under development address four broad sectors: community-led housing, landtitling and infrastructure; capacity building to the BRR; civil society and private sector; urgent infrastructureand logistics; and environmental restoration and protection.Community-Led Housing, Land Titling and InfrastructureA package of four projects to issue land titles and rebuild houses and infrastructure, was approved at the firstSteering Committee Meeting on May 10, 2005. Each of these projects makes use of community decision-making structures developed with the assistance of the network of facilitators put in place by the KecamatanDevelopment Project (KDP) and the Urban Poverty Program (UPP). Prior to the tsunami, this network offacilitators was present in 45 percent of rural sub-districts and 10 percent of urban neighborhoods in Aceh.The Multi-Donor Fund provided financing to increase the coverage of KDP and UPP to every urban neighbor-hood and every village in all sub-districts in Aceh and Nias. 7
  12. 12. These community-driven governance structure are used to: • Assist communities with land mapping to establish the basis for secure land ownership. The Land Titling Project, financed by the Multi-Donor Fund as part of this initial package of four projects, issues land titles through the community-based land inventory process and the recovery of land records damaged by the tsunami. Over three years, an estimated 600,000 landowners from Aceh and Nias will receive land titles and the provincial land administration system will be restored. • Assist rural and urban communities to compile their own community development plan that identifies the priority needs of the village. This development plan allows communities to access block grants from the KDP and UPP projects. These grants are used to rebuild and repair community-level infrastructure such as roads, drains, sanitation units and also create local employment and livelihood opportunities. • Assist communities to complete damage assessments to identify houses that need repairing and rebuilding. The Housing and Settlements Project, which completes the package of four community- based projects, will repair and reconstruct 14,000 houses throughout Aceh and Nias. This project also provides grants to build infrastructure and supplies an additional 200 housing facilitators to supplement the UPP and KDP networks to ensure quality of reconstruction. With support from the Fund, this network of facilitators has expanded to approximately 531 employees and more than 10,240 volunteers at the village level in Aceh and Nias. This network is also one of the primary vehicles for distributing information materials on the peace process. KDP facilitators have also been actively facilitating district coordination forums, which are attended by all NGOs working in the district. This ensures better coordination and helps to identify key gaps in financing. In addition, other agencies and NGOs, such as Oxfam, UN Habitat and Care also use the above mentioned community development plans to match their spending with community identified needs. Community participation and consultation are vital to empower- ing communities to retain ownership of their futures. Capacity Building to BRR, Civil Society and the Private Sector The Fund recognizes the importance of strong institutional capacities and governance processes to the long- term sustainability of reconstruction. Its first contribution has been to enhance the technical and operational capacities of the BRR through the Technical Support for BRR Project. This grant allows the BRR to 1) recruit technical specialists to assist with development of policies and programs, appraising proposals and monitoring of project implementation; 2) engage contractors to provide legal, IT, communications, human resources and logistics services; and to 3) enhance participation by stakeholders in decision making processes of the BRR. The Strengthening the Role and Capacity of Civil Society Organizations Project was approved in December 2005 and will provide training and small-scale grants to civil society organizations (CSOs) and community-based organizations (CBOs) so that these organizations can play a long-term role in the recovery process. To build private sector capacity, the Labor-Based Rural Roads Rehabilitation and Reconstruction Project, also improved in December 2005, trains small-scale contractors in labor-intensive road repair techniques and provides them with increased managerial capacities. Urgent Infrastructure and Logistics With the onset of the rainy season, the urgent need has arisen for large-scale infrastructure and transport facilities to guarantee continuation of reconstruction activities. This resulted in the development of the Immediate Action Program (IAP), which consists of the following projects: • Road and Bridge Repair Lamno-Calang Project: undertakes emergency repairs to the road and bridges on the 85km stretch between Lamno and Calang.8
  13. 13. • Flood Mitigation Program for Banda Aceh: this project rehabilitates and upgrades existing pump systems in Banda Aceh to mitigate flooding in high-risk areas. • Reconstruction and Rehabilitation of Ports: this project undertakes minor rehabilitation to several ports, as well as support the design of permanent reconstruction of three strategic ports, namely Calang, Sinabang and Gunung Sitoli in Nias. • The Sea Delivery and Logistics Program: facilitates sea delivery of reconstruction materials by providing temporary rehabilitation of nine ports and establishes a logistics network to deliver up to 140,000 metric tonnes of cargo to west coast communities, Simeulue and Nias.The development of these projects is almost complete, and implementation will start in late December 2005or early January 2006.Environmental Restoration and ProtectionThe Multi-Donor Fund is strongly committed to rehabilitating the environment and is currently the largestcontributor in this sector. The Tsunami Recovery Waste Management Project supports local governments tomanage both municipal solid waste collection and tsunami waste recycling. This project also creates liveli-hood opportunities in waste management such as manufacturing from tsunami wood, establishing a timbermill to process tsunami wood and using waste to make concrete and road base.Another project, which will start implementation in January 2006, is the Aceh Forest and Environment Projectwhich will protect Aceh’s rich and untouched forests in the Leuser and Ulu Masen ecosystems from illegallogging. This goal will be achieved through close cooperation with multiple stakeholders, particularly withnational and local government, and will result in protection of 60 percent of Aceh’s water supply.Wherever possible, this portfolio has built upon or rehabilitated existing infrastructure and communitydecision-making structures. This has helped the Multi-Donor Fund to balance the need for swift implemen-tation while maintaining quality, and lays the foundations for sustainable long-term recovery.AchievementsA summary of the results from the six projects currently in implementation is found below. Land Titling • 25,000 land parcels already mapped with a total of at least 50,000 expected by the end of 2005 • 5,000 land title documents to be handed out by the end of 2005 • 700 personnel trained in community-driven land adjudication Rural Community Recovery* • Project coverage expanded to 221 sub-districts in Aceh and 22 sub-districts in Nias, reaching all villages in both areas • Construction/repair of 215 km of roads, 94 bridges, 153 irrigation and, 31 drainage units, 41 sanitation facilities, 30 schools, and 8 health posts; provision of $76,000 worth of scholarships and educational packages; 57,113 persons employed through infrastructure projects Urban Community Recovery* • Start-up of the Urban Poverty Project in 48 urban neighborhoods, with 1,553 community members trained; to be expanded to 402 urban areas in 2006 • Ongoing rehabilitation/reconstruction of 41 km of roads, 187 drainage canals, 9 sanitation facilities, 7 community assembly halls (meunasah), 2 schools, 1 drinking water system, 1 irrigation canal; 501 high school student scholarships; generation of 25,372 person-days of employment* The Multi-Donor Fund intends to retroactively finance expenses incurred by the Gol for initial implementation. The results to date have beenachieved with Government and World Bank loan financing. 9
  14. 14. Housing and Settlements • Community settlement plans completed for the rebuilding and repair of 1382 houses • 150 housing groups formed in 16 different communities (pilot activity) • $1.68 million expected to be disbursed to housing groups for the reconstruction of 1,000 houses by the end of 2005 Waste Management • Cooperation established with Municipal Governments of Banda Aceh and Meulaboh, six further district cooperation agreements in preparation, including Nias • Over 1,100 cash-for-work jobs created, primarily for IDPs with 40 percent for women • Clearance of 14,000 m3 of tsunami waste for recycling and permanent disposal (expected to increase to 42,000 m3 by the end of 2005); support for municipal waste management in partner cities established Technical Assistance to the BRR • 36 new advisers hired or under recruitment • Contracts concluded for quality assurance services, installation of IT hardware, and public relations services Contributions, Receipts and Disbursements Of the $525 million pledged, 65 percent has been formalized as as Contribution Agreements. The Fund is currently in the process of signing agreements for the remaining 35 percent of pledges, and is confident that all commitments will be fulfilled. Table 1 shows the list of donors, their pledges and contribution agreements signed. As of December 14, 2005, the Fund has received $208 million, consisting of contributions of $206.2 million and $1.8 million from investment income. To date, the Fund has disbursed $53 million to its projects and an additional $29 million will be disbursed by December 31, 2005. As with any fund, it is common for dis- bursements to be slower during its establishment phase. A significant part of the first six months was used to select and design projects suitable for financing and doing the preparatory work prior to implementation. Table 1: List of Pledges by Donor as of December 8, 2005 Pledges Contribution Agreements Source in $ million signed in $ million European Commission 239.40 101.26 Government of the Netherlands 100.00 100.00 Goverment of the United Kingdom 44.51 10.00 World Bank 25.00 25.00 Government of Norway 17.06 17.06 Government of Denmark 17.54 8.31 Government of Canada 11.04 11.04 Government of Sweden 10.44 10.44 Asian Development Bank 10.00 10.00 Government of Germany 10.00 10.00 Government of the United States 10.00 10.00 Government of Finland 9.46 9.46 Government of Belgium 9.46 9.46 Government of New Zealand 8.80 8.8 0 Government of Ireland 1.20 1.20 Total Contributions 524.71 342.92 Exchange Rates from Dow Jones/Reuters November 29, 200510
  15. 15. For project funds that are channeled through the Government of Indonesia’s national budget, the Fund alsoexperienced delays in budget preparation on the part of Line Ministries and approval by the Ministry ofFinance. Since the budget approvals have been issued, disbursements to projects have increased signific-antly in November and December and will continue to accelerate in 2006.Looking ForwardIn the immediate future, the Steering Committee of the Multi-Donor Fund will, together with the BRR, makea decision on priority areas for the use of the remaining resources. During the seventh Steering Committeemeeting in Banda Aceh on December 13, 2005, the BRR presented the Steering Committee with an outline ofits proposed strategy for 2006.The BRR indicated that, in the future, the Multi-Donor Fund will be asked to support immediate and longer-term recovery projects that will focus on large-scale, mid-level and community infrastructure. Both commu-nity and mid-level infrastructure have been identified as the “missing middle” of the reconstruction processwhich is vital to link local communities and economies with those at regional and provincial levels.Further, the BRR stressed that local government capacity building is an activity that has to go alongside withrecovery activities, and local governments should become increasingly involved as on-the-job training.In addition to this sectoral focus, the BRR indicated that the Multi-Donor Fund will be called upon toaddress specific recovery needs of Nias. At the first Nias Islands Stakeholders Meeting on December 4, 2005,the Indonesian Government highlighted that out of the $1 billion required, only approximately $40 millionwas available from donors, and $300 million from the GoI, leaving a funding gap of $660 million for therecovery of Nias. 11
  17. 17. Second Prize: Syarifuddin (35) “River Crossing Raft” Ceunamprong, October 27, 2005 (Reflections of Aceh and Nias)14
  18. 18. INTRODUCTORY Section 1 ESTABLISHMENTThe DisasterThe earthquakes and tsunami of December 26, 2004, compounded by the Nias earthquake threemonths later, took an unprecedented toll. The losses are familiar but still incomprehensible: inAceh, there were 167,000 dead or missing, with 127,000 houses destroyed and a similar numberdamaged; in Nias, 850 were killed and 83,900 houses destroyed or damaged. While progress hasbeen made, hundreds of thousands are still homeless and the economy of the affected regions hascontracted by about 14 percent, including $1 billion in lost productivity. About three-quarters of amillion people (one in six) were direct victims but virtually everyone in Aceh and Nias has sufferedthrough the loss of family and friends, trauma or lost livelihood.An Unprecedented ResponseThe Indonesian Government (GoI) has responded firmly and comprehensively in handling theaftermath of the earthquake and tsunami tragedy. With its development partners, the GoI hasformulated and implemented a three-stage action plan covering the emergency, rehabilitation,and reconstruction. An initial GoI recovery strategy (the Master Plan) was made available at the endof March 2005, and provides the overarching framework for rehabilitation and reconstruction in theaffected areas. The Agency for the Rehabilitation and Reconstruction of Aceh and Nias (BRR) cameinto being a month later to coordinate and facilitate the recovery. A peace accord was signedbetween the GoI and the Free Aceh Movement (GAM) on August 15, 2005, resulting in troopwithdrawals, surrender of weapons and reduced tension overall.Worldwide support for the victims of the tsunami has been overwhelming. The GoI, donors andNGOs have each pledged or committed $2.5–3 billion through 2009. Many of these pledges havetranslated into reconstruction programs and projects. In addition to relief funding, an estimated$2.9 billion has been programmed for reconstruction projects and another $770 million for broaderdevelopment programs. 15
  19. 19. Coordinating Resources with the GoI and potential contributors in March 2005. Once there was tentative agreement on a This unprecedented outpouring of generosity from framework, the necessary legal and administrative individuals, organizations and governments steps were taken to establish the fund within the constituted an overwhelming amount of resources World Bank during the month of April. that threatened to deluge the absorptive capacity of national and local authorities. A plea for coordina- During the same time period, the GoI was completing tion went out at the Consultative Group for Indonesia two exercises that were critical for the establishment (CGI) meeting which was held just weeks after the of the fund. First, the Master Plan for the Rehabilita- disaster in mid-January 2005. To manage the recov- tion and Reconstruction of Aceh and Nias was being ery effort, the Government proposed some general prepared by a series of multi-stakeholder groups. principles: (i) encourage on-budget financing; It was issued in draft form at the end of March. Its (ii) develop an effective governance framework; existence was essential as the trust fund was being and (iii) maximize grant financing, then soft loans as designed to support the GoI’s recovery strategy as needed. Overall, the aim was to coordinate private embodied in the Master Plan. Second, the Agency and public offers of support, initially for the relief for the Rehabilitation and Reconstruction of Aceh effort and eventually for recovery. and Nias (BRR) was being formulated in order to govern the recovery process in a transparent and At the CGI meeting, discussion was initiated about coordinated manner. The BRR was created at the the possibility of establishing a multi-donor trust end of April 2005. Its establishment was fundamen- fund to coordinate some of the aid flow. Such a fund tal for the trust fund as the BRR was foreseen as the would allow a variety of donors to pool their resources fund’s key interlocutor and partner in government. in support of the GoI’s relief and recovery work. As the World Bank has often taken the lead in establish- Establishing a Multi-Donor Mechanism ing such funds in post-disaster and post-conflict situations, such as in Afghanistan, Iraq, Sudan, and In parallel with these developments, the design of East Timor; the Ministry of Finance requested the the trust fund was being finalized so that it could World Bank to pursue establishment of a multi- become operational once the Master Plan was donor fund in February 2005. validated through consultations in Aceh and Nias, and the BRR was up and running. The final design Work began immediately to develop a governance of the fund reflected the general characteristics of a structure, financing mechanisms, grant approval multi-donor initiative but had a number of innova- procedures, and administrative arrangements. These tive features to better respond to the specific nature were summarized in a prospectus that was discussed of the Indonesian disaster.16
  20. 20. In general, multi-donor trust funds are financing • Opening up the role of quality controlmechanisms in which money from different donors (appraising and supervising projects andis pooled to achieve a common set of objectives programs) to the Asian Development Bankagreed with the Government. A multi-donor trust and select UN provides a convenient way of pooling donor • Allowing the possibility of financing not justresources and avoids setting up a multiplicity of classic development projects but also GoIbank accounts and programs. Positive characteristics programs, that is a sector-wide approach.of similar funds from elsewhere could be adopted inIndonesia, including: (1) integration with the national • Charging only actual administrative, appraisalbudget; (2) the preparation of timely monitoring and supervision costs as opposed to a fixed feereports on actual disbursements, derived from the (normally five percent of the value of the fund),government’s accounting system; and (3) governance with the pledge of keeping these costs belowand fiduciary arrangements to ensure integrity in the two percent of the fund’s value.use of donor funds. All these special features were incorporated in theIn addition, potential contributors to the fund final design of the trust fund.agreed to a number of innovative features to bet-ter serve the needs of the recovery effort. These The fund was also designed to work in harmony withincluded: and support of the BRR. All proposals for funding must first be endorsed by the BRR as consistent with • Serving as a multi-purpose forum for donor the Master Plan and appropriate for grant support coordination and policy dialogue between from the Multi-Donor Fund. The BRR co-chairs the the international community and the GoI on fund’s key decision-making body (the Steering Com- recovery issues, as well as the traditional role mittee) and helps set the decision agenda. The two of financing initiatives. civil society members of the Steering Committee were selected by the Supervisory and Advisory • Creating a governance structure that reflected Bodies of the BRR. Finally, an early decision was the interests of key stakeholders (national and taken that the BRR could receive trust fund money local government agencies, donors, civil for capacity building and technical assistance to society, the UN system, international NGOs). strengthen its role in coordinating the recovery. These stakeholders form the Steering Commit- tee that is co-chaired by the Head of the BRR, These design elements were intended to yield the the Delegation Head of the EC (as the largest following comparative advantages: a) participation contributor to the Fund) and the Country of key partners in the donor community, GoI and civil Director of the World Bank. society through the Steering Committee; b) substan- 17
  21. 21. tial grant financing available over the five-year period c) support good governance; d) contribute to of reconstruction; c) considerable flexibility in being sustainable development; e) consider gender able to support projects and programs that are not issues; f ) have a geographic balance in Aceh earmarked in advance by contributors; d) promotion and Nias; g) promote equitable implementation of good governance and combating corruption; and through various partner agencies; h) be conflict e) the ability to draw on a tremendous accumulation sensitive; and i) avoid regional disparities. of development experiences through the contribu- tors to the Fund as well as the UN agencies, Asian • Sectoral – the Fund should meet financing gaps Development Bank and World Bank. and/or resolve critical issues by focusing on: community infrastructure (particularly housing), Setting a Policy for Assisting the Recovery repairing larger infrastructure, restarting liveli hoods, sustaining the environment, and At its inaugural meeting on May 10, 2005, the rebuilding governance. Steering Committee approved an initial package of four projects that support community-driven In order to properly monitor and evaluate the construction. Approving such a large package of performance of the Fund, the Policy was trans- assistance at the very outset was a bold step for formed into a logical framework (see Annex 5). the Steering Committee. It also generated concern The framework is designed to focus on verifiable about whether the Multi-Donor Fund was moving too results (both immediate deliverables and longer- quickly. To respond, the Fund’s Secretariat worked term impacts), identify key assumptions and risks, with members to develop an operations manual (see and to permit a rapid review of the Policy with an Annex 7) of transparent and expedited procedures eye towards periodical updating. Data for indica- and, more important, a Recovery Assistance Policy tors are to be collected from project monitoring (see Annex 1) to guide decision-making as well as and surveys by implementing and Partner Agen- potential project proponents. cies as well as cross-cutting surveys by the Fund’s Secretariat as needed. These will then be commu- The Policy states that the overall goal of the Multi- nicated to stakeholders through regular updates to Donor Fund is to efficiently and effectively contri- the Steering Committee and semi-annual progress bute to the reconstruction of a better Aceh and Nias. reports such as this one. “Better” means not only improving infrastructure in accordance with the Master Plan but also encom- passes social concerns such as reducing poverty, The Steering Committee also identified the need improving livelihoods and increasing equity. The key for a communications strategy to reach out to the elements of the Policy are: different stakeholders with relevant information. Local communities are informed about how the • Financing – the Fund should focus on financing Multi-Donor Fund financed projects will support larger grants and should retain a portion of its them in their recovery and reconstruction efforts. resources to meet needs that emerge after the Further, the Fund needs to provide visibility for the second year of the recovery process. donors and ensure that stakeholders get relevant information such as project results, achievements, • Implementation – all projects and programs to and financial status. A number of effective be financed should: a) enhance the quality of the communication tools have been identified and recovery process; b) use and build different used on an on-going basis. capacities for implementation over time;18
  22. 22. 2 BUILDING a PORTFOLIO and ACHIEVING RESULTSSince its establishment, the Multi-Donor Fund has built a portfolio that covers four major sectors ofthe reconstruction process. Eight of the projects mentioned in the following section are alreadybeing implemented, while five are in the project design phase (appraisal). Taken as a portfolio, theyrepresent a coherent approach to reconstruction, with a strong focus on rebuilding communities– based on local needs and wishes.Four projects provide a comprehensive approach to community-driven recovery of communities.These projects provide secure land ownership, and reconstruction of community infrastructure andhousing. Second, the Multi-Donor Fund supports the rebuilding of governance and strengtheningof institutional capacities. Third, the Multi-Donor Fund portfolio will make important investmentsin the reconstruction and rehabilitation of large-scale infrastructure and transport facilities oncefour projects of the Immediate Action Program, developed by the BRR, start implementation. Finally,with two projects contributing to sustaining the environment, the Multi-Donor Fund has becomethe largest financier in the field of environmental protection in Aceh (for detailed project descriptions,read Annex 3). 19
  23. 23. Table 2: Multi-Donor Fund Projects as of December 14, 2005 Active Projects in $ million Reconstruction of Aceh Land Administraton System Project 28.50 Community Recovery Through the Kecamatan Development Project (KDP) 64.70 Community Recovery Through the Urban Poverty Program (UPP) 17.96 Technical Support for Badan Rehabilitasi dan Rekonstruksi (BRR) 14.70 Community - Based Settlement Rehabilitation and Reconstruction Project 85.00 Tsunami Recovery Waste Management Programme 14.50 Labor - Based Rural Road Rehabilitation in Aceh 6.42 Support to Strengthen the Role and Capacity of CSOs in the Recovery of Aceh 6.00 Total Active Projects 237.78 Projects under Appraisal Aceh Forest and Environment Project 14.05 Immediate Action Program Road and Bridge Repair Lamno - Calang 11.50 Flood Mitigation Program 4.50 Sea Delivery and Logistics Program, Phase 1 24.60 Reconstruction and Rehabilitation of Ports, Phase 1 3.70 Total Projects under Appraisal 58.35 Total Active and Developing Projects 296.13 Community-Driven Recovery of Communities The Government of Indonesia’s Master Plan for reconstruction calls for public participation and respect for local cultures and values. At the first Steering Committee meeting (May 10, 2005) four large-scale projects for community recovery were endorsed that incorporate a strong community-driven development approach. These projects are funded through an on-budget mechanism, meaning that the grants have been integrated into the national budget. They are being implemented by the Ministry of Home Affairs, Public Works and the National Land Agency.20
  24. 24. “I can think of nothing that will generate more income over the long run for average families in this region than actually having title to the land they own. Then, they will be able to borrow money and build a much more diversified, much more modern economy.” Former President Bill Clinton, United Nations Special Envoy for Tsunami Recovery, Aceh, May 23, 2005Reconstruction of Aceh Land Administration SystemThe Land Titling project identifies land ownership and issues land titles through a land inventory process,recovery of land records, and the establishment of a land database. Over three years, an estimated 600,000land owners in Aceh and Nias will receive legal title documents which will provide them with a solidfoundation for restarting their lives.All land ownership is restored through a multi-tiered process. Community land mapping is mostly facilitatedby NGOs. It is done in accordance with the National Land Agency’s decree on Community-Driven Adjudica-tion, and results in a community agreement on land parcel ownership and boundary demarcation. In thesecond step, the Land Agency measures the earlier mapped plots, and validates the community agreements.The results of community land mapping are also officially checked against pre-tsunami satellite pictures,official government records and recovered land title documents. Eventually, the Land Agency issues a publicnotification for each plot. If this does not meet with objection, the plot is registered the land title issued tothe owner. All services are free of charge.In order to protect the property rights of the most vulnerable, the ownership rights of widows and orphanshave specifically been protected by a process that is in agreement with sharia law and local practices.Finally, to facilitate a sustainable recovery of property rights, the project also supports the restoration of fiveland administration offices in Aceh and Nias, and the establishment of a land data base and cadaster. Achievements in Issuance of Land Titles • 5,000 land title documents expected to be issued to owners by the end of 2005 • 50,000-80,000 land parcels expected to be mapped by NGOs by the end of 2005 • 12,000 public notifications issued by the end of 2005 • Training of 200 BPN staff (adjudication teams) and over 500 members of NGOs in Community-driven adjudication to ensure compliance of all results with Indonesian law • 10 adjudication teams of 200 BPN staff on the ground; more to be deployed in 2006 Mardiah M. Amin, 57, a resident of Baitussalam in the District of Aceh Besar, is grateful to the donors, since she will be able to get a land certificate soon. “I thank God there is finally the process of land registration. When I get my new certificate, I will rebuild my house.” 21
  25. 25. Community Recovery Through the Kecamatan Development Project (KDP) The Kecamatan Development Project is a nation-wide project that supports community development through grants and has been active in Aceh since 1998. It provides block grants directly to villages for community-based reconstruction of village infrastructure and economic development. This will support needs-based restoration of community infrastructure in up to 6000 villages in Aceh and Nias. Prior to the tsunami, KDP reached approximately 45 percent of Acehnese sub-districts, and four sub-districts in Nias. Through the contribution of the Multi-Donor Fund, the outreach to earthquake and tsunami affected communities is being scaled-up to include all affected rural communities in 243 sub-districts in Aceh and Nias. Facilitators guide communities to identify their priority needs in terms of tertiary infrastructure, community facilities, or for recovery of livelihoods, such as through granting small-scale credit to community members. The decision as to which priority projects will eventually be funded is made by a democratically elected board at a joint village meeting on sub-district level. KDP has a solid multi-layered control mecha- nism to prevent corruption in the planning and implementation of projects, including a strong policy of trans- parency and a complaints system. The Multi-Donor Fund intends to retroactively finance expenses incurred by the GoI for initial implementation of KDP in Aceh. The results achieved to date with Government financing are depicted in the box below. Achievements in Recovery of Community Infrastructure* • 215 km of roads; 94 bridges rehabilitated reconstructed • 153 irrigation and drainage units 68 storage reservoir units; 26 piped water systems; 49 public washing facilities • 30 school buildings; scholarships and educational packages distributed worth IDR 762 million ($76,000) • 8 village health units • 53 groups receiving credit funds worth Rp. 495 million ($49,500) • Emergency relief funds (24,125 households packets for relief supplies) distributed worth Rp. 1.676 billion ($167,666) • 57,113 persons employed through infrastructure works thus far * based on the most recently available KDP data, December 8, 2005 Sumiyati in the village of Grong Grong has enjoyed the positive economic effects since the completion of a bridge construction in their neighborhood. She says that “since the bridge was completed, I can carry my ba- nanas and coconuts and other agricultural products to the market to sell, more easily.”22
  26. 26. Community Recovery Through the Urban Poverty Program (UPP)The Urban Poverty Program is essentially the urban version of KDP. It addresses the needs of communitiesaffected by the disaster by providing block grants to urban neighborhoods.Similar to KDP, all decision-making and resource allocation takes place at the community level. Besides pro-viding grants to communities, both projects strongly emphasize the development of democratic institutionsand the strengthening of organizational capacities at community level through training. This ensures strongcommunity involvement in assessing damage and identifying needs for reconstruction.The Multi-Donor Fund intends to retroactively finance expenses incurred by the GoI for initial implementationof UPP in Aceh. The results achieved to date with Government financing are depicted in the box below. Infrastructure Projects Planned by UPP Communities* • 41 km of roads • 187 drainage units • 9 sanitation units • 2 school buildings; 501 students have received scholarships • 7 community meeting halls under construction/repair • 25,372 person/days of employment expected* This represents planned results in UPP supported communities, status as of November 16, 2005.Until the end of 2005, all 48 communities are expected to have received initial funding for theiractivities, totaling Rp. 6 billion. In Kampung Keuramat, Mahdi, a Community Trustee Committee coordinator in the UPP project, remarks: “The UPP planning method has been a good process for the community to determine priority needs, to discuss, and make a decision together. In my village the identified priority is drainage and ditch construction. The drainage project has encountered no resistance as it is fully supported by the community. There are other ongoing projects funded by other parties, without the participation of the community and the results are not that good, since nobody from the community supervises or monitors the processes.” 23
  27. 27. Community-Based Settlement Rehabilitation and Reconstruction Housing is certainly one of the most pressing issues in the recovery of Aceh and Nias. The return into one’s home for most victims is an important step in returning to a normal life. The BRR estimates that between 80,000 - 110,000 houses will need to be reconstructed or repaired. The Housing and Settlements Project will provide approximately 14,000 households throughout Aceh and Nias with repaired and reconstructed houses. It also provides grants for reconstruction of tertiary infrastructure such as neighborhood roads, sanitation facilities and water supply. The project primarily cooperates with KDP and UPP communities where it can build on the existing, highly effective facilitator networks and community-driven development structures. Communities receive guid- ance to carry out community mapping and damage assessments, identify reconstruction needs and its bene- ficiaries. Housing facilitators will ensure that the quality of the housing and infrastructure plans comply with GoI standards. Through close cooperation with the BRR and through conducting community damage assessments, the Housing and Settlement Project ensures that it has accurate information on the needs of each target commu- nity, as well as on pledges made by other agencies for the respective communities. In this way, all local needs should be effectively matched. Achievements in Recovery of Housing • 500 houses under reconstruction; 75 repaired • Identification of housing needs in 188 communities completed (approximately 5,000 reconstructions, 9,000 repairs) • Damage assessments, needs identification and planning completed in 16 pilot communities (reconstruction of 1,068 houses, repair of 314 houses) • Disbursement of first tranche of about $840,000 to housing groups made, for reconstruction of 500 houses; expected disbursement of $1.6 million to housing groups by the end 2005 In a neighboring area, Jannah, who lost her mother and two siblings, shares the happiness of being about to rebuild her house. “I’m so happy that I am entitled to get my house rebuilt. I am entitled to a 36 square meter permanent type house.” She also voices the hope that the housing project will use sound construction materials.24
  28. 28. Strengthening Community-Driven DevelopmentThe Indonesian Government has identified the swift recovery of communities as one of the top priorities.The four community recovery projects of the Multi-Donor Fund contribute significantly to community re-construction in Aceh and Nias. To begin, these projects have the widest geographic coverage, spanningall of Aceh and Nias. The Land Titling project, KDP and UPP target all rural and urban communities. TheHousing and Settlement Project will fill gaps where the Government and other agencies do not providehousing, thus completing the efforts of other actors and leading to a region-wide coverage.Further, secure property rights are crucial for the sustainable re-development of communities, andlonger-term economic recovery. Only after land ownership has been settled, a community is able to startreconstruction under legally safe conditions. On a more individual level, land ownership provides victimsof the tsunami and earthquakes with access to credit, with their land as collateral.Finally, the existing area-wide coverage with a network of very qualified facilitators and technicalexperts will provide enormous benefit to community-based re-development of the region. The KDP andUPP networks were established before the tsunami, and consists of project management staff, and moreimportantly a large number of facilitators with expertise in community-driven development and engineer-ing. With Multi-Donor Fund financing, this network has been expanded to about 1,500 employed profes-sionals, and more than 9,000 voluntary facilitators at village level. This network of locally-based peopleis at the heart of all four community-driven development projects. Further, information facilitators havebeen hired to improve coordination with all stakeholders of community recovery at the district level, andabout 200 housing facilitators ensure the quality of housing reconstruction.The services of these facilitators form the cornerstone of sustainable reconstruction. They help communi-ties develop needs-based development plans with a strong community ownership. They further supportcommunities in implementing and supervising their recovery activities, thus enhancing control, transpar-ency, and community empowerment. Moreover, other stakeholders make use of the facilitator net-work coverage, too. The KDP network has been one of the primary vehicle for distributing informationmaterials on the peace process, prepared by the Government/GAM socialization committee with otherdonors. Increasingly, donor agencies and international NGOs have tapped into the KDP network both as ameans of accessing information on reconstruction needs and livehood recovery strategies as well as directcollaboration and co-funding for village infrastructure priorities. The existing facilitator network with itsintimate knowledge of local conditions will play an important role throughout the recovery and peaceprocess, both for implementation and monitoring the development of community reconstruction. Denny Daryanto, a sub-district facilitator describes that “KDP aims to apply design principles of participation, transparency and accountability to a competitive bidding process by channeling the people’s interests and aspirations. I really enjoy this job, I am happy that I can participate in developing the community, especially after the tsunami when people really need others to help.” 25
  29. 29. Rebuilding Governance and Strengthening Institutional Capacities In order to achieve long-term sustainability of reconstruction, it is important to strengthen institutional capacities and especially governance processes. The large loss of human lives during the earthquakes and the tsunami has left government agencies, civil society and the private sector bereft of important capacities for reconstruction. Rebuilding capacities for management, technical skills and leadership is an important task with a longer-term perspective. Building Capacities of the Government The first contribution of the Multi-Donor Fund to enhancing capacities of government institutions is the Technical Support to the BRR Project. The project seeks to enhance technical capacities of the BRR to develop policies and programs, to appraise proposals and to monitor program implementation – in short, to achieve its mandate in a timely, efficient and transparent manner. This project recruits technical advisors to strengthen the capacities of various departments at the BRR, thus enhancing its abilities to act as the major governmental body for strategic planning, coordination, and implementation of reconstruction activities. Important contributions to the overall coordination process are investments for information technology, and the contracting of a Quality Assurance Team. The Quality Assur- ance Team consists of more than 110 staff who monitor all government-implemented reconstruction projects and thus help mitigate corruption and ensure a transparent reconstruction process. Strengthening Technical Capacities at the BRR • 42 technical individual advisor positions identified to assist the BRR in its regular duties for Aceh and Nias • 11 positions filled to date, 25 additional positions filled by January 2006 • Deployment of a Quality Assurance Team of 110 staff to ensure high quality reconstruction and rehabilitation activities in Aceh and Nias • Provision of additional IT infrastructure for BRR Banda Aceh, Nias, and Jakarta to improve communication • Provision of Reconstruction Progress Survey Team • Provision of a comprehensive Study on Economic Development for Aceh • Provision of public outreach activities Sigit Setyabudi, Health Building Architect, advises the Department of Health at the BRR. He explains: “My work entails coordination with local government health reconstruction agencies on how to conduct needs assessments and construction planing to achieve better standards for health buildings, sites, and access, and how to define budget allocations in more detail.” Reconstruction and rehabilitation activities in 2006 cover 13 hospitals and 45 other smaller health facili- ties. The consultant also advises the BRR on the selection of best suitable contractors for health facility construction activities based on transparent tender processes.26
  30. 30. Building Capacities of Civil Society and the Private SectorIn general, involvement and active participation of civil society actors is deemed an important element forthe recovery process. Even though a large and very active network of civil society organizations (CSOs)exists in Aceh, and community-based organizations (CBOs) can be found in most communities, both lackcapacities in planning, management and supervision. There is also a conceivable brain-drain from CSOs tolarge-scale actors in the recovery process. The Multi-Donor Fund therefore has approved a Strengtheningthe Role and Capacity of Civil Society Organizations Project that will provide both training and small-scale grants to CSOs and CBOs with the aim of preparing civic actors for a long-term role in the developmentof Aceh and Nias.At the same time, the private sector, and especially small-scale contractors have the capacity to contributeto local-resource based development by closely working together with local communities. The Labor-based Rural Roads Rehabilitation and Reconstruction Project trains small-scale contractors in labor-intensive road repair techniques, and provides them with increased managerial capacities. Both projectswere approved by the Steering Committee in December 13, 2005. 27
  31. 31. Large-scale Infrastructure and Transport One strategic focus identified by the BRR is the urgent need to secure large-scale infrastructure and transport facilities to guarantee an unobstructed continuation of reconstruction activities in 2006 and beyond. Therefore, the BRR has developed the Immediate Action Program (IAP), consisting of more than 15 projects implemented by various actors. In November 2005, the BRR approached the Steering Committee of the Multi-Donor Fund with four projects for funding that were subsequently endorsed for appraisal. The Road and Bridge Repair Lamno-Calang Project will undertake emergency repairs to the road and bridges on the 85km stretch between Lamno and Calang. These repairs are urgently needed to keep the road on the western coast of Aceh open for transportation of relief and reconstruction goods. The Flood Mitigation Program for Banda Aceh will rehabilitate and upgrade existing pumping systems at Banda Aceh. This project is part of the overall scheme to mitigate future flooding in Banda Aceh which would benefit up to 50 percent of the city population. The Reconstruction and Rehabilitation of Ports Project undertakes minor rehabilitation to a number of ports. It will further support the design of permanent reconstruction of three strategic ports, namely in Calang, Sinabang and Gunung Sitoli in Nias.28
  32. 32. The Sea Delivery and Logistics Program will facilitate sea delivery of reconstruction material. It willprovide temporary rehabilitation of up to nine ports and establish a logistics network to deliver up to140,000 metric tons of cargo to west coast communities, Simeulue and to Nias. This represents a sub-stantial part of the estimated demand of 600,000 metric tons of non-food items that need to be movedfor the reconstruction in Aceh, Nias and Simeulue island over the next 12 months.These last two projects make vital contributions to the transportation of reconstruction goods to af-fected areas during the upcoming months. Bearing in mind that roads, especially along the west coast,are still in initial stages of repair, transport of goods by sea gains a special significance. While temporaryand final reconstruction of roads is underway, damages due to the rainy season 2005/2006 could stillrender some areas inaccessible other than by sea. 29
  33. 33. Sustaining the Environment The Multi-Donor Fund supports two projects that contribute to the long-term sustainability of Aceh’s environment. These projects are currently the largest donor contribution to recovery and protection of the environment. The Tsunami Recovery Waste Management Project supports local governments to manage both munici- pal solid waste collection and tsunami waste recycling. Currently activities concentrate on Banda Aceh and Meulaboh, but shortly further agreements of cooperation will be concluded with other districts, including in Nias. Main activities include support for municipal waste management, demolition of damaged buildings, clearing tsunami waste from temporary dumps and recovery of recyclable wastes for reuse in reconstruction and livelihoods. The project will also support the rehabilitation of the Gampong Jawa dumpsite in Banda Aceh and potentially other dumpsites in Aceh. Finally, it creates livelihoods through recovering and recycling tsunami waste materials for example through composting, plastic processing, furniture manu- facturing from tsunami wood, or tsunami wood-fired brick kiln rehabilitation, or making aggregates for breeze blocks, concrete, and road base. Achievements in Support to Waste Management • Clearance of up to 42,000m3 of tsunami generated waste by the end of 2005 • Expected 3.75 ha of temporary dump sites cleared • Ongoing support for municipal waste management in Banda Aceh and Meulaboh • Short-term employment of 1,122 persons with a total of 17,300 person-days of labor created: • 90% of Banda Aceh employees are IDPs, and 80% in Meulaboh • 40% of female workers Misriani, 33, living in an emergency shelter after the disasters killed one of her children and destroyed all her property, says “I’m happy to join the activity of cleaning up debris since I can earn some money for my family. My husband has no work, as his office was destroyed, too. I want to keep working here because I think this kind of activity is good for me rather than just sitting around and doing nothing, which will make me sad, because I will remember the nightmare of losing my child.”30
  34. 34. The upcoming Aceh Forest and Environment Project seeks to protect Aceh’s rich and partially untouchedforests in the Leuser and Ulu Masen ecosystems from illegal logging. Where farmland was destroyed by thetsunami, the local population now often lacks livelihood options which may lead to an uncontrolled agri-cultural encroachment of the forest. Illegal logging is also expected to further increase due to the growingdemand for reconstruction timber.The Leuser National Park, the Leuser Ecosystem, and the Ulu Masen Forest Complex are the largest remain-ing connected forest area in South East Asia – home to such rare species as the Sumatran tiger, elephantsand orangutans. These forests provide a major environmental service for the Aceh Province: supply of cleanwater for domestic, agricultural and industrial consumption. Through close cooperation with multiple stake-holders, and especially the national and local government this project aims to slow down or even stop theloss of forest, thus creating a healthy and integral forest ecosystem. In this way water supply for 60 percentof Aceh’s population can be protected and floods and erosion prevented.Both projects are intimately linked with the reconstruction and recovery process. They provideenvironmental services such as proper waste management and protection of water resources, which arevital elements for a sustainable recovery of the affected areas and economic growth. The waste manage-ment project supports the recovery of communities and infrastructure by clearing the ground and providingsustainable building material.The forest project will further provide advice and guidance to reconstruction agencies on how to purchasesustainable timber for reconstruction. The project will work with government agencies, a network of envi-ronmental NGOs, and international relief NGOs to develop green reconstruction guidelines and standards. 31
  35. 35. 3 LOOKING FORWARD Looking forward to the next six months, the main challenge confronting the Multi-Donor Fund is how to spend its remaining resources to best serve the recovery process. This fundamental decision must be taken based on guidance from the BRR as to how the Fund fits in with the BRR’s overall recovery strategy while ensuring consistency with the Recovery Assistance Policy. During the seventh Steering Committee meeting in Banda Aceh on December 13, 2005, the BRR presented the Steering Committee with an outline of its proposed strategy for the recovery. To date, the BRR has executed its coordination function mainly by receiving and processing concept notes, and assessing the progress made. In order to increase its steering and coordinating function, the BRR now intends to take a more portfolio-based approach. This includes i) a review of the existing project portfolio, ii) a more active role in spelling out needs for concrete projects per sector, and matching those needs with funds and imple- menting parties, and iii) adopting the role of implementing agency for a limited number of key projects in each sector. Based on its stocktaking one year after the tsunami, the BRR has identified timelines and implementation peaks for the recovery process over the next four years (see: “Aceh and Nias, One Year After the Tsunami: ‘The Recovery Effort and the Way Forward’”). Recovery of housing and infrastructure will see their imple- mentation peaks during 2006 and 2007. The BRR indicated that, in the future, the Multi-Donor Fund could be specifically asked to support immediate and longer-term infrastructure recovery projects that will focus on large-scale, mid-level and community infrastructure. Both community and mid-level infrastructure have been identified as the “missing middle” of the reconstruction process which is vital to link local communities and economies with those at regional and provincial levels.32
  36. 36. Ramli “Making Ends Meet”Syiahkuala, November 18, 2005 (Reflections of Aceh and Nias)Further, the BRR stressed that strengthening of local Regarding improvement of fund coordination, thegovernments is an activity that has to go along- BRR proposes to increasingly co-fund projects byside recovery activities. Local governments should matching Multi-Donor Fund grants with financingbecome increasingly involved in recovery planning from the national budget (via the BRR) and/or withand project implementation. Such “on-the-job” train- local government funds (including deconcentrationing would prepare local governments to eventually funds). Tapping province and district local govern-take over the development of the region after the ment budgets, would also reassert the future rolerecovery process phases out in 2009. Several Multi- of local governments in the overall development ofDonor Fund projects foresee substantial training Aceh and Nias.and involvement of local agencies, but it will remaina challenge for future projects to include such capa- In addition to aligning the Multi-Donor Fund’scity building components. Recovery Assistance Policy with the BRR’s upcoming funding strategy, the donors, the BRR and the Sec-In addition to this sectoral focus, the BRR indicated retariat will undertake an evaluation of the Fund’sthat the Multi-Donor Fund may also be called upon operations during the first half of 2006 to assessto address specific recovery needs of Nias. All Fund its experience, so far, and propose possible furtherprojects currently under implementation, except improvements. This exercise should spell out im-for the Housing and Settlements Project, include portant lessons learned for the wider developmentactivities in Nias. At the first Nias Islands Stakehold- community as well as for the specific operations anders Meeting on December 4, 2005, the Indonesian the role of the Multi-Donor Fund.Government highlighted that out of the $1 billionrequired, only approximately $40 million wasavailable from donors, and $300 million from theGoI, leaving a funding gap of $660 million for therecovery of Nias. 33
  37. 37. Third Prize: Marinus Lose (23) “Community Prayers” Tuhemberua, Nias, November 18, 2005 (Reflections of Aceh and Nias)34
  38. 38. 3 FINANCE andOPERATIONS 35
  39. 39. 36
  40. 40. 1 FINANCEContributionsIn the first six months of operations, 15 donors have pledged approximately $525 million to the Multi-DonorFund. Of the pledges, 65 percent has been formalized as contribution agreements. The Fund is currently inthe process of signing agreements for the remaining pledges, and is confident that all promises will behonored.Donors have chosen to pay their contributions either up-front or in one or more installments, thus the Fundhas, by December 14, 2005, received over $200 million. The cash position is monitored closely to ensure thatadequate cash is available to meet disbursement requirements.Table 3 provides a break down of Multi-Donor Fund resources according to pledges, value of contributionagreements signed and the amount paid in by contributors. Table 3: Pledges, Contribution Agreements Signed and Paid-in Contributions as of December 14, 2005 Pledges in original Contribution Paid in currency Pledges Agreements Contributions Source Currency in $ million in $ million in $ million in $ million European Commission* EUR 202.50 239.40 101.26 44.87 Government of the Netherlands USD 100.00 100.00 100.00 60.00 Government of the United Kingdom* GBP 25.51 44.51 10.00 10.00 World Bank USD 25.00 25.00 25.00 25.00 Government of Norway NOK 120.00 17.86 17.86 17.96 Government of Denmark* DKK 110.00 17.54 8.31 8.31 Government of Canada CAD 13.00 11.04 11.04 11.04 Government of Sweden SEK 80.00 10.44 10.44 10.04 Asian Development Bank USD 10.00 10.00 10.00 10.00 Government of Germany USD 10.00 10.00 10.00 5.02 Government of the United States USD 10.00 10.00 10.00 Government of Finland* EUR 8.00 9.46 9.46 2.36 Government of Belgium* EUR 8.00 9.46 9.46 Government of New Zealand USD 8.80 8.80 8.80 1.20 Government of Ireland EUR 1.00 1.20 1.20 Total Contributions 524.71 342.92 206.19 *Exchange rates from Dow Jones/Reuters November 29, 2005 37
  41. 41. Receipts and Disbursements Table 4 : Financial Status Multi-Donor Fund as of December 14, 2005 Receipts in $ million Total Paid-in Contributions 206,192,375.31 Total Investment Income 1,803,021.19 Total Receipts 207,995,396.50 Disbursements Project Disbursements Reconstruction of Aceh Land Administration System Project 3,000,000.00 Community Recovery Through the Kecamatan Development Project (KDP) 23,000,000.00 Community Recovery Through Urban Poverty Program (UPP) 6,454,000.00 Community - Based Settlement Rehabilitation and Reconstruction Project 20,900,000.00 Total Project Disbursements 53,354,000.00 Other Administration Costs 222,918.51 Appraisal, Supervison and Monitoring Costs 425,118.95 Total Other Disbursements 648,037.46 Total Disbursements 54,002,037.46 Total Cash Available 153,993,359.04 By December 14, 2005, the Multi-Donor Fund has expenditures, current eligible expenditures, and received $206.2 million of contributions, and derived anticipated short-term expenditure requirements over $1.8 million in investment income. Income over a 4-6 month period from the date of fund trans- received is consolidated with the contributions and fer to project accounts. The Multi-Donor Fund made used to finance projects and programs. its first disbursement of $3 million to the Land Titling project on September 21, 2005. Since 82 percent To date, the Fund has disbursed $53.4 million to its of approved projects are channeled through the projects. Disbursement means the amount of money Government of Indonesia Budget, the speed of dis- transferred from the accounts of the World Bank to bursements is dependent on two external factors: projects’ accounts.1 Disbursements cover retroactive 1) the speed of the Implementing Agency in prepar- 1 As of December 14, 2005, projects have spent approximately $18 million on its activities on the ground.38
  42. 42. ing its budget work plan; and 2) the speed in which ment occurs when the World Bank transfers funds tothe Ministry of Finance is able to approve the work UNDP. This can only happen after the Fiscal Agencyplan and issue the budget execution document Agreement, governing the relationship between the(DIPA). As a result of delays in both these processes, Trustee and UNDP, is signed. Although the Agree-disbursements have not been as fast as the Fund ment will only be signed in December 2005, this haswould have wished. The projects, however, sourced not delayed implementation because UNDP acquiredfunds from alternative avenues to start implementa- financing from elsewhere which will be reimbursedtion while waiting for their grant. These funds are once the legal formalities are completed. The abilitythen reimbursed by the Multi-Donor Fund once the of all Multi-Donor Fund’s Partner Agencies to find in-money starts flowing through their Government of novative solutions like retroactive financing in orderIndonesia special account. All outstanding DIPAs to proceed with implementation, is a significantwere issued in mid-November and this allowed dis- advantage of the Fund.bursements to accelerate significantly. The speed of disbursements has accelerated signific-For projects with UNDP as the Partner Agency antly in December 2005. This is shown in Table 5,(namely the Technical Support for BRR and the which expects total disbursements by December 31,Tsunami Waste Management projects), disburse- 2005 to be approximately $82 million. Table 5: Expected Disbursements by December 31, 2005 in $ million Reconstruction of Aceh Land Administration System Project 3.00 Community Recovery Through the Kecamatan Development Project (KDP) 23.00 Community recovery Through the Urban Poverty Program (UPP) 7.00 Technical Support for Badan Rehabilitasi dan Rekonstruksi (BRR) 11.00 Community-Based Settlement Rehabillitation and Reconstruction Project 21.00 Tsunami Recovery Waste Management Progamme 11.00 Support to Strengthen the Role and Capacity of CSOs in the Recovery of Aceh 3.00 Labor-Based Rural Road Rehabilitation in Aceh 3.00 Total 82.00 39
  43. 43. Disbursements will continue to accelerate in 2006 and 2007. It is very common for disbursements to be initially slow during its establishment phase. A significant part of the first six months has been used to select projects suitable for financing and doing the preparatory work prior to implementation. The graphs below shows the expected commitments during the lifetime of the Multi-Donor Fund com- pared to its expected disbursements. This clearly shows that commitments are primarily made during the first two years of the operations, while disbursements are made during the middle two years. �������������������������� ���������������������������� �������������������� ��������������������������������������� ��� ��� ��� ��� ��� ��� ��� ��������� ��������� ��� ��� ��� ��� ��� �� ��� � � ���� ���� ���� ���� ���� ���� ���� ���� ���� ���� ���� ���� ������������� ����������� Meeting Disbursement Targets Table 6 provides a comparison between what was initially planned to be disbursed for each project at the time of development with the revised expected disbursements for 2005. It shows that Multi-Donor Fund projects have, in fact, accelerated their disbursements, to meet the urgent need for funds on the ground. Table 6: Initial Estimates versus Expected Disbursements in 2005 Expected Initial Estimate Disbursements in $ million in $ million Reconstruction of Aceh Land Administration System Project 5.00 3.00 Community Recovery Through the Kecamatan Development Project (KDP) 15.00 23.00 Community Recovery Through the Urban Poverty Program (UPP) 6.18 7.00 Technical Support for Badan Rehabilitasi dan Rekonstruksi (BRR) 6.00 11.00 Community - Based Settlement Rehabilitation and Reconstruction Project 10.00 21.00 Tsunami Recovery Waste Managenment Programme 7.00 11.00 Support to Strengthen the Role and Capacity of CSOs in the Recovery of Aceh 3.00 3.00 Labor-Based Rural Road Rehabilitation in Aceh 3.00 3.00 Total 55.18 82.0040
  44. 44. Table 7: Status of the Multi-Donor Fund as of December 14, 2005 in $ million Total Pledges 524.71 Total Active Projects 237.78 Total Projects Under Development 58.35 Total Active and Developing Projects 296.13 Plus : Estimated Investment Income 13.00 Less : Estimated Administration Costs (2% of total contributions) 10.49 Total Funds Available** 231.18**The Financing Policy of the Multi-Donor Fund states that 10% of total contributions is retained as a reserve to fund opportunities that arise in thesecond year of operation. This represents approximately $52.5 million.SummaryOf the $525 million of pledges, the Multi-Donor Fund has allocated $296 million to projects. The Fund hasaimed to keep administration costs to below two percent of total contributions, which is more than offsetby expected investment income derived from proceeds of the contributions. As of December 14, 2005,$231 million remains unallocated. The main challenge facing the Multi-Donor Fund is to decide with theBRR on the priority areas for use of the remaining resources. 41
  45. 45. 42