Asian Development Bank OKs $300 Million for Indonesian Recovery

MANILA, Philippines, April 12, 2005 (ENS) - The Asian Development Bank has approved its largest ever single grant to help rehabilitate and reconstruct areas in Indonesia affected by the earthquake and tsunami disaster of December 2004. The US$321 million grant from the bank's Asian Tsunami Fund will help restore essential public services, rebuild infrastructure, and revive economic activity through livelihood support.

Indonesia, particularly the provinces of Aceh and North Sumatra, was the most devastated among the 11 countries struck by the giant tsunami wave that resulted from a severe earthquake off the northwest coast of Sumatra on December 26, 2004.

At least 126,000 people lost their lives, about 94,000 people are listed as missing, and about 412,000 others are internally displaced. The disaster has left around 20 percent of Aceh's population homeless today.

The damages and losses in the country, estimated at $4.7 billion by a joint assessment conducted by the government and international donor community including the Asian Development Bank (ADB), are the largest requirements among the affected regions in Asia.


The December 2004 tsunami destroyed many thousands of homes in the Aceh province of Indonesia. (Photo by Rein Skullerud courtesy WFP)
"Apart from the grave tragedy and trauma, the disaster resulted in the complete destruction of most infrastructure along the coastlines, leading to a total collapse of public services, major loss of private property, and virtual loss of livelihood," says Shamshad Akhtar, director general of ADB's Southeast Asia Department, which oversees its operations in Indonesia.

"Restoring normalcy is key to helping people to get over their trauma," Akhtar said, "but the cost and challenges of rehabilitation and reconstruction are phenomenal."

In a two-phase approach, the focus will be first on providing support to less affected regions and launching assessments in the most affected regions.

Phase two involves subproject implementation after the spatial planning and safeguard issues are resolved.

Given the degree of devastation in Indonesia, with entire communities being wiped out, the project will be flexible. The design of its sub-components will be guided by emerging needs and ground realities, as well as the support provided by other development partners.

Distribution of the funds will be based on the disaster management, rehabilitation, and reconstruction strategy for Aceh and North Sumatra that was jointly prepared by the government and the donor community.

The largest amount, $127.4 million, will be spent to rebuild community infrastructure, including water and sanitation facilities, rebuilding of irrigation infrastructure, and reconstruction of damaged housing.

The next largest amount, $87.3 million, will be spent on livelihood restoration, including the rehabilitation of the agriculture and fisheries sectors and the revival of micro and small enterprises.

Physical infrastructure, including rebuilding damaged roads and bridges, restoring power supply, and strengthening environmental management systems will be funded with $48.1 million.

Social services, including the reconstruction of health and educational facilities, as well as vocational training for affected people will receive $47.7 million.

Fiduciary governance, including capacity building activities to ensure the effective delivery of assistance, will get $11 million.

The government of Netherlands will provide a $3.5 million grant for a fiduciary governance component, to help ensure the sound oversight of the utilization of donor funds.

"Given the huge amount of funds flowing in, sound oversight arrangements are vital to ensure that donor assistance is utilized in an efficient, transparent and accountable manner," says Akhtar.

"Speed in delivering the support is essential, but sound fiduciary management is of overriding importance," she said. "ADB will also support the tracking of donor support to avoid duplication and ensure effective monitoring on the use of funds, including by the civil society."


Water and sanitation expert Michael Hodges from the International Federation of Red Cross and Red Crescent examines wells where the town of Lamno, Indonesia used to be. The tsunami destroyed countless community and family wells like this one, filling them with debris and salt water. (Photo courtesy IFRC)
The government of Indonesia will contribute $28 million toward the project's total cost.

Out of the $300 million, ADB will contribute $10 million to the multidonor trust fund being established by the government. The Trust Fund is expected to attract about $500 million in contributions from donors, is a vehicle to poor bilateral resources to ensure a systematic and coordinated approach to rehabilitation and reconstruction.

The Aceh-North Sumatra Rehabilitation and Reconstruction Implementation Coordination Board being established by the government to coordinate and implement the disaster management, rehabilitation, and reconstruction strategy, will serve as the executing agency for the project, which is due for completion around June 2008.

The Asian Tsunami Trust Fund was set up by ADB in February with an initial contribution of $600 million to deliver prompt emergency grant funding to tsunami affected countries.

The fund takes ADB's total financial commitment on tsunami assistance to $775 million, which includes $175 million that can be redirected from ongoing projects and programs for the overall tsunami effort. It will be used to provide assistance to tsunami affected countries including India, Indonesia, Maldives, Sri Lanka and Thailand.