rebuilding together

REBUILDING TOGETHER

Multi-Donor Fund for Aceh and Nias Progress Report No. 1 | December 2005

NAD Nias

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

REBUILDING TOGETHER | Multi-Donor Fund for Aceh and Nias | Progress Report No. 1 - December 2005

3. Finance and Operations

1. Finance 37

2. Operations 43

3. Communications 45

4. Monitoring and Evaluation 46

5. Fighting Corruption 48

4. 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 84

The findings, interpretations and

conclusions expressed here have been

prepared by the Secretariat of the Multi-

Donor Fund and do not necessarily reflect

the views of the Steering Committee of

the Multi-Donor Fund or of the entities

represented by individual members.

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INTRODUCTION

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The stark scenes of devastation and human suffering in the wake of the earthquake and tsunami on December 26, 2004, were televised to audiences around the world. These images of torment and loss shocked the international community, and prompted unprecedented support. Recognizing the need for a coordinated approach to long-term reconstruction and recovery, the Government of Indonesia asked bilateral and multi-lateral donors to consider pooling their resources to establish a multi-donor trust fund, with the World Bank as trustee.

The establishment of the Multi-Donor Fund for Aceh and Nias came at a critical juncture for the people of Aceh. Prior to the tsunami, Aceh was a province under civil emergency rule, still caught in the middle of a decades-long conflict, with a declining economy. The recent peace accord, coupled with the inflow of financial assistance for reconstruction, offers the opportunity for creating a new and more 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 being converted into building materials, and grants are being provided to communities throughout Aceh and Nias.

Much work remains, however, and we must not underestimate the challenges that lie ahead. The on-set of the wet season makes the need for housing and basic infrastructure even more urgent. This need for a rapid response must always be balanced with the longer-term requirements for quality and ensuring 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 the sharing of lessons learnt and avoids overlaps. The Multi-Donor Fund plays a key role in forging these partnerships, as its Steering Committee brings together fifteen donors, Government representatives at both provincial and national levels, civil society, United Nations and international NGOs. The shared voice and common vision of its Steering Committee allows the Fund to respond swiftly to the needs on the ground.

The Multi-Donor Fund and the Government of Indonesia will continue to work together over the coming years to meet these challenges to assist the people of Aceh and Nias to build a brighter future.

Kuntoro Mangkusubroto Co-chair

Director of BRR Badan Rehabilitasi dan Rekonstruksi

Andrew Steer Co-chair

Country Director World Bank

H. E. Jean Bretéché Co-chair

Ambassador, Head of Delegation European Commission

Indonesia

Foreword by Steering Committee Co-chairs

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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.

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Andrew SteerCountry Director, World Bank

H.E. Jean Bretéché

Ambassador, Head of Delegation European Commission Indonesia

H.E. Nikolaus Van Dam Ambassador of the Netherlands

Sarah SanyahumbiHead of DfID Indonesia

H.E. Bjorn BlokhusAmbassador of Norway

H.E. Niels Erik AndersenAmbassador of Denmark

H.E. Randolph MonkAmbassador of Canada

H.E. Lennart LinnerAmbassador of Sweden

Edgar A. CuaADB Country Director

H.E. Joachim Broudré-Gröger Ambassador of Germany

William Frej USAID Mission Director

H.E. Hans-Christian Kint Ambassador of Belgium

H.E. Markku Niinioja Ambassador of Finland

H.E. Phillip Gibson Ambassador of New Zealand

H.E. Hugh Swift Ambassador of Ireland (Singapore)

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Abbreviations

ADB Asian Development Bank

BPN Badan Pertanahan Nasional (National Land Agency)

BRRBadan Rekonstruksi dan Rehabilitasi NAD-Nias (Agency for the Rehabilition and 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 Organization

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Acknowledgements

This report was prepared by the Secretariat of the Multi-Donor Fund with contributions from the Partner 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 and Rahayu Novianty. Many thanks to Steven Orr and Stuart Andrews for their contributions. The report was 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 her wonderful photos and to Christianto Nusatya for interviewing the many beneficiaries and project implementers in Aceh.

Contributions from Aceh and Nias

The Multi-Donor Fund team has actively encouraged the involvement of the communities of Aceh and 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, 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)

NAD Nias

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First Prize : Zakiul Fuadi (24)

“Fishermen working together”

Muria Batu, November 16, 2005

(Reflections of Aceh and Nias)

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Executive Summary

During its first six months of operations, the Multi-Donor Fund received pledges of $525 million from 15 donors and approved eight projects valued at $237 million to support the Government of Indonesia’s plan for post-tsunami reconstruction. Implementation of each of these projects is underway and the Fund will 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’s reconstruction coordination body, the BRR (Badan Rekonstruksi dan Rehabilitasi NAD-Nias), co-chairs the Steering Committee, along with the European Commission (EC) as the largest donor and the World Bank as the Trustee. The broad representation of stakeholders on its Steering Committee has established the Fund as an important donor coordination mechanism and forum for dialogue on recovery policy between the Government and the international community.

The Steering Committee is guided by the Recovery Assistance Policy, which provides strategic direction to assess whether a project is suitable to receive financing. The Fund supports quality projects in under-funded sectors, which promote capacity building, good governance, sustainable development, gender equity, geographic balance, and conflict sensitivity.

Building a Portfolio

Projects already approved or under development address four broad sectors: community-led housing, land titling and infrastructure; capacity building to the BRR; civil society and private sector; urgent infrastructure and logistics; and environmental restoration and protection.

Community-Led Housing, Land Titling and Infrastructure

A package of four projects to issue land titles and rebuild houses and infrastructure, was approved at the first Steering 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 Kecamatan Development Project (KDP) and the Urban Poverty Program (UPP). Prior to the tsunami, this network of facilitators 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.

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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.

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• 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 2005 or early January 2006.

Environmental Restoration and Protection

The Multi-Donor Fund is strongly committed to rehabilitating the environment and is currently the largest contributor in this sector. The Tsunami Recovery Waste Management Project supports local governments to manage both municipal solid waste collection and tsunami waste recycling. This project also creates livelihood opportunities in waste management such as manufacturing from tsunami wood, establishing a timber mill 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 Project which will protect Aceh’s rich and untouched forests in the Leuser and Ulu Masen ecosystems from illegal logging. This goal will be achieved through close cooperation with multiple stakeholders, particularly with national 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 community decision-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.

Achievements

A 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

9* The Multi-Donor Fund intends to retroactively finance expenses incurred by the Gol for initial implementation. The results to date have been achieved with Government and World Bank loan financing.

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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

SourcePledges

in $ millionContribution Agreements

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, 2005

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For project funds that are channeled through the Government of Indonesia’s national budget, the Fund also experienced delays in budget preparation on the part of Line Ministries and approval by the Ministry of Finance. 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 Forward

In the immediate future, the Steering Committee of the Multi-Donor Fund will, together with the BRR, make a decision on priority areas for the use of the remaining resources. 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 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 process which 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 with recovery 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 to address 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 million was available from donors, and $300 million from the GoI, leaving a funding gap of $660 million for the recovery of Nias.

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THE FIRST SIX MONTHS

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Second Prize: Syarifuddin (35)

“River Crossing Raft”

Ceunamprong, October 27, 2005


INTRODUCTORY Section

1 ESTABLISHMENT

The Disaster

The earthquakes and tsunami of December 26, 2004, compounded by the Nias earthquake three months later, took an unprecedented toll. The losses are familiar but still incomprehensible: in Aceh, there were 167,000 dead or missing, with 127,000 houses destroyed and a similar number damaged; in Nias, 850 were killed and 83,900 houses destroyed or damaged. While progress has been made, hundreds of thousands are still homeless and the economy of the affected regions has contracted by about 14 percent, including $1 billion in lost productivity. About three-quarters of a million people (one in six) were direct victims but virtually everyone in Aceh and Nias has suffered through the loss of family and friends, trauma or lost livelihood.

An Unprecedented Response

The Indonesian Government (GoI) has responded firmly and comprehensively in handling the aftermath of the earthquake and tsunami tragedy. With its development partners, the GoI has formulated 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 end of March 2005, and provides the overarching framework for rehabilitation and reconstruction in the affected areas. The Agency for the Rehabilitation and Reconstruction of Aceh and Nias (BRR) came into being a month later to coordinate and facilitate the recovery. A peace accord was signed between the GoI and the Free Aceh Movement (GAM) on August 15, 2005, resulting in troop withdrawals, surrender of weapons and reduced tension overall.

Worldwide support for the victims of the tsunami has been overwhelming. The GoI, donors and NGOs have each pledged or committed $2.5–3 billion through 2009. Many of these pledges have translated 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 broader development programs.

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Coordinating Resources

This unprecedented outpouring of generosity from individuals, organizations and governments constituted an overwhelming amount of resources that threatened to deluge the absorptive capacity of national and local authorities. A plea for coordina-tion went out at the Consultative Group for Indonesia (CGI) meeting which was held just weeks after the disaster in mid-January 2005. To manage the recov-ery effort, the Government proposed some general principles: (i) encourage on-budget financing; (ii) develop an effective governance framework; and (iii) maximize grant financing, then soft loans as needed. Overall, the aim was to coordinate private and public offers of support, initially for the relief effort and eventually for recovery.

At the CGI meeting, discussion was initiated about the possibility of establishing a multi-donor trust fund to coordinate some of the aid flow. Such a fund would allow a variety of donors to pool their resources in support of the GoI’s relief and recovery work. As the World Bank has often taken the lead in establish-ing such funds in post-disaster and post-conflict situations, such as in Afghanistan, Iraq, Sudan, and East Timor; the Ministry of Finance requested the World Bank to pursue establishment of a multi- donor fund in February 2005.

Work began immediately to develop a governance structure, financing mechanisms, grant approval procedures, and administrative arrangements. These were summarized in a prospectus that was discussed

with the GoI and potential contributors in March 2005. Once there was tentative agreement on a framework, the necessary legal and administrative steps were taken to establish the fund within the World Bank during the month of April.

During the same time period, the GoI was completing two exercises that were critical for the establishment of the fund. First, the Master Plan for the Rehabilita-tion and Reconstruction of Aceh and Nias was being prepared by a series of multi-stakeholder groups. It was issued in draft form at the end of March. Its existence was essential as the trust fund was being designed to support the GoI’s recovery strategy as embodied in the Master Plan. Second, the Agency for the Rehabilitation and Reconstruction of Aceh and Nias (BRR) was being formulated in order to govern the recovery process in a transparent and coordinated manner. The BRR was created at the end of April 2005. Its establishment was fundamen-tal for the trust fund as the BRR was foreseen as the fund’s key interlocutor and partner in government.

Establishing a Multi-Donor Mechanism

In parallel with these developments, the design of the trust fund was being finalized so that it could become operational once the Master Plan was validated through consultations in Aceh and Nias, and the BRR was up and running. The final design of the fund reflected the general characteristics of a multi-donor initiative but had a number of innova-tive features to better respond to the specific nature of the Indonesian disaster.

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In general, multi-donor trust funds are financing mechanisms in which money from different donors is pooled to achieve a common set of objectives agreed with the Government. A multi-donor trust fund provides a convenient way of pooling donor resources and avoids setting up a multiplicity of bank accounts and programs. Positive characteristics of similar funds from elsewhere could be adopted in Indonesia, including: (1) integration with the national budget; (2) the preparation of timely monitoring reports on actual disbursements, derived from the government’s accounting system; and (3) governance and fiduciary arrangements to ensure integrity in the use of donor funds.

In addition, potential contributors to the fund agreed to a number of innovative features to bet-ter serve the needs of the recovery effort. These included:

• Serving as a multi-purpose forum for donor coordination and policy dialogue between the international community and the GoI on recovery issues, as well as the traditional role of financing initiatives.

• Creating a governance structure that reflected the interests of key stakeholders (national and local government agencies, donors, civil society, the UN system, international NGOs). These stakeholders form the Steering Commit- tee that is co-chaired by the Head of the BRR, the Delegation Head of the EC (as the largest contributor to the Fund) and the Country Director of the World Bank.

• Opening up the role of quality control (appraising and supervising projects and programs) to the Asian Development Bank and select UN agencies.

• Allowing the possibility of financing not just classic development projects but also GoI programs, that is a sector-wide approach.

• Charging only actual administrative, appraisal and supervision costs as opposed to a fixed fee (normally five percent of the value of the fund), with the pledge of keeping these costs below two percent of the fund’s value.

All these special features were incorporated in the final design of the trust fund.

The fund was also designed to work in harmony with and support of the BRR. All proposals for funding must first be endorsed by the BRR as consistent with the Master Plan and appropriate for grant support from the Multi-Donor Fund. The BRR co-chairs the fund’s key decision-making body (the Steering Com- mittee) and helps set the decision agenda. The two civil society members of the Steering Committee were selected by the Supervisory and Advisory Bodies of the BRR. Finally, an early decision was taken that the BRR could receive trust fund money for capacity building and technical assistance to strengthen its role in coordinating the recovery.

These design elements were intended to yield the following comparative advantages: a) participation of key partners in the donor community, GoI and civil society through the Steering Committee; b) substan-

tial grant financing available over the five-year period of reconstruction; c) considerable flexibility in being able to support projects and programs that are not earmarked in advance by contributors; d) promotion of good governance and combating corruption; and e) the ability to draw on a tremendous accumulation of development experiences through the contribu-tors to the Fund as well as the UN agencies, Asian Development Bank and World Bank.

Setting a Policy for Assisting the Recovery

At its inaugural meeting on May 10, 2005, the Steering Committee approved an initial package of four projects that support community-driven construction. Approving such a large package of assistance at the very outset was a bold step for the Steering Committee. It also generated concern about whether the Multi-Donor Fund was moving too quickly. To respond, the Fund’s Secretariat worked with members to develop an operations manual (see Annex 7) of transparent and expedited procedures and, more important, a Recovery Assistance Policy (see Annex 1) to guide decision-making as well as potential project proponents.

The Policy states that the overall goal of the Multi-Donor Fund is to efficiently and effectively contri-bute to the reconstruction of a better Aceh and Nias. “Better” means not only improving infrastructure in accordance with the Master Plan but also encom-passes social concerns such as reducing poverty, improving livelihoods and increasing equity. The key elements of the Policy are:

• Financing – the Fund should focus on financing larger grants and should retain a portion of its resources to meet needs that emerge after the second year of the recovery process.

• Implementation – all projects and programs to be financed should: a) enhance the quality of the recovery process; b) use and build different capacities for implementation over time;

c) support good governance; d) contribute to sustainable development; e) consider gender issues; f ) have a geographic balance in Aceh and Nias; g) promote equitable implementation through various partner agencies; h) be conflict sensitive; and i) avoid regional disparities.

• Sectoral – the Fund should meet financing gaps and/or resolve critical issues by focusing on: community infrastructure (particularly housing), repairing larger infrastructure, restarting liveli hoods, sustaining the environment, and rebuilding governance.

In order to properly monitor and evaluate the performance of the Fund, the Policy was trans- formed into a logical framework (see Annex 5). The framework is designed to focus on verifiable results (both immediate deliverables and longer-term impacts), identify key assumptions and risks, and to permit a rapid review of the Policy with an eye towards periodical updating. Data for indica-tors are to be collected from project monitoring and surveys by implementing and Partner Agen-cies as well as cross-cutting surveys by the Fund’s Secretariat as needed. These will then be commu-nicated to stakeholders through regular updates to the Steering Committee and semi-annual progress reports such as this one.

The Steering Committee also identified the need for a communications strategy to reach out to the different stakeholders with relevant information. Local communities are informed about how the Multi-Donor Fund financed projects will support them in their recovery and reconstruction efforts. Further, the Fund needs to provide visibility for the donors and ensure that stakeholders get relevant information such as project results, achievements, and financial status. A number of effective communication tools have been identified and used on an on-going basis.

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2 BUILDING a PORTFOLIO and ACHIEVING RESULTS

Since its establishment, the Multi-Donor Fund has built a portfolio that covers four major sectors of the reconstruction process. Eight of the projects mentioned in the following section are already being implemented, while five are in the project design phase (appraisal). Taken as a portfolio, they represent 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 and housing. Second, the Multi-Donor Fund supports the rebuilding of governance and strengthening of institutional capacities. Third, the Multi-Donor Fund portfolio will make important investments in the reconstruction and rehabilitation of large-scale infrastructure and transport facilities once four 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 become the largest financier in the field of environmental protection in Aceh (for detailed project descriptions, read Annex 3).

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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

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.

Community-Driven Recovery of Communities

21

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 notifi cations 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

The Land Titling project identifi es 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 600,000 land owners in Aceh and Nias will receive legal title documents which will provide them with a solid foundation for restarting their lives.

All land ownership is restored through a multi-tiered process. Community land mapping is mostly facilitated by 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 the second step, the Land Agency measures the earlier mapped plots, and validates the community agreements. The results of community land mapping are also offi cially checked against pre-tsunami satellite pictures, offi cial government records and recovered land title documents. Eventually, the Land Agency issues a public notifi cation for each plot. If this does not meet with objection, the plot is registered the land title issued to the owner. All services are free of charge.

In order to protect the property rights of the most vulnerable, the ownership rights of widows and orphans have specifi cally 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 fi ve land administration offi ces in Aceh and Nias, and the establishment of a land data base and cadaster.

“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 diversifi ed, much more modern economy.”

Former President Bill Clinton, United Nations Special Envoy for Tsunami Recovery, Aceh, May 23, 2005

Reconstruction of Aceh Land Administration System

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 certifi cate soon. “I thank God there is fi nally the process of land registration. When I get my new certifi cate, I will rebuild my house.”

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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 aff ected communities is being scaled-up to include all aff ected 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 fi nance expenses incurred by the GoI for initial implementation of KDP in Aceh. The results achieved to date with Government fi nancing are depicted in the box below.

Community Recovery Through the Kecamatan Development Project (KDP)

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 eff ects 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.”

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The Urban Poverty Program is essentially the urban version of KDP. It addresses the needs of communities aff ected 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 institutions and the strengthening of organizational capacities at community level through training. This ensures strong community involvement in assessing damage and identifying needs for reconstruction.

The Multi-Donor Fund intends to retroactively fi nance expenses incurred by the GoI for initial implementation of UPP in Aceh. The results achieved to date with Government fi nancing are depicted in the box below.

Community Recovery Through the Urban Poverty Program (UPP)

* 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 their activities, totaling Rp. 6 billion.

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

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 identifi ed 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.”

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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 eff ective 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-fi ciaries. Housing facilitators will ensure that the quality of the housing and infrastructure plans complywith 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 eff ectively matched.

Community-Based Settlement Rehabilitation and Reconstruction

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.

Achievements in Recovery of Housing

• 500 houses under reconstruction; 75 repaired• Identifi cation of housing needs in 188 communities completed (approximately 5,000 reconstructions, 9,000 repairs)• Damage assessments, needs identifi cation and planning completed in 16 pilot communities (reconstruction of 1,068 houses, repair of 314 houses)• Disbursement of fi rst 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

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The Indonesian Government has identifi ed the swift recovery of communities as one of the top priorities. The four community recovery projects of the Multi-Donor Fund contribute signifi cantly to community re-construction in Aceh and Nias. To begin, these projects have the widest geographic coverage, spanning all of Aceh and Nias. The Land Titling project, KDP and UPP target all rural and urban communities. The Housing and Settlement Project will fi ll gaps where the Government and other agencies do not provide housing, thus completing the eff orts of other actors and leading to a region-wide coverage.

Further, secure property rights are crucial for the sustainable re-development of communities, and longer-term economic recovery. Only after land ownership has been settled, a community is able to start reconstruction under legally safe conditions. On a more individual level, land ownership provides victims of the tsunami and earthquakes with access to credit, with their land as collateral.

Finally, the existing area-wide coverage with a network of very qualifi ed facilitators and technical experts will provide enormous benefi t to community-based re-development of the region. The KDP and UPP networks were established before the tsunami, and consists of project management staff , and more importantly a large number of facilitators with expertise in community-driven development and engineer-ing. With Multi-Donor Fund fi nancing, 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 people is at the heart of all four community-driven development projects. Further, information facilitators have been hired to improve coordination with all stakeholders of community recovery at the district level, and about 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 support communities 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 information materials on the peace process, prepared by the Government/GAM socialization committee with other donors. Increasingly, donor agencies and international NGOs have tapped into the KDP network both as a means of accessing information on reconstruction needs and livehood recovery strategies as well as direct collaboration and co-funding for village infrastructure priorities. The existing facilitator network with its intimate knowledge of local conditions will play an important role throughout the recovery and peace process, both for implementation and monitoring the development of community reconstruction.

Strengthening Community-Driven Development

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.”

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Strengthening Technical Capacities at the BRR

• 42 technical individual advisor positions identifi ed to assist the BRR in its regular duties for Aceh and Nias

• 11 positions fi lled to date, 25 additional positions fi lled 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

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 fi rst 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, effi cient 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 projectsand thus help mitigate corruption and ensure a transparent reconstruction process.

Rebuilding Governance and Strengthening Institutional Capacities

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 defi ne 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.

27

In general, involvement and active participation of civil society actors is deemed an important element for the 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 lack capacities in planning, management and supervision. There is also a conceivable brain-drain from CSOs to large-scale actors in the recovery process. The Multi-Donor Fund therefore has approved a Strengthening the 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 development of Aceh and Nias.

At the same time, the private sector, and especially small-scale contractors have the capacity to contribute to 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 projects were approved by the Steering Committee in December 13, 2005.

Building Capacities of Civil Society and the Private Sector

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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.

Large-scale Infrastructure and Transport

29

The Sea Delivery and Logistics Program will facilitate sea delivery of reconstruction material. It will provide temporary rehabilitation of up to nine ports and establish a logistics network to deliver up to 140,000 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 moved for 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 temporary and final reconstruction of roads is underway, damages due to the rainy season 2005/2006 could still render some areas inaccessible other than by sea.

30

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-fi red brick kiln rehabilitation, or making aggregates for breeze blocks, concrete, and road base.

Sustaining the Environment

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 offi ce 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.”

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The upcoming Aceh Forest and Environment Project seeks to protect Aceh’s rich and partially untouched forests in the Leuser and Ulu Masen ecosystems from illegal logging. Where farmland was destroyed by the tsunami, 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 growing demand 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, elephants and orangutans. These forests provide a major environmental service for the Aceh Province: supply of clean water 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 the loss of forest, thus creating a healthy and integral forest ecosystem. In this way water supply for 60 percent of Aceh’s population can be protected and floods and erosion prevented.

Both projects are intimately linked with the reconstruction and recovery process. They provide environmental services such as proper waste management and protection of water resources, which are vital 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 providing sustainable building material.

The forest project will further provide advice and guidance to reconstruction agencies on how to purchase sustainable 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.

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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.

33

Further, the BRR stressed that strengthening of local governments is an activity that has to go along-side recovery activities. Local governments should become increasingly involved in recovery planning and project implementation. Such “on-the-job” train-ing would prepare local governments to eventually take over the development of the region after the recovery process phases out in 2009. Several Multi-Donor Fund projects foresee substantial training and involvement of local agencies, but it will remain a challenge for future projects to include such capa-city building components.

In addition to this sectoral focus, the BRR indicated that the Multi-Donor Fund may also be called upon to address specific recovery needs of Nias. All Fund projects currently under implementation, except for the Housing and Settlements Project, include activities in Nias. At the first Nias Islands Stakehold-ers Meeting on December 4, 2005, the Indonesian Government highlighted that out of the $1 billion required, only approximately $40 million was available from donors, and $300 million from the GoI, leaving a funding gap of $660 million for the recovery of Nias.

Regarding improvement of fund coordination, the BRR proposes to increasingly co-fund projects by matching Multi-Donor Fund grants with financing from the national budget (via the BRR) and/or with local government funds (including deconcentration funds). Tapping province and district local govern-ment budgets, would also reassert the future role of local governments in the overall development of Aceh and Nias.

In addition to aligning the Multi-Donor Fund’s Recovery Assistance Policy with the BRR’s upcoming funding strategy, the donors, the BRR and the Sec-retariat will undertake an evaluation of the Fund’s operations during the first half of 2006 to assess its experience, so far, and propose possible further improvements. This exercise should spell out im-portant lessons learned for the wider development community as well as for the specific operations and the role of the Multi-Donor Fund.

Ramli “Making Ends Meet”

Syiahkuala, November 18, 2005 (Reflections of Aceh and Nias)

34

Third Prize: Marinus Lose (23)

“Community Prayers”

Tuhemberua, Nias, November 18, 2005


35

3

FINANCE and OPERATIONS

37

1 FINANCE

Contributions

In the first six months of operations, 15 donors have pledged approximately $525 million to the Multi-Donor Fund. Of the pledges, 65 percent has been formalized as contribution agreements. The Fund is currently in the process of signing agreements for the remaining pledges, and is confident that all promises will be honored.

Donors have chosen to pay their contributions either up-front or in one or more installments, thus the Fund has, by December 14, 2005, received over $200 million. The cash position is monitored closely to ensure that adequate cash is available to meet disbursement requirements.

Table 3 provides a break down of Multi-Donor Fund resources according to pledges, value of contribution agreements signed and the amount paid in by contributors.

Table 3: Pledges, Contribution Agreements Signed and Paid-in Contributions as of December 14, 2005

Source Currency

Pledgesin original

currencyin $ million

Pledges in $ million

ContributionAgreements

in $ million

Paid in Contributions

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

38

Receipts and Disbursements

By December 14, 2005, the Multi-Donor Fund has received $206.2 million of contributions, and derived over $1.8 million in investment income. Income received is consolidated with the contributions and used to finance projects and programs.

To date, the Fund has disbursed $53.4 million to its projects. Disbursement means the amount of money transferred from the accounts of the World Bank to projects’ accounts.1 Disbursements cover retroactive

expenditures, current eligible expenditures, and anticipated short-term expenditure requirements over a 4-6 month period from the date of fund trans-fer to project accounts. The Multi-Donor Fund made its first disbursement of $3 million to the Land Titling project on September 21, 2005. Since 82 percent of approved projects are channeled through the Government of Indonesia Budget, the speed of dis-bursements is dependent on two external factors: 1) the speed of the Implementing Agency in prepar-

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

1 As of December 14, 2005, projects have spent approximately $18 million on its activities on the ground.

39

ing its budget work plan; and 2) the speed in which the Ministry of Finance is able to approve the work plan and issue the budget execution document (DIPA). As a result of delays in both these processes, disbursements have not been as fast as the Fund would have wished. The projects, however, sourced funds from alternative avenues to start implementa-tion while waiting for their grant. These funds are then reimbursed by the Multi-Donor Fund once the money starts flowing through their Government of Indonesia special account. All outstanding DIPAs were issued in mid-November and this allowed dis-bursements to accelerate significantly.

For projects with UNDP as the Partner Agency (namely the Technical Support for BRR and the Tsunami Waste Management projects), disburse-

ment occurs when the World Bank transfers funds to UNDP. This can only happen after the Fiscal Agency Agreement, governing the relationship between the Trustee and UNDP, is signed. Although the Agree-ment will only be signed in December 2005, this has not delayed implementation because UNDP acquired financing from elsewhere which will be reimbursed once the legal formalities are completed. The ability of all Multi-Donor Fund’s Partner Agencies to find in-novative solutions like retroactive financing in order to proceed with implementation, is a significant advantage of the Fund.

The speed of disbursements has accelerated signific-antly in December 2005. This is shown in Table 5, which expects total disbursements by December 31, 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

40

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

Initial Estimatein $ million

ExpectedDisbursements

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 82.00

Disbursements will continue to accelerate in 2006 and 2007. It is very common for disbursements to be initially slow during its establishment phase. A signifi cant part of the fi rst six months has been used to select projects suitable for fi nancing 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 fi rst two years of the operations, while disbursements are made during the middle two years.

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Table 7: Status of the Multi-Donor Fund as of December 14, 2005

in $ millionTotal 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 the second year of operation. This represents approximately $52.5 million.

Summary

Of the $525 million of pledges, the Multi-Donor Fund has allocated $296 million to projects. The Fund has aimed to keep administration costs to below two percent of total contributions, which is more than offset by 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 the BRR on the priority areas for use of the remaining resources.

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2 OPERATIONS

The core goal of the Multi-Donor Fund is to finance quality projects in a strategic, coordinated and timely manner. The Secretariat has established the following mechanisms to support this principle:

Steering Committee Meetings

Steering Committee meetings are attended by all members and observers, representing a diverse cross-section of the reconstruction community. At these meetings, the BRR provides an update on the status of reconstruction, which contributes to a discussion on strategic issues relating to the reconstruction as a whole and to the strategic direction of the Multi-Donor Fund. Another important part of this meeting is to review new project concept proposals and if consistent with the Fund’s strategic policy, to endorse these.

Donor Participation Initiatives

To benefit from the vast expertise available among the donors and to increase transparency in the Fund’s decision-making processes, donor participation at all stages of the concept and project evaluation processes is crucial. To this end, the Secretariat instituted technical review meetings and invited donors to participate in appraisal missions and supervision missions.

Technical Review meetings consist of a presentation from the proponent that is followed by a Q&A session. At these meetings, issues associated with concept and project design can be clarified and resolved.

Appraisal missions: after a concept is approved, the proponent and Partner Agency organize an appraisal mission to convert the concept to a detailed project plan. Donor participation provides them with a chance to be involved in the development of the project. Comments and questions from donors are a valuable input to improve the quality of project design and to prevent overlaps. In this way, a coordinated effort is made to ensure the quality of projects approved by the Multi-Donor Fund.

Supervision missions are organized on a regular basis to monitor project implementation. This provides donors the chance to see, first hand, the progress of projects that the Fund is financing. The mission verifies achievements and results received, and results from supervision missions provide material for further strategic development of the project.

Recovery Assistance Policy

Members identified the need to institute a policy that assists the Steering Committee to evaluate whether concept proposals put forward by the BRR are suitable for Multi-Donor Fund financing. This is documented in the Recovery Assistance Policy (Annex 1) which identifies the overall goal of the Fund, key priority sectors suitable for financing by the Fund, and key selection criteria for assessing concept proposals and projects. The first review of the Policy can be found in Annex 2.

Field Trip

Prior to the fifth Steering Committee meeting, the Secretariat organized a field trip for interested members to familiarize them with the KDP and UPP projects. Participants engaged in conversation with people in the affected communities and received a better and more personal understanding of their situation, how the projects were thus far progressing, and gained insight into the daily challenges the Acehnese face while coping with the aftermath of the earthquakes and tsunami. Visits were made to several sub-districts in the Municipality of Banda Aceh and Aceh Besar District. Due to the positive feedback from donors, the Secretariat intends to organize further field trips as more Multi-Donor Fund projects start implementation.

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3 COMMUNICATIONS

The Recovery Assistance Policy identifies the need for a communications strategy for a number of reasons: 1) to inform communities in Aceh and Nias of benefits and entitlements provided by projects financed by the Multi-Donor Fund; 2) to ensure visibility of the Multi-Donor Fund and its donors, individually and collectively; and 3) to maximize transparency to all stakeholders of the Fund.

The strategy identifies two main target groups:

• Information to Beneficiaries who need relevant and practical information. A variety of media tools are utilized. The Ombudsperson is the contact person for questions, complaints or issues on any of the Multi-Donor Fund financed projects. Projects are the most widespread and effective communication tools of the Fund and Newspapers and radio were used to disseminate information on the logo- competition. As of January 2006, radio, newspapers and pamphlets will be used to provide critical and practical information about the projects financed by the Fund.

• Information to Stakeholders (donors, media, government, NGOs, general public) seeking 1) general information about the Fund, and to maximize visibility of the Multi-Donor Fund. In line with the transparency guidelines, to ensure an accurate understanding of the Multi-Donor Fund and to create visibility for the donors, the Secretariat has produced and disseminated Newsflashes, Brochures, Leaflets, and Media Press Releases. Further, Minutes of Steering Committee Meetings, the publication of the Recovery Assistance Policy and being present at events, enlarge the transparency and visibility. All this information and more can be found on the Website www.multidonorfund.org.

The design of the Multi-Donor Fund Logo was inspired by winners of a competition sponsored by the Fund in the high schools of Aceh and Nias. It represents what the Fund stands for and introduces the donors and stakeholders.

The Tsunami Commemoration Activity. To give the people from Aceh and Nias an opportunity to share their views on the reconstruction efforts currently under way, the Multi-Donor Fund, with the help of facilitators and NGOs, distributed 100 disposable cameras to communities throughout Aceh and Nias. People were asked to reflect on ‘One day in the Recovery of Aceh and Nias’ and take photos accordingly to compete for a cash-prize. Forty photographs have been se-lected and will appear in an exhibition together with twenty pictures from professional photographers. The ‘Reflections on Aceh and Nias’ exhibition is to take place in Jakarta, Banda Aceh, Medan and Bali from 12-30 December, 2005. The exhibition is a joint event with the BRR, who will provide paintings, sculptures and installations from Acehnese artists. As part of the Art and Photograph exhibition, there will be live music performances and film screenings about Aceh.

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Logical Framework

Monitoring and evaluation of the Multi-Donor Fund portfolio is based on the Fund’s logical framework (logframe). The logical framework is designed to set the Recovery Assistance Policy document in a broader context that will (i) focus on verifiable results (both immediate deliverables, and longer term effects and impacts), (ii) highlight assumptions and risks, and (iii) permit a rapid review of the policy, in view of the need to periodically modify it. The logframe is a dynamic document that will be revisited when needed.

At the ‘Purpose Level’, targets have been set to reflect the six results as laid down in the Recovery Assis-tance Policy. These targets pertain to the longer term impacts of the Multi-Donor Fund. At the ‘Objec-tives Level’, the logframe provides indicators that refer to the implementing modes for both projects, and the overall efforts to support a coordinated reconstruction process in line with the Government of Indonesia’s strategy. At the ‘Output Level’, output indicators have been chosen that refer to widely used sector progress indicators sets to ensure compatibility and comparability of reports.

Assumptions and risks describe the conditions that need to be fulfilled so that the Fund can achieve its goals. Assumptions pertain to the stability of natural conditions, political stability in Aceh and progress in the peace process. They also refer to stable economic conditions for recovery, and a strong commit-ment of the Indonesian Government to the recovery process and to provide sufficient budget for it on all administrative levels.

4 MONITORING and EVALUATION

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Monitoring and Evaluation at the Project Level

Monitoring and evaluation of the Multi-Donor Fund as a whole will largely be built on project monitor-ing. Project monitoring therefore will also need to take into considerations the information needs of the Multi-Donor Fund as laid down in the logframe. Monitoring is done by the Implementing Agency, as well as by external agencies such as the media

or NGOs. The Partner Agency undertakes regular supervision missions (at least semi-annually), and is responsible for implementing surveys and studies such as mid-term and fi nal reviews. The Secretariat will also conduct surveys on selected issues, and a mid-term review. The Partner Agency reports back to the Secretariat that compiles regular updates on project status. Further the Secretariat is obliged to provide on a semi-annual basis a comprehensive report highlighting results and impacts.

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Flow of Information and Reporting

- Status updates on selected indicators- Problems/bottlenecks

Secretariat Surveys- Mid-term Review- Cross-cutting issues

Other sources of information

M. Yunus (29) “Coast Line”

Kreung Ateuh, November 4, 2005 (Refl ections of Aceh and Nias)

48

Indonesia is ranked amongst the world’s most corrupt countries. The current Government of Indonesia recognized and is responding to this problem. One of the fundamental objectives of the Government in establishing the BRR to oversee the reconstruction of Aceh was an attempt to reduce corruption. Similarly, the Multi-Donor Fund ensures that transparent mechanisms are implemented in the approval and disburse-ment of donor funds, as well as at all levels of project implementation. Donors strongly share the focus on establishing mechanisms to mitigate risks of corruption during the recovery process in Aceh and Nias. The Multi-Donor Fund’s approach to combat corruption is a multi-layered response.

Auditing the Multi-Donor Fund The financial management of the Multi-Donor Fund will be audited on a regular basis. The fund will regularly report on the findings of external audits concerning the adequacy of internal control over cash-based financial reporting. The Steering Committee has the right to request audits.

Mitigating corruption in projects At the project level, there are two anti-corruption mechanisms. First, projects will be monitored and evaluated regularly by their respective Partner Agencies. Monitoring and evaluation missions also provide an opportunity to check on compliance. Secondly, projects have tailored anti-corruption mechanisms to prevent graft. Especially where the World Bank is acting as Partner Agency, the development of an anti- corruption strategy is part of project planning (see Box). The World Bank is required to ensure that proceeds of any grant are used only for the purposes for which the funding was allocated, with due attention to consideration of economy and efficiency and without regard to political or other non-economic influences or consideration. This entails prevention through improved design for new projects, strengthening fiduciary supervision on on-going projects and enforcement via investigation of fraud and corruption cases. Further, funded projects can support government reforms in procurement and financial management. One important strategy regarding reconstruction activities in communities for instance is to create as much transparency at local level as possible, and hence social control.

In the Kecamatan Development Project, for example, all steps involved in financial management and disbursement have been simplified so that different stakeholders can easily understand and use them. All financial information is publicly displayed within the villages (e.g. price quotations for materials, labor costs etc.). Also, all transfers of funds require at least three signatures, including a facilitator and an elected

5 FIGHTING CORRUPTION

49

village member. Above the community level, KDP invites CSOs and other independent groups to inspect KDP sites, and grants access to documents. At the national level, transparency is created by sharing audit results with civil society oversight groups. KDP grants independent external monitors the right to go public with findings without prior consent of KDP.

Multi-Donor Fund projects where the World Bank is the Partner Agency must have an approved anti-corruption action plan. The following summarizes the plan that was developed for the Aceh Forest and Environment Project.

1. Enhanced disclosure provisions and transparency – through provision of information to beneficiaries and disclosure of information on procurement, auditing and regular evaluations 2. Civil society oversight – code of ethics for those involved in law enforcement, civil society involvement in monitoring livelihood activities, independent observation of procurement process 3. Complaint-handling unit – creation of independent entity that reports to the project coordination unit and informs the BRR, designated complaints handling officer for each of the two project regions 4. Mitigating collusion, fraud and nepotism – strengthened financial controls, e.g. quarterly financial planning, additional training of financial and procurement staff, annual audits 5. Mitigation of fraud and forgery risks – internal and external controls and monitoring for project financial staff 6. Sanctions and remedies – evidence of corruption, collusion or nepotism in all procurement contracts will result in termination of the contract, possibly with additional penalties imposed (both implementing NGOs have provided evidence of past enforcement)

Through its holistic forest resource monitoring system the project will help combat corruption in Indonesia. Monthly satellite photos and aerial patrols help check information from the ground teams. Second, the forest guardians will not always be working in the same area, and exchanges between the north and south patrolling teams will build skills, allow for cross-checking and also provide greater transparency. Third, transparency mechanisms like village-level bulletins, press reports, and regular public accountability reports will be issued, allowing communities to help monitor what is happening in the field. Any forest cutting in the core protected areas is illegal and will be identified through one or more of these monitoring processes. Further illegal wildlife trade networks will be identified through wider networks of informed individuals, community members.

Example of an Anti-Corruption Action Plan

The Ombudsperson The Multi-Donor Fund has established an ombudsperson to receive and manage complaints about projects financed by the Fund. Complaints will be handed over to the relevant party for resolution, and monitored. Apart from this, several projects have their own complaints systems, especially those being implemented at the community level.

Complaints Handling at the BRR The BRR has set up an Anti-Corruption Unit. The unit engages in prevention, investigation and education/ integrity enhancement. It also provides guidance on ethical issues, based on to the rules of conduct estab-lished by the BRR.

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ANNEXES

53

RECOVERY ASSISTANCE POLICY1

Purpose The purpose of this document is to set out the assistance policy of the Multi-Donor Fund for Aceh and Nias (Multi-Donor Fund). It is intended to guide those interested in obtaining funding as well as the Multi-Donor Fund Steering Committee and Secretariat. The policy paper contains: i) background information; ii) approach using a Logical Framework; iii) Multi-Donor Fund Steering Committee expected goals and results; iv) the Multi-Donor Fund comparative advantages and disadvantages, v) financing policy; (vi) implementation policy; vii) sectoral policy; and viii) operationalization of the policies in the form of a mission statement and decision-making criteria for the Multi-Donor Fund Secretariat and the Steering Committee.

I. BackgroundBrief history. In response to the Government of Indonesia’s request for coordination, several donor partners have, together with the Government, established a Multi-Donor Fund for Indonesia’s earthquake and tsunami-related recovery program. Initial contributions are expected to amount to over US$520 million. Private sector partners, foundations and non-governmental organizations are also welcome to contribute to the Multi-Donor Fund, subject to review by the trustee.

The Multi-Donor Fund supports the rehabilitation and reconstruction needs of Aceh and Nias in the wake of the earthquakes and tsunami. It may provide two types of support:

a) financing of new projects or new components of existing projects (including the purchase of goods, services and equipment), including co-financing of existing or new projects supported by multilateral agencies or other financiers.

b) assistance for Government programs that are part of the rehabilitation and reconstruction effort. This would support sectoral or multi-sectoral programs with funding in tranches that would be disbursed against the achievement of performance indicators.

Both types of financing are contingent upon a strong governance structure for the recovery program as a whole, including fiduciary, management, and stakeholder participation components. Rules and procedures acceptable to the trustee apply to both project and program financing. In both cases, most of the fund expenditures are intended to be primarily on the Government’s budget with funds flow-ing through the Treasury using dedicated, monitorable and reconcilable accounts. Quick-disbursing resources outside of the budget can also be provided, where this would make the use of funds more ef-fective. However, it is expected that over time the portion of funds utilized outside of the budget would become less and less.

54

Structure. The Multi-Donor Fund is governed by a Steering Committee (SC) consisting of Govern-ment, donors and representatives of civil society. The latter are nominated by the Supervisory Board of the Aceh Recovery Agency (BRR). Other key individuals, such as the United Nations Coordinator and a representative of the international NGO com-munity are represented in the SC as observers for coordination purposes. The SC meets on a regular basis probably monthly at the outset, quarterly later in Jakarta, Banda Aceh or Medan, to review and en-dorse proposals as well as to discuss donor coordina-tion, recovery program policies and implementation progress. Endorsement and other procedures are specified in a set of operational guidelines approved by the Committee.

The SC is co-chaired by the Head of the Badan Rehabilitasi dan Rekonstruksi, the trustee and the largest donor contributor. The trustee also serves as secretariat for the SC to organize its agenda, minutes and disclosure of public information. Each of the donors who have contributed US$10 million or more have a full seat on the SC, while smaller members can pool their contributions to reach or exceed the threshold and thus obtain a seat on the Committee.

Strategy. The Multi-Donor Fund SC will be guided by the Government’s strategy. All activities of the Multi-Donor Fund will be consistent with and guided by the Government’s Master Plan, and under the leadership of the BRR. The Master Plan, which is expected to be an evolving document, sets out a broad program and principles by which the recovery will take place, and the SC will be guided by these. The BRR is currently refining a detailed strategy for implementing the recovery program; the SC will seek to be a fully supportive source of funding and technical assistance in this process.

The Need For a Policy. While the SC strategy is clear, there is a need for a policy for several reasons. First, during the first few months of operation there is an inherent tension within the SC between the need for moving quickly to ensure a speedy recovery and the desire to prudently review funding proposals within a strategic decision-making frame-work. Second, the resources of the Multi-Donor Fund are finite and certainly less than the financing needs

of the recovery program. Thus, the SC needs a policy that will provide rules and guidance for prioritizing investments to meet the urgent financing needs of the recovery process. This paper forges such a policy.

Recovery Assistance Policy Review Process. The policy set forth in this document represents the current state of knowledge about the rehabili-tation and reconstruction program, the compara-tive advantages of the Multi-Donor Fund and the policy environment for development in Aceh and Nias. However, these are all likely to change over time, possibly requiring modifications in policy. This should be carefully monitored by the Secretariat and SC. It is proposed that the Secretariat’s semi-annual progress report include an evaluation of the applica-tion and relevance of this policy document, identify-ing any areas for improvement. If warranted, the SC should then review the need for updating its policies and approve any necessary changes.

II. Use Of A Logical Framework

Clear indicators to measure the expected results of the Recovery Asisstance Policy have been genetrated through the development of a logical framework. The framework and its indicators will provide the overall vision (Goal) of the Multi-Donor Fund and will use a standardized format for easy stakeholder review, reference, monitoring and evaluation. It will help put the policy into a broader context that (i) focuses on verifiable results (both immediate deliverables, and longer term effects and impacts), (ii) highlights assumptions and risks, and (iii) in view of the need to periodically modify the policy, permits a rapid review and examination of it. The logical framework has been presented to the SC for consideration and will be revisited on a regular basis to assure correspondence with the Multi- Donor Fund portfolio and its policy document.

III. Multi-Donor Fund Goal and Expected Results

The overall goal of the Multi-Donor Fund is to efficiently and effectively contribute to the recon-struction of a better Aceh and Nias following the earthquakes and tsunami. In this context, a “better”

55

Aceh and Nias means not only improving infrastructure in accordance with the Government’s Master Plan, but also adhering social concerns such as reducing poverty, improving livelihoods, and increasing equity.

This overall goal will be accomplished by:

• Pooling donor resources to support a mutually- agreed portfolio of projects and programs;

• Working through and within the Government’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 on progress in the recovery process;

• Having funds flow through the Government 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 expected results from achieving the above goal would be:

• Communities/community infrastructure regenerated

• Poverty reduction

• Livelihoods restarted

• Larger infrastructure repaired

• Governance rebuilt

• Environment sustained

Several donors to the Multi-Donor Fund have advised that their main focus in supporting the fund is to achieve such results. Bearing in mind the expected diverse nature of the Multi-Donor Fund portfolio across several priority sectors, both on- and off-budget, with different supervising/ monitoring Partner Agencies, it is essential for the Secretariat to determine appropriate macro-indicators, baseline values, and deliverable outputs.

IV. The Multi-Donor Fund’s Comparative Advantages and Disadvantages

The Multi-Donor Fund is unique in that it is charac-terized by: a) participation of key partners in the donor community, Government and civil society through its SC; 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

56

as programs that are not earmarked in advance; d) a common concern with promoting good gover-nance and combating corruption; and e) the accu-mulation 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. These characteristics result in a distinct set of com-parative advantages as well as limitations that have consequences for implementing the recommended policy.

Comparative advantages

Given this context, the comparative advantages of the Multi-Donor Fund include:

A capacity to access cross-country experience, and to see the big picture. Because of its unique composition and information resources, the SC and its Secretariat are able to draw on data, reports and analysis to obtain an overview of what is needed, what is happening and what remains to be done with the recovery process in Aceh and Nias. Mem-bers and currently accepted partner agencies can draw on knowledge well beyond Indonesia to identify models of good practice when it comes to post-disaster and post-conflict rehabilitation and reconstruction.

A capacity to respond directly to BRR guidance. The Multi-Donor Fund is unique among foreign funded support for Aceh and Nias, in that the head

of the BRR co-chairs the Steering Committee and submits every request to the Fund. This should enable a rapid response in real time to the emerging views of the BRR.

Coordination with donors and other stakeholders. The SC can support the BRR in its efforts to bring donors, Government, and other stakeholders, together to discuss aid coordination in the recovery process. The SC should have the know-ledge and policy commitment to ensure that its activities complement other donors’ activities.

Links to Government. Donors who choose to fund the Multi-Donor Fund, while appreciating the supplementary role and potential advantages of off-budget funding, also recognize the legitimate role of the Government in key areas of the recon-struction. The decision to place funds on-budget is done so with a clear purpose. Such funds, linked to government activities and policies (at the central, provincial and local levels) can influence policy, and play a positive role in strengthening public sector capacity beyond the lifetime of the BRR.

Experience of on-the-ground community-driven development in Aceh. The currently accepted Part-ner Agencies and other members of the SC have been supporting projects and programs in Aceh over the past years, giving them a good sense of what does and does not work in the local context.

Commitment to good governance. The SBY admini-stration has made clean government a priority and

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the donor members of the Multi-Donor Fund share a concern with transparent, accountable and par-ticipatory approaches to recovery, and several have significant technical experience in designing anti-corruption measures.

These comparative advantages allow the SC to pursue its stated policies in several ways. It is well- positioned to identify and act on funding gaps because of its capacity to see the big picture of development needs and opportunities in Aceh and Nias as well as its special relationship with the BRR. It can foster activities that enhance the quality of the recovery process because of its access to inter-national good practice, its experience with commu-nity-driven development in the affected areas and its capacity for coordination with donors and other stakeholders. The SC is capable of supporting different implementation capacities over time because of its reliance on community-based approaches, its working relationship with the BRR and its common concern with good governance, particularly at the local level. Finally, the SC is able to utilize Multi-Donor Fund to contribute to environ-mentally and social sustainable development due to its accumulated experience and its links to the Government at a policy level.

Comparative disadvantages

The Multi-Donor Fund is designed to work through partner agencies to appraise and supervise projects as well as programs. Any international development

institution (both bi-lateral and multi-lateral) may be designated as the partner agency for a particular activity so long as its own fiduciary framework and governance arrangements, policies and procedures, including audits and procurement procedures, are acceptable to the World Bank as Trustee and to the SC. Currently, only the World Bank, the ADB, and selected UN agencies are designated as Partner Agencies. These multilateral organizations have relatively expensive cost structures because they are international in nature. Thus, a limitation of the Multi-Donor Fund is that it would not be a cost-effective means of financing a large number of small grants.

V. Financing Policy

In view of the fact that, in the case of small grants, the costs of appraisal and supervision would likely be equivalent to a significant percentage of the grant itself, a corollary financing policy of the SC should be to focus on larger grants (for example, US$1 million and up). This would not preclude creating a dedi-cated project in the form of a larger off-budget grant facility to a Partner Agency that has the structure and expertise to provide small grants in a cost-effective manner directly for smaller activities that meet pre-selected criteria.

The SC also recognizes that the development pro-cess in Aceh and Nias will be dynamic and subject to change over time. Needs are likely to emerge that have not been anticipated in the Master Plan. The outcome of the peace process will have a significant

58

impact on the opportunities and pace of develop-ment. There will also be a need to support local government capacity in the longer term. This suggests another financing policy – that a portion of Multi-Donor Fund resources be retained to support financing needs that emerge after the second year of the recovery process. The actual portion, which may change over time, will be decided by the SC based on analysis provided on a regular basis by the Secretariat. At its fourth meeting on 28 July 2005, the SC decided to hold 10 percent of the pledged amount in reserve.

VI. Implementation Policy

This section outlines the key elements of the SC policy for assessing appropriate implementation arrangements.

Bearing in mind the comparative advantages of the Multi-Donor Fund listed above, all projects and programs that will be financed by the Multi-Donor Fund should: a) enhance the quality of the recovery process; b) use and build different capacities for implementation over time; c) reduce poverty d) support good governance; e) contribute to sustainable development; f ) promote gender equity; (g) achieve, to the extent possible, a geographic balance throughout the affected areas; and (h) be conflict sensitive; and share the workload among Partner Agencies.

A) Enhance the quality of the recovery process. Working with the BRR, the SC can catalyze initiatives that are both efficient and effective in several ways. First, marrying international good practice with local knowledge can help to improve the design and implementation of initiatives financed by the Multi-Donor Fund. The marriage of global and local occurs in the Multi-Donor Fund process when international partner agencies work with local implementing agencies through participatory approaches in the appraisal of specific projects and programs. Next, the SC should finance activities that are the “centers of gravity” or model approaches in their sector or geographical area. Lastly, the Multi-Donor Fund can enhance quality by investing in projects and programs that maximize opportunities for coordina-tion with other partners. Linking with other stake-holders working in the same area will increase synergies, decrease the potential for duplication, promote the sharing of knowledge, and improve the overall efficiency of resource utilization. All of these factors should help add to the quality of what is supported by the Multi-Donor Fund. It is also one of the key reasons why the Government requested that the Multi-Donor Fund be established in the first place.

B) Use different capacities over time. One of the special characteristics of the Multi-Donor Fund is that it can be utilized over a five-year planning horizon, using different capacities at different times. The Fund can thus invest in short, medium and long-term capacity building. In the first phase the

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Fund has sought to use whatever existing capacity could be found. In the case of Aceh, an important piece of social capital that remained relatively intact following the disaster was the network of communi-ty facilitators. Such a delivery mechanism embodies a community-driven approach. In the longer term, i.e. through to the end of the five-year planning horizon, it is essential to rebuild the local institutions that can deliver public goods and represent local interests in a sustainable manner into the future. The actors capable of doing so are local government and local civil society organizations. These differentiated time horizons imply that the SC should invest in:

• community-driven development, especially in its initial activities, in order to utilize a delivery mechanism that is more or less still intact and strengthen its capacity; • building the capacity of the BRR from the beginning so that the agency can be increasingly effective in coordinating recovery efforts and articulating an evolving development strategy for Aceh and Nias; and • strengthening the capability of local authorities and civil society groups so that when the BRR closes its doors there remains a vibrant and accountable governance structure.

C) Reduce Poverty. Poverty is an unacceptable human condition in the 21st century. It is charac-tarized by a lack of access to essential goods, services, assets, and opportunities to which every human being is entitled. Everyone should be free from hunger, should be able to live in peace, and

should have access to basic education and primary health care services. Poor households need to sustain themselves by their labor and be reasonably rewarded and should have a degree of protection from external shocks, be they natural or economic. In addition, individuals and societies are also poor—and tend to remain so—if they are not empowered to participate in making the decisions that shape their lives. In addition to being aligned with GOI’s national poverty reduction strategy, the SC will invest in activities in Aceh and Nias that will (i) achieve propoor, sustainable economic growth; (ii) be inclusive of social development as well as infrastructure; (iii) use bottom-up community driven participatory approaches, and (iv) promote good governance. These are closely linked, mutually reinforcing, and are expanded on elsewhere in this Implementation Policy.

D) Support good governance. The concern with good governance is not just about corruption; it also involves transparency, accountability and participation.

The Multi-Donor Fund portfolio, as a program, should maintain a transparent decision-making process and both the SC and the Secretariat should maximize the availability of its documentation to the public. To ensure more effective participation in relief and reconstruction efforts and in the process of making decisions on issues which impact them, affected communities need accessible and under-standable information about relief and reconstruc

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tion efforts as well as about relief and compensation benefits they are entitled to. The SC will implement a separate comprehensive and harmonized informa-tion policy that upholds internationally recognized access to information standards, and should encourage other donors and the BRR to do the same. The strategy will make use of appropriate formats and of local languages to ensure ease of access by local communities.

The SC will also be held accountable at variable levels – to contributors who are placing money in the Multi-Donor Fund, to the shareholders of the Partner Agencies that will be appraising and supervising each activity, and to the people of Aceh and Nias who are counting on it to deliver needed goods and services for the recovery. Individual activities will also need to embody the principles of good governance.

Multi-Donor Fund -financed initiatives should use participatory processes for design and implementation. While stakeholder participation in project/program preparation and execution is widely accepted, it is particularly challenging in a post- disaster setting where communities have been decimated and traumatized. This suggests that, in addition to respecting and building on existing capacity for participatory planning and management, innovative and sensitive approaches will be needed.

The SC should seek to support the efforts of BRR and others to enhance the capacity of district governments to become powerful contributors to reconstruction. This is particularly necessary as – it

is increasingly clear – a critically important gap is in the provision of meso-level infrastructure. Rebuild-ing the larger infrastructure will not be easy, but at root is relatively straightforward. At the other end of the scale, small infrastructure will be built through community-driven development approaches. The true weakness lies in the middle level, such as district-level roads and water/sanitation systems. These are beyond the scope of most NGOs and are the natural preserve of local authorities. However, in Aceh and Nias, the district governments do not have the capacity or, often, the motivation. The SC should support efforts to strengthen planning and imple-mentation capacities, improving incentives for good performance and strengthening controls to guard against bad practices.

E) Pursue sustainable development policies. In the rush to reconstruct, lessons learned about environ-mental and social sustainability may be overlooked because they might be construed as impediments to rapid development. Short-term benefits are usually swamped by long-term costs when sustainability is ignored.

Questions of environmental sustainability abound in many of the key sectors for recovery such as housing, coastal zone management, road construc-tion, agriculture, and water resource management. To ensure environmental sustainability in such sec-tors, the SC should support environmental assess-ments, as and when required in accordance with Government and Partner Agency policies, and the

“Timber for Aceh” initiative, so as to avoid environ-mental degradation and deforestation.

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Similarly, social sustainability is at the forefront in discussions about community development, gen-der roles, religion (e.g. shariah legal practices), and social capital. In particular, the SC should endeavor to maximize active participation of affected com-munities in relief and reconstruction decisions so as to minimize the risk of corruption in the delivery of aid. From the earliest stages of relief, through to the design, implementation and evaluation of long-term projects, such communities should be enabled to articulate their needs, assist in devising reconstruc-tion plans, as well as evaluate end-results.

F) Gender. Although embedded in the pursuit of sustainable development policies in item D) above, special emphasis should be placed on gender roles. The SC should ensure that projects funded from the Multi-Donor Fund include special design features and strategies that (i) address the root causes of vulnerability, including gender and social inequali-ties, (ii) facilitate and encourage meaningful oppor-tunities for women’s involvement i.e. are participato-ry in their approach, and (iii) ensure tangible benefits to women in the economic recovery process, while being sensitive to cultural issues Improving the sta-tus of women and promoting their potential roles in the reconstruction effort is seen not just as an issue of human rights or social justice, but as being a cru-cial element to achieving sustainable development.

G) Geographic balance and avoidance of regional disparity. It is appreciated that some activities fund-ed by Multi-Donor Fund will, by their very nature, be spread throughout most of the affected region, whereas others may have a much more localized

focus. In the case of the latter, and bearing in mind the finite resources of Multi-Donor Fund, the SC would like to ensure that, (i) when funding localized activities, they are not all focused in one affected area, and (ii) there is parity in terms of economic development across all regions of Aceh and Nias so as to avoid imbalances such as between urban and rural, and coast and hinterland and or conflict and/or non-conflict areas. This does not mean that the SC should necessarily restrict funding to only one activity in any given locality but rather, when examining the portfolio as a whole, the SC ensures that the Multi-Donor Fund support is not just supporting beneficiaries in localized areas but is spread among the needy to the extent possible.

H) Conflict sensitive approach. With positive de-velopments in the peace negotiations with GAM resulting in the signing of the peace accord on 15th August 2005, the responsibility of the BRR may be extended to address and integrate GAM-influenced areas into the reconstruction program as well as those areas affected by the earthquakes and tsunamis. If the BRR’s mandate is extended, then the SC would like to ensure that some of Multi-Donor Fund resources are also used to support develop-ment in these areas. In so doing, the SC would en-sure that any Multi-Donor Fund financed activities in those areas would (i) use non-partisan and transpar-ent coordination mechanisms, (ii) use independent implementing agencies, (iii) apply transparent exter-nal auditing, (iv) be community-driven, (v) integrate people, and (vi) promote dialogue in such a way that they do not unintentionally provoke further conflict or cause harm.

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VI. Sectoral Policy

This section outlines the key elements of the SC policy for assessing current sectoral gaps and priority sector needs. The SC is well-positioned to respond to the needs of the recovery process that are not being adequately addressed by other sources of finance (Government, bilateral donors, multilateral institutions, international NGOs, and the private sector) and which are expected to have a measurable impact within the selected sector1 in order to achieve the expected results as set out in Section II. The stocktaking exercise, “Rebuilding a Better Aceh and Nias,” (June 2005) can be used as a starting point for identifying such sectoral gaps.

The Government’s Master Plan estimates total reconstruction needs at US$5.1 billion. While the amount is similar to the US$5 billion of estimated damage and losses2, the composition of the two sets of estimates differ significantly. The Master Plan allocates much less to compensate for private losses2 and much more for public assets and infrastructure. This reflects the Government’s desire to rebuild much higher quality services and infrastructure than before the earthquakes and tsunami. Thus, only about half of the Master Plan is for reconstruction in the strict sense; the rest is to build a better Aceh and Nias. Given this background, the stocktaking identi-fies three types of funding gaps:

Damage and loss – this is the difference between the existing (or agreed) financing available and the original calculation of

damage and losses shortly after the disaster (January 2005)

Master Plan – this is the difference between the existing (or agreed) financing available and the financing needs identified in the Mas-ter Plan to partially compensate private losses and improve on pre-tsunami conditions

Core needs – this is the difference between the existing (or agreed) financing available and the minimum investment that would be required to build back Aceh and Nias to its pre-earthquake and disaster status.

The funding gaps emerging from each of these three scenarios is summarized for the various sectors in the table above. The policy of the SC should be to, at a minimum, address the substantial funding gaps that enable a full rehabilitation of Aceh and Nias to its pre-disaster situation. Once this has been achieved, remaining funds can be used to invest in improvements.

This implies an initial focus on the substantial core funding gap, which yields the following sectors that are listed in descending order, from greatest to least funding gap:

• Transport • Housing • Flood control and irrigation works • Environment • Energy

While there are also funding gaps in respect of Banking and Finance, Fisheries, and Communications,

1 Such impact can be assessed by means of clearly defined indicators and targets, achievable within the time frame of the activity, that are defined in the concept proposal. 2 This includes additional estimated damage and losses for the Nias earthquake of March 26, 2005 of U$400 million.

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these are less significant. As a check, it is useful to compare these selected sectors with the previously-stated expected results indicated in Section III. The gap analysis results in a selection of sectors that is consistent with the pre-established focus of several key donors, with the exception of governance where there appears to be adequate core financing.

The sectoral investment policy of the Multi-Donor Fund should thus be to initially focus on the sectors where there are substantial funding gaps to meet core needs. This suggests that funding in the short-

term should go to meeting financing gaps and/or resolving critical issues in: community infrastructure (particularly housing), repairing larger infrastructure (especially transport, energy, flood control and irrigation works), restarting livelihoods (fisheries and banking/finance could be included here although their funding gap is less significant) and the environment. In the medium term, the SC could also focus investment on the “building better” as-pects of the Master Plan, including rebuilding governance. This will have an accumulative effect and will help reducing poverty.

Funding Gaps in the Recovery

GAP

Damage & Loss

Master Plan Core Needs

(US$ millions)

Social Sector 612 -620 323

Education 176 -571 105

Health 258 129 130

Community, culture and religion 178 -179 88

Infrastructure and Housing -895 -1,387 -466

Housing -957 -88 -192

Transport -128 -737 -337

Communications 3 -16 -2

Energy -45 -440 -57

Water & Sanitation 195 -120 159

Flood control, irrigation works -126 -106 -146

Other Infrastructure 163 120 109

Productive Sectors -802 222 160

Agriculture & Livestock -152 21 8

Fisheries -413 6 -15

Industry & Trade -418 24 22

Manpower and transmigration 28 26 25

Cooperative and SMEs 154 146 120

Cross Sectoral -362 -355 -63

Environment -495 -85 -109

Governance & Administration (w. land) 147 -270 62

Bank & Finance -14 0 -16

TOTAL -1,447 -2,141 -47

Source: “Rebuilding a Better Aceh and Nias”, June 2005, World Bank, p. 55

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This policy document will have three immediate operational uses. First, it will provide potential project/program proponents with guidance as to the eligibility of individual proposals. This can be done in a succinct manner by developing a mission statement to back up the Multi-Donor Fund brand. Second, it will assist the Multi-Donor Fund Secretari-at with an initial assessment of project concepts that are received from the BRR. Third, it will help the Steering Committee decide on best use of funds between sectors and over time. These latter two uses of the policy document can be operational-ized in a set of decision-making criteria used initially by the Secretariat and subsequently by the SC for evaluating proposals.

Mission statement. A mission statement clearly communicates the purpose and nature of the Multi-Donor Fund to a general audience. It also reminds the stakeholders in the Multi-Donor Fund about what we stand for.

“The Multi-Donor Fund for Aceh and Nias is a partnership of the international community, Indonesian government and civil society to support the recovery following the earthquakes and tsunami. It contributes to the recovery process by providing grants for quality investments that are based on good practice, stakeholder participa-tion, and coordination with others. In doing so, the Multi-Donor Fund seeks to reduce poverty, (re)build capacity, support good governance and enhance sustainable development.”

Decision-making criteria. Criteria are needed in order to evaluate proposals from the BRR and decide what should be funded on a priority basis. These decision-making criteria should reflect both the implementation and sectoral policies. Initially they will be used by the Secretariat and its “Ad hoc Committee” to both evaluate and screen concept proposals. Thus, the SC will know that concept proposals recommended to it by the Secretariat for potential endorsement, will either meet all, or most, of the following:

Responding to needs – the concept and appraised activity should either fill a financing gap or help resolve critical issues within the priority sectors initially identified in Section III above;

Enhancing quality – the initiative being considered for financing should tailor recognized good practice with local conditions, serve as a reference point for other similar efforts and increase opportunities for aid coordination;

Building capacity – the potential investment should have an explicit short, medium or long-term capacity building effect, or a combination of impacts, in order to utilize or strengthen institutional resources;

Reducing poverty – the proposal should demon-strate poverty reduction interventions that can be short term (such as sustaining basic services to the poor); medium term such as targeted interventions); or long-term (such as those that build human re-sources, stimulate pro-poor growth, and encourage expansion of the private sector).

VII. From Policies to Operational Guidance

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Supporting good governance – the proposal should consciously seek to reduce opportunities for corruption while including measures to maximize transparency and accountability. The final (appraised) initiative should be prepared in a participatory fashion and be implementable with the involvement of stakeholders;

Pursuing sustainable solutions – the proposed activity should be assessed as to whether it will contribute to environmental and social sustainability. Greater weight should be given to proposals that improve sustainability rather than just mitigate negative impacts;

Gender – the proposed activity should, where possible and appropriate, include features and strategies to facilitate and encourage women’s involvement and ensure tangible benefits to women while being sensitive to cultural issues;

Geographic balance and avoidance of regional disparity.– if the proposed activity is not spread but focuses on one locality then a check should be undertaken to ensure that (i) there are not too many Multi-Donor Fund – financed activities in the same locality and (ii) the activity will not cause economic development disparities;

Conflict sensitive approach – if the activity is proposed to take place in areas affected by the conflict, then the activity would be checked so as to ensure that it will not unintentionally provoke further conflict or cause harm;

Partner Agency workload – a check should be made that the work of monitoring and supervising Multi-Donor Fund -financed activities is shared more or less equitably among designated Partner Agencies.

These criteria have been employed to create the attached evaluation template that can be used by the Secretariat to evaluate and screen concepts for the Steering Committee. The template also presents statistical information on the implications of finan-cing a particular proposal so as to better inform Steering Committee decision-making.

VII. Summary of the Policy

The key policies embodied in this statement to guide the Multi-Donor Fund are:

Financing policy – the Multi-Donor Fund should focus on financing larger grants and should retain a portion of its resources to meet financing needs that emerge after the second year of the recovery process.

Implementation policy – all projects and programs that will be financed by the Multi-Donor Fund should: a) enhance the quality of the recovery pro-cess; b) use and build different capacities for imple-mentation over time; c) support good governance; d) contribute to sustainable development, e) consid-er gender issues, f ) have a geographic balance over the affected areas, g) an equitable workload among acceptable Partner Agencies, h) be conflict sensitive, and i) avoid regional disparities.

Sectoral policy – respond to the needs of the recovery process that are not being adequately addressed by other sources of finance through financing and/or addressing critical issues. Such priority sectors may change over time and also when the SC decides to not only fund core needs but also improvements.

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Evaluation of Concept Proposals Submitted for Multi-Donor Fund Grant Financing

BRR Ref. No. : Proponent:

Date Received by BRR: Project

Name:Date ReceivedBy Secretariat:

Proposal would be ON ❑ or OFF ❑ the Government’s budgetIf funded, XX% of approved Multi-Donor Fund financing would be ON the Government’s budget

Decision-making Criteria0 = Non compliance 5 = Full compliance Comments

Responds to needs by either filling a financing gap or resolving critical issue(s) in a priority sector

If funded, XX% of approved Multi-Donor Fund funding would then be in sector YY

Enhances quality by tailoring good practice to local conditions, serving as a reference point and enhancing aid coordination

Builds capacity in the short, medium and/or long term.

Is the project driven by the community?

Can the project be directly or indirectly considered to reduce poverty ?If directly, what specific interventions?

Supports good governance by controlling corruption, transparency and accountability, and stakeholder participation

Supports environmentally and socially sustainable development

Includes features/strategies that facilitate and encourage the involvement of women and provides them with tangible benefits

If the activity focuses on one locality have there been any other Multi-Donor Fund -financed activities in the same locality? If funded, how would the geographic distribution of the Multi-Donor Fund portfolio change?If located in a GAM-influenced area will it be conflict sensitive? Would the activity cause regional disparity?

Fiduciary Criterion0 = Non compliance 5 = Full compliance Comments

Corresponds with policies and procedures that are acceptable to the Trustee

If funded, XX% of approved Multi-Donor Fund funding would be with Partner Agency YY

Additional Comments (where appropriate, include risks assessment, cost effectiveness, potential for rapid implementation, and list all issues raised during appraisal if not covered above):

If funded, activity would represent XX% of approved Multi-Donor Fund funding and YY% of remaining resourcesRecommended for Concept Endorsement by Multi-Donor Fund Steering Committee

(Y/N) Secretariat Endorsement

Signature Date

*O = Non compliance , 5 = Full compliance

Secretariat Concept Note Evaluation Form

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RAP: A Review2

The Steering Committee’s Recovery Assistance Policy, approved at its fourth meeting on July 28, 2005, provides guidance to the Multi-Donor Fund and its partners on how limited resources should be used to best support the recovery process. A copy of the Policy can be found in Annex 1. This section reviews how the elements of the Policy have been applied over the first six months of the Multi-Donor Fund and identifies several key lessons that can be used to update the Policy in order to make it more relevant.

Financing Policy

The financial section of the Policy recommends that the Multi-Donor Fund should support larger grants ($1 million and up) and that a portion of pledged funds should be set aside to meet needs during the second year of reconstruction. During its first six months, the Multi-Donor Fund has applied the grant size limitation in one case, returning a BRR request for a small grant of $56,000 on the grounds that it could not be efficiently appraised and supervised according the Operational Manual procedures. The smallest project concept approved to date is for $3.7 million. Thus, the initial financing policy has been successfully followed and is still deemed appropriate.

However, the Policy also recognizes the need for flexibility in being able to finance worthwhile but smaller requests for funding. To do so, the Policy suggests that an off-budget grant facility could be developed through a Partner Agency. This is being partially achieved through the Support to Strengthen the Role and Capacity of Civil Society Organizations in the Recovery of Aceh project to be implemented by the UNDP as Partner Agency.

The idea of a reserve fund was approved by the Steering Committee at its fourth meeting where it decided to hold 10 percent of the amount of pledges for 2006 (the second year of the recovery). This has been respected both through financial planning and actual decision-making. In quarterly financial reporting, the 10 percent amount (currently $53 million) is shown as a reserve that cannot be allocated during 2005. In practice, the Steering Committee has approved $299 million in projects and concepts, leaving $231 million available for 2006 and beyond which is well above the 10 percent reserve.

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Implementation Policy

All projects and programs that will be financed by the Multi-Donor Fund should: a) enhance the quality of the recovery process; b) use and build different capacities for implementation over time; c) reduce poverty; d) support good governance; e) contribute to sustainable development; f ) promote gender equity; g) achieve, to the greatest extend possible, a geographic balance and parity; h) be conflict- sensitive; and i) share the workload among Partner Agencies. What follows is a brief assessment of how well each implementation criterion has been applied.

QUALITY – The World Bank and UN agencies (Partner Agencies), working with well-selected implementing agencies, have been able to com-bine international good practice with the local knowledge obtained through their presence on the ground. A good example would be the Land Titling Project which has brought in experience from the Middle East on capacity building and has facilitated a hybrid approach that respects both community practice and Indonesian land laws. Similar sound expertise has been mobilized for other projects such as for housing, infrastructure and logistics.

BUILDING CAPACITIES – Implementation has been guided by this criterion as:

a) the initial package of four projects apply a community-driven approach to development that aims at empowerment and increasing the capacities of the local population though intensive training;

b) a special grant of $14.7 million was approved to provide technical support to the BRR, and several other projects provide substantial training for local government staff (Land Titling Project, Urban Poverty Program, Waste Management Project, Aceh Forest and Environment Project);

c) a dedicated project to build the capacity of CSOs has been authorized for appraisal, while other projects will involve NGOs and the media as monitoring agents; and

d) discussions are under way with the BRR and others to develop a local government support project.

POVERTY REDUCTION – No one project in the current portfolio is explicitly designed to reduce poverty. Most, though, will contribute to alleviat-ing poverty, for example through the provision of property rights, housing stock that can serve as collateral, infrastructure to meet basic needs, micro-credit for informal sector entrepreneurs, cash-for-work, or labor-intensive employment for unskilled workers, skills training, and facilitating the flow of goods to devastated poor communities. Eventually, the community-driven approach increases the voice of the poor by institutionalizing their representation throughout planning and implementation.

GOOD GOVERNANCE – The Multi-Donor Fund has applied this criterion in several ways. The Steering Committee and Secretariat have main-tained transparency by making all key documents publicly available. The Secretariat has developed and is implementing a communications strategy to keep stakeholders fully informed. Participatory

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processes are used in the design and implemen-tation of almost all projects. Community-driven processes are designed to increasing transparency. Work is ongoing to design a project that will support district governments with planning, implementation and anti-corruption measures.

SUSTAINABLE DEVELOPMENT – All projects must be reviewed for environmental and social impacts, including any necessary mitigating measures that will be addressed through project implementation guidelines. The Steering Committee has approved two projects that directly contribute to environmen-tal sustainability – the Tsunami Recovery Waste Management Project and the Aceh Forest and En- vironment Project – for a total of over $28 million.

GENDER – The Steering Committee has not yet approved a project where gender is the key theme. Rather, individual projects have sought to include gender sensitivity in their design. For example, the Land Titling project has special procedures to protect the land ownership rights of widows and orphans, and KDP has developed a separated planning stream for women to include their needs in village development. Projects creating short- term employment have been sensitive to creating job opportunities for women (e.g. 40% short-term employment rate for women in the Waste Manage-ment Project).

GEOGRAPHIC BALANCE – The portfolio has sought to avoid regional imbalance by investing in both comprehensive and location – specific projects. Whereas KDP and UPP strive for a full coverage of rural and urban areas, the actual presence of the

other projects is determined by identified needs for reconstruction. If an area is sufficiently supported by other actors on the ground, the Multi-Donor Fund will not engage, in this way preventing the creation of imbalanced development. The Aceh Forest and Environment Project focuses largely on develop-ment of non-coastal and highland communities, thus creating a balance with coast-centered recon-struction.

CONFLICT SENSITIVITY – None of the approved projects and concepts have been evaluated as pro-voking further conflict. Some projects actively seek the involvement of ex-combatants, e. g. the BRR has an open-door policy for hiring ex-GAM members, and the Technical Support Project supports their ability to do so. The Waste Management Project recruited former GAM-members for waste-related work. The Aceh Forest and Environment Project will be active in areas that were “off-limits” GAM territory until the signing of the peace agreement, and thus contribute to a more regionally balanced develop-ment in conflict and non-conflict areas.

SHARED WORKLOAD – The World Bank has been selected as Partner Agency for eight of the 13 approved projects and concepts (62%) while the UNDP is Partner Agency for four project (31%), and the WFP for one project (7%). The situation is less balanced when it comes to volume: World Bank-su-pervised projects and concepts amount to $226.2 million (77%) while those for UNDP total $45 million (15%), and WFP totals $24.6 million (8%). Opportuni-ties for the ADB, UNICEF and WHO to serve as Partner Agencies have not yet emerged.

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Sectoral Policy

Based on a gap analysis, the Multi-Donor Fund is committed to meeting fi nancing gaps and/or resolving critical issues in: community infra-structure (particularly housing), repairing larger infrastructure (especially transport, energy, fl ood control and irrigation works), restarting liveli-hoods, environment, and rebuilding governance

The table below summarizes the sectoral division of the portfolio to date.

Based on this analysis, the Multi-Donor Fund has most heavily invested in community infrastruc-ture but not at all in livelihoods. However, this is somewhat misleading as a number of projects contri-bute to livelihoods though this is not their primary objective. For example, the Urban Poverty Project provides micro-credit to small businesses, the Rural Road Rehabilitation Project upgrades skills, and the Land Titling and the Housing and Settlements Projects help people with home-based businesses get back on their feet. Overall, the portfolio could become more balanced in the future with greater emphasis on sectors other than community infrastructure.

Projects by sector In $ million

Housing

Housing and Settlements 85.00

Community Infrastructure

KDP 64.70

UPP 17.96

Larger Infrastructure

Rural Road Rehabilitation 6.00

Lamno-Calang Road 11.50

Flood Mitigation 4.50

Sea Delivery & Logistics 24.60

Port Rehabilitation 3.70

Environment

Aceh Forests and Environment 14.05

Tsunami Waste Management 14.50

Governance

Land Titling project 28.50

Technical Support for BRR 14.70

Strengthening CSOs 6.10

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Grant Amount $28.5 million

Date Approved 24 June 2005

Implementation Period August 2005 - June 2008

Funding Stages 2005 $3m, 2006 $11m, 2007 $10m, 2008 $4.5m

Geographic Area All earthquake and tsunami affected areas in Aceh and Nias

Partner Agency World Bank

Implementing Agency National Land Administration Agency (BPN)

Funding Recipient Ministry of Finance (for on budget funding to BPN)

Reconstruction of Aceh Land Administration System Project

Project Fact Sheets3

The Land Titling project identifies land ownership and issues land titles through community land inventory, recovery of land records, and establishment of a land database. Over three years, an es-timated 600,000 land owners in Aceh and Nias will receive legal title documents which will provide them with a solid foundation for restarting their lives.

The importance of secure property rights cannot be underestimated. It is only after land ownership has been settled,

can a community is able to start reconstruction of houses and infrastructure under conditions of legal certainty. On

a more individual level, land titling documents provide land owners with access to credit, with their land as collateral.

Prior to the tsunami, up to 75% of land property rights in Aceh had not been officially registered.

All land ownership is restored through a multi-tiered process. Community land mapping is mostly facilitated by NGOs,

in accordance with the National Land Agency (BPN) decree for community-driven adjudication. In a second step,

adjudication teams from BPN conduct adjudication. Land is measured and community agreements on land parcel

ownership and boundary demarcation validated. The results of land mapping are checked against pre-tsunami satellite

pictures, government records and recovered land title documents. Eventually, the Land Agency issues a public notifica-

tion of adjudication, followed by registration and issuance of the land titles. All services are free of charge.

In order to ensure the property rights of the most vulnerable, the ownership rights of widows and orphans have

specifically been protected by a process that is in agreement with sharia law and local practices. Community

leadership will form custodianship for underage inheritors. Finally, to facilitate a sustainable recovery of property rights,

the project supports the restoration of BPN Offices in Aceh and Nias and the establishment of a land titling database

and cadastre.

Nias

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This project provides block grants directly to villages to use for rebuilding. This will support restora-tion of community infrastructure in up to 3000 villages.

After the tsunami and earthquakes washed away hundreds of communities, a key challenge for the reconstruction

program was to identify mechanisms that can reach large numbers of affected villages quickly in ways that provide a

maximum amount of resources directly to the villagers while maintaining effective corruption mitigation measures.

The community-driven development structures established by KDP guide communities to decide and map out what

their priority needs are in terms of tertiary infrastructure, such as roads, schools, sanitation, water supply, other commu-

nity buildings such as assembly halls and markets. The Multi-Donor Fund for Aceh and Nias supports the expansion of

the KDP project from former partial coverage to area wide village coverage in all of Aceh and Nias.

The largest part of the provided funds (79%) will be directly transferred to sub-districts as un-earmarked block-grants.

All communities prepare community recovery plans and prioritize activities for funding in a participatory manner. KDP

has a solid multi-layered control mechanism to prevent corruption throughout planning and implementation of

projects, including a sound transparency policy and a complaints system.


Date Approved 26 July 2005

Implementation Period September 2005 - June 2007

Funding Stages 2005 $23m, 2006 $30m, 2007: $11.7m

Geographic AreaAll tsunami affected kecamatans, with up to 6000 villages


Implementing Agency Ministry of Home Affairs

Funding RecipientMinistry of Finance (for on-budget funding to Ministry of Home Affairs)

Community Recovery Through the Kecamatan Development Project (KDP)

Nias

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This project provides block grants directly to urban neighborhoods to rehabilitate and develop community infrastructure in 402 urban neighborhoods.

The Urban Poverty Program is a community-driven development project that supports communities to decide and

map out what their priority needs are in terms of tertiary infrastructure, such as roads, schools, sanitation, water

supply, or other community buildings such as assembly halls and markets. It is essentially the urban version of the

KDP program.

UPP focuses on urban areas where there is an identified priority need for reconstruction. It promotes bottom-up,

participatory planning. By providing resources and facilitating democratic decision-making processes, the local

population becomes an important actor in the rebuilding of destroyed areas. The Multi-Donor Fund financing also

supports substantial capacity building for local governments to gain experience with community-driven

development processes.

UPP follows a complaints handling and anti-corruption strategy to mitigate the incidence of corruption. The

strategy targets both the implementing agency (Ministry of Public Works) and the communities as beneficiaries of

the project as well as the implementing units of the construction sub-projects. Community level participation and

empowerment are crucial to the success of the project. Together these factors inspire greater accountability and

better governance.


Date Approved 29July 2005

Implementation Period September 2005 - December 2009

Funding Stages2005 $7m, 2006 $7.53m, 2007 $1.43m, 2008 $1m; 2009 $1m

Geographic Area Tsunami affected urban neighborhoods (Aceh/Nias)


Implementing Agency Ministry of Public Works

Funding RecipientMoF (for on-budget funding to Ministry of Public Works)

Community Recovery Through the Urban Poverty Program (UPP )

Nias

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NIAS

Rebuilding and repairing houses in 188 villages (desas) and urban neighborhoods (kelurahans) and provision of grants for basic community infrastructure, based on a community-driven approach to planning, implementation and control of activities.

Building on the community driven development structures that have been established by the Kecamatan Development

Project and the Urban Poverty Program, communities will receive guidance to carry out community-based mapping

and conduct damage assessment, to establish construction needs, and to identify beneficiaries. The current estimate of

housing recovery is to rebuild 5,500 houses and to repair roughly 9,000 houses. Housing facilitators will ensure that the

quality of the housing and infrastructure plans are up to standard.

Beneficiaries are required to form housing groups of several households in order to receive funds. Communities will

be allocated funds based on the number of houses that need rebuilding or repair. This community-driven approach to

program planning, management, implementation, and monitoring maximizes efforts to target appropriate beneficia-

ries. It supports the transparency of the flow of funds and creates community ownership of the program. Infrastructure

reconstruction grants will further support communities in the recovery of tertiary infrastructure.

The project will also provide assistance to strengthen the Directorate of Housing, Water and Sanitation at BRR to ensure

the Multi-Donor Fund projects are coordinated with other donor and NGO programs to minimize duplication of efforts

and maximize equality and transparency among beneficiaries.

Grant Amount $85 million

Date Approved 23 August 2005

Implementation Period September 2005 - August 2007

Funding Stages 2005 $21m, 2006: $50m, 2007 $14m

Geographic Area Aceh and Nias


Implementing Agency Ministry of Public Works

Funding Recipient MoF (on-budget funding to Ministry of Public Works)

Community-Based Settlement Rehabilitation and Reconstruction Project

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Nias

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The project supports the BRR to effectively implement its mandate of planning, coordinating, and monitoring the rehabilitation and reconstruction of tsunami and earthquake affected areas of Aceh and Nias. Assistance provided will enhance technical and operational capacities, increase transpar-ency in decision making, and strengthen participation of all stakeholders.

The BRR was established in April 2005 to oversee reconstruction in the regions affected by the tsunami and earthquakes

in Aceh and Nias. The BRR aims to adopt the highest professional standards in its operations, drawing on the best

available technical and operational skills. BRR has requested technical and operational support in order to flexibly,

effectively and accountably fulfill its mandate.

This project provides the BRR with additional funding, complementary to Government funding, that will enable BRR to

recruit consultants and firms with the best skills and expertise available in national and international markets. Project

support consists of recruitment of individual consultants, the procurement, contracting, and payment of contractors,

and the monitoring and supervision of individuals and firms.

All needs for technical support will be coordinated by the Technical Advisors Advisory Panel that records requests

and prioritizes needs for assistance, supported by UNDP as Partner Agency. UNDP’s tasks consist of recruitment,

out-sourcing, procurement, joint monitoring with the BRR of contracted services, and supporting the BRR in the

preparation of periodic reports. It is planned to contract professional providers for legal services, IT services and

management of human resources at the BRR.


Date Approved 29July 2005

Implementation Period July 2005 - June 2007

Funding Stages 2005 $11m, 2006 $3.7m

Geographic Area BBR supports the recovery in entire Aceh and Nias

Partner Agency UNDP

Implementing AgencyBRR (Agency for Rehabilitation and Reconstruction for Aceh and Nias)

Funding Recipient UNDP (off-budget funding to BRR)

Technical Support for Badan Rehabilitasi dan Rekonstruksi (BRR) NAD-Nias

Nias

75

76

The Tsunami Recovery Waste Management Programme aims to build government capacity in waste management, create immediate employment and longer-term livelihoods in waste management and benefit the environment through collection, recovery and recycling of waste materials for use in reha-bilitation and reconstruction.

The Master Plan for Rehabilitation and Reconstruction in Aceh and Nias notes the environmental impact of the tsunami

and earthquake disasters; in particular the waste generated by the disasters and the need for appropriate handling and

clean up of this waste and rubble. Much of the waste is recoverable and recyclable for use in rehabilitation and

reconstruction. Re-use of recycled timber, concrete and bricks will reduce the need to fell trees for virgin timber and

quarry rock for use in concrete, drainage, roads and fill.

Overall the project will provide local governments (at municipal/district level) with the financial and technical support

for municipal garbage collection and tsunami waste management. Main activities include capacity building, support

for garbage collection, drainage clearance, demolition of tsunami and earthquake damaged buildings, clearing tsunami

waste from temporary dumps and recovery of recyclable waste for reuse in reconstruction and livelihoods. This will

employ over 3,300 workers.

Further the project will aid the rehabilitation of the Gampong Jawa Dumpsite, Banda Aceh and potentially other

dumpsites in Aceh. Existing open dumps will be upgraded to protect the environment and groundwater.

Finally the project focuses on restoration and creation of livelihoods in waste management utilizing recovered and

recycled materials. For example through composting, plastic processing, furniture manufacturing from tsunami wood,

tsunami wood-fired brick and limestone kilns, and making aggregates for breeze blocks, concrete and road base.


Date Approved 26 September 2005

Implementation Period September 2005 - June 2007

Funding Stages 2005 $11m, 2006 $3.5m

Geographic Area Banda Aceh, Aceh Barat and other impacted districts

Partner Agency UNDP

Implementing Agency District Sanitation Department (Dinas Kebersihan)

Funding Recipient UNDP (off-budget)

Tsunami Recovery Waste Management Programme

Nias

77

Members of the Steering Committee4

78

Ind

icat

ors

Mea

ns

of V

erifi

cati

on

Ass

um

pti

on

s an

d R

isks

Ove

rall

Go

al

The

sust

aina

ble

reco

nstr

uctio

n of

Ace

h an

d N

ias

is c

hara

cter

-iz

ed b

y ov

eral

l im

pro

vem

ent

of in

fras

truc

ture

, pov

erty

re

duct

ion,

incr

ease

d eq

ualit

y,

and

enha

nced

cap

aciti

es fo

r go

vern

ance

.

Tru

st F

un

d P

urp

ose

The

Mul

ti-D

onor

Fun

d ha

s co

ntrib

uted

to th

e su

stai

ned

reco

very

and

imp

rove

men

t of

livi

ng c

ondi

tions

and

liv

elih

oods

in A

ceh

and

Nia

s.

Targ

ets

1.

Rest

orat

ion

of h

ousi

ng a

nd in

fras

truc

ture

ha

s b

een

imp

lem

ente

d ac

cord

ing

to G

OI

reco

nstr

uctio

n st

anda

rds

and

bas

ed o

n a

soun

d co

mm

unit

y-dr

iven

pro

cess

lead

ing

to h

igh

satis

fact

ion

rate

s of

sup

por

ted

com

mun

ities

2.

Emp

loym

ent a

nd li

velih

ood

crea

ting

activ

ities

and

mic

ro-c

redi

t sch

emes

for t

he

loca

l pop

ulat

ion

cont

ribut

e to

eco

nom

ic

reco

very

3.

Rest

orat

ion

of la

rger

infr

astr

uctu

re re

sult

s in

imp

rove

d in

fras

truc

ture

and

ser

vice

s in

A

ceh

and

Nia

s

4.

Rest

ored

loca

l gov

ernm

ent i

nstit

utio

ns

adhe

re to

prin

cip

les

of g

ood

gove

rnan

ce

5.

Fund

ed p

roje

cts

activ

ely

cont

ribut

e to

en

viro

nmen

tal s

usta

inab

ility

or m

itiga

te

pot

entia

l neg

ativ

e im

pac

ts

Surv

eys

and

revi

ews

as n

eede

d; e

xter

nal s

urve

ys

1.

(Pro

ject

) eva

luat

ions

on

qual

ity

of re

cons

truc

tion,

sa

tisfa

ctio

n su

rvey

s by

pro

ject

s

2.

Econ

omic

dev

elop

men

t of r

egio

ns th

at h

ave

bee

n ta

rget

ed b

y se

vera

l pro

ject

s (p

ossi

ble

me

ans o

f ve

rifica

tion

need

to b

e fu

rthe

r dis

cuss

ed, e

sp. t

akin

g in

to a

ccou

nt th

e ‘a

ttrib

utio

n ga

p’ re

gard

ing

the

reco

very

of e

cono

my

or th

e re

duct

ion

of p

over

ty)

3.

(Pro

ject

) eva

luat

ions

on

qual

ity

of in

fras

truc

ture

an

d se

rvic

es

4.

Perf

orm

ance

mon

itorin

g of

loca

l gov

ernm

ent

office

s re

gard

ing

a) p

artic

ipat

ory

deci

sion

-mak

ing,

b

) tra

nsp

aren

t bud

getin

g, a

nd c

) inc

reas

ed

cap

acit

y fo

r coo

rdin

atio

n an

d m

anag

emen

t of t

he

reco

very

5.

(Pro

ject

) eva

luat

ion

and

surv

eys

rega

rdin

g en

viro

nmen

tal s

usta

inab

ility

and

imp

act

1.

The

reco

very

is n

ot h

amp

ered

by

furt

her m

ajor

env

ironm

enta

l ca

tast

rop

hes

(ear

thqu

akes

, floo

ds e

tc).

2.

The

initi

ated

pea

ce p

roce

ss in

Ace

h p

roce

eds

alon

g th

e fo

rese

en p

ath

and

does

not

enc

ount

er m

ajor

set

-b

acks

that

cou

ld e

ndan

ger a

bal

ance

d re

cons

truc

tion

pro

cess

.

3.

Gov

ernm

ent o

f Ind

ones

ia d

oes

not

sign

ifica

ntly

alte

r Rec

onst

ruct

ion

Stra

tegy

and

/or p

roce

dure

s

4.

Nat

iona

l and

loca

l con

ditio

ns a

re

favo

rab

le to

eco

nom

ic re

cove

ry.

5.

Stro

ng m

otiv

atio

n on

the

side

of l

ocal

go

vern

men

t ins

titut

ions

, esp

ecia

lly a

t di

stric

t lev

el, t

o ta

ke u

p th

eir k

ey ro

le a

s re

cons

truc

tion

imp

lem

entin

g ag

enci

es.

This

incl

udes

saf

egua

rds

agai

nst

corr

uptio

n an

d fu

nd a

bus

e, a

nd o

ptim

al

use

of a

vaila

ble

bud

get.

5D

ynam

ic L

ogic

al F

ram

ewor

k

79

Ind

icat

ors

Mea

ns

of V

erifi

cati

on

Ass

um

pti

on

s an

d R

isks

Tru

st F

un

d O

bje

ctiv

es

Ob

ject

ive

1

Mul

ti-D

onor

Fun

d fin

ance

d p

roje

cts

cont

ribut

e to

a

sust

aina

ble

reco

nstr

uctio

n p

roce

ss b

y em

pha

sizi

ng

par

ticip

atio

n, tr

ansp

aren

cy,

incl

usio

n of

the

poo

r, an

d ge

nder

and

con

flict

sen

sitiv

ity.

1.

Evid

ence

that

the

Mul

ti-D

onor

Fun

d co

mm

unit

y re

cove

ry p

roje

cts

are

bas

ed o

n a

stro

ng c

omm

unit

y-b

ased

pro

cess

2.

Evid

ence

of i

nclu

sion

of w

omen

in

deve

lop

men

t pro

cess

es a

nd e

mp

loym

ent

crea

tion;

pro

tect

ion

of w

omen

’s rig

hts

3.

Evid

ence

that

exi

stin

g co

mp

lain

ts h

andl

ing

syst

ems

per

tain

ing

to M

ulti-

Don

or F

und

pro

ject

s ar

e ea

sily

acc

essi

ble

and

use

d by

th

e lo

cal p

opul

atio

n, a

nd c

omp

lain

ts a

re

follo

wed

up

by

the

rele

vant

par

ty

4.

Evid

ence

that

, whe

re a

pp

rop

riate

op

por

tuni

ties

are

crea

ted

to s

upp

ort

rein

tegr

atio

n of

form

er G

AM

mem

ber

s (in

clus

ion

of fo

rmer

GA

M c

omb

atan

ts;

rein

tegr

atio

n of

con

flict

are

as)

1.

Proj

ect M

&E

rep

orts

: par

ticip

atio

n ra

tes

(ave

rage

p

erce

ntag

e of

pop

ulat

ion

– m

en/w

omen

); ta

rget

ing

and

incl

usio

n of

the

poo

r

2.

Proj

ect M

&E

rep

orts

: par

ticip

atio

n of

wom

en in

co

mm

unit

y-b

ased

reco

very

pro

cess

es; d

egre

e of

in

clus

ion

of w

omen

as

reci

pie

nts

of s

ervi

ces

(in %

, e.

g. tr

aini

ng; c

ash-

for-

wor

k, e

tc.);

ach

ieve

men

ts in

p

rote

ctin

g w

omen

’s rig

hts

3.

Rep

orts

on

com

pla

ints

han

dlin

g by

pro

ject

s an

d om

bud

sper

son

(# o

f com

pla

ints

ab

out M

ulti-

Don

or F

und

pro

ject

s, ra

te o

f han

dlin

g in

%; %

of

suc

cess

ful r

esol

utio

n of

com

pla

ints

); su

rvey

on

kno

wle

dge

of a

nd a

cces

sib

ility

of c

omp

lain

ts

mec

hani

sms

in th

e p

opul

atio

n

4.

Proj

ect M

&E

rep

orts

on

incl

usio

n of

form

er G

AM

m

emb

ers

and

opp

ortu

nitie

s off

ered

to th

em;

rep

orts

on

geog

rap

hic

cove

rage

rega

rdin

g co

nflic

t ar

eas

1.

Gen

eral

risk

for I

ndon

esia

that

co

mm

unit

y-dr

iven

pro

cess

es a

re

app

rop

riate

d by

a s

tron

g lo

cal e

lite,

that

p

over

ty ta

rget

ing

is u

nder

min

ed b

y lo

cal

collu

sion

or n

epot

ism

2.

The

initi

ated

pea

ce p

roce

ss in

Ace

h p

roce

eds

alon

g th

e fo

rese

en p

ath

and

does

not

enc

ount

er m

ajor

set

bac

ks

that

cou

ld e

ndan

ger a

bal

ance

d re

cons

truc

tion

pro

cess

.

Ob

ject

ive

2

The

Mul

ti-D

onor

Fun

d co

ntrib

utes

to a

coo

rdin

ated

re

cons

truc

tion

pro

cess

that

is

in li

ne w

ith th

e G

over

nmen

t of

Indo

nesi

a’s

stra

tegy

for

reco

nstr

uctio

n.

1.

Evid

ence

that

the

Mul

ti-D

onor

Fun

d ap

pro

ved

pro

ject

s ar

e co

nsis

tent

with

the

curr

ent G

OI s

trat

egy

of re

cons

truc

tion

2.

Evid

ence

that

the

Mul

ti-D

onor

Fun

d co

ntrib

utes

to a

clo

ser c

oord

inat

ion

of

dono

r act

iviti

es

3.

Evid

ence

of g

eogr

aphi

cally

bal

ance

d p

roje

cts

and

fund

s di

strib

utio

n

1.

Com

par

ison

of M

&E

rep

orts

with

ove

rall

stra

tegy

fo

r rec

onst

ruct

ion

2.

Mee

ting

freq

uenc

y an

d at

tend

ance

of d

onor

s (e

sp. T

echn

ical

Mee

tings

); tr

acki

ng c

oop

erat

ion

esta

blis

hed

by fu

nded

pro

ject

s w

ith o

ther

rele

vant

do

nors

/org

s (fo

rmal

, inf

orm

al e

tc)

3.

To b

e tr

acke

d w

ith th

e M

ulti-

Don

or F

und

pro

ject

m

app

ing

(e.g

. pla

nned

, cur

rent

and

imp

lem

ente

d ac

tiviti

es; d

isb

urse

men

t of f

unds

etc

.)

1.

No

maj

or c

hang

es o

ccur

in th

e G

OI

reco

nstr

uctio

n st

rate

gy th

at c

ould

de

viat

e fr

om M

ulti-

Don

or F

und

pro

ject

s

2.

Bala

nced

geo

grap

hic

reco

very

can

be

at

risk,

if o

ther

don

ors

mig

ht n

ot h

old

thei

r p

ledg

es fo

r rec

onst

ruct

ion.

80

Ind

icat

ors

Mea

ns

of V

erifi

cati

on

Ass

um

pti

on

s an

d R

isks

Tru

st F

un

d O

utp

uts

Out

put

s of

Ob

ject

ive

1

1.

The

Mul

ti-D

onor

Fun

d ha

s co

ntrib

uted

to

reha

bili

tatio

n an

d re

cons

truc

tion

in s

elec

ted

sect

ors

that

sho

w fu

ndin

g ga

ps1

1.

Evid

ence

of c

ost-

effec

tiven

ess

of

reco

nstr

uctio

n in

all

sup

por

ted

sect

ors

2.

Dev

elop

men

t/ re

hab

ilita

tion

exp

endi

ture

by

sect

or; p

erce

ntag

e of

the

Mul

ti-D

onor

Fun

d co

ntrib

utio

n to

fund

ing

gap

s in

resp

ectiv

e se

ctor

s, a

s id

entifi

ed in

the

Mul

ti-D

onor

Fun

d Re

cove

ry A

ssis

tanc

e Po

licy

docu

men

t

1.

Uni

t-co

st c

omp

aris

on w

ith s

imila

r pro

ject

s

2.

Fina

ncia

l Rep

orts

1.1

Reco

very

of C

omm

uniti

es1.

#

of c

omm

unit

y fa

cilit

ies

rest

ored

(e.g

. #

of s

choo

ls, h

ealt

h ce

nter

s, re

ligio

us a

nd

com

mun

ity

bui

ldin

gs, w

ater

poi

nts

and

latr

ines

rep

aire

d)

2.

# of

land

plo

ts id

entifi

ed w

here

land

righ

ts

have

bee

n re

solv

ed in

coo

rdin

atio

n w

ith

com

mun

ities

3.

# of

hou

ses

reb

uilt

/ rep

aire

d w

heth

er

tem

por

ary

or p

erm

anen

t

4.

# of

hou

sing

uni

ts w

hich

are

und

er

cons

truc

tion

5.

satis

fact

ion

rate

of p

opul

atio

n w

ith /b

asic

in

fras

truc

ture

del

iver

ed (q

ualit

y, ti

mel

ines

s,

imp

lem

enta

tion,

hou

sing

targ

etin

g)

Proj

ect M

&E

1.2

Infr

astu

ctur

e an

d Tr

ansp

ort

1.

# km

of r

oads

reb

uilt

/reh

abili

tate

d

2.

# of

brid

ges

reb

uilt

/reh

abili

tate

d

3.

Stat

us o

f por

ts re

hab

ilita

tion/

reco

nstr

uctio

n

4.

Volu

me/

Tonn

age

of c

argo

mov

ed (i

ncl.

kind

of

car

go: n

on-f

ood

item

s, re

cons

truc

tion

mat

eria

ls)

Proj

ect M

&E

81

1 In

dica

tors

in th

is s

ectio

n ar

e de

rived

from

the

“Mem

oran

dum

on

Prog

ress

Indi

cato

rs fo

r 12-

Mon

th A

nniv

ersa

ry R

epor

ting”

of t

he U

nite

d N

atio

ns, t

he W

orld

Ban

k, A

sian

Dev

elop

men

t Ban

k an

d th

e In

tern

atio

nal F

eder

atio

n of

the

red

cros

s (d

ated

25

Oct

ober

200

5).

Indi

cato

rs w

ill b

e tr

eate

d in

a d

ynam

ic w

ay to

refle

ct b

est t

he c

ontr

ibut

ion

of th

e M

ulti-

Don

or F

und

to th

e re

cove

ry p

roce

ss.

At t

he m

omen

t, p

rogr

ess

rath

er th

an im

pac

t is

at th

e ce

nter

of a

tten

tion.

Ind

icat

ors

Mea

ns

of V

erifi

cati

on

Ass

um

pti

on

s an

d R

isks

Tru

st F

un

d O

utp

uts

1.3

Emp

loym

ent a

nd

Live

lihoo

ds1.

#

of p

eop

le w

ho h

ave

bee

n p

lace

d fo

r eith

er

per

man

ent o

f tem

por

ary

job

s (c

ash-

for-

wor

k)

2.

# of

dis

pla

ced

per

sons

in e

mp

loym

ent

sche

mes

3.

# of

par

ticip

ants

in s

hort

-cyc

le s

kills

and

vo

catio

nal t

rain

ing

cour

ses

4.

# of

ben

efici

arie

s tr

aine

d

5.

Sust

aina

ble

em

plo

ymen

t pro

gram

s es

tab

lishe

d/N

umb

er o

f ben

efici

arie

s

6.

Spec

ific

pro

gram

s ta

rget

ed to

wom

en

Proj

ect M

&E

1.4

Sust

aini

ng th

e

Envi

ronm

ent

1.

Acr

eage

of f

ores

t pro

tect

ed/r

efor

este

d

2.

no in

crea

se in

def

ores

tatio

n

3.

Am

ount

of t

suna

mi w

aste

s ge

nera

ted/

am

ount

reco

vere

d-re

cycl

ed-d

isp

osed

4.

Inst

itutio

nal c

apac

ity

(num

ber

of o

ffice

rs

trai

ned

in e

nviro

nmen

tal p

lann

ing,

m

onito

ring

and

asse

ssm

ent)

5.

Cap

acit

y of

Nat

iona

l Par

k m

anag

emen

t

Proj

ect M

&E

1.5

Inst

itutio

nal C

apac

ity

Build

ing

and

Gov

erna

nce

1.

# of

loca

l gov

ernm

ent s

ervi

ces

re-e

stab

lishe

d (p

er s

ecto

r)

2.

# of

adv

isor

s p

lace

s at

the

BRR;

kin

ds a

nd

volu

me

of o

ut-c

ontr

acte

d se

rvic

es

3.

# lo

cal g

over

nmen

t sta

ff tr

aine

d

Proj

ect M

&E

Ind

icat

ors

Mea

ns

of V

erifi

cati

on

Ass

um

pti

on

s an

d R

isks

Tru

st F

un

d O

utp

uts

Out

put

s of

Ob

ject

ive

1

1.

The

Mul

ti-D

onor

Fun

d ha

s co

ntrib

uted

to

reha

bili

tatio

n an

d re

cons

truc

tion

in s

elec

ted

sect

ors

that

sho

w fu

ndin

g ga

ps1

1.

Evid

ence

of c

ost-

effec

tiven

ess

of

reco

nstr

uctio

n in

all

sup

por

ted

sect

ors

2.

Dev

elop

men

t/ re

hab

ilita

tion

exp

endi

ture

by

sect

or; p

erce

ntag

e of

the

Mul

ti-D

onor

Fun

d co

ntrib

utio

n to

fund

ing

gap

s in

resp

ectiv

e se

ctor

s, a

s id

entifi

ed in

the

Mul

ti-D

onor

Fun

d Re

cove

ry A

ssis

tanc

e Po

licy

docu

men

t

1.

Uni

t-co

st c

omp

aris

on w

ith s

imila

r pro

ject

s

2.

Fina

ncia

l Rep

orts

1.1

Reco

very

of C

omm

uniti

es1.

#

of c

omm

unit

y fa

cilit

ies

rest

ored

(e.g

. #

of s

choo

ls, h

ealt

h ce

nter

s, re

ligio

us a

nd

com

mun

ity

bui

ldin

gs, w

ater

poi

nts

and

latr

ines

rep

aire

d)

2.

# of

land

plo

ts id

entifi

ed w

here

land

righ

ts

have

bee

n re

solv

ed in

coo

rdin

atio

n w

ith

com

mun

ities

3.

# of

hou

ses

reb

uilt

/ rep

aire

d w

heth

er

tem

por

ary

or p

erm

anen

t

4.

# of

hou

sing

uni

ts w

hich

are

und

er

cons

truc

tion

5.

satis

fact

ion

rate

of p

opul

atio

n w

ith /b

asic

in

fras

truc

ture

del

iver

ed (q

ualit

y, ti

mel

ines

s,

imp

lem

enta

tion,

hou

sing

targ

etin

g)

Proj

ect M

&E

1.2

Infr

astu

ctur

e an

d Tr

ansp

ort

1.

# km

of r

oads

reb

uilt

/reh

abili

tate

d

2.

# of

brid

ges

reb

uilt

/reh

abili

tate

d

3.

Stat

us o

f por

ts re

hab

ilita

tion/

reco

nstr

uctio

n

4.

Volu

me/

Tonn

age

of c

argo

mov

ed (i

ncl.

kind

of

car

go: n

on-f

ood

item

s, re

cons

truc

tion

mat

eria

ls)

Proj

ect M

&E

82

Ind

icat

ors

Mea

ns

of V

erifi

cati

on

Ass

um

pti

on

s an

d R

isks

Tru

st F

un

d O

up

uts

4.

# of

inci

denc

es o

f cor

rup

tion

dete

cted

and

co

mp

lain

ts fi

led

abou

t loc

al g

over

nmen

t p

erfo

rman

ce in

reco

nstr

uctio

n (r

elat

ed to

M

ulti-

Don

or F

und

pro

ject

s)

5.

Evid

ence

that

the

BRR

pro

vide

s te

chni

cal

assi

stan

ce a

s ne

eded

for d

esig

ning

, ap

pra

isin

g an

d m

onito

ring

reco

very

p

rogr

ams

to lo

cal g

over

nmen

ts

6.

# of

par

ticip

ants

in tr

aini

ng fo

r CSO

s

7.

# of

CSO

s ha

ving

rece

ived

fund

s fr

om s

mal

l-gr

ants

faci

lity

Out

put

s of

Ob

ject

ive

2

The

Mul

ti-D

onor

Fun

d off

ers

a co

ordi

nate

d op

erat

iona

l p

roce

ss, b

ased

on

cont

inuo

us

pol

icy

dial

og a

nd a

tran

spar

ent

info

rmat

ion

flow

to a

ll co

ncer

ned

stak

ehol

ders

1.

Evid

ence

that

a c

once

pt a

sses

smen

t pro

cess

le

ads

to a

n co

ordi

nate

d an

d effi

cien

t pro

ject

ap

pro

val p

roce

sses

2.

The

Secr

etar

iat p

rovi

des

regu

lar u

pda

tes

on

finan

cial

sta

tus

and

pro

ject

pro

gres

s an

d to

th

e SC

3.

Evid

ence

that

the

Mul

ti-D

onor

Fun

d co

mm

unic

atio

n st

rate

gy le

ads

to in

crea

sed

visi

bili

ty o

f the

Fun

d an

d its

don

ors

4.

X%

sat

isfa

ctio

n of

SC

mem

ber

s w

ith

coor

dina

tion

pro

cess

faci

litat

ed b

y th

e M

ulti-

Don

or F

und

1.

Trac

king

pro

cess

es: C

oord

inat

ion

with

the

BRR,

do

nors

and

oth

er re

leva

nt s

take

hold

ers

2.

Qua

rter

ly F

inan

cial

Rep

orts

of t

he M

ulti-

Don

or

Fund

Leg

al a

nd F

inan

ce O

ffice

r; A

uditi

ng R

epor

ts,

Prog

ress

Up

-dat

es a

nd N

ewsfl

ashs

; Six

-mon

th

Rep

orts

3.

Rep

ort o

n ac

tiviti

es a

nd a

chie

ved

visi

bili

ty, p

ossi

bly

in

clud

ing

an e

valu

atio

n of

the

succ

ess

of th

e co

mm

unic

atio

n st

rate

gy e

sp. r

egar

ding

reci

pie

nts

4.

Regu

lar r

evie

w o

f sat

isfa

ctio

n of

the

SC m

emb

ers

with

rega

rd to

Mul

ti-D

onor

Fun

d p

roce

sses

83

6O

rgan

izat

ion

al C

har

t of t

he

Secr

etar

iat

84

1. O

per

atio

ns

Man

ual

: ple

ase

see

web

site

: ww

w.m

ultid

onor

fund

.org

\ab

out

2. C

om

mu

nic

atio

ns

Stra

teg

y: p

leas

e se

e w

ebsi

te: w

ww

.mul

tidon

orfu

nd.o

rg\a

bou

t

7Si

tem

ap o

f th

e W

ebsi

te

Contact the Multi-Donor Fund Secretariat

Jakarta Office:Jakarta Stock Exchange BuildingTower 2, 26th floorJl. Jendral Sudirman Kav. 52-53Jakarta 12190Phone 62-21-529-93122

Aceh Office:Jl. T. Iskandar No. 46Ulee KampungBanda AcehPhone 62-651-27997

http://www.multidonorfund.org

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rebuilding together

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